COROWARE, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 12 – NOTES PAYABLE
On June 29, 2007, the Company issued a promissory note to Gary Sumner for $45,000. The note accrues compounded interest of 5% per annum and matures on March 31, 2008, with a default simple interest rate of 18%. As of June 30, 2016, there is $45,000 of principal and $61,572 of accrued interest remaining on this note. This note is currently in default.
On July 3, 2008, the Company issued a promissory note to LTC International Corp. for $25,000. The note accrues simple interest of 20.80% per annum and matures on December 17, 2008, with a default simple interest rate of 41.60%. Through December 31, 2015, the Company made principal payments totaling $20,268. As of June 30, 2016, there is $4,732 of principal and $17,904 of accrued interest remaining on this note. This note is currently in default.
On August 1, 2008, the Company issued a promissory note to YA Global for $12,500. On August 18, 2008, the Company issued a separate promissory note to YA Global for $25,000. The notes accrue simple interest of 18% per annum and mature on December 20, 2008, with a default simple interest rate of 24%. On February 5, 2016, all outstanding principal and accrued interest on this note were consolidated into a new convertible promissory note along with all other outstanding notes due to YA Global.
On March 17, 2010, the Company issued a promissory note to John Kroon for $10,000. The note accrues compounded interest of 18% per annum and matures on September 13, 2010, with a default compounded interest rate of 21%. As of June 30, 2016, there is $10,000 of principal and $26,501 of accrued interest remaining on this note. This note is currently in default.
On July 27, 2010, the Company issued a promissory note to Richard Wynns for $25,000. The note accrues compounded interest of 18% per annum and matures on January 23, 2011, with a default compounded interest rate of 21%. As of June 30, 2016, there is $25,000 of principal and $59,608 of accrued interest remaining on this note. This note is currently in default.
On March 15, 2011, the Company issued a promissory note to Barclay Lyons for $15,000. The note accrues simple interest of 18.99% per annum and matures on March 25, 2011, with a default simple interest rate of 28.99%. As of June 30, 2016, there is $15,000 of principal and $22,988 of accrued interest remaining on this note. This note is currently in default.
On March 29, 2011, the Company issued a promissory note to George Ferch for $5,000. The note accrues interest of 0% per annum and matures on June 27, 2011, with a default compounded interest rate of 21%. As of June 30, 2016, there is $5,000 of principal and $9,184 of accrued interest remaining on this note. This note is currently in default.
On April 11, 2012, the Company issued a promissory note to Blackbridge for $6,000. The note accrues simple interest of 5% per annum and matures on May 25, 2012, with a default simple interest rate of 5%. Through June 30, 2016, the Company made principal payments totaling $4,500. As of June 30, 2016, there is $1,500 of principal and $540 of accrued interest remaining on this note. This note is currently in default.
On October 18, 2013, the Company issued a promissory note to Walter Jay Bell (“Bell”) for $10,000. The note accrues simple interest of 10% per annum and matures on November 29, 2013. As of June 30, 2016, there is $10,000 of principal and $2,699 of accrued interest remaining on this note. This note is currently in default.
In January 2015 and February 2015, the Company entered into two short-term notes with LoanMe due on February 1, 2017 and March 1, 2017, respectively, whereby the Company received $18,500 in total cash proceeds, and $1,500 went directly towards indirect expenses, totaling $20,000 in principal due. These notes were paid in full in February 2015 and July 2015, along with $828 and $6,066 of interest expense, respectively.
On April 24, 2016, the Company issued a promissory note to Bell for $8,642. The note accrues simple interest of 10% per annum and matures on June 30, 2016. As of June 30, 2016, there is $8,642 of principal and $81 of accrued interest remaining on this note. This note is currently in default.
On April 27, 2016, the Company issued a promissory note to YA Global for $80,000, of which $5,000 is original issue discount. The note accrues no interest per annum and matures on June 1, 2016, with a default simple interest rate of 18%. Effective May 6, 2016, the Company is to make weekly payments of $18,750 for four consecutive weeks, with a final payment of $5,000 due on June 3, 2016. As of June 30, 2016, this note was paid in full.
On May 10, 2016, the Company issued a promissory note to William Rittman for $20,000. The note accrues compounded interest of 16% per annum and matures on August 29, 2016. Effective May 16, 2016, the Company is to make weekly payments of $1,250 plus interest for sixteen consecutive weeks. As of June 30, 2016, there is $11,250 of principal and $7 of accrued interest remaining on this note.
NOTE 13 – NOTES PAYABLE, RELATED PARTIES
As of June 30, 2016 and December 31, 2015 the Company had an aggregate total of $160,354 and $166,506, respectively, in related party notes payable. These notes bear simple interest at 10%-18% per annum, with default simple interest of 10%-24% per annum. As of June 30, 2016 all notes payable to related parties were in default. Accrued interest on related party notes payable totaled $224,894 and $205,885 at June 30, 2016 and December 31, 2015, respectively.
COROWARE, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
NOTE 14 – SMALL BUSINESS ADMINISTRATION LOAN
On April 17, 2002, the Company borrowed $989,100 under a note agreement with the Small Business Administration. The note bears interest at 4% and is secured by the equipment and machinery assets of the Company. The balance outstanding at June 30, 2016 and December 31, 2015 was $979,950 and $979,950, respectively. The note calls for monthly installments of principal and interest of $4,813 beginning September 17, 2002 and continuing until April 17, 2032.
The Company and the Small Business Administration reached an agreement in November 2010, whereby the Small Business Administration would accept $500 per month for 12 months with payment reverting back to $4,813 in November 2011. The Company only made four payments under the modification agreement. The Company continues to carry the loan as a current term liability because current payments are not being made, resulting in a default. Accrued interest payable on the note totaled $477,549 and $458,111 as of June 30, 2016 and December 31, 2015, respectively.
NOTE 15 – DERIVATIVE LIABILITY
Effective July 31, 2009, the Company adopted ASC 815, which defines determining whether an instrument (or embedded feature) is solely indexed to an entity’s own stock. The conversion price of certain convertible notes, convertible preferred stock and exercise price of certain warrants are variable and subject to the fair value of the Company’s units on the date of conversion or exercise. As a result, the Company has determined that the conversion and exercise features are not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company has bifurcated the conversion and exercise features of the instruments to be recorded as a derivative liability.
ASC 815 requires Company management to assess the fair market value of certain derivatives at each reporting period and recognize any change in the fair market value as items of other income or expense. The Company’s only asset or liability measured at fair value on a recurring basis is its derivative liability associated with convertible notes payable and warrants.
At origination and subsequent revaluations, the Company valued the derivative liabilities using the Black-Scholes options pricing model under the following assumptions as of June 30, 2016 and December 31, 2015:
|
|
June 30, 2016
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
|
0.58% - 1.25
|
%
|
|
|
0.89% - 1.31
|
%
|
|
Expected options life
|
1 - 5 yrs
|
|
1 - 3 yrs
|
|
|
Expected dividend yield
|
|
|
-
|
|
|
|
-
|
|
|
Expected price volatility
|
|
|
298.01% - 495.92
|
%
|
|
|
295.78% - 531.45
|
%
|
During the six months ended June 30, 2016, the Company’s derivative liability increased from $7,396,430 to $7,863,051, and the Company recognized a gain (loss) on derivative liabilities of $2,579,370 and $(840,790) for the six months ended June 30, 2016 and 2015, respectively, in conjunction with settlement of convertible notes payable, additions of new derivative liabilities and subsequent revaluations of existing derivative liabilities. In connection with certain conversions of debt, derivative liabilities of $253,726 were recognized as additional paid in capital for the six months ended June 30, 2016. In connection with the debt consolidation by YA Global on February 5, 2016 (see Note 11) derivative liabilities of $3,299,717 were recognized as a loss on extinguishment of debt for the six months ended June 30, 2016.
NOTE 16 – PREFERRED STOCK
a) Series A Preferred Stock
The Company has authorized 125,000 shares of Series A Preferred Stock. Each share of Series A Preferred Stock (i) pays a dividend of 5%, payable at the discretion of the Company in cash or common stock, (ii) is convertible immediately after issuance into the Company's common stock at the lesser of $0.005 per share or 75% of the average closing bid prices over the 20 trading days immediately preceding the date of conversion, (iii) has a liquidation preference of $1.00 per share, (iv) may be redeemed by the Company at any time up to five years after the issuance date for $1.30 per share plus accrued and unpaid dividends, and (v) has no voting rights except when mandated by Delaware law.
There were no shares of Series A Preferred Stock outstanding at any time during the periods ended June 30, 2016 and December 31, 2015.
COROWARE, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
b) Series B Preferred Stock
The Company has authorized 525,000 shares of Series B Preferred Stock. Each share of Series B Preferred Stock (i) pays a dividend of 5%, payable at the discretion of the Company in cash or common stock, (ii) is convertible immediately after issuance into the Company's common stock at the lesser of $15 per share or 75% of the average closing bid prices over the 20 trading days immediately preceding the date of conversion, (iii) has a liquidation preference of $1.00 per share, and (iv) may be redeemed by the Company at any time up to five years.
There were no issuances, conversions or redemptions of Series B Preferred Stock during the periods ended June 30, 2016 and December 31, 2015. At June 30, 2016 and December 31, 2015 the Company had 159,666 shares of Series B Preferred Stock issued and outstanding.
Based upon the Company’s evaluation of the terms and conditions of the Series B Preferred Stock, the embedded conversion feature related to the Series B Preferred Stock was afforded the exemption as a conventional convertible instrument due to certain variabilities in the conversion price, and met the conditions for equity classification. However, the Company is required to bifurcate the embedded conversion feature and carry it as a derivative liability.
The Company estimated the fair value of the compound derivative using a common stock equivalent and the current share price of the Company’s common stock. As a result of this estimate, the Company’s valuation model resulted in a compound derivative balance associated with the Series B Preferred Stock of $212,466 and $212,868 as of June 30, 2016 and December 31, 2015, respectively. This amount is included as a derivative liability on the Company’s unaudited condensed consolidated balance sheet. Fair value adjustments of $402 and $0 were charged to derivative income (expense) for the six months ended June 30, 2016 and 2015, respectively.
c) Series C Preferred Stock
The Company has authorized 500,000 shares of Series C Preferred Stock. During 2007, the Company initiated a private offering under Regulation D of the Securities Act of 1933 (the “Private Offering”), of an aggregate 500,000 units (collectively referred to as the “Units”) at a price of $1.00 per Unit, with each Unit consisting of one share of Series C Preferred Stock at the lesser of 85% of the average closing bid price of the common stock over the 20 trading days immediately preceding the date of conversion, or $0.04 and stock purchase warrants equal to the number of shares of common stock converted from the Series C Preferred Stock, exercisable at $0.06 per share and which expire five years from the conversion date.
There were no shares of Series C Preferred Stock outstanding at any time during the periods ended June 30, 2016 and December 31, 2015.
d) Series D Preferred Stock
On November 10, 2011 the Board approved by unanimous written consent an amendment to the Company’s Certificate of Incorporation to designate the rights and preferences of Series D Preferred Stock. There are 500,000 shares of Series D Preferred Stock authorized with a par value of $0.001. Each share of Series D Preferred Stock has a stated value equal to $1.00. These preferred shares rank higher than all other securities. Each outstanding share of Series D Preferred Stock shall be convertible into the number of shares of the Company’s common stock determined by dividing the stated value by the conversion price which is defined as 85% of the average closing bid price of the common stock over the twenty trading days immediately preceding the date of conversion, but no less than par value of the common stock. Mandatory conversion can be demanded by the Company prior to October 1, 2013. Each share of the Series D Preferred Stock shall have voting rights equal to 100,000 votes of common stock.
There were no issuances, conversions or redemptions of Series D Preferred Stock during the periods ended June 30, 2016 and December 31, 2015. At June 30, 2016 and December 31, 2015 there were 100,000 shares of Series D Preferred Stock issued and outstanding.
Based upon the Company’s evaluation of the terms and conditions of the Series D Preferred Stock, the embedded conversion feature related to the Series D Preferred Stock was afforded the exemption as a conventional convertible instrument due to certain variabilities in the conversion price, and met the conditions for equity classification. However, the Company is required to bifurcate the embedded conversion feature and carry it as a derivative liability.
The Company estimated the fair value of the compound derivative using a common stock equivalent and the current share price of the Company’s common stock. As a result of this estimate, the Company’s valuation model resulted in a compound derivative balance associated with the Series D Preferred Stock of $99,771 and $99,989 as of June 30, 2016 and December 31, 2015, respectively. This amount is included as a derivative liability on the Company’s unaudited condensed consolidated balance sheet. Fair value adjustments of $218 and $0 were charged to derivative income (expense) for the six months ended June 30, 2016 and 2015, respectively.
e) Series E Preferred Stock
On March 9, 2012, the Company filed the Certificate of Designation of the Rights and Preferences of Series E Preferred Stock of the Company with the Delaware Secretary of the State pursuant to which the Company set forth the designation, powers, rights, privileges, preferences and restrictions of 1,000,000 authorized shares of Series E Preferred Stock, par value $0.001 per share. The Series E Preferred Stock is convertible into common stock at 50% of the lowest closing bid price of the common stock over the 20 days immediately prior the date of conversion, but no less than the par value of the common stock.
COROWARE, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
In October 2015, the Company issued 10,000 shares of Series E Preferred Stock for services valued at $10,000 per the agreement.
In December 2015, the Company redeemed 2,692 shares of Series E Preferred Stock for $3,500 cash from an employee of the Company.
During the six months ended June 30, 2016, the Company issued 21,000 shares of Series E Preferred Stock for services valued at $27,000 per the agreements.
During the six months ended June 30, 2016, the Company redeemed 18,663 shares of Series E Preferred Stock for $24,250 cash from three employees of the Company.
During the six months ended June 30, 2016, holders of Series E Preferred Stock converted 16,162 shares into 323,240,000 shares of common stock.
At June 30, 2016 and December 31, 2015, the Company had 791,567 and 805,392 shares of Series E Preferred Stock issued and outstanding, respectively.
Based upon the Company’s evaluation of the terms and conditions of the Series E Preferred Stock, the embedded conversion feature related to the Series E Preferred Stock was afforded the exemption as a conventional convertible instrument due to certain variabilities in the conversion price, and met the conditions for equity classification. However, the Company is required to bifurcate the embedded conversion feature and carry it as a derivative liability.
The Company estimated the fair value of the compound derivative using a common stock equivalent and the current share price of the Company’s common stock. As a result of this estimate, the Company’s valuation model resulted in a compound derivative balance associated with the Series E Preferred Stock of $801,080 and $805,303 as of June 30, 2016 and December 31, 2015, respectively. This amount is included as a derivative liability on the Company’s unaudited condensed consolidated balance sheet. Fair value adjustments of $4,223 and $1 were charged to derivative income (expense) for the six months ended June 30, 2016 and 2015, respectively.
f) Series F Preferred Stock
On October 4, 2013, the Company filed the certificate of designation pursuant to which the Company set forth the designation, powers, rights, privileges, preferences and restrictions of 500,000 authorized shares of Series F Preferred Stock, par value $0.001 per share.
The shares of Series F Preferred Stock have a stated value of $1.00, have no voting rights, are entitled to no dividends due or payable and are convertible into the number of shares of the Company’s common stock determined by dividing the stated value by the conversion price, which is defined as 85% of the average closing bid price of the common stock over the five trading days immediately preceding the date of conversion, but no less than the par value of the common stock. At any time after the issuance date through the fifth anniversary of the issuance of the Series F Preferred Stock, the Company shall have the option to redeem any unconverted shares at an amount equal to 130% of the stated value of the Series F Preferred Stock plus accrued and unpaid dividends, if any. Redemption shall be established by the Company in its sole and absolute discretion and no holder of Series F Preferred Stock may demand that the Series F Preferred Stock be redeemed.
There were no issuances, conversions or redemptions of Series F Preferred Stock during the periods ended June 30, 2016 and December 31, 2015. At June 30, 2016 and December 31, 2015, the Company had 190,000 and 190,000 shares of Series F Preferred Stock issued and outstanding, respectively.
Based upon the Company’s evaluation of the terms and conditions of the Series F Preferred Stock, the embedded conversion feature related to the Series F Preferred Stock was afforded the exemption as a conventional convertible instrument due to certain variabilities in the conversion price, and met the conditions for equity classification. However, the Company is required to bifurcate the embedded conversion feature and carry it as a derivative liability.
The Company estimated the fair value of the compound derivative using a common stock equivalent and the current share price of the Company’s common stock. As a result of this estimate, the Company’s valuation model resulted in a compound derivative balance associated with the Series F Preferred Stock of $189,564 and $189,979 as of June 30, 2016 and December 31, 2015, respectively. This amount is included as a derivative liability on the Company’s unaudited condensed consolidated balance sheet. Fair value adjustments of $415 and $0 were charged to derivative income (expense) for the six months ended June 30, 2016 and 2015, respectively.
g) Series G Preferred Stock
On April 17, 2014, the Company filed the certificate of designation pursuant to which the Company set forth the designation, powers, rights, privileges, preferences and restrictions of 500,000 authorized shares of Series G Preferred Stock, par value $0.001 per share.
The shares of Series G Preferred Stock have a stated value of $1.00, have voting rights equal to 5,000,000 votes of common stock, are entitled to no dividends due or payable, are non-redeemable, and are convertible into the number of shares of the Company’s common stock determined by dividing the stated value by the conversion price, which is defined as 85% of the average closing bid price of the common stock over the twenty trading days immediately preceding the date of conversion, but no less than par value of the common stock.
COROWARE, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
There were no issuances, conversions or redemptions of Series G Preferred Stock during the periods ended June 30, 2016 and December 31, 2015. At June 30, 2016 and December 31, 2015, the Company had 25,000 and 25,000 shares of Series G Preferred Stock issued and outstanding, respectively.
Based upon the Company’s evaluation of the terms and conditions of the Series G Preferred Stock, the embedded conversion feature related to the Series G Preferred Stock was afforded the exemption as a conventional convertible instrument due to certain variabilities in the conversion price, and met the conditions for equity classification. However, the Company is required to bifurcate the embedded conversion feature and carry it as a derivative liability.
The Company estimated the fair value of the compound derivative using a common stock equivalent and the current share price of the Company’s common stock. As a result of this estimate, the Company’s valuation model resulted in a compound derivative balance associated with the Series G Preferred Stock of $24,943 and $24,997 as of June 30, 2016 and December 31, 2015, respectively. This amount is included as a derivative liability on the Company’s unaudited condensed consolidated balance sheet. Fair value adjustments of $54 and $0 were charged to derivative income (expense) for the six months ended June 30, 2016 and 2015, respectively.
NOTE 17 – COMMON STOCK AND TREASURY STOCK
Common Stock
The Company is authorized to issue up to 35,000,000,000 shares of $0.0001 par value common stock, of which 11,937,670,076 and 8,888,809,250 shares were issued and outstanding as of June 30, 2016 and December 31, 2015, respectively. On June 15, 2016, the board of directors approved the increase of the total amount of authorized shares of common stock from 13,000,000,000 to 35,000,000,000.
During the year ended December 31, 2015, the Company issued 474,531,098 shares of common stock pursuant to conversions of various notes payable and other debts. The shares were valued at an aggregate of $84,611.
During the six months ended June 30, 2016, the Company issued 3,048,860,826 shares of common stock pursuant to conversions of Series E Preferred Stock, and various notes payable and other debts. The shares were valued at an aggregate of $178,936.
Treasury Stock
During the year ended December 31, 2015, the Company repurchased a total of 129,933,000 shares of common stock into the Company’s treasury for $12,993.
During the six months ended June 30, 2016, the Company repurchased a total of 58,248,000 shares of common stock into the Company’s treasury for $9,637.
As of June 30, 2016 and December 31, 2015, the Company held 189,966,000 and 131,718,000 shares of common stock in treasury, respectively.
NOTE 18 – STOCK OPTIONS AND WARRANTS
Employee Stock Options
The Company has a 2005 Stock Option Plan which is authorized to issue 66,667 options. There are currently no options outstanding under this plan. During 2016 and 2015, 38,164 and -0- unvested options expired. No options were issued during 2016 or 2015.
Stock Purchase Warrants
On February 5, 2016, the Company granted 2,000,000,000 warrants to acquire shares of common stock at $0.0006 per share. The warrants were valued at $400,000 using the Black-Scholes method and were recognized as a loss on extinguishment of debt in the unaudited condensed consolidated statement of operations. All tranches of stock purchase warrants were issued to a single note holder in connection with the issuance of convertible debt.
COROWARE, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
A summary of the status of the Company’s options and warrants as of June 30, 2016 and December 31, 2015, as well as the changes during the six months ended June 30, 2016 and the year ended December 31, 2015 is presented below:
|
|
|
Number of
Options and
Warrants
|
|
|
|
|
|
|
|
Outstanding at December 31, 2014
|
|
|
38,164
|
|
|
|
|
|
|
|
|
Options and warrants granted
|
|
|
-
|
|
|
Options and warrants exercised
|
|
|
-
|
|
|
Options and warrants forfeited or expired
|
|
|
-
|
|
|
Outstanding at December 31, 2015
|
|
|
38,164
|
|
|
Exercisable at December 31, 2015
|
|
|
38,164
|
|
|
|
|
|
|
|
|
Options and warrants granted
|
|
|
2,000,000,000
|
|
|
Options and warrants exercised
|
|
|
-
|
|
|
Options and warrants forfeited or expired
|
|
|
(38,164
|
)
|
|
Outstanding at June 30, 2016
|
|
|
2,000,000,000
|
|
|
Exercisable at June 30, 2016
|
|
|
2,000,000,000
|
|
In applying the Black-Scholes options pricing model to the option and warrant grants, the fair value of our share-based awards granted for the six months ended June 30, 2016 were estimated using the following assumptions:
|
Risk-free interest rate
|
|
|
1.25
|
%
|
|
Expected options life
|
|
|
4.91
|
|
|
Expected dividend yield
|
|
|
-
|
|
|
Expected price volatility
|
|
|
484.63
|
%
|
The following table summarizes information about stock options and warrants as of June 30, 2016:
|
|
Options and Warrants
Outstanding
|
|
Options and Warrants
Exercisable
|
|
|
Range of
Exercise
Prices
|
Number
Outstanding
|
|
Weighted
Average
Remaining
Contractual
Life (in
years)
|
|
Weighted
Average
Exercise
Price
|
|
Number
Exercisable
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.0006
|
|
|
2,000,000,000
|
|
|
|
4.51
|
|
|
$
|
0.0006
|
|
|
|
2,000,000,000
|
|
|
$
|
0.0006
|
|
The following table summarizes information about stock options and warrants as of December 31, 2015:
|
|
Options and Warrants
Outstanding
|
|
Options and Warrants
Exercisable
|
|
|
Range of
Exercise
Prices
|
Number
Outstanding
|
|
Weighted
Average
Remaining
Contractual
Life (in
years)
|
|
Weighted
Average
Exercise
Price
|
|
Number
Exercisable
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$3.60
|
|
|
38,164
|
|
|
|
0.38
|
|
|
$
|
3.60
|
|
|
|
38,164
|
|
|
$
|
3.60
|
|
NOTE 19 – SUBSEQUENT EVENTS
Management has evaluated subsequent events according to the requirements of FASB ASC Topic 855, Subsequent Events, and has determined that there were no material reportable subsequent events to be disclosed, other than those listed below:
COROWARE, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Preferred Stock Activity
Subsequent to June 30, 2016, the Company issued 20,000 shares of Series E Preferred Stock for services valued at $20,000 to two employees per the agreements.
Subsequent to June 30, 2016, the Company redeemed 4,811 shares of Series E preferred stock for $6,250 cash from three employees of the Company.
Debt Issuances
On July 13, 2016, the Company issued a convertible promissory note to YA Global for $108,000, of which $8,000 was an original issue discount. The note accrues simple interest at a rate of 0% per annum and is due on September 22, 2016, with a default simple interest rate of 18%. Pursuant to the terms of the note, the principal balance and accrued interest is convertible at the option of the note holder into shares of the Company’s common stock at a rate of 51% of the lowest closing price during the 20-day trading period prior to conversion. Effective July 21, 2016, the Company is to make weekly payments of $9,000 for twelve consecutive weeks.
On August 2, 2016, the Company entered into an accounts receivable financing arrangement with PowerUp for a principal amount received in cash of $51,000. The terms of the arrangement requires the Company to repay the principal balance plus an additional $19,600 in debt discounts for total remittance of $71,400. The terms of repayment require the Company to remit to the lender approximately 13% of all future receivables arising from credit card, debit card and prepaid transactions until such time as the total remittance is paid in full. This borrowing is secured by the assets of the Company. The additional $19,600 will be recognized as interest expense over the estimated term of the agreement. The term is not fixed due to the variable repayment terms; however, management currently estimates such terms to be between approximately two and eight months.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may" "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of such terms, or other comparable terminology. These statements are only predictions. Actual events or results may differ materially from those in the forward-looking statements as a result of various important factors. Although we believe that the expectations reflected in the forward-looking statements are reasonable, they should not be regarded as a representation by CoroWare, Inc., or any other person, that such expectations will be achieved. The business and operations of CoroWare, Inc. are subject to substantial risks, which increase the uncertainty inherent in the forward-looking statements contained in this report.
Overview
CoroWare, Inc. (“CWI” or, collectively with its subsidiaries, the “Company”) is a public holding company whose principal subsidiary, CoroWare Technologies, Inc. (“CTI”), has expertise in information technology consulting, mobile robotics, and Internet of Things (“IOT”). Through our subsidiary, the Company delivers custom engineering services, hardware and software products.
Employees
As of December 31, 2015, we had forty-four (44) employees comprised of one (1) full-time Officer and CEO, two (2) full-time finance administration persons, one (1) full-time human resources person, thirty-two (32) full-time employees delivering services, and eight (8) part-time employees delivering services. Our employees are not represented by a union. We consider relations with our employees to be positive and productive.
COROWARE TECHNOLOGIES, INC.
CTI is a software professional services company with a strong focus on information technology integration and robotics integration, business automation solutions, and unmanned systems solutions to its customers in North America and Europe.
CTI’s consulting staff members uses their experience to develop product specifications, project plans, marketing plans, workflow checklists, and perform their work with the objective of helping enterprise customers - such as Microsoft - deliver their solutions and products efficiently, affordably and on schedule.
CTI service model includes R&D engineering services; business process workflow; software architecture, design and development; content management; and marketing coordination and management. CTI’s revenues are principally derived from standing contracts with customers whose product development groups require custom software development and consulting companies. Existing contract revenues vary month by month based on the demands of the clients.
CTI’s enhanced collaboration and conferencing subscription services were discontinued in fiscal year 2015 as the Company focused its resources on its growing software professional services business.
COROWARE ROBOTICS SOLUTIONS, INC.
In fiscal year 2015, the Company created a new subsidiary, CoroWare Robotics Solutions, Inc. (“CRS”). CRS is a technology incubation company whose focus is on the delivery of mobile robotics and IOT products, solutions and services for university, government and corporate researchers, and enterprise customers.
Recently, CoroWare Robotics Solutions began to integrate Mixed Reality into its solutions portfolio planning, and is actively prototyping augmented reality solutions based on the Microsoft HoloLens platform and virtual reality solutions based on the HTC VIVE platform.
Regulation
Our services and products are not uniquely subject to governmental or industry regulations.
Research & Development
Our research and development activities have primarily been focused on the development of software components, mobile robot platforms and IOT solutions.
Products
CoroBot Classic:
CoroBot Classic was created to minimize the complexity of robot development. By combining a powerful PC-class platform with a robust, object-oriented software development system, the CoroBot Classic empowers users to rapidly deploy and develop robotic solutions. The CoroBot Classic also assists the hardware developer with additional physical mounting space, ports, sensors and communication devices.
CoroBot Spark:
CoroBot Spark is an open and state-of-the-art mobile robotics platform that is based on the Raspberry Pi™ 2 Model B embedded computer and the CoroBot Pi Hat™ embedded controller card, and will support the development of mobile applications that run on both Linux and Windows 10 operating systems. The CoroBot Spark platform will include open and cross-platform application programming interfaces that support the development of mobile robot applications.
PLAN OF OPERATION
We believe that CoroWare is well positioned for stable growth in Fiscal Year 2016, principally through continued growth of our CoroWare Business Solutions group.
The Business Consulting Services group anticipates growing its revenues by delivering consulting services to its long-term clients – including Microsoft – such as R&D engineering; business process workflow; software architecture, design and development; content management; and marketing coordination and management.
The Robotics & Automation group is in the process of reestablishing its market presence by providing custom engineering solutions and services to clients who are developing innovative software services, solutions and products that leverage our expertise in “Internet of Things”.
We shall continue to grow an investor relations program that has already helped the Company communicate more effectively and actively with CoroWare shareholders, and generate greater awareness of CoroWare and our services, solutions and products.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2016 COMPARED TO THREE MONTHS ENDED JUNE 30, 2015
During the three months ended June 30, 2016, revenues were $1,971,901 compared to revenues of $1,355,239 during the three months ended June 30, 2015, an increase of $616,662 or 45.5%. Revenues in the three months ended June 30, 2016 were higher compared to the three months ended June 30, 2015 as the Company continued to focus on selling R&D support, operations support, and marketing support services in 2016.
Cost of sales was $1,585,033 and $1,070,007 for the three months ended June 30, 2016 and 2015, respectively, an increase of $515,026 or 48.1%. Cost of goods sold primarily represents labor and labor-related costs in addition to overhead costs. The Company completed the reorganization of its Robotics & Automation team through June 30, 2016, further reducing its cost of sales.
Gross profits increased to $386,868 during the three months ended June 30, 2016 compared to $285,232 during the three months ended June 30, 2015, an increase of $101,636 or 35.6%. Gross profits increased during the three months ended June 30, 2016 as a result of gross revenues increased. The gross profit percentage in the three months ended June 30, 2016 was 19.6% compared to 21.0% in the three months ended June 30, 2015.
Operating expenses were $450,871 for the three months ended June 30, 2016 compared to $515,006 for the three months ended June 30, 2015, a decrease of $64,135 or 12.5%. General and administrative expenses amounted to $415,261 during the three months ended June 30, 2016 compared to $453,037 for the three months ended June 30, 2015, and represented mostly labor and related compensation costs, legal and professional fees, outside services, travel expenses, rental expense and related office expenses. Sales and marketing expenses were $21,133 for the three months ended June 30, 2016 compared to $39,221 for the three months ended June 30, 2015. Research and developments costs totaled $11,494 for the three months ended June 30, 2016 compared to $19,548 during the three months ended June 30, 2015. Depreciation and amortization costs were $2,983 for the three months ended June 30, 2016 compared to $3,200 for the three months ended June 30, 2015.
Loss from operations was $64,003 for the three months ended June 30, 2016 compared to $229,774 for the three months ended June 30, 2015, a decrease of $165,771 or 72.1%. The decrease in loss from operations in the three months ended June 30, 2016 was due to an increase in gross profits and a decrease in general and administrative expenses.
Other income (expenses) was $5,824,755 during the three months ended June 30, 2016 compared to other income (expenses) of $(227,687) in the three months ended June 30, 2015, an increase of $6,052,442 or 2658.2%. Other expenses is comprised primarily of gain/loss on derivative, amortization of debt discount, deferred finance costs, accrued interest on notes payable, and loss on extinguishment of debt. The change in derivative liabilities for the three months ended June 30, 2016 was $6,092,487 compared to $(78,751) for the three months ended June 30, 2015, an increase of $6,171,238 or 7836.4%. The embedded conversion features associated with our convertible debentures are valued based on the number of shares that are indexed to that liability. Keeping the number of shares constant, the liability associated with the embedded conversion features increases as our share price increases and, likewise, decreases when our share price decreases. Derivative income (expense) displays the inverse relationship. Interest expense, net for the three months ended June 30, 2016 was $267,732 compared to $154,233 for the three months ended June 30, 2015, an increase of $113,499 or 73.6%. The increase in interest expense is principally a result of an increase in accrued interest on debt and debt discount. The Company also recognized a $0 gain on extinguishment of debt during the three months ended June 30, 2016 compared to a gain on extinguishment of debt of $5,297 in the three months ended June 30, 2015, a decrease in gain of $5,297 or 100%.
Net income for the three months ended June 30, 2016 was $5,760,752 compared to net loss of $(457,461) for the three months ended June 30, 2015, an increase of $6,218,213 or 1359.3%. The increase in net income is primarily a result of an increase in gain on the change in derivative liabilities and an increase in loss on extinguishment of debt.
SIX MONTHS ENDED JUNE 30, 2016 COMPARED TO SIX MONTHS ENDED JUNE 30, 2015
During the six months ended June 30, 2016, revenues were $3,618,088 compared to revenues of $2,153,780 during the six months ended June 30, 2015, an increase of $1,464,308 or 68.0%. Revenues in the six months ended June 30, 2016 were higher compared to the six months ended June 30, 2015 as the Company continued to focus on selling R&D support, operations support, and marketing support services in 2016.
Cost of sales was $2,756,636 and $1,642,069 for the six months ended June 30, 2016 and 2015, respectively, an increase of $1,114,567 or 67.9%. Cost of goods sold primarily represents labor and labor-related costs in addition to overhead costs. The Company reorganized its Robotics & Automation team during the six months ended June 30, 2016 in order to further improve its gross profits in fiscal year 2016.
Gross profits increased to $861,452 during the six months ended June 30, 2016 compared to $511,711 during the six months ended June 30, 2015, an increase of $349,741 or 68.3%. Gross profits increased during the six months ended June 30, 2016 as a result of gross revenues increased. The gross profit percentage in the six months ended June 30, 2016 was 23.8% compared to 23.8% in the six months ended June 30, 2015.
Operating expenses were $1,217,049 for the six months ended June 30, 2016 compared to $930,177 for the six months ended June 30, 2015, an increase of $286,872 or 30.8%. General and administrative expenses amounted to $1,129,801 during the six months ended June 30, 2016 compared to $824,842 for the six months ended June 30, 2015, and represented mostly labor and related compensation costs, legal and professional fees, outside services, travel expenses, rental expense and related office expenses. Sales and marketing expenses were $48,649 for the six months ended June 30, 2016 compared to $59,239 for the six months ended June 30, 2015. Research and developments costs totaled $32,872 for the six months ended June 30, 2016 compared to $39,876 during the six months ended June 30, 2015. Depreciation and amortization costs were $5,727 for the six months ended June 30, 2016 compared to $6,220 for the six months ended June 30, 2015. The overall increase in operating expenses was due to the Company increasing its travel expenses in support of its marketing specialist services, and increasing investor relations expenses.
Loss from operations was $355,597 for the six months ended June 30, 2016 compared to $418,466 for the six months ended June 30, 2015, a decrease of $62,869 or 15.0%. The decrease in loss from operations in the six months ended June 30, 2016 was primarily due to an increase in gross profits.
Other expenses were $1,205,558 during the six months ended June 30, 2016 compared to other expenses of $1,353,686 in the six months ended June 30, 2015, a decrease of $148,128 or 10.9%. Other expenses is comprised primarily of gain/loss on derivative, amortization of debt discount, deferred finance costs, accrued interest on notes payable, and loss on extinguishment of debt. The change in derivative liabilities for the six months ended June 30, 2016 was $2,579,370 compared to $(840,790) for the six months ended June 30, 2015, an increase of $3,420,160 or 406.8%. The embedded conversion features associated with our convertible debentures are valued based on the number of shares that are indexed to that liability. Keeping the number of shares constant, the liability associated with the embedded conversion features increases as our share price increases and, likewise, decreases when our share price decreases. Derivative income (expense) displays the inverse relationship. Interest expense, net for the six months ended June 30, 2016 was $485,211 compared to $301,587 for the six months ended June 30, 2015, an increase of $183,624 or 60.9%. The increase in interest expense is principally a result of an increase in accrued interest on debt and debt discount. The Company also recognized a $3,299,717 loss on extinguishment of debt during the six months ended June 30, 2016 compared to $211,309 in the six months ended June 30, 2015, an increase of $3,088,408 or 1461.6%. The increase in loss on extinguishment of debt is primarily a result of the consolidation of debt with YA Global on February 5, 2016.
Net loss for the six months ended June 30, 2016 was $1,561,155 compared to net loss of $1,772,152 for the six months ended June 30, 2015, a decrease of $210,997 or 11.9%. The increase in net loss is primarily a result of an increase in loss on the change in derivative liabilities and an increase in loss on extinguishment of debt.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 2016 net cash provided by operating activities was $81,704 compared to $(96,045) of net cash used in operating activities for the six months ended June 30, 2015. This decrease for the six months ended June 30, 2016 was primarily due to an increase in net loss, an increase in change in derivative liability, an increase in loss on extinguishment of debt, and a decrease in accounts receivable and accounts payable.
During the six months ended June 30, 2016, we used $5,996 net cash from investing activities compared to $14,007 for the six months ended June 30, 2015, exclusively for purchases of property and equipment.
During the six months ended June 30, 2016, the Company had used $118,879 in cash from financing activities compared to net cash provided by financing activities of $104,906 for the six months ended June 30, 2015. This increased use of cash for financing activities was primarily due to payments made towards debt financings in the six months ended June 30, 2016.
At June 30, 2016, we had current assets of $214,009, current liabilities of $20,914,230, a working capital deficit of $20,737,704 and an accumulated deficit of $53,511,830.
At December 31, 2015, we had current assets of $284,936, current liabilities of $19,873,447, a working capital deficit of $19,588,511 and an accumulated deficit of $51,950,675.
We presently have limited and expensive available credit, and do not have bank financing or other external sources of liquidity. We will need to obtain additional capital in order to expand operations and become profitable. In order to obtain capital, we may need to sell additional shares of our common stock or borrow funds from private lenders. There can be no assurance that we will be successful in obtaining additional funding. We will still need additional capital in order to continue operations until we are able to achieve positive operating cash flow. Additional capital is being sought, but we cannot guarantee that we will be able to obtain such investments. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity, or capital expenditures.
CONTRACTUAL OBLIGATIONS
The following table sets forth the contractual obligations of the Company as of June 30, 2016 (debt discounts are not included):
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Payments due by Period
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Contractual Obligations
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Total
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Less than 1
year
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|
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1-3 years
|
|
|
3-5 years
|
|
|
More than5
years
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations collateralized by receivables
|
|
$
|
282,552
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|
|
$
|
282,552
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|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
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-
|
|
|
Convertible debt
|
|
|
4,590,318
|
|
|
|
4,590,318
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Notes payable
|
|
|
136,123
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|
|
|
136,123
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|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Notes payable, related parties
|
|
|
160,354
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|
|
|
160,354
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|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Small Business Administration loan
|
|
|
979,950
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|
|
|
979,950
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|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
$
|
6,149,297
|
|
|
$
|
6,149,297
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
EFFECT OF RECENT ACCOUNTING PRONOUNCEMENTS
Refer to Form 10-K for the year ended December 31, 2015 and Note 3 in the notes to the unaudited condensed consolidated financials as of June 30, 2016.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
With the participation of Lloyd T. Spencer, who serves as the Chief Executive Officer (the principal executive officer) and Interim Chief Financial Officer (the principal financial officer); the Company’s management has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act), as of the end of the quarterly period covered by this Quarterly Report on Form 10-Q. As of the end of the period covered by this Report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and interim chief financial officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our chief executive officer and interim chief financial officer concluded that our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. The ineffectiveness of our disclosure controls and procedures is the result of certain deficiencies in internal controls constituting material weaknesses as discussed below.
The Company has historically had limited operating revenue and, as such, all accounting and financial reporting operations have been and are currently performed by a limited number of individuals. The parties that perform the accounting and financial reporting operations are the only parties with any significant knowledge of generally accepted accounting principles. Thus, we lack segregation of duties in the period-end financial reporting process. This lack of additional accounting/auditing staff with significant knowledge of generally accepted accounting principles in order to properly segregate duties could result in ineffective oversight and monitoring and the possibility of a misstatement within the unaudited condensed consolidated financial statements. However, the material weaknesses identified did not result in the restatement of any previously reported financial statements or any other related financial disclosure, nor does management believe that it had any effect on the accuracy of the Company's unaudited condensed consolidated financial statements for the current reporting period.
The Company is currently reviewing its policies and is evaluating its disclosure controls and procedures so that it will be able to determine the changes it can and should make to make such controls more effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the period ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II
ITEM 1. LEGAL PROCEEDINGS
We are party to two pending legal proceedings that arose in the normal course of business. While the results of proceedings cannot be predicted with certainty, management believes that the final outcome of these proceedings should not have a material adverse effect on our unaudited condensed consolidated financial statements, and should not adversely affect our cash flows. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.
ITEM 1A. RISK FACTORS
As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF FUNDS
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(a) |
On January 8, 2016, the Company issued 15,000 shares of Series E Preferred Stock to a third party valued at $15,000 or $1.00 per share. The shares were issued for professional services rendered.
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On January 11, 2016, the Company issued 443,500,000 shares of common stock to a note holder for $22,175 at a price of $0.00005 per share. The shares were issued as a conversion of $22,175 in principal on an outstanding convertible promissory note.
On January 13, 2016, the Company issued 221,018,600 shares of common stock to a note holder for $11,051 at a price of $0.00005 per share. The shares were issued as a conversion of $8,500 in principal and $2,551 in accrued interest on an outstanding convertible promissory note.
On January 13, 2016, the Company issued 176,452,226 shares of common stock to a note holder for $14,798 at a price of $0.00008 per share. The shares were issued as a conversion of $14,798 in principal on an outstanding convertible promissory note.
On February 5, 2016, the Company granted 2,000,000,000 warrants to acquire shares of common stock at $0.0006 per share. The warrants were valued at $400,000 using the Black-Scholes method and were issued as consideration relating to the debt refinancing with YA Global.
On February 18, 2016, the Company issued 444,000,000 shares of common stock to a note holder for $22,200 at a price of $0.00005 per share. The shares were issued as a conversion of $22,175 in principal on an outstanding convertible promissory note.
On March 15, 2016, the Company issued 443,550,000 shares of common stock to a note holder for $22,175 at a price of $0.00005 per share. The shares were issued as a conversion of $22,175 in principal on an outstanding convertible promissory note.
On March 15, 2016, the Company issued 6,000 shares of Series E Preferred Stock to a third party valued at $12,000 or $2.00 per share. The shares were issued for professional services rendered.
On April 5, 2016, the Company issued 443,550,000 shares of common stock to a note holder for $44,350 at a price of $0.0001 per share. The shares were issued as a conversion of $44,350 in principal on an outstanding convertible promissory note.
On April 18, 2016, the Company issued 443,550,000 shares of common stock to a note holder for $22,175 at a price of $0.00005 per share. The shares were issued as a conversion of $22,175 in principal on an outstanding convertible promissory note.
On May 17, 2016, the Company issued 323,240,000 shares of common stock to a note holder for $16,162 at a price of $0.00005 per share. The shares were issued as a conversion of 16,162 shares of Series E Preferred Stock.
On June 21, 2016, the Company issued 110,000,000 shares of common stock to a note holder for $3,850 at a price of $0.00004 per share. The shares were issued as a conversion of $3,850 in principal on an outstanding convertible promissory note.
The above said sales relied on the exemption from registration afforded by Section 4(a)(2) of the Securities Act; adequate information was provided to offerees; and no general solicitation or advertising was made in connection with the offer or sale of the above said securities.
|
(c) |
On November 2, 2015, the Board of Directors authorized the repurchase of up to $500,000 of its common stock, par value $0.0001 per share at a price of up to $0.01 per share, with no expiration date. |
On January 12, 2016, the Company repurchased 20,800,000 shares of common stock into the Company’s treasury for $4,320 at a price of $0.0002 per share.
On January 15, 2016, the Company repurchased 16,648,000 shares of common stock into the Company’s treasury for $2,076 at a price of $0.00012 per share.
On January 15, 2016, the Company repurchased 20,800,000 shares of common stock into the Company’s treasury for $3,241 at a price of $0.00015 per share.
As of the June 30, 2016, the Company has repurchased a total of 189,966,000 shares of common stock at an aggregate value of $22,630. Of the $500,000 of common stock authorized to repurchase, there remains $477,370 of common stock to be repurchased.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
|
(a) |
At June 30, 2016, the Company was in default in payment of interest and/or principal on indebtedness amounting to $6,308,021. |
|
(b) |
As of the balance sheet date the Company is in arrears in the payment of dividends related to its Series B preferred stock in the amount of $15,969. |
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
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Exhibit
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Description
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31
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Certification of Periodic Financial Reports by Lloyd Spencer in satisfaction of Section 302 of the Sarbanes-Oxley Act of 2002
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32
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Certification of Periodic Financial Reports by Lloyd Spencer in satisfaction of Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. Section 1350
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: August 15, 2016
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COROWARE, INC.
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By:
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/s/ Lloyd T. Spencer
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Lloyd T. Spencer
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Chief Executive Officer and
Interim Chief Financial Officer
(Principal Executive Officer and Principal
Accounting and Financial Officer)
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