SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2003
Commission file number 000-25499
Network Installation Corporation
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(Exact name of small business issuer as specified in its charter)
Nevada 88-0390360
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State or other jurisdiction of (IRS Employer
Incorporation or organization Identification Number)
18 Technology Dr., Suite 140A
Irvine, CA 92618
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(Address of principal executive offices) (Zip Code)
(949) 753-7551
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(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
As of November 1, 2003, the Issuer had outstanding 12,616,330 shares of its
common stock, $0.001 par value.
Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]
PART I - FINANCIAL INFORMATION
NETWORK INSTALLATION CORP.
(Formerly, Flexxtech Corporation)
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2003
(Unaudited)
ASSETS
Current Asset:
Cash and cash equivalents . . . . . . . . . . . . $ 667
Accounts receivable . . . . . . . . . . . . . . . 337,763
Notes receivable - related parties. . . . . . . . 80,534
Other current assets. . . . . . . . . . . . . . . 2,289
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421,253
Property and Equipment, net. . . . . . . . . . . . . . . . . . . 7,739
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,745,840
-------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,174,832
=============
LIABILITIES & STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable and accrued expenses . . . . . . $ 1,358,428
Loans payable . . . . . . . . . . . . . . . . . . 61,730
Loans payable related parties . . . . . . . . . . 47,500
Due to factor . . . . . . . . . . . . . . . . . . 205,929
Convertible debt - current. . . . . . . . . . . . 663,860
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Total Current Liabilities . . . . . . . . . . . . . . . . 2,337,447
Long-term Liabilities:
Convertible debt. . . . . . . . . . . . . . . . . 378,000
STOCKHOLDERS' DEFICIT
Common stock, authorized 100,000,000 shares at $.001 par
value, issued and outstanding 12,616,330 shares. . 12,616
Additional paid in capital. . . . . . . . . . . . . . . 20,066,110
Shares to be issued . . . . . . . . . . . . . . . . . . 16,900
Accumulated deficit . . . . . . . . . . . . . . . . . . (20,636,241)
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Total Stockholders' Deficit . . . . . . . . . . . . (540,615)
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT. . . . . . . . . . . $ 2,174,832
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NETWORK INSTALLATION CORP.
(Formerly, Flexxtech Corporation)
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Three Month Periods Nine Month Period
Ended September 30, Ended September 30,
2003 2002 2003 2002
---------------- ---------------- ------------ ------------
Net revenue. . . . . . . . . . . . . . . . . . . . . $ 444,736 $ - $ 641,307 $ -
Cost of revenue. . . . . . . . . . . . . . . . . . . 367,361 - 503,196 -
---------------- ---------------- ------------ ------------
Gross profit . . . . . . . . . . . . . . . . . . . . 77,375 - 138,111 -
Operating Expenses . . . . . . . . . . . . . . . . . 1,316,761 253,164 1,634,005 1,110,984
---------------- ---------------- ------------ ------------
Loss from operations . . . . . . . . . . . . . . . . (1,239,386) (253,164) (1,495,894) (1,110,984)
Other income (expense)
Litigation settlement. . . . . . . . . . . . . . - - - (41,743)
Gain on settlement of note receivable. . . . . . - 192,314 - 192,314
Interest income. . . . . . . . . . . . . . . . . - - 1,320 -
Loss on conversion of debenture. . . . . . . . . (59,740) - (59,740) -
Loss on settlement of debts. . . . . . . . . . . - (150,000) - (322,443)
Interest expense . . . . . . . . . . . . . . . . (1,350,981) (86,525) (1,376,546) (240,533)
---------------- ---------------- ------------ ------------
Total other income (expense). . . . . . . (1,410,721) (44,211) (1,434,966) (412,405)
---------------- ---------------- ------------ ------------
Loss from continuing operations before
income taxes . . . . . . . . . . . . . . . . . . . (2,650,107) (297,375) (2,930,860) (1,523,389)
Provision of Income tax. . . . . . . . . . . . . . . - - 800 1,600
---------------- ---------------- ------------ ------------
Loss from continuing operations. . . . . . . . . . . (2,650,107) (297,375) (2,931,660) (1,524,989)
Discontinued operations
Loss from operations of discontinued subsidiary
(Less applicable income taxes of $800). . . - (95,711) - (1,502,172)
Gain from disposal of subsidiary . . . . . . . . - 327,012 - 327,012
---------------- ---------------- ------------ ------------
- 231,301 - (1,175,160)
Net loss . . . . . . . . . . . . . . . . . . . . . . $ (2,650,107) $ (66,074) $(2,931,660) $(2,700,149)
================ ================ ============ ============
Basic and diluted net loss per share:*
Basic and diluted loss per share from continuing
operations . . . . . . . . . . . . . . . . . . . . . $ (0.24) $ (1.78) $ (0.53) $ (11.45)
---------------- ---------------- ------------ ------------
Basic and diluted loss per share from discontinued
operations. . . . . . . . . . . . . . . . . . . . . $ 0.00 $ 1.39 $ 0.00 $ (8.83)
---------------- ---------------- ------------ ------------
Basic and diluted loss per share . . . . . . . . . . $ (0.24) $ (0.39) $ (0.53) $ (20.28)
================ ================ ============ ============
Basic and diluted weighted average shares
outstanding. . . . . . . . . . . . . . . . . . . . . 11,127,512 166,638 5,481,065 133,162
================ ================ ============ ============
* The basic and diluted net loss per share has been restated to retroactively effect a 200:1 reverse stock
split at January 23, 2003
Weighted average number of shares used to compute basic and diluted loss per share is the same since
since the effect of dilutive securities is anti-dilutive.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NETWORK INSTALLATION CORP.
(Formerly, Flexxtech Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2003 AND 2002
(Unaudited)
2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . $(2,931,660) $(2,700,149)
Adjustments to reconcile net loss to net cash used in operating
activities from continued operations:
Depreciation and amortization . . . . . . . . . . . . . . 6,206 154,979
Issuance of stocks for consulting services & compensation 2,198,000 826,591
Options granted for compensation. . . . . . . . . . . . . 6,987 -
Issuance of marketable securities for consulting services - 15,000
Loss on settlement/conversion of debt . . . . . . . . . . 59,740 322,443
Beneficial conversion feature of debentures . . . . . . . 134,000 -
Gain on settlement of note receivable . . . . . . . . . . - (192,314)
Disposal of subsidiaries. . . . . . . . . . . . . . . . . - (327,012)
(Increase) / decrease in current assets
Accounts receivable . . . . . . . . . . . . . . . . 174,259 (120,233)
Inventory. . . . . . . . . . . . . . . . . . . . . - (173,818)
Prepaid expenses . . . . . . . . . . . . . . . . . - (17,871)
Deposits & other current assets. . . . . . . . . . 3,775 6
Increase /(decrease) in current liabilities
Accrued expenses & accounts payable . . . . . . . . 286,610 (735,857)
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NET CASH USED IN OPERATING
ACTIVITIES FROM CONTINUED OPERATIONS. . . . . (62,083) (2,948,235)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash balance with disposed subsidiary. . . . . . . . . . - (26,335)
Cash received in acquisition of subsidiary . . . . . . . 3,311 -
------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES. 3,311 (26,335)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sales of common stock. . . . . . . . . . . - 825,879
Proceeds from shares to be issued. . . . . . . . . . . . 2,150 -
Increase in notes receivable . . . . . . . . . . . . . . (93,120) (110,300)
Proceeds from borrowings . . . . . . . . . . . . . . . . 247,640 2,671,564
Payments of loans. . . . . . . . . . . . . . . . . . . . (101,137) (777,082)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES . . . . . . 55,533 2,610,061
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . (3,239) (364,509)
CASH AND CASH EQUIVALENTS -BEGINNING. . . . . . . . . . . . . . 3,906 370,784
------------ ------------
CASH AND CASH EQUIVALENTS -ENDING . . . . . . . . . . . . . . . $ 667 $ 6,275
=========== ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NETWORK INSTALLATION CORP. & SUBSIDIARY
(Formerly, Flexxtech Corporation)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION:
The accompanying unaudited condensed interim financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission for the presentation of interim financial information, but
do not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. The audited financial
statements for the two years ended December 31, 2002 and 2001 were filed on
April 23, 2003 with the Securities and Exchange Commission and are hereby
referenced. In the opinion of management, all adjustments considered necessary
for a fair presentation have been included. Operating results for the nine-month
periods ended September 30, 2003 are not necessarily indicative of the results
that may be expected for the year ended December 31, 2003.
Basic and diluted net loss per share
Net loss per share is calculated in accordance with the Statement of financial
accounting standards No. 128 (SFAS No. 128), "Earnings per share". SFAS No. 128
superseded Accounting Principles Board Opinion No.15 (APB 15). Net loss per
share for all periods presented has been restated to reflect the adoption of
SFAS No. 128. Basic net loss per share is based upon the weighted average number
of common shares outstanding. Diluted net loss per share is based on the
assumption that all dilutive convertible shares and stock options were converted
or exercised. Dilution is computed by applying the treasury stock method. Under
this method, options and warrants are assumed to be exercised at the beginning
of the period (or at the time of issuance, if later), and as if funds obtained
thereby were used to purchase common stock at the average market price during
the period.
Description of business
The Company was organized on March 24, 1998, under the laws of the State of
Nevada, as Color Strategies. On December 20, 1999, the Company changed its name
to Infinite Technology Corporation. The Company changed its name to Flexxtech
Corporation in April 2000.
On May 23, 2003, the Company closed a purchase agreement to acquire 100% of the
issued and outstanding common stock of Network Installation Corporation (NIC).
The purchase price consisted of $50,000 cash, 7,382,000 shares of the Company's
common stock and five year option to purchase an additional 618,000 shares of
the Company stock if NIC's total revenue exceeds $450,000 for the period
beginning on June 1, 2003 and ending August 31, 2003. The option is exercisable
at a price equal to the closing bid price of the stock on August 31, 2003 (note
12).
A certificate of amendment was filed on July 10, 2003 to change the Company's
name from Flexxtech Corporation to Network Installation Corp.
NIC was incorporated on July 18, 1997, under the laws of the State of
California. The Company focuses on the implementation requirements of
specialty communication systems, Wireless Fidelity deployment and fixed
Wireless Local Area Networks, or WLANs. They offer their customers the
ability to integrate superior network solutions across the vast majority of
communication requirements.
Revenue Recognition
Revenue Recognition Revenue is recognized when the contract is completed
(Completed-Contract Method). The Company's revenue recognition policies are in
compliance with all applicable accounting regulations, including American
Institute of Certified Public Accountants (AICPA) Statement of Position (SOP)
81-1, Accounting for Performance of Construction-Type and Certain
Production-Type Contracts. Because of short duration of the contracts, the
Company did not have any work in progress as of September 30, 2003. Expenses are
recognized in the period in which the corresponding liability is incurred.
Issuance of shares for service
The Company accounts for the issuance of equity instruments to acquire goods and
services based on the fair value of the goods and services or the fair value of
the equity instrument at the time of issuance, whichever is more reliably
measurable.
Reclassifications
For comparative purposes, prior years' consolidated financial statements have
been reclassified to conform with report classifications of the current year.
2. PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of Network
Installation Corp., formerly Flexxtech Corporation (the "Parent"), and its 100%
owned subsidiary, Network Installation Corporation. All significant intercompany
accounts and transactions have been eliminated in consolidation. The historical
results for the period ended September 30, 2003 include the Company and Network
Installation Corporation (from the acquisition date), while the historical
results for the period ended September 30, 2002 include only Network
Installation Corp., formerly Flexxtech Corporation.
3. RECENT PRONOUCEMENTS
On April 30 2003, the FASB issued FASB Statement No. 149 (FAS 149), Amendment of
Statement 133 on Derivative Instruments and Hedging Activities. FAS 149 amends
and clarifies the accounting guidance on (1) derivative instruments (including
certain derivative instruments embedded in other contracts) and (2) hedging
activities that fall within the scope of FASB Statement No. 133 (FAS 133),
Accounting for Derivative Instruments and Hedging Activities. FAS 149 also
amends certain other existing pronouncements, which will result in more
consistent reporting of contracts that are derivatives in their entirety or that
contain embedded derivatives that warrant separate accounting. FAS 149 is
effective (1) for contracts entered into or modified after June 30, 2003, with
certain exceptions, and (2) for hedging relationships designated after June 30,
2003. The guidance is to be applied prospectively. The adoption of SFAS No. 149
does not have a material impact on the Company's financial position or results
of operations or cash flows.
On May 15, 2003, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 150 (FAS 150), Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. FAS 150 changes the accounting
for certain financial instruments that, under previous guidance, could be
classified as equity or "mezzanine" equity, by now requiring those instruments
to be classified as liabilities (or assets in some circumstances) in the
statement of financial position. Further, FAS 150 requires disclosure regarding
the terms of those instruments and settlement alternatives. FAS 150 affects an
entity's classification of the following freestanding instruments: a)
Mandatorily redeemable instruments b) Financial instruments to repurchase an
entity's own equity instruments c) Financial instruments embodying obligations
that the issuer must or could choose to settle by issuing a variable number of
its shares or other equity instruments based solely on (i) a fixed monetary
amount known at inception or (ii) something other than changes in its own equity
instruments d) FAS 150 does not apply to features embedded in a financial
instrument that is not a derivative in its entirety. The guidance in FAS 150 is
generally effective for all financial instruments entered into or modified after
May 31, 2003, and is otherwise effective at the beginning of the first interim
period beginning after June 15, 2003. For private companies, mandatorily
redeemable financial instruments are subject to the provisions of FAS 150 for
the fiscal period beginning after December 15, 2003. The adoption of SFAS No.
150 does not have a material impact on the Company's financial position or
results of operations or cash flows.
4. GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of the
Company as a going concern. However, the Company has accumulated deficit of
$20,636,241 including a net loss of $2,931,660 for the nine month period ended
September 30, 2003. The continuing losses have adversely affected the liquidity
of the Company. The Company faces continuing significant business risks,
including but not limited to, its ability to maintain vendor and supplier
relationships by making timely payments when due.
In view of the matters described in the preceding paragraph, recoverability of a
major portion of the recorded asset amounts shown in the accompanying balance
sheet is dependent upon continued operations of the Company, which in turn is
dependent upon the Company's ability to raise additional capital, obtain
financing and to succeed in its future operations. The financial statements do
not include any adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern.
Management has taken the following steps to revise its operating and financial
requirements, which it believes are sufficient to provide the Company with the
ability to continue as a going concern. Management devoted considerable effort
during the period ended September 30, 2003, towards obtaining additional equity
financing through various private placements and evaluation of its distribution
and marketing methods. In that regard, during the year ended December 31, 2002,
the Company disposed off all of its losing subsidiaries.
5. NOTES RECEIVABLE/PAYABLE - RELATED
Notes receivable from related parties
Through December 31, 2002, the Company had advanced $6,008 to an entity related
through common director and $38,000 to a shareholder and former officer of the
Company. As a part of the reorganization of the Company on April 9, 2003, the
amount were forgiven as a part of the whole transaction.
The Company has a receivable from a company related by common officer amounting
$80,534 as of September 30, 2003. The amount is unsecured, due on demand and non
interest bearing.
Notes payable to related parties
The notes payable to related parties through common major shareholders and
officer of the Company and individuals related to major shareholders of the
Company, amounting $1,727,908 were forgiven per restructuring agreement at April
9, 2003. The notes were due on demand, with interest rate ranging from 10% to
18% per year and secured by the assets of the Company. Interests on the notes
along with any accrued interest were also forgiven per a restructuring agreement
(note 12). As part of restructuring agreement, the Company issued 690,000 shares
of common stock to the related parties. The Company recorded $1,727,908 as an
addition to the stockholders' equity.
The Company has $3,500 payable based on the purchase agreement of the subsidiary
and $44,000 loans from the major shareholder and officer of the Company. The
amount is unsecured, due on demand and non interest bearing.
6. LOAN PAYABLE
NIC, the Company's wholly owned subsidiary, has an unsecured note payable of
$47,500, guaranteed by the officer and shareholder of the Company, bearing an
interest rate of 8.75%. The note was payable through a revolving line of
credit, which commenced on November 6, 2001, the date of the note, and was to be
expired in three years following the note date. The Company was to pay a total
of 36 payments of interest only on the disbursed balance beginning one month
from the note date and every month thereafter. The term period was to commence
upon the termination of the revolving line of credit period. During the term
period, the Company was to pay principal and interest payments in equal
installment sufficient to fully amortize the principal balance outstanding,
beginning one month from the commencement of the term period. All remaining
principal and accrued interest was due and payable 7 years from the date of the
note.
As a result of acquisition of NIC by the Company, NIC was in default on this
note, since the note prohibited a change of ownership over 25% of NIC's common
stock outstanding. The entire principal amount became due upon default and the
revolving line of credit is no longer available to NIC. The Company is in the
process of making payment arrangements with the financing institution. The
amount outstanding at September 30, 2003, amounted to $39,949.
The Company has notes payable to unrelated parties amounting $21,781. These
notes are due on demand, bear interest rate of 6% per annum and unsecured.
7. DUE TO FACTOR
On February 27, 2003, NIC, the subsidiary of the Company, entered into a
factoring and security agreement to sell, transfer and assign certain accounts
receivable to Orange Commercial Credit (OCC). OCC may at its sole discretion
purchase any specific account. All accounts sold are with recourse on seller.
All of the Company's property of NIC including accounts receivable, inventories,
equipment and promissory notes are collateral under this agreement. OCC will
advance 80% of the face amount of each account. The difference between the face
amount of each purchased account and advance on the purchased account shall be
reserve and will be released after deductions of discount and charge backs on
the 15th and the last day of each month. OCC charges 1% of gross face value of
purchased receivable for finance charge and 1% for administrative fees with
minimum charge of $750 on each settlement date. As of September 30, 2003, the
Company factored receivables of approximately $129,929. In connection with the
factoring agreement, the Company included fees of $10,752 in the period ended
September 30, 2003.
On September 17, 2003, NIC entered a factoring agreement with a related entity
for $76,000 face amount. This amount is payable in 30 days and certain
receivables were assigned and delivered. In the event that on the maturity date,
any amounts on the note remain, the holder can exercise its right the face
amount by $10,000 per month that the Note remains unpaid.
8. INCOME TAXES
No provision was made for Federal income tax since the Company has significant
net operating loss carryforwards. Through September 30, 2003, the Company
incurred net operating losses for tax purposes of approximately $19,893,000.
The net operating loss carryforwards may be used to reduce taxable income
through the year 2023. The availability of the Company's net operating loss
carryforwards are subject to limitation if there is a 50% or more positive
change in the ownership of the Company's stock. The provision for income taxes
consists of the state minimum tax imposed on corporations.
Temporary differences which give rise to deferred tax assets and liabilities at
September 30, 2003 comprised of depreciation and amortization and net operating
loss carry forward. The gross deferred tax asset balance as of September 30,
2003 was approximately $7,957,000. A 100% valuation allowance has been
established against the deferred tax assets, as the utilization of the loss
carry forwards cannot reasonably be assured.
9. STOCKHOLDERS' EQUITY
During the nine month periods ended September 30, 2003, the Company issued stock
at various times, as described per the following. The stocks were valued at the
average fair market value of the freely trading shares of the Company as quoted
on OTCBB on the date of issuance.
Stock Split
On January 23, 2003, the Company announced a 1 for 200 reverse stock split of
its common stock. All fractional shares are rounded up and the authorized shares
remain the same. The financial statements have been retroactively restated for
the effects of stock splits.
Common Stock:
During the nine month period ended September 30, 2003, the Company issued common
stock as follows:
75,000 shares of common stock were issued to an entity related through a common
officer at that time, for consulting fees, amounting to $3,750.
7,382,000 shares of common stock valued at $1,107,300 were issued for
acquisition of its subsidiary, Network Installation Corporation.
On April 7, 2003, the Company issued 800,000 shares of common stock to a major
shareholder as inducement for debentures amounting to $80,000. The shares were
valued at $120,000 and recorded as a deemed dividend to the major shareholder.
On April 7, 2003, the Company issued 250,000 shares of common stock to an
unrelated party as inducement for debentures amounting to $25,000. The shares
were recorded as debenture issuance cost up to the amount of debenture of
$25,000. The debentures have been presented net of debentures issuance cost
in the financial statements.
The Company issued 690,000 shares of common stock as a part of restructuring on
April 9, 2003 (note 12).
The Company issued 700,000 shares of common stock to a major shareholder for
consulting services amounting to $105,000.
The Company issued 400,000 shares of common stock to directors for directors'
fees amounting to $610,800.
The Company issued 275,000 shares of common stock to a major shareholder for
consulting services amounting to $278,750.
The Company issued 65,923 shares of common stock valued at $158,641 for
conversion of debentures in the amount of $98,901. The difference of the value
of the stock issued and the debenture amount of $59,740 was charged as a
loss on conversion.
The Company issued 1,550,000 shares to a major shareholder pursuant to a
debenture agreement. $1,199,700 interest was recorded in the financial statement
for these shares.
Convertible debentures:
In the year ended December 31, 2001, the Company issued debentures amounting
$720,000, carrying an interest rate of 6% per annum, due in August 2003. The
holders are entitled to, at any time or from time to time, convert the
conversion amount into shares of common stock of the Company, par value $.001
per share at a conversion price for each share of common stock equal to the
lower of (a) 120% of the losing bid price per share (as reported by Bloomberg,
LP) on the closing date, and (b) 80% of the lowest closing bid price per share
(as reported by Bloomberg, LP) of the Company's common stock for the five
trading days immediately preceding the date of conversion. The Company recorded,
in accordance with EITF 00-27 and 98-5, a beneficial conversion feature on the
issuance of the convertible debentures amounting $180,000 reflected in the
interest expense in the financial statement. As of September 30, 2003, the
outstanding balance of the debentures amounted to $563,860 out of which, $38,524
pertains to major shareholder.
On April 7, 2003, in connection with the recession agreement (note 12), the
Company issued convertible debentures of $140,000 to various parties. The
Company has recorded the debentures as recession cost in the financial
statements at December 31, 2002. The Holder of the debentures is entitled to
convert the face amount of this Debenture, plus accrued interest, anytime
following the Restricted Period, at the lesser of (i) 75% of the lowest closing
bid price during the fifteen (15) trading days prior to the Conversion Date or
(ii) 100% of the average of the closing bid prices for the twenty (20) trading
days immediately preceding the Closing Date ("Fixed Conversion Price"), each
being referred to as the "Conversion Price". No fractional shares or scrip
representing fractions of shares will be issued on conversion, but the number of
shares issuable shall be rounded up or down, as the case may be, to the nearest
whole share. The Debentures shall pay six percent (6%) cumulative interest, in
cash or in shares of common stock, par value $.001 per share, of the Company
("Common Stock"), at the Company's option, at the time of each conversion. The
debentures are payable on April 8, 2008.
On April 7, 2003, the company issued debentures amounting $105,000 to a major
shareholder and a related party to a major shareholder, carrying an interest
rate of 6% per annum, due in April 2008. The face amount of this Debenture may
be converted, in whole or in art, any time following the Closing Date. Holder is
entitled to convert the face amount of this Debenture, plus accrued interest,
anytime following the Closing Date, at the lesser of (i) 75% of the lowest
closing bid price during the fifteen (15) trading days prior to the Conversion
Date or (ii) 100% of the average of the closing bid prices for the twenty (20)
trading days immediately preceding the Closing Date ("Fixed Conversion Price"),
each being referred to as the "Conversion Price". No fractional shares or scrip
representing fractions of shares will be issued on conversion, but the number of
shares issuable shall be rounded up or down, as the case may be, to the nearest
whole share.
In connection with issuance of debentures, the Company issued 250,000 shares of
common stock to an unrelated party and 800,000 shares of common stock to a
related party. The shares issued to the unrelated party were recorded as
debenture issuance cost up-to the amount of debenture amounting $25,000. The
debentures have been presented net of debentures issuance cost in the financial
statements. The shares issued to the related party have been recorded as deemed
dividend amounting $120,000. The valuation of shares was based upon average fair
market value of the freely trading shares of the Company as quoted on OTCBB on
the date of issuance.
The Company has recorded, in accordance with EITF 00-27 and 98-5, a beneficial
conversion feature on the issuance of the convertible debentures in the nine
month period ended September 30, 2003, an amount of $134,000, reflected in the
financial statement as interest expense.
During the period ended September 30, 2003, the Company issued $158,000
debentures to a related party. These debentures carry an interest rate of 6% per
annum, due in July to September 2008. The face amount of these Debentures may be
converted, in whole or in part, any time following the Closing Date. Holder is
entitled to convert the face amount of this Debenture, plus accrued interest,
anytime following the Closing Date, at the lesser of (i) 75% of the lowest
closing bid price during the fifteen (15) trading days prior to the Conversion
Date or (ii) 100% of the average of the closing bid prices for the twenty (20)
trading days immediately preceding the Closing Date ("Fixed Conversion Price"),
each being referred to as the "Conversion Price". No fractional shares or scrip
representing fractions of shares will be issued on conversion, but the number of
shares issuable shall be rounded up or down, as the case may be, to the nearest
whole share.
The Company issued 1,550,000 shares to the major shareholder per debenture
agreement. Per the agreement, the Company was required to issue one hundred
thousand (100,000) shares of its common stock to holder, for each ten thousand
dollars ($10,000) invested. The Company recorded stock issued amounting
$1,199,700 as interest expense in the accompanying financial statements.
Convertible promissory notes payable
In the year ended December 31, 2001, the Company issued convertible promissory
notes of $100,000 due on April 1, 2004, carrying an interest rate of 10% per
annum. The holder of $100,000 promissory notes is entitled to convert the
conversion amount into shares of common stock of the Company, par value $.001,
at any time, per share at a conversion price for each share of common stock
equal $7.00 per share of common stock. The note is secured and collateralized by
shares of common stock of the Company at one share per every five dollars
($5.00) of the principal.
Stock option plan
In compliance with FAS No. 148, the Company has elected to follow the intrinsic
value method in accounting for its stock-based employee compensation plan as
defined by APB No. 25 and has made the applicable disclosures below.
Had the Company determined employee stock based compensation cost based on a
fair value model at the grant date for its stock options under SFAS 123, the
Company's net earnings per share would have been adjusted to the pro forma
amounts for the nine months ended September 30, 2003 (no options were issued in
the period ended September 30, 2002) as follows ($ in thousands, except per
share amounts):
Net loss - as reported $(2,932)
Stock-Based employee compensation
expense included in reported net
income, net of tax (7)
Total stock-based employee
compensation expense determined
under fair-value-based method for all
rewards, net of tax (10)
-------------
Pro forma net loss $(2,949)
=============
Loss per share:
Basic, as reported 0.53
Diluted, as reported 0.53
Basic, pro forma 0.54
Diluted, pro forma 0.54
10. LITIGATION
In the year ended December 31, 2002, a suit was brought against the Company
alleging the Company made false written and oral representations to induce the
plaintiff to invest in the Company and that such investment occurred despite the
Plaintiff's request that the funds be held in a brokerage account maintained by
a related entity. A co-defendant in the case also filed a cross-complaint in the
action alleging theories of recovery against the Company and several other
defendants and alleging fraud, breach of contract, misrepresentation, conversion
and securities fraud against the Company. Presently, the complaint and
cross-complaint have been answered by the Company and discovery has commenced.
The plaintiff has filed a motion to compel further discovery and for sanctions.
Management of the Company is opposing the claims and alleges that it delivered a
properly issued convertible note to the plaintiff. In the opinion of the
Company's counsel, the Company's exposure in the case is $100,000 for the
investment plus interest. However, if the claims against the Company are
successful, the punitive damages could triple the damages. The Company has
accrued $300,000 in the accompanying financial statements against any possible
outcome. The Company is attempting to settle the case with the plaintiff, and
has made a payment of $20,000 towards a definitive settlement agreement.
On April 25, 2003 the Superior Court of The State of California entered a
judgment in the amount of $46,120 against the Company, in favor of a vendor of
the Company's former subsidiary North Texas Circuit Board ("NTCB"). The Company
believes that it was never issued proper service of process for the complaint.
In addition, on August 20, 2002 NTCB was sold by the Company to a purchaser
("Purchaser"). Pursuant to terms of the share purchase agreement, Purchaser
assumes all liabilities of NTCB. The Company plans to vigorously oppose the
action.
On April 29, 2003 a suit was brought against the Company by an investor,
alleging breach of contract pursuant to a settlement agreement executed between
the Company and investor dated November 20, 2002. The suit alleges that the
Company is delinquent in its repayment of a $20,000 promissory note, of which
$5,000 has been repaid to date. Management of the Company intends to oppose the
claims.
The Company may be involved in litigation, negotiation and settlement matters
that may occur in the day-to-day operations of the Company and its subsidiary.
Management does not believe implication of these litigations will have any other
material impact on the Company's financial statements.
11. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
The Company prepares its statements of cash flows using the indirect method as
defined under the Financial Accounting Standard No. 95.
The Company paid $-0- for income taxes and interest during the nine month period
ended September 30, 2003. The Company paid income taxes of $-0- and interest of
$26,500 during the nine month period ended September 30, 2002.
The statement of cash flows does not include effect of non-cash transaction of
issuance of shares (note 9).
12. RESTRUCTURING AND ACQUISITIONS
On October 1, 2002, the Company signed to acquire 80% of the outstanding Common
Shares of W3M, Inc. (dba "Paradigm Cabling Systems"), a privately held
California corporation ("Paradigm"), in a stock for stock exchange. Paradigm was
incorporated in California in May of 1998, under its current corporate name,
W3M, Inc. Paradigm was a full service computer cabling, networking and
telecommunications integrator contractor, providing networks from stem to stern
in house, for larger, medium and smaller industrial, educational and residential
complexes. As part of the transaction, the Company agreed to use its best
efforts to arrange in the future for an infusion of $250,000 in additional
capital, either as debt or equity or some combination of both, to Paradigm, in
order to increase its working capital. However, the Company was unable to
arrange infusion of the capital per the agreement.
On April 8, 2003, the Company and Paradigm agreed that the transaction is void
ab initio (that is, at its inception), with the effect that Paradigm remains the
owner of all of its Assets and the shares of the Company's Preferred Stock are
restored to the status of authorized but un-issued shares. The Purchase
Agreement and all related documents and all documents delivered in connection
therewith were thereby terminated ab initio and are of no force or effect
whatsoever. In connection with funds invested as working capital into Paradigm
during the period from October 1, 2002 until April 1, 2003, the Company issued
to Ashford Capital LLC and e-fund Capital/Barrett Evans (or its designee), 5
year convertible debentures in the amount of sixty five thousand dollars
($65,000) and seventy five thousand dollars ($75,000) respectively. The Company
recorded $140,000 as loss on acquisition and recession in the financial
statements at December 31, 2002.
On April 9, 2003, the Company signed a restructuring agreement with Duchess
Advisors LLC and its affiliates. Under the agreement, Western Cottonwood
Corporation, a related party through major shareholder, agreed to forgive Notes
receivable and interest receivable from the Company (note 5). Under the
agreement, Western Cottonwood and Atlantis Partners shall maintain a combined
ownership percentage of a non-dilutive 4.9% and Greg Mardock, former president
of the Company, shall maintain a combined ownership percentage of a non-dilutive
2% through the Company's first merger or acquisition transaction. Per the
agreement, the president of the Company resigned and nominees of Dutchess
Advisors LLC were appointed officers of the Company. Pursuant to the consulting
Agreement, the Company issued Seven Hundred Thousand (700,000) shares or common
stock of the Company to Dutchess Advisors, Ltd. (the "consultant"). Also, the
Company will pay to the Consultant, the sum of three thousand dollars per month
($3,000) for non accountable expenses for months 1-12. The Retainer shall
increase to five thousand dollars ($5,000) per month for months 13-24. Payment
of nine thousand dollars ($9,000) for the first three months is due upon
execution of this Agreement. Payment for the remaining months shall be due by
the fifth business day of each month and payable in the form of corporate check
or wire transfer. The Company shall reimburse Consultant for those reasonable
and necessary out-of-pocket expenses (including but not limited to travel,
transportation, lodging, meals etc.) which have been approved by the President
of the Company prior to their incurrence and which have been incurred by
Consultant in connection with the rendering of services hereunder. The term of
this Agreement shall be twenty four (24) months commencing on the date and year
first above written.
On May 23, 2003, the Company closed a purchase agreement to acquire 100% of the
issued and outstanding common stock of Network Installation Corporation (NIC).
The purchase price consisted of $50,000 cash, 7,382,000 shares of the Company's
common stock and five year option to purchase an additional 618,000 shares of
the Company stock if NIC's total revenue exceeds $450,000 for the period
beginning on June 1, 2003 and ending August 31, 2003. The option is exercisable
at a price equal to the closing bid price of the stock on August 31, 2003. A
summary of the NIC assets acquired, liabilities assumed and consideration for is
as follows:
Allocated
Amount
Cash. . . . . . . . . . . . . $ 3,311
Accounts receivable . . . . . 511,722
Notes receivable. . . . . . . 73,206
Fixed assets. . . . . . . . . 10,262
Other assets. . . . . . . . . 2,289
Current liabilities . . . . . (1,189,330)
Goodwill. . . . . . . . . . . 1,745,840
------------
$ 1,157,300
============
Consideration paid. . . . . . Amount
Cash. . . . . . . . . . . . . $ 50,000
Common stock-7,382,000 shares 1,107,300
------------
$ 1,157,300
============
Unaudited Pro-forma revenue, net income and income per share assuming the
transaction had been completed at the beginning of the periods reported, on
pro-forma financial results would be as follows:
For Nine months period
September 30, 2003 September 30, 2002
------------------- -------------------
(Unaudited) (Unaudited)
Revenue $1,199,680 $804,080
Net loss for the period $3,184,057 $2,524,090
Net loss per share $0.58 $0.34
ITEM 2. Management's Discussion and Analysis or Plan of Operation
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Report on Form 10-QSB contains forward-looking statements,
including, without limitation, statements concerning our possible or assumed
future results of operations. These statements are preceded by, followed by or
include the words "believes," "could," "expects," "intends" "anticipates,"
or similar expressions. Our actual results could differ materially from those
anticipated in the forward-looking statements for many reasons including: our
ability to continue as a going concern, adverse economic changes affecting
markets we serve; competition in our markets and industry segments; our timing
and the profitability of entering new markets; greater than expected costs,
customer acceptance of wireless networks or difficulties related to our
integration of the businesses we may acquire and other risks and
uncertainties as may be detailed from time to time in our public announcements
and SEC filings. Although we believe the expectations reflected in the
forward-looking statements are reasonable, they relate only to events as of
the date on which the statements are made, and our future results, levels of
activity, performance or achievements may not meet these expectations. We do
not intend to update any of the forward-looking statements after the date of
this document to conform these statements to actual results or to changes in
our expectations, except as required by law.
The discussion and financial statements contained herein are for the
three and nine month periods ended September 30, 2003 and September 30, 2002.
The following discussion should be read in conjunction with our financial
statements and the notes thereto included herewith.
Overview:
THREE MONTHS AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2003 AS COMPARED TO
THREE MONTHS AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2002 (restated
for disposal of subsidiaries)
Results of Operations
-----------------------
We generated consolidated revenues of $444,736 and $641,307 for the three and
nine months ended September 30, 2003 as compared to $0 for the three and nine
months ended September 30, 2002. The increase of $444,736 and $641,307 is due
to the acquisition of the Company's operating subsidiary Network Installation
Corp.
Net Revenues
-------------
We had net revenues of $444,736 for the quarter ended September 30,
2003 as compared to $0 for the quarter ended September 30, 2002. We had net
revenues of $641,307 for the nine months ended September 30, 2003 as compared to
$0 for the nine months ended September 30, 2002. All of our revenue in the
current period is from our subsidiary Network Installation Corporation. Our
operations from the subsidiaries disposed off in 2002 have been separately
classified in the Statements of Operations.
Cost of Revenue
-----------------
We incurred Cost of Revenue of $367,361 and 503,196 for the three and
nine month period ended September 30, 2003, respectively as compared to $0 for
the three and nine month period ended September 30, 2002. The increase of
$367,361 and $503,196 is due to the acquisition of the Company's operating
subsidiary Network Installation Corp.
General, Administrative and Selling Expenses
------------------------------------------------
We incurred costs of $1,316,761 and $1,634,005 for the three and
nine month ended September 30, 2003 as compared to $253,164 and $1,110,984
for the three month and nine month periods ended June 30, 2002, respectively.
General, Administrative and Selling Expenses increased in the current period
primarily because we issued shares of common stock amounting to $687,419 as
consulting fees in the prior period as compared to issuance of common shares
amounting $121,950 in the current period.
Net loss before income taxes and loss on discontinued segments
-----------------------------------------------------------------------
We had a loss before taxes and discontinued segments of ($2,650,107)
and ($2,930,860) for the three and nine month period ended September 30, 2003,
as compared to a loss of (253,164) and (1,110,984) for the three and nine month
periods ended September 30, 2002. The decrease in net loss before income taxes
and loss on discontinued segments is due to the factors described above as well
as the fact that we did not have any loss on settlement of debt in the current
period as compared to $172,444 in the corresponding periods last year.
.
Net loss
---------
We had a net loss of ($2,650,107) and ($2,931,660) for the three and nine
Month periods ended September 30, 2003 as compared to a net loss of ($66,074)
and ($2,700,149) for the three and six month periods ended September
30, 2002.
Basic and diluted loss per share
-------------------------------------
Our basic and diluted loss per share for the quarter ended September 30,
2003 was $(0.24) as compared to $(0.39) for the quarter ended September 30,
2002. The decrease of $(0.15) is due to the acquisition of the Company's
operating subsidiary Network Installation Corp.
Liquidity and Capital Resources
----------------------------------
We must continue to raise capital to fulfill its plan of acquiring companies
and assisting in the development of those companies internally. If we are unable
to raise any additional capital, our operations will be curtailed. As of
September 30, 2003, we had total Current Assets of $421,253 and Current
Liabilities of $2,337,447 . Cash and cash equivalents were $667 as compared
to $72,444 at September 30, 2002. Our Stockholder's Deficit at September 30,
2003 was $(540,615).
We had a net usage of cash due to operating activities in September 30,
2003 and 2002 of $62,083 and $2,948,235 respectively. The major factor in
contributing to negative cash flows in the corresponding period last year was
the net loss for the period amounted to $2,634,077 as compared to a net loss
of $281,553 in the nine month period ended September 30, 2003. We had
net cash provided by financing activities of $55,533 and $2,610,061 in the
nine month period ended September 30, 2003 and 2002, respectively. The
reason for decrease in the current period is no sale shares for cash as
compared to sale of shares for cash of $824,191 in the corresponding
period last year. We had $0 from borrowings in the period ended September
30, 2003 as compared to $496,187 in the corresponding period last year.
Currently, our cash needs include, but are not limited to, legal and
accounting services, and future acquisitions.
Subsidiaries
------------
As of September 30, 2003, we have one subsidiary, Network
Installation Corporation.
Substantial Indebtedness
-------------------------
We have a substantial amount of indebtedness. As a result of our level of
debt and the terms of our debt instruments:
- our vulnerability to adverse general economic conditions is heightened;
- we will be required to dedicate a substantial portion of our cash flow
from operations to repayment of debt, limiting the availability of cash for
other purposes;
- we are and will continue to be limited by financial and other restrictive
covenants in our ability to borrow additional funds, consummate asset sales,
enter into transactions with affiliates or conduct mergers and acquisitions;
- our flexibility in planning for, or reacting to, changes in its business
and industry will be limited;
- we are sensitive to fluctuations in interest rates because some of our
debt obligations are subject to variable interest rates; and
- our ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, general corporate purposes or other
purposes may be impaired.
Our ability to pay principal and interest on our indebtedness and to
satisfy our other debt obligations will depend upon our future operating
performance, which will be affected by prevailing economic conditions and
financial, business and other factors, some of which are beyond our control. If
we are unable to service our indebtedness, we will be forced to take actions
such as reducing or delaying capital expenditures, selling assets, restructuring
or refinancing our indebtedness, or seeking additional equity capital. There is
no assurance that we can effect any of these remedies on satisfactory terms, or
at all.
Item 3. Controls and Procedures
Our Chief Executive Officer and Interim Chief Financial Officer evaluated
the effectiveness of our disclosure controls and procedures as of the end of the
period covered by this Quarterly Report on Form 10-QSB. Based on this
evaluation, the Chief Executive Officer and Interim Chief Financial Officer
concluded that our disclosure controls and procedures are effective to ensure
that information we are required to disclose in reports that we file or submit
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange Commission
rules and forms.
There was no change in our internal control over financial reporting that
occurred during the fourth fiscal quarter of the fiscal year covered by this
Annual Report on Form 10-KSB that materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.
PART II
Item 1. Litigation
In the year ended December 31, 2002, a suit was brought against us alleging
we made false written and oral representations to induce the plaintiff to invest
in our Company and that such investment occurred despite the Plaintiff's request
that the funds be held in a brokerage account maintained by a related entity. A
co-defendant in the case also filed a cross-complaint in the action alleging
theories of recovery against us and several other defendants and alleging
fraud, breach of contract, misrepresentation, conversion and securities fraud.
Presently, we have answered the complaint and cross-complaint and discovery
has commenced. The plaintiff has filed a motion to compel further discovery
and for sanctions. We are vigorously opposing the claims. In the opinion of
our counsel, our exposure in the case is $100,000 for the investment plus
interest. However, if the claims against us are successful, the punitive
damages could triple the damages. We have accrued $300,000 in the accompanying
financial statements against any possible outcome. We are attempting to settle
the case with the plaintiff, and has made a good faith payment of $20,000
towards a definitive settlement agreement.
On April 25, 2003 the Superior Court Of The State of California entered a
judgment in the amount of $46,120 against us; in favor of a vendor of our
former subsidiary North Texas Circuit Board ("NTCB"). We believe that we were
never issued proper service of process for the complaint. In addition, on
August 20, 2002, we sold NTCB to a purchaser. Pursuant to terms of
the share purchase agreement, the purchaser assumed all liabilities of NTCB.
We plan to vigorously oppose the action and to pursue the purchaser to pay the
judgment under its contractual obligation.
On April 29, 2003 a suit was brought against us by an investor, alleging
breach of contract pursuant to a settlement agreement executed between us and
investor dated November 20, 2002. The suit alleges that we are delinquent in
its repayment of a $20,000 promissory note, of which $5,000 has been repaid to
date. Management intends to oppose the claims.
Other than the litigation disclosed above, we are not aware of
threatened or existing litigation that could have an adverse material impact on
our financial statements.
Item 2: Changes in Securities
(a) Not Applicable.
(b) Not Applicable.
(c)
We issued 7,382,000 shares of common stock valued at $1,107,300 on May 10th,
2003 for acquisition of our subsidiary, Network Installation Corporation.
On April 7, 2003, we issued 800,000 shares of common stock to a major
shareholder as inducement for debentures amounting to $80,000. The shares were
valued at $120,000.
On April 7, 2003, we issued 250,000 shares of common stock to an unrelated
party as an inducement for debentures amounting to $25,000. The shares were
recorded as debenture issuance cost up to the amount of debenture of $25,000.
We issued 700,000 shares of common stock to a major shareholder for
consulting services amounting to $105,000 on June 11th, 2003.
On April 8, 2003, we issued convertible debenture of $140,000 to Dutchess
Private Equities Fund, LP. The debentures convert into common stock
at the lesser of (i) 75% of the lowest closing bid price during the fifteen
trading days prior to the Conversion Date or (ii) 100% of the average of
the closing bid prices for the twenty trading days immediately preceding
the Closing Date of the Transaction.
We issued 690,000 shares of common stock as a part of restructuring on April
9, 2003 to former management as per the transaction disclosed on Form 8-K filed
April 23, 2003.
We issued 275,000 shares of common stock to a major shareholder for consulting
services amounting to $278,750.
We issued 65,923 shares of common stock valued at $158,641 for conversion of
debentures in the amount of $98,901.
We issued 1,550,000 shares to a major shareholder pursuant to a debenture
agreement. $1,199,700 interest was recorded in the financial statements for
these shares.
The securities issued in the foregoing transactions were offered and sold in
reliance upon exemptions from the Securities Act of 1033 ("Securities Act")
registration requirements set forth in Sections 3(b) and 4(2) of the
Securities Act, and any regulations promulgated thereunder, relating to sales by
an issuer not involving any public offering. No underwriters were involved
in the foregoing sales of securities.
(d) Not Applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Item 5. Other Information.
Not Applicable
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number Description
4.1 Certificate of Amendment to the Certificate of Incorporation of
Flexxtech Corporation.
10.1 Reseller Agreement between Vivato, Inc. and the Company dated
August 14, 2002.
10.2 Motorola Reseller Agreement between Motorola, Inc. and the
Company dated August 18, 2003.
10.3 Short Term Rental Agreement between Vidcon Solutions Group, Inc.
and the Company dated February 5, 2003.
31.1 Section 302 Certification of the Chief Executive Officer.
31.1 Section 302 Certification of the Interim Chief Financial Officer.
32.2 Section 906 Certification of the Chief Executive Officer.
32.2 Section 906 Certification of the Interim Chief Financial Officer.
(b) Reports on Form 8-K
The Company filed a Form 8-K/A on September 9, 2003 that included Financial
Statements and Pro Forma Financial Information.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NETWORK INSTALLATION CORPORATION
(Registrant)
Date: November 13, 2003 By: /s/ Michael Cummings
--------------------------------
Michael Cummings
President & Chief Executive Officer
By: /s/ Michael Novielli
---------------------------------
Michael Novielli
Interim Chief Financial Officer