UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
FORM
10-Q
x
QUARTERLY REPORT UNDER SECTION
13 OR 15 (D) OF THE SECURITES
EXCHANGE
ACT OF 1934
FOR
THE QUARTERLY PERIOD ENDED September 30, 2008
COMMISSION
FILE NUMBER: 0-21419
NETFABRIC
HOLDINGS, INC.
(Exact
Name of Small Business Issuer as Specified in Its Charter)
|
Delaware
|
76-0307819
|
|
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
|
(I.R.S
Employer Identification No.)
|
(Address
of Principal Executive Offices)
299
Cherry Hill Road,
Parsippany,
New Jersey 07054
(973)-537-0077
(Issuer's
Telephone Number, Including Area Code)
(Former
address, if changed since last report)
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 o No x
Indicate
by check mark whether the registrant has submitted electronically and posted on
its Website, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T ( 232.405 of this chapter) during
the preceding 12 months ( or for such shorter period that the registrant was
required to submit and post such files) Yes o No x.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small r5eporting
company.
|
Large
accelerated filer o
|
Accelerated
filer o
|
|
Non-
accelerated filer o
|
Small
reporting company x
|
Indicate
by a check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No x
State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date: As of January 8, 2010, 97,053,044 shares of
common stock, $.001 par value per share, of the issuer were
outstanding.
Transitional
Small Business Disclosure Format (check one): Yes o No x
NETFABRIC
HOLDINGS, INC.
INDEX
|
Page
|
||
|
PART
I.
|
FINANCIAL
INFORMATION
|
|
|
Item
1.
|
Financial
Statements (Unaudited)
|
|
|
Condensed
Consolidated Balance Sheets
|
1
|
|
|
Condensed
Consolidated Statements of Operations
|
2
|
|
|
Condensed
Consolidated Statements of Cash Flows
|
3
|
|
|
Notes
to Interim Condensed Consolidated Financial Statements
|
4
|
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
8
|
|
Item
4.
|
Controls
and Procedures
|
12
|
|
PART
II.
|
OTHER
INFORMATION
|
12
|
|
Item
1.
|
Legal
Proceedings
|
12
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
12
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
12
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
13
|
|
Item
5.
|
Other
Information
|
13
|
|
Item
6.
|
Exhibits
|
13
|
|
Signatures
|
14
|
NETFABRIC
HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
September 30, 2008
|
DECEMBER 31,
2007
|
|||||||
|
(Unaudited)
|
(See Note)
|
|||||||
|
ASSETS
|
||||||||
|
CURRENT
ASSETS:
|
||||||||
|
Cash
|
$ | 6,061 | $ | 15,224 | ||||
|
Trade
accounts receivable, net
|
2,872,553 | 1,758,821 | ||||||
|
Prepaid
expenses and other current assets
|
184,511 | 34,012 | ||||||
|
Total
current assets
|
3,063,125 | 1,808,057 | ||||||
|
Property
and equipment, net
|
146,026 | 206,329 | ||||||
|
Goodwill
|
5,704,000 | 5,704,000 | ||||||
|
Other
intangibles, net
|
494,676 | 659,687 | ||||||
|
Other
assets
|
22,921 | 22,929 | ||||||
|
TOTAL
ASSETS
|
$ | 9,430,748 | $ | 8,401,002 | ||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
|
CURRENT
LIABILITIES:
|
||||||||
|
Convertible
debentures, net of unamortized discounts
|
$ | 50,000 | $ | 150,000 | ||||
|
Short
term borrowings
|
850,000 | 970,000 | ||||||
|
Accounts
payable and accrued liabilities
|
4,493,912 | 3,976,771 | ||||||
|
Accrued
compensation
|
443,128 | 554,880 | ||||||
|
Deferred
revenues and customer advances
|
572,680 | 112,000 | ||||||
|
Convertible
note, net of unamortized discount
|
1,317,232 | |||||||
|
Revolving
note, net of unamortized discount
|
1,389,376 | 981,555 | ||||||
|
Total
current liabilities
|
9,116,328 | 6,745,206 | ||||||
|
Convertible
note, net of unamortized discount
|
940,232 | |||||||
|
Total
liabilities
|
9,116,328 | 7,685,438 | ||||||
|
COMMITMENTS
AND CONTINGENCIES
|
||||||||
|
STOCKHOLDERS'
EQUITY :
|
||||||||
|
Common
Stock, $.001 par value, authorized shares 200,000,000, 97,053,044 and
96,053,044 shares issued and outstanding, respectively
|
97,053 | 96,053 | ||||||
|
Additional
paid-in capital
|
38,043,162 | 37,802,940 | ||||||
|
Accumulated
deficit
|
(37,825,795 | ) | (37,183,429 | ) | ||||
|
Total
stockholders' equity
|
314,420 | 715,564 | ||||||
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
|
$ | 9,430,748 | $ | 8,401,002 | ||||
The
accompanying notes should be read in conjunction with the condensed consolidated
financial statements.
-1-
NETFABRIC
HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED
CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS
|
Three Months
|
Three Months
|
Nine Months
|
Nine Months
|
|||||||||||||
|
Ended
|
Ended
|
Ended
|
Ended
|
|||||||||||||
|
September 30, 2008
|
September 30, 2007
|
September 30, 2008
|
September 30, 2007
|
|||||||||||||
|
Revenues
|
$ | 6,269,900 | $ | 3,636,721 | $ | 17,618,214 | $ | 12,016,185 | ||||||||
|
OPERATING
EXPENSES:
|
201,222 | |||||||||||||||
|
Direct
employee compensation and consultant expenses (includes share based
compensation of $18,250, $11,396 $37,830 and $34,188)
|
5,048,795 | 2,788,865 | 13,940,766 | 9,272,344 | ||||||||||||
|
Selling,
general and administrative expenses (includes share based
compensation of $78,824, $83,237, $163,392 and
$337,076)
|
981,070 | 1,070,006 | 2,876,702 | 3,978,922 | ||||||||||||
|
Non-cash
goodwill impairment
|
3,397,451 | |||||||||||||||
|
Depreciation
and amortization
|
71,706 | 41,466 | 227,751 | 239,229 | ||||||||||||
|
Total
operating expenses
|
6,101,571 | 3,900,337 | 17,045,219 | 16,887,946 | ||||||||||||
|
Income
(loss) from operations
|
168,329 | (263,616 | ) | 572,995 | (4,871,761 | ) | ||||||||||
|
OTHER
INCOME / (EXPENSE):
|
||||||||||||||||
|
Amortization
of debt discounts
|
(234,104 | ) | (182,799 | ) | (602,365 | ) | (552,272 | ) | ||||||||
|
Amortization
of debt issuance costs
|
(118,000 | ) | (112,000 | ) | (371,373 | ) | (112,000 | ) | ||||||||
|
Interest
and bank charges
|
(53,664 | ) | (78,359 | ) | (241,623 | ) | (240,202 | ) | ||||||||
|
Debt
extinguishment costs
|
(539,043 | ) | (539,043 | ) | ||||||||||||
|
Total
other income / (expense)
|
(405,768 | ) | (912,201 | ) | (1,215,361 | ) | (1,443,517 | ) | ||||||||
|
Loss
before provision for income taxes
|
(237,439 | ) | (1,175,817 | ) | (642,366 | ) | (6,315,278 | ) | ||||||||
|
Provision
for income taxes
|
- | - | - | |||||||||||||
|
LOSS
FROM CONTINUING OPERATIONS
|
(237,439 | ) | (1,175,817 | ) | (642,366 | ) | (6,315,278 | ) | ||||||||
|
DISCONTINUED
OPERATIONS:
|
||||||||||||||||
|
Loss
from operations of discontinued operations
|
- | - | - | (53,398 | ) | |||||||||||
|
NET
LOSS
|
$ | (237,439 | ) | $ | (1,175,817 | ) | $ | (642,366 | ) | $ | (6,368,676 | ) | ||||
|
Net
loss from continuing operations per common share, basic and
diluted
|
$ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.08 | ) | ||||
|
Net
loss from discontinued operations per common share, basic and
diluted
|
- | - | - | - | ||||||||||||
|
Net
loss per common share, basic and diluted
|
$ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.08 | ) | ||||
|
Weighted
average number of shares outstanding, basic and diluted
|
97,053,044 | 91,148,533 | 96,764,723 | 80,763,179 | ||||||||||||
The
accompanying notes should be read in conjunction with the condensed consolidated
financial statements.
-2-
NETFABRIC
HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED
CONDENSED CONSOLIDATED
STATEMENT
OF CASH FLOWS
|
NINE MONTHS
|
NINE MONTHS
|
|||||||
|
ENDED
|
ENDED
|
|||||||
|
OPERATING ACTIVITIES
|
September 30, 2008
|
September 30, 2007
|
||||||
|
Net
loss
|
$ | (642,366 | ) | $ | (6,368,676 | ) | ||
|
Loss
from discontinued operations
|
53,398 | |||||||
|
Adjustments
to reconcile net loss to net cash provided by (used
in) operating activities:
|
||||||||
|
Common
stock, options and warrants issued for services
|
77,600 | |||||||
|
Non-cash
charge for employee share based compensation
|
201,222 | 293,664 | ||||||
|
Non-cash
charge on debt extinguishment
|
539,043 | |||||||
|
Non-cash
financing fees
|
40,000 | |||||||
|
Amortization
of debt discounts
|
562,365 | 552,272 | ||||||
|
Amortization
of debt issuance costs
|
371,373 | 112,000 | ||||||
|
Non-cash
goodwill impairment
|
3,397,451 | |||||||
|
Depreciation
and amortization
|
227,751 | 239,229 | ||||||
|
Loss
on disposal of property and equipment
|
5,287 | |||||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Trade
accounts receivable
|
(1,113,732 | ) | (14,019 | ) | ||||
|
Prepaid
expenses and other current assets
|
(150,499 | ) | (17,073 | ) | ||||
|
Other
assets
|
31,502 | |||||||
|
Accounts
payable and accrued liabilities
|
514,948 | 372,062 | ||||||
|
Accrued
compensation
|
(111,752 | ) | 44,653 | |||||
|
Deferred
revenues and advances
|
460,680 | 689,821 | ||||||
|
Net
cash provided by continuing operations
|
365,277 | 2,927 | ||||||
|
Net
cash used in discontinued operations
|
(53,398 | ) | ||||||
|
Net
cash provided by (used in) operating activities
|
365,277 | (50,471 | ) | |||||
|
INVESTING
ACTIVITIES
|
||||||||
|
Proceeds
from disposal of property and equipment
|
5,981 | |||||||
|
Purchases
of property and equipment
|
(11,504 | ) | (95,010 | ) | ||||
|
Net
cash used in investing activities
|
(5,523 | ) | (95,010 | ) | ||||
|
FINANCING
ACTIVITIES
|
||||||||
|
Proceed
from a private sale of common stock
|
450,000 | |||||||
|
Short
term borrowings
|
760,000 | 770,000 | ||||||
|
Repayment
of short term borrowings
|
(880,000 | ) | (300,000 | ) | ||||
|
Repayment
of convertible debentures
|
(100,000 | ) | (500,000 | ) | ||||
|
Proceeds
from issuance (repayment) of revolving note, net
|
222,456 | (167,087 | ) | |||||
|
Debt
issuance costs
|
(371,373 | ) | (112,000 | ) | ||||
|
Net
cash (used in) provided by financing activities
|
(368,917 | ) | 140,913 | |||||
|
Net
decrease in cash
|
(9,163 | ) | (4,568 | ) | ||||
|
Cash
at beginning of period
|
15,224 | 13,437 | ||||||
|
Cash
at end of period
|
$ | 6,061 | $ | 8,869 | ||||
|
Supplemental
cash flow information:
|
||||||||
|
Cash
paid for interest
|
$ | 243,000 | $ | 252,000 | ||||
The
accompanying notes should be read in conjunction with the condensed consolidated
financial statements.
-3-
NETFABRIC
HOLDINGS INC. AND SUBSIDIARIES
NOTES
TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
RECENT
DEVELOPMENTS
On August
24, 2009, the “Company” along with its wholly-owned subsidiary, NetFabric
Technologies, Inc., d/b/a UCA Services, Inc. (“UCA”) and Fortify Infrastructure
Services, Inc. (“Fortify) entered into Amendment No. 1 (“Amendment”) to the
Option and Purchase Agreement (“Option Agreement”) in connection with
the closing of Fortify’s purchase of all of the outstanding capital
stock of UCA upon exercise of its option granted under the Option Agreement.
Pursuant to the Amendment, among other things, the Secured Convertible
Promissory Note in the principal amount of $5 million issued by UCA to Fortify
was cancelled, releases of certain obligations of the parties were granted as
specified in the Amendment , and the commencement date and measurement period
for the earn-out and bonuses provided for in the Option Agreement were
modified.
On March
13, 2009, the Company along with its wholly-owned subsidiary, UCA entered into a
Convertible Note Purchase Agreement dated March 12, 2009 with Fortify. Pursuant
to the Convertible Note Purchase Agreement, Fortify purchased a Secured
Convertible Promissory Note (the “Note”) from UCA in the principal amount of $5
million with the Company being a guarantor for UCA’s borrowings. Fortify, UCA
and the Company also entered into the Option Agreement. Pursuant to the Option
Agreement, Fortify has an option to acquire all of the outstanding shares of
common stock of UCA.
The holders of a majority of
the Company’s outstanding common stock had previously approved the terms of the
Option Agreement by a written consent as detailed in the Company’s Definitive
Schedule 14 C Information Statement filed with the Securities and
Exchange Commission (the “SEC”) on July 9, 2009.
NOTE
1. NATURE OF BUSINESS AND MANAGEMENT'S PLANS
NetFabric
Holdings, Inc. ("Holdings" or the "Company") (formerly known as Houston
Operating Company) was incorporated under the laws of the State of Delaware on
August 31, 1989. On December 9, 2004, Holdings entered into an exchange
agreement (the "Acquisition Agreement" or "Share Exchange") with all of the
stockholders of NetFabric Corporation, a Delaware corporation ("NetFabric")
whereby Holdings acquired all of the issued and outstanding capital stock of
NetFabric and NetFabric became a wholly-owned subsidiary of Holdings. Upon
completion of the merger, the NetFabric stockholders controlled approximately
95% of the then issued and outstanding stock. NetFabric's business activities
were the activities of the merged company and Holdings was a shell corporation
without any operations. As a result of these factors, this transaction was
treated as a reverse merger for financial reporting purposes.
NetFabric
was incorporated on December 17, 2002 and began operations in July 2003.
NetFabric developed and marketed Voice over Internet Protocol ("VoIP")
appliances that simplified the integration of standard telephone systems with an
IP infrastructure. On May 5, 2006, the Company announced its decision to exit
from the hardware-based VoIP communications product line (including resale of
transport services) that is targeted at small to mid-sized businesses ("SMBs").
In accordance with Statement of Financial Accounting Standards No. 144
"Accounting for the Impairment or Disposal of Long-Lived Assets", ("SFAS No.
144"), the Company has presented the results of operations from its VoIP
business segment as “discontinued operations” in the accompanying consolidated
balance sheets, statements of operations and statements of cash flows (Note
3).
On May
20, 2005, Holdings entered into and closed on a share exchange agreement
("Exchange Agreement"), whereby Holdings acquired all of the issued and
outstanding shares of UCA Services, Inc., a New Jersey company ("UCA Services")
, from its shareholders in exchange for the issuance of 24,096,154 shares of
common stock of Holdings (see Note 8). Holdings emerged from the development
stage upon the acquisition of UCA Services. In May 2007, UCA Services changed
its legal name to NetFabric Technologies, Inc.
UCA
Services, a New Jersey company, is an information technology ("IT") services
company that serves the information and communications needs of a wide range of
Fortune 500 and small to mid-size business clients in the financial markets
industry as well as the pharmaceutical, health care and hospitality sectors. UCA
Services delivers a broad range of IT services in the practice areas of
infrastructure builds and maintenance, managed services and professional
services.
-4-
NETFABRIC
HOLDINGS INC. AND SUBSIDIARIES
NOTES
TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Management's
plans
The
accompanying unaudited condensed consolidated financial statements have been
prepared on a going concern basis. As shown in the accompanying unaudited
condensed consolidated financial statements, the Company has incurred
accumulated losses totaling $37,825,795 and has a working capital deficit of
$6,053,023 at September 30, 2008. These factors, among others, indicate that the
Company may be unable to continue as a going concern. The unaudited condensed
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Management
recognizes that the Company's continuation as a going concern is dependent upon
its ability to generate sufficient cash flow to allow the Company to continue
the development of its business plans and satisfy its current and long-term
obligations on a timely basis. The Company believes that it will be able to
complete the necessary steps in order to meet its cash requirements throughout
fiscal 2008 and continue its business development efforts.
In March
2009, the company entered into a transaction with Fortify Infrastructure
Services, Inc. See Note 2. Pursuant the transaction, the Company will transfer
its ownership interest in UCA Services. Out of proceeds from the transaction,
the Company repaid all of its debt. After the eventual divesture of
UCA, the Company will not have any operations. However, the Company will be debt
free. The Company will explore strategic alternatives including merger with
another entity. Currently, the Company does not have any agreement or
understanding with any entity and there is no assurance that such a transaction
will ever be consummated .
BASIS OF PRESENTATION / INTERIM
FINANCIAL STATEMENTS
The
accompanying unaudited condensed consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC"), except for the condensed consolidated balance sheet as of
December 31, 2008, which was derived from audited financial statements. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles in the
United States of America have been omitted pursuant to such rules and
regulations. However the Company believes that the disclosures are adequate to
make the information presented not misleading. The financial statements reflect
all adjustments (consisting only of normal recurring adjustments) that are, in
the opinion of management, necessary for a fair presentation of the Company's
financial position and results of operations. The operating results for the
three months ended September 30, 2009 and September30, 2008 are not
necessarily indicative of the results to be expected for any other interim
period or any future year. The accompanying unaudited condensed consolidated
financial statements should be read in conjunction with the Company's December
31, 2007 consolidated financial statements, including the notes thereto, which
are included in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2007 filed on February 18, 2010.
RECLASSIFICATIONS
Certain
reclassifications have been made in the prior periods’ consolidated financial
statements to conform to the current period’s presentation.
ESTIMATES
The
preparation of the condensed consolidated financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities as of the date of the condensed consolidated financial statements
and the reported amounts of revenues and expenses during the reporting period.
The accounting estimates that require management's most difficult and subjective
judgments include provisions for bad debts, depreciable/amortizable lives,
impairment of long-lived assets, accounting for goodwill and other intangible
assets, the fair value of the Company's common stock, the fair value of options
and warrants issued for services, the allocation of proceeds from certain
financings to equity instruments and the computation of other reserves. Because
of the uncertainty inherent in such estimates, actual results may differ from
these estimates.
Concentrations of Credit
Risk
Financial
instruments that potentially subject the Company to concentrations of credit
risk consist primarily of cash and cash equivalents and accounts receivable. The
Company reduces its credit risk by placing its cash and cash equivalents with
major financial institutions with high credit ratings. At times, such amounts
may exceed Federally insured limits. The Company reduces its credit risk related
to accounts receivable by routinely assessing the financial strength of its
customers and maintaining an appropriate allowance for doubtful
accounts.
-5-
NETFABRIC
HOLDINGS INC. AND SUBSIDIARIES
NOTES
TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The
Company's services have been provided primarily to a limited number of clients
located in a variety of industries. The Company had revenues from one client
representing a total of 54% of revenues during the three months ended September
30, 2008. For the nine months ended September 30, 2008, the Company had revenues
from two clients representing a total of 62% (49% and 13%,
respectively).
The
Company generally does not require its clients to provide collateral.
Additionally, the Company is subject to a concentration of credit risk with
respect to its accounts receivable. The Company had 2 clients accounting for 67%
(56% and 11%, respectively) of total gross accounts receivable as of September
30, 2008.
Earnings
(Loss) Per Share
The
Company calculates earnings (loss) per share in accordance with SFAS No. 128,
"Earnings per Share" (“SFAS No. 128”). SFAS No. 128 computes basic earnings
(loss) per share by dividing the net income (loss) by the weighted average
number of shares of common stock outstanding during the period. Diluted earnings
(loss) per share is computed by dividing the net income (loss) by the weighted
average number of shares of common stock outstanding during the period plus the
effects of any dilutive securities.
Diluted
earnings (loss) per share considers the impact of potentially dilutive
securities except in periods in which there is a loss because the inclusion of
the potential common shares would have an anti-dilutive effect. The Company's
potentially dilutive securities include common shares which may be issued upon
exercise of its stock options, exercise of warrants or conversion of convertible
debt.
Diluted
loss per share for the three and six months ended September 30, 2008
and 2007 exclude potentially issuable common shares of approximately 12,408,856
and 14,353,856, respectively, primarily related to the Company's outstanding
stock options, warrants and convertible debt, because the assumed issuance of
such potential common shares is antidilutive.
Recent
Accounting Pronouncements
In
September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements," (“SFAS
No. 157”), which defines fair value, establishes a framework for using fair
value to measure assets and liabilities, and expands disclosures about fair
value measurements. SFAS No. 157 applies whenever other statements require or
permit assets or liabilities to be measured at fair value. SFAS No. 157 is
effective for fiscal years beginning after November 15, 2007. The Company
adopted SFAS No. 157 effective January 1, 2008 and determined that
it did not have a material effect on our consolidated financial
statements.
In
February 2007, FASB issued FASB Statement No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities. (“FAS 159”) is effective for fiscal
years beginning after November 15, 2007. Early adoption is permitted subject to
specific requirements outlined in FAS 159. Therefore, calendar-year companies
may be able to adopt FAS 159 for their first quarter 2007 financial
statements.
FAS 159
allows entities to choose, at specified election dates, to measure eligible
financial assets and liabilities at fair value that are not otherwise required
to be measured at fair value. If a company elects the fair value option for an
eligible item, changes in that item's fair value in subsequent reporting periods
must be recognized in current earnings. FAS 159 also establishes presentation
and disclosure requirements designed to draw comparisons between entities that
elect different measurement attributes for similar assets and liabilities.
Management is currently evaluating the effect of this pronouncement on financial
statements.
In
December 2007, the FASB issued SFAS No. 141(R), “Business Combinations,” which
replaces FASB Statement No. 141, “Business Combinations.” SFAS No. 141(R)
establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, any non-controlling interest in the acquired, and the
goodwill acquired. The Statement also establishes disclosure requirements that
will enable users to evaluate the nature and financial effects of the business
combination. SFAS No. 141(R) is effective for business combinations for which
the acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. The Company has not completed
its evaluation of the potential impact, if any, of the adoption of SFAS No.
141(R) on its consolidated financial position, results of operations, and cash
flows.
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of Accounting Research Bulletin
No. 51,” which establishes accounting and reporting standards for ownership
interests in subsidiaries held by parties other than the parent, the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest, changes in a parent’s ownership interest and the valuation of retained
noncontrolling equity investments when a subsidiary is
deconsolidated. The Statement also establishes reporting requirements
that provide sufficient disclosures that clearly identify and distinguish
between the interests of the parent and the interests of the noncontrolling
owners. SFAS No.160 is effective as of the beginning of an entity’s fiscal year
that begins after December 15, 2008 (our Fiscal 2010). The Company has not
completed its evaluation of the potential impact, if any, of the adoption of
SFAS No. 160 on our consolidated financial position, results of operations, and
cash flows.
The
Company does not believe that any other recently issued, but not effective,
accounting standards, if currently adopted will have material effect on the
Company’s consolidated financial position, results of operations and cash
flows.
NOTE
2. DEBT FINANCINGS
During
the six months ended September30,2008, the Company and Laurus entered into a
waiver/ amendment agreement, pursuant to which Laurus waived the Company’s non
compliance of certain terms of the Security Agreement. In exchange for the
waivers the Company issued Laurus 1,000,000 shares of its common stock. The fair
value of the shares was $40,000 and was charged to operations expense during the
six months ended September30,2008.
During
the six months ended September 30,2008 the Company borrowed an aggregate of
$760,000 from six individuals and repaid an aggregate of $880,000 of previously
borrowed amounts. The aggregate amount of short term borrowings outstanding as
of September 30, 2008 is $850,000. The borrowings outstanding at
September 30, 2008 are due at various dates through February 2009. The
borrowings are unsecured and bear nominal interest. The Company paid financing
costs of $371,373 to third parties and lenders and this amount is being
amortized over the term of the borrowings. During three months ended September
30, 2008, $371,373 was charged to operations as amortization of debt issuance
costs.
Debt
Financings consist of the following as of September 30, 2008:
|
2008
|
||||||||||||
|
Unamortized
|
||||||||||||
|
Principal
|
debt discount
|
Net
|
||||||||||
|
Laurus
Revolving Note Due in March 2009
|
$
|
1,499,405
|
$
|
(110,029
|
)
|
$
|
1,389,376
|
|||||
|
Laurus
Convertible Note Due in March 2009
|
1,500,000
|
(182,768
|
)
|
1,317,232
|
||||||||
|
2006
Convertible Debentures
|
50,000
|
50,000
|
||||||||||
|
Short
term borrowings
|
850,000
|
750,000
|
||||||||||
|
$
|
3,899,405
|
$
|
(292,797
|
)
|
$
|
3,606,608
|
||||||
-6-
NETFABRIC
HOLDINGS INC. AND SUBSIDIARIES
NOTES
TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
3. STOCKHOLDERS' EQUITY
Warrants
Outstanding
warrant securities consist of the following at September 30,2008
|
Exercise
|
|||||||||
|
Price
|
Expiration
|
||||||||
|
Laurus
Warrants
|
554,282
|
$
|
0.001
|
See
(1)
|
|||||
|
2006
Private Placement
|
1,350,000
|
$
|
0.01
|
April
to November 2009
|
|||||
|
2007
Short Term Financing
|
890,000
|
$
|
0.01
|
April
to November 2010
|
|||||
|
Others
|
1,766,137
|
$
|
$0.15 to
$0.82
|
December
2008 to June 2011
|
|||||
|
4,560,419
|
|||||||||
|
(1)
|
No
expiration .
|
NOTE 4. STOCK-BASED
COMPENSATION
Share-based
compensation expense recognized under SFAS 123(R) for the three months ended
September 30, 2008 and 2007 was $97,074 and $94,633, respectively. For the nine
months ended September 30, 2008 and 2007 share-based compensation expenses was
$201,222 and $293,664, respectively. Share-based compensation expense recognized
in the Company's condensed consolidated statements of operations includes
compensation expense for share-based payment awards granted prior to, but not
yet vested as of December 31, 2005, based on the grant-date fair value estimated
in accordance with the provisions of SFAS 123(R).
-7-
ITEM
2.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The
following discussion and analysis and results of operations should be read in
conjunction with the unaudited condensed consolidated financial statements and
accompanying notes and the other financial information appearing elsewhere in
this report and reports included herein by reference. The following discussion
contains forward-looking statements that reflect our plans, estimates and
beliefs. Our actual results could differ materially from those discussed in the
forward-looking statements.
Our
independent registered public accounting firm has indicated in their report,
dated May 11, 2009, on our December 31, 2007 financial statements since we have
experienced net losses since inception and have a working capital deficiency
their report indicates that these matters raise substantial doubt about our
ability to continue as a going concern. Our plan with regard to this matter is
discussed elsewhere in this document. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
CORPORATE
HISTORY
We were
formerly known as Houston Operating Company and were incorporated in Delaware on
August 31, 1989. On December 9, 2004, we entered into an Acquisition Agreement
with all of the stockholders of NetFabric Corp., a Delaware corporation.
NetFabric Corp. was incorporated in Delaware on December 17, 2002 and began
operations in July 2003. At the closing, which occurred simultaneously with the
execution of the Acquisition Agreement, we acquired all of the issued and
outstanding capital stock of NetFabric Corp. from the stockholders in exchange
for an aggregate of 32,137,032 newly-issued shares of our common stock. The
acquisition was accounted for as a reverse merger whereby NetFabric Corp. was
treated as the acquirer. On April 19, 2005, our name was changed from Houston
Operating Company to NetFabric Holdings, Inc. and our stock symbol was changed
from "HOOC" to "NFBH."
UCA
SERVICES, INC. ACQUISITION
On May
20, 2005, we entered into and closed on a share exchange agreement, whereby we
purchased all of the issued and outstanding shares of UCA Services, Inc., a New
Jersey company (“UCA Services”) from its shareholders in exchange for the
issuance of 24,096,154 shares of our common stock. UCA Services is an IT
services and solutions company that serves the information needs of a wide range
of Fortune 500 clients in the financial markets industry and the pharmaceutical,
health care and hospitality sectors. UCA Services delivers a broad range of IT
services in managed services, professional services, infrastructure building and
maintenance, application development and maintenance areas. The acquisition was
accounted for using the purchase method of accounting with UCA Service’s results
of operations included in our consolidated financial statements from the date of
acquisition.
DISCONTINUED
OPERATIONS
Prior to
acquiring NetFabric Corp., Houston Operating Company did not have any
operations, and we were a shell company whose primary business objective was to
merge and become public.
-8-
NetFabric
Corp. was a provider of hardware and services to small to mid-sized businesses
("SMBs") that utilized the Internet for telephone communications or Voice over
Internet Protocol ("VoIP"). It developed and marketed appliances or Customer
Premises Equipment ("CPE") that simplified the integration of standard telephone
systems with an IP infrastructure. In addition, NetFabric Corp resold transport
services of a third party VoIP transport provider.
Our
operations, prior to the UCA Services acquisition, consisted of developing VoIP
appliances, including research and product development activities. We also hired
additional personnel for sales and marketing and developed our sales and
marketing programs.
With
minimal revenues from VoIP operations, we concluded that we could not implement
our original business plan for VoIP operations within our resources or with the
additional capital we could raise in the near term. On May 5, 2006, our Board of
Directors decided that the Company should exit the hardware-based VoIP
communications product line (including resale of transport services) that is
targeted to SMBs. In accordance with Statement of Financial Accounting Standards
(‘SFAS’) No. 144 "Accounting for the Impairment or Disposal of Long-Lived
Assets", ("SFAS No. 144"), the results of operations from the VoIP business
segment has been reclassified as discontinued operations for all periods
presented. After the discontinuation of VoIP operations, our only operations are
that of UCA Services.
OVERVIEW
OF UCA SERVICES BUSINESS
UCA
Services derives revenues primarily from managed IT services, professional
services, application development services and business process management
services. Service arrangements with customers are generally on a time and
material basis or fixed-price, fixed-timeframe revenue basis. UCA Services
principal operating expenses are direct employee costs, consultant expenses and
selling, general and administrative expenses. The principal components of
selling, general and administrative expenses are salaries of sales and support
personnel, and office rent. Direct employee costs and consultant expenses are
comprised primarily of the costs of consultant labor, including employees,
subcontractors and independent contractors, and related employee benefits.
Approximately 50% of our consultants are employees and the remainder are
subcontractors and independent contractors.
We
compensate most of our consultants only for the hours that we bill to our
clients for projects undertaken, which allows us to better match our labor costs
with our revenue generation. With respect to our consultant employees, we are
responsible for employment-related taxes, medical and health care costs and
workers' compensation. Labor costs are sensitive to shifts in the supply and
demand of IT professionals, as well as increases in the costs of benefits and
taxes.
-9-
As
previously noted, the December 9, 2004 acquisition of NetFabric Corp. was
accounted for as a reverse merger whereby NetFabric Corp. was treated as the
acquirer. Accordingly, the historical financial statements of NetFabric Corp.
have been presented for all periods required. NetFabric Corp. began operations
in January 2003 and was a development stage company until the UCA Services
acquisition. The UCA Services acquisition was accounted for using the purchase
method of accounting with the results of the operations included in the
Company's consolidated financial statements from the date of
acquisition.
COMPARISON
OF THREE AND SIX MONTHS ENDED SEPTEMBER30,2008 AND 2007:
Revenues.
Revenues
for the three months ended September 30, 2008, increased by $2,633,179 or 72.4%
compared to the same period of the prior year. For the nine months
ended September 30, 2008, revenues increased by $5,602,029 or
46.6%. The increase in revenues were due to new projects undertaken
in 2008.
Direct
employee compensation and consultant expenses.
Excluding
non-cash share based compensation, for the three months ended September 30
,2008, our direct employee compensation and consultant expenses increased by
$2,253,076 or 81.1% to $5,030,545. For the nine months ended September 30, 2008,
our direct employee compensation and consultant expenses excluding
non-cash share based compensation increased by $4,664,780 or 50.5% to
$13,902,936 compared to the same period of the prior year. Excluding non-cash
share based compensation as a percentage of revenues our direct employee
compensation and consultant expenses for the three and nine months
ended September 30, 2008 were 80.2 and 78.9% , respectively, compared
to 76.3% and 76.9%, respectively in 2007. The increases in employee
compensation and consultant expenses as a percentage of revenues
were due to the nature of projects performed in 2008.
Selling,
general and administrative expenses.
Excluding
non-cash share based compensation, our selling, general and administrative
expenses decreased for the three months ended September 30, 2008 by
$84,523, or 8.6%, to $902,246 compared to 2007. For the nine months ended
September 30, 2008, our selling, general and administrative expenses excluding
non-cash share based compensation decreased by $928,536 or 25.5% to $2,713,310
compared to the same period of prior year. During the nine months
ended September 30, 2007, we incurred approximately $162,000 in expenses
($240,000 including the fair value of shares of common stock issued) for an
acquisition of an entity and the related financing. We terminated the
acquisition related negotiation in April 2007 and the entire amount incurred was
charged to operations during the three months ended March 31, 2007. The
decreases in our selling, general and administrative expenses for the three and
nine months ended September 30, 2008 compared to the same period of
prior year were due to expense reductions implemented in the third
quarter of 2007.
Depreciation
and amortization.
For three
months ended September 30, 2008, depreciation and amortization increased by
$30,240 or 72.9%, to $71,706. For nine months ended September 30, 2008,
depreciation and amortization decreased by $11,478 or 4.8%, to
$227,751.
Amortization
of debt discount.
Amortization
of debt discount for the three months ended September 30, 2008 increased by
$51,305, or 28.1%, to $234,104. For the nine months ended September 30, 2008
amortization of debt discount increased by $50,093 or 9.1% to
$602,365 As of September 30, 2008, the aggregate unamortized debt
discount was $292,797, which will be amortized and charged to operations over
the term of the respective debt.
Interest
expense.
For the
three months ended September 30, 2008, interest expense decreased by
$24,695. Interest expense for the nine months ended September 30, 2008,
increased by $1,421. The increase was due to additional interest payable to
Laurus due to different terms negotiated with Laurus.
Discontinued
Operations.
On May 5,
2006, our Board of Directors decided to exit from the hardware-based VoIP
communications product line (including resale of transport services) that is
targeted to SMBs. In accordance with SFAS No. 144 "Accounting for the Impairment
or Disposal of Long-Lived Assets", ("SFAS No. 144"), the results of operations
from the VoIP business segment has been reclassified as discontinued operations
for all periods presented. For the three months and six months ended September
30, 2008, losses from discontinued operations were $0 and $0, respectively. For
the nine months ended September 30, 2007, losses from discontinued operations
were $53,398. Revenues from VoIP operations have been nominal in all periods
presented and operating expenses are the losses reported.
Goodwill
impairment
Pursuant
to SFAS No. 142 “Goodwill and Other Intangibles Assets,” (“SFAS No. 142”), the
Company performed its annual testing of goodwill impairment for the second
quarter ended June 30, 2007. As a part of goodwill impairment testing,
management reviewed various factors, such as the market price of the Company’s
common stock, discounted cash flows from projected earnings and values of
comparable companies to determine whether impairment exists. Based on this
evaluation it was determined that the goodwill was impaired. The
impairment was due to a continued decline in our market
capitalization during the nine months ended September 30, 2007 and due
to lower future cash flows expected to be generated by the business due to
working capital constraints. The implied value of the goodwill was $10,585,000
compared to a carrying value of $13,982,451, indicating an impairment of
$3,397,451. The impairment loss was charged to operations during the three
months ended June 30, 2007.
Net
loss.
As a
result of the foregoing, for the three months ended September 30, 2008, net loss
decreased by $938,378, or 79.8%, to a loss of $237,439, compared to a net loss
of $1,175,817 in the three months ended September 30, 2007. For the nine months
ended September 30, 2008, net loss decreased by $5,726,310 or 89.9% to a loss of
$642,366 compared to a net loss of $6,368,676 in the nine months ended September
30, 2007.
LIQUIDITY
AND CAPITAL RESOURCES
As of
September 30, 2008, our working capital deficiency was $6,053,203, compared to a
working capital deficiency of $4,937,149 on December 31, 2007. The increase in
the working capital deficiency was principally due to operating losses and due
to reclassification of convertible note due in March 2009 as a current
liability. During the nine months ended September 30, 2008, our
operating activities from continuing operations provided approximately $365,000
of cash, compared to approximately $3,000 provided during the nine months ended
September 30, 2007.
-10-
During
the six months ended September 30, 2008, our operating losses, after adjusting
for non-cash items, provided approximately $766,000 of cash, and working capital
items used approximately $400,000 of cash. The principal component of these
working capital changes was an increase in our deferred revenues and accounts
payable off set by an increase in accounts receivable. During the
nine months ended September 30, 2007, our operating losses, after adjusting for
non-cash items, utilized approximately $1,104,000 of cash, and working capital
items provided approximately $1,107,000 of cash.
During
the nine months ended September 30,2008 we borrowed an aggregate of $760,000
repaid an aggregate of $880,000 of previously borrowed amounts from five
individuals. The aggregate amount of short term borrowings outstanding as of
September30, 2008 is $850,000. The borrowings outstanding at September30, 2008
are due at various dates through February 2009.
We
evaluated several options for obtaining financing to fund our working capital
requirements and to retire our debt upon maturity. We had approximately $3.8
million debt that was due in the first quarter of 2009. After several
discussions and negotiations, we concluded that the most viable option would be
to sell the operations of UCA Services. This would not only provide us financing
but also enable UCA Services to grow to its optimal potential with appropriate
financial backing.
On March
12, 2009, we along with our wholly-owned subsidiary, NetFabric Technologies,
Inc., d/b/a UCA Services, Inc. (“UCA”) entered into a Convertible Note Purchase
Agreement with Fortify Infrastructure Services, Inc. (“Fortify). Pursuant to the
Convertible Note Purchase Agreement, Fortify purchased a Secured Convertible
Promissory Note (the “Note”) from UCA in the principal amount of $5 million with
the Company being a guarantor for UCA’s borrowings.
The Note
has a six-month term, and bears interest at 8% per annum, compounded annually.
The Note is secured by (i) all of the assets of
UCA and the Company, and (ii) all of the equity securities of UCA currently
owned or hereafter acquired by the Company. At the exclusive option of Fortify,
Fortify may convert the entire principal amount of, and accrued and unpaid
interest on, the Note into shares of Series A Preferred Stock of
UCA. The conversion price shall be at a price equal to the price per
share reflecting a valuation of UCA equal to $5 million, on an as-converted
basis.
Fortify,
UCA and the Company also entered into a Credit Agreement whereby Fortify agreed
to provide UCA a revolving line of credit of up to $1 million for working
capital purposes. Amounts borrowed under the line of credit are secured by (i) all of the assets of
UCA and the Company and (ii) all of the equity securities of UCA currently owned
or hereafter acquired by the Company.
Fortify,
UCA and the Company also entered into an Option and Purchase Agreement (“Option
Agreement’). Pursuant to the Option Agreement, Fortify has an option to acquire
all of the outstanding shares of common stock of UCA upon effectiveness of this
Information Statement. Upon exercise of the Option by Fortify, we
will (a) receive an aggregate purchase price of $500,000, less the amount of accrued
and unpaid interest, if any, on the Note, and (b) be released from the guaranty
obligations of the Note. The Company and certain employees of UCA will also be
eligible to receive earn-out payments in connection with the closing of the
Option based upon achievement of certain financial thresholds during a 24-month
period following the closing.
We used
approximately $3 million from the proceeds of the Note to repay all amounts owed
to Laurus Master Fund. The balance of the proceeds was used for repayment of
debt, other payables and for working capital purposes.
On August
24, 2009, we along with our wholly-owned subsidiary, UCA and Fortify entered
into Amendment No. 1 (“Amendment”) to the Option and Purchase
Agreement (“Option Agreement”) in connection with the closing of
Fortify’s purchase of all of the outstanding capital stock of UCA upon
exercise of its option granted under the Option Agreement. Pursuant to the
Amendment, among other things, the Secured Convertible
Promissory Note in the principal amount of $5 million issued by UCA to Fortify
was cancelled, releases of certain obligations of the parties were granted as
specified in the Amendment , and the commencement date and measurement period
for the earn-out and bonuses provided for in the Option Agreement were
modified.
After the
divesture of UCA, we will have no operations. However, the Company will be debt
free. We will explore strategic alternatives, including merging with another
entity. Currently, we do not have any agreement or understanding with any entity
and there is no assurance that such a transaction will ever be
consummated.
-11-
ITEM
4. CONTROLS AND PROCEDURES
A.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES:
Our
disclosure controls and procedures are designed to ensure that information
required to be disclosed in the reports filed or submitted under the Securities
Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and
reported, within the time period specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in the
reports filed under the Exchange Act are accumulated and communicated to
management, including the Chief Executive Officer ("CEO"") and Chief Financial
Officer ("CFO") , as appropriate, to allow timely decisions regarding required
disclosure. As of the end of the period covered by this report, we carried out
an evaluation, under the supervision and with participation of our management,
including our CEO and CFO, of the effectiveness of the design and operation of
our disclosure controls and procedures. Based upon and as of the date of that
evaluation, the CEO and CFO concluded that our disclosure controls and
procedures are effective to ensure that information required to be disclosed in
the reports we file and submit under the Exchange Act are recorded, processed,
summarized and reported as and when required.
B.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING:
There
were no changes in our internal controls over financial reporting during the
most recent fiscal quarter that have materially affected or are reasonably
likely to materially affect our internal control over financial
reporting.
PART II. OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
The
Company from time to time is involved in routine legal matters incidental to
business. In the opinion of management, the ultimate resolution of such matters
will not have a material adverse effect on the Company's financial position,
results of operations or liquidity.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None
-12-
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM
5. OTHER INFORMATION
None
ITEM
6. EXHIBITS
(a)
Exhibits:
31.1 Rule
13a-14(a)/15d-14(a) Certification (CEO)
31.2 Rule
13a-14(a)/15d-14(a) Certification (CFO)
32.1
Section 1350 Certification (CEO)
32.2
Section 1350 Certification (CFO)
-13-
SIGNATURES
In
accordance with the requirements of Section 13 or 15(d) of the Securities
Exchange Act , the registrant has caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
|
Date: February
19, 2010
|
By:
|
/s/ Fahad
Syed
|
| Name: Fahad Syed | ||
|
Title:
Chairman and Chief Executive Officer
|
||
|
By:
|
/s/ Vasan
Thatham
|
|
|
Name:
Vasan Thatham
|
||
|
Title:
Principal Financial Officer and Vice
President
|
-14-
EXHIBIT 31.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION
302 OF THE SARBANES OXLEY ACT OF 2002
I, Fahad
Syed certify that:
1. I have
reviewed this quarterly report on Form 10-Q of NetFabric Holdings, Inc. (the “
Company”).
2. Based
on my knowledge, this quarterly report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this quarterly
report;
3. Based
on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Company as of,
and for, the periods presented in this quarterly report;
4. The
Company's other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d15(e) for the Company and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the Company, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b)
) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles;
c)
Evaluated the effectiveness of the Company's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d)
Disclosed in this report any change in the Company's internal control over
financial reporting that occurred during the Company's most recent fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting;
and
5. The
Company's other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the Company's
auditors and the audit committee of the Company's board of directors (or persons
performing the equivalent functions):
a) All
significant deficiencies and material weaknesses in the design or operation of
internal controls over financial reporting which are reasonably likely to
adversely affect the Company's ability to record, process, summarize and report
financial information; and
b) Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the Company's internal control over financial
reporting.
|
February
19, 2010
|
By:
|
/s/ Fahad
Syed
|
|
Name:
Fahad Syed
|
||
|
Title:
Chairman and Chief Executive
Officer
|
EXHIBIT 31.2
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION
302 OF THE SARBANES OXLEY ACT OF 2002
I, Vasan
Thatham certify that:
1. I have
reviewed this quarterly report on Form 10-Q of NetFabric Holdings, Inc. (the “
Company”).
2. Based
on my knowledge, this quarterly report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this quarterly
report;
3. Based
on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Company as of,
and for, the periods presented in this quarterly report;
4. The
Company's other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d15(e) for the Company and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the Company, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b)
) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
c)
Evaluated the effectiveness of the Company's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d)
Disclosed in this report any change in the Company's internal control over
financial reporting that occurred during the Company's most recent fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting;
and
5. The
Company's other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the Company's
auditors and the audit committee of the Company's board of directors (or persons
performing the equivalent functions):
a) All
significant deficiencies and material weaknesses in the design or operation of
internal controls over financial reporting which are reasonably likely to
adversely affect the Company's ability to record, process, summarize and report
financial information; and
b) Any
fraud, whether or not material, that involves management or other employees who
have a significant role in the Company's internal control over financial
reporting.
|
February
19, 2010
|
By:
|
/s/ Vasan
Thatham
|
|
Name:
Vasan Thatham
|
||
|
Title:
Chief Financial
Officer
|
EXHIBIT 32.1
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report of NetFabric Holdings, Inc. (the “
Company”) on Form 10-Q for the period ended September 30, 2008 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Fahad
Syed certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) The
information contained in the Report fairly presents, in all material respects,
the financial condition and result of operations of the Company.
|
February
19, 2010
|
By:
|
/s/ Fahad
Syed
|
|
Name:
Fahad Syed
|
||
|
Title:
Chairman and Chief Executive
Officer
|
A signed
original of this written statement required by Section 906 has been provided to
NetFabric Holdings, Inc. and will be retained by NetFabric Holdings, Inc. and
furnished to the Securities and Exchange Commission or its staff upon
request.
EXHIBIT
32.2
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report of NetFabric Holdings, Inc. (the “Company”)
on Form 10-Q for the period ended September 30, 2008 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Vasan
Thatham, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that, to my
knowledge:
(1) The
Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) The
information contained in the Report fairly presents, in all material respects,
the financial condition and result of operations of the Company.
|
February
19, 2010
|
By:
|
/s/ Vasan
Thatham
|
|
Name:
Vasan Thatham
|
||
|
Title:
Chief Financial
Officer
|
A signed
original of this written statement required by Section 906 has been provided to
NetFabric Holdings, Inc. and will be retained by NetFabric Holdings, Inc. and
furnished to the Securities and Exchange Commission or its staff upon
request.