Delaware
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76-0307819
|
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
|
(I.R.S
Employer Identification No.)
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Large
accelerated filer o
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Accelerated
filer o
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Non-
accelerated filer o
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Small
reporting company x
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Page
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||
PART
I.
|
FINANCIAL
INFORMATION
|
|
Item
1.
|
Financial
Statements (Unaudited)
|
|
Condensed
Consolidated Balance Sheet
|
1
|
|
Condensed
Consolidated Statements of Operations
|
2
|
|
Condensed
Consolidated Statements of Cash Flows
|
3
|
|
Notes
to Interim Condensed Consolidated Financial Statements
|
4
|
|
Item
2.
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Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
10
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Item
4.
|
Controls
and Procedures
|
14
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PART
II.
|
OTHER
INFORMATION
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14
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Item
1.
|
Legal
Proceedings
|
14
|
Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
|
14
|
Item
3.
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Defaults
Upon Senior Securities
|
14
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Item
4.
|
Submission
of Matters to a Vote of Security Holders
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14
|
Item
5.
|
Other
Information
|
14
|
Item
6.
|
Exhibits
|
15
|
Signatures
|
16
|
June 30,
2009
|
December 31,
2008
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|||||||
(Unaudited)
|
(Audited)
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
|
$ | 15,533 | $ | 74 | ||||
Trade
accounts receivable, net
|
- | 18,584 | ||||||
Current
assets of discontinued operations
|
2,240,139 | 4,478,242 | ||||||
Total
current assets
|
2,255,672 | 4,496,900 | ||||||
Property
and equipment, net
|
17,346 | 17,346 | ||||||
Non
current assets of discontinued operations
|
6,183,527 | 6,298,476 | ||||||
TOTAL
ASSETS
|
$ | 8,456,545 | $ | 10,812,722 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIENCY)
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Secured
Convertible Promissory Note
|
$ | 5,000,000 | $ | - | ||||
Short
term borrowings
|
- | 950,000 | ||||||
Accounts
payable and accrued liabilities
|
520,589 | 982,502 | ||||||
Accrued
compensation
|
- | 198,000 | ||||||
Current
liabilities of discontinued operations
|
3,320,644 | 5,751,325 | ||||||
Convertible
note, net of unamortized discount
|
- | 1,443,144 | ||||||
Revolving
note, net of unamortized discount
|
- | 1,384,257 | ||||||
Total
current liabilities
|
8,841,233 | 10,709,228 | ||||||
Total
liabilities
|
8,841,233 | 10,709,228 | ||||||
COMMITMENTS
AND CONTINGENCIES
|
||||||||
STOCKHOLDERS'
EQUITY (DEFICIENCY):
|
||||||||
Common
Stock, $.001 par value, authorized shares 200,000,000, 97,053,044 shares
issued and outstanding
|
97,053 | 97,053 | ||||||
Additional
paid-in capital
|
38,242,240 | 38,110,162 | ||||||
Accumulated
deficit
|
(38,723,981 | ) | (38,103,721 | ) | ||||
Total
stockholders' equity (deficiency)
|
(384,688 | ) | 103,494 | |||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
|
$ | 8,456,545 | $ | 10,812,722 |
Three Months
|
Three Months
|
Six Months
|
Six Months
|
|||||||||||||
Ended
|
Ended
|
Ended
|
Ended
|
|||||||||||||
June 30, 2009
|
June 30, 2008
|
June 30, 2009
|
June 30, 2008
|
|||||||||||||
REVENUES
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$ | - | $ | - | $ | - | $ | - | ||||||||
OPERATING
EXPENSES:
|
||||||||||||||||
Selling, general and
administrative expenses (includes share based compensation of
$66,039, $31,074, $132,078 and $104,148)
|
183,337 | 177,833 | 624,522 | 309,200 | ||||||||||||
Depreciation
and amortization
|
3,389 | 12,366 | ||||||||||||||
Total
operating expenses
|
183,337 | 181,222 | 624,522 | 321,566 | ||||||||||||
Loss
from operations
|
(183,337 | ) | (181,222 | ) | (624,522 | ) | (321,566 | ) | ||||||||
OTHER
EXPENSE:
|
||||||||||||||||
Amortization
of debt discounts
|
- | (186,895 | ) | (91,862 | ) | (368,261 | ) | |||||||||
Amortization
of debt issuance costs
|
- | (121,000 | ) | (47,630 | ) | (253,373 | ) | |||||||||
Interest
and bank charges
|
- | (70,134 | ) | (36,270 | ) | (173,197 | ) | |||||||||
Total
other expense
|
- | (378,029 | ) | (175,762 | ) | (794,831 | ) | |||||||||
Loss
before provision for income taxes
|
(183,337 | ) | (559,251 | ) | (800,284 | ) | (1,116,397 | ) | ||||||||
Provision
for income taxes
|
- | - | - | - | ||||||||||||
LOSS
FROM CONTINUING OPERATIONS
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(183,337 | ) | (559,251 | ) | (800,284 | ) | (1,116,397 | ) | ||||||||
DISCONTINUED
OPERATIONS:
|
||||||||||||||||
Income
(loss) from discontinued operations
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(18,222 | ) | 487,935 | 180,024 | 711,470 | |||||||||||
NET
LOSS
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$ | (201,559 | ) | $ | (71,316 | ) | $ | (620,260 | ) | $ | (404,927 | ) | ||||
Net
loss from continuing operations per common share, basic and
diluted
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$ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||
Net
income (loss) from discontinued operations per common share, basic and
diluted
|
$ | (0.00 | ) | $ | 0.01 | $ | 0.00 | $ | 0.01 | |||||||
Net
loss per common share, basic and diluted
|
$ | (0.01 | ) | $ | 0.00 | $ | (0.01 | ) | $ | 0.00 | ||||||
Weighted
average number of shares outstanding, basic and diluted
|
97,053,044 | 97,053,044 | 97,053,044 | 96,618,978 |
Six Months Ended
|
Six Months Ended
|
|||||||
June 30, 2009
|
June 30, 2008
|
|||||||
OPERATING
ACTIVITIES
|
||||||||
Net
loss
|
$ | (620,260 | ) | $ | (404,927 | ) | ||
Income
from discontinued operations
|
(180,024 | ) | (711,470 | ) | ||||
Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities:
|
||||||||
Share
based compensation
|
132,078 | 104,148 | ||||||
Non-cash
financing fees
|
- | 40,000 | ||||||
Amortization
of debt discounts
|
91,862 | 368,261 | ||||||
Amortization
of debt issuance costs
|
47,630 | 253,373 | ||||||
Depreciation
and amortization
|
- | 12,366 | ||||||
Loss
on disposal of property and equipment
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- | 6,249 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Trade
accounts receivable
|
18,584 | 4,242 | ||||||
Prepaid
expenses and other current assets
|
- | (22,875 | ) | |||||
Accounts
payable and accrued liabilities
|
(461,912 | ) | (432,452 | ) | ||||
Accrued
compensation
|
(198,000 | ) | 16,785 | |||||
Net
cash used by continuing operations
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(1,170,042 | ) | (766,300 | ) | ||||
Net
cash provided by discontinued operations
|
108,792 | 1,003,289 | ||||||
Net
cash provided by (used in) operating activities
|
(1,061,250 | ) | 236,989 | |||||
INVESTING
ACTIVITIES
|
||||||||
Proceeds
from disposal of property and equipment
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- | 5,981 | ||||||
Net
provided by investing activities by continuing operations
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- | 5,981 | ||||||
Net
cash used in discontinued operations
|
(6,398 | ) | (4,971 | ) | ||||
Net
cash (used in) provided by investing activities
|
(6,398 | ) | 1,010 | |||||
FINANCING
ACTIVITIES
|
||||||||
Proceeds
from issuance of Secured Convertible Promissory Note
|
5,000,000 | - | ||||||
Repayment
of short term borrowings
|
(950,000 | ) | (220,000 | ) | ||||
Repayment
of convertible debenture
|
(1,500,000 | ) | - | |||||
Proceeds
from issuance (repayment) of revolving note, net
|
(1,419,263 | ) | 223,915 | |||||
Debt
issuance costs
|
(47,630 | ) | (253,373 | ) | ||||
Net
cash (used in) provided by financing activities
|
1,083,107 | (249,458 | ) | |||||
Net
increase (decrease) in cash
|
15,459 | (11,459 | ) | |||||
Cash
at beginning of period
|
74 | 15,270 | ||||||
Cash
at end of period
|
$ | 15,533 | $ | 3,811 | ||||
Supplemental
cash flow information:
|
||||||||
Cash
paid for interest
|
||||||||
Continuing
operations
|
$ | 57,000 | $ | 201,000 | ||||
Discontinued
operations
|
$ | 124,000 | $ | 15,000 |
June 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
Cash
|
$ | - | $ | 1,317,436 | ||||
Trade
Receivable, net
|
2,134,351 | 3,008,934 | ||||||
Prepaid
expenses and other current assets
|
105,788 | 151,872 | ||||||
Current
assets of discontinued operations
|
$ | 2,240,139 | $ | 4,478,242 | ||||
Property
and equipment, net
|
$ | 96,161 | $ | 114,991 | ||||
Goodwill
|
5,704,000 | 5,704,000 | ||||||
Other
intangibles, net
|
360,445 | 456,564 | ||||||
Other
assets
|
22,921 | 22,921 | ||||||
Non
current assets of discontinued operations
|
$ | 6,183,527 | $ | 6,298,476 | ||||
Accounts
payable and accrued expenses
|
$ | 2,120,361 | $ | 3,714,572 | ||||
Cash
overdraft
|
13,989 | - | ||||||
Accrued
compensation
|
340,180 | 414,526 | ||||||
Deferred
revenues and customer advances
|
846,114 | 1,622,227 | ||||||
Current
liabilities of discontinued operations
|
$ | 3,320,644 | $ | 5,751,325 |
Discontinued Operations was as follows:
|
Three Months
|
Three Months
|
||||||
Ended
|
Ended
|
|||||||
June 30, 2009
|
June 30, 2008
|
|||||||
Revenues
|
$ | 4,099,504 | $ | 6,331,071 | ||||
Direct
employee compensation and consultant expenses
|
3,121,300 | 4,995,059 | ||||||
Selling,
general and administrative expenses
|
834,806 | 772,493 | ||||||
Depreciation
and amortization
|
60,292 | 69,783 | ||||||
Interest
expenses
|
101,328 | 5,801 | ||||||
Income
from discontinued operations
|
$ | (18,222 | ) | $ | 487,935 |
Discontinued Operations
|
Six Months
|
Six Months
|
||||||
Ended
|
Ended
|
|||||||
June 30, 2009
|
June 30, 2008
|
|||||||
Revenues
|
$ | 9,013,826 | $ | 11,344,633 | ||||
Direct
employee compensation and consultant expenses
|
6,854,443 | 8,872,391 | ||||||
Selling,
general and administrative expenses
|
1,734,157 | 1,602,331 | ||||||
Depreciation
and amortization
|
121,347 | 143,679 | ||||||
Interest
expenses
|
123,855 | 14,762 | ||||||
Income
from discontinued operations
|
$ | 180,024 | $ | 711,470 |
2008
|
||||||||||||
Unamortized
|
||||||||||||
Principal
|
debt discount
|
Net
|
||||||||||
Laurus
Revolving Note Due in March 2009
|
$
|
1,419,263
|
$
|
(35,006
|
)
|
$
|
1,384,257
|
|||||
Laurus
Convertible Note Due in February 2009
|
1,500,000
|
(56,856
|
)
|
1,443,144
|
||||||||
Short
term borrowings
|
950,000
|
- |
950,000
|
|||||||||
$
|
3,869,263
|
$
|
(91,862
|
)
|
$
|
3,777,401
|
Exercise
|
|||||||||
Price
|
Expiration
|
||||||||
Laurus
Warrants
|
554,282
|
$
|
0.001
|
None
|
|||||
2006
Private Placement
|
750,000
|
$
|
0.01
|
April
to November 2009
|
|||||
2007
Short Term Financing
|
890,000
|
$
|
0.01
|
April
to November 2010
|
|||||
Others
|
312,500
|
$
|
0.82
|
June
2011
|
|||||
2,506,782
|
Date: August
13, 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
|
August
13, 2010
|
By:
|
/s/ Fahad
Syed
|
Name:
Fahad Syed
|
||
Title:
Chairman and Chief Executive
Officer
|
August
13 , 2010
|
By:
|
/s/ Vasan
Thatham
|
Name:
Vasan Thatham
|
||
Title:
Chief Financial
Officer
|
August
13 , 2010
|
By:
|
/s/ Fahad
Syed
|
Name:
Fahad Syed
|
||
Title:
Chairman and Chief Executive
Officer
|
August
13 , 2010
|
By:
|
/s/ Vasan
Thatham
|
Name:
Vasan Thatham
|
||
Title:
Chief Financial Officer
|