Hi shorts re SOFN – I took some quick notes for discussion and noted some issues. The business is evolving, they dropped hardware sales. I’m not sure what will generate that “wow” factor to move it. What do you have on it?
Class A 87,825,489 shares of Common Stock, $0.001 par value, as of November 14, 2008; 1,304,000 Class B $0.001 par value as of November 14, 2008.
Current liabilities 2.2 million – dwarfs assets
Last quarter shows ½ revenue vs. year before, but smaller loss, negligible. They appear to be changing business mix, dropped hardware sales.
This may wind up being toxic – need to get full terms of how they convert.
The Company entered into a merger agreement with PeriNet Technologies LLC (Perinet), a Pennsylvania based information technology firm, Inc. in September 2006 effective July 1, 2006. Under the merger agreement PeriNet was to merge into the Company. Under the terms of the merger, the Company is to pay a total of $300,000 in cash over a period of 180 days, and issue restricted Class A, Common Stock of the Company with a maximum value of $2,100,000, $1,000,000 of which is guaranteed and the remaining being vested based on future performance. The shares will be valued based on the average share price of the stock the month preceding the vesting period. The Company in this transaction acquired $171,057 of assets and $376,098 in liabilities. Based on the initial payout of $100,000 and $1,000,000 of stock the difference of $1,305,851 was recognized as goodwill. However the entire goodwill amount of $1,305,851 was impaired in 2007.
NOTE 5 - NOTES PAYABLE – BANK
In the acquisition of PeriNet the company was to assume a line of credit agreement with Commerce Bank. The credit line has been closed and the balance of, at acquisition of approximately $100,000 and $96,826 at September 30, 2008 is the subject of litigation as disclosed below.
In June 2007, the Company entered into an agreement with three companies to borrow $366,667 with the ability to borrow up to$1.5 million based on certain conditions being met. The loans carry an interest rate of 8% and is due to mature and be paid in its entirely on June 26, 2008. Interest is payable on October 1, 2007 and quarterly thereafter up to the maturity date. The loans have a conversion option into the Company's common stock. The conversion price of the stock shall be the lesser of (i) the Initial Market Price of the stock at the time of the loan or (ii) Fifty-five percent (55%) of the average of the three lowest intra-day trading prices during the twenty trading days immediately prior to the Conversion date. In addition the Company will issue one Class A warrant and one class B warrant will be issued for each two dollars loaned to the company. The per warrant share exercise price to acquire a warrant share upon exercise of Class A warrant shall be $0.03 and the exercise price of Class B warrant shall be $0.06. Both Class A and Class B warrant shall be expire seven years after the closing date. As of September 30, 2008 $57,500 of the debt has been converted leaving a remaining balance of $239,167 outstanding.
NOTE 6 - RELATED PARTY TRANSACTIONS
Amounts due to related parties at September 30, 2008 consists of advances totaling $246,000 from Jim Farinella, a former director of the company and Jim Booth CEO.
I didn’t see where the classes of stock terms are listed so this needs to be explored
NOTE 8 - STOCKHOLDERS' EQUITY (DEFICIT)
Class B Common Stock
As of September 30, 2008, there were 5,000,000 shares authorized, and 1,304,000 shares issued and outstanding of the Company's Class B common stock with a par value of $.001. Of the 5,000,000 shares authorized and issued ,as of September 30, 2008, Mr. David Facciani, a former officer and director, holds 1,304,000 shares of Class B common stock.
Common Stock
In February 2003, the Company upon an approved board resolution increased the authorized limit of the Class A common shares to 250,000,000 and increased it to 500,000,000 in 2004.
As of September 30, 2008, there were 500,000,000 shares authorized, and 49,815,532 shares issued and outstanding, of the Company's common stock A with a par value of $.001.
Reverse Stock Split
The Board of the Company approved a resolution on July 25, 2007, pursuant to the requirements of Nevada Revised Statutes, section 78.207, for a Reverse Stock Split on a one for ten basis so that ten shares of old Common Stock shall be converted into one share of new Class A Common Stock, par value $0.001. The reverse stock split became effective April 28, 2008.
As of September 30, 2008, there were 5,000,000 shares authorized, and 1,304,000 shares issued and outstanding of the Company's Class B common stock with a par value of $.001.
In February 2003, the Company upon an approved board resolution increased the authorized limit of the Class B common shares to 5,000,000. Subsequent to this board resolution, the Company cancelled the outstanding 1,142,858 shares and issued the entire 5,000,000 shares to two of its officers. Of the 5,000,000 shares authorized and issued to the then officers of the Company, James Farinella and David Facciani, As of September 30, 2008, Mr. Farinella holds zero shares of Class B common stock, and Mr. Facciani holds 1,304,000 shares of Class B common stock.
NOTE 11 - GOING CONCERN
As shown in the accompanying consolidated condensed financial statements the Company has incurred significant recurring losses of $398,584 and $1,211,530 for the nine months ended September 30, 2008 and 2007, and has a working capital deficiency of $1,848,391 as of September 30, 2008. There is no guarantee that the Company will be able to raise enough capital or generate revenues to sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern for a reasonable period.
Management believes that the Company's capital requirements will depend on many factors including the success of the Company's future growth and ability to cut costs. The Company's ability to continue as a going concern is also dependent upon management's ability to raise additional interim capital and, ultimately, achieve profitable operations. There can be no assurance that management will be able to raise sufficient capital, under terms satisfactory to the Company, if at all.
The consolidated condensed financial statements do not include any adjustments relating to the carrying amounts of recorded assets or the carrying amounts and classification of recorded liabilities that may be required should the Company be unable to continue as a going concern.
Note includes that they are continuing to fund – what are prospects for dilution?
Liquidity and Capital Resources
For the nine-months ended September 30, 2008, the Company had $110,351 provided by operating activities compared to a usage of $797,766 for the nine-months ended September 30, 2007. The increase in cash provided by operating activities of approximately $900,000 is most attributable to the increase in shares of stock being issued for services and the lower net loss incurred by the company in each quarter. The Company has continued to borrow certain amounts from related parties to finance the operations brought in to the company through the acquisitions. The Company has made significant progress with respect to future funding through unrelated third parties. Funding is being sought which will enable the Company to market, and continue to expand operations at a quickened pace. We anticipate that going forward; we will continue to streamline administrative and professional fees to conserve cash flow. Once the recognition of increased revenues occurs, certain expenses will increase, but only in accordance with the increase in revenues.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has suffered recurring losses from operations and at September 30, 2008 had working capital deficits as noted above. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Additional capital would be required to increase the pace of growth for the overall company. It is expected in the short term through organic growth and strategically targeted acquisitions that the Company will be able to sustain a very high rate of growth however it will require additional capital.
|
