|• ENXNET INC. FORM 10-Q/A-1 (6/30/2012 • SARBANES-OXLEY 302 CERTIFICATION - PRINCIPAL EXECUTIVE OFFICER • SARBANES-OXLEY 302 CERTIFICATION - PRINCIPAL FINANCIAL OFFICER • SARBANES-OXLEY 906 CERTIFICATION - CHIEF EXECUTIVE OFFICER • SARBANES-OXLEY 906 CERTIFICATION - CHIEF FINANCIAL OFFICER • XBRL INSTANCE DOCUMENT • XBRL TAXONOMY EXTENSION - SCHEMA • XBRL TAXONOMY EXTENSION - CALCULATIONS • XBRL TAXONOMY EXTENSION - DEFINITIONS • XBRL TAXONOMY EXTENSION - LABELS • XBRL TAXONOMY EXTENSION - PRESENTATION|
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Commission File Number 000-30675
(Name of issuer in its charter)
11333 E. Pine Street, Suite 92 - Tulsa, Ok 74116
(Address of principal executive offices & zip code)
(918) 592 - 0015
Registrant’s telephone number, including area code:
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 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 last 90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (SS 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 [ ] NO [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES [ ] NO [X]
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of August 14, 2012, there were outstanding 46,639,018 shares of the registrant’s common stock, $0.0005 par value.
REASON FOR AMENDMENT
The sole purpose of this Amendment to the Quarterly Report on Form 10-Q of EnXnet, Inc. for the period ended June 30, 2012, filed with the Securities and Exchange Commission (“SEC”) on August 14, 2012, is to furnish Exhibit 101 to the Form 10-Q in accordance with Rule 405(a)(2) of Regulation S-T. Exhibit 101 consists of the interactive data files that were not included with the Form 10-Q, as allowed by the 30-day grace period for the first quarterly period in which detailed footnote tagging is required. This amendment does not otherwise change or update the disclosures set forth in the Form 10-Q as originally filed and does not otherwise reflect events occurring after the original filing of the Form 10-Q.
The accompanying notes are an integral part of these unaudited financial statements.
The accompanying notes are an integral part of these unaudited financial statements.
The accompanying notes are an integral part of these unaudited financial statements.
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements of EnXnet, Inc. (“EnXnet” or “the Company”) for the three months ended June 30, 2012 have been prepared in accordance with generally accepted accounting principles in the United States of America, pursuant to the rules and regulations of the U.S. Securities and Exchange Comission (the “SEC”) for interim financia1 information. Accordingly, the financial statements do not include all information and footnotes required by generally accepted accounting principles in the United States (“GAAP”) for complete annual financial statements. In the opinion of management, the accompanying unaudited condensed interim financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation. The accompanying financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s March 31, 2012 Annual Report on Form 10-K.
NOTE 2 – GOING CONCERN
The Company has a working capital deficit and has incurred losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that may be necessary if the Company is unable to continue as a going concern.
Management of the Company has undertaken certain actions to address these conditions. Management is currently in negotiations with potential customers and with marketing representatives to establish a more developed product channel. Funds required to carry out management’s plans are expected to be derived from future stock sales and borrowings from outside parties. There can be no assurances that the Company will be successful in executing its plans.
NOTE 3 – CONVERTIBLE NOTES PAYABLE
NOTE 4 – ADVANCES FROM AND NOTES PAYABLE TO OFFICER
Advances from a stockholder at both June 30, 2012 and March 31, 2012 were $32,400.
Our CEO, Ryan Corley, has made advances to the Company in prior years. During the three months ended June 30, 2012, the CEO made additional unsecured advances totaling $18,900. During the three months ended June 30, 2012 the Company made payments on these advances of $11,000. On May 17, 2012, advances in the amount of $36,900 were converted into a note payable bearing interest at 2% and convertible into common stock of the Company at $0.08 per share.
NOTES TO FINANCIAL STATEMENTS
The Company has notes payable to the CEO totaling $642,455 and $605,555 as of June 30, 2012 and March 31, 2012. Accrued interest owed on these notes is $125,814 and $122,670. These notes and accrued interest are convertible into 13,899,258 and 13,372,992 shares, respectively.
An entity controlled by the CEO has made unsecured advances and notes payables to the Company. At both June 30, 2012 and March 31, 2012, advances from the entity controlled by the CEO were $10,500 with notes payable totaled $160,250. Accrued interest owed on these notes was $13,213 and $12,136, respectively. These notes and accrued interest are convertible into 2,797,773 and 2,780,783 shares, respectively.
NOTE 5 - COMMON STOCK TRANSACTIONS
The Company issued 250,000 shares in exchange for services valued at $7,500 for the three months ended June 30, 2012. The Company also issued 1,250,000 shares for $50,000 in cash during the three months ended June 30, 2012.
NOTE 6 – STOCK OPTIONS
On July 24, 2001, the Company filed with the SEC Form S-8, for its 2002 Stock Option Plan, (the Plan). An aggregate amount of common stock that may be awarded and purchased under the Plan is 3,000,000 shares of the Company’s common stock. Under the Plan during the years ended March 31, 2012, the Company granted stock options to employees and members of the Board of Directors in the amount of 2,190,000. The Company recognized option expense of $4,453 due to the vesting of these options.
There were no stock options issued during the 3 months ended June 30, 2012. A summary of the status of the Company’s stock options as of June 30, 2012 is presented below:
The following table summarizes the information about the stock options as of June 30, 2012:
NOTE 7 – SUBSEQUENT EVENTS
On July 1, 2012, the Company issued to its new Executive Vice President, 100,000 shares and an option to purchase 200,000 shares at $0.25 per share. This option expires on the earlier of 3 years from the grant date or 90 days after the resignation of the Executive Vice President.
On July 18, 2012, the Company sold 500,000 shares for $50,000 cash.
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS.
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Exchange Act which represent the expectations or beliefs concerning future events that involve risks and uncertainties, including but not limited to the demand for Company products and services and the costs associated with such goods and services. All other statements other than statements of historical fact included in this Quarterly Report including, without limitation, the statements under “Management’s Discussion and Analysis or Plan of Operations” and elsewhere in the Quarterly Report, are forward-looking statements. While the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct.
The following discussion of the results of operations and financial conditions should be read in conjunction with the financial statements and related notes appearing in this report.
EnXnet, Inc. was formed under the laws of the State of Oklahoma on March 30, 1999 as Southern Wireless, Inc. It is a business and technology development enterprise engaged in the development, marketing, and licensing of emerging technologies and innovative business strategies and practices, focusing primarily on products, solutions, and services that support and enhance multimedia management and green environmentally friendly systems for heating and air conditioning units.
The Company currently can satisfy its current cash requirements for approximately 30 days and has a plan to raise additional working capital by the sale of shares of the Company common stock to select perspective individuals and from additional borrowings. Additionally, holders of outstanding stock options have been exercising those options which have provided additional working capital for the Company. This plan should provide the additional necessary funds required to enable the Company to continue marketing and developing its products until the Company can generate enough cash flow from sales to sustain its operations.
The Company does not anticipate any significant cash requirements for the purchase of any facilities.
The Company currently has one full-time employee on the payroll. It is anticipated that the Company will need to hire additional employees in order to expand the marketing and developing of its products. Currently our employee and other outside consultants are used for the further development of our products.
Results of Operations – Three months ended June 30, 2012 and 2011.
Revenues have not been substantial as we refocused our efforts on developing technologies and developing marketing affiliates.
The Company incurred operating expenses of $44,996 and $40,983 for the three months ended June 30, 2012 and 2011, a increase of $4,013 or 10%. The increase in operating expenses of $4,013 for the three months ended June 30, 2012 when compared to the three month period ended June 30, 2011 is attributed to:
The increase in professional fees of $9,264 for the three months ended June 30, 2012 compared to the three month period ended June 30, 2011 is attributed to an increase in fees for auditor related services.
The decrease in consulting expenses of $3,908 for the three months ended June 30, 2012 compared to the three month period ended June 30, 2011 is related to the amount of restricted stock issued to consultants for services to the company. In the three months ended June 30, 2012 we recognized consulting expense totaling $8,246 while in the three months ended June 30, 2011 we recognized consulting expense totaling $14,681.
Other classifications of expenses did not fluctuate substantially for the three month period ended June 30, 2012 compared to the three month period ended June 30, 2011.
During the three months ended June 30, 2012 and 2011 we incurred net losses of $51,019 and $46,584 or $(0.001) and $(0.001) per share.
Liquidity and Capital Resources.
From inception through June 30, 2012, the Company has issued 46,639,018 shares of its Common Stock to officers, directors and outside shareholders. The Company has little operating history and no material assets other than the patents for TAC Unit, ThinDisc, Passive Resonant Reflector, and an Antenna for an optical storage disk, EnXcase, and Disc Security Tag. The Company has $32,462 in cash as of June 30, 2012.
The Company has incurred operating losses each year since its inception and has had a working capital deficit at June 30, 2012. At June 30, 2012 and March 31, 2012 the working capital deficit was $1,509,116 and $1,520,568, respectively. The working capital deficit and cash balance raise substantial doubt about the Company’s ability to continue as a going concern. As a result of these factors, the Company’s independent certified public accountants have included an explanatory paragraph in their reports on the Company’s March 31, 2012 financial statements which expressed substantial doubt about the Company’s ability to continue as a going concern.
At the present time, the Company has no material commitments for capital expenditures. If capital expenditures are required after operations commence, the Company will pay for the same through the sale of common stock, or through loans from third parties. There is no assurance, however, that such financing will be available and in the event such financing is not available, the Company may have to cease operations.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES.
Management’s discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements. These statements have been prepared in accordance with generally accepted accounting principles in the United States of America.
Use of estimates in preparation of financial statements
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, based on historical experience, and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The following critical accounting policies rely upon assumptions, judgments and estimates and were used in the preparation of our consolidated financial statements:
Cash and cash equivalents
Cash equivalents are highly liquid investments with an original maturity of three months or less.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States necessarily requires management to make estimates and assumptions that affect the amounts reported in the financial statements. We regularly evaluate estimates and judgments based on historical experience and other relevant facts and circumstances. Actual results could differ from those estimates.
Fixed assets are recorded at cost. Depreciation and amortization are provided using the straight-line method over the useful lives of the respective assets, typically 3-10 years. Major additions and betterments are capitalized. Upon retirement or disposal, the cost and related accumulated depreciation or amortization is removed from the accounts and any gain or loss is reflected in operations.
Depreciation expenses included in operating expenses for the three months ended June 30,, 2012 and 2011 were $518 and $1452, respectively.
Impairment of long-lived assets – The Company reviews the carrying value of its long-lived assets annually or whenever events or changes in circumstances indicate that the historical-cost carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the asset by comparing the undiscounted future net cash flows expected to result from the asset to its carrying value. If the carrying value exceeds the undiscounted future net cash flows of the asset, an impairment loss is measured and recognized. An impairment loss is measured as the difference between the net book value and the fair value of the long-lived asset. Fair value is estimated based upon either discounted cash flow analysis or estimated salvage value. As of June 30, 2012, the company recognized $0 impairment expense.
Goodwill and other intangibles – Goodwill and other intangibles with indefinite lives are not amortized but are reviewed for impairment at least annually, or more frequently if an event or circumstance indicates that an impairment may have occurred. To test for impairment, the fair value of each reporting unit is compared to the related net book value, including goodwill. If the net book value of the reporting unit exceeds the fair value, an impairment loss is measured and recognized. An income approach is utilized to estimate the fair value of each reporting unit. The income approach is based on the projected debt-free cash flow, which is discounted to the present value using discount factors that consider the timing and risk of cash flows.
The costs associated with acquiring exclusive licensing rights to patented technology have been capitalized and are being charged to expense using the straight line method of amortization over ten years, the estimated remaining useful lives of the patents.
Fair Value of Financial Instruments
Under FASB ASC 825 the Company is required to disclose the fair value of financial instruments for which it is practicable to estimate value.
The Company’s financial instruments consist of cash, accounts receivable, accounts payable, accrued liabilities and debt. The Company believes that the carrying amounts approximate fair value for all such instruments.
FASB ASC 820 defines fair value, establishes a framework for measurement, and expands disclosure about fair value measurements. Topic No. 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Topic No. 820 classifies the inputs used to measure fair value into the following hierarchy:
Fair values assigned to the Company’s acquired fixed assets were determined using Level 2, and the fair value associated with the Company’s intangible asset was based on Level 3 inputs. The inputs used to determine fair value require significant management judgment and estimation.
Research and Development Costs
Research and development costs are charged to expense as incurred.
Stock Based Compensation
FASB ASC 718 requires that measurement of the cost of employee services received in exchange for an award of equity instruments be based on the grant-date fair value of the award. Such costs are recorded over the periods employees are required to render services in exchange for the awards.
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. These assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to reverse.
We have net operating loss carryforwards available to reduce future taxable income. Future tax benefits for these net operating loss carryforwards are recognized to the extent that realization of these benefits is considered more likely than not. To the extent that we will not realize a future tax benefit, a valuation allowance is established.
Basic and diluted net loss per share
Basic loss per share is computed using the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the dilutive effects of common stock equivalents on an “as if converted” basis. For the years ended 2012, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share
Recent Accounting Pronouncements
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operation, financial position or cash flows.
Unaudited Financial Statements
The accompanying unaudited financial statements for the three months ended June 30, 2012 have been prepared in accordance with generally accepted accounting principles for interim financia1 information. In the opinion of management all adjustments considered necessary for a fair presentation, which consist of normal recurring adjustments, have been included. The accompanying financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s March 31, 2012 Annual Report on Form 10-K.
Off Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
CURRENT TRADING MARKET FOR THE COMPANY’S SECURITIES.
Currently the Company’s stock is traded under the symbol “EXNT” on the NASD OTC Bulletin Board, and the symbol “AOHMDW” on the Frankfurt, Berlin and Stuttgart Stock Exchanges in Germany. There can be no assurance that an active or regular trading market for the common stock will develop or that, if developed, will be sustained. Various factors, such as operating results, changes in laws, rules or regulations, general market fluctuations, changes in financial estimates by securities analysts and other factors may have a significant
impact on the market of the Company securities. The market price for the securities of public companies often experience wide fluctuations that are not necessarily related to the operating performance of such public companies such as high interest rates or impact of overseas markets.
Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures (as defined in Rules 13(a)-15(e) under the Securities Act of 1934, as amended) are effective to ensure that all information required to be disclosed by us in the reports filed or submitted by us under the Securities and Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by us in such reports is accumulated and communicated to the management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate and allow timely decisions regarding required disclosure.
Changes in Internal Controls. In connection with the above-referenced evaluation, no change in our internal control over financial reporting occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
The Company is not involved in litigation at this time. We may from time to time be a party to various legal actions in the ordinary course of business. There can be no assurance that the Company will not be a party to litigation in the future that could have an adverse effect on the Company.
There have been no material changes with regard to the risk factors previously disclosed in our most recent Annual Report on Form 10-K.
The following are included herein: The following are included herein:
Pursuant to the requirements of the Securities Exchange Act of 1934, this registrant has duly caused this amended report to be signed on its behalf by the undersigned thereunto duly authorized on this 11th day of September, 2012.