10-Q 1 v319782_10q.htm FORM 10-Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

Form 10-Q

  

xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the quarterly period ended June 30, 2012.

 

or

 

¨TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT.

 

For the transition period from ______________ to ______________

 

Commission File No. — 33-131110-NY

  

4net Software, Inc.
(Exact Name of Small Business Issuer as Specified in its Charter)

  

DELAWARE   22-1895668
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification Number)

 

225 N.E. Mizner Boulevard, Suite 400 Boca Raton, Florida 33432
(Address of Principal Executive Office) (Zip Code)

 

(561) 362-5385
    (Registrant's telephone number including area code)    

  

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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.

 

x Yes ¨ 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 (Section 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).

 

x Yes ¨ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

Large accelerated filer ¨   Accelerated filer         ¨
     
Non-accelerated filer   ¨   Smaller reporting company x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

x Yes ¨ No

 

As of August 7, 2012, the issuer had 9,261,017 outstanding shares of common stock.

 

 
 

 

4net Software, Inc.

 

TABLE OF CONTENTS

 

  Page No.
   
PART I - FINANCIAL INFORMATION 3
   
Item 1.  Financial Statements 3
   
Balance Sheets as of June 30, 2012 (unaudited) and September 30, 2011 (audited) 3
   
Statements of Operations (three-months and nine months ended June 30, 2012 and 2011) 4
   
Statements of Cash Flows (nine-months ended June 30, 2012 and 2011) 5
   
Notes to Condensed Financial Statements 6
   
Item 2.  Management Discussion and Analysis of Financial Condition and Results of Operations 8
   
Item 4. Controls and Procedures 9
   
PART II - OTHER INFORMATION 10
   
Item 1.  Legal Proceedings 10
   
Item 5.  Other Information 10
   
Item 6.  Exhibits 10
   
SIGNATURES 12

 

2
 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

4NET SOFTWARE, INC.

BALANCE SHEETS

 

   June 30,   September 30, 
   2012   2011 
   (Unaudited)     
         
ASSETS          
           
CURRENT ASSETS          
Cash  $7,857   $7,180 
TOTAL ASSETS  $7,857   $7,180 
           
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)          
           
CURRENT LIABILITIES          
Accounts payable and accrued expenses  $4,956   $13,154 
Related party note and interest payable   104,216    66,541 
           
TOTAL CURRENT LIABILITIES  $109,172   $79,695 
           
COMMITMENTS AND CONTINGENCIES        
           
STOCKHOLDERS' EQUITY (DEFICIT)          
Preferred stock, $.01 par value; authorized - 5,000,000 shares - issued and outstanding - none        
Common stock $.00001 par value; authorized - 100,000,000 shares - issued and outstanding - 9,261,017  on June 30, 2012 and on September 30, 2011   93    93 
Capital in excess of par value   3,198,255    3,198,255 
Accumulated deficit   (3,299,663)   (3,270,863)
           
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)   (101,315)   (72,515)
           
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)  $7,857   $7,180 

 

See accompanying notes to these financial statements.

 

3
 

 

4NET SOFTWARE, INC.

STATEMENTS OF OPERATIONS

(Unaudited)

 

   Three Months Ended   Nine Months Ended 
   June 30,   June 30, 
   2012   2011   2012   2011 
                 
REVENUES  $   $   $   $ 
                     
OPERATING EXPENSES                    
General and Administrative   9,900    8,858    23,125    18,665 
TOTAL OPERATING EXPENSES   (9,900)   (8,858)   (23,125)   (18,665)
                     
LOSS FROM OPERATIONS   (9,900)   (8,858)   (23,125)   (18,665)
                     
Interest expense   (2,158)   (1,479)   (5,675)   (3,523)
Other Income       10,000        10,000 
OTHER INCOME/(EXPENSE)   (2,158)   8,521    (5,675)   6,477 
                     
NET LOSS  $(12,058)  $(337)   (28,800)   (12,188)
                     
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING-Basic and Dilutive   9,261,017    9,261,017    9,261,017    9,261,017 
                     
NET LOSS PER COMMON SHARE - Basic and Dilutive  $(.00)  $(.00)  $(.00)  $(.00)

 

See accompanying notes to these financial statements.

 

4
 

 

4NET SOFTWARE, INC.

STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED JUNE 30, 2012 AND 2011

(Unaudited)

 

   2012   2011 
         
CASH FLOWS FROM OPERATING ACTIVITIES          
Net loss  $(28,800)  $(12,188)
Adjustments to reconcile net loss to net cash used in operating activities:          
Changes in assets and liabilities:          
Decrease in accounts payable and Accrued expenses   (2,523)   (3,267)
Net Cash Used in Operating Activities   (31,323)   (15,455)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
           
Proceeds from related party note payable   32,000    22,000 
           
Net Cash Provided by Financing Activities   32,000    22,000 
           
Net Increase in Cash   677    6,545 
           
CASH - BEGINNING OF PERIOD   7,180    7,995 
           
CASH - END OF PERIOD  $7,857   $14,540 

 

See accompanying notes to these financial statements.

 

5
 

 

4NET SOFTWARE, INC.

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accompanying condensed interim financial statements of 4net Software, Inc. (the "Company") are unaudited. In the opinion of management, the interim data includes all normally recurring adjustments, necessary for a fair presentation of the results for the interim period. The results of operations for the three month period ended June 30, 2012 are not necessarily indicative of the operating results for the entire year.

 

The condensed interim financial statements included herein are prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America has been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the disclosures made are adequate to make the information not misleading. These condensed interim financial statements should be read in conjunction with the financial statements and notes included in the Company's Form 10-K for the year ended September 30, 2011.

 

USE OF ESTIMATES - The preparation of 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 at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

CASH EQUIVALENTS - For purposes of reporting cash flows, management considers as cash equivalents all highly liquid investments with a maturity of three months or less at the time of purchase. At June 30, 2012, the Company had no cash equivalents.

 

NOTE 2 - GOING CONCERN

 

The accompanying condensed interim financial statements have been prepared on the basis of accounting principles applicable to a going concern which contemplates the realization of assets and extinguishment of liabilities in the normal course of business. As shown in the accompanying condensed interim financial statements, the Company has an accumulated deficit of approximately $3.30 million through June 30, 2012. As of June 30, 2012, the Company has no principal operations or significant revenue producing activities, which raises substantial doubt about its ability to continue as a going concern. The Company's condensed interim financial statements do not include any adjustments related to the carrying value of assets or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company's ability to establish itself as a going concern is dependent on its ability to merge with another entity. The outcome of this matter cannot be determined at this time.

 

6
 

 

4NET SOFTWARE, INC.

NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS

 

NOTE 3 - CONTROL

 

As of June 30, 2012 Mr. Bronson beneficially owns 5,560,210 shares of the Company's common stock. Mr. Bronson's beneficial ownership represents approximately 60% of the Company's issued and outstanding shares of common stock. Accordingly, Mr. Bronson has effective control of the Company. In the election of directors, stockholders are not entitled to cumulate their votes for nominees. Accordingly, as a practical matter, Mr. Bronson may be able to elect all of the Company's directors and otherwise direct the affairs of the Company.

 

NOTE 4 - DUE TO RELATED PARTY

 

Since February 3, 2009, the Company's president and principal executive officer has loaned the Company money to fund working capital needs to pay operating expenses. The loans are repayable upon demand and accrue interest at the rate of 10% per annum. As of June 30, 2012, the aggregate principal loan balance amounted to $90,696 and such loans have accrued interest of $13,520 through June 30, 2012.

 

Note 5 - RELATED PARTY TRANSACTION

 

The Company occupies a portion of the premises occupied by BKF Capital Group, Inc. at 225 N.E. Mizner Boulevard, Suite 400 Boca Raton, Florida 33432 on a month to month basis for a fee of $100 per month paid to BKF Capital Group, Inc. Steven N. Bronson, the Company's president, is the president of BKF Capital Group, Inc.

 

7
 

 

Item 2. Management's Discussion and Analysis or Plan of Operation.

 

Forward Looking Statements Disclosure

 

This report on Form 10-Q contains, in addition to historical information, Forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"). You can identify these forward-looking statements when you see words such as "expect," "anticipate," "estimate," "may," "plans," "believe," and other similar expressions. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Actual results could differ materially from those projected in the forward-looking statements. Factors that could cause such a difference include, but are not limited to, those discussed in the section entitled "Factors Affecting Operating Results and Market Price of Stock," contained in the Company's Annual Report on Form 10-K for the year ended September 30, 2011. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update any forward -looking statements.

 

The following discussion and analysis provides information which management of 4net Software, Inc. (the "Company" or "4net Software") believes to be relevant to an assessment and understanding of the Company's results of operations and financial condition. This discussion should be read together with the Company's financial statements and the notes to financial statements, which are included in this report as well as the Company's Annual Report on Form 10-K for the year ended September 30, 2011 which is incorporated herein by reference.

 

4net Software's Acquisition Strategy

 

The Company is engaged in pursuing an acquisition strategy, whereby 4net Software is seeking to enter into an acquisition, merger or other business combination transaction (a "Transaction") with an undervalued business (a "Target Company") with a history of operating revenues in markets that provide opportunities for growth. 4net Software is currently engaged in identifying, investigating and, if investigation warrants, entering into a Transaction with a Target Company that will enhance 4net Software's revenues and increase shareholder value. The Company utilizes several criteria to evaluate Target Companies including whether the Target Company: (1) is an established business with viable services or products, (2) has an experienced and qualified management team, (3) has opportunities for growth and/or expansion into other markets, (4) is accretive to earnings, (5) offers the opportunity to achieve and/or enhance profitability, and (6) increases shareholder value.

 

In some cases, management of the Company will have the authority to effect acquisitions without submitting the proposal to the stockholders for their consideration. In some instances, however, a proposed Transaction may be submitted to the stockholders for their consideration, either voluntarily by the Board of Directors to seek the stockholders' advice and consent, or because of a requirement of applicable law to do so.

 

Management believes that the successful implementation of the Company's Acquisition Strategy will allow 4net Software to increase revenues and earnings and achieve profitability. There can be no assurances, however, that 4net Software will successfully complete any additional acquisitions or that 4net Software will achieve profitability.

 

8
 

 

Results of Operations

 

For the three month periods ended June 30, 2012 and 2011, the Company had no revenue. Operating expenses for the three month periods ended June 30, 2012 and 2011 were $9,900 and $8,858, respectively. Other expenses consist of interest expense for the periods presented and other income for 2011 consisting of $10,000 received from EnSA Holdings, LLC ("EnSA"), in connection with the termination of the Letter of Intent between 4net Software and EnSA (the “EnSA LOI”).

 

For the nine month periods ended June 30, 2012 and 2011, the Company had no revenue. Operating expenses for the nine month periods ended June 30, 2012 and 2011 were $23,125 and $18,665, respectively. Other expenses consist of interest expense for the periods presented and other income for 2011 consisting of $10,000 received from EnSA as a result of terminating the EnSA LOI.

 

Liquidity and Capital Resources

 

During the three months ended June 30, 2012, the Company satisfied its working capital needs from cash on hand and the loans extended by the Company's president and principal executive officer to enable the Company to pay its expenses. As of June 30, 2012, the Company had cash on hand of $7,857. The Company will need additional funds in order to satisfy its financial obligations and to finance any transaction or acquisition by the Company. There can be no assurances that the Company will be able to obtain additional funds if and when needed.

 

Item 4. Controls and Procedures

 

Disclosure controls and procedures are controls and other procedures that are designed to provide reasonable assurances that information required to be disclosed by the Company in its periodic reports filed or submitted by the Company under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurances that information required to be disclosed by the Company in its periodic reports that are filed under the Exchange Act is accumulated and communicated to our Principal Executive Officer, as appropriate to allow timely decisions regarding required disclosure.

 

Evaluation of disclosure and controls and procedures.

 

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of management including our Principal Executive Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on the evaluation, the Company's Principal Executive Officer has concluded that the Company's disclosure controls and procedures are designed to provide reasonable assurances that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and are operating in an effective manner.

 

Changes in internal controls over financial reporting.

 

There were no changes in the Company's internal controls over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

 

9
 

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

During the quarter ended June 30, 2012, the Company was not a party to any material legal proceedings.

 

Item 5. Other Information.

 

Since February 3, 2009, the Company's president and principal executive officer has loaned the Company money at various times to fund working capital needs to pay operating expenses. The loans ("Loans") are repayable upon demand and accrue interest at the rate of 10% per annum. As of June 30, 2012, the aggregate principal loan balance amounted to $90,696 and such loans have accrued interest of $13,520 through June 30, 2012. The Loans are evidenced by a Third Amended and Restated Consolidated Loan Agreement, dated February 8, 2012, that is attached to the Company’s Quarterly Report for the quarter ended December 31, 2011, as Exhibit 10.23.

 

Item 6. Exhibits.

 

a. Exhibits

 

The following exhibits are hereby filed as part of this Quarterly Report on Form 10-Q or incorporated herein by reference.

 

Exhibit    
Number   Description of Document
     
2.1   Stock Purchase Agreement by and between Michael Park, Andrew Patros and Robert Park and MedTech Diagnostics, Inc. dated April 24, 2000. (Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by the Company on May 3, 2000)
     
3.1   Certificate of Incorporation of the Company. (Incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-KSB for the fiscal year ended September 30, 1999)
     
3.2   By-Laws of the Company. (Incorporated by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-KSB for the fiscal year ended September 30, 1999)
     
3.3   Certificate of Amendment to the Certificate of Incorporation of the Company. (Incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2000)
     
3.4   Amended and Restated By-Laws of the Company. (Incorporated by reference to Exhibit 3.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2000)
     
3.5   Certificate of Merger between the Company and its wholly owned subsidiary 4net Software, Inc. (Incorporated by reference to Exhibit 3.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001)

 

10
 

 

3.6   Amended Certificate of Designation of the Series A Convertible Preferred Stock of 4net Software, Inc. (Incorporated by reference to Exhibit 3.6 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001)
     
10.3   Employment Agreement dated as of August 1, 2000 by and between the Company and Steven N. Bronson. (Incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2000)
     
10.4   Employment Agreement dated as of August 1, 2000 by and between the Company and Robert Park. (Incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2000)
     
10.5   Sublease dated as of February 1, 2001 by and between the Company and Catalyst Operations, Inc. (Incorporated by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001)
     
10.6   Management Consulting Agreement, dated as of February 1, 2001 by and between the Company and Catalyst Financial LLC. (Incorporated by reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001)
     
10.7   Mergers and Acquisitions Advisory Agreement, dated as of March 27, 2001 by and between the Company and Catalyst Financial LLC. (Incorporated by reference to Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001)
     
10.8   Placement Agent Agreement, dated as of April 30, 2001, by and between the Company and Catalyst Financial LLC. (Incorporated by reference to Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001)
     
10.9   Placement Agent Agreement, dated as of July 2, 2001, by and between the Company and Catalyst Financial LLC. (Incorporated by reference to Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2001)
     
10.10   Employment Agreement, dated as of July 1, 2001 by and between the Company and Steven N. Bronson. (Incorporated by reference to Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2001)
     
10.11   Separation Agreement, dated as of September 21, 2001 by and between the Company and Michael Park. (Incorporated by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-KSB for the fiscal year ended September 30, 2001)
     
10.12   Letter of Intent, dated December 19, 2002 by and between the Company and NWT, Inc. (Incorporated by reference to Exhibit 10.12 to the Company's Annual Report on Form 10-KSB for the fiscal year ended September 30, 2002)
     
10.13   First Amendment to Sublease between Catalyst Operation, Inc. and 4networld.com, Inc. n/k/a 4net Software, Inc. made as of August 30, 2002. (Incorporated by reference to Exhibit 10.13 to the Company's Current Report on Form 8-K, dated September 27, 2002)

 

11
 

 

10.14   Assignment Agreement, dated as of September 18, 2002, between 4net Software, Inc. and New England Computer Group, Inc. (Incorporated by reference to Exhibit 10.14 to the Company's Current Report on Form 8-K, dated September 27, 2002)
     
10.15   Consulting Agreement, dated December 17, 2003 between the Company and ETN Financial Services, Inc.
     
10.16   Stock Purchase Agreement, dated September 13, 2005, between 4net Software, Inc. and RAM Capital Management Trust I
     
10.17   Stock Purchase Agreement, dated as of May 13, 2008, between 4net Software, Inc. and David Castaneda
     
10.18   Loan Agreement between Steven N. Bronson and 4net Software, Inc., dated May 13, 2009
     
10.19   Consolidated Loan Agreement between Steven N. Bronson and 4net Software, Inc., dated December 11, 2009
     
10.20   Amended Consolidated Loan Agreement between Steven N. Bronson and 4net Software, Inc., dated February 12, 2010
     
10.21   Amended and Restated Consolidated Loan Agreement between Steven N. Bronson and 4net Software, Inc., dated August 4, 2011
     
10.22   Second Amended and Restated Consolidated Loan Agreement between Steven N. Bronson and 4net Software, Inc., dated December 20, 2011
     
10.23   Third Amended and Restated Consolidated Loan Agreement between Steven N. Bronson and 4net Software, Inc., dated February 8, 2012. (Incorporated by reference to Exhibit 10.23 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 2011)
     
14   Code of Ethics
     
31*   President's Written Certification Of Financial Statements Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
     
32*   President's Written Certification Of Financial Statements Pursuant to 18 U.S.C. Statute 1350

 

 

* Filed herewith

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Dated: August 9, 2012

 

  4net Software, Inc.
     
  By: /s/ Steven N. Bronson
    Steven N. Bronson, President
    Principle Executive Officer
    as Registrant's duly authorized officer

 

12
 

 

EXHIBIT INDEX

 

The following Exhibits are filed herewith:

 

Exhibit    
Number   Description of Document
31   President's Statement Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32   President's Written Certification Of Financial Statements Pursuant to 18 U.S.C. Statute 1350.

 

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