þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2012
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Florida
(State or other jurisdiction of
incorporation or organization)
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83-0245581
(IRS Employer
Identification No.)
|
Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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Smaller reporting company þ
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Page
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||||||
PART I – FINANCIAL INFORMATION
|
||||||
Item 1. Financial Statements
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3
|
|||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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20
|
|||||
Item 4. Controls and Procedures
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22
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|||||
PART II – OTHER INFORMATION
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||||||
Item 6. Exhibits
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22
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|||||
Signatures
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23
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March 31,
|
||||||||
2012
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September 30,
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|||||||
(unaudited)
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2011
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|||||||
ASSETS
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||||||||
Cash and equivalents
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$
|
93,261
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$
|
169,499
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||||
Accounts receivable
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148,920
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228,085
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||||||
Contract claim receivable
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-
|
-
|
||||||
Inventory
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799,993
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685,226
|
||||||
Other current assets
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40,283
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130,826
|
||||||
Total current assets
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1,082,457
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1,213,636
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||||||
Property, plant and equipment
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2,459,498
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2,545,258
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||||||
Investments
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1,791,855
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1,791,855
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||||||
Other assets
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42,617
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107,618
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||||||
Total Assets
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$
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5,376,427
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$
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5,658,367
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||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
||||||||
Accounts payable
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$
|
580,026
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$
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203,769
|
||||
Accrued expenses
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6,427,536
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6,416,831
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||||||
Advance payments and billings in excess of cost
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512,524
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883,504
|
||||||
Current portion of long term debt
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6,775,565
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5,365,245
|
||||||
Current liabilities associated with discontinued operations
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1,966,262
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1,934,588
|
||||||
Total current liabilities
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16,261,913
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14,803,937
|
||||||
Shareholder loans and accrued interest
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140,861
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185,392
|
||||||
Long term debt, net of current portion
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1,211,087
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1,268,925
|
||||||
Total liabilities
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17,613,861
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16,258,254
|
||||||
Commitments and contingencies
|
-
|
-
|
||||||
Shareholders’ deficit:
|
||||||||
Preferred stock, $.00001 par, authorized 2,000,000,000 shares; 2,000,000,000 and -0- issued and outstanding at March 31, 2012 and September 30, 2011
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20,000
|
-
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||||||
Common stock, $.001 par; authorized 2,000,000,000 shares; 878,781,100 and 438,138,975 issued and outstanding at March 31, 2012 and September 30, 2011
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878,781
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438,139
|
||||||
Additional paid in capital in excess of par
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20,009,609
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18,065,442
|
||||||
Retained deficit
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(33,145,824)
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(29,103,468)
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||||||
Total shareholders’ deficit
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(12,237,434)
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(10,599,887)
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||||||
Total liabilities and shareholders’ equity
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$
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5,376,427
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$
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5,658,367
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Three Months Ended
|
.Six Months Ended
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||||||||||||
March 31,
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March 31
|
||||||||||||
2012
|
2011
|
2012
|
2011
|
||||||||||
Revenues
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$ | 638,849 | $ | 789,445 | $ | 1,921,742 | $ | 2,180,123 | |||||
Cost of revenues
|
418,813 | 612,810 | 1,160,438 | 1,352,735 | |||||||||
Gross profit
|
220,036 | 176,635 | 761,304 | 827,388 | |||||||||
Selling and administrative expense
|
999,502 | 1,257,681 | 1,928,895 | 2,461,414 | |||||||||
Stock based compensation
|
1,490,074 | 459,148 | 1,527,684 | 585,786 | |||||||||
Depreciation and amortization expense
|
260,089 | 184,399 | 1,186,757 | 239,634 | |||||||||
Interest expense
|
374,879 | 268,167 | 639,808 | 440,678 | |||||||||
Total expenses
|
3,124,544 | 2,169,395 | 5,283,144 | 3,727,512 | |||||||||
Income (loss) from operations
|
(2,904,508 | ) | (1,992,760 | ) | (4,521,840 | ) | (2,900,124 | ) | |||||
Other income (expense)
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|||||||||||||
Other income
|
525,000 | - | 525,158 | 1,190 | |||||||||
Loss from continuing operations before Income taxes
|
(2,379,508 | ) | (1,992,760 | ) | (3,996,682 | ) | (2,898,934 | ) | |||||
Income tax expense
|
- | - | - | - | |||||||||
Loss from continuing operations
|
(2,379,508 | ) | (1,992,760 | ) | (3,996,682 | ) | (2,898,934 | ) | |||||
Income (loss) from discontinued operations, net of tax
|
(22,837 | ) | 845,889 | (45,674 | ) | 414,105 | |||||||
Net loss
|
$ | (2,402,345 | ) | $ | (1,146,871 | ) | $ | (4,042,356 | ) | $ | (2,484,829 | ) | |
Basic and diluted net income (loss) per share
|
|||||||||||||
Loss from continuing operations
|
$ | (.003 | ) | $ | (.014 | ) | $ | (.006 | ) | $ | (.022 | ) | |
Loss from discontinued operations
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- | .006 | - | .003 | |||||||||
$ | (.003 | ) | $ | (.008 | ) | $ | (.006 | ) | $ | (.019 | ) | ||
Weighted average shares used in computing basic and diluted net (loss) per common share | 836,878,560 | 147,372,940 | 651,214,167 |
133,002,893
|
2012
|
2011
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$ | (4,042,356 | ) | $ | (2,484,829 | ) | ||
(Income) Loss from discontinued operations
|
45,674 | (414,105 | ) | |||||
Loss from continuing operations
|
(3,996,682 | ) | (2,898,934 | ) | ||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
1,378,421 | 239,635 | ||||||
Stock based payment for services
|
1,527,684 | 585,786 | ||||||
Changes in operating assets and liabilities
|
||||||||
Accounts receivable
|
79,165 | (69,759 | ) | |||||
Inventory
|
(114,767 | ) | 297,086 | |||||
Prepaid expenses and other assets
|
90,543 | 87,694 | ||||||
Accounts payable and accrued expenses
|
386,962 | 190,737 | ||||||
Advance payments and billings in excess of costs
|
(370,980 | ) | (163,566 | ) | ||||
Net cash flows from operating activities – continuing operations
|
(1,019,654 | ) | (1,731,321 | ) | ||||
Net cash flows from operating activities – discontinued operations
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- | (99,330 | ) | |||||
Net cash flows from operating activities
|
(1,019,654 | ) | (1,830,651 | ) | ||||
Cash flows from investing activities:
|
||||||||
Investments in multiple companies
|
- | (25,000 | ) | |||||
Purchase of property and equipment
|
- | (3,500 | ) | |||||
Net cash flows from investing activities – continuing operations
|
- | (28,500 | ) | |||||
Net cash flows from investing activities – discontinued operations
|
- | - | ||||||
Net cash flows from investing activities
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- | (28,500 | ) | |||||
Cash flows from financing activities:
|
||||||||
Repayment of Shareholder loans
|
(51,787 | ) | (113,668 | ) | ||||
Increases in long term debt
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1,080,000 | 1,542,000 | ||||||
Repayment of long term debt
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(84,797 | ) | (78,971 | ) | ||||
Proceeds from sale of stock
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- | 633,000 | ||||||
Net cash flows from financing activities – continuing operations
|
943,416 | 1,982,361 | ||||||
Net cash flows from financing activities – discontinued operations
|
- | - | ||||||
Net cash flows from financing activities
|
943,416 | 1,982,361 | ||||||
Increase (decrease) in cash and cash equivalents
|
(76,238 | ) | 123,210 | |||||
Cash and cash equivalents, beginning
|
169,499 | 12,605 | ||||||
Cash and cash equivalents, ending
|
$ | 93,261 | $ | 135,815 | ||||
Cash paid for interest
|
$ | 48,205 | $ | 78,383 | ||||
Cash paid for taxes
|
$ | - | $ | - |
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●
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October 2011, the Company issued 8,896,394 common shares issued as conversion of debt
|
|
●
|
October 2011, the Company issued 500,000 common shares for services
|
|
●
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November 2011, the Company issued 10,268,342 common shares to various individuals
|
|
●
|
November 2011, the Company issued 5,352,941 common shares as conversion of debt
|
|
●
|
December 2011, the Company issued 12,831,591 common shares as conversion of debt
|
|
●
|
December 2011, the Company issued 90,000,000 common shares and authorized the issuance of an additional 60,000,000 shares as conversion of related party debt 50,000,000 of which were issued in the first quarter of 2012
|
|
●
|
January 2012, the Company issued 151,500,000 common shares for services
|
|
●
|
February 2012 , the Company issued 750,000 common shares for services
|
|
●
|
February 2012, the Company issued 95,000,000 common shares in association with new debt
|
|
●
|
February 2012, the Company issued 2,400,000 common shares as conversion of debt
|
|
●
|
March 2012, the Company issued 3,142,857 common shares as conversion of debt
|
Preferred Stock
|
Common Stock
|
Additional
|
||||||||||||||||||||||||||
Number
of Shares
|
Amount
|
Number
of Shares
|
Amount
|
Paid in
Capital |
Accumulated
(deficit)
|
Total
|
||||||||||||||||||||||
Balances, October 1, 2011
|
- | $ | - | 438,138,975 | $ | 438,139 | $ | 18,065,442 | $ | (29,103,468 | ) | $ | (10,599,887 | ) | ||||||||||||||
Issuance of shares for services
|
2,000,000,000 | 20,000 | 154,011,024 | 154,012 | 506,598 | 680,610 | ||||||||||||||||||||||
Issuance of shares without consideration in completion of a prior year transaction
|
9,007,318 | 9,007 | (9,007 | ) | - | |||||||||||||||||||||||
Issuance of shares in satisfaction of debt
|
182,623,783 | 182,623 | 648,377 | 831,000 | ||||||||||||||||||||||||
Issuance of convertible debt
|
46,125 | 46,125 | ||||||||||||||||||||||||||
Issuance of shares associated with new debt
|
95,000,000 | 95,000 | 570,000 | 665,000 | ||||||||||||||||||||||||
Issuance of common stock warrants
|
182,074 | 182,074 | ||||||||||||||||||||||||||
Net loss for the six months ended March 31, 2012
|
(4,042,356 | ) | (4,042,356 | ) | ||||||||||||||||||||||||
Balances, March 31, 2012
|
2,000,000,000 | $ | 20,000 | 878,781,100 | $ | 878,781 | $ | 20,009,609 | $ | (33,145,824 | ) | $ | (12,237,434 | ) |
March 31,
|
September 30,
|
|||||||
2012
|
2011
|
|||||||
Finished goods
|
$ | - | $ | - | ||||
Work in process
|
- | 96,000 | ||||||
Materials and supplies
|
799,993 | 589,226 | ||||||
Total inventory
|
799,993 | 685,226 | ||||||
Less inventory classified as discontinued operations
|
- | - | ||||||
Total inventory of continuing operations
|
$ | 799,993 | $ | 685,226 |
March 31,
|
September 30,
|
|||||||
2012
|
2011
|
|||||||
Land
|
$ | 1,225,000 | $ | 1,225,000 | ||||
Buildings and improvements
|
1,170,194 | 1,170,194 | ||||||
Machinery and equipment
|
698,758 | 698,759 | ||||||
Funiture, fixtures and leasehold improvements
|
44,735 | 44,735 | ||||||
3,138,687 | 3,138,688 | |||||||
Less accumulated depreciation
|
(679,189 | ) | (593,430 | ) | ||||
Net Property, plant and equipment
|
2,459,498 | 2,545,258 | ||||||
Less property, plant and equipment from discontinued operations
|
- | - | ||||||
Net property, plant and equipment of continuing operations
|
$ | 2,459,498 | $ | 2,545,258 |
Investments
|
||||||||||||||||
Cost
|
Gain
|
Loss
|
Fair Value
|
|||||||||||||
Level 1 Equity Investments
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Level 2 Equity Investments
|
184,500 | - | - | 184,500 | ||||||||||||
Level 2 Loans
|
1,607,355 | - | - | 1,607,355 | ||||||||||||
$ | 1,791,855 | $ | - | $ | - | $ | 1,791,855 |
Six Months Ended
|
||||||||
March 31,
|
||||||||
2012
|
2011
|
|||||||
Revenue
|
$ | - | $ | 254,004 | ||||
Cost of Sales
|
- | (152,403 | ) | |||||
Gross profit
|
- | 101,601 | ||||||
Operating expenses
|
(45,674 | ) | (497,127 | ) | ||||
Other
|
- | 809,631 | ||||||
Gain (Loss) to be recognized from discontinued operations
|
(45,674 | ) | 414,105 | |||||
Income tax benefit
|
- | - | ||||||
Gain (loss) to be recognized from discontinued operations, net of tax
|
$ | (45,674 | ) | $ | 414,105 |
March 31,
|
September 30,
|
|||||||
2012
|
2011
|
|||||||
Accounts receivable
|
$ | - | $ | - | ||||
Inventory
|
- | - | ||||||
Other current assets
|
- | - | ||||||
Total current assets held for sale
|
- | - | ||||||
Property plant and equipment - net
|
- | - | ||||||
Other assets
|
- | - | ||||||
Total assets from discontinued operations
|
$ | - | $ | - | ||||
Accounts payable and accrued expenses
|
$ | 305,379 | $ | 273,705 | ||||
Current portion of long-term debt
|
1,660,883 | 1,660,883 | ||||||
Provision for loss on disposal of business segment
|
- | - | ||||||
Total current liabilities associated with discontinued operations
|
1,966,262 | 1,934,588 | ||||||
Long term debt, net of current portion
|
- | - | ||||||
Total liabilities associated with discontinued operations
|
$ | 1,966,262 | $ | 1,934,588 |
March 31,
2012
|
September 30,
2011
|
|||||||
Promissory note payable to Webster Business Capital Corporation, dated December 16, 2008, in the original amount of $825,000 payable in full on June 30, 2009, with interest at 4.5% annually. This note was not repaid and is still outstanding as of the issuance of these financial statements. This note is secured by a lien on real estate, timber rights and certain equipment with net carrying values of approximately $2,000,000 at March 31, 2012.
|
$ | 825,000 | $ | 825,000 | ||||
Mortgage payable to Bank of America, dated March 10, 2006, in the original amount of $840,000 payable in monthly fixed principal payments of $4,667 plus variable interest at 2.5% plus the banks index rate, secured by real estate with carrying values of approximately $1,500,000 at March 31, 2012. Final payment is due on March 10, 2021.
|
508,666 | 532,000 | ||||||
Note payable to Harold L. and Helene M. McCray, dated October 19, 2005, in the original amount of $1,070.000, bearing interest at 8% per annum, payable in monthly installments of $10,225.48 secured by land and buildings with carrying values of approximately $1,500,000 at March 31, 2012. Final payment is due on December 1, 2020.
|
769,246 | 799,283 | ||||||
Note payable to Edward Viola, dated October 19, 2005, in the original amount of $80,000, bearing interest at 8% per annum, payable in monthly installments of $764.52. Final payment is due on December 1, 2020.
|
57,218 | 59,463 | ||||||
Note payable to PNL Newco II, LLC, dated December 22, 2009, in the original amount of $2,000,000, payable in monthly fixed principal payments of $42,000 plus variable interest at LIBOR plus 5% with a minimum rate of 5.5%, secured by an earn out agreement with the party that acquired all of the personal property of the discontinued operations of BT Manufacturing Company, LLC. Final balloon payment is due December 22, 2011. This loan is currently in default.
|
1,660,883 | 1,660,883 | ||||||
Convertible Note payable to GovFunding, LLC, dated February 4, 2011, in the amount of $3,158,000, bearing interest at 18. Final payment is due January 31, 2012.
|
3,158,000 | 2,955,646 | ||||||
Convertible Note payable to Asher Enterprises, Inc. dated February 28, 2011 in the original amount of $75,000, current balance net of debt discount of $6,141, bearing interest at 8%. with a maturity date of December 2, 2011.
|
- | 41,859 | ||||||
Insurance premium financing agreement with First Insurance Funding Corp. dated January 21, 2011 in the original amount of $75,043, bearing interest at 9.9%, payable in monthly installments of $8,693 per month, final payment due October 21, 2011
|
- | 7,924 |
Note payable to The David J Keehan Trust dated June 30, 2011 in the amount of $500,000, bearing interest at the rate of 10% payable interest only through maturity. Final payment due September 30, 2011.
|
- | 500,000 | ||||||
Convertible Note payable to Asher Enterprises, Inc. dated March 31, 2011 in the amount of $42,500 net of debt discount of $5,703, bearing interest at 8%. with a maturity date of January 4, 2012.
|
- | 36,797 | ||||||
Convertible Note payable to Asher Enterprises, Inc. dated May 26, 2011 in the amount of $35,000 net of debt discount of $7,459, bearing interest at 8%. with a maturity date of March 1, 2012.
|
- | 27,541 | ||||||
Convertible Note payable to GovFunding, LLC dated May 25, 2011 in the amount of $220,000 net of debt discount of $10,342, bearing interest at 18%. with a maturity date of April 30, 2012.
|
209,658 | 146,573 | ||||||
Convertible Note payable to GovFunding LLC dated June 23, 2011 in the amount of $133,000 net of debt discount of $17,952, bearing interest at 18%. with a maturity date of June 30, 2012.
|
115,048 | 78,946 | ||||||
Note payable to GovFunding LLC dated July 14, 2011 in the amount of $105,000, bearing interest at 18%. with a maturity date of August 1, 2011.
|
105,000 | 105,000 | ||||||
Insurance premium financing agreement with Flat Iron Capital dated July 26, 2011 in the original amount of $14,224, bearing interest at 7.4%, payable in monthly installments of $1,251 per month, final payment due May 26, 2012
|
2,480 | 9,737 | ||||||
Convertible Note payable to GovFunding LLC dated August 1, 2011 in the amount of $128,000 net of debt discount of $9,266, bearing interest at 18%. with a maturity date of April 30, 2012.
|
118,734 | 62,208 | ||||||
Convertible Note payable to GovFunding LLC dated August 9, 2011 in the amount of $250,000 net of debt discount of $45,545, bearing interest at 18%. with a maturity date of June 30, 2012.
|
204,455 | 112,865 | ||||||
Convertible Note payable to Asher Enterprises, Inc. dated August 19, 2011 in the original amount of $43,000, with a current principal balance of $20,000 net of debt discount of $3,632, bearing interest at 8%. with a maturity date of May 22, 2012
|
16,368 | 26,584 | ||||||
Note payable to The David J Keehan Trust dated July 11, 2011 in the amount of $100,000, bearing interest at the rate of 10% payable interest only through maturity. Final payment due September 30, 2011.
|
- | 100,000 | ||||||
Note payable to The David J Keehan Trust dated August 5, 2011 in the amount of $100,000, bearing interest at the rate of 10% payable interest only through maturity. Final payment due September 30, 2011.
|
- | 100,000 | ||||||
Note payable to The David J Keehan Trust dated August 5, 2011 in the amount of $50,000, bearing interest at the rate of 10% payable interest only through maturity. Final payment due September 30, 2011.
|
- | 50,000 | ||||||
Convertible Note payable to GovFunding LLC dated August 30, 2011 in the amount of $110,000 net of debt discount of $17,687, bearing interest at 18%. with a maturity date of June 30, 2012.
|
92,313 | 56,744 | ||||||
Convertible Note payable to Asher Enterprises, Inc. dated December 2, 2011 in the original amount of $35,000 net of debt discount of $9,512, bearing interest at 8%. with a maturity date of September 30, 2012
|
25,488 | - |
Convertible Note payable to Asher Enterprises, Inc. dated December 30, 2011 in the original amount of $35,000 net of debt discount of $10,979, bearing interest at 8%. with a maturity date of October 31, 2012
|
24,021 | - | ||||||
Convertible Note payable to Asher Enterprises, Inc. dated February 21, 2012 in the original amount of $32,500 net of discount of $12,543 bearing interest at 8% with a maturity date of November 21, 2012
|
19,957 | - | ||||||
Note payable to Keehan Trust Funding, LLC dated January 19, 2012 in the amount of $1,550,000, bearing interest at the rate of 10%. This note is secured by the assignment of the proceeds of a government contract with a value in excess of $4,500,000 as of March 31, 2012. Final payment due May 1, 2012.
|
1,550,000 | - | ||||||
Note payable to GovFunding LLC dated March 30 2012 in the amount of $100,000, bearing interest at 18%, with a maturity date of June 1, 2012.
|
100,000 | - | ||||||
Note payable to Keehan Trust Funding, LLC dated March 30, 2012 with a maximum amount of $653,731, bearing interest at the rate of 10%. This note is secured by the assignment of the proceeds of certain government contracts with a value in excess of $700,000 as of March 31, 2012. Final payment due August 1, 2012.
|
85,000 |
-
|
||||||
9,647,535 | 8,295,053 | |||||||
Less current portion pertaining to continuing operations
|
(6,775,565 | ) | (5,365,245 | ) | ||||
Less current portion associated with discontinued operations
|
(1,660,883 | ) | (1,660,883 | ) | ||||
$ | 1,211,087 | 1,268,925 |
Period ended March 31, | ||||
2013
|
$ | 8,436,448 | ||
2014
|
129,694 | |||
2015
|
135,811 | |||
2016
|
142,435 | |||
2017
|
149,609 | |||
Thereafter
|
653,538 | |||
$ | 9,647,535 |
Continuing Operations
|
3/31/2012
|
9/30/2011
|
||||||
Expected provision at US statutory rate
|
34.00 | % | 34.00 | % | ||||
State income tax net of federal benefit
|
3.63 | % | 3.63 | % | ||||
Permanent and Other Differences
|
- | - | ||||||
Valuation Allowance
|
(37.63 | )% | (37.63 | %) | ||||
Effective Income Tax Rate
|
$ | - | $ | - |
Period ended March 31 | ||||
2013
|
$ | 214,017 | ||
2014
|
207,300 | |||
2015
|
207,300 | |||
2016
|
207,300 | |||
2017
|
207,300 | |||
Thereafter
|
2,228,475 | |||
$3,271,692
|
31.1
|
Rule 13a-14(a) Certification of Principal Executive Officer
|
31.2
|
Rule 13a-14(a) Certification of Principal Financial Officer
|
32.1
|
Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
32.2
|
Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
101.INS** | XBRL Instance |
101.SCH** | XBRL Taxonomy Extension Schema |
101.CAL** | XBRL Taxonomy Extension Calculation |
101.DEF** | XBRL Taxonomy Extension Definition |
101.LAB** | XBRL Taxonomy Extension Labels |
101.PRE** | XBRL Taxonomy Extension Presentation |
** XBRL
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information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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BULOVA TECHNOLOGIES GROUP, INC.
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By
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/s/ Stephen L Gurba
Stephen L Gurba
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Principal Executive Officer
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By
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/s/ Frank W. Barker, Jr.
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Frank W. Barker, Jr.
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Principal Financial and Accounting Officer
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/s/ Stephen L Gurba
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Stephen L Gurba
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Principal Executive Officer
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/s/ Frank W. Barker, Jr.
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Frank W. Barker, Jr.
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Principal Financial Officer
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Stephen L Gurba
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Stephen L Gurba
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Principal Executive Officer
May 15, 2012
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Frank W. Barker, Jr.
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Frank W. Barker, Jr.
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Principal Financial Officer
May 15, 2012
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Note 2 - Principles of Consolidation and Basis of Presentation:
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Mar. 31, 2012
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Basis of Presentation and Significant Accounting Policies [Text Block] |
2.
Principles
of consolidation and basis of presentation:
The
accompanying consolidated balance sheet as of September 30,
2011, has been derived from audited financial
statements.
The
unaudited interim consolidated financial statements have
been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and
note disclosures normally included in annual financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted
pursuant to those rules and regulations, although the
Company believes that the disclosures made are adequate to
make the information not misleading. It is suggested that
these consolidated financial statements be read in
conjunction with the consolidated financial statements and
the notes thereto, included in the Company’s latest
Form 10-K.
On
January 1, 2009, the Company acquired the stock of 3Si
Holdings, Inc. (“3Si”) a privately held Florida
corporation controlled by the majority stockholder of the
Company in exchange for 40,000,000 shares of its common
stock. The assets and operations of 3Si have been accounted
for in three operating subsidiaries, BT Manufacturing
Company LLC, Bulova Technologies Ordnance Systems LLC, and
Bulova Technologies (Europe) LLC (formerly Bulova
Technologies Combat Systems LLC).
BT
Manufacturing Company LLC – prior to
discontinuance, its operations were located in Melbourne,
Florida, in a 35,000 square foot facility where it
assembled a wide range of printed circuit boards, including
single sided through 14 layers, through-hole, surface mount
and mixed. It manufactured cable assemblies and complete
systems and offered value-add services such as direct-ship
to end customers, depot repair and design assistance. In
June 2010, the Company determined to dispose of BT
Manufacturing Company LLC, and as such has accounted for
this business segment as a discontinued operation. Final
settlement and disposition of this segment was accomplished
during the quarter ended March 31, 2011.
Bulova
Technologies Ordnance Systems LLC.
– located on 261 acres in Mayo, Florida is a load,
assembly, and pack facility specializing in fuzes, safe and
arming devices and explosive simulators. Bulova
Technologies Ordnance Systems LLC is registered with the
United States Department of State Directorate of Defense
Trade Controls (DDTC). It produces a variety of pyrotechnic
devices, ammunition and other energetic materials for the
U. S. Government and other allied governments throughout
the world.
Bulova
Technologies (Europe) LLC –
located in the Company’s corporate headquarters in
Clearwater, Florida, this subsidiary was originally formed
to administer an acquisition contract that Bulova
Technologies Ordnance Systems LLC was awarded from the U.S.
Department of Defense in January 2009. The Company has
since changed the name to Bulova Technologies (Europe) LLC
and is developing a Mortar Exchange program to facilitate
the needs of NATO member countries.
Bulovatech
Labs, Inc., prior to its disposal was located in
Clearwater, Florida. This entity was formed to incubate,
develop and license commercial applications of technologies
pertinent to the defense, alternative energy and healthcare
industries. Subsequent to its formation Bulovatech Labs,
Inc. made various loans and investments in both private and
public companies. On June 25, 2010, the Company sold all of
its interest in Bulovatech Labs in exchange for 200,000,000
shares of Growth Technologies International, Inc.
(GRWT)
In
the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting solely of normal recurring adjustments)
necessary to present fairly the financial position as of
March 31, 2012 and the results of operations and cash flows
for the three months and six months ended March 31, 2012
and 2011.
The
results of operations for interim periods are not
necessarily indicative of the results to be expected for
the full year.
Subsequent
Events
The
Company has evaluated subsequent events through May 11,
2012, 2012 to assess the need for potential recognition or
disclosure in this report. Based upon this
evaluation, management determined that all subsequent
events that require recognition in the financial statements
have been included.
Business
Segments
Commencing
with the Company’s acquisition of 3Si Holdings, Inc.
in January of 2009, the Company operated in two business
segments, government contracting and contract
manufacturing. With the Company’s disposal
of BT Manufacturing Company LLC, the Company is no longer
operating more than one business segment as all efforts of
the company are now focused on Department of Defense
contracting
Use
of Estimates
The
preparation of the Company's financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the amounts reported in these financial statements
and accompanying notes. Actual results could differ from
those estimates.
Financial
Instruments
The
carrying amounts of cash, receivables and current
liabilities approximated fair value due to the short-term
maturity of the instruments. Debt obligations
were carried at cost, which approximated fair value due to
the prevailing market rate for similar instruments.
Fair
Value Measurement
All
financial and nonfinancial assets and liabilities were
recognized or disclosed at fair value in the financial
statements. This value was evaluated on a
recurring basis (at least annually). Generally
accepted accounting principles in the United States define
fair value as the exchange price that would be received for
an asset or paid to transfer a liability (an exit price) in
the principal or most advantageous market for the asset or
liability in an orderly transaction between market
participants on a measurement date. The accounting
principles also established a fair value hierarchy which
required an entity to maximize the use of observable inputs
and minimize the use of unobservable inputs when measuring
fair value. Three levels of inputs were used to
measure fair value.
Level
1: Quotes market prices in active markets for identical
assets or liabilities.
Level
2: Observable market based inputs or unobservable inputs
that were corroborated by market data.
Level
3: Unobservable inputs that were not corroborated by market
data.
Cash
and Cash Equivalents
For
purposes of the statements of cash flows, the Company
considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
The Company maintains its cash deposits in major financial
institutions in the United States. At times deposits within
a bank may exceed the amount of insurance provided on such
deposits. Generally, these deposits are redeemed upon
demand and, therefore, are considered by management to bear
minimal risk.
Accounts
receivable
Accounts
receivable represent amounts due from customers in the
ordinary course of business from sales activities in each
of the Company’s business segments. The
Company considers accounts more than 90 days old to be
past due. The Company uses the allowance method for
recognizing bad debts. When an account is deemed
uncollectible, it is written off against the allowance. The
Company generally does not require collateral for its
accounts receivable. The
Company considers all accounts receivable to be collectable
and consequently has provided no allowance for doubtful
accounts.
The
majority of the Company’s revenues and accounts
receivable pertain to contracts with the US
Government.
Inventory
Inventory
is stated at the lower of cost (first-in, first-out) or
market. Market was generally considered to be
net realizable value. Inventory consisted of
materials used to manufacture the Company’s products
work in process and finished goods ready for sale.
The
breakdown of inventory at March 31, 2012 and September
30, 2011 is as follows:
Property,
Plant and Equipment
Property,
plant and equipment are stated at cost, less accumulated
depreciation. Depreciation is computed by applying
principally the straight-line method to the estimated
useful lives of the related assets. Useful lives range from
10 to 20 years for buildings and improvements and 5 to
10 years for machinery, equipment, furniture and
fixtures. Leasehold improvements are amortized over the
shorter of the lease term or the estimated useful life of
the improvements. When property or equipment is retired or
otherwise disposed of, the net book value of the asset is
removed from the Company’s balance sheet and the net
gain or loss is included in the determination of operating
income. Property, plant and equipment acquired as part of a
business acquisition are valued at fair value. Depreciation
expense for the three and six months ended March 31, 2012
are $42,880 and $85,759, and for the three and six months
ended March 31, 2011 are $41,254 and $82,450.
Property,
plant and equipment are comprised of the following at
March 31, 2012 and September 30, 2011
Impairment
of Long-Lived Assets
The
Company evaluates the carrying value of its long-lived
assets at least annually. Impairment losses were
recorded on long-lived assets used in operations when
indicators of impairment were present and the undiscounted
future cash flows estimated to be generated by those assets
were less than the assets’ carrying
amount. If such assets were impaired, the
impairment to be recognized was measured by the amount by
which the carrying amount of the assets exceeds the fair
value of the assets. Assets to be disposed of
were reported at the lower of the carrying value or fair
value, less costs to sell.
Discontinued
Operations
In
accordance with ASC 205-20, Presentation
of Financial Statements-Discontinued Operations
(“ASC 205-20”), we reported the results of BT
Manufacturing Company LLC, our contract manufacturing
segment as a discontinued operation. The application of ASC
205-20 is discussed in Note 5 “Discontinued
Operations”
Revenue
Recognition
Sales
revenue is generally recognized upon the shipment of
product to customers or the acceptance by customers of the
product. Allowances for sales returns, rebates
and discounts are recorded as a component of net sales in
the period the allowances were recognized. The
majority of the Company’s revenue is generated under
various fixed and variable price contracts as
follows:
Revenues
on fixed-price type contracts are recognized using the
Percentage-Of-Completion (POC) method of accounting as
specified in government contract accounting standards and
the particular contract. Revenues earned on
fixed-price production contracts under which units are
produced and delivered in a continuous or sequential
process are recognized as units are delivered based on
their contractual selling prices (the
“Units-of-Delivery” basis of
determination). Sales and profits on each
fixed-price production contract under which units are not
produced in a continuous or sequential process are recorded
based on the ratio of actual cumulative costs incurred to
the total estimated costs at completion of the contract,
multiplied by the total estimated contract revenue, less
cumulative sales recognized in prior periods (the
“Cost-to-Cost” basis of
determination). Under both types of basis for
determining revenue earned, a single estimated total profit
margin is used to recognize profit for each contract over
its entire period of performance, which can exceed one
year. The estimated total profit margin is evaluated on a
periodic basis by management throughout the term of an
individual contract to determine if the estimated total
profit margin should be adjusted.
The
Company has certain contracts with the U.S. Government that
are funded through
“Performance-Based-Payments”. Performance-based-payments
are a method of financing designed by the Government to
facilitate the accomplishment of the terms of the contract,
and are not payments for accepted items. These
financing payments are designed as a funding mechanism to
facilitate production and may be made based on performance
measured by objective, the accomplishment of defined
events, or other quantifiable measures of
results. As units are delivered and invoiced,
the U.S. Government withholds 90% of the invoiced amount as
repayment of the contract financing advances.
Cost
of Revenues
The
costs of revenues include direct materials and labor costs,
and indirect labor associated with production and shipping
costs.
Advertising
Costs
The
costs of advertising are expensed as incurred and are
included in the Company’s operating
expenses. The Company did not incur any
advertising expenses for the six months ended March 31,
2012 and 2011.
Shipping
Costs
The
Company includes shipping costs in cost of goods
sold.
Income
Taxes
Income
tax benefits or provisions are provided for the tax effects
of transactions reported in the financial statements and
consist of taxes currently due plus deferred taxes related
primarily to differences between the recorded book basis
and the tax basis of assets and liabilities for financial
and income tax reporting. Deferred tax assets
and liabilities represent the future tax return
consequences of those differences, which will either be
taxable or deductible when the assets and liabilities were
recovered or settled. Deferred tax assets were
also recognized for operating losses that were available to
offset future taxable income and tax credits that were
available to offset future federal income taxes, less the
effect of any allowances considered necessary. The Company
follows the guidance provided by FIN
48, Accounting for Uncertainty in Income Taxes, for
reporting uncertain tax provisions.
Loss
per Common Share
Basic
net loss per share includes the impact of common stock
equivalents. Diluted net loss per share utilizes the
average market price per share when applying the treasury
stock method in determining common stock equivalents. As of
March 31, 2012, there were 124,924,000 common stock
equivalents that were dilutive but had no effect on loss
per share.
Basic
net loss per share includes the impact of common stock
equivalents. Diluted net loss per share utilizes the
average market price per share when applying the treasury
stock method in determining common stock equivalents.
Effect
of Recent Accounting Pronouncements
The
Company reviews new accounting standards as issued. No new
standards had any material effect on these financial
statements. The accounting pronouncements issued subsequent
to the date of these financial statements that were
considered significant by management were evaluated for the
potential effect on these consolidated financial
statements. Management does not believe any of the
subsequent pronouncements will have a material effect on
these consolidated financial statements as presented and
does not anticipate the need for any future restatement of
these consolidated financial statements because of the
retro-active application of any accounting pronouncements
issued subsequent to March 31, 2012 through the date
these financial statements were issued.
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