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, 2013
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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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21
|
|||||
Item 4. Controls and Procedures
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23
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|||||
PART II – OTHER INFORMATION
|
||||||
Item 6. Exhibits
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23
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|||||
Signatures
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24
|
|||||
March 31,
2013
(unaudited)
|
September 30,
2012 |
|||||||
ASSETS
|
||||||||
Cash and equivalents
|
$
|
3,656
|
$
|
29,034
|
||||
Accounts receivable
|
-
|
112,005
|
||||||
Contract claim receivable
|
-
|
-
|
||||||
Inventory
|
-
|
1,023,980
|
||||||
Other current assets
|
26,936
|
48,334
|
||||||
Total current assets
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30,592
|
1,213,353
|
||||||
Property, plant and equipment
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26,920
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2,474,928
|
||||||
Other assets
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385,387
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27,461
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||||||
Total Assets
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$
|
442,899
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$
|
3,715,742
|
||||
Accounts payable
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$
|
147,848
|
$
|
423,102
|
||||
Accrued expenses
|
533,283
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7,202,905
|
||||||
Advance payments and billings in excess of cost
|
-
|
666,490
|
||||||
Current portion of long term debt
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1,958,133
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8,386,675
|
||||||
Current liabilities associated with discontinued operations
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-
|
2,011,937
|
||||||
Total current liabilities
|
2,639,264
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18,691,109
|
||||||
Shareholder loans and accrued interest
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175,720
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185,195
|
||||||
Long term debt, net of current portion
|
207,661
|
1,144,074
|
||||||
Total liabilities
|
3,022,645
|
20,020,378
|
||||||
Commitments and contingencies
|
-
|
-
|
||||||
Shareholders’ deficit:
|
||||||||
Preferred stock, $.00001 par, authorized 5,000,000,000 shares; 4,000,000,000 and 2,000,000,000 issued and outstanding at March 31, 2013 and September 30, 2012
|
40,000
|
20,000
|
||||||
Common stock, $.001 par; authorized 5,000,000,000 shares; 3,700,263,290 and 1,658,327,831 issued and outstanding at March 31, 2013 and September 30, 2012
|
3,700,263
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1,658,328
|
||||||
Subscription receivable - warrants
|
(66,000)
|
|||||||
Additional paid in capital in excess of par
|
19,206,304
|
20,223,672
|
||||||
Retained deficit
|
(25,460,313)
|
(38,206,636)
|
||||||
Total shareholders’ deficit
|
(2,579,746)
|
(16,304,636)
|
||||||
Total liabilities and shareholders’ equity
|
$
|
442,899
|
$
|
3,715,742
|
Three Months Ended
March 31, |
Six Months Ended
March 31, |
|||||||||||||||
2013
|
2012
|
2013
|
2012
|
|||||||||||||
Revenues
|
1,940,515 | 638,849 | $ | 2,976,788 | $ | 1,921,742 | ||||||||||
Cost of revenues
|
1,726,871 | 418,813 | 2,625,540 | 1,160,438 | ||||||||||||
Gross profit
|
213,644 | 220,036 | 351,248 | 761,304 | ||||||||||||
Selling and administrative expense
|
510,009 | 999,502 | 1,181,431 | 1,928,895 | ||||||||||||
Stock based compensation
|
115,500 | 1,490,074 | 273,182 | 1,527,684 | ||||||||||||
Depreciation and amortization expense
|
66,937 | 260,089 | 292,719 | 1,186,757 | ||||||||||||
Interest expense
|
26,868 | 374,879 | 484,587 | 639,808 | ||||||||||||
Total expenses
|
719,314 | 3,124,544 | 2,231,919 | 5,283,144 | ||||||||||||
Income (loss) from operations
|
(505,670 | ) | (2,904,508 | ) | (1,880,671 | ) | (4,521,840 | ) | ||||||||
Other income (expense)
|
||||||||||||||||
Other income
|
5,851,002 | 525,000 | 13,317,570 | 525,158 | ||||||||||||
Income (loss) from continuing operations before income taxes
|
5,345,332 | (2,379,508 | ) | 11,436,899 | (3,996,682 | ) | ||||||||||
Income tax expense
|
- | - | - | - | ||||||||||||
Income (loss) from continuing operations
|
5,345,332 | (2,379,508 | ) | 11,436,899 | (3,996,682 | ) | ||||||||||
Income (loss) from discontinued operations, net of tax
|
- | (22,837 | ) | 1,309,424 | (45,674 | ) | ||||||||||
Net Income (loss)
|
5,345,332 | (2,402,345 | ) | $ | 12,746,323 | $ | (4,042,356 | ) | ||||||||
Basic net income (loss) per share
|
||||||||||||||||
Income (loss) from continuing operations
|
$ | .002 | $ | (.003 | ) | $ | .003 | $ | (.006 | ) | ||||||
Income (loss) from discontinued operations
|
- | - | - | - | ||||||||||||
Net income (loss) per share
|
$ | .002 | $ | (.003 | ) | $ | .003 | $ | (.006 | ) | ||||||
Diluted net income (loss) per share | ||||||||||||||||
Income (loss) from continuing operations | $ | .0006 | $ | (.003 | ) | $ | .0019 | $ | (.006 | ) | ||||||
Income (loss) from discontinued operations | - | - | - | - | ||||||||||||
Net income (loss) per share | $ | .0006 | $ | (.003 | ) | $ | .0019 | $ | (.006 | ) | ||||||
Weighted average shares outstanding | ||||||||||||||||
Basic |
3,568,095,432
|
836,878,560
|
|
3,204,429,984
|
651,214,167
|
|||||||||||
Diluted | 8,293,644,729 | 836,878,560 | 6,718,461,630 | 651,214,167 |
2013
|
2012
|
|||||||
Cash flows from operating activities:
|
||||||||
Net Income (loss)
|
$ | 12,746,323 | $ | (4,042,356 | ) | |||
(Income) Loss from discontinued operations
|
(1,309,424 | ) | 45,674 | |||||
Income (Loss) from continuing operations
|
11,436,899 | (3,996,682 | ) | |||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
292,719 | 1,378,421 | ||||||
Stock based payment for services
|
273,182 | 1,527,684 | ||||||
Gain from change in accounting estimate
|
(6,071,700 | ) | - | |||||
(Gain) from settlement of debt
|
(356,765 | ) | - | |||||
Loss on sale of note receivable
|
156,710 | - | ||||||
(Gain) on sale of assets
|
(6,153,177 | ) | - | |||||
Changes in operating assets and liabilities
|
||||||||
Accounts receivable
|
112,005 | 79,165 | ||||||
Inventory
|
55,404 | (114,767 | ) | |||||
Prepaid expenses and other assets
|
21,398 | 90,543 | ||||||
Accounts payable and accrued expenses
|
(301,793 | ) | 386,962 | |||||
Advance payments and billings in excess of costs
|
- | (370,980 | ) | |||||
Net cash flows from operating activities – continuing operations
|
(535,118 | ) | (1,019,654 | ) | ||||
Net cash flows from operating activities – discontinued operations
|
(1,309,424 | ) | - | |||||
Net cash flows from operating activities
|
(1,844,542 | ) | (1,019,654 | ) | ||||
Cash flows from investing activities:
|
||||||||
Proceeds from sale of assets
|
9,547,580 | - | ||||||
Proceeds from sale of note receivable
|
250,000 | - | ||||||
Principle collections on note receivable
|
3,831 | - | ||||||
Net cash flows from investing activities – continuing operations
|
9,801,411 | - | ||||||
Net cash flows from investing activities – discontinued operations
|
- | - | ||||||
Net cash flows from investing activities
|
9,801,411 | - | ||||||
Cash flows from financing activities:
|
||||||||
Proceeds from sale of preferred shares
|
20,000 | - | ||||||
Repayment of Shareholder loans
|
(270,800 | ) | (51,787 | ) | ||||
Increases in long term debt
|
1,250,870 | 1,080,000 | ||||||
Repayment of long term debt
|
(8,982,317 | ) | (84,797 | ) | ||||
Net cash flows from financing activities – continuing operations
|
(7,982,247 | ) | 943,416 | |||||
Net cash flows from financing activities – discontinued operations
|
- | - | ||||||
Net cash flows from financing activities
|
(7,982,247 | ) | 943,416 | |||||
Increase (decrease) in cash and cash equivalents
|
(25,378 | ) | (76,238 | ) | ||||
Cash and cash equivalents, beginning
|
29,034 | 169,499 | ||||||
Cash and cash equivalents, ending
|
$ | 3,656 | $ | 93,261 | ||||
Cash paid for interest
|
$ | 2,222 | $ | 48,205 | ||||
Cash paid for taxes
|
$ | - | $ | - |
·
|
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
|
·
|
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.
|
·
|
October 2012, the Company issued 150,807,692 common shares for services
|
·
|
October 2012, the Company issued 988,923,568 common shares as conversion of debt
|
·
|
November 2012, the Company issued 151,500,000 common shares for services
|
·
|
November 2012, the Company issued 183,029,958 common shares as conversion of debt
|
·
|
December 2012, the Company issued 99,249,999 common shares for services
|
·
|
January 2013, the Company issued 247,424,242 common shares as conversion of debt
|
·
|
January 2013, the Company issued 30,000,000 common shares associated with new debt
|
·
|
January 2013, the Company issued 41,000,000 common shares for services
|
·
|
February 2013, the Company issued 150,000,000 common shares as conversion of debt
|
·
|
February 2013, the Company issued 4,260,102,343 warrants associated with new debt
|
·
|
February 2013, the Company issued 4,117,996,250 warrants in exchange for subscription notes receivable of $66,000
|
·
|
February 2013, the Company issued 1,073,000,000 warrants for services
|
Preferred Stock
|
Common Stock
|
|||||||||||||||||||||||||||||||
Number of
Shares
|
Amount
|
Number of
Shares
|
Amount
|
Subscription Receivable
|
Additional Paid in Capital
|
Accumulated (deficit)
|
Total
|
|||||||||||||||||||||||||
Balances, October 1, 2012
|
2,000,000,000 | $ | 20,000 | 1,658,327,831 | $ | 1,658,328 | $ | 20,223,672 | $ | (38,206,636 | ) | $ | (16,304,636 | ) | ||||||||||||||||||
Issuance of shares in satisfaction of debt
|
1,171,953,526 | 1,171,954 | (966,954 | ) | 205,000 | |||||||||||||||||||||||||||
Issuance of convertible debt
|
16,875 | 16,875 | ||||||||||||||||||||||||||||||
Issuance of shares for services
|
401,557,691 | 401,557 | (243,875 | ) | 157,682 | |||||||||||||||||||||||||||
Issuance of Warrants
|
(66,000 | ) | 66,000 | - | ||||||||||||||||||||||||||||
Sale of Stock
|
2,000,000,000 | 20,000 | 20,000 | |||||||||||||||||||||||||||||
Issuance of shares in satisfaction of debt
|
397,424,242 | 397,424 | (365,924 | ) | 31,500 | |||||||||||||||||||||||||||
Issuance of shares for new debt
|
30,000,000 | 30,000 | (24,000 | ) | 6,000 | |||||||||||||||||||||||||||
Issuance of shares for services
|
41,000,000 | 41,000 | (32,800 | ) | 8,200 | |||||||||||||||||||||||||||
Issuance of warrants associated with new debt
|
426,010 | 426,010 | ||||||||||||||||||||||||||||||
Issuance of warrants for services
|
107,300 | 107,300 | ||||||||||||||||||||||||||||||
Net income for the six months ended March 31, 2013
|
12,746,323 | 12,746,323 | ||||||||||||||||||||||||||||||
Balances, March 31, 2013
|
4,000,000,000 | $ | 40,000 | 3,700,263,290 | $ | 3,700,263 | $ | (66,000 | ) | $ | 19,206,304 | $ | (25,460,313 | ) | $ | (2,579,746 | ) |
March 31,
2013 |
September 30,
2012 |
|||||||
Finished goods
|
$ | - | $ | - | ||||
Work in process
|
- | - | ||||||
Materials and supplies
|
- | 1,023,980 | ||||||
Total inventory
|
- | 1,023,980 | ||||||
Less inventory classified as discontinued operations
|
- | - | ||||||
Total inventory of continuing operations
|
$ | - | $ | 1,023,980 |
March 31,
2013 |
September 30,
2012 |
|||||||
Land
|
$ | - | $ | 1,225,000 | ||||
Buildings and improvements
|
- | 1,170,194 | ||||||
Machinery and equipment
|
- | 752,554 | ||||||
Funiture, fixtures and leasehold improvements
|
45,735 | 45,735 | ||||||
45,735 | 3,193,483 | |||||||
Less accumulated depreciation
|
(18,815 | ) | (718,555 | ) | ||||
Net Property, plant and equipment
|
26,920 | 2,474,928 | ||||||
Less property, plant and equipment from discontinued operations
|
- | - | ||||||
Net property, plant and equipment of continuing operations
|
$ | 26,920 | $ | 2,474,928 |
Six Months Ended
March 31, |
||||||||
2013
|
2012
|
|||||||
Revenue
|
$ | - | $ | - | ||||
Cost of Sales
|
- | - | ||||||
Gross profit
|
- | - | ||||||
Operating expenses
|
- | (45,674 | ) | |||||
Other
|
1,309,424 | - | ||||||
Gain (Loss) to be recognized from discontinued operations
|
1,309,424 | (45,674 | ) | |||||
Income tax benefit
|
- | - | ||||||
Gain (loss) to be recognized from discontinued operations, net of tax
|
$ | 1,309,424 | $ | (45,674 | ) |
March 31,
|
September 30,
|
|||||||
2013
|
2012
|
|||||||
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
|
$ | - | $ | 351,054 | ||||
Current portion of long-term debt
|
- | 1,660,883 | ||||||
Provision for loss on disposal of business segment
|
- | - | ||||||
Total current liabilities associated with discontinued operations
|
- | 2,011,937 | ||||||
Long term debt, net of current portion
|
- | - | ||||||
Total liabilities associated with discontinued operations
|
$ | - | $ | 2,011,937 |
March 31,
2013
|
September 30,
2012
|
|||||||
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 September 30, 2012.
|
$ | - | $ | 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 September 30, 2012. Final payment is due on March 10, 2021.
|
- | 480,666 | ||||||
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 September 30, 2012. Final payment is due on December 1, 2020.
|
- | 776,116 | ||||||
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.
|
- | 54,880 | ||||||
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.
|
- | 1,660,883 | ||||||
Convertible Note payable to GovFunding, LLC, dated February 4, 2011, in the amount of $3,158,000 bearing interest at 18%., secured by a lock box agreement tied to the proceeds of a single government contract with a carrying value of approximately $2,600,000 at September 30, 2012. Final payment is due January 31, 2012.
|
- | 3,158,000 | ||||||
Convertible Note payable to GovFunding, LLC dated May 25, 2011 in the amount of $220,000, bearing interest at 18%. with a maturity date of April 30, 2012.
|
- | 220,000 | ||||||
Convertible Note payable to GovFunding LLC dated June 23, 2011 in the amount of $133,000, bearing interest at 18%. with a maturity date of June 30, 2012.
|
- | 133,000 |
March 31,
2013
|
September 30,
2012
|
|||||||
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 | ||||||
Convertible Note payable to GovFunding LLC dated August 1, 2011 in the amount of $128,000, bearing interest at 18%. with a maturity date of April 30, 2012.
|
- | 128,000 | ||||||
Convertible Note payable to GovFunding LLC dated August 9, 2011 in the amount of $250,000, bearing interest at 18%. with a maturity date of June 30, 2012.
|
- | 250,000 | ||||||
Convertible Note payable to GovFunding LLC dated August 30, 2011 in the amount of $110,000, bearing interest at 18%. with a maturity date of June 30, 2012.
|
- | 110,000 | ||||||
Convertible Note payable to Asher Enterprises, Inc. dated May 15, 2012 in the original amount of $22,500 net of discount of $0, bearing interest at 8% with a maturity date of February 21, 2013.
|
- | 25,032 | ||||||
Convertible Note payable to Asher Enterprises, Inc. dated July 16, 2012 in the original amount of $23,500 net of discount of $1,003, bearing interest at 8% with a maturity date of April 19, 2013.
|
22,497 | 21,888 | ||||||
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 $4,700,000 as of December 31, 2012. Final payment due upon delivery
|
700,000 | 1,550,000 | ||||||
Note payable to GovFunding LLC dated March 30, 2012 in the amount of $100,000, bearing interest at 18%. Final payment was due 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 as the rate of 10%. This note is secured by the assignment of the proceeds of certain government contracts with a value in excess of $850,000 as of December 31, 2012
|
- | 285,000 | ||||||
Convertible Note payable to an individual dated May 4, 2012 in the amount of $25,000, bearing interest at 18% with a maturity date of July 31, 2012.
|
- | 25,000 | ||||||
Convertible Note payable to an individual dated May 4, 2012 in the amount of $25,000, bearing interest at 18% with a maturity date of July 31, 2012.
|
- | 25,000 | ||||||
Note payable to GovFunding LLC dated May 11, 2012 in the amount of $200,000, bearing interest at 12% with a maturity date of July 31, 2012
|
- | 200,000 |
March 31,
2013
|
September 30,
2012
|
|||||||
Convertible Note payable to an individual dated May 25, 2012 in the amount of $100,000, bearing interest at 18% with a maturity date of August 25, 2012.
|
- | 100,000 | ||||||
Note payable to Keehan Trust Funding, LLC, dated June 1, 2012 in the amount of $700,000, 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 $2,400,000 as of December 31, 2012. Final payment due November 30, 2012.
|
295,520 | 700,000 | ||||||
Convertible Note payable to an individual dated August 15, 2012 in the amount of $5,000 net of discount of $568, bearing interest at 18% with a maturity date of October 31, 2012.
|
- | 4,432 | ||||||
Convertible Note payable to an individual dated May 25, 2012 in the amount of $10,000 net of discount of $1,265, bearing interest at 18% with a maturity date of October 31, 2012.
|
- | 8,735 | ||||||
Note payable to GovFunding LLC dated August 7, 2012 in the amount of $245,000, bearing interest at 18%. Final payment due October 15, 2012
|
- | 245,000 | ||||||
Convertible Note payable to Asher Enterprises, Inc. dated November 7, 2012 in the original amount of $37,500 net of discount of $8,038, bearing interest at 8% with a maturity date of August 9, 2013.
|
29,462 | - | ||||||
Note payable to GovFunding, LLC dated October 24, 2012 in the amount of $553,763, bearing interest at 8%, payable quarterly principal of $69,220.38 plus accrued interest, with a maturity of October 24, 2014.
|
553,763 | - | ||||||
Note payable to an individual dated December 21, 2012 in the amount of $60,000, bearing interest at 8%, with a maturity date of February 1, 2013
|
60,000 | - | ||||||
Note payable to NFC III LLC dated February 25, 2013 in the amount of $400,000 bearing interest at 10%, with a maturity date of November 25, 2013
|
400,000 | |||||||
Note payable to an individual dated January 25, 2013 in the amount of $50,000 bearing interest at 7%, with a maturity of June 30, 2013
|
50,000 | |||||||
Note payable to GovFunding LLC dated January 1, 2013 in the amount of $30,000, bearing interest at 8%, with a maturity date of December 31, 2013.
|
30,000 | |||||||
Note payable to GovFunding LLC dated January 1, 2013 in the amount of $24,552 bearing interest at 8%, with a maturity of December 31, 2013
|
24,552 | |||||||
2,165,794 | 11,191,632 | |||||||
Less current portion pertaining to continuing operations
|
(1,958,133 | ) | (8,386,675 | ) | ||||
Less current portion associated with discontinued operations
|
- | (1,660,883 | ) | |||||
$ | 207,661 | $ | 1,144,074 |
Period ended March 31,
|
|||||
2013
|
$ | 1,958,133 | |||
2014
|
207,661 | ||||
2015
|
- | ||||
2016
|
- | ||||
2017
|
- | ||||
Thereafter
|
- | ||||
$ | 2,165,794 |
Continuing Operations
|
3/31/2013
|
9/30/2012
|
||||||
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
|
$ | - | $ | - |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
Certain portions of this report, and particularly the Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the Notes to Consolidated Financial Statements, contain forward-looking statements which represent the Company’s expectations or beliefs concerning future events. The Company cautions that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements.
|
1 .
|
Overview:
|
|
Since January 1, 2009, Bulova Technologies Group, Inc. has operated in two business segments. The Government Contracting segment is focused on the production and procurement of military articles for the US. Government and other Allied Governments throughout the world, and is accounted for through two of the Company’s wholly owned subsidiaries, Bulova Technologies Ordnance Systems LLC., and Bulova Technologies (Europe) LLC. The Contract Manufacturing segment produced cable assemblies, circuit boards as well as complete systems, and was accounted for through BT Manufacturing Company, LLC, another of its wholly owned subsidiaries. In June of 2010, because of continuing losses in our contract manufacturing business segment, the Company announced management’s decision to market BT Manufacturing Company LLC for sale. During the quarter ended March 31, 2011, the Company accomplished this disposition. For reporting purposes, the Company has identified the assets and liabilities of BT Manufacturing Company LLC as pertaining to discontinued operations and has segregated its operating results and presented them separately as a discontinued operation for all periods.
Application of critical accounting policies:
|
||
Management’s Discussion and Analysis of our Financial Condition and Results of Operations is based on the Company’s unaudited Consolidated Financial Statements, which have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). The preparation of financial statements in accordance with GAAP requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and corresponding disclosures at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we continue to evaluate our estimates which in large part are based on historical experience and on various assumptions that we believe to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions or conditions.
|
2 .
|
Results of operations:
|
|
For the three months ended March 31, 2013 compared to the three months ended March 31, 2012.
Discontinued Operations
There is no activity to report from discontinued operations for the three months ended March 31, 2013. The only activity for the three months ended March 31, 2012 was the accrual of interest expense on this debt in the amount of $22,873.
Continuing Operations
With the sale of substantially all of the assets of Bulova Technologies Ordnance Systems LLC, the contracts that were being performed at the Mayo, Florida location are in the process of being novated to the buyer of the facilities. This process conveys the rights to the contracts conveyed, and also releases our Company from the obligation to perform. Until this process is completed, the contracts remain in the name of Bulova Technologies Ordnance Systems LLC, and our Company is still legally responsible for their fulfillment. As a consequence, the Company is subcontracting the performance to the buyer of the facilities, and passing all monies on those specific contracts straight through. The effect on our financial statements will be to show revenue with very little gross profit as pertaining only to those contracts that are in the process of novation.
The Company’s revenue for continuing operations for the three months ended March 31, 2013 of $1,940,515 is an increase of $1,301,666 when compared to the Company’s revenue for the three months ended March 31, 2012 of $638,849.
The Company’s cost of sales for continuing operations for the three months ended March 31, 2013 of $1,726,871 is an increase of $1,308,058 when compared to the Company’s cost of sales for the three months ended March 31, 2012 of $418,813.
The Company’s gross profit for continuing operations for the three months ended March 31, 2013 of $213,644 is a decrease of $6,392 when compared to the Company’s gross profit for the three months ended March 31, 2012 of $220,036.
|
||
The Company’s operating expenses for continuing operations consisting of selling, general and administrative, depreciation, amortization, and interest for the three months ended March 31, 2013 of $603,814 is a decrease of $1,030,656 when compared to the same expenses of $1,634,470 for the three months ended March 31, 2012. This is due primarily to the elimination of costs associated with the operations that have been sold.
The Company’s stock based compensation for continuing operations for the three months ended March 31, 2013 was $115,500, and represents a decrease of $1,347,574 as compared to the stock based compensation of $1,490,074 for the three months ended March 31, 2012.
The Company’s other income for the three months ended March 31, 2013 of $5,851,002 represents an increase of $5,326,002 as compared to $525,000 for the three months ended March 31, 2012. This increase is comprised primarily of a change in accounting estimate relative to a provision the company recorded in the amount of $6,071,700. This amount was derived through a percentage of completion accounting on a contract that was terminated. The Company is pursuing a course to have the termination for default changed to a termination for convenience. Since the contracting entity in this matter is the subsidiary which sold substantially all of its assets, the Company has determined to revise its estimate and recognize as income the full amount that had previously been reserved.
The Company’s net income from continuing operations for the three months ended March 31, 2013 of $5,345,332 is an increase of $7,724,840 when compared to the Company’s net loss for continuing operations for the three months ended March 31, 2012 of $2,379,508.
For the six months ended March 31, 2013 compared to the six months ended March 31, 2012.
Discontinued Operations
The only activity to reflect as results from our discontinued operations for the six months ended March 31, 2013 is the final settlement of the note balance that carried over after the disposition of all of the assets of BT Manufacturing Company LLC. The Company negotiated a substantial discount of approximately $1.3 million in settling almost $2 million of guaranteed debt and accrued interest. The only activity for the six months ended March 31, 2012 was the accrual of interest expense on this debt in the amount of $45,674.
Continuing Operations
With the sale of substantially all of the assets of Bulova Technologies Ordnance Systems LLC, the contracts that were being performed at the Mayo, Florida location are in the process of being novated to the buyer of the facilities. This process conveys the rights to the contracts conveyed, and also releases our Company from the obligation to perform. Until this process is completed, the contracts remain in the name of Bulova Technologies Ordnance Systems LLC, and our Company is still legally responsible for their fulfillment. As a consequence, the Company is subcontracting the performance to the buyer of the facilities, and passing all monies on those specific contracts straight through. The effect on our financial statements will be to show revenue with very little gross profit as pertaining only to those contracts that are in the process of novation.
The Company’s revenue for continuing operations for the six months ended March 31, 2013 of $2,976,788 is an increase of $1,055,046 when compared to the Company’s revenue for the six months ended March 31, 2012 of $1,921,742.
The Company’s cost of sales for continuing operations for the six months ended March 31, 2013 of $2,625,540 is an increase of $1,465,102 when compared to the Company’s cost of sales for the six months ended March 31, 2012 of $1,160,438.
The Company’s gross profit for continuing operations for the six months ended March 31, 2013 of $351,248 is a decrease of $410,056 when compared to the Company’s gross profit for the six months ended March 31, 2012 of $761,304.
The Company’s operating expenses for continuing operations consisting of selling, general and administrative, depreciation, amortization, and interest for the six months ended March 31, 2013 of $1,958,737 is a decrease of $1,796,723 when compared to the same expenses of $3,755,460 for the six months ended March 31, 2012. This is due primarily to the elimination of costs associated with the operations that have been sold.
The Company’s stock based compensation for continuing operations for the six months ended March 31, 2013 was $273,182, and represents a decrease of $1,254,502 as compared to the stock based compensation of $1,527,684 for the six months ended March 31, 2012.
The Company’s other income for the six months ended March 31, 2013 of $13,317,570 represents an increase of $12,792,412 as compared to $525,158 for the six months ended March 31, 2012. This increase is comprised of two major events. The first is the net gain on the sale of substantially all of the assets of Bulova Technologies Ordnance Systems LLC in the amount of $7,257,719 which occurred on October 24, 2012. With the sale on October 24, 2012, the Company has determined effective January 1, 2013 to recognize $6,071,700 as a change in accounting estimate. This amount was derived through a percentage of completion accounting on a contract prior to it being terminated by the US Government. The Company has disputed this termination, and is pursuing a course to have the termination for default changed to a termination for convenience. Since the contracting entity in this matter is the subsidiary which sold substantially all of its assets, the Company has determined that the opportunity to perform under this contract is past, and is therefore changing the estimate of revenue to be recognized to take into income the full amount that had previously been reserved.
The Company’s net income from continuing operations for the six months ended March 31, 2013 of $11,436,899 is an increase of $15,433,581 when compared to the Company’s net loss for continuing operations for the six months ended March 31, 2012 of $3,996,682.
|
3.
|
Liquidity and capital resources:
|
|
As of March 31, 2013, the Company’s sources of liquidity consisted of the proceeds from the sale of substantially all of the assets of Bulova Technologies Ordnance Systems LLC, as well as new debt and the current active contracts with the U.S. Army.
|
As of March 31, 2013, we had $3,656 in cash and cash equivalents.
Cash flows used in operating activities was $1,844,542 for the six months ended March 31, 2013.
Cash flows from investing activities were $9,801,411, and consisted primarily of the proceeds from the sale of assets for the six months ended March 31, 2013,
Cash flows used in financing activities were $7,982,247 for the six months ended March 31, 2013, and consisted primarily of the repayment of long term debt afforded by the sale of assets.
The Company’s ability to cover its operating and capital expenses, and make required debt service payments will depend primarily on its ability to generate operating cash flows.
The Company‘s business may not generate cash flows at sufficient levels, and it is possible that currently anticipated contract awards may not be achieved. If we are unable to generate sufficient cash flow from operations to service our debt, we may be required to reduce costs and expenses, sell assets, reduce capital expenditures, refinance all or a portion of our existing debt as well as our operating needs, or obtain additional financing and we may not be able to do so on a timely basis, on satisfactory terms, or at all. Our ability to make scheduled principal payments or to pay interest on or to refinance our indebtedness depends on our future performance and financial results, which, to a certain extent, are subject to general conditions in or affecting the U.S. defense industry and to general economic, political, financial, competitive, legislative and regulatory factors beyond our control.
While the Company believes that anticipated revenues resulting from additional contract awards accompanied by its efforts will be sufficient to bring profitability and a positive cash flow to the Company, it is uncertain that these results can be achieved. Accordingly, the Company will, in all likelihood have to raise additional capital to operate. There can be no assurance that such capital will be available when needed, or that it will be available on satisfactory terms.
There are no off-balance sheet arrangements.
|
||
Item 4. Controls and Procedures
|
||
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period covered by this report. This evaluation was carried out under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and the Company’s principal officer.
Based upon that evaluation, the principal executive officer and the principal financial officer concluded that the Company’s disclosure controls and procedures were effective at March 31, 2013 to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. The Company’s disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company's internal control over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting.
|
(b)
|
Exhibits:
|
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 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.
|
BULOVA TECHNOLOGIES GROUP, INC.
|
||||||
By
|
/s/ Stephen L Gurba
|
|||||
|
Stephen L Gurba
|
|||||
Principal Executive Officer
|
||||||
By
|
/s/ William McMillen
|
|||||
William McMillen
|
||||||
Principal Financial and Accounting Officer
|
/s/ Stephen L Gurba
|
||||
Stephen L Gurba
|
||||
Principal Executive Officer
|
/s/ William McMillen
|
||||
William McMillen
|
||||
Principal Financial Officer
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
||||||
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
||||||
/s/ Stephen L Gurba
|
|||||||
Stephen L Gurba
|
|||||||
Principal Executive Officer
May 15, 2013
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
||||||
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
||||||
/s/ William McMillen
|
|||||||
William McMillen
|
|||||||
Principal Financial Officer
May 15, 2013
|
Note 8 - Commitments and Contingencies (Detail) (USD $)
|
6 Months Ended |
---|---|
Mar. 31, 2013
sqft
|
|
Area of Real Estate Property (in Square Feet) | 5,000 |
Operating Leases of Lessee, Contingent Rentals, Basis Spread on Variable Rate | 2.50% |
Operating Leases, Rent Expense, Net (in Dollars) | $ 140,000 |
Note 5 - Advance Payments and Billings in Excess of Cost (Detail) (USD $)
|
Mar. 31, 2013
|
Sep. 30, 2012
|
Jan. 02, 2009
|
---|---|---|---|
Amount of Invoiced Amount Withheld to Repay Debt to US Government | 90.00% | ||
United States Government [Member]
|
|||
Notes and Loans Payable | $ 0 | $ 666,490 | $ 3,200,597 |
Supplemental Schedule of Non-Cash Financing and Investing Activities: (Detail) (USD $)
|
1 Months Ended | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Feb. 28, 2013
|
Jan. 31, 2013
|
Dec. 31, 2012
|
Nov. 30, 2012
|
Oct. 31, 2012
|
Sep. 30, 2012
|
Aug. 31, 2012
|
Jul. 31, 2012
|
Jun. 30, 2012
|
May 31, 2012
|
Apr. 30, 2012
|
Mar. 31, 2012
|
Feb. 28, 2012
|
Jan. 31, 2012
|
Dec. 31, 2011
|
Nov. 30, 2011
|
Oct. 31, 2011
|
Mar. 31, 2013
|
Sep. 26, 2012
|
|
Debt Conversion, Converted Instrument, Shares Issued | 150,000,000 | 247,424,242 | 183,029,958 | 988,923,568 | 14,084,507 | 6,360,000 | 3,461,538 | 3,142,857 | 2,400,000 | 12,831,591 | 5,352,941 | 8,896,394 | |||||||
Share-based Goods and Nonemployee Services Transaction, Quantity of Securities Issued | 99,249,999 | 151,500,000 | 150,807,692 | 500,000 | |||||||||||||||
Stock Issued During Period, Shares, New Issues | 90,000,000 | 10,268,342 | |||||||||||||||||
Common Stock, Shares Authorized | 5,000,000,000 | 80,000,000 | 2,000,000,000 | 5,000,000,000 | 5,000,000,000 | ||||||||||||||
Stock Issued During Period, Shares, in Association with New Debt | 30,000,000 | 177,002,028 | 193,846,154 | 168,289,206 | 75,000,000 | 35,000,000 | 95,000,000 | ||||||||||||
Stock Issued During Period, Shares, Issued for Services | 41,000,000 | 99,249,999 | 151,500,000 | 150,807,692 | 30,878,777 | 25,412,821 | 20,000,000 | 750,000 | 151,500,000 | ||||||||||
Warrants Issued Associated with New Debt | 4,260,102,343 | ||||||||||||||||||
Warrants Issued in Exchange for Subscription Notes Receivable | 4,117,996,250 | ||||||||||||||||||
Temporary Equity, Shares Subscribed but Unissued, Subscriptions Receivable (in Dollars) | $ 66,000 | $ 66,000 | |||||||||||||||||
Warrants Issued for Services | 1,073,000,000 | ||||||||||||||||||
Conversion of Related Party Debt [Member]
|
|||||||||||||||||||
Common Stock, Shares Authorized | 60,000,000 |
Note 11 - Change in Accounting Estimate (Detail) (Terminated by Government Before Completion [Member], USD $)
|
Mar. 31, 2013
|
---|---|
Terminated by Government Before Completion [Member]
|
|
Accrued Liabilities | $ 6,071,700 |
Note 7 - Income Taxes (Detail) (USD $)
|
Sep. 30, 2012
|
---|---|
Deferred Tax Assets, Operating Loss Carryforwards, Domestic | $ 24,160,000 |
Deferred Tax Assets, Operating Loss Carryforwards, State and Local | $ 23,926,000 |
Note 2 - Principles of consolidation and basis of presentation:
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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,
2012, 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 then 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 board
products. 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. In October 2012, the Company sold
substantially all of the assets of this subsidiary to an
unrelated party.
Bulova
Technologies (Europe) LLC –
located in the Company’s corporate headquarters in
Tampa, 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. It markets the Mortar Exchange program,
which it helped develop, to facilitate the needs of NATO
members and allied countries. It leases office
space in Frankfurt, Germany to promote this
program. The subsidiary also looks to take
advantage of the offset opportunities around the world
through a joint venture, focusing, initially, in the UAE
and is administering non-standard ammo and non-standard
weapons contracts through its blanket purchase agreements
with the U.S. Government
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, 2013 and the results of operations and cash flows
for the three and six months ended March 31, 2013 and
2012.
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
10, 2013, 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 and
international 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 fewer 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. 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, 2013 and September 30,
2012 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.
Property,
plant and equipment are comprised of the following at
March 31, 2013 and September 30, 2012
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 three and six months ended
March 31, 2013 and 2012.
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.
Income
(Loss) per Common Share
Basic
net income (loss) per share includes the impact of common
stock equivalents. Diluted net income (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, 2013, there
were 9,671,098,593 common stock equivalents.
For the three and six month periods ended March 31, 2013,
the dilutive effect of 9,451,098,593 warrants is included
in the calculation and 220,000,000 warrants are excluded
from the calculation as they are antidilutive.
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, 2013 through the date these
financial statements were issued.
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