UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended September 30, 2011
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Transition Period from ____________ to ____________
Commission File Number: 000-54358
NETCO INVESTMENTS, INC.
(Exact name of registrant as specified in its charter)
Texas 76-0270330
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2295 Corporate Blvd NW, Suite 131, Boca Raton, FL 33431
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 561-705-4863
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such period that the registrant was required to submit and post such files). Yes [ ] No [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer", "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(do not check if smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
rule 12(b)-2 of the Exchange Act). Yes [ ] No [X]
There were 30,581,451 shares of common stock, with a par value of $.0001 per share outstanding as of November 21, 2011. This number includes 1,088,978 shares that are in the process of being canceled.
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NETCO INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
QUARTERLY REPORT ON FORM 10-Q
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Condensed Consolidated Balance Sheets as of September 30, 2011
and December 31, 2010 3
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2011, September 30, 2010 and for the Period from December 18, 1988 (inception) to September 30, 2011 4
Condensed Consolidated Statement of Changes in Stockholders' Equity for the period from January 1, 2009 to September 30, 2011 5
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2011, September 30, 2010 and for the Period from December 18, 1988 (inception) to September 30, 2011 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results / Plan of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
Item 4. Controls and Procedures 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 1A. Risk Factors 17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 17
Item 3. Defaults Upon Senior Securities 17
Item 4. Removed and Reserved 17
Item 5. Other Information 17
Item 6. Exhibits 17
SIGNATURES 18
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NETCO INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2011 December 31, 2010
------------------ -----------------
Unaudited
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,364 $ 50
------------ ------------
TOTAL CURRENT ASSETS 3,364 50
Investments 1,250,000 1,250,000
------------ ------------
TOTAL ASSETS $ 1,253,364 $ 1,250,050
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 300,005 $ 256,140
Convertible notes payable 650,000 700,000
Advances payable to shareholders 40,400 --
Accrued interest payable 483,000 --
------------ ------------
TOTAL CURRENT LIABILITIES 1,473,405 956,140
------------ ------------
TOTAL LIABILITIES 1,473,405 956,140
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock Series D: $.0001 par value, 1,000,000 shares
authorized, 250,000 and 0 shares issued and outstanding as
of September 30, 2011 and December 31, 2010, respectively 25 --
Common Stock: $.0001 par value, 500,000,000 shares authorized,
23,171,451 and 19,029,873 shares issued and outstanding
as of September 30, 2011 and December 31, 2010, respectively 2,317 1,903
Additional paid-in capital 1,693,763 1,114,902
Accumulated deficit (1,916,146) (822,895)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (220,041) 293,910
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 1,253,364 $ 1,250,050
============ ============
See accompanying notes to financial statements
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NETCO INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended December 18, 1988
September 30, September 30, (inception) to
--------------------------- ---------------------------- September 30,
2011 2010 2011 2010 2011
------------ ------------ ------------ ------------ ------------
REVENUES $ -- $ -- $ 132 $ -- $ 28,421
------------ ------------ ------------ ------------ ------------
OPERATING EXPENSES
Consulting fees 33,000 24,000 590,525 60,000 999,780
Professional fees -- -- -- 42,500 244,100
General and Administrative 2,664 4,211 19,858 54,461 217,687
------------ ------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 35,664 28,211 610,383 156,961 1,461,567
LOSS FROM OPERATIONS (35,664) (28,211) (610,251) (156,961) (1,433,146)
------------ ------------ ------------ ------------ ------------
OTHER EXPENSE
Interest expense (19,500) -- (483,000) -- (483,000)
------------ ------------ ------------ ------------ ------------
TOTAL OTHER EXPENSE (19,500) -- (483,000) -- (483,000)
LOSS BEFORE INCOME TAXES (55,164) (28,211) (1,093,251) (156,961) (1,916,146)
------------ ------------ ------------ ------------ ------------
Income taxes -- -- -- -- --
------------ ------------ ------------ ------------ ------------
NET LOSS $ (55,164) $ (28,211) $ (1,093,251) $ (156,961) $ (1,916,146)
============ ============ ============ ============ ============
LOSS PER SHARE OF COMMON STOCK
BASIC AND DILUTED: $ (0.00) $ (0.00) $ (0.05) $ (0.01) $ (0.08)
============ ============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING - BASIC AND DILUTED 23,171,451 19,029,873 23,171,451 19,029,873 23,171,451
============ ============ ============ ============ ============
See accompanying notes to financial statements
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NETCO INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
FOR THE PERIOD FROM JANUARY 1, 2009 THROUGH SEPTEMBER 30, 2011
(Unaudited)
Preferred Stock
Series D Common Stock
----------------- ----------------- Additional Total
Par Par Paid-In Accumulated Equity
Shares Value Shares Value Capital Deficit (Deficit)
------ ----- ------ ----- ------- ------- ---------
Balance January 1, 2009 400,000 $ 40 29,673 $ 3 $ 87,854 $ (26,014) $ 61,883
Net Loss For The Year Ended
December 31, 2009 -- -- -- -- -- (538,687) (538,687)
------- ------- ---------- ------- ----------- ----------- ----------
Balance December 31, 2009 400,000 40 29,673 3 87,854 (564,701) (476,804)
Common Stock Issued For
Conversion of 400,000
Series D Preferred
Shares at $0.22 400,000) (40) 4,000,000 400 878,548 -- 878,908
Common Stock Issued For Accrued
Compensation at $0.01 -- -- 15,000,000 1,500 148,500 -- 150,000
Net Loss For The Year Ended
December 31, 2010 -- -- -- -- -- (258,194) (258,194)
------- ------- ---------- ------- ----------- ----------- ----------
Balance December 31, 2010 -- -- 19,029,673 1,903 1,114,902 (822,895) 293,910
Common Stock Issued For Services
at $0.05 -- -- 2,400,000 240 119,760 -- 120,000
Common Stock Issued For Services
at $1.30 -- -- 202,800 20 202,780 -- 202,800
Common Stock Issued For Services
at $2.00 -- -- 200,000 10 199,990 -- 200,000
Common Stock Issued From Sale
at $0.05 -- -- 100,000 10 4,990 -- 5,000
Common Stock Issued From Sale
at $0.01 -- -- 150,000 15 1,485 -- 1,500
Record Notes Payable Adjustment -- -- -- -- (200,000) -- (200,000)
Common Stock to be Canceled
Pursuant to Rescission
Agreements -- -- 1,088,978 109 (109) -- --
Series D Preferred Stock Issued
for Conversion of Note Payable
at $1.00 250,000 25 -- -- 249,975 -- 250,000
Net Loss For Nine Months Ended
September 30, 2011 -- -- -- -- -- (1,093,251) (1,093,251)
------- ------- ---------- ------- ----------- ----------- ----------
Balance September 30, 2011 250,000 $ 25 23,171,451 $ 2,317 $ 1,693,763 $(1,916,146) $ (220,041)
======= ======= ========== ======= =========== =========== ==========
See accompanying notes to financial statements
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NETCO INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
December 18, 1988
Nine Months Ended Nine Months Ended (inception) to
September 30, 2011 September 30, 2010 September 30, 2011
------------------ ------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,093,251) $ (156,961) $(1,916,146)
Adjustments to reconcile net income to net cash
used by operating activities:
Common stock issued for compensation and services 522,800 -- 524,300
Preferred stock issued for conversion of note payable 250,000 -- 250,400
Changes in operating assets and liabilities: -- --
Increase in accounts payable 43,865 115,550 297,669
Increase in accrued interest payable 483,000 -- 483,000
----------- ----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 206,414 (41,411) (360,777)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of investments -- -- (1,250,000)
----------- ----------- -----------
NET CASH USED IN INVESTING ACTIVITIES -- -- (1,250,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of stock 6,500 -- 1,121,405
Advances payable to shareholders 40,400 41,511 40,400
Conversion of note payable (250,000) -- 450,000
----------- ----------- -----------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (203,100) 41,511 1,611,805
----------- ----------- -----------
Net change in cash and cash equivalent 3,314 100 1,028
Cash and cash equivalent at beginning of period 50 25 --
----------- ----------- -----------
Cash and cash equivalent at end of period $ 3,364 $ 125 $ 1,028
=========== =========== ===========
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING ACTIVITIES:
Conversion of accrued salaries to notes payable $ -- $ -- $ --
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ -- $ -- $ --
=========== =========== ===========
Cash paid for income taxes $ -- $ -- $ --
=========== =========== ===========
See accompanying notes to financial statements
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NETCO INVESTMENTS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Nine Months Ended September 30, 2011 and 2010
(Unaudited)
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared by Netco Investments, Inc. (the "Company" or "Netco") without independent audit. In the opinion of the Company's management, all adjustments and reclassifications of a normal and recurring nature necessary to present fairly the financial position, results of operations and cash flows for the periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted. The results of operations for interim periods are not necessarily an indication of the results for the full year.
Netco Investments, Inc. (the "Company or "Netco"), a development stage company, was originally incorporated in Texas on March 21st, 1997 under the name Great American Leasing Inc.. On November 1, 2005, the Company changed its name to Netco Investments, Inc. The Company is focused on merchant banking activities in both domestic and international markets.
The Company is considered a development stage enterprise as defined in Financial Accounting Standards Board ("FASB") Statement No. 7, "Accounting and Reporting for Development Stage Companies". There is no assurance the Company will achieve a profitable level of operations.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as reported amounts of revenues and expenses during the reporting period. The Company's most significant estimates relate to revenue recognition, valuation of intangible assets acquired, contingent consideration issued in business acquisitions, and the recoverability of deferred costs. Actual results could differ from these estimates and those differences could be material.
2. STOCKHOLDERS' EQUITY COMMON STOCK
The Company is authorized to issue up to 500,000,000 shares of $.0001 par value common stock. As of September 30, 2011 and December 31, 2010, there were 23,171,451 and 19,029,873 common stock shares issued and outstanding.
As of December 31, 2009, the outstanding shares of common stock were 29,673. In addition, there were 400,000 Series D Preferred shares outstanding at December 31, 2009. During the year ended December 31, 2010, 19,000,000 common stock shares were issued and during the nine months ended September 30, 2011 4,141,778 common stock shares were issued, as set forth in the following table:
Total shares outstanding as of Dec. 31, 2009 29,673
Shares issued in conversion of 400,000 Preferred D
shares during 2010 4,000,000
Shares issued in satisfaction of services rendered during 2010 15,000,000
Total shares issued and outstanding at December 31, 2010 19,029,673
Total shares issued during nine months ended September 30, 2011 4,141,778
Total shares issued and outstanding at September 30, 2011 23,171,451
SERIES D PREFERRED STOCK
The Company is authorized to issue up to 1,000,000 shares of $.0001 par value Series D preferred stock. As of September 30, 2011 and December 31, 2010, there were 250,000 and 0 Series D preferred stock shares issued and outstanding.
During 2010, 400,000 shares of Series D preferred stock shares were converted into 4,000,000 shares of common stock shares, leaving no Series D preferred stock shares issued at December 31, 2010. During the three months ended June 30, 2011, $250,000 of convertible notes were converted into 250,000 shares of Series D preferred stock shares, the issued and outstanding amount of Series D preferred stock shares issued and outstanding at September 30, 2011.
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NET LOSS PER COMMON SHARE
Net loss per share is calculated in accordance with FASB ASC Topic 260 (formally SFAS No. 128, "EARNINGS PER SHARE."). The weighted-average number of common shares outstanding during each period is used to compute basic loss per share. Diluted loss per share is computed using the weighted average number of shares and dilutive potential common shares outstanding. Basic net loss per common share is based on the weighted average number of shares of common stock outstanding during the years ended December 31, 2010 and 2009.
3. ADVANCES PAYABLE TO SHAREHOLDERS
Advances payable to shareholders represent amounts advanced by the shareholders of the Company. The notes are unsecure, due on demand, and have no stated interest rate. The Company anticipated that the notes will be repaid from proceeds received from Private Placement Offering (hereinafter "Offering"), and have, therefore, been classified as current liabilities.
4. CONVERTIBLE NOTES PAYABLE
During 2002, the Company entered into a series of convertible debenture agreements with five accredited investors providing for the issuance of 12% secured convertible debentures in the aggregate principal amount of $900,000 due January 31, 2003 at a conversion price calculated at the time of conversion for the aggregate consideration of $900,000, exercisable at the lesser of $5.70 or the average of the lowest three trading prices during the 20-day period prior to exercise. The amounts due in January 2003 were not repaid and the Company is currently working out a payment plan with the group of investors to repay the convertible debentures.
On June 15, 2011, $250,000 worth of the convertible debentures were converted into 250,000 Series D Preferred Shares of the Company.
As of September 30, 2011 there is a total of $650,000 in convertible notes recorded on the Company's books and related accrued interest of $483,000.
5. LIQUIDITY
As shown on the accompanying consolidated balance sheet as of September 30, 2011 and December 31, 2010, the Company's current liabilities exceeded its current assets by $1,470,041 and $956,090 respectively. Management of the Company is developing a plan to reduce its liabilities, to fund operations and generate additional revenue.
6. RELATED PARTY TRANSACTIONS
During the years ended December 31, 2010 and 2009 the Company recognized a total of $50,000 each year for services provided by the President and Director of the Company. These amounts are recorded as an increase to additional paid-in capital.
During the year ended December 31, 2010 and 2009 the Company recorded $64,000 each year for accrued management fees due to Directors of the Company for services rendered.
During the year ended December 31, 2010 the Company agreed to issue 15,000,000 shares to a related party in exchange for services over a three year period. The shares were valued using the closing price of the Company's common stock on the closest date of sale of $0.10 per share.
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
Accounting Standards Codification ("ASC") 820, FAIR VALUE MEASUREMENTS AND DISCLOSURES, defines 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 the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
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The levels of the fair value hierarchy established by ASC 820 are:
Level 1: inputs are quoted prices, unadjusted, in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2: inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. A Level 2 input must be observable for substantially the full term of the asset or liability.
Level 3: inputs are unobservable and reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the asset or liability.
The Company considers the recorded value of certain of its financial assets and liabilities, which consist primarily of cash, accounts receivable and accounts payable, to approximate the fair value of the respective assets and liabilities at September 30, 2011 and December 31, 2010 based upon the short-term nature of the assets and liabilities. The Company values goodwill, intangible assets, and contingent consideration using significant inputs which are not observable in the market which are defined as Level 3 inputs pursuant to fair value measurement accounting.
At September 30, 2011 and December 31, 2010 the Company had less than $1,000 deposited in any money market account.
8. STOCK-BASED COMPENSATION
The Company recognizes compensation expense for all equity-based compensation awards issued to employees, directors and non-employees that are expected to vest. Compensation cost is based on the fair value of awards as of the grant date. The Company recognized $120,000 and $150,000 of pre-tax stock-based compensation expense for the nine months ended September 30, 2011 and 2010, respectively.
9. INCOME TAXES
We did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because we have experienced operating losses since inception. Pursuant to FASB ASC Topic 740, when it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit. We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carryforwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carryforward period.
The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements for the year ended December 31, 2010 or 2009, applicable under FIN 48. As a result of the adoption of FIN 48, we did not recognize any adjustment to the liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of accumulated deficit on the balance sheet.
10. SUBSEQUENT EVENTS
On November 21 2011, the Company entered into a Rescission Agreement with Team Advisory Corp. ("Team") which effectively rescinded and unwound the Agreement For Purchase and Sale of Assets that the Company entered into with Team on May 3, 2011.
On November 21, 2011, the Company entered into a Rescission Agreement with Wall Street 411Private Equity Group, Inc. ("Wall Street") and the individual former shareholders of Wall Street (the "Exchanging Shareholders") which effectively rescinded and unwound the Agreement for Purchase and Sale of Stock and Plan of reorganization that the Company entered into with Wall Street and the Exchanging Shareholders on May 5, 2011.
Pursuant to the above Rescission Agreements, 1,088,978 shares of the Company's common stock issued in May 2011 are being returned to the Company for cancellation.
On November 9, 2011, the Company issued an aggregate of 4,910,000 shares of the Company's common stock in satisfaction of accounts payable and advances payable.
On November 9, 2011, the Company issued 2,500,000 shares of the Company's common stock in exchange for the conversion of 250,000 Series D Preferred shares of the Company.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY FORWARD - LOOKING STATEMENT
The following discussion should be read in conjunction with our financial statements and related notes.
Certain matters discussed herein may contain forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties include, but are not limited to, the following:
* the volatile and competitive nature of our industry,
* the uncertainties surrounding the rapidly evolving markets in which we compete,
* the uncertainties surrounding technological change of the industry,
* our dependence on its intellectual property rights,
* the success of marketing efforts by third parties,
* the changing demands of customers and
* the arrangements with present and future customers and third parties.
Should one or more of these risks or uncertainties materialize or should any of the underlying assumptions prove incorrect, actual results of current and future operations may vary materially from those anticipated.
THE FOLLOWING DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF NETCO INVESTMENTS, INC., FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2011 AND 2010 (UNAUDITED) SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS, AND THE NOTES TO THOSE FINANCIAL STATEMENTS THAT ARE INCLUDED IN ITEM 1 ELSEWHERE IN THIS FILING. REFERENCES TO "WE," "OUR," OR "US" IN THIS SECTION REFERS TO THE COMPANY AND ITS SUBSIDIARIES. OUR DISCUSSION INCLUDES FORWARD-LOOKING STATEMENTS BASED UPON CURRENT EXPECTATIONS THAT INVOLVE RISKS AND UNCERTAINTIES, SUCH AS OUR PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS. ACTUAL RESULTS AND THE TIMING OF EVENTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF A NUMBER OF FACTORS, INCLUDING THOSE SET FORTH UNDER THE RISK FACTORS, FORWARD-LOOKING STATEMENTS AND BUSINESS SECTIONS IN THIS PROSPECTUS. WE USE WORDS SUCH AS "ANTICIPATE," "ESTIMATE," "PLAN," "PROJECT," "CONTINUING," "ONGOING," "EXPECT," "BELIEVE," "INTEND," "MAY," "WILL," "SHOULD," "COULD," AND SIMILAR EXPRESSIONS TO IDENTIFY FORWARD-LOOKING STATEMENTS.
OVERVIEW
Netco Investments, Inc. (the "Company or "Netco"), a development stage company, was originally incorporated in Texas on December 18, 1988 under the name Great Leasing Inc. On November 1, 2005, the Company changed its name to Netco Investments, Inc. The Company is focused on merchant banking activities in both domestic and international markets.
The Company provides merchant banking type services to small, private and microcap public companies seeking debt and equity capital and/or to be part of a diversified, resource sharing, business combination . The Company also engages in advising distressed private and public companies in special turnaround situations. Specifically, the Company identifies small private and public companies (the "Clients") and assists them with managerial, accounting and financial advice, and helps the Clients refinance and / or raise adequate capital by introducing them to potential investors and lenders.
RISKS, UNCERTAINTIES AND TRENDS RELATING TO THE COMPANY AND INDUSTRY
REVENUES AND PROFITS ARE NOT ASSURED
We have had a very limited history of operations. Since inception we have relied on loans to fund our operations, and we have incurred significant operating losses. Negative cash flow from operations is expected in the foreseeable future due to limited revenues. There can be no assurance that we will ever achieve any significant revenues or profitable operations.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our management's discussion and analysis of our financial condition and results of operations are based on our condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported net sales and expenses
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during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are more fully described in Note 3 to our financial statements, we believe that the following accounting policies are the most critical to aid the reader in fully understanding and evaluating this discussion and analysis:
CONCENTRATION OF CREDIT RISK
The Company maintains cash balances at two banks. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. As of December 31, 2010 and 2009, there were no uninsured balances.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include short-term, highly liquid investments with maturities of less than three months when acquired.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost net of accumulated depreciation. Expenditures for maintenance and repairs are charged against operations, if any. Renewals and betterments that materially extend the life of the assets are capitalized. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is reflected in income for the period.
The Company capitalized purchases of property and equipment with an original cost greater than $500.
Depreciation is computed for financial statement purposes on a straight-line basis over estimated useful lives of the related assets.
LONG-LIVED ASSETS
The Company adopted ASC 360-10-20 (previous known as Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company periodically evaluates the carrying value of long-lived assets to be held. ASC 360-10-20 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets.
The long-lived assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. It is reasonably possible that these assets could become impaired as a result of technology or other industry changes. Determination of recoverability of assets to be held and used is by comparing the carrying amount of an asset to future net undiscounted cash flows to be generated by the assets.
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FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts in the balance sheet for cash and cash equivalents, and notes payable to shareholders and officers approximate the respective fair values due to the short maturities of those instruments and rates available for similar debt.
INCOME TAXES
Income taxes are provided for using the liability method of accounting in accordance with FASB ASC 740 "INCOME TAXES" and clarified by FIN 48, "ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES--AN INTERPRETATION OF FASB STATEMENT NO. 109." A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.
SHARE BASED EXPENSES
The Company follows FASB ASC 718 "STOCK COMPENSATION." This statement is a revision to SFAS 123 and supersedes Accounting Principles Board (APB) Opinion No. 25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES," and amends FASB Statement No. 95, "STATEMENT OF CASH FLOWS." This statement requires a public entity to expense the cost of employee services received in exchange for an award of equity instruments. This statement also provides guidance on valuing and expensing these awards, as well as disclosure requirements of these equity arrangements. The Company adopted SFAS No. 123R upon creation of the company and expenses share based costs in the period incurred.
ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS (CONTINUED)
If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. There was no impairment loss during the years ended December 31, 2010 and 2009.
REVENUE RECOGNITION
The Company's financial statements are prepared under the accrual method of accounting. Revenues will be recognized in the period the services are performed and costs are recorded in the period incurred. Revenue is recognized when (1) the evidence of the agreement exists, (2) services have been rendered, (3) the price is fixed or determinable, and (4) collectability is reasonably assured. The Company has not generated revenues since its inception.
ADVERTISING COSTS
Advertising and promotion costs are expensed as incurred. The Company did not incur any of such cost during the nine months ended September 30, 2011 or the year ended December 31, 2010.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred, if any.
GOING CONCERN
The Company's financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company does not have significant operations or a source of revenue sufficient to cover its operation costs and allow it to continue as a going concern. Additionally, the Company has incurred a net loss of $1,916,146 since inception. The Company will be dependent upon the raising of additional capital in order to fully execute its business plan. There can be no assurance that the Company will be successful in order to continue as a going concern. The officers and directors have committed to advancing certain operating costs of the Company.
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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
On January 1, 2011 the Company adopted Accounting Standards Update ("ASU") 2009-13, Revenue Recognition (Topic 605), Multiple-Deliverable Arrangements. ASU 2009-13 amends the guidance that in the absence of vendor-specific objective and third-party evidence for deliverables in multiple-deliverable arrangements, companies will be required to develop a best estimate of the selling price to separate deliverables and allocate arrangements consideration using the relative selling price method. ASU 2009-13 expands the disclosure requirements for multiple-deliverable revenue arrangements. The adoption of ASU 2009-13 has not had a material impact on the financial statements.
On January 1, 2011 the Company adopted ASU 2009-14, Software (Topic 985), Certain Revenue Arrangements that Include Software Elements. ASU 2009-14 amends the guidance to exclude from the scope of software revenue accounting requirements tangible products if the product contains both software and non-software components that function together to deliver a product's essential functionality and factors to consider in determining whether a product is within the scope of the guidance. The adoption of ASU 2009-14 has not had a material impact on the financial statements.
In April 2009, the FASB issued an update to ASC 820, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly", which provides guidance on determining fair value when there is no active market or where the price inputs being used represent distressed sales. This update to ASC 820 was effective for interim and annual periods ending after June 15, 2009 and was adopted by the Company in the second quarter of 2009. The adoption did not have a material impact on the Company's financial statements.
In May 2009, the FASB issued ASC 855, "Subsequent Events". ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. ASC 855, which includes a new required disclosure of the date through which an entity has evaluated subsequent events, was effective for interim or annual periods ending after June 15, 2009. The Company adopted this standard as of September 30, 2009; however, the adoption of ASC 855 had no impact to the Company's financial statements.
In June 2009, the FASB issued ASU 2009-17, Consolidation (ASC 810) "Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities," which eliminates the quantitative approach previously required for determining the primary beneficiary of a variable interest entity and requires ongoing qualitative reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. This new standard also requires additional disclosures about an enterprise's involvement in variable interest entities. The Company adopted this pronouncement on January 1, 2010 but there was no significant impact on its financial statements.
In June 2009, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 168, THE FASB ACCOUNTING
STANDARDS CODIFICATIONTM AND THE HIERARCHY OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES - A REPLACEMENT OF FASB STATEMENT NO. 162. With the issuance of SFAS 168, the FASB Accounting Standards Codification ("the Codification" or "ASC") becomes the single source of authoritative U.S. accounting and reporting standards applicable for all nongovernmental entities, with the exception of guidance issued by the SEC. This change is effective for financial statements issued for interim or annual periods ending after September 15, 2009. The Codification does not modify existing GAAP nor any guidance issued by the SEC. Nonauthoritative accounting literature is excluded from the Codification. To improve usability, the Codification does include certain SEC guidance. GAAP accounting standards used to populate the Codification are superseded, with the exception of certain standards yet to be codified as of September 30, 2009, including SFAS 166 and 167 described subsequently.
In June 2009, the FASB issued ASC 105, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles". ASC 105 establishes the FASB Accounting Standards Codification ("Codification"), as the single source of authoritative accounting and reporting standards in the United States for all non-government entities, with the exception of the Securities and Exchange Commission and its staff. It does not include any new guidance or interpretations of US GAAP, but merely eliminates the existing hierarchy and codifies the previously issued standards and pronouncements into specific topic areas. The Codification was adopted on July 1, 2009 for the Company's financial statements for the year ended December 31, 2009.
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On June 12, 2009 the FASB issued two statements that amended the guidance for off-balance-sheet accounting of financial instruments: SFAS No. 166, "ACCOUNTING FOR TRANSFERS OF FINANCIAL ASSETS," and SFAS No. 167, "AMENDMENTS TO FASB INTERPRETATION NO. 46(R)." SFAS No. 166 revises SFAS No. 140, "ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES," and will require entities to provide more information about sales of securitized financial assets and similar transactions, particularly if the seller retains some risk to the assets, the FASB said. The statement eliminates the concept of a qualifying special-purpose entity, changes the requirements for the derecognition of financial assets, and calls upon sellers of the assets to make additional disclosures about them.
The Company refers to FASB ASC 605-25 "MULTIPLE ELEMENT ARRANGEMENTS" in recognizing revenue from agreements with multiple deliverables. This statement provides principles for allocation of consideration among its multiple-elements, allowing more flexibility in identifying and accounting for separate deliverables under an arrangement. The EITF introduces an estimated selling price method for valuing the elements of a bundled arrangement if vendor-specific objective evidence or third-party evidence of selling price is not available, and significantly expands related disclosure requirements. This standard is effective on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Alternatively, adoption may be on a retrospective basis, and early application is permitted. The Company does not expect the adoption of this statement to have a material effect on its consolidated financial statements or disclosures.
In August 2009, the FASB issued Accounting Standards Update No. 2009-05, "Measuring Liabilities at Fair Value," ("ASU 2009-05"). ASU 2009-05 provides guidance on measuring the fair value of liabilities and is effective for the first interim or annual reporting period beginning after its issuance. The Company's adoption of ASU 2009-05 did not have an effect on its disclosure of the fair value of its liabilities.
SFAS No. 167 amends FASB Interpretation (FIN) No. 46(R), "CONSOLIDATION OF VARIABLE INTEREST ENTITIES," by altering how a company determines when an entity that is insufficiently capitalized or not controlled through voting should be consolidated, the FASB said. A company has to determine whether it should provide consolidated reporting of an entity based upon the entity's purpose and design and the parent company's ability to direct the entity's actions. SFAS Nos. 166 and 167 will be effective at the start of the first fiscal year beginning after November 15, 2009, which will mean January 2010 for companies that are on calendar years.
In January 2010, the FASB issued ASU 2010-06, "Fair Value Measurements and Disclosures (ASC 820): Improving Disclosures about Fair Value Measurements." This update will require (1) an entity to disclose separately the amounts of significant transfers in and out of Levels 1 and 2 fair value measurements and to describe the reasons for the transfers; and (2) information about purchases, sales, issuances and settlements to be presented separately (i.e. present the activity on a gross basis rather than net) in the reconciliation for fair value measurements using significant unobservable inputs (Level 3 inputs). This guidance clarifies existing disclosure requirements for the level of disaggregation used for classes of assets and liabilities measured at fair value and require disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements using Level 2 and Level 3 inputs. The new disclosures and clarifications of existing disclosure are effective for fiscal years beginning after December 15, 2009, except for the disclosure requirements for related to the purchases, sales, issuances and settlements in the roll forward activity of Level 3 fair value measurements. Those disclosure requirements are effective for fiscal years ending after December 31, 2010. The Company is still assessing the impact on this guidance and does not believe the adoption of this guidance will have a material impact to its financial statements. Management does not believe that other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants or the SEC have a material impact on the Company's present or future financial statements.
In February 2010, the FASB issued guidance to remove the requirement for an entity that files financial statements with the SEC to disclose a date through which subsequent events have been evaluated. The adoption of this guidance during our current fiscal quarter did not have any impact on our financial statements.
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COMPARISON OF THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2011 AND 2010
OPERATING EXPENSES. Our operating expenses consist of fees paid to consultants and general and administrative expenses. Operating expenses for the three month period ended September 30, 2011 amounted to $35,664 which consisted of approximately $33,000 for management fees and consultants and approximately $2,664 for general, office and administrative expenses. Operating expenses for the three month period ended September 30, 2010 amounted to $28,211 which consisted of $24,000 in management fees and $4,211 in general, office and administrative expenses.
COMPARISON OF THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2011 AND 2010
OPERATING EXPENSES. Our operating expenses consist of professional fees paid to attorneys and auditors, fees paid to consultants and general and administrative expenses. Operating expenses for the nine month period ended September 30, 2011 amounted to $610,383 which consisted of approximately $557,525 for outside consultants to assist with structuring our Company in setting up our platforms and infrastructure, $33,000 for consultants and approximately $19,858 for general, office and administrative expenses. Operating expenses for the nine month period ended September 30, 2010 amounted to $156,961 which consisted of $42,500 in professional fees, approximately $60,000 in consulting expenses and $54,461 in general, office and administrative expenses.
CASH FLOWS - FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2011 AND 2010
Net cash provided by operating activities was $206,414 for the nine month period ended September 30, 2011 and for the nine month period ended September 30, 2010, $41,351 was used in operating activities. The $206,414 for the nine month period ended September 30, 2011 is primarily due to common stock issued for compensation and services in the amount of $522,800, preferred stock issued for conversion of notes payable in the amount of $250,000 and an increase in accrued interest payable of $483,000 offset by a loss of $1,093,251.
There were no cash flows used in investing activities for the nine month periods ended September 30, 2011 and 2010.
Net cash used in financing activities was $203,100 for the nine month period ended September 30, 2011 and is primarily due to the conversion of a $250,000 note into Series D preferred stock. The $41,511 in net cash provided by financing activities for the nine months ended September 30, 2010 is a result of advances payable from shareholders.
MATERIAL IMPACT OF KNOWN EVENTS ON LIQUIDITY
The disruption in the credit markets has had a significant adverse impact on a number of financial institutions. As of September 30, 2011, however, our liquidity and capital investments have not been materially adversely impacted, and we believe that they will not be materially adversely impacted in the near future. We will continue to closely monitor our liquidity and the credit markets. We cannot, however, predict with any certainty the impact to us of any further disruption in the credit environment.
There are no other known events that are expected to have a material impact on our short-term or long-term liquidity.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2010 we had cash of $50 and a working capital deficit of $956,090. As of September 30, 2011 we had cash of $3,364 and a working capital deficit of $1,470,041. We are solely dependent on the funds raised through our equity or debt financing and our net loss was funded through equity financing and from loans from our directors.
During 2009 and 2010 we obtained our liquidity principally from cash advances from our Officers and principal shareholders. The Company has executed promissory notes totaling approximately $900,000 as of December 31, 2010. Each note bears 12% annual interest is convertible into our common stock at an adjustable price per share.
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Although we intend to increase our revenue by engaging in more aggressive sales, marketing and advertising activity designed to increase awareness of our products, we still need substantial additional capital to finance our business activities on an ongoing basis, as our revenue is insufficient to fund our operations.
Even if we do receive additional financing through our Officers and principal shareholders, we still will require, and following the completion of the Securities and Exchange Commission's review of this Registration Statement we intend to seek, substantial additional funds to finance our business activities on an ongoing basis. However, we do not have any commitments or arrangements with any person or entity to obtain any equity or debt financing, and there can be no assurance that the additional financing we require would be available on reasonable terms, if at all; and if available, any such financing likely would result in a material and substantial dilution of the equity interests of our current shareholders. The unavailability of such additional financing could require us to delay, scale back or terminate our business activities, which would have a material adverse effect on our viability and prospects. See Item 1A, Risk Factors - We May Be Unable to Continue as a Going Concern; and - The Substantial Additional Capital We Need May Not Be Obtainable, and Item 7, Certain Relationships and Related Transactions, and Director Independence - Transactions with Related Persons - Borrowings.
We also intend to seek to have our common stock listed on the OTC Bulletin Board (OTCBB) , which we believe would make it easier for us to raise capital from institutional investors and others. However, there can be no assurance that our common stock will be approved for listing on the OTCBB. In addition, we do not have any commitments or arrangements to obtain any additional equity capital, and there can be no assurance that the additional financing we require would be available on reasonable terms, if at all. The unavailability of additional financing could require us to delay, scale back or terminate our acquisition efforts as well as our own business activities, which would have a material adverse effect on our company and its viability and prospects.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company's market risk is principally confined to changes in foreign currency exchange rates. The Company's exposure to foreign exchange rate fluctuations arises in part from minimal accounts in which costs incurred in one entity are charged to other entities in different foreign jurisdictions. As exchange rates vary, those results when translated may vary from expectations and adversely impact overall expected profitability.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. The Company maintains adequate internal disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act"), as amended) as of the end of the period covered by this quarterly report on Form 10-Q pursuant to Rule 13a-15(b) under the Exchange Act that are designed to ensure that information required to be disclosed by it in its reports filed or submitted pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms and that information required to be disclosed by the Company in its Exchange Act reports is accumulated and communicated to management, including the Company's Chief Executive Officer ("CEO"), who is its principal executive officer, and on an interim basis, also acts as the Chief Financial Officer ("CFO"), the principal financial officer, to allow timely decisions regarding required disclosure.
The Company's CEO and acting CFO is responsible for establishing and maintaining adequate internal control over the Company's financial reporting. He has reviewed and evaluated the effectiveness of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14 as of June 30, 2011 in order to ensure the reporting of material information required to be included in the Company's periodic filings with the Commission comply with the Commission's requirements for certification of this Form 10-Q. Based on that evaluation, the Company's CEO and acting CFO has concluded that as of September 30, 2011 the Company's disclosure controls and procedures were effective.
(b) Changes in internal control. There were no changes in the Company's internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting.
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LIMITATION OF EFFECTIVENESS OF CONTROLS
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. The design of any control system is based, in part, upon the benefits of the control system relative to its costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of control. In addition, over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of inherent limitation in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. The Company's controls and procedures are designed to provide a reasonable level of assurance of achieving their objectives.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. REMOVED AND RESERVED
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
31.1 Certification of the Chief Executive Officer and acting Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.1 Certification of the Chief Executive Officer and acting Principal Financial and Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: November 21, 2011
NETCO INVESTMENTS, INC.
/s/ Gary Freeman
------------------------------------------
Gary Freeman
Chief Executive Officer,
Principal Executive Officer and acting
Principal Financial and Accounting Officer
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EXHIBIT 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER AND
ACTING PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER
I, Gary Freeman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Netco Investments, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant, as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 21, 2011
/s/ Gary Freeman
------------------------------------------
Gary Freeman
Chief Executive Officer,
Principal Executive Officer and acting
Principal Financial and Accounting Officer
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report on Form 10-Q of Netco Investments, Inc. (the "Company") for the quarter ended September 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gary Freeman, Chief Executive Officer and acting Principal Financial and Accounting Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that,
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. To my knowledge, the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 21, 2011
/s/ Gary Freeman
------------------------------------------
Gary Freeman
Chief Executive Officer,
Principal Executive Officer and acting
Principal Financial and Accounting Officer
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