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Press Release Source: One Voice Technologies
One Voice Technologies Issues Corporate Update
On Thursday May 28, 2009, 9:59 am EDT
Buzz up! Print Related:One Voice Technologies Inc.
LA JOLLA, CA--(MARKET WIRE)--May 28, 2009 -- One Voice Technologies, Inc. (OTC BB:ONEV.OB - News) Chairman and CEO Dean Weber, today issued the following corporate update:
We are pleased to provide our shareholders with the following corporate update:
"As a result of being in full compliance with SEC and FINRA listing requirements, our trading symbol has been changed back from "ONEVE" to our original symbol "ONEV" effective May 22, 2009. The change in symbol is due to One Voice filing our 2008 10KSB annual audited financial statement on May 18, 2009 and therefore becoming in full compliance with the SEC and FINRA.
"In addition, on May 22, 2009 the company held a special meeting of shareholders where the shareholders of One Voice voted in favor of a reverse stock split of the company's common stock on a 1 for 20 basis. The final shareholder vote was 755,515,014 FOR; 271,709,775 AGAINST and 310,238 ABSTAIN. The company anticipates the reverse stock split will become effective by mid-June 2009 as indicated to the company by FINRA.
"In attendance at the shareholders meeting were representatives of One Voice including Dean Weber, President and CEO, Jacobo Kaloyan, Director of Sales for Latin America and Ari Brara, Chairman and Managing Director of Mantec Consultants in Delhi, India. Mr. Weber gave a company overview for 2008 and 2009 followed by Mr. Kaloyan discussed customers in Mexico and Mr. Brara gave an overview of our service launch in India."
"In Mexico, One Voice is working with our customer TELMEX to introduce new marketing strategies to grow our existing revenue stream through greater market penetration," said Jacobo Kaloyan, Director of Sales for Latin America.
"The MobileVoice Remote Email service is well received by MTNL including their executives," said Ari Brara, Chairman and Managing Director of Mantec Consultants. "MTNL is the government of India owned phone company offering both mobile and landline service in Delhi and Mumbai. Mantec has been working closely with MTNL in ensure a very successful marketing campaign to create subscriber awareness. Mantec has actively been training MTNL call center and sales representatives on the service along with finalizing a marketing campaign which includes email and SMS blasts, in-store signage and a sales incentive program for MTNL sales representatives. We feel this marketing campaign will be highly effective in generating awareness of our service and essential to create a high growth revenue stream."
Dean Weber continued, "I will keep the shareholders updated as events occur and I would like to thank you for your continued support of One Voice."
About One Voice Technologies, Inc.
One Voice Technologies, Inc. (OTC BB:ONEV.OB - News) is the world's first developer of 4th Generation voice solutions for the Telecom and Interactive Multimedia markets. Our Intelligent Voice(TM) solutions employ revolutionary, patented technology that allows people to send messages (E-mail, SMS, Instant Messaging and paging), purchase products, get information and control devices -- all by using their voice. The company is headquartered in La Jolla, California. For more information, please visit http://www.onev.com
FORWARD-LOOKING STATEMENT DISCLAIMER
Some of the statements made in this press release discuss future events and developments, including our future business strategy and our ability to generate revenue, income and cash flow, and should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These "forward-looking" statements can generally be identified by words such as "expect," "anticipate," "believe," "estimate," "intend," "plan," and similar expressions. These statements involve a high degree of risk and uncertainty that exists in the Company's operations and business environment and are subject to change based on various factors that could cause actual Company results, performance, plans, goals and objectives to differ materially from those contemplated or implied in these forward-looking statements. Actual results may be different from anticipated results for a number of reasons, including the Company's new and uncertain business model, uncertainty regarding acceptance of the Company's products and services and the Company's limited operating history.
MobileVoice, Media Center Communicator, VoiceTunes and Say2Play are trademarks of One Voice Technologies, Inc. All other products and company names herein may be trademarks of their registered owners.
Contact:
INVESTOR RELATIONS:
One Voice Technologies
Attn: Investor Relations
Phone: (866) 823-1432
Fax: (858) 754-1276
Email Contact
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"That should translate to a PPS of between .013 and .01 cent by year end (post split). Well done, Mr. Weber....just very well done indeed, lol! IMHO."
======================================================
Interesting.. the first part of the statement has to do with the future(what SHOULD happen, IYO).
The second part refers to the same prediction as history,
as in "well DONE"(done deal?).
Nice spin job, SBB, but I guess we'll just have to wait and see...
Meanwhile, can you tell us what positives you see in the
10K, and or the 10Q,
TIA.
So now the "E" can be removed.
GLTAEB.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2009
COMMISSION FILE NUMBER 0-27589
ONE VOICE TECHNOLOGIES, INC.
(Name of Small Business Issuer in its Charter)
NEVADA 95-4714338
(State or Other Jurisdiction of
Incorporation or Organization) (I.R.S. Employer
Identification No.)
7825 Fay Avenue, Suite 200, La Jolla CA 92037
(Address of principal Executive Offices) (Zip Code)
(866) 823-1432 (858) 754-1276
(Issuer's Telephone Number) (Issuer's Facsimile Number)
Securities registered under Section 12(b) of the Exchange Act: None.
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK-$.001 PAR VALUE
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [_] No [_]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definitions of "large accelerated filer," "accelerated filed," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [_] Accelerated filer [_] on-accelerated filer [_] Do not check if a smaller reporting company)
Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [_] No [X]
As of May 20, 2009 the registrant had 1,290,000 shares of common stock, $.001 par value, issued and outstanding.
--------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) F-1
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 1
Item 3. Quantitative and Qualitative Disclosures About Market Risk 6
Item 4T. Controls and Procedures 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 7
Item 1A. Risk Factors 8
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 9
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits 10
SIGNATURES 11
--------------------------------------------------------------------------------
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
One Voice Technologies, Inc
Balance Sheet
March 31, 2009 December 31, 2008
Assets (UNAUDITED) (AUDITED)
Current Assets
Cash and cash equivalents $ - $ 666
Accounts receivable, net 70,937 95,840
Inventories 20,329 20,479
Prepaid expenses 32,160 41,130
Total Current Assets 123,426 158,115
Fixed and Intangible assets
Property and Equipment, net of accumulated depreciation 22,262 26,455
Intangible assets, net of accumulated amortization 21,101 26,024
Total Fixed and Intangible Assets 43,363 52,479
Other Assets
Deposits 4,732 4,732
Total Other Assets 4,732 4,732
Total Assets $ 171,521 $ 215,326
Liabilities and Stockholders' Deficit
Current Liabilities
Accounts payable $ 551,154 $ 539,562
Accrued expenses 908,917 821,452
Settlement agreement liability 137,400 173,091
License agreement liability 1,302,000 1,267,500
Current notes payable 176,471 133,264
Debt derivative liability 1,767,342 1,805,482
Warrant derivative liability 128,064 31,266
Convertible notes payable, net 546,000 546,000
Revolving line of credit 2,493,508 2,374,621
Total Current Liabilities 8,010,856 7,692,238
Long term notes payable 24,535 67,742
Total Liabilities 8,035,391 7,759,980
Stockholders' Deficit
Preferred stock, $.001 par value; 10,000,000 shares authorized; no shares issued and outstanding - -
Common stock, $.001 par value; 1,290,000,000 shares authorized; 1,290, 000,000 and 1,218,581,701 issued and outstanding as of March 31, 2009 and December 31, 2008 respectively 1,290,000 1,218,582
Additional paid-in capital 43,934,875 43,920,439
Escrow Shares (713,087 ) (713,087 )
Accumulated deficit (52,375,658 ) (51,970,588 )
Total Stockholders' Deficit (7,863,870 ) (7,544,654 )
Total Liabilities and Stockholders' Deficit $ 171,521 $ 215,326
THE ACCOMPANYING CONDENSED NOTES FORM AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-1
--------------------------------------------------------------------------------
One Voice Technologies, Inc
Statements of Operations
UNAUDITED
THREE MONTH ENDED
MARCH 31,
2009 2008
Revenue
Net Revenue $ 81,316 $ 188,753
Cost of good sold 53,614 94,926
Gross profit 27,702 93,827
Operating Expenses
Selling, general and administrative 350,478 749,536
Research and development - -
Total Operating Expenses 350,478 749,536
Loss from Operations (322,776 ) (655,709 )
Other Income (Expense)
Interest expense (59,327 ) (254,754 )
Gains (loss) from change in derivative liability (58,658 ) 1,301,754
Other income (expense) 35,691 -
Total Other Income (Expense) (82,294 ) 1,047,000
Net income before taxes (405,070 ) 391,291
Income taxes - (800 )
NET INCOME $ (405,070 ) $ 390,491
Income Per Share
Basic and diluted $ (0.00 ) $ 0.00
Number of shares used in calculation of loss per share
Basic and diluted 1,267,799,716 753,124,000
THE ACCOMPANYING CONDENSED NOTES FORM AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-2
--------------------------------------------------------------------------------
One Voice Technologies, Inc
Statements of Cash Flows
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
2009 2008
Cash Flows from Operating Activities:
Net loss $ (405,070 ) $ 390,491
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 9,116 134,069
Debt issue costs and debt discount amortization - 200,768
(Gain) loss on debt derivative liability (38,140 ) (399,379 )
(Gain) loss on warrant derivative liability 96,798 (926,375 )
Common stock issued for services rendered - 47,405
Common stock issued for liquidated damages - 24,000
Stock based compensation 14,436 46,187
Non cash interest expense - -
Settlement liability (35,691 ) -
License agreement liability 34,500 40,500
Changes in certain assets and liabilities
Accounts receivable 24,903 (17,213 )
Inventory 150 (1,319 )
Prepaid expenses 8,970 (30,335 )
Accounts payable 11,593 (2,173 )
Accrued expenses 94,271 27,886
Deferred rent - 609
Net Cash Used in Operating Activities (184,164 ) (464,879 )
Cash Flows from Financing Activities:
Proceeds from revolving line 183,498 450,000
Net Cash Provided by Financing Activities 183,498 450,000
Net Increase (Decrease) in Cash and Cash Equivalents (666 ) (14,879 )
Cash and Cash Equivalents - Beginning of Year 666 14,879
Cash and Cash Equivalents - End of Year $ - $ -
Supplemental Disclosure of Cash Flow Information:
Cash Paid during the year for:
Interest paid $ - $ -
Income taxes paid $ - $ 800
Supplemental Disclosure of Non-cash Investing and Financing Activities:
Common stock issued upon conversion of debt $ 71,418 $ 249,582
THE ACCOMPANYING CONDENSED NOTES FORM AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-3
--------------------------------------------------------------------------------
ONE VOICE TECHNOLOGIES, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. DESCRIPTION OF BUSINESS
One Voice Technologies, Inc. is a voice recognition technology company with over $43 million invested in Research and Development and deployment of products in both the telecom and PC multi-media markets. To date, our customers include: Telefonos de Mexico, S.A.B. de C.V. (TELMEX), Intel Corporation, Inland Cellular, Nex-Tec Wireless and several additional telecom service providers throughout the United States. Our telecom solutions allow business and consumer phone users to Voice Dial, Group Conference Call, Read and Send E-Mail and Instant Message, all by voice. We offer PC Original Equipment Manufacturers (OEM's) the ability to bundle a complete voice interactive computer assistant which allows PC users to talk to their computers to quickly play digital media (music, videos, DVD) along with reading and sending e-mail messages, SMS text messaging to mobile phones, PC-to-Phone calling (VoIP) and PC-to-PC audio/video.We feel we are strongly positioned across these markets with our patented voice technology.
The Company is traded on the NASD OTC Bulletin Board ("OTCBB") under the symbol ONEV. One Voice is incorporated in the State of Nevada and commenced operations on July 14, 1999.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INTERIM FINANCIAL STATEMENTS:
The accompanying audited financial statements represent the financial activity of One Voice Technologies, Inc. These financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been included or omitted pursuant to such rules and regulations. These financial statements and the accompanying notes are unaudited and should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2008. In the opinion of management, the financial statements herein include adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the Company's financial position as of March 31, 2009, and results of operations for the three months ended March 31, 2009 and 2008. The results of operations for the three months ended March 31, 2009 are not necessarily indicative of the operating results to be expected for the full fiscal year or any future periods.
ORGANIZATION AND BASIS OF PRESENTATION
One Voice Technologies, Inc., ("The Company"), is incorporated under the laws of the State of Nevada. The Company develops voice recognition software and it commenced operations in 1999. The Company's telecom solutions allow business and consumer phone users to Voice Dial, Group Conference Call, Read and Send E-Mail and Instant Message, all by voice. We offer PC Original Equipment Manufacturers (OEM's) the ability to bundle a complete voice interactive computer assistant which allows PC users to talk to their computers to quickly play digital media (music, videos, DVD) along with reading and sending e-mail messages, SMS text messaging to mobile phones, PC-to-Phone calling (VoIP) and PC-to-PC audio/video.
GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has incurred significant losses since inception of $52,375,658 and used cash from operations of 184,164 during the three months ended March 31, 2009. The Company also has a working capital deficit of $7,887,430 of which $1,895,406 represents non-cash warrant and debt derivative liabilities.
F-4
--------------------------------------------------------------------------------
ONE VOICE TECHNOLOGIES, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company also has a stockholders' deficit of $7,863,870 as of March 31, 2009. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management has instituted a cost reduction program that included a reduction in labor and fringe costs. Historically, management has been able to obtain capital through either the issuance of equity or debt, and is currently seeking such financing. There can be no assurance as to the availability or terms upon which such financing and capital might be available. Additionally, management is currently pursuing revenue-bearing contracts utilizing various applications of its technology including wireless technology. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the amount of revenue and expense reported during the period. Significant estimates include valuation of derivative and warrant liabilities. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, cash equivalents include all highly liquid debt instruments with original maturities of three months or less which are not securing any corporate obligations.
ACCOUNTS RECEIVABLE
Trade accounts receivable are stated at amounts billed to and due from clients, net of an allowance for doubtful accounts. Credit is extended based on evaluation of a client’s financial condition, and collateral is not required. In determining the adequacy of the allowance, management identifies specific receivables for which collection is not certain and estimates the potentially uncollectible amount based on the most recently available information. We write off accounts receivable when they are determined to be uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. As of March 31, 2009 and December 31, 2008, the Company had a reserve for doubtful accounts of 174,952 and 135,289, respectively.
CONCENTRATION OF CUSTOMER
The Company generated 82% of total revenues from three major customers in the period ended March 31, 2009. The accounts receivable balance for these customers at March 31, 2009 represented 77% of the total net accounts receivable.
REVENUE RECOGNITION
The Company recognizes revenue when persuasive evidence of a sale arrangement exists, delivery has occurred or services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured in accordance with SEC Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements" ("SAB 104").
In most cases, revenue from hardware and software product sales is recognized when title passes to the customer. Based upon the Company's standard shipping terms, FOB The Company, title passes upon shipment to the customer. The Company ships a portion of its hardware and software products on consignment. Revenue for these products is recognized when title passes to the end consumer. These products are included in the Company’s inventory totals for the years ended December 31, 2008 and 2007.
Revenue is recognized on service contracts using the proportional-performance method. The Company uses the proportional-performance method when a service contract involves an unspecified number of acts over a fixed time period for performance. Revenue is recognized over the period during which the acts will be performed by using the straight-line method.
F-5
--------------------------------------------------------------------------------
ONE VOICE TECHNOLOGIES, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
TRADEMARKS AND PATENTS
The Company's trademark costs consist of legal fees paid in connection with trademarks. The Company amortizes trademarks using the straight-line method over the period of estimated benefit, generally four years. The Company's patent costs consist of legal fees paid in connection with patents pending. The Company amortizes patents using the straight-line method over the period of estimated benefit, generally five years. Yearly patent renewal fees are expensed in the year incurred.
In accordance with SFAS No. 142, the Company evaluates its operations to ascertain if a triggering event has occurred which would impact the value of finite-lived intangible assets (e.g., patents). Examples of such triggering events include a significant disposal of a portion of such assets, an adverse change in the market involving the business employing the related asset, a significant decrease in the benefits realized from an asset
As of March 31, 2009, no such triggering event has occurred. An impairment test involves a comparison of undiscounted cash flows against the carrying value of the asset as an initial test. If the carrying value of such asset exceeds the undiscounted cash flow, the asset would be deemed to be impaired. Impairment would then be measured as the difference between the fair value of the fixed or amortizing intangible asset and the carrying value to determine the amount of the impairment. The Company determines fair value generally by using the discounted cash flow method. To the extent that the carrying value is greater than the asset's fair value, an impairment loss is recognized for the difference.
CONVERTIBLE NOTES AND FINANCIAL INSTRUMENTS WITH EMBEDDED FEATURES
The Company accounts for conversion options embedded in convertible notes in accordance with Statement of Financial Accounting Standard ("SFAS) No. 133 "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") and EITF 00-19 "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock" ("EITF 00-19"). SFAS 133 generally requires Companies to bifurcate conversion features embedded in convertible notes from their host instruments and to account for them as free standing derivative financial instruments in accordance with EITF 00-19. SFAS 133 provides for an exception to this rule when convertible notes, as host instruments, are deemed to be conventional as that term is described in the implementation guidance under Appendix A to SFAS 133 and further clarified in EITF 05-2 "The Meaning of "Conventional Convertible Debt Instrument" in Issue No. 00-19.
The Company accounts for convertible notes (if deemed conventional) in accordance with the provisions of Emerging Issues Task Force Issue ("EITF")98-5 "Accounting for Convertible Securities with Beneficial Conversion Features," ("EITF 98-5"), EITF 00-27 "Application of EITF 98-5 to Certain Convertible Instruments," Accordingly, the Company records, as a discount to convertible notes, the intrinsic value of such conversion options based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption.
The Company’s convertible notes do host conversion features and other features that are deemed to be embedded derivatives financial instruments or beneficial conversion features based on the commitment date fair value of the underlying common stock.
COMMON STOCK PURCHASE WARRANTS AND OTHER DERIVATIVE FINANCIAL INSTRUMENTS
The Company accounts for the issuance of common stock purchase warrants issued and other free standing derivative financial instruments in accordance with the provisions of EITF 00-19. Based on the provisions of EITF 00-19, the Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company) (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).
See notes 9 and 10 in the accompanying footnotes to the financial statements for additional details.
F-6
--------------------------------------------------------------------------------
ONE VOICE TECHNOLOGIES INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED DEBT ISSUE COST
The costs relating to obtaining and securing debt financing are capitalized and expensed over the term of the debt instrument. In the event of settlement in part or whole of such debt in advance of the maturity date, an expense is recognized for the remaining unamortized deferred debt issue cost.
For the three months ended March 31, 2009 and year ended December 31, 2008, the Company has no deferred debt issue costs outstanding.
NET LOSS PER COMMON SHARE
Basic earnings per share ("EPS") is calculated using the weighted-average number of outstanding common shares during the period. Diluted earnings per share is calculated using the weighted-average number of outstanding common shares and dilutive common equivalent shares outstanding during the period, using either the as-converted method for convertible notes and convertible preferred stock or the treasury stock method for options and warrants.
The net (loss) per common share for the three months ended March 31, 2009 and 2008 is based on the weighted average number of shares of common stock outstanding during the periods. Potentially dilutive securities include options, warrants and convertible debt.
The following table is a reconciliation of the numerator (net income / (loss)) and the denominator (number of shares) used in the basic and diluted EPS calculations and sets forth potential shares of common stock that are not included in the diluted net loss per share calculation as the effect is antidilutive:
THREE MONTHS ENDED
MARCH 31,
2009 2008
NUMERATOR - basic net income (loss) $ (405,070 ) $ 390,491
DENOMINATOR- BASIC
Weighted average common shares outstanding 1,267,799,716 753,124,000
DENOMINATOR-DILUTIVE
Weighted average common shares outstanding -- 851,252,000
TOTAL BASIC AND DILUTED SHARES 1,267,799,716 1,604,376,000
NET INCOME (LOSS) PER SHARE- BASIC $ (0.00 ) $ 0.00
NET INCOME (LOSS) PER SHARE- DILUTED $ (0.00 ) $ 0.00
F-7
--------------------------------------------------------------------------------
ONE VOICE TECHNOLOGIES INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET LOSS PER COMMON SHARE (CONTINUED)
THREE MONTHS ENDED
MARCH 31,
2009 2008
POTENTIAL DILUTIVE COMMON SHARES:
Convertible debentures 2,963,487,784 144,543,651
Options 61,434,000 55,459,000
Warrants 262,923,939 331,979,838
Escrow shares 41,878,896 0
TOTAL POTENTIAL DILUTIVE SHARES 3,287,845,723 531,982,489
ACCOUNTING FOR STOCK-BASED COMPENSATION
On January 1, 2006 the Company adopted "SFAS" No.123 (Revised 2004), "Share Based Payment," ("SFAS 123R"), using the modified prospective method. In accordance with SFAS No. 123R, the Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period during which an employee is required to provide service in exchange for the award - the requisite service period. The Company determines the grant-date fair value of employee share options using the Black-Scholes option-pricing model.
During the three months ended March 31, 2009 and 2008, the Company recorded $14,436 and $46,187 respectively, in non-cash charges for stock based compensation.
The fair value of stock options at date of grant was estimated using the Black-Scholes model with the following assumptions: expected volatility of 120.5% and 90.9%, respectively, expected term of 2.0 years, risk-free interest rate of 4.74% and an expected dividend yield of 0%. Expected volatility is based on the historical volatilities of the Company's common stock. The expected life of employee stock options is determined using guidance from SAB 107. As such, the expected life of the options and warrants is the average of the vesting term and the full contractual term of the options and warrants. The risk free interest rate is based on the U.S. Treasury notes for the expected life of the stock option.
COMPREHENSIVE INCOME
The Company has adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income," which establishes standards for reporting comprehensive income and its components in the financial statements. Comprehensive income consists of net income and other gains and losses affecting shareholders' equity that, under generally accepted accounting principles are excluded from net income. For the three months ended March 31, 2009 and 2008, the Company's comprehensive income (loss) had equaled its net income (loss). Accordingly, a statement of comprehensive loss is not presented.
F-8
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ONE VOICE TECHNOLOGIES INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS
In April 2009, the FASB issued FSP FAS 157-4, “ 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 .” This FSP provides additional guidance for estimating fair value in accordance with FASB Statement No. 157, Fair Value Measurements, when the volume and level of activity for the asset or liability have significantly decreased. This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. This FSP emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. FSP FAS 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, and is applied prospectively. We do not believe that the implementation of this standard will have a material impact on our financial statements.
In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, “ Interim Disclosures about Fair Value of Financial Instruments ”. This FSP amends FASB Statement No. 107, “ Disclosures about Fair Value of Financial Instruments ” to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. FSP FAS 107-1 and APB 28-1 are effective for interim and annual reporting periods ending after June 15, 2009. We do not believe that the implementation of this standard will have a material impact on our financial statements.
In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “ Recognition and Presentation of Other-Than-Temporary Impairments ”. This FSP amends the other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments in the financial statements. The most significant change the FSP brings is a revision to the amount of other-than-temporary loss of a debt security recorded in earnings. FSP FAS 115-2 and FAS 124-2 are effective for interim and annual reporting periods ending after June 15, 2009. We do not believe that the implementation of this standard will have a material impact on our financial statements.
In March 2009, FASB unanimously voted for the FASB “ Accounting Standards Codification ” (the “Codification”) to be effective beginning on July 1, 2009. Other than resolving certain minor inconsistencies in current United States Generally Accepted Accounting Principles (“GAAP”), the Codification is not supposed to change GAAP, but is intended to make it easier to find and research GAAP applicable to particular transactions or specific accounting issues. The Codification is a new structure which takes accounting pronouncements and organizes them by approximately ninety accounting topics. Once approved, the Codification will be the single source of authoritative U.S. GAAP. All guidance included in the Codification will be considered authoritative at that time, even guidance that comes from what is currently deemed to be a non-authoritative section of a standard. Once the Codification becomes effective, all non-grandfathered, non-SEC accounting literature not included in the Codification will become non-authoritative.
The Company has adopted all recently issued accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force ("EITF")), the American Institute of Certified Public Accountants ("AICPA"), and the SEC did not or are not believed by management to have a material impact on the Company's present or future financial statements.
F-9
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ONE VOICE TECHNOLOGIES INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PREPAID EXPENSES
THREE MONTHS
ENDED
March 31, 2009 YEAR ENDED
December 31, 2008
Rents 8,514 8,514
Business and health insurance -- 8,971
Assets held for use in 2009 launch 23,646 23,645
TOTAL $ 32,160 $ 41,130
4. PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS
THREE MONTHS
ENDED
March 31, 2009 YEAR ENDED
December 31, 2008
Computer equipment 731,281 731,281
Website development 38,524 38,524
Equipment 1,565 1,565
Furniture and fixtures 9,430 9,430
Telphone equipment 5,365 5,365
Molds and tooling 120,217 120,214
TOTAL 906,382 906,379
Less accumulated depreciation (884,120 ) (879,924 )
NET PROPERTY AND EQUIPMENT $ 22,262 $ 26,455
THREE MONTHS
ENDED
March 31, 2009 YEAR ENDED
December 31, 2008
Patents 212,062 $ 212,062
Trademarks 243,259 243,259
Software licensing 1,145,322 1,145,322
Software development costs 1,675,601 1,675,601
TOTAL 3,276,244 3,276,244
Less accumulated amortization (3,255,143 ) (3,250,220 )
NET INTANGIBLE ASSETS $ 21,101 $ 26,024
Depreciation and amortization expense totaled $9,116 and $134,069 for the three months ended March 31, 2009 and 2008, respectively.
F-10
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ONE VOICE TECHNOLOGIES INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. ACCRUED EXPENSES
THREE MONTHS
ENDED
March 31, 2009 YEAR ENDED
December 31, 2008
Accrued salaries $ 283,094 $ 260,154
Accrued vacation & 401k 106,273 101,468
Accrued interest 437,651 385,129
Accrued commission 1,026 1,026
Accrued taxes 28,460 25,917
Bank overdraft 4,580 --
Accrued payables (other) 47,833 47,758
TOTAL $ 908,917 $ 821,452
6. SETTLEMENT AGREEMENT LIABILITY
On August 23, 2007, One Voice Technologies, Inc. (the "Company") entered into a Settlement Agreement and Mutual Release with La Jolla Cove Investors, Inc. ("LJCI") pursuant to which we agreed with LJCI to forever settle, resolve and dispose of all claims, demands and causes of action asserted, existing or claimed to exist between the parties because of or in any way related to a legal proceeding in the San Diego County Superior Court (the "Court") entitled La Jolla Cove Investors, Inc. vs. One Voice Technologies, Inc., Case No. GIC850038 (the "Action"). LJCI received a judgment in its favor against the Company in connection with the Action whereby the Company owes LJCI an amount equal to $408,594.48 (the "Owed Amount"). Under the Settlement Agreement, the parties reached a final resolution with respect to such Owed Amount whereby (i) LJCI shall receive $200,000 within 15 days of the date of the Agreement and (ii) the difference between the Owed Amount and $200,000 shall be payable at a later date (the "Remaining Owed Amount"). The payment of the Remaining amount owed of $208,594 shall be made to LJCI in the following manner:
· Concurrently with the execution of the Agreement, the Company shall transfer to an independent escrow agent, on behalf of LJCI, all right, title and interest to 30,000,000 shares of Common Stock of the Company (the "Escrow Shares"), issued in 30 increments of 1,000,000 shares. On the one year anniversary of the Agreement, 1,000,000 Escrow Shares shall be released to LJCI whereby LJCI shall be able to sell such shares in open market transactions provided such sales do not exceed more than 14% of the corresponding daily volume of such shares on the trading market on which the Company's securities are sold. LJCI shall continue to receive the Escrow Shares, provided they satisfy the volume limitation set forth above and LJCI's ownership of the Company's common stock does not exceed 4.99% of the Company's then issued and outstanding shares of common stock, until the Remaining Owed Amount is satisfied;
· Upon notice from LJCI that the Remaining Owed Amount has been satisfied by the sale of the Escrow Shares either (i) Alpha Capital Ansalt ("Alpha") shall have the ability within 15 business days to purchase any remaining Escrow Shares at a 20% discount to the current market price of the shares or (ii) if Alpha does not exercise its right to purchase the shares, the Company shall have the ability to redeem the remaining Escrow Shares within 5 business days.
· At anytime while the Remaining Owed Amount is outstanding, the Company or Alpha may pay in cash to LJCI an amount equal to the Remaining Owed Amount and either (i) Alpha shall have the ability within 15 business days to purchase any remaining Escrow Shares at a 20% discount to the current market price of the shares or (ii) if Alpha does not exercise its right to purchase the shares, the Company shall have the ability to redeem the remaining Escrow Shares within 5 business days.
F-11
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ONE VOICE TECHNOLOGIES INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
6. SETTLEMENT AGREEMENT LIABILITY (CONTINUED)
LJCI has contractually agreed to restrict their ability to exercise the Escrow Shares such that the number of shares of the Company common stock held by it does not exceed 4.99% of the Company's then issued and outstanding shares of common stock.
Upon receipt of the Owed Amount, LJCI will file a Satisfaction of Judgment in the appropriate court and grant the Company a release from any and all actions related to the Action.
7. LICENSE AGREEMENT LIABILITY
In March 2000 the Company entered into a Software License Agreement ("License Agreement") with Philips Speech Processing, a division of Philips Electronics North America ("Philips"). Pursuant to the License Agreement, the Company received a world-wide, limited, nonexclusive license to certain speech recognition software owned by Philips. The initial term of the License Agreement was three (3) years, and the License Agreement included an extended term provision under which the License Agreement was automatically renewable for successive one (1) year periods, unless terminated by either party upon a minimum of sixty (60) days written notice prior to the expiration of the initial term or any extended term.
The License Agreement provides for the Company to pay a specified commission on revenues from products incorporating licensed software, and includes minimum royalty payment obligations over the initial three (3) year term of the License Agreement in the aggregate amount of $1,100,000.
The License Agreement has been amended as follows:
The first amendment to the License Agreement was entered into during March 2002.
o The initial term of the License Agreement was extended for two (2) years.
o The aggregate minimum royalty payment was increased from $1,100,000 to $1,500,000.
The amendment also included a revised payment schedule of the minimum royalty payment obligation due that provided for semi-annual payments of $250,000 (due on March 31th and December 31st of each year). In lieu of scheduled payments, in May, 2003, based on a verbal agreement with the Company and Philips, the Company began making monthly payments of $15,000, of which $10,000 is being applied against the remaining minimum royalty payment due and $5,000 is being applied as interest.
The second amendment to the License Agreement was entered into on February 1, 2007.
The following payment terms are as follows:
The 2006 past due amounts owed by the Company of $70,000 were allocated as follows:
o The Company paid $20,000 on February 23, 2007 to Philips.
o The remaining balance of $50,000 is to be paid in the form of a non-interest bearing note payable to Philips Speech Processing.
o During the period of January 1, 2007 thru March 31, 2008 the following payments will be allocated as follows: $6,000 is to be paid monthly by the Company to Philips Speech Processing. The monthly remaining balance of $11,500 due to Philips Speech Processing is to be paid by the Company in the form of a non-interest bearing note payable to Philips Speech Processing.
As of March 31, 2009 the note payable balance due Philips Speech Processing was $1,302,000.
F-12
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ONE VOICE TECHNOLOGIES INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
8. SHORT TERM NOTE PAYABLE
On June 8, 2007 the Company entered into agreement with Maguire Properties-Regents Square LLC. ("Landlord"). The agreement relates to past due office rents owed by the Company to the Landlord. The landlord has agreed to accept payment in the form of a promissory note for $103,605.59. The promissory note has a term of 42 months and bears an interest rate of 10.0% per annum, due December 1, 2010. Monthly payments of $2,933.78 are to be paid to the Landlord. All rent expenses related to the note have been fully expensed in the proper periods.
As of March 31, 2009 the short term note payable balance due Maguire Properties-Regents Square LLC was $76,471 with the remaining balance classified as long term notes payable. The Company has not made any payments towards this note, but has continued to accrue interest at the stated rate of 10% per annum.
On August 8, 2003 the Company entered into a note payable in the amount of $100,000 with an interest rate of 8% per annum. The note matured on August 8, 2008, but remains outstanding in full at March 31, 2009 . As of March 31, 2009, the Company is on default on this note.
9. DEBT DERIVATIVE LIABILITY
Since inception, the Company has entered into several convertible debt financing agreements with several institutional investors. Embedded within these convertible financing transactions are derivatives which require special treatment pursuant with SFAS No. 133 and EITF 00-19. The derivatives include but are not limited to the following characteristics:
o Beneficial conversion features
o Early redemption option
o Registration rights and associated liquidated damage clauses
As a result of the valuation conducted as of March 31, 2009 the Company has incurred a net non-cash gain of $38,140 for the three months ended March 31, 2009.
The liability valuation calculated at March 31, 2009 and December 31, 2008, resulted in the fair value of the debt derivative liability being $1,767,342 and $1,805,482 respectively.
10. WARRANT DERIVATIVE LIABILITY
Since inception, the Company has issued warrants in connection with convertible debt financing agreements and private placements that required analysis in accordance with EITF 00-19. EITF 00-19 specifies the conditions which must be met in order to classify warrants issued in a company's own stock as either equity or as a derivative liability. Evaluation of these conditions under EITF 00-19 resulted in the determination that these warrants are classified as a derivative liability. In accordance with EITF 00-19, warrants which are determined to be classified as derivative liabilities are marked-to-market each reporting period, with a corresponding non-cash gain or loss charged to the current period. The Company valued all warrant derivative liabilities as of March 31, 2009 using a Black-Scholes option pricing model using the following assumptions: expected dividend yield of 0.0%, expected stock price volatility of 79%, risk free interest rate of 2.91% and a remaining contractual life ranging from .014 years to 3.19 years.
As a result of the valuation conducted, the Company incurred net non-cash (loss) of ($96,798) for the three months ended March 31, 2009.
The liability valuation calculated at March 31, 2009 and December 31, 2008, resulted in the fair value of the warrant derivative liability being $128,064 and $31,266, respectively.
F-13
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ONE VOICE TECHNOLOGIES INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. REVOLVING CREDIT NOTE PAYABLE
On December 21, 2006, the Company completed a private placement pursuant to a Revolving Credit Note Agreement which the Company entered into with several institutional Investors, pursuant to which the Investors subscribed to advance up to a maximum amount of $640,000 bearing an interest rate of 7%. The term of the agreement shall be effective as of December 21, 2008 and shall be in full force and effect until the earliest to occur of (a) 12 months from December 21, 2006 (B) a date not less than thirty days after Lender gives notice of termination to the Company. In connection with the Revolving Credit Note Agreement, the Company also issued 20,000,000 shares of its common stock to the related investors. Interest shall be calculated daily on the outstanding principal balance due, and is to be reimbursed to the Investors a monthly basis. The reimbursement of the interest shall be in the form of the Company's restricted shares of common stock. The stock is to be valued at the month end stock closing price. The advances to the Company are to be based on an amount of up to 75% of the face value of the current and future invoices "Receivables" submitted for borrowing. All proceeds paid relating to the previously mentioned invoices are to be deposited into a lockbox [c1] account belonging to Investors. The lockbox proceeds are to be 100% applied towards any outstanding principal amount owed by the Company. On January 10, 2008 the lockbox was terminated and subsequently all future "Receivables" go directly to the Company and the Company is no longer obligated to apply any Receivables towards paying outstanding amount owed. In addition, the Company's obligation to repay all principal and accrued and unpaid interest under the convertible notes is secured by the Company's assets pursuant to a certain Security Agreement dated February 16, 2006, which also secures the remaining unconverted principal amount of the Company's convertible notes in the aggregate amount of $1,114,220 which the Company issued on March 18, 2005, July 13, 2005, March 17, 2006 May 5, 2006, July 6, 2006 and August 29, 2006 to certain of the investors participating in this new private placement.
The original Revolving Credit Note agreement has been amended seventeen times since inception. The amendments increased the maximum borrowing by the Company to an amount of $2,851,000. On the second amendment the principal and interest payment terms by the Company to the lender had changed. The original note payment terms were that all outstanding principal and interest were to be paid in cash by the Company upon maturity of the note.
The amendment provided an option to convert the outstanding balance into shares of the Company's restricted common stock. The following conversion privileges apply:
The lender may elect to convert at a conversion rate of the lower of (i)$0.015 or (ii)80% of the lowest 3 day trading price of the past 30 trading days.
Since inception the Company has borrowed $2,851,000 against the revolving note. During the same period the Company paid $357,492 against the outstanding balance for a total net borrowing of $2,493,508 since inception. All borrowings are used to cover recurring operating expenses by the Company.
As of March 31, 2009 the outstanding principal amount owed to the Investors is $2,493,508. Interest accrued on the outstanding principal is $255,546 as of March 31, 2009.
12. LONG TERM NOTES PAYABLE
On June 8, 2007 the Company entered into agreement with Maguire Properties-Regents Square LLC. ("Landlord"). The agreement relates to past due office rents owed by the Company to the Landlord. The landlord has agreed to accept payment in the form of a promissory note for $103,605.59. The promissory note has a term of 42 months and bears an interest rate of 10.0% per annum, due December 1, 2010. Monthly payments of $2,933.78 are to be paid to the Landlord. All rent expenses related to the note have been fully expensed in the proper periods. As of March 31, 2009 the long term notes payable balance due Maguire Properties-Regents Square LLC. was $24,535 with the remaining balance of $76,471 being classified as short term notes payable.
At March 31, 2009 and December 31, 2008 the principal balance on the notes payable was $24,535 and $67,742, respectively. Accrued interest as of March 31, 2009 is $8,873.
F-14
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ONE VOICE TECHNOLOGIES INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
13. CONVERTIBLE NOTES PAYABLE SUMMARY
ISSUANCE SUMMARY
THREE MONTHS
ENDED
MARCH 31,
2009 YEAR ENDED
DECEMBER 31,
2008
Principal $ - $ 420,000
Warrants issued A&B - 10,000,000
CONVERSION SUMMARY
THREE M ONTHS
ENDED
MARCH 31,
2009 YEAR ENDED
DECEMBER 31,
2008
Principal Converted $ 71,418 $ 1,304,671
Shares converted 71,418,299 406,250,697
Average share conversion price $ 0.001 $ 0.003
During the three months ended March 31, 2009 and year ended December 31, 2008, $71,418 and $1,304,671 of notes payable and accrued interest was converted into 71,418,299 and 406,250,697 shares of the Company's common stock at an average conversion price of $0.001 and $0.010 per share.
On September 7, 2007, the Company entered into a subscription agreement (the "Agreement") with accredited investors and/or qualified institutional investors (the "Investors") pursuant to which the investors subscribed to purchase an aggregate principal amount of $420,000 in convertible promissory notes for an aggregate purchase price of $210,000. The Company also issued 10,000,000 Class A common stock purchase warrants to the Investors. The Class A warrants are exercisable until four years from the closing date at an exercise price of $0.02 per share. The exercise price of the Class A warrants will be adjusted in the event of any stock split or reverse stock split, stock dividend, reclassification of common stock, recapitalization, merger or consolidation. In addition, the exercise price of the warrants will be adjusted in the event that we spin off or otherwise divest ourselves of a material part of our business or operations or dispose all or a portion of our assets. The initial discount of $412,410 will be expensed over the term of the agreement using the straight line method. The fair value of the warrants of $153,369 using the Black Scholes option pricing model is recorded as a derivative liability. The proceeds of the offering were used to make payment towards a legal settlement agreement.
The secured convertible notes mature 1 year after the date of issuance. Each investor shall have the right to convert the secured convertible notes after the date of issuance and at any time, until paid in full, at the election of the investor into fully paid and nonassessable shares of our common stock. The conversion price per share shall be the lower of (i) $0.015 or (ii) 80% of the average of the three lowest closing bid prices for our common stock for the 30 trading days prior to, but not including, the conversion date as reported by Bloomberg, L.P. on any principal market or exchange where our common stock is listed or traded. The conversion price is adjustable in the event of any stock split or reverse stock split, stock dividend, reclassification of common stock, recapitalization, merger or consolidation. In addition, the conversion price of the secured convertible notes will be adjusted in the event that we spin off or otherwise divest ourselves of a material part of our business or operations or dispose all or a portion of our assets.
No convertible debt agreements have been entered into during the three months ended March 31, 2009.
The Company must file a registration statement (Form SB-2) with the SEC for all the above financing transactions. Filing date is typically between 90 and 120 days of the transaction date.
F-15
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ONE VOICE TECHNOLOGIES INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
14. COMMON STOCK
The following is a summary of transactions that had an impact on equity:
THREE MONTHS ENDED
MARCH 31,
2008 YEAR ENDED
DECEMBER 31,
2008
SHARES
ISSUED AVERAGE
SHARE
PRICE VALUE SHARES
ISSUED AVERAGE
SHARE
PRICE VALUE
Debt conversions 71,418,299 0.001 71,418 406,250,697 0.003 1,304,671
Issuance of stock in exchange for services - - - 59,205,359 0.009 552,407
Stock issued for liquidated damages - - - 3,000,000 0.007 24,000
Shares in escrow - - - 11,878,896 0.010 113,087
Total 71,418,299 0.001 71,418 480,334,952 0.004 1,994,165
CONVERTIBLE DEBT CONVERSION BY INVESTOR
During the three months ended March 31, 2009 the Company issued 71,418,299 shares of its restricted common stock having a market value of $71,418 as settlement of convertible debt.
15. OTHER INCOME (EXPENSE)
Other income / (expense) totaled $(82,294) and $1,047,000 for the three months ended March 31, 2009 and 2008, respectively.
Other income (expense) consist of:
OTHER INCOME / (EXPENSE) SUMMARY
THREE MONTH ENDED
MARCH 31,
2009 2008
Interest expense $ (59,327 ) $ (254,754 )
Gain / (Loss) on warrant and debt derivatives (58,658 ) 1,301,754
Other income 35,691 --
Total other income / (expense) $ (82,294 ) $ 1,047,000
F-16
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ONE VOICE TECHNOLOGIES INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
15. OTHER INCOME (EXPENSE) (CONTINUED)
INTEREST EXPENSE
INTEREST EXPENSE SUMMARY
THREE MONTHS
ENDED
MARCH 31,
2009 2008
Debt issue cost -- 17,313
Discount amortization -- 183,455
Interest 59,327 253,986
TOTAL $ 59,327 $ 254,754
For three months ended March 31, 2009 and 2008, interest expense was $59,327 compared to $254,754 respectively. A decrease of $195,427 or 77%.
Interest expense is composed of three very distinct transactions, which vary in their financial treatment. Below is a brief explanation of the nature and treatment of these expenses.
1. Monthly amortization of debt issue costs related to securing convertible debt Financing (legal fees etc.).
This represents a cash related transaction.
For the three months ended March 31, 2009 and 2008, interest expense related to debt issue costs was $0 compared to $17,313, respectively.
2. Monthly amortization of the embedded discount features within convertible debt financing.
This represents a non-cash transaction.
For the three months ended March 31, 2009, and 2008, interest expense related to the amortization of discount was $0 compared to $183,455 respectively.
3. Monthly accrued interest related to notes payable and convertible notes payable financing.
This represents a future cash transaction if the convertible interest accrued is not converted into common stock. No accrued interest related to convertible notes payable has been paid in cash during the three months ended March 31,2009 and 2008.
For the three months ended March 31, 2009 and 2008, interest expense related to notes payable and convertible notes payable was $59,327 compared to $253,986, respectively.
F-17
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ONE VOICE TECHNOLOGIES INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
15. OTHER INCOME / (EXPENSE) (CONTINUED)
GAIN ON DEBT DERIVATIVES
For the three months ended March 31, 2009 and 2008, non-cash gain recorded on debt derivatives were $38,140 and $375,379 respectively.
See Note 9 in the accompanying notes to the financial statements for a full description of the nature of debt derivative transactions.
LOSS ON WARRANT DERIVATIVES
For the three months ended March 31, 2009 and 2008, non-cash losses recorded on warrant derivatives were ($96,798) and ($5,913,154) respectively.
See Note 10 in the accompanying notes to the financial statements for a brief description of the nature of warrant derivative transactions.
16. COMMITMENTS AND CONTINGENCIES
The Company leases its facilities under a leases that expires in 2009. The Company does not have future minimum rental payments required under operating leases that have non cancelable lease terms in excess of one year as of March 31, 2009.
Rent expense amounted to $17,026 and $31,783 for the three months ended March 31, 2009 and 2008 respectively. The decrease of 14,757 is attributed to the relocation of the corporate office in March 2009 to a less expensive facility.
17. INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
On July 14, 1999, the Company adopted an Incentive and Nonqualified Stock Option Plan (the "Plan") for its employees and consultants under which a maximum of 3,000,000 options (Amendment to increase the available shares from 1,500,000 to 3,000,000 approved by the shareholders in December 2001) and approved by the shareholders may be granted to purchase common stock of the Company. On July 29, 2005 the Company adopted the 2005 Stock Incentive Plan and reserved 60,000,000 shares of the Company's common stock for issuance under the 2005 Plan.
F-18
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ONE VOICE TECHNOLOGIES INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
17. INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN (CONTINUED)
Two types of options may be granted under the 2005 Plan: (1) Incentive Stock Options (also known as Qualified Stock Options) which may only be issued to employees of the Company and whereby the exercise price of the option is not less than the fair market value of the common stock on the date it was reserved for issuance under the Plan; and (2) Nonstatutory Stock Options which may be issued to either employees or consultants of the Company and whereby the exercise price of the option is greater than 85% of the fair market value of the common stock on the date it was reserved for issuance under the plan. Grants of options may be made to employees and consultants without regard to any performance measures. All options issued pursuant to the Plan vest at a rate of at least 20% per year over a 5-year period from the date of the grant or sooner if approved by the Board of Directors. All options issued pursuant to the Plan are nontransferable and subject to forfeiture.
Upon termination of employment or service contract, all options vested or non-vested expire unless the options have been exercised in full, or in part within 90 days of such event. Management reserves the right to extend vested options under certain circumstances, given approval by the Board of Directors.
On September 12, 2007 the Company granted 15,000,000 stock options to its employees and Board of Directors. The stock options issued are pursuant to the 2005 stock option plan.
The total intrinsic value of vested options relating to employee and director compensation at March 31, 2009 was $0. The intrinsic value of $0 is due to the closing stock price at March 31, 2009 of $0.007 being lower than any vested option grant price.
For the three months ended March 31, 2009 and 2008, there was approximately $14,436 and $46,187 of total compensation expense recorded by the Company related to share-based compensation.
As of March 31, 2009, there was approximately $28,872 of total unrecognized compensation cost related to share-based compensation arrangements with employees, directors and contractors.
The Company's closing stock price reported by NASDAQ listed under symbol ONEV at March 31, 2009 was $0.0016 per share.
STOCK OPTIONS ACTIVITY
The following table is a summary for the two stock compensation plans adopted by the Company as of March 31, 2009.
THREE MONTHS ENDED
MARCH 31, 2009
NUMBER OF
SHARES
AUTHORIZED NUMBER OF
SHARES
OUTSTANDING NUMBER OF
SHARES AVAILABLE
FOR GRANT
Year 1999 plan 3,000,000 3,000,000 -
Year 2005 plan 60,000,000 59,934,000 66,000
Total 63,000,000 62,934,000 66,000
F-19
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ONE VOICE TECHNOLOGIES INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
17. INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN (CONTINUED)
A summary of the Company's stock option activity and related information is as follows for the year ended March 31, 2009 and 2008, respectively.
THREE MONTHS ENDED
MARCH 31,
2009 2008
NUMBER OF
SHARES
OUSTANDING WEIGHTED
AVERAGE
EXERCISE
PRICE NUMBER OF
SHARES
OUSTANDING WEIGHTED
AVERAGE
EXERCISE
PRICE
Outstanding at beginning of year 61,434,000 $ 0.054 62,934,000 $ 0.054
Options granted 0 N/A 0 N/A
Options exercised 0 N/A 0 N/A
Options terminated 0 N/A 0 N/A
OPTIONS OUTSTANDING AT END OF 1ST QUARTER 61,434,000 0.054 62,934,000 0.054
OPTIONS EXERCISABLE AT END OF 1ST QUARTER 57,809,000 $ 0.017 52,928,444 $ 0.061
The following table summarizes the number of options authorized by the plan and available for distribution as of March 31, 2009 and 2008, respectively.
THREE MONTHS ENDED
MARCH 31,
2009 2008
NUMBER OF
SHARES NUMBER OF
SHARES
Beginning options available for grant 1,566,000 66,000
Add: Additional options authorized -- --
Less: Options granted -- --
Add: Options terminated -- --
ENDING OPTIONS AVAILABLE FOR DISTRIBUTION 1,566,000 66,000
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ONE VOICE TECHNOLOGIES INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
17. INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN (CONTINUED)
The following tables summarize the number of option shares, the weighted average exercise price and the weighted average life (by years) by price range for both total outstanding options and total exercisable options as of March 31, 2009 and 2008, respectively.
THREE MONTHS ENDED MARCH 31, 2009
TOTAL OUSTANDING TOTAL EXERCISABLE
PRICE RANGE # OF SHARES WEIGHTED
AVERAGE
EXERCISE
PRICE LIFE # OF SHARES WEIGHTED
AVERAGE
EXERCISE
PRICE LIFE
$6.08 - $12.80 240,000 $ 7.158 2.63 240,000 $ 7.158 2.63
$0.32 - $2.00 694,000 0.867 3.53 694,000 0.867 3.53
$0.016 - $ 0.19 60,500,000 0.017 7.23 56,875,000 0.017 7.57
TOTAL 61,434,000 $ 0.054 7.17 57,809,000 $ 0.054 7.46
THREE MONTHS ENDED MARCH 31, 2008
TOTAL OUSTANDING TOTAL EXERCISABLE
PRICE RANGE # OF SHARES WEIGHTED
AVERAGE
EXERCISE
PRICE LIFE # OF SHARES WEIGHTED
AVERAGE
EXERCISE
PRICE LIFE
$6.08 - $12.80 240,000 $ 7.15 2.38 240,000 $ 7.16 2.38
$0.32 - $2.00 694,000 0.867 3.28 694,000 0.867 3.28
$0.016 - $ 0.19 62,000,000 0.017 6.98 51,994,444 0.017 7.47
TOTAL 62,934,000 $ 0.05 6.92 52,928,444 $ 0.06 7.39
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ONE VOICE TECHNOLOGIES INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
17. INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN (CONTINUED)
A summary of option activity and the average intrinsic value that relate to employee, director and contractor compensation as of March 31, 2009 and 2008, respectively is presented below:
THREE MONTHS ENDED MARCH 31,
2009
OPTIONS RELATING OT EMPLOYEE, CONSULTANTS
AND DIRECTOR COMPENSATION # OF SHARES WEIGHTED
AVERAGE
GRANT-DATE
FAIR VALUE LIFE AVERAGE
INTRINSIC
VALUE
Outstanding at beginning of year 61,434,000 $ 0.009 7.17 N/A
Options granted - N/A N/A N/A
Options exercised - N/A N/A N/A
Options terminated - N/A N/A N/A
OPTIONS OUTSTANDING AT END OF 1ST QUARTER 61,434,000 $ 0.054 7.17 N/A
OPTIONS EXERCISABLE AT END OF 1ST QUARTER 57,809,000 $ 0.054 7.46 N/A
THREE MONTHS ENDED MARCH 31,
2008
OPTIONS RELATING OT EMPLOYEE, CONSULTANTS
AND DIRECTOR COMPENSATION # OF SHARES WEIGHTED
AVERAGE
GRANT-DATE
FAIR VALUE LIFE AVERAGE
INTRINSIC
VALUE
Otstanding at beginning of year 62,934,000 $ 0.054 0.05 N/A
Options granted - N/A N/A N/A
Options exercised - N/A N/A N/A
Options terminated - N/A N/A N/A
OPTIONS OUTSTANDING AT END OF 1ST QUARTER 62,934,000 $ 0.054 6.92 N/A
OPTIONS EXERCISABLE AT END OF 1ST QUARTER 52,928,444 $ 0.061 7.39 N/A
Note: Assumes only options above water are to be exercised, the closing stock price is under the price of any options granted. Calculation is based on closing stock price of $ 0.002 per share dated March 31, 2009 and $ 0.007 per share dated March 31, 2008.
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ONE VOICE TECHNOLOGIES INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
17. INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN (CONTINUED)
A summary of the status of the Company's non-vested option shares relating to employee and director compensation as of March 31, 2009 and 2008, and changes during the period ended March 31, 2009 and 2008, respectively is presented below:
THREE MONTHS ENDED MARCH 31,
2009 2008
NON VESTED OPTIONS RELATING OT EMPLOYEE,
CONSULTANTS AND DIRECTOR COMPENSATION # OF SHARES WEIGHTED
AVERAGE
GRANT-DATE
FAIR VALUE # OF SHARES WEIGHTED
AVERAGE
GRANT-DATE
FAIR VALUE
Otstanding at beginning of year 4,833,333 $ 0.009 62,934,000 $ 0.054
Options granted - N/A - N/A
Options exercised - N/A - N/A
Options vested (1,208,333 ) N/A (52,928,444 ) 0.061
Options terminated - N/A - N/A
NON VESTED AT END OF 1ST QUARTER 3,625,000 $ 0.016 10,005,556 $ 0.019
In addition to the assumptions in the below table, the Company applies a forfeiture-rate assumption in its estimate of fair value that is primarily based on historical annual forfeiture rates of the Company.
Expected dividend yield 0.00%
Expected volatility 113.00%
Average risk-free interest rate 4.74%
Expected life (in years) 2.16 to 8.07
The above options carry vesting date's as follows: 1/3 of the options vest on the grant date, 1/3 of the options vest one year after the grant date, the final 1/3 of the options vest two years after the grant date.
On July 14, 1999, the Company adopted an Incentive and Nonqualified Stock Option Plan (the "Plan") for its employees and consultants under which a maximum of 3,000,000 options (Amendment to increase the available shares from 1,500,000 to 3,000,000 approved by the shareholders in December 2001) and approved by the shareholders may be granted to purchase common stock of the Company. On July 29, 2005 the Company adopted the 2005 Stock Incentive Plan and reserved 60,000,000 shares of the Company's common stock for issuance under the 2005 Plan.
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ONE VOICE TECHNOLOGIES INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
17. INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN (CONTINUED)
Stock options: The Company generally grants stock options to employees at exercise prices equal to the fair market value of the Company's stock at the dates of grant. Stock options may be granted throughout the year, vest immediately, vest based on years of continuous service, or vest upon completion of specified performance conditions. Stock options granted prior to September 12, 2007 expire 10 years following the initial grant date. Stock options granted on or after September 12, 2007 expire 5 years following the initial grant date. The Company recognizes compensation expense for the fair value of the stock options over the requisite service period for each separate vesting portion of the stock option award, or, for awards with performance conditions, when the performance condition is met.
Warrant options: The Company generally grants warrant options to directors and consultants at exercise prices equal to the fair market value of the Company's stock at the dates of grant. Stock warrants and options may be granted throughout the year, vest immediately, vest based on years of continuous service, or vest upon completion of specified performance conditions, and expire 10 years following the initial grant date. The Company recognizes compensation expense for the fair value of the stock options over the requisite service period for each separate vesting portion of the stock option award, or, for awards with performance conditions, when the performance condition is met.
The fair value of each option and warrant award is estimated on the date of grant using the Black-Scholes option-pricing model that uses the assumptions noted in the following table. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's stock options and warrants have characteristics significantly different from those of traded options, and because changes in the subjective assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options and warrants. The expected dividend yield assumption is based on the Company's expectation of dividend payouts. Expected volatilities are based on historical volatility of the Company's stock. The average risk-free interest rate is based on the U.S. treasury yield curve in effect as of the grant date. The expected life is primarily determined using guidance from SAB 107. As such, the expected life of the options and warrants is the average of the vesting term and the full contractual term of the options and warrants.
SFAS 123(R) requires the cash flows resulting from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options to be classified as financing cash flows. Due to the Company's loss position, there were no such tax benefits for the years ended December 31, 2007 and 2006. Prior to the adoption of SFAS 123(R), those benefits would have been reported as operating cash flows had the Company received any tax benefits related to stock option exercises.
18. WARRANTS
As a normal business practice, the Company grants warrants to Investors who participate in the financing of the Company. Warrants issued are an additional incentive to the Investors and also provide additional cashflow for the Company upon exercise.
At March 31, 2009, the Company had warrants outstanding that allow the holders to purchase up to 5,906,909 shares of common stock.
At March 31, 2009, the weighted average remaining contractual life of the warrants was approximately 22 months.
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ONE VOICE TECHNOLOGIES INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS (CONTINUED)
18. WARRANTS (CONTINUED)
The number and weighted average exercise prices of the warrants for the six months ended March 31, 2009 and 2008 are as follows:
THREE MONTHS ENDED MARCH 31,
2009 2008
# OF SHARES WEIGHTED
AVERAGE
EXERCISE
PRICE # OF SHARES WEIGHTED
AVERAGE
EXERCISE
PRICE
Outstanding at beginning of year 275,906,909 $ 0.016 276,052,744 $ 0.014
Warrants granted - N/A - N/A
Warrants exercised - N/A - N/A
Warrants terminated (12,982,970 ) N/A - N/A
WARRANTS OUSTANDING AT END OF 1ST QUARTER 262,923,939 $ 0.016 276,052,744 $ 0.014
WARRANTS EXERCISABLE AT END OF 1ST QUARTER 262,923,939 $ 0.016 276,052,744 $ 0.014
19. SUBSEQUENT EVENTS
AMENDMENTS OF LOAN AGREEMENT AND REVOLVING CREDIT NOTE
Subsequent to March 31, 2009, the Company entered into the 18 th and 19 th amendments of the original Loan Agreement and Revolving Credit Note dated December 21, 2006, with Alpha Capital Anstalt and Whalehaven Capital Fund Limited. The amendments state that in the aggregate, the principal sums as defined in the preamble of the notes issued to Alpha Capital Anstalt and Whalehaven Capital Fund Limited shall be amended to $1,258,500 and $1,469,000, respectively.
On April 14, 2009, the Company filed a Definitive Proxy Statement on Schedule 14A which was subsequently mailed to all shareholders of record as of April 8, 2009, giving notice of a Special Meeting of Stockholders to be held on May 22, 2009 (the “Special Meeting”). At the Special Meeting, stockholders of record will be asked to vote upon a proposal to amend the Articles of Incorporation to implement a reverse stock split of the Company’s common stock, par value $0.001 per share, at a ratio of one for twenty.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The information in this report contains forward-looking statements. All statements other than statements of historical fact made in this report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as "believes," "estimates," "could," "possibly," "probably," anticipates," "projects," "expects," "may," "will," or "should" or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management's current expectations and are inherently uncertain. Our actual results may differ significantly from management's expectations.
The following discussion and analysis should be read in conjunction with our financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.
OVERVIEW OF THE BUSINESS
One Voice Technologies, Inc. is a voice recognition technology company with over $43 million invested in Research and Development and deployment of more than 20 million products worldwide in seven languages. To date, our customers include: Mahanagar Telephone Nigam Ltd. ("MTNL") of India, Telefonos de Mexico, S.A.B. de C.V. (TELMEX), Intel Corporation, Fry's Electronics, Nex-Tec Wireless,
Rural Independent Networks, Mohave Wireless, Inland Cellular and several additional telecom service providers throughout the United States.
Based on our patented technology, One Voice offers voice solutions for the Telecom and Interactive Multimedia markets. Our telecom solutions allow business and consumer phone users to voice dial, group conference call, read and send e-mail and instant messages, all by voice. We offer PC Original Equipment Manufacturers (OEM's) the ability to bundle a complete voice interactive computer assistant which allows PC users to talk to their computers to quickly play digital media (music, videos, DVD) along with read and send e-mail
messages, SMS text messaging to mobile phones, PC-to-Phone calling (VoIP) and PC-to-PC audio/video. We feel we are strongly positioned across these markets with our patented voice technology.
The Company believes that the presence of voice technology as an interface in mobile communications and PC computing is of paramount importance. Voice interface technology makes portable communications more effective and safer to use and it makes communicating with a PC to play digital content, such as music, videos and photos, easier for consumers. One Voice's development efforts currently are focused on the Telecom and PC multimedia markets and more specifically on mobile communications from a cell phone, directory assistance
and in-home digital media access.
TELECOM SECTOR
In the Telecom sector, we believe that the Mobile Messaging market, which has both business and consumer market applications including: e-mail, instant messages, and SMS (Short Message Service), is extremely large and is growing at an astonishing rate. One Voice solutions enable users to send, route and receive text messages using voice from any type of phone (wired or wireless) anywhere in the world.
The Company's strategy, in the telecom sector, is to continue aggressive sales and marketing activities for our voice solutions, which we believe, may result in increased deployments and revenue stream. The product offerings will encompass both MobileVoice(TM) suite of solutions as well as our Directory Assistance 411 service.
In 2006, the Company signed a deployment contract with the residential group within TELMEX for deployment of One Voice's MobileVoice solutions to the over 19 million TELMEX subscribers throughout Mexico. The MobileVoice service was launched to TELNOR subscribers, a TELMEX subsidiary, in October, 2007 as a TELNOR branded service called IRIS. For information on IRIS visit http://www.yosoyiris.com or http://www.telnor.com. The MobileVoice (IRIS) service has tested and performed very well as anticipated. We are working closely with TELNOR to ensure the IRIS service is very successful and the feedback to date has been very positive. We are currently working with TELNOR to relaunch IRIS as a standard bundle included with all new and existing TELNOR Package customers and anticipate this happening during 2009. Subsequent to this relaunch within TELNOR, TELMEX will evaluate the results and make a determination regarding a national launch as a bundle to all TELMEX Package customers.
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In October 2007 both the Company and Mantec Consultants ("Mantec") entered into a contract with Mahanagar Telephone Nigam Ltd. ("MTNL") of India to provide MobileVoice services to MTNL's over 6 million subscribers. Mantec is One Voice's local sales associate in India. MTNL is owned and operated by the Government of India. The Company and Mantec are currently working on deployment of hardware and systems integration with MTNL. According to MTNL, the MobileVoice service will be made available to MTNL's existing 6.13 million subscribers for MobileVoice email by phone service and the total expected customers for this service is .92 million within the first two years. MTNL has set the monthly subscription price of $Rs. 50/- (Rupees) monthly per subscriber out of which the Company has a 30% share. We anticipate the MTNL revenue stream to grow as we launch additional MobileVoice services including voice dialing, group call and voice-to-SMS services. In order to expedite the launch with MTNL we decided to initially launch email by phone and the revenue projections given by the marketing department of MTNL reflect the email by phone service only. We anticipate this revenue projection to grow as additional MobileVoice services are launched to MTNL subscribers. We are planning on having our service launched by MTNL in May, 2009. The revenue generated from this launch with MTNL should have a material impact on the Company.
The Company has finalized initial system and acceptance testing with a domestic US based carrier with over 10 million subscribers. We are currently negotiating terms and conditions and anticipate a national launch in 2009.
EMBEDDED SECTOR
On August 15, 2007 the Company signed a Memorandum of Understanding ("MOU") with Intel Corporation in which both companies will work together to add One Voice's voice technology to a Linux based handheld device. The Company sees a potential opportunity with this mass consumer electronics (CE) device and will apply the necessary resources to co-develop this project. We have been working closely
with Intel engineers to add voice control to their Moblin operating system. We have recently demonstrated this capability in the Intel booth at the 2007 Consumer Electronics Show, Mobile World Congress and the upcoming Intel Developers Forum. We have also ported our software to RedFlag Linux. Both RedFlag Linux and Moblin are the primary operating systems used on Mobile Internet Devices (MIDs). Both One Voice and Intel have jointly presented our voice solution to several MID OEM's worldwide. Currently the MID market is very small and has not gained enough traction for One Voice to focus resources on this market. One Voice is currently focusing all our resources on Telecom launches during 2009 and will wait until the MID market matures and gains industry acceptance before we readdress this market. We have evaluated launching applications on the iPhone and BlackBerry but the current state for voice control applications for these devices from competitors offering free software is not in line with our focus on near-term revenue generating opportunities that we currently have in the Telecom sector.
PC SECTOR
In the PC sector, we believe that digital in-home entertainment is rapidly growing with the wide acceptance of digital photography, MP3 music and videos, along with plasma and LCD TV's. We believe that companies including Apple, Microsoft and Intel are actively creating products and technology, which allow consumers to experience the next-generation of digital entertainment. The Company's Media Center Communicator(TM) product works with Microsoft Windows XP Media Center Edition and Microsoft Windows Vista to add voice-navigation
and a full suite of communication features allowing consumers to talk to their Media Center PC to play music, view photo slideshows, watch and record TV, place Voice-Over-IP (VoIP) phone calls, read and send e-mail and Instant Message friends and family, all by voice. The company recently launched a new retail product called VoiceTunes. VoiceTunes allows users to voice control their entire music library including Apple iTunes and Windows Media. This product is similar to our flagship product Media Center Communicator but is very focused on music. In addition, the Company launched a voice controlled PC gaming software called Say2Play. Say2Play gives gamers a tremendous advantage by adding voice command for common game macros while allowing the gamer to keep their hands and fingers on the keyboard and mouse for rapid motion movements. Say2Play has recently received several very positive editorial reviews and is available for purchase online.
The Company has changed our focus from in-store on-shelf retail sales to only offering online downloadable retail versions. The Company’s retail products are now available for immediate purchase and download on the new Dell Download Store at http://downloadstore.dell.com as the only products in the category of Voice Control.
In summary, since the beginning of 2007, the Company has deployed services with telecom carriers and began recognizing a recurring revenue stream. Management believes the Company's transition into the revenue recognition phase is very important as it signifies acceptance of our solutions and the value they deliver to the customer and their subscribers.
The management team remains committed to generating short and long-term revenues significant enough to fund daily operations, expand the intellectual property portfolio and development of cutting edge solutions and applications for the emerging speech recognition market sector which should build shareholder value.
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CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to impairment of property, plant and equipment, intangible assets, deferred tax assets, fair value of derivative liabilities and fair value of options or warrants computation using Black Scholes option pricing model. We base our estimates on historical experience and on various other assumptions, such as the trading value of our common stock and estimated future undiscounted cash flows, that we believe to be 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; however, we believe that our estimates, including those for the above-described items, are reasonable.
The following is a discussion that relates to certain financial transactions and the results of operations for the three months ended March 31, 2009 and 2008.
RESULTS OF OPERATION FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008.
One Voice Technologies, Inc
Statements of Operations
UNAUDITED
THREE MONTHS ENDED
MARCH 31, FAV/ (UN FAV) PERCENTAGE
2009 2008 CHANGE CHANGE
Net Revenue $ 81,316 188,753 (107,437 ) -57 %
Cost of good sold 53,614 94,926 (41,312 ) -44 %
Gross profit 27,702 93,827 (66,125 ) -70 %
Selling, general and administrative 350,478 749,536 (399,058 ) -53 %
Other Income (Expense) (82,294 ) 1,047,000 (1,129,294 ) -108 %
Net income (loss) before taxes (405,070 ) 391,291
Income taxes - (800 )
NET INCOME ( LOSS) $ (405,070 ) 390,491 (795,561 ) -204 %
REVENUES
Net revenues totaled $81,316 and $188,753 for the three months ended March 31, 2009 and 2008, respectively. The decrease of 107,437 or 57% was due to certain Telecom contracts expired in 2008 after their initial 3-year term
COST OF GOODS SOLD
Cost of goods sold for the three months ended March 31, 2009 and 2008 totaled $53,614 and $94,926, respectively. The decrease of $41,312 or 44% was primarily due to the decrease in revenues during the year and a decreased employee headcount. These expenses specifically relate to licensing agreements and telecommunication expenses that allow the voice recognition products offered to be functional.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expenses totaled $350,478 and $749,536 for the three months ended March 31, 2009 and 2008, respectively. The decrease of $399,058 or 53% was primarily due to decreases in salary and compensation, a decrease in accounting and legal fees, and a decrease in depreciation and amortization for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008.
SALARY AND COMPENSATION
Salary and wage related expenses totaled $178,248 and $340,167 for the three months ended March 31, 2009 and 2008, respectively. The decrease of $161, 919 or 48% was primarily due to voluntary reductions in salaries for current employees, paired with headcount reductions.
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ACCOUNTING AND LEGAL
The Company incurred accounting and legal fees of $11,000 and $74,580 for the three months ended March 31, 2009 and 2008, respectively. The decrease of $63,580 or 85% between the two periods was due to the timing of the expense for the two periods as the related accounting and legal fees during 2009 were incurred during April 2009.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense totaled $9,116 and $134,069 for the three months ended March 31, 2009 and 2008, respectively. The decrease of 124,953 or 93% was due to the full amortization of capitalized costs associated with the design and development of a product for which the completion and launch time frame could not be accurately estimated by management during the three months ended March 31, 2008 .
OTHER INCOME (EXPENSE)
Other income / (expense) totaled (82,294) and $1,047,000 for the three months ended March 31, 2009 and 2008, respectively. The expense decrease of 1,129,294 or 108% can be directly related to non cash income / (expense) activity, more specifically the revaluation of both debt and warrant derivatives.
GAIN ON DEBT DERIVATIVES
For the three months ended March 31, 2009 and 2008, gains recorded on debt derivatives were $38,140 compared to $399,379 respectively.
See Note 9 in the accompanying notes to the financial statements for a brief description of the nature of debt derivative transactions.
GAIN / (LOSS) ON WARRANT DERIVATIVES
For the three months ended March 31, 2009, loss of (96,798) were recorded on warrant derivatives, compared to gains of $926,375 for the same period in 2008. See
Note 10 in the accompanying notes to the financial statements for a brief description of the nature of warrant derivative transactions.
LIQUIDITY AND CAPITAL RESOURCES
NON-CASH ITEMS EFFECTING THE COMPANY'S NET INCOME/(LOSS)
Non-cash related items of 90,400 and ($873,325) are reflected in the net income / (loss) for the three months ended March 31, 2009 and 2008 respectively, consisted of the following items:
THREE MONTHS ENDED
MARCH 31 ,
2009 2008
Depreciation and amortization 9,116 134,069
Stock compensation expense 14,436 46,187
Stock issuance for exchange of debt and other obligations -- 47,406
Stock issuance for interest conversion -- --
Stock issuance for liquidated damages -- 24,000
Amortization of note discount 8,190 200,768
Interest payable related to convertible debt -- --
(gain) / Loss on warrants and debt derivatives 58,658 (1,301,754 )
TOTAL NON -CASH RELATED (INCOME) / EXPENSE ITEMS 90,400 (849,324 )
The above information is intended to illustrate the impact that these specific expenses have on the Company's net income/(loss). There are no cash transactions that related to these expenses. More specifically, this table is shown to demonstrate the impact that the re-valuation of warrant and debt derivatives have on the income statement. Please note that this table is not in conformity with auditing standards generally accepted in the United States of America.
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At March 31, 2009, the Company had a working capital deficit of $7,887,430 as compared with a working capital deficit of $ 7,534,123 at December 31, 2008. The decrease in working capital deficit of $353,303 consists primarily of the following:
o Decrease in debt derivative liability of $38,140
o Increase in warrant derivative liability of $96,798
o Increase in revolving line of credit of $118,887
Net cash used for operating activities is $184,164 for the three months ended March 31, 2009 compared to $464,879 for the three months ended March 31, 2008. The decrease of $280,715 or 60% was primarily due to the timing of cash management during the three months ended March 31, 2009 as compared to the three months ended March 31, 2008 .
Net cash used for investing activities is $0 for the three months ended March 31, 2009 and 2008.
Net cash provided by financing activities is $183,498 for the three months ended March 31, 2009 compared to $450,000 for the three months ended March 31, 2008. The decrease of $266,502 or 59% was due to a decrease in the proceeds from the revolving line.
See financing transaction details below.
FINANCING TRANSACTIONS
The following is a discussion that summarizes the net financing and conversion activities for the three months ended March 31, 2009 and year ended December 31, 2008.
NET CASH PROCEEDS RECEIVED DUE TO FINANCING ACTIVITY
THREE MONTHS ENDED
MARCH 31,
2009 2008
Revolving line of credit net of pay down $ 183,498 $ 450,000
TOTAL FINANCING ACTIVITY $ 183,498 $ 450,000
ISSUANCE OF CONVERTIBLE NOTES PAYABLE SUMMARY
ISSUANCE SUMMARY
THREE MONTHS ENDED
MARCH 31,
2009 2008
Principal $ - $ -
Warrants issued A&B - -
CONVERSION SUMMARY
THREE MONTHS ENDED
MARCH 31,
2009 2008
Principal and interest Converted $ 71,418 $ 249,582
Shares converted 71,418,299 31,508,528
Average share conversion price $ 0.001 $ 0.01
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COMMON STOCK
The following is a summary of transactions that had an impact on equity:
THREE MONTHS ENDED
MARCH 31,
2009 2008
SHARES
ISSUED AVERAGE
SHARE
PRICE VALUE SHARES
ISSUED AVERAGE
SHARE
PRICE VALUE
Debt conversions 71,418,299 0.001 71,418 31,508,528 0.008 249,582
Issuance of stock in exchange for services - - - 7,919,609 0.009 71,405
Stock to be issued in exchange for interest conversion - - - - - -
Total 71,418,299 0.001 71,418 39,428,137 0.008 320,987
REVOLVING CREDIT NOTE PAYABLE
On December 21, 2006, the Company completed a private placement pursuant to a Revolving Credit Note Agreement which the Company entered into with several institutional investors, pursuant to which the Investors subscribed to advance up to a maximum amount of $640,000 bearing an interest rate of 7%. The term of the agreement shall be effective as of December 21, 2006 and shall be in full force and effect until the earliest to occur of (a) 12 months from December 21, 2006 (B) a date not less than thirty days after Lender gives notice of termination to the Company.
The original Revolving Credit Note agreement has been amended seventeen times during the term of the agreement. The amendments increased the maximum borrowing by the Company to an amount of $2,851,000.
Since inception the Company has borrowed $2,851,000 against the revolving note. During the same period the Company paid $357,492 against the outstanding balance for a total net borrowing of $2,493,508 since inception. All borrowings are used to cover recurring operating expenses by the Company.
As of March 31, 2009 the outstanding principal amount owed to the Investors is $2,493,508. Interest accrued on the outstanding principal is $255,546 as of March 31, 2009.
FUTURE CAPITAL OUTLOOK
The Company will continue to rely heavily on our current method of convertible debt and equity funding, and proceeds borrowed from the revolving line of credit. The losses of $405,070 through the period ended March 31, 2009 are due to minimal revenues and recurring operating expenses, with a majority of expenses in the areas of: salaries, marketing consulting fees, and licensing costs, along with non-cash expenses related to derivative revaluations. The Company faces considerable risk in completing each of our business plan steps, including, but not limited to: a lack of funding or available credit to continue development and undertake product rollout; potential cost overruns; a lack of interest in its solutions in the market on the part of wireless carriers or other customers; potential reduction in wireless carriers which could lead to significant delays in consummating revenue bearing contracts; and/or a shortfall of funding due to an inability to raise capital in the securities market. Since further funding is required, and if none is received, we would be forced to rely on our existing cash in the bank, collection of monthly accounts receivable or secure short-term loans. This may hinder our ability to complete our product development until such time as necessary funds could be raised. In such a restricted cash flow scenario, we would delay all cash intensive activities including certain product development and strategic initiatives described above.
OFF BALANCE SHEET ARRANGEMENTS
We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
N/A
6
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ITEM 4T. CONTROLS AND PROCEDURES.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Pursuant to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation with the participation of the Company's management, including Dean Weber, the Company's Chief Executive Officer and Interim Chief Financial Officer ("CEO/CFO"), of the effectiveness of the Company's disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the three months ended March 31, 2009. Based upon that evaluation, the Company's CEO /CFO concluded that the Company's disclosure controls and procedures are ineffective and cannot ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including the Company's CEO /CFO, as appropriate, to allow timely decisions regarding required disclosure.
CHANGES IN INTERNAL CONTROLS.
Our management, with the participation the Principal Executive Officer and Principal Accounting Officer performed an evaluation as to whether any change in our internal controls over financial reporting occurred during the Quarter ended March 31, 2009. Based on that evaluation, the Company's CEO/CFO concluded that no change occurred in the Company's internal controls over financial reporting during the Quarter ended March 31, 2009 that has materially affected, or is reasonably likely to materially affect, the Company's internal controls over financial reporting.
Part II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. Except as disclosed below we are currently not aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse affect on business, financial condition or operating results. There has been no bankruptcy, receivership or similar proceedings.
On August 23, 2007, the Company entered into a Settlement Agreement and Mutual Release with La Jolla Cove Investors, Inc. ("LJCI") pursuant to which we agreed with LJCI to forever settle, resolve and dispose of all claims, demands and causes of action asserted, existing or claimed to exist between the parties because of or in any way related to a legal proceeding in the San Diego County Superior Court (the "Court") entitled La Jolla Cove Investors, Inc. vs. One Voice Technologies, Inc., Case No. GIC850038 (the "Action") for a total amount owed of $408,594.48 (the "Owed Amount"). Under the Settlement Agreement dated August 23, 2007, the parties reached a final resolution with respect to such Owed Amount whereby (i) LJCI shall receive $200,000 within 15 days of the date of the Agreement and (ii) the difference between the Owed Amount and $200,000 shall be payable at a later date (the "Remaining Owed Amount"). The payment of the Remaining Owed Amount shall be made to LJCI in the following manner:
7
--------------------------------------------------------------------------------
o Concurrently with the execution of the Agreement, the Company shall transfer to an independent escrow agent, on behalf of LJCI, all right, title and interest to 30,000,000 shares of Common Stock of the Company (the "Escrow Shares"), issued in 30 increments of 1,000,000 shares. On the one year anniversary of the Agreement, 1,000,000 Escrow Shares shall be released to LJCI whereby LJCI shall be able to sell such shares in open market transactions provided such sales do not exceed more than 14% of the corresponding daily volume of such shares on the trading market on which the Company's securities are sold. LJCI shall continue to receive the Escrow Shares, provided they satisfy the volume limitation set forth above and LJCI's ownership of the Company's common stock does not exceed 4.99% of the Company's then issued and outstanding shares of common stock, until the Remaining Owed Amount is satisfied;
o Upon notice from LJCI that the Remaining Owed Amount has been satisfied by the sale of the Escrow Shares either (i) Alpha Capital Ansalt ("Alpha") shall have the ability within 15 business days to purchase any remaining Escrow Shares at a 20% discount to the current market price of the shares or (ii) if Alpha does not exercise its right to purchase the shares, the Company shall have the ability to redeem the remaining Escrow Shares within 5 business days.
o At anytime while the Remaining Owed Amount is outstanding, the Company or Alpha may pay in cash to LJCI an amount equal to the Remaining Owed Amount and either (i) Alpha shall have the ability within 15 business days to purchase any remaining Escrow Shares at a 20% discount to the current market price of the shares or (ii) if Alpha does not exercise its right to purchase the shares, the Company shall have the ability to redeem the remaining Escrow Shares within 5 business days.
LJCI has contractually agreed to restrict their ability to exercise the Escrow Shares such that the number of shares of the Company common stock held by it does not exceed 4.99% of the Company's then issued and outstanding shares of common stock.
Upon receipt of the Owed Amount, LJCI will file a Satisfaction of Judgment in the appropriate court and grant the Company a release from any and all actions related to the Action.
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors previously disclosed in Part I, "Risk Factors," of the Company's Annual Report on Form 10-K for the year ended December 31, 2008, other than to update certain financial information as of and for the three months ended March 31, 2009 regarding the following risk factors.
WE HAVE A HISTORY OF LOSSES. WE MAY TO CONTINUE TO INCUR LOSSES, AND WE MAY NEVER ACHIEVE AND SUSTAIN PROFITABILITY.
Since inception, we have incurred significant losses and have negative cash flows from operations. For the three months ended March 31, 2009 and 2008, we incurred a net loss of $405,070 compared to a net income of $390,491, respectively. A large part of the 2009 loss is due to non-cash related expense items of ($90,400), whereas non-cash related income items of $849,324 were reflected in 2008.
IF WE DO NOT BECOME PROFITABLE WE MAY NOT BE ABLE TO CONTINUE OUR OPERATIONS.
Our future sales and profitability depend in part on our ability to demonstrate to prospective customers the potential performance advantages of using voice interface software. To date, commercial sales of our software have been limited.
WE HAVE A LIMITED OPERATING HISTORY WHICH MAKES IT DIFFICULT TO EVALUATE OUR BUSINESS.
Our current corporate entity commenced operations in 1999 and has a limited operating history. We have limited financial results on which you can assess our future success. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by growing companies in new and rapidly evolving markets, such as voice recognition software, media delivery systems and electronic commerce. To address the risks and uncertainties we face, we must:
o Establish and maintain broad market acceptance of our products and services and convert that acceptance into direct and indirect sources of revenues.
o Maintain and enhance our brand name.
o Continue to timely and successfully develop new products, product features and services and increase the functionality and features of existing products.
o Successfully respond to competition, including emerging technologies and solutions.
o Develop and maintain strategic relationships to enhance the distribution, features and utility of our products and services.
IF WE ARE UNABLE TO OBTAIN ADDITIONAL FUNDING OUR BUSINESS OPERATIONS WILL BE HARMED.
We do not know if additional financing will be available when needed, or if it is available, if it will be available on acceptable terms. Insufficient funds may prevent us from implementing our business strategy or may require us to delay, scale back or eliminate certain contracts for the provision of voice interface software.
8
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OUR OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY.
As a result of our limited operating history and the rapidly changing nature of the markets in which we compete, our quarterly and annual revenues and operating results are likely to fluctuate from period to period. These fluctuations may be caused by a number of factors, many of which are beyond our control.
As a result of the rapidly changing nature of the markets in which we compete, our quarterly and annual revenues and operating results are likely to fluctuate from period to period. These fluctuations may be caused by a number of factors, many of which are beyond our control.
For these reasons, you should not rely solely on period-to-period comparisons of our financial results, if any, as indications of future results. Our future operating results could fall below the expectations of public market analysts or investors and significantly reduce the market price of our common stock. Fluctuations in our operating results will likely increase the volatility of our stock price.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES
UNREGISTERED SALES OF EQUITY SECURITIES HOLDERS
The securities described below represent our securities sold by us for the period starting January 1, 2007 and March 31, 2008 that were not registered under the Securities Act of 1933, as amended, all of which were issued by us pursuant to exemptions under the Securities Act.
SALES OF WARRANTS FOR CASH
During the year ended December 31, 2008 and the three months ended March 31, 2009, no warrants were exercised. As a result, the Company received no cash proceeds in relation to warrants.
ISSUANCE OF WARRANTS ON A CASHLESS BASIS
From time to time warrants can be exercised on a cashless basis if certain conditions exist. If warrants are held for a certain period of time and there is no effective registration statement for these warrants, the holder of these warrants may exercise them on a cashless basis. The result is the Company issuing restricted shares pursuant to rule 144 or 144K, no cash is received by the Company. The number of shares issued are discounted according the subscription agreement formula. EX: The Company issues 1,000,000 restricted shares and the holder forfeits 1,500,000 of their warrants.
During the year ended December 31, 2008 no warrants were issued on a cashless basis and no warrants were forfeited
No cashless warrants were exercised during the three months ended March 31, 2009 or 2008.
SHARES IN ESCROW
On August 23, 2007, the Company issued 30,000,000 shares of the Company's restricted common stock valued at $600,000. The shares were put into an independent 3rd party escrow account on behalf of La Jolla Cove Investors Inc. These shares relate to a legal settlement on August 23, 2007 between the Company and La Jolla Cove Investors Inc. The shares were issued pursuant to an exemption under Section 4(2) of the Securities Act of 1933.
On May 2, 2008, the company issued 11,878,896 shares of the Company’s restricted common stock valued at $113,087. The shares were also put into an independent 3rd party escrow account on behalf of La Jolla Cove Investors Inc. These shares relate to a legal settlement on August 23, 2007 between the Company and La Jolla Cove Investors Inc. The shares were issued pursuant to an exemption under Section 4(2) of the Securities Act of 1933.
See Item 1 Legal Proceedings for additional details.
ISSUANCES OF STOCK FOR SERVICES OR IN SATISFACTION OF OBLIGATIONS
During the year ended December 31, 2008, the Company issued a total of 59,205,359 shares of restricted common stock in exchange for services rendered. Services included financial advisor fees and consulting. The services were valued at approximately $552,000.
During the three months ended March 31, 2009 the Company did not issue any shares of restricted common stock in exchange for services rendered.
The above transactions were granted in lieu of cash payment to satisfy the debt and obligation.
The shares were issued pursuant to an exemption under Section 4(2) of the Securities Act of 1933.
9
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS:
31 Certification of the Chief Executive Officer and Interim Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32 Certification Chief Executive Officer and Interim Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
10
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SIGNATURES
In accordance with the requirements of the Exchange Act of 1933, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ONE VOICE TECHNOLOGIES, INC.,
A NEVADA CORPORATION
Date: May 20, 2009 By: /s/ DEAN WEBER
DEAN WEBER, CHAIRMAN, CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER) AND INTERIM
CHIEF FINANCIAL OFFICER (PRINCIPAL ACCOUNTING
AND FINANCIAL OFFICER)
1 1
--------------------------------------------------------------------------------
EXHIBIT 31
CERTIFICATION OF PRINCIPAL EXECUTIVE AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Dean Weber, certify that:
1. I have reviewed this quarterly report on Form 10-Q of One Voice Technologies, Inc.;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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 controls 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 quarterly 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 and evaluated the effectiveness of our internal control over financial reporting, and presented in this report our conclusions about the effectiveness of our internal control over financial reporting, as of the end of the period covered by this report based on such evaluation;
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;
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and have identified for the registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
Date: May 20, 2009 By: /s/ Dean Weber
Principal Executive Officer and
Principal Financial Officer
--------------------------------------------------------------------------------
EXHIBIT 32
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
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 of One Voice Technologies, Inc. (the "Company") on Form 10-Q for the quarterly period ended March 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Dean Weber, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 20, 2009 By: /s/ Dean Weber
Principal Executive Officer and
Principal Financial Officer
--------------------------------------------------------------------------------
Got some .004s that day....
what a bargain!
GLTA.
Press Release Source: Lighthouse Petroleum, Inc.
Lighthouse Petroleum Inc. Acquires 20% Ownership in Williston Basin Oil & Gas Development Company Focused on Acquiring Both Bakken Shale and Conventional Oil
On Thursday May 14, 2009, 8:00 am EDT
Buzz up! Print SALT LAKE CITY--(BUSINESS WIRE)--Lighthouse Petroleum, Inc. (Pink Sheets:LHPT) is pleased to announce to shareholders that LHPT has recently closed on a 20% ownership stake in the Williston Basin Acquisition LLC.
As previously stated in the press release dated, April 28, 2009, the Williston Basin—which is best known for the Bakken Shale resource play—is one of three oil and gas basins where Lighthouse Petroleum is aggressively focused on acquiring producing assets to pair with its existing drilling prospect located in Fremont County, Wyoming.
Based in Lafayette, LA, the Williston Basin Acquisition, LLC is focused on acquiring producing oil and gas production within the Williston Basin, with upside via additional in-fill drilling locations or the utilization of secondary recovery that has been proven by offset operators. Williston Basin Acquisition, LLC’s management team has several candidates under review and awaiting 3rd party engineering runs in order to secure funding for these various acquisition targets. Funding for these acquisitions will be secured by Williston Basin Acquisition, LLC’s international investment banking team whose typical structure ranges from senior secured type transactions to mezzanine financing, depending on the risk profile of the transaction.
Lighthouse Petroleum CEO, Paul Norat, states, “We are excited about this opportunity because it allows our management team to execute the business model that we’ve been developing over the past several months. The possibility of acquiring cash flow from this venture combined with our existing oil and gas opportunities has made our immediate outlook somewhat bullish, considering the state of the current economic environment.” Mr. Norat further states, “Both management teams are anxiously awaiting the receipt of the 3rd party reserve analysis, as this will be the main catalyst in determining the economic viability of the various projects that Williston Basin Acquisition, LLC’s management team has under its current evaluation. These producing assets are very sensitive to crude pricing and with the recent bullish run on crude, as well as the current contango environment that exists in the futures market, [Williston Basin Acquisition, LLC’s] management feels optimistic about the forthcoming results.”
Both management teams expect to receive the updated 3rd party reserve reports in approximately two to three weeks. Once received, Lighthouse Petroleum will announce the results as well the identification and the acquisition metrics involved in the transaction.
About the Williston Basin
The United States portion of the Williston Basin covers approximately 143,000 sq miles and encompasses much of the Northern Great Plains and extends northward into Canada. Using a geology-based assessment methodology, the U.S. Geological Survey estimated mean undiscovered volumes of 3.65 billion barrels of oil, 1.85 trillion cubic feet of associated/dissolved natural gas, and 148 million barrels of natural gas liquids in the Bakken Formation of the Williston Basin Province, Montana and North Dakota.
About Lighthouse Petroleum, Inc.
Lighthouse Petroleum, Inc. (LHPT.PK News) is an oil & gas exploration company headquartered in Salt Lake City, Utah. The company is publicly traded on the over-the-counter Pink Sheets trading system under the symbol LHPT.
Currently, Lighthouse Petroleum is focused on acquiring oil and gas assets in the Williston Basin, the Permian Basin, as well as within the Wind River Basin. Lighthouse Petroleum’s first acquisition is located within the Wind River Basin allowing Lighthouse Petroleum the opportunity to develop unproven oil and gas reserves, thus contributing to our domestic energy needs. Additionally, management is currently seeking exploitation opportunities within the Permian Basin as well as within the Williston Basin that will complement our Diamond Springs Drilling Prospect.
Legal Notice Regarding Forward-Looking Statements
No statement herein should be considered an offer or a solicitation of an offer for the purchase or sale of any securities. This release contains forward-looking statements that are based upon current expectations or beliefs, as well as a number of assumptions about future events. Although the Company believes that the expectations reflected in the forward-looking statements and the assumptions upon which they are based are reasonable, it can give no assurance that such expectations and assumptions will prove to have been correct. Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable by use of the words "may," "will," "should," "could," "expect," "anticipate," "estimate," "believe," "intend," or "project" or the negative of these words or other variations on these words or comparable terminology. The reader is cautioned not to put undue reliance on these forward-looking statements, as these statements are subject to numerous factors and uncertainties, including but not limited to adverse economic conditions, intense competition, lack of meaningful research results, entry of new competitors and products, adverse federal, state and local government regulation, inadequate capital, unexpected costs and operating deficits, increases in general and administrative costs, termination of contracts or agreements, technological obsolescence of the Company's products, technical problems with the Company's research and products, price increases for supplies and components, litigation and administrative proceedings involving the Company, the possible acquisition of new businesses or technologies that result in operating losses or that do not perform as anticipated, unanticipated losses, the possible fluctuation and volatility of the Company's operating results, financial condition and stock price, losses incurred in litigating and settling cases, dilution in the Company's ownership of its business, adverse publicity and news coverage, inability to carry out research, development and commercialization plans, loss or retirement of key executives and research scientists, changes in interest rates, inflationary factors, and other specific risks. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect the events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Contact:
For Lighthouse Petroleum, Inc.
Integrity Capital Group, LLC
Daniel Covill, Managing Partner
619-269-4285
IR@lhpetroleum.com
www.lhpetro.comEmailIM Bookmarkdel.icio.usDigg Buzz up!
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thx,bbb(EOM).
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------------------------------------------------
FORM 10-K/A
(Amendment No. 1)
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2008
o 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 0-28806
ENERGROUP HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 87-0420774
(State of Incorporation) (I.R.S. Employer Identification No.)
No. 9, Xin Yi Street, Ganjingzi District +86 411 867 166 96
Dalian City, Liaoning Province, PRC 116039 (Registrant’s telephone number, including area code)
(Address of principal executive offices, including zip code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001 per share
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark whether the registrant is required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes x No o
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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 x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
--------------------------------------------------------------------------------
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 (Check one):
Large Accelerated Filer o Accelerated Filer o
Non-accelerated filer o Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
As of March 11, 2009, the aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $25.84 million based on a closing price of $4.00 per share of common stock as reported on the Over-the Counter Bulletin Board on such date. On December 31, 2008, we had 21,136,391 shares of our common stock issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: None.
2
--------------------------------------------------------------------------------
EXPLANATORY NOTE
This Annual Report on Form 10-K/A is being filed as Amendment No. 1 to our Annual Report on Form 10-K for the year ended December 31, 2008, which was originally filed with the Securities and Exchange Commission on March 31, 2009. We are amending Part II, Item 8 Financial Statements and Supplementary Data :
· to revise the disclosure in Note 2 to our financial statements with respect to our showcase store arrangements; and
· to revise the disclosure in Note 15 to our financial statements to include the measures of profit or loss for the segments that are evaluated by our chief operating decision maker.
Except as specifically referenced herein, this Amendment No. 1 to Annual Report on Form 10-K/A does not reflect any event occurring subsequent to March 31, 2009, the filing date of the original report.
3
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ENERGROUP HOLDINGS CORPORATION
FORM 10-K/A
For the Year Ended December 31, 2008
TABLE OF CONTENTS
PART II
Item 8. Financial Statements and Supplementary Data
Signatures
4
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Energroup Holdings Corporation
Audited Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Stated in U.S. Dollars)
Energroup Holdings Corporation
Contents Pages
Report of Registered Public Accounting Firm F-1
Consolidated Balance Sheets F-2—F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Changes in Stockholders’ Equity F-5
Consolidated Statements of Cash Flows F-6 — F-7
Notes to Consolidated Financial Statements F-8 — F-31
5
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Board of Directors and Stockholders
Energroup Holdings Corporation
Report of Registered Independent Public Accounting Firm
We have audited the accompanying consolidated balance sheets of Energroup Holdings Corporation as of December 31, 2008, 2007, and 2006 and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Energroup Holdings Corporation as of December 31, 2008, 2007, and 2006, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
South San Francisco, California Samuel H. Wong & Co., LLP
January 23, 2009 Certified Public Accountants
F-1
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Energroup Holdings Corporation
Consolidated Balance Sheets
At December 31, 2008, 2007, and 2006
(Stated in US Dollars)
Notes At At At
December 31, December 31, December 31,
ASSETS 2008 2007 2006
Current Assets
Cash 2 (D) $ 5,695,798 $ 14,031,851 $ 3,075,787
Restricted Cash 3 2,177,091 4,250,000 -
Accounts Receivable 2 (E) ,4 18,661,065 622,433 1,798,397
Other Receivable 2,162,412 1,068,939 679,019
Related Party Receivable 5 10,919,777 3,964,357 13,148,788
Inventory 2 (F) ,6 6,051,109 2,916,016 2,385,447
Advance to Suppliers 2(G) 1,453,861 267,807 1,110,449
Prepaid Expenses 62,734 46,401 90,913
Prepaid Taxes 334,413 185,319 -
Deferred Tax Asset 2 (Q) 643,609 613,844 574,316
Total Current Assets 48,161,869 27,966,967 22,863,116
Non-Current Assets
Property, Plant & Equipment, net 2 (H) ,7 25,794,151 24,836,496 20,875,462
Land Use Rights, net 2 (I) ,8 13,430,435 12,855,980 8,911,119
Construction in Progress 2 (J) 3,262,146 927,866 4,165,407
Other Assets 34,807 32,619 30,519
Total Assets $ 90,683,408 $ 66,619,928 $ 56,845,623
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Bank Loans 9 (A) $ 6,419,422 $ 7,383,095 $ 6,971,538
Accounts Payable 7,695,208 3,779,274 4,207,992
Taxes Payable 2,341,971 1,677,194 2,259,465
Other Payable 2,318,142 1,471,381 1,362,607
Accrued Liabilities 1,724,266 3,347,013 912,707
Customer Deposits 2 (L) 3,258,752 24,161 1,049,212
Related Party Payable - - -
Total Current Liabilities 23,757,761 17,682,118 16,763,521
Long Term Liabilities
Bank Loans 9 (B) - - 17,908,539
Total Liabilities $ 23,757,761 $ 17,682,118 $ 34,672,060
See Notes to Financial Statements and Accountant’s Report
F-2
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Energroup Holdings Corporation
Consolidated Balance Sheets
At December 31, 2008, 2007, and 2006
(Stated in US Dollars)
At At At
Notes December 31, December 31, December 31,
Stockholders' Equity 2008 2007 2006
Preferred Stock - $0.001 Par Value 10,000,000 Shares Authorized; 0 Shares Issued & Outstanding at December 31, 2008, 2007, and 2006, respectively. $ - $ - $ -
Common Stock - $0.001 Par Value 21,739,130 Shares Authorized; 21,136,392 Shares Issued & Outstanding at December 31, 2008 and 2007, and 17,272,756 Shares Issued & Outstanding at December 31, 2006.
10 21,137 21,137 17,273
Additional Paid in Capital 26,062,337 15,440,043 2,396,079
Statutory Reserve 2 (M), 11 2,077,488 751,444 751,444
Retained Earnings 35,275,457 29,764,236 18,112,089
Accumulated Other Comprehensive Income 2 (N) 3,489,228 2,960,951 896,679
Total Stockholders' Equity 66,925,647 48,937,811 22,173,564
Total Liabilities & Stockholders' Equity $ 90,683,408 $ 66,619,928 $ 56,845,623
See Notes to Financial Statements and Accountant’s Report
F-3
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Energroup Holdings Corporation
Consolidated Statements of Operations
For the years ended December 31, 2008, 2007, and 2006
(Stated in US Dollars)
For the For the For the
year ended year ended year ended
Note December 31, December 31, December 31,
2008 2007 2006
Sales 2 (O) $ 176,360,013 $ 124,696,036 $ 70,396,439
Cost of Sales 2 (P) 149,794,249 104,378,909 57,794,853
Gross Profit 26,565,764 20,317,127 12,601,586
Operating Expenses
Selling Expenses 2 (Q) 5,147,366 4,672,862 1,556,805
General & Administrative Expenses 2 (R) 2,675,661 1,572,836 1,334,866
Total Operating Expense 7,823,027 6,245,698 2,891,671
Operating Income/(Loss) 18,742,737 14,071,429 9,709,915
Other Income (Expenses)
Other Income 5,780 114,496 -
Interest Income 284,774 - 147
Other Expenses (100,183 ) (90,508 ) (126,098 )
Interest Expense (953,460 ) (1,475,730 ) (1,457,204 )
Release of Escrowed Make Good Shares (10,622,294 ) - -
Total Other Income (Loss) and Expense (11,385,383 ) (1,451,742 ) (1,583,155 )
Earnings before Tax 7,357,354 12,619,687 8,126,760
(Income Tax Expense)/Deferred Tax Benefit 2 (V) ,13 (520,089 ) (967,540 ) 1,611
Net Income $ 6,837,265 $ 11,652,147 $ 8,128,371
Earnings Per Share 2(Z),16
- Basic $ 0.40 $ 0.87 $ 0.61
- Diluted $ 0.32 $ 0.67 $ 0.47
Weighted Average Shares Outstanding
- Basic 17,272,756 13,409,120 13,409,120
- Diluted 21,182,756 17,272,756 17,272,756
For the For the For the
year ended year ended year ended
December 31, December 31, December 31, Accumulated
Comprehensive Income 2008 2007 2006 Totals
Net Income $ 6,837,265 $ 11,652,147 $ 8,128,371 26,617,783
Other Comprehensive Income:
Foreign Currency Translation Adjustment 528,277 2,064,272 610,696 3,203,245
$ 7,365,542 $ 13,716,419 $ 8,739,067 $ 29,821,028
See Notes to Financial Statements and Accountant’s Report
F-4
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Energroup Holdings Corporation
Consolidated Statements of Changes in Stockholders’ Equity
For the years ended December 31, 2008, 2007, and 2006
(Stated in US Dollars)
Accumulated
Common Additional Comprehensive
Shares Paid in Statutory Retained Other
Outstanding Amount Capital Reserve Earnings Income Total
Balance, January 1, 2006 17,272,756 $ 17,273 $ 2,396,079 $ 72,508 $ 10,662,654 $ 285,983 $ 13,434,497
Net Income 8,128,371 8,128,371
Appropriations of Retained Earnings 678,936 (678,936 ) -
Foreign Currency Translation Adjustment 610,696 610,696
Balance, December 31, 2006 17,272,756 $ 17,273 $ 2,396,079 $ 751,444 $ 18,112,089 $ 896,679 $ 22,173,564
Balance, January 1, 2007 17,272,756 $ 17,273 $ 2,396,079 $ 751,444 $ 18,112,089 $ 896,679 $ 22,173,564
Issuance of Common Stock & Warrants 3,863,636 3,864 13,043,964 13,047,828
Net Income 11,652,147 11,652,147
Appropriations of Retained Earnings - - -
Foreign Currency Translation Adjustment 2,064,272 2,064,272
Balance, December 31, 2007 21,136,392 $ 21,137 $ 15,440,043 $ 751,444 $ 29,764,236 $ 2,960,951 $ 48,937,811
Balance, January 1, 2008 21,136,392 $ 21,137 $ 15,440,043 $ 751,444 $ 29,764,236 $ 2,960,951 $ 48,937,811
Release of Shares Placed in Escrow 10,622,294 10,622,294
Net Income 6,837,265 6,837,265
Appropriations of Retained Earnings 1,326,044 (1,326,044 ) -
Foreign Currency Translation Adjustment 528,277 528,277
Balance, December 31, 2008 21,136,392 $ 21,137 $ 26,062,337 $ 2,077,488 $ 35,275,457 $ 3,489,228 $ 66,925,647
See Notes to Financial Statements and Accountant’s Report
F-5
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Energroup Holdings Corporation
Consolidated Statements of Cash Flows
For the years ended December 31, 2008, 2007, and 2006
(Stated in US Dollars)
For the For the For the
year ended year ended year ended
December 31, December 31, December 31,
2008 2007 2006
Cash Flow from Operating Activities
Cash Received from Customers $ 153,507,080 $ 112,741,680 $ 59,979,793
Cash Paid to Suppliers & Employees (155,266,953 ) (108,527,656 ) (65,116,627 )
Interest Received 284,774 - 147
Interest Paid (net of amount capitalized) (1,763,404 ) (1,247,575 ) (1,580,310 )
Income Tax Paid - (1,007,067 ) (400,065 )
Miscellaneous Receipts 5,780 9,182 -
Cash Sourced/(Used) in Operating Activities (3,232,723 ) 1,968,564 (7,117,062 )
Cash Flows from Investing Activities
Escrowed Funds from Private Placement Placed in Restricted Cash 2,072,909 (4,250,000 ) -
Payments for Purchases of Equipment & Construction of Plant (5,832,731 ) (2,882,433 ) (1,655,077 )
Payments for Purchases of Land Use Rights - (4,198,178 ) (265,509 )
Payments for Deposits - (2,100 ) -
Cash Sourced/(Used) in Investing Activities (3,759,822 ) (11,333,712 ) (1,920,586 )
Cash Flows from Financing Activities
Financing Transaction - Proceeds Allocated to Accrued Liabilities for Liquidated Damages - 1,700,000 -
Financing Transaction - Proceeds of Issuance of Common Stock & Warrants - 13,047,828 -
Proceeds from Bank Borrowings 9,264,246 5,725,377 1,753,971
Repayment of Bank Loans (10,700,664 ) (2,217,265 ) -
Cash Sourced/(Used) in Financing Activities (1,436,417 ) 18,255,939 1,753,971
Net Increase/(Decrease) in Cash & Cash Equivalents for the Year (8,428,962 ) 8,891,791 (7,283,677 )
Effect of Currency Translation 92,910 2,064,273 180,050
Cash & Cash Equivalents at Beginning of Year 14,031,851 3,075,787 10,179,414
Cash & Cash Equivalents at End of Year $ 5,695,798 $ 14,031,851 $ 3,075,787
Non-Cash Financing Activity :
Extinguishment of Debt by Setoff Against Related Party Receivables $ - $ 21,005,094 $ -
Release of shares held in escrow $ 10,622,294 $ - $ -
See Notes to Financial Statements and Accountant’s Report
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Energroup Holdings Corporation
Reconciliation of Net Income to Cash Provided/(Used) in Operating Activities
For the years ended December 31, 2008, 2007, and 2006
(Stated in US Dollars)
For the For the For the
year ended year ended year ended
December 31, December 31, December 31,
2008 2007 2006
Net Income $ 6,837,265 $ 11,652,147 $ 8,128,371
Adjustments to Reconcile Net Income to Net Cash Provided by Cash Activities:
Non Cash Expense Recorded for the Release of Escrowed Shares 10,622,294 - -
Extinguishment of Debt by Setting Off Against Related Party Receivable - (21,005,094 ) -
Liquidated Damages Included in Accrued Liabilities - (1,700,000 ) -
Amortization 331,468 253,317 160,782
Depreciation 2,540,797 2,158,940 1,651,055
Provision for Bad Debt 103,773 5,456 -
Decrease/(Increase) in Accounts Receivable (18,142,404 ) 1,170,508 1,523,176
Decrease/(Increase) in Other Receivable (1,093,473 ) (389,920 ) 353,046
Decrease/(Increase) in Related Party Receivable (6,955,420 ) 9,184,432 (12,877,984 )
Decrease/(Increase) in Inventory (3,135,093 ) (530,569 ) 546,573
Decrease/(Increase) in Advance to Suppliers (1,186,054 ) 842,641 (374,793 )
Decrease/(Increase) in Prepaid Taxes (149,096 ) (185,317 ) -
Decrease/(Increase) in Prepaid Expenses (16,333 ) 44,512 (40,297 )
Decrease/(Increase) in Deferred Tax Benefit (29,764 ) (39,528 ) (401,674 )
Increase/(Decrease) in Accounts Payable 3,915,934 (428,718 ) (3,611,921 )
Increase/(Decrease) in Taxes Payable 664,777 (582,271 ) 1,371,696
Increase/(Decrease) in Other Payable 846,762 108,773 482,075
Increase/(Decrease) in Related Party Payable - - (4,506,002 )
Increase/(Decrease) in Accrued Liabilities (1,622,747 ) 2,434,306 (106,278 )
Increase/(Decrease) in Customer Advances 3,234,591 (1,025,051 ) 585,113
Total of all adjustments (10,069,987 ) (9,683,583 ) (15,245,431 )
Net Cash Provided by/(Used in) Operating Activities $ (3,232,723 ) $ 1,968,564 $ (7,117,062 )
See Notes to Financial Statements and Accountant’s Report
F-7
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Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
1. The Company and Principal Business Activities
Energroup Holdings Corporation (the “Company”) (OTCBB: ENHD) is a holding company incorporated in the state of Nevada in the United States of America whose primary business operations are conducted through its three operating subsidiaries: (1) Dalian Chuming Processed Foods Company Ltd., (“Food Company”) (2) Dalian Chuming Slaughter and Packaging Pork Company Ltd. (“Meat Company”), and (3) Dalian Chuming Sales Company Ltd. (“Sales Company”), which are incorporated in the People’s Republic of China (“PRC”). The Company is headquartered in the City of Dalian, Liaoning Province of China.
The three operating subsidiaries were spun-off constituents of the former parent company, Dalian Chuming Group Co. Ltd (“Group”). The Company indirectly holds the three operating subsidiary companies through its wholly owned intermediary subsidiaries: (A) Precious Sheen Investments Limited (“PSI”), a British Virgin Islands corporation, and (B) Dalian Chuming Precious Sheen Investments Consulting Co., Ltd., (“Chuming”), a wholly foreign owned enterprise incorporated in the PRC.
The Company’s primary business activities are the production and packing of fresh pork and also production of processed meat products for distribution and sale to clients throughout the PRC and Russia.
Corporate Reorganization
PRC law currently has limits on foreign ownership of certain companies. To enable Chuming to raise equity capital from investors outside of China, it established an offshore holding company by incorporating Precious Sheen Investments Limited in the British Virgin Islands in May 2007. On September 26, 2007, Chuming entered into share transfer agreements with Dalian Chuming Group Co., Ltd., under which Dalian Chuming Group Co., Ltd. agreed to transfer ownership of three operating subsidiaries (collectively known as “Chuming Operating Subsidiaries”) to Chuming. On October 23, 2007, Chuming completed all required registrations to complete the share transfer, and became the 100% owner of the Chuming Operating Subsidiaries. On November 14, 2007 the Dalian Commerce Bureau approved the transfer of Dalian Chuming Group Co., Ltd’s 68% interest in Chuming to PSI, and upon this transfer, Chuming became a wholly foreign owned enterprise, with PSI as the 100% owner of Chuming (including its subsidiaries). On December 13, 2007, the PRC government authorities issued Chuming a business license formally recognizing it as a wholly foreign owned enterprise, of which PSI is the sole shareholder.
The following is a description of the Chuming Operating Subsidiaries:
A. Dalian Chuming Slaughter and Packaging Pork Company Ltd., whose primary business activity is acquiring, slaughtering, and packaging of pork and cattle;
B. Dalian Chuming Processed Foods Company Ltd., whose primary business activity is the processing of raw and cooked meat products; and
C. Dalian Chuming Sales Company Ltd., which is responsible for Chuming’s sales, marketing, and distribution operations.
Share Exchange Transaction
On December 31, 2007, the Company acquired all of the outstanding shares of PSI in exchange for the issuance of 16,850,000 restricted shares of our common stock to the shareholders of PSI, which represented approximately 97.55% of the then-issued and outstanding common stock of the Company (excluding the shares issued in the Financing). As a result of that transaction, PSI became our wholly owned subsidiary and we acquired the business and operations of the three operation subsidiaries.
F-8
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Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
The share exchange transaction has been accounted for as a recapitalization of PSI where the Company (the legal acquirer) is considered the accounting acquiree and PSI (the legal acquiree) is considered the accounting acquirer. As a result of this transaction, the Company is deemed to be a continuation of the business of PSI.
Accordingly, the financial data included in the accompanying consolidated financial statements for all periods prior to December 31, 2007 is that of the accounting acquirer (PSI). The historical stockholders’ equity of the accounting acquirer prior to the share exchange has been retroactively restated as if the share exchange transaction occurred as of the beginning of the first period presented.
2. Summary of Significant Accounting Policies
(A) Method of Accounting
The Company maintains its general ledger and journals with the accrual method accounting for financial reporting purposes. The financial statements and notes are representations of management. Accounting policies adopted by the Company conform to generally accepted accounting principles in the United States of America and have been consistently applied in the presentation of financial statements, which are compiled on the accrual basis of accounting.
(B) Principles of Consolidation
The consolidated financial statements, which include the Company and its subsidiaries, are compiled in accordance with generally accepted accounting principles in the United States of America. All significant inter-company accounts and transactions have been eliminated. The consolidated financial statements include 100% of assets, liabilities, and net income or loss of those wholly-owned subsidiaries.
The Company owned the three operating subsidiaries since its inception. The Company also owns two intermediary holdings companies. As of December 31, 2008, the detailed identities of the consolidating subsidiaries are as follows:
Name of Company Place
of
Incorporation Attributable
Equity
Interest Registered
Capital
Precious Sheen Investments Limited BVI 100% USD 10,000
Dalian Chuming Precious Sheen Investment Consulting Co., Ltd. PRC 100% RMB 29,400,682
Dalian Chuming Slaughtering & Pork Packaging Co. Ltd. PRC 100% RMB 10,000,000
Dalian Chuming Processed Foods Co. Ltd. PRC 100% RMB 5,000,000
Dalian Chuming Sales Co. Ltd. PRC 100% RMB 5,000,000
The consolidation of these operating subsidiaries into a newly formed holding company i.e. “the Company” is permitted by United States GAAP: ARB51 paragraph 22 and 23.
F-9
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Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
(C) Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States 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. Management makes these estimates using the best information available at the time the estimates are made; however, actual results could differ materially from these estimates.
(D) Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid equity or debt instruments purchased with a maturity of three months or less to be cash equivalents.
(E) Accounts Receivable
The Company extends unsecured, non-interest bearing credit to its customers; accordingly, the Company carries an allowance for doubtful accounts, which is an estimate, made by management. Management makes its estimate based on prior experience rates and assessment of specific outstanding customer balances. Management may extend credit to new customers who have met the criteria of the Company’s credit policy.
(F) Inventory Carrying Value
Inventory, consisting of raw materials in the form of livestock, work in progress, and finished products, is stated at the lower of cost or market value. Finished products are comprised of direct materials, direct labor and an appropriate proportion of overhead. Periodic evaluation is made by management to identify if inventory needs to be written down because of damage, or spoilage. Cost is computed using the weighted average method.
(G) Purchase Deposit
Purchase deposit represents the cash paid in advance for purchasing raw materials. The purchase deposit is interest free and unsecured.
(H) Property, Plant, and Equipment
Property, Plant, and Equipment are stated at cost. Repairs and maintenance to these assets are charged to expense as incurred; major improvements enhancing the function and/or useful life are capitalized. When items are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gains or losses arising from such transactions are recognized.
Property and equipment are depreciated using the straight-line method over their estimated useful life with a 5% salvage value. Their useful lives are as follows:
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Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
Fixed Asset Classification Useful Life
Land Improvements 10 years
Buildings 20 years
Building Improvements 10 years
Manufacturing Machinery & Equipment 10 years
Office Equipment 5 years
Furniture & Fixtures 5 years
Vehicles 5 years
(I) Land Use Rights
Land Use Rights are stated at cost less accumulated amortization. Amortization is provided over its useful life, using the straight-line method. The useful life of the land use right is 50 years.
(J) Construction in Progress
Construction in progress represents the direct costs of design, acquisition, and construction of buildings, building improvements, and land improvements. These costs are capitalized in the Construction-in-Progress account until substantially all activities necessary to prepare the assets for their intended use are completed. At such point, the Construction-in-Progress account is closed and the capitalized costs are transferred to their appropriate asset classification. No depreciation is provided until the assets are completed and ready for their intended use.
(K) Accounting for Impairment of Assets
The Company reviews the recoverability of its long-lived assets, such as property and equipment, when events or changes in circumstances occur that indicate the carrying value of the asset group may not be recoverable. The assessment of possible impairment is based on the Company’s ability to recover the carrying value of the asset from the expected future cash flows, undiscounted and without interest charges, of the related operations. If these cash flows are less than the carrying value of such assets, an impairment loss is recognized for the difference between estimated fair value and carrying value. The measurement of impairment requires management to estimate future cash flows and the fair value of long-lived assets.
(L) Customer Deposits
Customer Deposits represents money the Company has received in advance for purchases of pork and pork products. The Company considers customer deposits as a liability until products have been shipped and revenue is earned.
The Company collects a damage deposit (as a deterrent) recorded in Other Payable from showcase store operators as a means of enforcing proper use of the Company’s trademarks. These are not fees, but deposits that are carried as current liabilities until and unless an operator violates the Company’s policies (e.g. misuse of Company brand names, or sale of substandard or counterfeit products, or unacceptably poor customer service), or if the proprietor ceases to operate the showcase store. If no violations have been committed by the showcase store operator, the deposit is returned to the operator. The Company carries the amount of these deposits as a current liability because the Company will return the deposit immediately to the operator when the Company ceases to conduct business with the operator.
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Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
(M) Statutory Reserve
Statutory reserve refer to the amount appropriated from the net income in accordance with laws or regulations, which can be used to recover losses and increase capital, as approved, and, are to be used to expand production or operations. PRC laws prescribe that an enterprise operating at a profit, must appropriate, on an annual basis, from its earnings, an amount to the statutory reserve to be used for future company development. Such an appropriation is made until the reserve reaches a maximum equaling 50% of the enterprise’s capital.
(N) Other Comprehensive Income
Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. The Company’s current component of other comprehensive income is the foreign currency translation adjustment.
(O) Recognition of Revenue
Revenue from the sale of pork products, etc., is recognized on the transfer of risks and rewards of ownership, which generally coincides with the time when the goods are delivered to customers and the title has passed.
The Company supplies pork products, equipment, uniforms, and technical support to the proprietors of showcase stores, who are granted the right to use the Company’s trademarks to sell pork products. Start-up fees relating to uniforms are immaterial and are charged to the showcase store operators merely to recoup setup costs. Any funds collected from store operators in conjunction with initial startup and operation is minimal and immaterial. The Company does not charge any fees for providing equipment to the showcase stores. The Company provides equipment at its own cost, and the Company owns all such equipment. Considering the foregoing, the Company takes the position that any amount it receives from the store operators is not material in accordance with Rule 5-03.1 of Regulation S-X. In addition, since the Company does not receive any material franchise fee revenue, SFAS 45 is not applicable.
(P) Cost of Sales
The Company’s cost of sales is comprised of raw materials, factory worker salaries and related benefits, machinery supplies, maintenance supplies, depreciation, utilities, inbound freight, purchasing and receiving costs, inspection and warehousing costs
(Q) Selling Expense
Selling expenses are comprised of outbound freight, salary for the sales force, client entertainment, commissions, depreciation, advertising, and travel and lodging expenses.
(R) General & Administrative
General and administrative costs include executive compensation, quality control, and general overhead such as the finance department, administrative staff, and depreciation and amortization expense.
(S) Shipping and handling
All shipping and handling are expensed as incurred and are included as a component of cost of sales.
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Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
(T) Advertising Expense
Costs related to advertising and promotion expenditures are expensed as incurred during the year. Advertising costs are charged to selling expense
(U) Retirement Benefits
Retirement benefits in the form of contributions under defined contribution retirement plans to the relevant authorities are charged to the statement of operations as incurred.
(V) Income Taxes
The Company uses the accrual method of accounting to determine and report its taxable reduction of income taxes for the year in which they are available. The Company has implemented Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Income tax liabilities computed according to the United States and People’s Republic of China (PRC) tax laws are provided for the tax effects of transactions reported in the financial statements and consists of taxes currently due plus deferred taxes related primarily to differences between the basis of fixed assets and intangible assets for financial and tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will be either taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future income taxes. A valuation allowance is created to evaluate deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize that tax benefit, or that future realization is uncertain.
In respect of the Company’s subsidiaries domiciled and operated in China:
· Chuming and Chuming Operating Subsidiaries are located in the PRC and PSI is located in the British Virgin Islands; all of these entities are subject to the relevant tax laws and regulations of the PRC and British Virgin Islands in which the related entity domiciled. The maximum tax rates of the subsidiaries pursuant to the countries in which they domicile are: -
Subsidiary Country of Domicile Income Tax Rate
Chuming and Chuming Operating Subsidiaries PRC 25.00 %
PSI British Virgin Islands 0.00 %
· Effective January 1, 2008, PRC government implements a new 25% tax rate across the board for all enterprises regardless of whether domestic or foreign enterprise without any tax holiday which is defined as "two-year exemption followed by three-year half exemption" hitherto enjoyed by tax payers. As a result of the new tax law of a standard 15% tax rate, tax holidays terminated as of December 31, 2007. However, PRC government has established a set of transition rules to allow enterprises already started tax holidays before January 1, 2008, to continue enjoying the tax holidays until being fully utilized.
· The Company is subject to United States Tax according to Internal Revenue Code Sections 951 and 957. Corporate income tax is imposed on progressive rates in the range of: -
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Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
Taxable Income
Rate Over But Not Over Of Amount Over
15% 0 50,000 0
25% 50,000 75,000 50,000
34% 75,000 100,000 75,000
39% 100,000 335,000 100,000
34% 335,000 10,000,000 335,000
35% 10,000,000 15,000,000 10,000,000
38% 15,000,000 18,333,333 15,000,000
35% 18,333,333 - -
Based on the consolidated net income for the year ended December 31, 2008, the Company shall not be subject to income tax.
(W) Economic and Political Risks
The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.
(X) Foreign Currency Translation
The Company maintains its financial statements in the functional currency. The functional currency of the Company is the Renminbi (RMB). Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchanges rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.
For financial reporting purposes, the financial statements of the Company which are prepared using the functional currency have been translated into United States dollars. Assets and liabilities are translated at the exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and stockholders’ equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of stockholders’ equity.
Exchange Rates 12/31/2008 12/31/2007 12/31/2006
Period end RMB : US$ exchange rate 6.85420 7.3141 7.8175
Average period RMB : US$ exchange rate 6.96225 7.6172 7.9819
RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.
(Y) Earnings Per Share
The Company computes earnings per share (“EPS”) in accordance with Statement of Financial Accounting Standards No. 128, “Earnings per share” (“SFAS No. 128”), and SEC Staff Accounting Bulletin No. 98 (“SAB 98”). SFAS No. 128 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., contingent shares, convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.
F-14
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Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
(Z) Recent Accounting Pronouncements
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133" ("SFAS 161"). SFAS 161 applies to all derivative instruments and related hedged items accounted for under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 161 requires entities to provide greater transparency about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, results of operations and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008.
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS 162"). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (the GAAP hierarchy). Statement 162 will become effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles."
In May 2008, the FASB issued FSP Accounting Principles Board ("APB") 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" ("FSP APB 14-1"). FSP APB 14-1 requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 on a retroactive basis.
The Company is currently evaluating the potential impact, if any, of the adoption of the above recent accounting pronouncements on its consolidated results of operations and financial condition.
3. Restricted Cash
The restricted cash reflects funds received from the financing transaction described in Note 18 that are held in an escrow with US Bank in the United States. These funds are restricted until fulfilment of the following criteria: (1) the hiring of a Chief Financial Officer that meets the approval of the investors within 90 days of the closing (subsequently extended to 120 days), at such point the Company will release $1.5 million from restriction, (2) appointment of a Board of Directors that has majority of independent members, at such point $2.0 million will be released from restriction, and (3) appoint a successor auditor, at which point $500,000 will be released from restriction. There is $250,000 in the escrow account that has already been earmarked for investor relations purposes.
At December 31, 2008, the Company has not fulfilled requirement (3), and did not fulfill requirement (1). The Company has requested bids for consideration from auditing firms that were on an approved list submitted by, Pinnacle Fund, whom was the lead investor in the Company’s financing transaction in December 2007, detailed in Note 18 – Financing Transaction .
4. Accounts Receivable
Accounts Receivable at December 31, consisted of the following:
F-15
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Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
At At At
December 31, December 31, December 31,
2008 2007 2006
Accounts Receivable – Trade 18,849,560 $ 707,156 $ 1,877,664
Less : Allowance for Doubtful Accounts (188,495 ) (84,723 ) (79,267 )
Net Accounts Receivable 18,661,065 $ 622,433 $ 1,798,397
At At At
December 31, December 31, December 31,
Allowance for Bad Debts 2008 2007 2006
Beginning Balance $ (84,723 ) $ (79,267 ) $ (76,754 )
Allowance Provided $ (103,772 ) (5,456 ) (2,513 )
Charged Against Allowance - - -
Ending Balance $ (188,495 ) $ (84,723 ) $ (79,267 )
During the second quarter of the 2008 fiscal year, management revised the Company’s credit policy. Based on management’s review, the Company began extending more favorable credit terms to its top tier customers. Those customers that qualified as top tier were extended approximately 45 to 60 days of credit. The Company previously extended one to two days of credit. As of December 31, 2008, the Company has not had any receivables that were unrecoverable.
Accounts Receivable Aging Analysis
At December 31, 2008
0-30 Days 31-60 Days 61-90 Days 91-120 Days Total Outstanding
$ 10,478,579 $ 1,627,515 $ 168,045 $ 6,575,420 $ 18,849,560
5. Related Party Receivable
In the normal course of business which includes the purchases of hogs and other raw materials, sale of pork and pork products, the Company conducts transactions with the following related parties: Dalian Chuming Group Co., Ltd (“Group”) and the Group subsidiaries, that are not consolidated into Energroup Holdings or Energroup’s subsidiary, Dalian Chuming Precious Sheen Investments Consulting Co. Ltd. (Chuming): (1) Dalian Chuming Industrial Development Co., Ltd., (“Industrial Development Co.”) (2) Dalian Chuming Trading Co., Ltd, (“Trading Co.”) (3) Dalian Mingxing Livestock Product Co. Ltd., (“Mingxing”) (4) Dalian Chuming Stockbreeding Combo Development Co., Ltd., (“Combo Development Co.”) (5) Dalian Chuming Fodder Co., Ltd. (“Fodder Co.”), and (6) Dalian Chuming Biological Technology Co., Ltd., (“Biological Co.”) and (7) Dalian Huayu Seafood Food Co., Ltd. (“Huayu”). The Company and the aforementioned related parties share common beneficial ownership. All transactions with related parties are generally performed at arm’s length.
In the event that the Company has both receivables from, and payables to the Group it will, in accordance with FIN 39, setoff the balances in order to arrive at a single balance that is either due from, or due to the Group. The Company’s net receivable balance of $10,919,777 at December 31, 2008 is shown in the following table.
F-16
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Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
Ref. Subsidiary
Due to: Nature of Balance Related Party Balance Description of
Transaction
A Food Company Sale of Products resulting in Trade Receivable from Dalian Huayu Seafood Food Co., Ltd. 234,699 Food Company sold cooked food to Huayu dating back to 1/2007.
Subtotal of Related Party Sales $ 234,699
B Food Company Loan Receivable from Dalian Huayu Seafood Co., Ltd. 2,917,918 Huayu borrowed loan from Food Company back to 11/2008
C Food Company Loan Receivable from Dalian Mingxing Livestock Product Co. Ltd., 4,376,878 Mingxing borrowed loan from Food Company back to 12/2008
D Meat Company Loan Receivable from Dalian Chuming Fodder Co., Ltd. 34,714 Meat Companypaid utility fees for Fodder Co. dating back to 7/2008.
E Meat Company Loan Receivable from Dalian Chuming Stockbreeding Combo Development Co., Ltd. 3,445,292 Prepayment to Group for Purchase of hogs dating back to 7/2008.
F Meat Company Loan Receivable from Dalian Chuming Group Co., Ltd. 68,211 Meat Company purchased office supplies on behalf of the Group dating back to 11/2005
G Food Company Loan Receivable from Dalian Chuming Group Co., Ltd. 1,458,959 Food Company paid bank loan principal and interest on behalf of Industrial Co. dating back to 1/2008
H Sales Company Loan Receivable from Dalian Huayu Seafood Co., Ltd. 1,562,263 Sales Company paid Huayu to help it buy materials dating back to 9/2008.
I Sales Company Loan Receivable from Dalian Chuming Group Co., Ltd. 5,212,167 Sales Company paid the Group to help it buy materials dating back to 7/2008.
J Sales Company Loan Receivable from Dalian Chuming Stockbreeding Combo Development Co., Ltd. 19,568,483 Sales Company paid for Stockbreeding to buy hogs from farmer dating back 7/2008
K Sales Company Loan Receivable from Dalian Chuming Fodder Co., Ltd. 2,509,410 Sales Company paid for feeding materials on behalf of Fodder dating back to 9/2008.
Subtotal of Loans to Related Parties $ 41,154,295
Gross Related Party Receivable $ 41,388,994
F-17
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Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
Subsidiary Due from: Nature of Balance Related Party Balance Description of
Transaction
L Meat Company Purchase of Raw Materials resulting in Trade Payable to Dalian Chuming Group Co., Ltd. 5,396,217 Purchase of hogs from Group dating back to 12/1/2004.
M Meat Company Purchase of Raw Materials resulting in Trade Payable to Dalian Chuming Group Co., Ltd. 7,365,945 Purchase of hogs from Group dating back to 7/2008.
N Food Company Purchase of Raw Materials resulting in Trade Payable to Dalian Huayu Seafood Food Co., Ltd 2,621,251 Advance from Huayu for the purchase of product dating back to 12/2007.
Subtotal of Purchases from Related Parties $ 15,383,413
O Food Company Loan Payable to Dalian Chuming Group Co., Ltd. 950,134 Group paid for salaries and other G&A expenses on behalf of Food dating back to 1/2004.
P Meat Company Loan Payable to Dalian Chuming Stockbreeding Combo Development Co., Ltd. 123,210 Meat Company collected bank loans for Stockbreeding Co. dating back to 7/2008
Q Meat Company Loan Payable to Dalian Chuming Industrial Development Co., Ltd. 6,477 Industrial Development paid salaries on behalf of Meat Company dating back to 1/2005.
R Meat Company Loan Payable to Dalian Mingxing Livestock Product Co. Ltd., 393,919 Meat Company collected bank loans on behalf of Mingxing dating back to 8/2008
S Meat Company Loan Payable to Dalian Huayu Seafood Food Co., Ltd 541,738 Huayu lent funds to Meat Company for necessary operation activities dating 12/2008
T Sales Company Loan Payable to Dalian Mingxing Livestock Product Co. Ltd., 986,256 Sales Company borrowed funds from Mingxing for operations purpose dating back to 12/2008
U WFOE Loan Payable to Dalian Chuming Group Co. 12,084,070 Group loaned funds to WFOE (incl. funds transferred from Meat for US RTO.
Subtotal of Loans from Related Parties $ 15,085,804
Gross Related Party Payable $ 30,469,217
Setoff Related Party Receivable (Receivables have been setoff against payables) $ 10,919,777
F-18
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Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
A. The Food Company sold USD 235 thousand (RMB 1.6 million) worth of cooked food to Huayu on credit. This transaction impacted the statement of income. After applying a 17% valued added tax, the Food Company generated USD 200 thousand (RMB 1.4 million) in sales revenue from this transaction.
B. Food Company loaned USD 2.9 million (RMB 20 million) to Huayu in November 2008.
C. Food Company loaned USD 4.4 million (RMB 30 million) to Mingxing in December 2008.
D. Meat Company paid USD 35 thousand (RMB 237 thousand) for utility fees on behalf of Fodder Co. in the 3rd quarter of 2008, which resulted in this receivable.
E. The prepayment of USD 3.5 million (RMB 23.6 million) from Meat Company to the Group for hogs was increased by USD 96 thousand (RMB 0.6 million), USD 0.15 million (RMB 1 million), and USD 4.1 million (RMB 28.3 million) in July, August, and September respectively. Simultaneously, the Group paid down its balance in the amounts of USD 1.3 million (RMB 8.9 million) and USD 230 thousand (RMB 1.54 million) to Meat Company.
F. The balance of USD 68 thousand (RMB 467 thousand) for the purchase of office supplies by Meat Company for the Group, was still outstanding as of December 31, 2008.
G. Food Company paid certain bank loan interest and principal on behalf of Industrial Co. prior to 2008. This resulted in a receivable of USD 1.5 million (RMB 10 million) owed by Industrial Co. to the Food Company. A balance of USD 1.5 million (RMB 10 million) remained outstanding as of December 31, 2008.
H. The Sales Company advanced USD 1.6 million (RMB10.7 million) to Huayu for the purchase of raw materials, resulting in this receivable.
I. The Sales Company paid for the purchase of certain materials for the Group, resulting in a balance of USD 5.2 million (RMB 35.7 million) receivable from Group to Sales Company. This balance was increased by USD 5.8 million (RMB 39.6 million) and USD 3.9 million (RMB 20.6 million) in the 3rd and 4th quarters of 2008, in connection with the purchase of additional materials by Sales Company. The Group has paid down USD 4.5 million (RMB 20.3 million) of this balance, resulting in an ending balance of USD 5.2 million (RMB 35.7 million).
J. Sales Company paid USD 19.6 million (RMB 134.1 million) to local farmers for the purchase of hogs, on behalf of the Group, which gave rise to this receivable from the Group to Sales Company.
K. Sales Company purchase feed materials, paid construction fees, and utility costs for Fodder Co., resulting in a receivable of USD 2.5 million (RMB17.2 million) due from Fodder Co. to Sales Company. In 2008, the following transactions affected the balance of this receivable: USD 0.8 million (RMB 5.4 million) was paid to buy feeding materials, USD 1.1 million (RMB 7.7 million) was paid for construction fees, and USD 0.6 million (RMB 4 million) for utilities.
F-19
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Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
L. The Company acquired hogs from the Group, resulting in a balance payable from the Company to the Group of USD 5.4 million (RMB 36.9 million). In 2008, this balance was affected by the following transactions: increases by USD 3.9 million (RMB 27.4 million), USD 5.5 million (RMB 37.7 million), USD 5.2 million (RMB 35.1 million), and USD 480 thousand (RMB 3.3 million) in July, August, September, and December respectively. The Company paid USD 9.8 million (RMB 67.4 million) to settle this balance in September 2008. The increase in the balance as result of the purchase hogs would impact the statements of income; however, the effect of the repayment is isolated to the Company’s balance sheet.
M. The Group sold hogs to Meat Company on August 12, 2008 which were not immediately paid for, which resulted in a net payable from the Meat Company to Group in the amount of USD 7.4 million (RMB 50.5 million).
N. The USD 2.6 million (RMB 18 million) deposit owed to Huayu was still outstanding at December 31, 2008.
O. The Group paid USD 954 thousand (RMB 6.5 million) in salaries and general administrative expense on behalf of Food Company, resulting in this payable.
P. The outstanding balance of USD 123 thousand (RMB 84 thousand) due from Meat Company to Combo Development Co. resulted from the fact that Meat Company collected USD 52 thousand (RMB 0.4 million) hogs sales and USD 1.5 million (RMB 10.4 million) in proceeds from a bank loan on behalf of Combo Development Co. in August and September, 2008 respectively. Simultaneously, the Meat Company repaid USD 1.5 million (RMB 10 million) to Combo Development Co.
Q. The a balance of USD 6 thousand (RMB 44 thousand) owed by Industrial Development Co. to Meat Company was still outstanding at December 31, 2008.
R. Meat Company collected bank loans on behalf of Mingxing dating back to August 2008.
S. Meat Company borrowed USD 542 thousand (RMB 3.7 million) operating funds from Huayu in December 2008.
T. Sales Company borrowed USD 986 thousand (RMB 6.7 million) from Mingxing in December 2008.
U. The outstanding payable balance of USD 12.1 million (RMB 83.2 million) due to the Group has been transferred to the books of Chuming, i.e., WFOE owes Chuming the amount stated above. This balance was increased by USD 250 thousand (RMB 1.7 million) in the fourth quarter of 2008.
The related party receivable balance detailed above, and the related transactions that comprise that balance were integral and material to the Company’s operations. The Company was reliant on transactions with the above related parties in order to conduct its business normally. The Company acknowledges that it has the responsibility to comply with paragraph c of SFAS 57 which calls for the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period. The Company’s accounting system in the past was manual and accordingly is not able to, from a cost benefit perspective, summarize and provide further detail on the related party transactions. Also, the Company’s current accounting department does not have sufficient staff in order to perform an exercise to further detail the related party payables and receivables beyond what has been provided above; however the Company is taking steps to update its accounting systems and methods to provide fuller detail regarding these transactions for future periods. The Company does represent that the balances disclosed above are both accurate and reliable within acceptable thresholds of materiality.
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Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
The Company’s related party receivables and payables in the period presented were in the form of either short-term loans bearing no interest, or trade payables and receivables relating to the purchase of raw materials, supplies or products for which payment was due within a short period of time. Management believes that the net receivables from related parties are fully recoverable.
Of the $10,919,777 net receivable owed by the Group to the Company, the entire amount has been securitized by bank drafts issued by the bank on behalf of subsidiaries of the Group to the Company. These notes are collateralized by deposits at the bank by those particular subsidiaries of the Group. The drafts can be endorsed and discounted to the bank for cash; however the Company currently intends to hold these drafts until maturity. The following table summarizes the amounts of each draft.
Subsidiary of the Group Amount
Huayu $ 2,917,919
Mingxing 4,376,878
Combo Development 2,188,439
Group 1,436,540
$ 10,919,777
6. Inventory
At At At
December 31, December 31, December 31,
2008 2007 2006
Raw Materials $ 867,549 $ 1,039,440 $ 875,223
Work in Progress 241,738 547,889 365,961
Finished Goods 4,941,822 1,328,688 1,144,263
$ 6,051,109 $ 2,916,016 $ 2,385,447
7. Property, Plant & Equipment
At Accumulated
December 31, 2008: Cost Depreciation Net
Buildings $ 21,604,325 $ (3,607,219 ) $ 17,997,105
Manufacturing Equipment 10,061,608 (3,132,725 ) 6,928,883
Office Equipment 195,577 (150,670 ) 44,907
Vehicles 913,816 (477,265 ) 436,551
Furniture & Fixture 524,020 (137,317 ) 386,704
$ 33,299,346 $ (7,505,196 ) $ 25,794,151
At Accumulated
December 31, 2007: Cost Depreciation Net
Buildings $ 19,910,391 $ (2,522,257 ) $ 17,388,134
Manufacturing Equipment 9,066,948 (2,041,694 ) 7,025,254
Office Equipment 122,124 (60,298 ) 61,826
Vehicles 652,231 (321,138 ) 331,093
Furniture & Fixture 49,204 (19,015 ) 30,189
$ 29,800,898 $ (4,964,402 ) $ 24,836,496
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Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
At Accumulated
December 31, 2006: Cost Depreciation Net
Buildings $ 14,663,106 $ (1,174,049 ) $ 13,489,057
Manufacturing Equipment 8,346,776 (1,403,176 ) 6,943,600
Office Equipment 68,198 (14,165 ) 54,033
Vehicles 572,290 (203,600 ) 368,690
Furniture & Fixture 30,550 (10,468 ) 20,082
$ 23,680,920 $ (2,805,458 ) $ 20,875,462
8. Land Use Right
The Company had the following intangible assets outstanding at December 31:
At At At
December 31, December 31, December 31,
2008 2007 2006
Land Use Rights, at Cost $ 14,407,503 $ 13,501,580 $ 9,303,402
Less : Accumulated Amortization (977,068 ) (645,600 ) (392,283 )
$ 13,430,435 $ 12,855,980 $ 8,911,119
9. Bank Loans
(A) Short Term Bank Loans
At December 31, 2008 the Company had the following short term loans outstanding:
Bank Interest Rate Due Date Amount
Bank of China 6.1586 % 10/26/2009 $ 4,376,878
Bank of China 7.3260 % 10/17/2009 2,042,543
$ 6,419,422
The loan provided by the Bank of China is secured by the Meat Company’s land use rights, which have been appraised at a fair market value of $5,605,611 (RMB 41,000,000). Also, the Shanghai Pudong Development Bank loan has been guaranteed by the Dalian Chuming Group Co., Ltd.
(B) Bank Loan through Group
The Company obtained a loan of $20,466,901 (RMB 160,000,000) from the Group; which in turn, obtained these funds in a joint loan commitment from both China Development Bank and Shenzhen Development Bank (“Banks”) via a collateralized loan. The Group collateralized the loan by purchasing a bond from China Export and Credit Insurance Corporation (“Bond Issuer”). The bond guarantees to the Banks the entire principal and accrued interest of the loan. The cost of the bond is RMB 1,000,000 annually, or in USD: $120,668, 121,902, and 125,284 for the years 2004, 2005, and 2006, respectively, which was paid by the Company. The loan carries a fixed interest of 5.76% per annum. The Company pledged both land use rights and buildings to the Bond Issuer. The Company pursued a loan from the Group as the financing solution of choice because the Company’s tangible assets, at the time of origination, were insufficient to collateralize the loan. Additionally, the Company lacked the favorable credit history to directly establish credit facility with the bank.
F-22
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Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
At December 31, 2007, the Company repaid its debt, in its entirety to the Group by setting off receivables owed by the Group to the Company. The Company repaid the loan in order to meet the requirements of the equity financing transaction detailed in Note 18. The balances are now owed by the Group to the Banks, and liability for paying the bonding insurance annually lies with the Group. The pledged collateral of land use rights and buildings made to the Bond Issuer still underlie the loan currently owed by the Group, and as such, the Company’s assets, namely the buildings and land use rights are at risk if the Group were to default on this loan.
10. Capitalization
As a result of a reverse-acquisition on December 31, 2007 that was consummated via a share exchange, and a concurrent equity financing, in the form of a private placement by issuing common stock to ten accredited investors, the Company’s capitalization is now reflected by the table shown below:
Name of Shareholder Number of
Shares Common
Stock
Capital Additional
Paid in
Capital Equity %
Operating Companies Founders 14,688,948 $ 14,689 $ 2,396,079 69.50 %
Pre-RTO Shareholders 422,756 423 - 2.00 %
Advisors & Consultants 2,161,052 2,161 - 10.22 %
Private Investors 3,863,636 3,864 13,043,964 18.28 %
21,136,392 $ 21,137 $ 15,440,043 100.00 %
11. Commitments of Statutory Reserve
In compliance with PRC laws, the Company is required to appropriate a portion of its net income to its statutory reserve up to a maximum of 50% of an enterprise’s registered capital in the PRC. The Company had future unfunded commitments, as provided below.
At At At
December 31, December 31, December 31,
2008 2007 2006
PRC Registered Capital 15,566,849 3,642,866 2,413,352
- Statutory Reserve Ceiling based on 50% of Registered Capital 7,783,424 1,821,433 1,206,676
Less : - Retained Earnings appropriated to Statutory Reserve (2,077,488 ) (751,444 ) (751,444 )
Reserve Commitment Outstanding $ 5,705,936 $ 1,069,989 $ 455,232
12. Advertising Costs
Advertising expenses were $2,629,853, $3,611,666, and $869 for the years ended December 31, 2008, 2007, and 2006, respectively.
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Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
13. Income Taxes
The Company’s different operating subsidiaries are subject to different income tax regulations under PRC law.
The operating subsidiary, Meat Company, has been given special tax-free status by the PRC government because of the Company standing as leader in its industry in Dalian; therefore, no provision for income tax in the PRC was made for years 2008, 2007, and 2006.
The Company’s operating subsidiary, Food Company, has provided provisions for income taxes in years 2008, 2007, and 2006, of $508,844, $967,539, and $400,605, respectively.
The Company’s operating subsidiary, Sales Company, has not provided provisions for income taxes in years 2008, 2007, and 2006 as it has incurred operating losses for those respective years. The Company has determined that deferred tax assets arising from net operating losses in prior years may not realized, accordingly, the company has recognized a tax expense to the income statement in the amount of $11,246.
After adjusting for special tax-free status and net operating loss, the consolidated taxable earnings were determined, and the results were as follows: -
i. 2007 Tax expense (520,089)
ii. 2006 Tax expense (967,539)
iii. 2005 Tax benefit 1,609
Beginning December 31, 2007, the Company’s foreign subsidiaries became subject to U.S. income tax liability; however, the tax is deferred until foreign source income is repatriated to the Company and the Company has not currently determined when foreign source income will be repatriated. Accordingly, the company has not made any provisions for U.S. income tax liability.
On March 16, 2007, the PRC government passed new tax legislation that repealed preferential tax treatment for foreign investment enterprises in the PRC and enacted new tax regulations. Under such regulations, with certain exceptions, both domestic and foreign enterprises will be taxed at a standard enterprise income tax rate of 25%. The Company’s two operating subsidiaries, Food Company, and Sales Company are subject to the 25% income tax rate beginning January 1, 2008. Based on current PRC legislation, Meat Company should be expected to continue benefiting from a tax holiday.
14. Commitments
It is company policy to develop plant facilities based on availability of cash resources without incurring capital commitments. Therefore, the Company did not have any capital commitments existing at December 31, 2008.
On December 19, 2007, the Company entered into a hog purchase agreement whereby the Group will provide at fair market price a minimum number of hogs to the Company. At December 31, 2008, the Company expects minimum quantities of hogs detailed in the following table:
Year Hogs Price Per Hog Amount
2009 800,000 $ 187.13 $ 149,704,306
2010 800,000 $ 205.84 164,674,737
$ 314,379,043
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Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
The Company believes that the fair market price of the hogs will increase by 10% each year. The assumption of 10% reflects that Company expectations in regards to inflation, and the rising costs of inputs in breeding livestock.
15. Operating Segments
The Company individually tracks the performance of its three operating subsidiaries Meat Company, Food Company, and Sales Company. Meat Company is primarily engaged in the slaughter and processing of pork livestock for wholesale and retail distribution. Food Company is primarily engaged in the production of pork-based food products, such as sausages and cured meats, for retail distribution. Sales Company is primarily engaged in the sale and distribution of products produced by Food Company and Meat Company.
The chief operating decision maker is the Chief Executive Officer of the Company. He evaluates each operating segment on the following measures of profit or loss: gross profit, operating income, and earnings before taxes, and net income. When he makes decisions on the strategic plans of each operating segment, he considers the foregoing measures of profit or loss and their impact on the overall performance of the Company as a whole.
Below is a presentation of the Company’s results of operations and financial position for its operating subsidiaries at December 31, 2008, 2007, and 2006 and for the years then ended. The Company has also provided reconciling adjustments with the Company and its intermediate holding companies Dalian Chuming Precious Sheen Investments Consulting Ltd. (“Chuming WFOE”) and Precious Sheen Investments Ltd (PSI).
Results of Operations Chuming WFOE,
For the year ended Meat Food Sales PSI, &
December 31, 2008 Company Company Company Eliminations Total
Sales $ 165,540,800 $ 20,275,953 $ 82,629,122 $ (92,085,862 ) $ 176,360,013
Cost of Sales 143,467,926 17,018,115 81,394,069 (92,085,862 ) 149,794,249
Gross Profit 22,072,873 3,257,837 1,235,054 - 26,565,764
Operating (Loss)/Profit 19,835,123 2,038,279 (2,475,995 ) (654,670 ) 18,742,737
Other Income (Expense) (684,408 ) (95,144 ) (6,952 ) (10,598,879 ) (11,385,383 )
Earnings/(Loss) before Tax 19,150,715 1,943,135 (2,482,947 ) (11,253,549 ) 7,357,354
(Income Tax Expense) - (508,844 ) (11,246 ) - (520,089 )
Net Income/(Loss) 19,150,715 1,434,292 (2,494,193 ) (11,253,549 ) 6,837,265
Eliminated Intercompany Sales of Products Sold during
Year ended December 31, 2008
Sold From: Sold To: Amount
Food Company Sales Company $ 15,614,380
Meat Company Sales Company 66,171,117
Meat Company Food Company 10,300,365
$ 92,085,862
F-25
--------------------------------------------------------------------------------
Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
Results of Operations Chuming WFOE,
For the year ended Meat Food Sales PSI, &
December 31, 2007 Company Company Company Eliminations Total
Sales $ 113,777,514 $ 18,224,294 $ 26,110,284 $ (33,416,057 ) $ 124,696,035
Cost of Sales 99,779,158 12,672,576 25,343,231 (33,416,057 ) 104,378,908
Gross Profit 13,998,356 5,551,718 767,053 - 20,317,127
Operating (Loss)/Profit 10,842,549 3,624,143 (368,002 ) (27,261 ) 14,071,429
Other Income (Expense) (691,006 ) (712,807 ) (47,929 ) - (1,451,742 )
Earnings/(Loss) before Tax 10,151,543 2,911,336 (415,931 ) (27,261 ) 12,619,687
(Income Tax Expense)/Credit - 967,539 - - 967,539
Net Income/(Loss) $ 10,151,543 $ 1,943,797 $ (415,931 ) $ (27,261 ) $ 11,652,147
Eliminated Intercompany Sales of Products Sold during
Year ended December 31, 2007
Sold From: Sold To: Amount
Food Company Sales Company $ 4,221,813
Meat Company Sales Company 20,435,143
Meat Company Food Company 8,759,101
$ 33,416,057
Results of Operations Chuming WFOE,
For the year ended Meat Food Sales PSI, &
December 31, 2006 Company Company Company Eliminations Total
Sales $ 64,169,418 $ 7,351,567 $ 17,277,285 $ (18,401,830 ) $ 70,396,439
Cost of Sales 54,146,375 4,855,542 16,923,680 (18,130,743 ) 57,794,853
Gross Profit 10,023,044 2,496,025 353,605 (271,087 ) 12,601,586
Operating (Loss)/Profit 9,253,704 1,930,499 (1,203,200 ) (271,087 ) 9,709,916
Other Income (Expense) (849,450 ) (718,182 ) (15,522 ) - (1,583,154 )
Earnings/(Loss) before Tax 8,404,254 1,212,317 (1,218,722 ) (271,087 ) 8,126,762
(Income Tax Expense)/Credit - 400,065 (401,674 ) - (1,609 )
Net Income/(Loss) $ 8,404,254 $ 812,252 $ (817,049 ) $ (271,087 ) $ 8,128,371
F-26
--------------------------------------------------------------------------------
Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
Eliminated Intercompany Sales of Products Sold during
Year ended December 31, 2006
Sold From: Sold To: Amount
Food Company Sales Company $ 3,735,082
Meat Company Sales Company 12,709,432
Meat Company Food Company 1,686,229
$ 18,130,743
Financial Position Chuming WFOE,
At Meat Food Sales PSI, &
December 31, 2008 Company Company Company Eliminations Total
Current Assets 74,713,237 21,126,826 41,826,291 (89,504,485 ) 48,161,868
Non Current Assets 22,624,642 19,570,329 325,480 1,088 42,521,540
Total Assets $ 97,337,879 $ 40,697,155 $ 42,151,770 $ (89,503,397 ) $ 90,683,408
Current Liabilities 42,293,137 34,796,536 45,747,946 (99,079,857 ) 23,757,761
Total Liabilities 42,293,137 34,796,536 45,747,946 (99,079,857 ) 23,757,761
Net Assets 55,044,742 5,900,619 (3,596,176 ) 9,576,460 66,925,647
Total Liabilities
& Net Assets $ 97,337,879 $ 40,697,155 $ 42,151,770 $ (89,503,397 ) $ 90,683,408
Financial Position Chuming WFOE,
At Meat Food Sales PSI, &
December 31, 2007 Company Company Company Eliminations Total
Current Assets $ 36,387,010 $ 19,361,784 $ 24,500,857 $ (52,282,684 ) $ 27,966,967
Non Current Assets 22,256,798 16,228,202 167,961 - 38,652,961
Total Assets $ 58,643,808 $ 35,589,986 $ 24,668,818 $ (52,282,684 ) $ 66,619,928
Current Liabilities $ 25,289,655 $ 31,425,683 $ 25,664,664 $ (64,697,884 ) $ 17,682,118
Total Liabilities 25,289,655 31,425,683 25,664,664 (64,697,884 ) 17,682,118
Net Assets 33,354,152 4,164,303 (995,846 ) 12,415,200 48,937,810
Total Liabilities
& Net Assets $ 58,643,808 $ 35,589,986 $ 24,668,818 $ (52,282,684 ) $ 66,619,928
F-27
--------------------------------------------------------------------------------
Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
Financial Position Chuming WFOE,
At Meat Food Sales PSI, &
December 31, 2006 Company Company Company Eliminations Total
Current Assets $ 27,676,447 $ 18,497,318 $ 27,870,908 $ (51,181,557 ) $ 22,863,116
Non Current Assets 21,257,469 12,561,441 163,596 - 33,982,507
Total Assets $ 48,933,916 $ 31,058,759 $ 28,034,504 $ (51,181,557 ) $ 56,845,623
Current Liabilities 16,426,173 22,340,903 28,560,949 (50,564,504 ) 16,763,521
Total Liabilities 27,619,010 29,056,605 28,560,949 (50,564,504 ) 34,672,060
Net Assets 21,314,906 2,002,154 (526,445 ) (617,053 ) 22,173,564
Total Liabilities
& Net Assets $ 48,933,916 $ 31,058,759 $ 28,034,504 $ (51,181,557 ) $ 56,845,623
F-28
--------------------------------------------------------------------------------
Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
16. Earnings Per Share
Components of basic and diluted earnings per share were as follows: -
For the For the For the
year ended year ended year ended
December 31, December 31, December 31,
2008 2007 2006
Net Income (A) $ 6,837,265 $ 11,652,147 $ 8,128,371
Basic Weighted Average Shares Outstanding (B) 17,272,756 13,409,120 13,409,120
Dilutive Shares:
-Addition to Common Stock from Exercise of Placement Warrants 46,364 - -
-Addition to Common Stock from Contingent Shares Held in Escrow (Please refer to Note 18) 3,863,636 3,863,636 3,863,636
Diluted Weighted Average Shares Outstanding: (C) 21,182,756 17,272,756 17,272,756
Earnings Per Share:
-Basic (A)/(B) $ 0.40 $ .87 $ 0.61
-Diluted (A)/(C) $ 0.32 $ .67 $ 0.47
Weighted Average Shares Outstanding:
-Basic 17,272,756 13,409,120 13,409,120
-Diluted 21,182,756 17,272,756 17,272,756
17. Concentration of Risk
(A) Demand risk
The Company had concentrations of risk in demand for its products because its sales were made to a small number of customers.
(B) Supply Risk
The Company is subject to concentration of supply shortage risk because it purchases its materials for resale from a few select vendors. The Company’s availability of supply is correlated with the few select vendors’ ability to meet the market demand. In 2007, the entire industry in the PRC faced a shortage in the supply of hogs.
18. Financing Transaction
On December 31, 2007, the Company, a Nevada corporation (“Energroup” or the “Company”), acquired Precious Sheen Investments Ltd. (“PSI”) in a reverse take-over transaction, by executing a Share Exchange Agreement (“Exchange Agreement”) by and among Energroup, PSI, and all of the shareholders of PSI’s
issued and outstanding share capital (the “PSI Shareholders”). PSI owned 100% of the equity in Chuming WFOE. Chuming WFOE is a holding company for the following three operating subsidiaries: (i) Meat Company, (ii) Food Company, and (iii) Sales Company, each of which is a limited liability company headquartered in, and organized under the laws of, China (also referred to elsewhere as the “Chuming Operating Subsidiaries”).
F-29
--------------------------------------------------------------------------------
Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
As a result of the reverse take-over transaction, PSI’s Shareholders became Energroup’s controlling shareholders and PSI became Energroup’s wholly-owned subsidiary. As a result of PSI becoming Energroup’s wholly-owned subsidiary, Energroup acquired the business and operations of Chuming and the Chuming Operating Subsidiaries.
Under the Exchange Agreement, Energroup completed the acquisition of all of the issued and outstanding shares of PSI through the issuance of 16,850,000 restricted shares of common stock of Energroup to PSI’s Shareholders. Immediately prior to the Exchange Agreement transaction, the Company had 422,756 shares of common stock issued and outstanding. Immediately after the issuance of the shares to PSI’s Shareholders, the Company had 17,272,756 shares of common stock issued and outstanding. The 422,756 shares of PSI were cancelled and 17,272,756 shares of Energroup were issued to reflect this reverse take-over transaction.
Concurrently with the Exchange Agreement, Energroup also entered into a Securities Purchase Agreement (the “Purchase Agreement”) pursuant to which Energroup agreed to issue and sell 3,863,635 shares of its common stock to ten accredited investors for an aggregate purchase price of $17,000,000 or $4.40 per share (the “Financing”). The closing of the Financing coincided with the Closing of the reverse take-over transaction.
In connection with the sales of securities to accredited investors under the securities purchase agreement, Hunter Wise Financial Group, LLC (the “Placement Agent”), was compensated with a commission of $1,190,000 which is equal to 7.00% of the aggregate purchase price and a warrant to purchase the 386,364 shares of the Company’s common stock at an exercise price of $4.40 per share. At December 31, 2007, the Company had adequate authorized capital to issue common shares upon the exercise of the warrant.
At December 31, 2008, the total number of shares outstanding, on a fully diluted basis, is shown in the following table:
i. Common shares outstanding prior to offering of securities 17,272,756
ii. Common shares issued under securities purchase agreement 3,863,636
iii. Common shares issuable upon exercise of placement agent warrants 386,364
21,522,756
Concurrent with the Company’s financing transaction, the Company agreed to register for resale the common shares that were sold under the securities purchase agreement. Pursuant to filing a Form S-1 registration statement with the U.S. Securities and Exchange Commission, the Company entered into a Registration Rights Agreement with the Investors. The agreement calls for liquidated damages to be paid by the Company, if in the event the registration statement is not declared effective within 135 days of the closing of the financing transaction. The liquidated damages will be 1% of the total financing amount in cash per month for each month after the 135 period. The agreement states a maximum penalty of $1.70 million or 10% of the financing amount. At December 31, 2007, the Company accounted for the liability under the registration rights agreement in accordance with FASB Staff Position No. EITF 00-19-2 Accounting for Registration Payment Arrangements . Under such accounting treatment, the liquidated damages are accounted for as a reduction of the proceeds. In asserting the most conservative position, the Company has accrued the maximum liability of $1.7 million and is carrying that balance in the accrued liabilities account. In the event that the registration becomes effective in a timeframe that is earlier than February 15, 2009, the portion that is not legally owed, or in the event that investors waive any liquidating damages, the accrual will be reversed and the funds will be added back to the Company’s additional paid in capital.
F-30
--------------------------------------------------------------------------------
Energroup Holdings Corporation
Notes to Consolidated Financial Statements
As of and for the years ended December 31, 2008, 2007, and 2006
In connection with a make good agreement related to the financing transaction on December 31, 2007, the Company’s Chairman and CEO, Mr. Shi Huashan placed in escrow 3,863,636 shares, which were beneficially owned by him. These shares are to be released back to him if the Company meets the following earnings targets of $15.9 million, and $20.9 million in after-tax net income for the years ended December 31, 2008, and 2009 respectively. In the event that the Company does not meet the aforementioned financial targets, the escrowed shares will be released, on a pro-rata basis, to the investors in the financing transaction. In accordance with SFAS 128, Earnings Per Share , for the sake of calculating the Company’s earnings per share, the Company has accounted for the 3,863,636 escrowed shares as contingently issuable shares as such they are not included in the weighted average basic shares outstanding but are included in the weighted average diluted shares outstanding. Please refer to Note 16.
In accordance with Topic 5.T of the Staff Accounting Bulletins (SAB 79), the Company expects to record a compensatory expense for the shares upon their release from escrow. Whether the shares are released to the accredited investors or released to Mr. Shi the Company will record an expense with a corresponding credit to the Company’s contributed paid in capital. The Company anticipates that compensatory expense to be recognized in future operating periods could be in a range between $17.0 million to $29.2 million. The Company approximates this range based on the per share offering price of $4.40 at December 31, 2007 and a potential future stock price of $7.57 based on a $20.0 million net income (short of the target of $20.9 million net income) with a price-to-earnings ratio of 8.0, which is comparable to the valuation used in the offering at December 31, 2007.
For the year ended December 31, 2008, the Company recorded an expense for the expected release of shares deposited in the escrow account. The Company expects that 1,931,818 shares will be released from escrow. The amount of expense recorded was $10,622,294. The impact on earnings per share, on a basic and diluted basis, was $0.61 and $0.50, respectively.
19. Change of Chief Financial Officer
The Company filed an 8-K on December 29, 2008 in connection with the change of Chief Financial Officer where Mr. Zhang Yizhao resigned his position and Ms. Wang Shu was appointed to this position that she had previously held until September 28, 2008. Mr. Zhang Yizhao's total remuneration during his term of service at the Company was approximately $71,000 (RMB 500,000).
F-31
--------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on the 6th day of May, 2009.
ENERGROUP HOLDINGS CORPORATION
By: /s/ Shi Huashan
Shi Huashan
President, Chief Executive Officer
and Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature Title Date
/s/ Shi Huashan Chief Executive Officer, May 6, 2009
Shi Huashan President, and Director
(Principal Executive Officer)
/s/ Wang Shu
Wang Shu Chief Financial Officer and Director
(Principal Financial and Accounting Officer)
May 6, 2009
/s/ Wang Shuying Director May 6, 2009
Wang Shuying
/s/ Ma Fengqin Director May 6, 2009
Ma Fengqin
--------------------------------------------------------------------------------
EXHIBIT 31.1
CERTIFICATION
I, Shi Huashan, certify that:
1. I have reviewed this Amendment No. 1 to the annual report on Form 10-K of Energroup Holdings Corporation;
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(s) 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 principals;
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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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(s) 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 (or persons performing the equivalent functions):
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 data 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: May 6, 2009 By: /s/ Shi Huashan
Shi Huashan
Chief Executive Officer
(Principal Executive Officer)
--------------------------------------------------------------------------------
EXHIBIT 31.2
CERTIFICATION
I, Wang Shu, certify that:
1. I have reviewed this Amendment No. 1 to the annual report on Form 10-K of Energroup Holdings Corporation;
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(s) 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 principals;
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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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(s) 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 (or persons performing the equivalent functions):
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 data 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: May 6, 2009 By: /s/ Wang Shu
Wang Shu
Chief Financial Officer
(Principal Financial and Accounting Officer)
--------------------------------------------------------------------------------
EXHIBIT 32.1
CERTIFICATION
In connection with the Amendment No. 1 to the annual report of Energroup Holdings Corporation (the “Company”) on Form 10-K for the year ending December 31, 2008 as filed with the Securities and Exchange Commission (the “Report”), I, Shi Huashan, Chief Executive Officer (Principal Executive Officer) of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.
Date: May 6, 2009 By: /s/ Shi Huashan
Shi Huashan
Chief Executive Officer
(Principal Executive Officer)
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
--------------------------------------------------------------------------------
EXHIBIT 32.2
CERTIFICATION
In connection with the Amendment No. 1 to the annual report of Energroup Holdings Corporation (the “Company”) on Form 10-K for the year ending December 31, 2008 as filed with the Securities and Exchange Commission (the “Report”), I, Wang Shu, Chief Financial Officer (Principal Financial and Accounting Officer) of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.
Date: May 6, 2009 By: /s/ Wang Shu
Wang Shu
Chief Financial Officer
(Principal Financial and Accounting Officer)
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
--------------------------------------------------------------------------------
"Guess" was your own word,
not mine.
Copied from post 36082....
" My guess is that ONEVE is holed up in that little office paying month to month until they start the wholesale shoveling of their new shares out the door to their toxics next month. All IMHO.
SBB"
That's your guess....
My guess is that OneVoice, having few employess and no need
for huge office space, has "downsized" into smaller space (smaller rent payments), be it converted motel space or whatever.
They're doing whatever it takes to survive the current downturn, until the revs from MTNL(done deal) and others
kick in.
SBB, keep it up, I'm sure you can find more negative
GUESSES about ONEV, it must kill you that they go on
surviving in these tough economic times.
GLTAEB.
I sent the company an eMail....
Along with merging SIVC with Redwood(why have a company owning
100% of one subsidiary company?), I suggested they get rid of both names and call the new entity something meaningful like
China Investments, Inc.
GLTA.
Pretty weak, james, LOL.
"The Company expects the Form 10-K to be filed shortly and once the filing occurs the Company expects the 'E' will be removed from its symbol."
Spin that, you BK sayers!
GLTAEB.
Press Release Source: One Voice Technologies
One Voice Technologies Announces Temporary Change in Ticker Symbol
An "E" Has Been Added to the Company's Symbol Denoting a Late Filing
Monday April 20, 2009, 2:25 pm EDT
Buzz up! Print LA JOLLA, CA--(MARKET WIRE)--Apr 20, 2009 -- One Voice Technologies, Inc. (OTC BB:ONEVE.OB - News), developer of 4th Generation voice solutions for the Telecom and Interactive Multimedia markets, today announced that the Company's ticker symbol has been changed from ONEV to ONEVE as a result of the Company's failure to timely file a Form 10-K for the Company's annual 2008 results for the period ended December 31, 2008. The Company expects the Form 10-K to be filed shortly and once the filing occurs the Company expects the 'E' will be removed from its symbol.
About One Voice Technologies, Inc.
One Voice Technologies, Inc. (OTC BB:ONEVE.OB - News) is the world's first developer of 4th Generation voice solutions for the Telecom and Interactive Multimedia markets. Our Intelligent Voice(TM) solutions employ revolutionary, patented technology that allows people to send messages (E-mail, SMS, Instant Messaging and paging), purchase products, get information and control devices -- all by using their voice. The company is headquartered in La Jolla, California. For more information, please visit http://www.onev.com
FORWARD-LOOKING STATEMENT DISCLAIMER
Some of the statements made in this press release discuss future events and developments, including our future business strategy and our ability to generate revenue, income and cash flow, and should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These "forward-looking" statements can generally be identified by words such as "expect," "anticipate," "believe," "estimate," "intend," "plan," and similar expressions. These statements involve a high degree of risk and uncertainty that exists in the Company's operations and business environment and are subject to change based on various factors that could cause actual Company results, performance, plans, goals and objectives to differ materially from those contemplated or implied in these forward-looking statements. Actual results may be different from anticipated results for a number of reasons, including the Company's new and uncertain business model, uncertainty regarding acceptance of the Company's products and services and the Company's limited operating history.
MobileVoice, Media Center Communicator, VoiceTunes and Say2Play are trademarks of One Voice Technologies, Inc. All other products and company names herein may be trademarks of their registered owners.
Contact:
INVESTOR RELATIONS:
Attn: Investor Relations
Phone: (866) 823-1432
Fax: (858) 754-1276
Email Contact
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Are yuou absolutely sure that "lack of funds" is the only
reason for a late filing?
No other possible reasons exist?
LOL.
Do you actually believe the nonsense you're throwing around?
Lots of businesses (and families) are tightening their belts in this economy.
Belt-tightening does not spell bankruptcy.
GLTAEB.
"Telmex said no.".....
says who?
You?
LOL.
IRIS, ONEV is a risk I accepted and am (so far) willing to
stay the course. My only "agenda" with my posts here is to
try to counter the attacks made by you and others which
attempt to prevent anyone looking at ONEV from buying,
or getting current holders to sell.
You claim to hold shares but I don't believe you. No one holding would be so shrill and obvious about deriding Dean and the company. I believe you are part and parcel of the group attempting to drive the company out of business, or drive the stock price to zero.
The company will make it, or it won't, but it galls me to see you and others working hard to influence the outcome in your own favor.
I'm not pushing people to believe in a favorable outcome, they can make up their own minds, but if noone counters the
loudmouthed negativity on this board, noone will look
further to try to fully understand the possibilities.
Telmex has not evaporated, MTNL is a done deal waiting to launch, all new authorized shares need NOT be issued,
losing OTC is just something you're hoping for.
Somebody bought 12 shares of ENHD at 3.00/sh.
??
Schedule 13G by Alpha .....
---------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13G
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 6)
ONE VOICE TECHNOLOGIES INC.
--------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK
--------------------------------------------------------------------------------
(Title of Class of Securities)
682421102
--------------------------------------------------------------------------------
(CUSIP Number)
Check the appropriate box to designate the rule pursuant to which this Schedule is filed: x Rule 13d-1(c)
*The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter the disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
(Continued on following page(s)
--------------------------------------------------------------------------------
CUSIP No. 682421102 13G Page 2 of 4 Pages
1. NAMES OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Alpha Capital Anstalt
--------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a) o
(b) o
--------------------------------------------------------------------------------
3. SEC USE ONLY
--------------------------------------------------------------------------------
4. CITIZENSHIP OR PLACE OF ORGANIZATION
Liechtenstein
--------------------------------------------------------------------------------
5. SOLE VOTING POWER, NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON – 128,871,000 Common Stock
--------------------------------------------------------------------------------
6. SHARED VOTING POWER - None
--------------------------------------------------------------------------------
7. SOLE DISPOSITIVE POWER – 128,871,000 shares of Common Stock
--------------------------------------------------------------------------------
8. SHARED DISPOSITIVE POWER – None
--------------------------------------------------------------------------------
9. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON -
128,871,000 shares of Common Stock
--------------------------------------------------------------------------------
10. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES CERTAIN SHARES x
The aggregate amount in Row 9 represents the maximum amount of shares that Alpha Capital Anstalt can beneficially control under a contractually stipulated 9.99% ownership restriction. The full conversion of Alpha Capital Anstalt’s Notes and exercise of its warrants would cause Alpha Capital Anstalt to exceed this restriction.
--------------------------------------------------------------------------------
11. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 9
9.99%
--------------------------------------------------------------------------------
12. TYPE OF REPORTING PERSON
CO
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CUSIP No. 682421102 13G Page 3 of 4 Pages
ITEM 1 (a) NAME OF ISSUER: One Voice Technologies Inc.
ITEM 1 (b) ADDRESS OF ISSUER'S PRINCIPAL EXECUTIVE OFFICES:
6333 Greenwich Drive, #240, San Diego, CA 92122
ITEM 2 (a) NAME OF PERSON FILING: Alpha Capital Anstalt
ITEM 2 (b) ADDRESS OF PRINCIPAL BUSINESS OFFICE OR, IF NONE, RESIDENCE:
Pradafant 7, Furstentums 9490, Vaduz, Liechtenstein
ITEM 2 (c) CITIZENSHIP: Liechtenstein
ITEM 2 (d) TITLE OF CLASS OF SECURITIES: Common Stock
ITEM 2 (e) CUSIP NUMBER: 682421102
ITEM 3 IF THIS STATEMENT IS FILED PURSUANT TO RULE 13D-1(B) OR 13D-2(B): Not applicable
ITEM 4 OWNERSHIP
(a) AMOUNT BENEFICIALLY OWNED: 128,871,000 Shares of Common Stock
(b) PERCENT OF CLASS: 9.99%
(c) NUMBER OF SHARES AS TO WHICH SUCH PERSON HAS:
(i) SOLE POWER TO VOTE OR DIRECT THE VOTE
128,871,000 Shares
(ii) SHARED POWER TO VOTE OR DIRECT THE VOTE
0 Shares
(iii) SOLE POWER TO DISPOSE OR TO DIRECT THE DISPOSITION OF
128,871,000 Shares
(iv) SHARED POWER TO DISPOSE OR TO DIRECT THE DISPOSITION OF
0 Shares
--------------------------------------------------------------------------------
CUSIP No. 682421102 13G Page 4 of 4 Pages
ITEM 5 OWNERSHIP OF FIVE PERCENT OR LESS OF A CLASS
Not applicable
ITEM 6 OWNERSHIP OF MORE THAN FIVE PERCENT ON BEHALF OF ANOTHER PERSON
Not applicable
ITEM 7 IDENTIFICATION AND CLASSIFICATION OF THE SUBSIDIARY WHICH ACQUIRED THE SECURITY BEING REPORTED ON BY THE PARENT HOLDING COMPANY
Not applicable
ITEM 8 IDENTIFICATION AND CLASSIFICATION OF MEMBERS OF A GROUP
Not applicable
ITEM 9 NOTICE OF DISSOLUTION OF GROUP
Not applicable
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.
April 6, 2009
(Date)
/s/ Konrad Ackerman
(Signature)
Konrad Ackerman, Director
(Name/Title)
Any other reason we should sell you our shares?
Press Release Source: Boyuan Construction Group, Inc.
Boyuan appoints new CFO
Friday April 3, 2009, 12:04 pm EDT
Buzz up! Print TORONTO, April 3 /CNW/ - Boyuan Construction Group, Inc., (TSX-V: BOY & BOY.DB) a leading builder of commercial, residential and municipal infrastructure projects in China's fast-growing regions of the Yangtze River Delta and the city of Sanya on Hainan Island, announced today that Paul FY Law, CA, has been appointed Chief Financial Officer, effective April 3, 2009. Fluently bilingual in Mandarin and English, Mr. Law will be responsible for all of Boyuan's financial activities, including accounting, reporting and financing.
"Paul is a welcome addition to our senior management team," said Shou Cailiang, Chairman of Boyuan Construction Group, Inc. "His considerable accounting and capital markets experience will be of tremendous value given Boyuan's current stage of development and our commitment to meeting our financial targets for fiscal 2009."
Mr. Law brings more than 20 years of audit, banking and corporate finance experience to Boyuan, and has previously worked with Brainlink Investments International Ltd., Prudential-Bache Securities HK Ltd, National Australia Bank, and PriceWaterhouseCoopers.
About Boyuan Construction Group, Inc.
-------------------------------------
Based in Jiaxing City, China, Boyuan Construction Group, Inc. is in the business of residential and commercial building construction, municipal infrastructure and engineering projects. In its last three fiscal years ended June 30, 2008, Boyuan completed more than 120 projects for a number of private and public sector clients including Cargill and the Dalian Shide Group, a billion dollar conglomerate whose partners include DuPont, Mitsubishi and GE. Boyuan's current projects include residential, industrial and mixed-use developments, including a five-star hotel and a project at the Qingshan Nuclear Plant, China's first and largest nuclear facility. From its operating bases in Zhejiang Province and on Hainan Island, Boyuan focuses on construction projects in China's fast-growing regions of the Yangtze River Delta and the city of Sanya.
Caution concerning forward-looking statements
---------------------------------------------
Statements in this news release, which are not purely historical, are forward-looking statements and include any statements regarding beliefs, plans, expectations or intentions regarding the future, such as the following: "His considerable accounting and capital markets experience will be of tremendous value given Boyuan's current stage of development and our commitment to meeting our financial budget for 2009."
It is important to note that actual outcomes and Boyuan's actual results could differ materially from those in such forward-looking statements. Actual results could differ from those projected in any forward-looking statements due to numerous factors. Such factors include, among others: (1) the failure of Boyuan to execute its business plan, (2) the risks arising from Boyuan's operations generally (such as the ability to secure raw materials, arrange for manufactured products on a timely basis, and maintain an adequate workforce), (3) Boyuan's ability to remain competitive as other parties develop and release competitive projects and services, (4) Boyuan's ability to retain the employees necessary to continue research and development of current and new projects and services, (5) the success by Boyuan of the sales of its projects and services, (6) the impact of competitive products on the sales of Boyuan's projects and services, (7) the impact of technology changes on Boyuan's projects and services, (8) Boyuan's reliance on contractual rights such as licenses and leases in the conduct of its business, (9) general economic conditions as they affect Boyuan and its current and prospective customers, (10) the ability of Boyuan to control costs operating, general administrative and other expenses, and (11) insufficient investor interest in the Boyuan's securities which may impact on Boyuan's ability to raise additional financing as required.
Actual future results may differ from the anticipated results expressed in the forward-looking statements contained in this press release and Boyuan does not undertake to update this information. Investors are cautioned against placing undue importance on forward-looking information contained herein and should consult Boyuan's disclosure documents filed from time to time on SEDAR and other public filings which contain a more exhaustive analysis of risks and uncertainties connected to Boyuan's business.
Neither TSX Venture Exchange nor its Regulation Services Provider (as
that term is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
For further information
Boyuan Construction Group, Inc., Ms. Ren Shu, Secretary of the Board, +(86) 139 0651 1503, renshu@zjboyuan.com.cn
The Equicom Group Inc., Joe Racanelli, (416) 815-0700 ext. 243, jracanelli@equicomgroup.com
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Justme......
"Are we down to a mailbox at a UPS store?"
Sure comes across as a bash to me.
5 days on 10Q, 15 days on 10K(EOM).
NT 10K filed.
GLTAEB.
Press Release Source: Wuhan General Group, Inc.
Wuhan General Announces Conference Call to Discuss Fourth Quarter and Fiscal Year 2008 Results
Monday March 30, 2009, 8:00 am EDT
Buzz up! Print Related:Wuhan General Group (China) Inc.
WUHAN, Hubei, China, March 30 /PRNewswire-Asia-FirstCall/ -- Wuhan General Group, Inc. (Nasdaq: WUHN - News; "Wuhan General" or the "Company"), a leading manufacturer of industrial blowers and turbines in China, today announced that it will conduct a conference call at 9:00 a.m. eastern time on Wednesday, April 1, 2009 to discuss results for the fourth quarter and fiscal year 2008.
Related Quotes
Symbol Price Change
WUHN 2.61 0.00
{"s" : "wuhn","k" : "c10,l10,p20,t10","o" : "","j" : ""} To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 1-800-688-0796. International callers should dial +1-617-614-4070. When prompted by the operator, mention conference pass code 571 499 58.
The call will be available to replay beginning at 11:00 a.m. eastern time for fourteen days after it occurs. If you would like to listen to the replay, please dial 1-888-286-8010 or +1-617-801-6888 from outside the US and enter pass code 75724878.
About Wuhan General Group Inc.
Through its subsidiaries Wuhan Blower Co., Ltd (Wuhan Blower) and Wuhan Generating Equipment Co., Ltd, Wuhan General Group is the leading manufacturer of industrial blowers and turbines based in Wuhan, Hubei Province, China. Wuhan Blower is a China-based manufacturer of industrial blowers that are principal components of steam-driven electrical power generation plants. Wuhan Generating Equipment is a China-based manufacturer of industrial steam and water turbines used for electricity generation in coal, oil, nuclear, and hydroelectric power plants. The Company's primary customers are from the iron and steel, power generation, petrochemical and other industries. Lead by a strong management team, Wuhan General Group Inc. is well recognized for its technological sophistication and quality construction of blowers and turbines.
For more information, please contact:
Wuhan General Group, Inc.
Mr. Haiming Liu, CFO
Tel: +86-27-5970-0069
Email: haiming.liu@wuhangeneral.com
CCG Investor Relations Inc.
Mr. Crocker Coulson, President
Tel: +1-646-213-1915 (New York)
Email: crocker.coulson@ccgir.com
Mr. Graham Reed, Financial Writer
Tel: +1-646-213-1907
Email: graham.reed@ccgir.com
Web: http://www.ccgirasia.com
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Wuhan General Group (China), Inc. Appoints New Independent Director - PR Newswire
Wuhan General Group (China), Inc. Enters Into Asset Purchase Agreement With Wuhan Gongchuang Real Estate Co., Ltd. - PR Newswire
WUHAN GENERAL GROUP (CHINA), INC Files SEC form 8-K, Entry into a Material Definitive Agreement, Completion of Acquis - EDGAR Online
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wuhn Headlines
Copyright © 2008 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.
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Press Release Source: Boyuan Construction Group, Inc.
Boyuan announces change in auditor
Monday March 30, 2009, 7:00 am EDT
Buzz up! Print TORONTO, March 30 /CNW/ - Boyuan Construction Group, Inc., a leading builder of commercial, residential and municipal infrastructure projects in China's fast-growing regions of the Yangtze River Delta and the city of Sanya on Hainan Island, announced today that in connection with its reverse takeover of SND Energy Ltd., as previously announced on March 3, 2009 and March 11, 2009, that Manning Elliot LLP will be replacing Raymond Chabot Grant Thornton LLP as auditor of the Company.
There were no reservations in the former auditor's reports for the two most recently-completed fiscal years or for any period subsequent to the most recently-completely period for which an audit report was issued and preceeding the date of the former auditor's resignation. There were no reportable events between the Company and the former auditor or between the Company and the successor auditor.
About Boyuan Construction Group, Inc.
Based in Jiaxing City, China, Boyuan Construction Group, Inc. is in the business of residential and commercial building construction, municipal infrastructure and engineering projects. In its last three fiscal years ending June 30, 2008, Boyuan completed more than 120 projects for a number of private and public sector clients including Cargill and the Dalian Shide Group, a billion dollar conglomerate whose partners include DuPont, Mitsubishi and GE. Boyuan's current backlog includes residential, industrial and mixed-use developments, including a five-star hotel and a project at the Qingshan Nuclear Plant, China's first and largest nuclear facility. From its operating bases in Zhejiang Province and on Hainan Island, Boyuan focuses on construction projects in China's fast-growing regions of the Yangtze River Delta and the city of Sanya.
Caution concerning forward-looking statements
---------------------------------------------
This press release contains forward-looking statements. Such statements inherently involve numerous risks and uncertainties. Actual future results may differ from the anticipated results expressed in the forward-looking statements contained in this press release and Boyuan does not undertake to update this information. Investors are cautioned against placing undue importance on forward-looking information contained herein and should consult the Company's reports and other public filings which contain a more exhaustive analysis of risks and uncertainties connected to Boyuan's business
Neither TSX Venture Exchange nor its Regulation Services Provider (as
that term is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
For further information
Boyuan Construction Group, Inc., Ms. Ren Shu, Secretary of the Board, +(86) 139 0651 1503, renshu@zjboyuan.com.cn
The Equicom Group Inc., Joe Racanelli, (416) 815-0700 ext. 243, jracanelli@equicomgroup.com
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Quotes and other information supplied by independent providers identified on the Yahoo! Finance partner page. Quotes are updated automatically, but will be turned off after 25 minutes of inactivity. Quote data delayed 15 minutes for Nasdaq, NYSE and Amex. Real-Time continuous streaming quotes are available through our premium service. You may turn streaming quotes on or off. All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Yahoo! is not an investment adviser and does not provide, endorse or review any information or data contained herein.
My PC is one year old with Vista and it loads onev.com fine but
S-L-O-W-L-Y.
I bet my old Gateway would have locked up every time.
GLTAEB.
Beautiful!
Press Release Source: Boyuan Construction Group, Inc.
Boyuan reports second quarter 2009 fiscal results
Monday March 16, 2009, 7:00 am EDT
On track to achieve make good provision net income targets
TORONTO, March 16 /CNW/ - Boyuan Construction Group, Inc., a leading builder of commercial, residential and municipal infrastructure projects in China's fast-growing regions of the Yangtze River Delta and the city of Sanya on Hainan Island, announced today its financial results for the three and six-months ended December 31, 2008. All figures are in U.S. dollars unless otherwise stated.
Q2 FY 2009 Financial and Operating Highlights
- Consolidated revenue was $23.4 million, an increase of 367% when
compared to $5.0 million for the second quarter of fiscal year 2008.
- Gross profit was $3.2 million, up from $0.4 million for Q2-FY2008.
- EBITDA(1) was $3.2 million compared to $0.1 million for Q2-FY2008.
- After tax net income was $2.4 million, up from $0.02 million for Q2-
FY2008.
Highlights Subsequent to Quarter End
- Completed the acquisition of all issued and outstanding common shares
of SND Energy Ltd. through a reverse-takeover (RTO) transaction.
- Concurrent with the RTO transaction, completed a private placement
financing, which generated gross proceeds of $4.1 million (CDN),
issuing secured convertible debentures and 512,500 common shares to
investors.
- As part of the private placement financing, the Company's chairman
deposited 2.05 million common shares into escrow, which will be
transferred to investors in the event that Boyuan does not achieve
after-tax net income of least $8.5 million (U.S.) for fiscal year
2009 and $11.5 million (U.S.) for fiscal year 2010.
- The Company's common shares began trading on the TSX Venture Exchange
under the symbol BOY and its debentures under the symbol BOY.DB.
"We are very pleased with our second-quarter performance," said Shou Cailiang, Chairman of Boyuan Construction Group, Inc. "Through our commitment to building quality projects and by capitalizing on China's urbanization and middle class growth trends, Boyuan achieved record revenue, EBITDA and after-tax net income results. Based on our current sales backlog and clear visibility for net income for each building project, we are confident of achieving our $8.5 million after-tax net income target for the year."
Operational Results
Revenue for the second quarter of 2009 was $23.4 million, up 367% when compared to $5.0 million for the second quarter of 2008. Revenue for the first six-months of 2009 was $44.7 million, an increase of 353% when compared to $9.9 million for the same period in 2008. The significant growth was mainly due to an increase in project volume as well as an increase in the number of projects with higher margins, particularly in the Sanya market, where contract value per construction area is stronger.
Cost of sales for the second quarter of 2009 was $20.2 million, compared to $4.7 million for the second quarter of 2008. For the first six months of 2009, the cost of sales was $38.4 million, up 314% from $9.3 million for the same period in 2008. The increase was primarily due to expanded project contract volume and an increase in labour costs.
Gross profit for the second quarter of 2009 was $3.2 million, up 789% from $0.4 million for the second quarter of 2008. Gross profit for the first six-months of 2009 increased 1007% to $6.2 million from $0.6 million from the same period of last fiscal year.
EBITDA for the second quarter was $3.2 million, up 3140% from $0.1 million for the second quarter of 2007. For the first six months of the year, EBITDA was $6.0 million compared to $0.1 million for the same period in 2008.
After tax net income for the second quarter of 2009 was $2.4 million compared to $0.02 million for the second quarter of 2008. After tax net income for the first six months of 2009 was $4.4 million, up from a loss of $0.02 million for the same period in 2008. As specified by the Company's make-good provision, Boyuan forecasts an after-tax net income of $8.5 million for the fiscal year ending June 30, 2009. If the target is not met, Boyuan's Chairman will transfer more than 1 million currently in escrow to investors.
Cash and cash equivalents at December 31, 2008 were $1.6 million compared to $1.1 million for 2007
Subsequent to the quarter-end, Boyuan raised $4.1 million in gross proceeds (CDN) through a private-placement financing. The funds will be used for working capital purposes, including the procurement of new construction equipment.
Outlook
"Backed by a diversified sales strategy, strong sales backlog and a growing reputation for building quality projects, we are very encouraged by our long-term prospects," said Mr. Shou Cailiang. "Not only are our core markets in the Yangtze delta growing rapidly, a significant portion of China's $585 billion stimulus package will be earmarked for major construction initiatives, which as a National Class-I qualified company, we are eligible to bid on."
Financial Highlights
For the For the For the For the
three three six six
months months months months
ended ended ended ended
December 31, December 31, December 31, December 31,
2008 2007 2008 2007
---------------------------------------------------
Revenue $23,388,354 $5,006,453 $44,659,513 $9,858,371
Gross Profit $3,185,136 $358,212 $6,213,953 $561,323
EBITDA(1) $3,172,982 $97,937 $6,025,701 $121,695
Net Income $2,375,268 $19,834 $4,418,371 ($21,193)
Total Assets $60,016,435 $23,326,878 $60,016,435 $23,326,878
Cash and cash
equivalents $1,568,993 $1,138,582 $1,568,993 $1,138,582
Total Liabilities $38,175,770 $12,973,522 $38,175,770 $12,973,522
Working Capital $15,589,347 $3,243,958 $15,589,347 $3,243,958
Shareholders' Equity $21,840,665 $10,353,357 $21,840,665 $10,353,357
-----------------------------
(1) Earnings before interest, taxes, depreciation and amortization
(EBITDA) is a not a recognized measure under Canadian generally accepted
accounting principles (GAAP), however, management believes that it is a
useful performance measure as it approximates cash generated from
operations, before capital expenditures and changes in working capital
and excludes unusual items.
Boyuan's consolidated statements for the quarter ended December 31, 2008 and related management's discussion and analysis (MD&A) will be filed with securities regulatory authorities and available via SEDAR at www.sedar.com.
About Boyuan Construction Group, Inc.
Based in Jiaxing City, China, Boyuan Construction Group, Inc. is in the business of residential and commercial building construction, municipal infrastructure and engineering projects. In its last three fiscal years ending June 30, 2008, Boyuan completed more than 120 projects for a number of private and public sector clients including Cargill and the Dalian Shide Group, a billion dollar conglomerate whose partners include DuPont, Mitsubishi and GE. Boyuan's current backlog includes residential, industrial and mixed-use developments, including a five-star hotel and a project at the Qingshan Nuclear Plant, China's first and largest nuclear facility. From its operating bases in Zhejiang Province and on Hainan Island, Boyuan focuses on construction projects in China's fast-growing regions of the Yangtze River Delta and the city of Sanya.
Caution concerning forward-looking statements
---------------------------------------------
This press release contains forward-looking statements. Such statements inherently involve numerous risks and uncertainties. Actual future results may differ from the anticipated results expressed in the forward-looking statements contained in this press release and Boyuan does not undertake to update this information. Investors are cautioned against placing undue importance on forward-looking information contained herein and should consult the Company's reports and other public filings which contain a more exhaustive analysis of risks and uncertainties connected to Boyuan's business
Neither TSX Venture Exchange nor its Regulation Services Provider (as
that term is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
For further information
Boyuan Construction Group Inc., Ms. Ren Shu, Secretary of the Board, +(86) 139 0651 1503, renshu@zjboyuan.com.cn
The Equicom Group Inc., Joe Racanelli, (416) 815 0700 ext. 243, jracanelli@equicomgroup.com
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Sure, you're spending all this time and effort over the years just to save us poor deluded folks from ourselves...
The selfless people I'm aware of who dedicate
themselves to helping others are not mean-spirited, rude,
and downright nasty.
You don't fit the profile of a Good Samaritan, just the opposite, in fact.
So, what's the real deal?
Where's your payoff?
OTTAWA, March 13 (Reuters) - A Chinese construction company that listed on Canada's TSX Venture Exchange this week will use insider shares to pay investors if it misses ambitious profit targets.
Boyuan Construction Group Inc (BOY.V), which builds residential, commercial and public infrastructure projects, included a "make-good provision" in a recent $4.1 million private placement.
Under that provision, Boyuan's chairman Shou Cailiang agreed to transfer 2.05 million of his own shares to investors if the company's after-tax net income does not grow by 34 percent in 2009 and 35 percent in 2010.
Shares put in escrow by Shou represent about 8 percent of the company's total float.
"It's very tough to raise financing and to get investors' interest," said Blake Corbet, managing director of investment banking at Haywood Securities, which ran the placement with U.S. bank Hunter Wise Securities.
"The make-good provision does two things. One is it puts teeth into company's forecasts, but the second thing is, it results in the company producing a forecast publicly."
Boyuan forecasts a 2009 profit of $8.5 million on revenue of $99.1 million, and 2010 earnings of $11.5 million on sales of $117.6 million.
In 2008, Boyuan made $6.4 million in after-tax profit on revenue of $56.4 million, a gain of 36 percent and 15 percent, respectively, over 2007.
Make-good provisions have been used in the United States for 12 to 18 months, but Corbet said this a first for Canada.
Boyuan, whose shares are unchanged from an opening trade of $2 on Wednesday, is focused on the high-growth Yangtze River Delta and city of Sanya. It will use funds from the financing to buy machinery and meet cash requirements, Corbet said. ($1=$1.27 Canadian) (Reporting by Susan Taylor; editing by Janet Guttsman)
© Thomson Reuters 2009 All rights reserved
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Sanya
Sanya, at the southernmost tipof Hainan Island, is becoming the most popular destinations for vacationers from both China and the world. A coastal city with the tropical scenery, Sanya is like a pearl on a piece of green jade, the Hainan Island.
Sanya's annual average temperature is 25. 4 centigrade (77 F). In July, the hottest month, its average temperature is 28 centigrade (82 F) and in January, the coldest one, 21 centigrade (70 F). It is always called "WINTER PALACE."
Sanya has five kinds of treasures: Sea, Sand, Air, Green and Sunshine. The sea is fade-like, the sand rouge-like, the bay rainbow-like and the sight picturesque, which makes sanya rival Hawaii in beauty yet not yet commercialized.
Sanya has s long history. There are famous places of scenic beauty and historical interest such as the ying wan pagoda built in the first year of the Qing Dynasty(1851), the word" ÊÙ"(Longevity) on a monument which was written by the Empress Dowager Ci xi, TiaYaHaiJiao (Land's End) and the Cape of the sea where the sky can't be told from the sea in color, the Turn- round Deer with a myth on Love affair, Da Donghai(sea) and Xiao Donghai(sea), fine places for swimming in winter, Ya long Bay and Sanya Bay with fame of "Hawaii in the east", the major and minor Caves with a wonder of the sea and mountains, the Pen-Drop Cave, on the top of which a fairy pen is being hung high, the Eastern Island and the western Island like two turtles floating on the waves, in addition, the silent coconut gardens, the customs of the Li, Miao and Hui nationalities.
Sanya is rich in the resources of the sea and the topical plant Treasured seafood such as "Sanya Three Delicacies (sea cucumber, shark's fin and abalone), sea- snakes and jelly fish can be served. Tropical fruits like Lychee, gui yuan, pineapple, Jack-fruit, mongo and bananas are available year round.
--------------------------------------------------------------------------------
Return to Hainan Home Page Return to RegentTour.com Home Page
China's Boyuan Construction Completes Acquisition and Private Placement of $4.1 Million
- Receives listing approval from the TSX Venture Exchange -
TORONTO, March 3 /CNW/ - Boyuan Construction Group, Inc., a leading
builder of commercial, residential and municipal infrastructure projects in
China's fast-growing regions of the Yangtze River Delta and the city of Sanya
on Hainan Island, announced today that it has completed the acquisition of all
of the issued and outstanding common shares of SND Energy Ltd. through a
reverse-takeover transaction.
Concurrent with the closing of the acquisition, Boyuan also announced
that it has completed a private placement financing which generated gross
proceeds of $4.1 million in a unit offering, issuing secured convertible
debentures and 512,500 common shares to accredited investors. Haywood
Securities Inc., which served as sponsor, also acted as co-lead agent for the
private placement along with California-based Hunter Wise Securities, LLC.
Redwood Capital Inc. of Beijing served as Chinese merchant banking advisor to
Boyuan.
Under the terms of the private placement financing, Boyuan investors will
receive units priced at $1,000 each, consisting of one listed convertible
debenture and 125 free-trading common shares at $2.00 per share, along with
250 warrants. Investors will be able to convert the debentures at any time
during their four-year term into Boyuan common shares at $2.00 per share. The
warrants are exercisable at $2.00 per share for the same four-year period.
Each Boyuan debenture holder will also receive 250 rights and 250 additional
rights. Each right and additional right entitles the holder to receive one new
share upon execution of a unique make-good provision.
Under the make-good provision, Boyuan's Chairman has deposited into
escrow 2,050,000 common shares, equal to the total dollar value of the private
placement financing. In the event that Boyuan does not achieve after-tax net
income of at least US$8.5 million for its fiscal year ending June 30, 2009 and
US$11.5 million for the fiscal year ending June 30, 2010, the escrow agent
will transfer, for no additional consideration, one escrowed share for each
exercised right. Should Boyuan not achieve the above earnings targets, half of
the make-good escrow shares are transferable to the private placement
investors within 30 days of the Company posting its audited financial results
on SEDAR, for each of fiscal 2009 and 2010 respectively. Following the expiry
of the additional rights exercise period, all shares remaining in escrow will
be transferred back to Boyuan's management if they are not otherwise
transferred to the offering's private placement investors.
The Boyuan debentures, which will be listed separately on the TSX Venture
Exchange, mature on February 27, 2013, and bear interest an annual interest
rate of 11.75% paid quarterly in cash.
The gross proceeds of the private placement financing will be used by
Boyuan for working capital purposes as well as for the procurement of new
construction equipment.
As a result of the completed acquisition and concurrent financing,
Boyuan's common shares and the convertible debentures have received
conditional listing approval from the TSX Venture Exchange. Information on the
Company's listing details, including ticker symbol and commencement of
trading, will be disclosed pending final approval.
Boyuan also announced that it expects to file its second quarter
financial results for the three months ended December 31, 2008 with SEDAR the
week of March 9, 2009.
About Boyuan Construction Group, Inc.
Based in Jiaxing City, China, Boyuan Construction Group, Inc. is in the
business of residential and commercial building construction, municipal
infrastructure and engineering projects. In its last three fiscal years ending
June 30, 2008, Boyuan completed more than 120 projects for a number of private
and public sector clients including Cargill and the Dalian Shide Group, a
billion dollar conglomerate whose partners include DuPont, Mitsubishi and GE.
Boyuan's current backlog includes residential, industrial and mixed-use
developments, including a five-star hotel and a project at the Qingshan
Nuclear Plant, China's first and largest nuclear facility. From its operating
bases in Zhejiang Province and on Hainan Island, Boyuan focuses on
construction projects in China's fast-growing regions of the Yangtze River
Delta and the city of Sanya.
<<
Caution concerning forward-looking statements
---------------------------------------------
>>
This press release contains forward-looking statements. Such statements
inherently involve numerous risks and uncertainties. Actual future results may
differ from the anticipated results expressed in the forward-looking
statements contained in this press release and Boyuan does not undertake to
update this information. Investors are cautioned against placing undue
importance on forward-looking information contained herein and should consult
the Company's reports and other public filings which contain a more exhaustive
analysis of risks and uncertainties connected to Boyuan's business
<<
Neither TSX Venture Exchange nor its Regulation Services Provider (as
that term is defined in the policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.
>>
%SEDAR: 00026251E E
For further information: Boyuan Construction Group, Inc., Ms. Ren Shu,
Secretary of the Board, +(86) 139 0651 1503, renshu@zjboyuan.com.cn; The
Equicom Group Inc., Joe Racanelli, (416) 815-0700 ext. 243,
jracanelli@equicomgroup.com
BOYUAN CONSTRUCTION GROUP, INC. - More on this organization
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I thought his post about Dean's itinerary, was funny.
Totally useless, but funny.
GLTAEB.
IRIS et al ..........
you really need to give this Telmex thing a rest.
A. Mexico itself is in a complete turmoil right now, things are sliding toward a possible civil war.
B. For some reason, Telmex has always been dragging their feet, maybe it's a "manana" thing, maybe it's an internal
struggle based on their reorganization. whatever.
C. what will be will be, but IMO, it's really out of ONEV's hands. ONEV's prospects, like those of many other companies,
BLUE CHIPs included, are being affected by the GLOBAL economic
problems.
Meanwhile , I'm pleased to see ONEV's tech slowly catching on, be it MTNL, XBOX, Telmex, BT, or whomever.
GLTAEB.
PS... PATIENCE.. easy to say, hard to do.
Want some cheese with that whine?
:)
10qs are normally due 45 days after quarter ends...
if quarter ends 3/31, then 10Q prolly due 5/15.
GLTAEB.