þ
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QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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o
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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NEVADA
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20-4237445
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(State
or other jurisdiction of
incorporation
or organization)
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(IRS
Employer
Identification
No.)
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Large
accelerated filer o
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Accelerated
filer o
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Non-accelerated
filer o (Do
not check if smaller reporting company)
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Smaller
reporting company x
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Page
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PART
I.
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FINANCIAL
INFORMATION
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1
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ITEM
1.
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FINANCIAL
STATEMENTS
|
1
|
|
ITEM
2.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
2
|
|
ITEM
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
9
|
|
ITEM
4.
|
CONTROLS
AND PROCEDURES
|
9
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|
PART
II. OTHER INFORMATION
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11
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||
ITEM
1.
|
LEGAL
PROCEEDINGS
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11
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|
ITEM
1A.
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RISK
FACTORS
|
11
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|
ITEM
2.
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UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
|
11
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|
ITEM
3.
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DEFAULTS
UPON SENIOR SECURITIES
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11
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|
ITEM
4.
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SUBMISSIONS
OF MATTERS TO A VOTE OF SECURITY HOLDERS
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11
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|
ITEM
5.
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OTHER
INFORMATION.
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11
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ITEM
6.
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EXHIBITS
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12
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SIGNATURES
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13
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ITEM 1.
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FINANCIAL
STATEMENTS
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Consolidated
Balance Sheets as of March 31, 2009 (Unaudited) and June 30, 2008
(Audited)
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F-1
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Consolidated
Statements of Operations (Unaudited) for the Three and Nine Months Ended
March 31, 2009 and 2008
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F-2
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Consolidated
Statement of Changes in Stockholders’ Equity (Deficit) (Unaudited) as of
March 31, 2009
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F-3
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Consolidated
Statements of Cash Flows (Unaudited) for the Nine Months Ended March 31,
2009 and 2008
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F-4
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Notes
to Consolidated Financial Statements (Unaudited)
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F-5
|
3/31/09
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6/30/08
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|||||||
(UNAUDITED)
|
(AUDITED)
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
and cash equivalents
|
$ | 122,218 | $ | 228,467 | ||||
Investment
in available for sale marketable securities
|
20,827 | 60,266 | ||||||
Accounts
receivable, net
|
199,735 | 289,299 | ||||||
Note
receivable
|
57,880 | 53,115 | ||||||
Other
current assets
|
9,500 | 30,007 | ||||||
Prepaid
expenses
|
556,109 | 219,996 | ||||||
TOTAL
CURRENT ASSETS
|
966,269 | 881,150 | ||||||
Fixed
assets, net
|
35,806 | 44,706 | ||||||
Investment
in unconsolidated subsidiary, at cost
|
82,000 | 82,000 | ||||||
Deferred
offering costs, net
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0 | 250,342 | ||||||
Deferred
tax asset
|
1,307,655 | 1,037,985 | ||||||
Intangible
asset, net
|
296,110 | 398,611 | ||||||
Goodwill
|
185,717 | 185,717 | ||||||
Security
deposits and other assets
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30,583 | 41,603 | ||||||
Prepaid
expenses
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0 | 73,340 | ||||||
TOTAL
ASSETS
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$ | 2,904,140 | $ | 2,995,454 | ||||
LIABILIATIES
AND STOCKHOLDERS' EQUITY
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable and accrued expenses
|
$ | 526,529 | $ | 384,820 | ||||
Deferred
revenue
|
15,000 | 116,723 | ||||||
Income
tax payable
|
1,350 | 1,350 | ||||||
Current
portion of long-term debt
|
1,450,000 | 1,300,000 | ||||||
TOTAL
CURRENT LIABILITIES
|
1,992,879 | 1,802,893 | ||||||
Convertible
debentures, net of discount
|
570,672 | 262,319 | ||||||
TOTAL
LIABILITIES
|
2,563,551 | 2,065,212 | ||||||
STOCKHOLDERS'
EQUITY:
|
||||||||
Preferred
stock, $.001 par value, 50,000,000 shares authorized, none issued and
outstanding
|
- | - | ||||||
Subscription
receivable
|
(70,000 | ) | (95,000 | ) | ||||
Common
stock, $.001 par value, 900,000,000 shares authorized, 78,563,952
and 75,463,952 shares issued and outstanding, as
of March 31, 2009 and June 30, 2008, respectively
|
78,564 | 75,464 | ||||||
Additional
paid-in capital
|
4,162,514 | 2,933,258 | ||||||
Retained
earnings
|
(3,666,316 | ) | (1,893,743 | ) | ||||
Accumulated
other comprehensive loss
|
(164,173 | ) | (89,737 | ) | ||||
TOTAL
STOCKHOLDERS' EQUITY
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340,589 | 930,242 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
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$ | 2,904,140 | $ | 2,995,454 |
Three
Months
Ended March
31, 2009
|
Three
Months
Ended
March 31,
2008
|
Nine
Months
Ended
March 31,
2009
|
Nine Months
Ended March
31, 2008
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
Revenues:
|
||||||||||||||||
Software
subscription revenues
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$ | 110,500 | $ | - | $ | 118,757 | $ | - | ||||||||
Professional
service revenues
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93,607 | 411,761 | 1,330,961 | 1,293,055 | ||||||||||||
Product
and training revenues
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1,868 | 67,146 | 33,135 | 157,001 | ||||||||||||
Revenue
and equity sharing revenues
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- | 150,000 | 35,000 | 150,000 | ||||||||||||
Total
Revenues
|
205,975 | 628,907 | 1,517,853 | 1,600,056 | ||||||||||||
Cost
of Revenues
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85,304 | 171,031 | 400,490 | 520,345 | ||||||||||||
Gross
Profit
|
120,671 | 457,876 | 1,117,363 | 1,079,711 | ||||||||||||
Operating
expenses:
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||||||||||||||||
Marketing
and sales
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22,420 | 132,824 | 307,981 | 236,272 | ||||||||||||
Research
and development
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155,773 | 139,565 | 309,482 | 389,226 | ||||||||||||
Stock
based compensation
|
45,834 | 12,270 | 512,287 | 336,397 | ||||||||||||
General
and administrative
|
298,344 | 546,170 | 1,067,104 | 1,441,017 | ||||||||||||
Total
operating expenses
|
522,371 | 830,829 | 2,196,854 | 2,402,912 | ||||||||||||
Loss
from operations
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(401,700 | ) | (372,954 | ) | (1,079,491 | ) | (1,323,201 | ) | ||||||||
Other
(income) expenses
|
||||||||||||||||
Interest
expense and amortization of debt discount
|
212,402 | 229,315 | 649,448 | 440,794 | ||||||||||||
Amortization
of deferred financing costs
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134,944 | 71,743 | 250,343 | 150,397 | ||||||||||||
Other
expense (income)
|
65,040 | 33,197 | 62,786 | 24,867 | ||||||||||||
Realized
capital gains
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- | - | - | (35,326 | ) | |||||||||||
Total
other expenses (income)
|
412,386 | 334,255 | 962,577 | 580,732 | ||||||||||||
(Loss)
before taxes
|
(814,086 | ) | (707,209 | ) | (2,042,068 | ) | (1,903,933 | ) | ||||||||
Income
tax provision (benefit)
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50 | (98,096 | ) | (269,495 | ) | (233,113 | ) | |||||||||
Net
(loss) applicable to common shareholders
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$ | (814,136 | ) | $ | (609,113 | ) | $ | (1,772,573 | ) | $ | (1,670,820 | ) | ||||
Comprehensive
(loss):
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||||||||||||||||
Unrealized
loss on available for sale marketable securities
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(75,267 | ) | (119,186 | ) | (74,439 | ) | (119,186 | ) | ||||||||
Total
comprehensive (loss)
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$ | (889,403 | ) | $ | (728,299 | ) | $ | (1,847,012 | ) | $ | (1,790,006 | ) | ||||
Net
(loss) per share - basic and diluted
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$ | (0.01 | ) | $ | (0.01 | ) | $ | (0.02 | ) | (0.03 | ) | |||||
Weighted
number of shares outstanding -
|
||||||||||||||||
basic
and diluted
|
78,563,952 | 71,242,191 | 78,130,741 | 66,841,832 |
Preferred
Stock
|
Common
|
Accum
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Retained
|
Stockholders'
|
||||||||||||||||||||||||||||||||
Shares
|
Par
Value
|
Shares
|
Par
Value
|
Paid-In
Capital
|
Comp
(Loss)
|
Sub
Rec'b
|
Earnings
(Deficit)
|
Equity
(Deficit)
|
||||||||||||||||||||||||||||
Balance
June 30, 2008
|
0 | $ | - | 75,463,952 | $ | 75,464 | $ | 2,933,258 | $ | (89,737 | ) | $ | (95,000 | ) | $ | (1,893,743 | ) | $ | 930,242 | |||||||||||||||||
Issuance
of stock for share purchase
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555,556 | 556 | 99,444 | 100,000 | ||||||||||||||||||||||||||||||||
Change
in fair value of marketable services
|
(74,436 | ) | (74,436 | ) | ||||||||||||||||||||||||||||||||
Stock
issued for prepaid consulting services
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2,500,000 | 2,500 | 547,500 | 550,000 | ||||||||||||||||||||||||||||||||
Stock
issued for quarterly Board compensation
|
44,444 | 44 | 11,956 | 12,000 | ||||||||||||||||||||||||||||||||
Employee
stock options
|
166,323 | 166,323 | ||||||||||||||||||||||||||||||||||
Modification
of employee stock options
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107,500 | 107,500 | ||||||||||||||||||||||||||||||||||
Stock
options issued for debt guaranty
|
82,052 | 82,052 | ||||||||||||||||||||||||||||||||||
Reduction
to subscription receiv able due to separation agreement
|
25,000 | 25,000 | ||||||||||||||||||||||||||||||||||
Officer
compensation waiver
|
214,481 | 214,481 | ||||||||||||||||||||||||||||||||||
Net
loss for period
|
(1,772,573 | ) | (1,772,573 | ) | ||||||||||||||||||||||||||||||||
Balance
March 31, 2009
|
0 | $ | - | 78,563,952 | $ | 78,564 | $ | 4,162,514 | $ | (164,173 | ) | $ | (70,000 | ) | $ | (3,666,316 | ) | $ | 340,589 |
Nine
Months
Ended
March 31,
2009
|
Nine Months
Ended March
31, 2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
(loss)
|
$ | (1,772,573 | ) | $ | (1,670,820 | ) | ||
Adjustments
to reconcile net (loss) to cash used in operating
activities:
|
||||||||
Change
in deferred tax asset
|
(269,670 | ) | (235,054 | ) | ||||
Realized
gain on sales of investment
|
- | (35,326 | ) | |||||
Provision
for doubtful accounts
|
(4,500 | ) | 45,000 | |||||
Stock
based compensation
|
512,287 | 336,397 | ||||||
Depreciation
|
8,900 | 2,967 | ||||||
Amortization
of prepaid interest
|
165,000 | 91,667 | ||||||
Amortization
of debt discount
|
307,469 | 300,568 | ||||||
Amortization
of intangibles
|
102,501 | - | ||||||
Amortization
of deferred offering costs
|
250,342 | 150,397 | ||||||
Change
in operating assets and liabilities:
|
||||||||
Accounts
and notes receivable
|
94,064 | (22,701 | ) | |||||
Prepaid
and other current assets
|
(14,605 | ) | (9,600 | ) | ||||
Deferred
offering costs
|
- | (82,340 | ) | |||||
Income
tax receivables/payable
|
- | 7,481 | ||||||
Accounts
payable and accrued expenses
|
405,236 | 52,985 | ||||||
Deferred
licensing fees
|
- | (33,334 | ) | |||||
Deferred
revenue
|
(101,722 | ) | 112,500 | |||||
Security
deposit
|
11,022 | (40,122 | ) | |||||
Net
cash used in operating activities
|
$ | (306,249 | ) | $ | (1,029,335 | ) | ||
CASH
FLOW FROM INVESTING ACTIVITIES:
|
||||||||
Issuance
of revolving credit facility
|
- | (45,115 | ) | |||||
Proceeds
from sale of investment
|
- | 35,326 | ||||||
Equipment
purchases and leasehold improvements
|
- | (30,300 | ) | |||||
Net
cash provided(used in) by investing activities
|
$ | - | $ | (40,089 | ) | |||
CASH
FLOW FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds
from stock option exercises
|
- | 20,000 | ||||||
Proceeds
from sale of common stock
|
100,000 | - | ||||||
Proceeds
from bank credit line
|
100,000 | |||||||
Proceeds
from warrant exercises
|
- | 90,000 | ||||||
Proceeds
from issuance of convertible debentures
|
- | 1,500,000 | ||||||
Net
cash provided by financing activities
|
$ | 200,000 | $ | 1,610,000 | ||||
NET
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
(106,249 | ) | 540,576 | |||||
CASH
AND CASH EQUIVALENTS at beginning of period
|
228,467 | 640,041 | ||||||
CASH
AND CASH EQUIVALENTS at end of period
|
$ | 122,218 | $ | 1,180,617 | ||||
Supplemental disclosure of cash flow
information
|
||||||||
Cash
paid for:
|
||||||||
Interest
|
$ | 16,823 | $ | 27,396 | ||||
Income
Taxes
|
$ | 500 | $ | 250 | ||||
Supplemental schedule of non-cash investing and
financing activities
|
||||||||
Deferred
offering warrant costs
|
$ | - | $ | 308,315 | ||||
Issuance
of stock for services to be provided
|
$ | 550,000 | ||||||
Debt
discount on convertible notes
|
$ | - | $ | 92,374 | ||||
Issuance
of stock for board of directors quarterly retainer
|
$ | 12,000 | ||||||
Contribution
of deferred compensation to equity
|
$ | 241,481 | ||||||
Forgiveness
of promissory note
|
$ | 25,000 | ||||||
Change
in fair value of marketable securites for sale
|
$ | (74,436 | ) | |||||
Conversion
of convertible debt
|
$ | - | $ | 200,000 | ||||
Promissory
notes issued for option purchases
|
$ | - | $ | 95,000 | ||||
Prepaid
interest and deferred offering withheld from gross proceeds from the
issuance
of convertible debentures
|
$ | - | $ | 550,000 | ||||
Receipt
of marketable securities for engagement terms
|
$ | - | $ | 150,000 |
·
|
Estimated
volatility is a measure of the amount by which the Company’s stock price
is expected to fluctuate each year during the expected life of the award.
The Company’s estimated volatility is an average of the historical
volatility of peer entities whose stock prices were publicly available.
The Company’s calculation of estimated volatility is based on historical
stock prices of these peer entities over a period equal to the expected
life of the awards. The Company uses the historical volatility of peer
entities due to the lack of sufficient historical data of its stock
price;
|
|
·
|
The
expected term represents the period of time that awards granted are
expected to be outstanding and is currently the average of the contractual
term and the vesting period. With the passage of time, actual behavioral
patterns surrounding the expected term will replace the current
methodology; and
|
|
·
|
The
risk-free interest rate is based on the yield curve of a zero-coupon U.S.
Treasury bond on the date the stock option award is granted with a
maturity equal to the expected term of the stock option award. An increase
in the risk-free interest rate would result in an increase to the
Company’s stock-based compensation
expense.
|
For the Nine
Months Ended
March
31,
|
||||||||
|
2009
|
2008
|
||||||
Market
prices
|
$.015
- $.05
|
$.16
- $.50
|
||||||
Exercise
prices
|
$.04
- $.06
|
$.16
- $.50
|
||||||
Expected
lives
|
5
|
5
|
||||||
Expected
volatility
|
115%
|
115%
|
||||||
Expected
dividends
|
-
|
-
|
||||||
Risk-free
rate of return (weighted average)
|
3.0 –
4.0%
|
3.15 –
4.91%
|
Shares
|
Weighted Average
Exercise Prices
|
Weighted Average
Remaining
Contractual Term
|
||||||||||
Stock
Options
|
||||||||||||
Outstanding
at beginning of the year
|
8,247,243 | $ | 0.33 | 4.75 | ||||||||
Granted
|
12,594,743 | $ | 0.05 | 5.00 | ||||||||
Exercised
|
- | $ | 0.00 | - | ||||||||
Forfeited
|
(9,974,368 | ) | $ | 0.30 | - | |||||||
Outstanding
at the end of the period
|
10,867,618 | $ | 0.065 | 4.95 | ||||||||
Options
exercisable at the end of the period
|
8,590,816 | - | - |
Warrants
Outstanding
|
Weighted
Average
Exercise Prices
|
Weighted Average
Remaining
Contractual Term
(years)
|
||||||||||
Outstanding
at the beginning of the year
|
9,046,979 | $ | 0.41 | 5.6 | ||||||||
Issued
|
277,778 | 0.36 | 4.7 | |||||||||
Exercised
|
- | 0.00 | - | |||||||||
Expired
|
- | 0.00 | - | |||||||||
Outstanding
at the end of the period
|
9,324,757 | $ | 0.40 | 4.7 | ||||||||
Vested
|
9,324,757 | $ | 0.40 | 4.7 | ||||||||
Exercisable
at the end of the period
|
9,324,757 | $ | 0.40 | 4.7 |
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
|
§
|
there
is persuasive evidence of an
arrangement;
|
§
|
the
service has been provided to the
customer;
|
§
|
the
collection of the fees is reasonably assured;
and
|
§
|
the
amount of fees to be paid by the customer is fixed or
determinable.
|
ITEM
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
ITEM
4.
|
CONTROLS
AND PROCEDURES
|
Exhibit No .
|
Description
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
|
32.2
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
FUTURE
NOW GROUP INC.
|
|
Date:
May 20, 2009
|
By: /s/ Jeffrey
Eisenberg
|
Jeffrey
Eisenberg
|
|
Chief
Executive Officer and Director
|
|
Date:
May 20, 2009
|
By: /s/ William Schloth
|
William
Schloth
Chief
Financial and Accounting Officer and
Director
|
Exhibit No .
|
Description
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
|
32.2
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|