UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
ྈ
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For
the
quarterly period ended June 30, 2008
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
1934
|
Commission
file number: 000-09459
NEW
CENTURY COMPANIES, INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
061034587
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
Number)
|
9835
Romandel Ave.
Santa
Fe Springs, CA 90670
(Address
of principal executive offices)
(562)
906-8455
(Registrant’s
telephone number, including area code)
Not
applicable
(Former
name, former address and former fiscal year, if changed since last
report)
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 whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of
the
Exchange Act).
|
Accelerated
filer
|
Non-accelerated
filer
|
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 o
No
x
As
of
August 12, 2008, the Company had 15,344,656 shares of common stock, $0.10 par
value, issued and outstanding.
Documents
incorporated by reference: None
NEW
CENTURY COMPANIES, INC.
INDEX
|
|
Page No.
|
PART
I - FINANCIAL INFORMATION
|
|
|
|
|
|
Item
1. Financial Statements
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets -
|
|
|
June
30, 2008 (Unaudited) and December 31, 2007
|
|
F-1
|
|
|
|
Condensed
Consolidated Statements of Operations (Unaudited) -
|
|
|
Three
and Six Months Ended June 30, 2008 and 2007
|
|
F-2
|
|
|
|
Condensed
Consolidated Statements of Cash Flows (Unaudited) -
|
|
|
Six
Months Ended June 30, 2008 and 2007
|
|
F-3
|
|
|
|
Notes
to Condensed Consolidated Financial Statements
|
|
F-4
|
|
|
|
Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
|
|
2
|
|
|
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
|
7
|
|
|
|
Item
4T. Controls and Procedures
|
|
|
|
|
|
PART
II - OTHER INFORMATION
|
|
|
|
|
|
Item
1. Legal Proceedings
|
|
11
|
|
|
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
|
|
|
|
|
Item
3. Defaults Upon Senior Securities
|
|
|
|
|
|
Item
4. Submission of Matters to a Vote of Security
Holders
|
|
|
|
|
|
Item
5. Other Information
|
|
|
|
|
|
Item
6. Exhibits
|
|
|
|
|
|
SIGNATURES
|
|
|
Forward-Looking
Statements
This
Quarterly Report on Form 10-Q contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, and Section 21E of
the
Securities Exchange Act of 1934. For example, statements regarding the Company’s
financial position, business strategy and other plans and objectives for future
operations, and assumptions and predictions about future product demand, supply,
manufacturing, costs, marketing and pricing factors are all forward-looking
statements. These statements are generally accompanied by words such as
“intend,” anticipate,” “believe,” “estimate,” “potential(ly),” “continue,”
“forecast,” “predict,” “plan,” “may,” “will,” “could,” “would,” “should,”
“expect” or the negative of such terms or other comparable terminology. The
Company believes that the assumptions and expectations reflected in such
forward-looking statements are reasonable, based on information available to
it
on the date hereof, but the Company cannot provide assurances that these
assumptions and expectations will prove to have been correct or that the Company
will take any action that the Company may presently be planning. However, these
forward-looking statements are inherently subject to known and unknown risks
and
uncertainties. Actual results or experience may differ materially from those
expected or anticipated in the forward-looking statements. Factors that could
cause or contribute to such differences include, but are not limited to,
regulatory policies, available cash, research results, competition from other
similar businesses, and market and general economic factors. This discussion
should be read in conjunction with the condensed consolidated financial
statements and notes thereto included in Item 1 of this Quarterly Report on
Form 10-Q.
NEW
CENTURY COMPANIES, INC. AND SUBSIDIARY
CONDENSED
CONSOLIDATED BALANCE SHEETS
June
30, 2008 and December 31, 2007
ITEM
1. FINANCIAL STATEMENTS
|
|
June
30, 2008
|
|
December
31,
|
|
|
|
2008
|
|
2007
|
|
|
|
(unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
Current
Assets
|
|
|
|
|
|
Cash
|
|
|
- |
|
|
281,729 |
|
Contract
receivables, net
|
|
|
390,900
|
|
|
438,876
|
|
Inventories,
net
|
|
|
653,730
|
|
|
886,107
|
|
Costs
and estimated earnings in excess of billings on uncompleted
contracts
|
|
|
435,434
|
|
|
570,797
|
|
Deferred
financing costs, current portion
|
|
|
139,178
|
|
|
358,292
|
|
Prepaid
expenses and other current assets
|
|
|
278,599
|
|
|
14,183
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
1,897,841
|
|
|
2,549,984
|
|
|
|
|
|
|
|
|
|
Property
and Equipment, net
|
|
|
227,860
|
|
|
269,092
|
|
Deferred
financing costs, long-term
portion
|
|
|
206,331 |
|
|
59,715 |
|
Total
Assets
|
|
$
|
2,332,032
|
|
$
|
2,878,791
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
|
|
|
Bank
Overdraft
|
|
$
|
66,627
|
|
$
|
18,962
|
|
Accounts
payable and accrued liabilities
|
|
|
1,055,107
|
|
|
2,074,666
|
|
Dividends
payable
|
|
|
418,000
|
|
|
376,725
|
|
Billings
in excess of costs and estimated earnings on uncompleted
contracts
|
|
|
329,038
|
|
|
88,025
|
|
Capital
lease obligation, current portion
|
|
|
26,703
|
|
|
25,597
|
|
Deferred
Gain on forgiveness of debt
|
|
|
554,218
|
|
|
-
|
|
Convertible
(2007 only) notes payable, net of discount of $319,133
|
|
|
|
|
|
|
|
at
June 30, 2008 and $1,175,504 for December 31, 2007, current
portion
|
|
|
149,324
|
|
|
1,391,163
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
2,599,017
|
|
|
3,975,138
|
|
|
|
|
|
|
|
|
|
Long
Term Liabilities
|
|
|
|
|
|
|
|
Capital
lease obligation, long-term portion
|
|
|
19,750
|
|
|
37,679
|
|
Deferred
Gain on forgiveness of debt
|
|
|
600,402
|
|
|
-
|
|
Convertible
(2007 only) notes payable, net of discount of $345,728
|
|
|
|
|
|
|
|
for
June 30, 2008 and $0 for December 31, 2007, long-term
portion
|
|
|
2,135,815
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Total
long term liabilities
|
|
|
2,755,967
|
|
|
37,679
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Deficit
|
|
|
|
|
|
|
|
Cumulative,
convertible, Series B preferred stock, $1 par value,
|
|
|
|
|
|
|
|
15,000,000
shares authorized, no shares issued and outstanding
|
|
|
|
|
|
|
|
(liquidation
preference of $25 per share)
|
|
|
-
|
|
|
-
|
|
Cumulative,
convertible, Series C preferred stock, $1 par value,
|
|
|
|
|
|
|
|
75,000
shares authorized, 26,880 shares issued and outstanding
|
|
|
|
|
|
|
|
(liquidation
preference of $910,000)
|
|
|
26,880
|
|
|
26,880
|
|
Cumulative,
convertible, Series D preferred stock, $25 par value,
|
|
|
|
|
|
|
|
75,000
shares authorized, 11,640 shares issued and outstanding
|
|
|
|
|
|
|
|
(liquidation
preference of $416,000)
|
|
|
291,000
|
|
|
291,000
|
|
Common
stock, $0.10 par value, 50,000,000 shares authorized;
|
|
|
|
|
|
|
|
15,344,656
and 13,744,654 shares issued and outstanding
|
|
|
|
|
|
|
|
at
March 31, 2008 and December 31, 2008, respectivelly
|
|
|
1,534,466
|
|
|
1,374,466
|
|
Subscriptions
receivable
|
|
|
(462,500
|
)
|
|
(462,500
|
)
|
Notes
receivable from stockholders
|
|
|
(545,165
|
)
|
|
(545,165
|
)
|
Deferred
consulting fees
|
|
|
(166,756
|
)
|
|
(334,921
|
)
|
Additional
paid-in capital
|
|
|
9,397,195
|
|
|
9,748,781
|
|
Accumulated
deficit
|
|
|
(13,098,072
|
)
|
|
(11,232,567
|
)
|
|
|
|
|
|
|
|
|
Total
stockholders' deficit
|
|
|
(3,022,952
|
)
|
|
(1,134,026
|
)
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' deficit
|
|
$
|
2,332,032
|
|
|
2,878,791
|
|
See
accompanying notes to the condensed consolidated financial statements.
NEW
CENTURY COMPANIES, INC. AND SUBSIDIARY
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
For
the Three and Six Months Ended June 30, 2008 and 2007
(Unaudited)
|
|
For
the Three Months Ended June 30,
|
|
For
the Six Months Ended June 30,
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTRACT
REVENUES
|
|
$
|
1,434,676
|
|
$
|
2,600,147
|
|
$
|
2,961,278
|
|
$
|
5,785,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF SALES
|
|
$
|
1,363,614
|
|
|
1,889,145
|
|
|
2,672,093
|
|
|
3,889,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
71,062
|
|
|
711,002
|
|
|
289,185
|
|
|
1,896,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
and other compensation
|
|
|
73,998
|
|
|
212,955
|
|
|
345,382
|
|
|
642,318
|
|
Salaries
and related
|
|
|
74,123
|
|
|
110,336
|
|
|
127,619
|
|
|
226,970
|
|
Selling,
general and administrative
|
|
|
278,441
|
|
|
195,095
|
|
|
716,470
|
|
|
368,371
|
|
TOTAL
OPERATING EXPENSES
|
|
|
426,562
|
|
|
518,386
|
|
|
1,189,471
|
|
|
1,237,659
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
INCOME (LOSS)
|
|
|
(355,500
|
)
|
|
192,616
|
|
|
(900,286
|
)
|
|
658,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain
(loss) on writeoff of accounts payable
|
|
|
3,577
|
|
|
4,729
|
|
|
60,205
|
|
|
(6,959
|
)
|
Interest
expense
|
|
|
(497,382
|
)
|
|
(722,273
|
)
|
|
(984,151
|
)
|
|
(1,187,514
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
OTHER EXPENSES
|
|
|
(493,805
|
)
|
|
(717,544
|
)
|
|
(923,946
|
)
|
|
(1,194,473
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
BEFORE PROVISION FOR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME
TAXES
|
|
|
(849,305
|
)
|
|
(524,928
|
)
|
|
(1,824,232
|
)
|
|
(535,891
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROVISION
FOR INCOME TAXES
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(849,305
|
)
|
$
|
(524,928
|
)
|
$
|
(1,824,232
|
)
|
$
|
(535,891
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
Stock Dividends
|
|
$
|
(41,275
|
)
|
$
|
27,350
|
|
$
|
(41,275
|
)
|
$
|
27,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS APPLICABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TO
COMMON STOCKHOLDERS
|
|
$
|
(890,580
|
)
|
|
(497,578
|
)
|
$
|
(1,865,507
|
)
|
$
|
(508,541
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted net loss available to
|
|
|
|
|
|
|
|
|
|
|
|
|
|
common
stockholders per common share
|
|
$
|
(0.06
|
)
|
|
(0.04
|
)
|
$
|
(0.13
|
)
|
$
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted weighted average common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares
outstanding
|
|
|
14,200,975
|
|
|
12,654,601
|
|
|
14,040,672
|
|
|
12,320,927
|
|
See
accompanying notes to the condensed consolidated financial statements.
NEW
CENTURY COMPANIES, INC. AND SUBSIDIARY
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For
the Six Months Ended June 30, 2008 and 2007
(Unaudited)
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,824,232
|
)
|
$
|
(535,891
|
)
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
(used
in) provided by operating activities:
|
|
|
|
|
|
|
|
Depreciation
and amortization of property and equipment
|
|
|
41,232
|
|
|
63,535
|
|
Gain
on write off of accounts payable
|
|
|
(60,205
|
)
|
|
-
|
|
Amortization
of deferred financing cost
|
|
|
180,960
|
|
|
179,148
|
|
Amortization
of debt discount
|
|
|
503,788
|
|
|
848,485
|
|
Amortization
of deferred consulting fees and deferred employees stock
option
|
|
|
168,165
|
|
|
(126,683
|
)
|
Estmated
fair market value of common stock issued for consulting services
|
|
|
|
|
|
|
|
and
related change in fair value
|
|
|
83,000
|
|
|
610,000
|
|
Conversion
of interest to common stock
|
|
|
-
|
|
|
74,317
|
|
Bad
debt expense
|
|
|
27,259
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
Contracts
receivable
|
|
|
20,717
|
|
|
(4,766
|
)
|
Inventories
|
|
|
232,377
|
|
|
(173,695
|
)
|
Costs
and estimated earnings in excess of billings on uncompleted
contracts
|
|
|
135,363
|
|
|
48,960
|
|
Prepaid
expenses and other current assets
|
|
|
(264,416
|
)
|
|
18,645
|
|
Notes
receivable from stockholders
|
|
|
-
|
|
|
(17,500
|
)
|
Accounts
payable and accrued liabilities
|
|
|
202,406
|
|
|
(77,846
|
)
|
Billings
in excess of costs and estimated earnings on uncompleted
contracts
|
|
|
241,013
|
|
|
(99,635
|
)
|
|
|
|
|
|
|
|
|
Net
cash (used in) provided by operating activities
|
|
|
(312,573
|
)
|
|
807,074
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Purchases
of property and equipment
|
|
|
-
|
|
|
(30,000
|
)
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
-
|
|
|
(30,000
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
-
|
|
|
123,898
|
|
Bank
overdraft
|
|
|
47,665
|
|
|
6,929
|
|
Proceeds
of issuance of convertible notes payable
|
|
|
-
|
|
|
-
|
|
Principal
payments on notes payable
|
|
|
(16,821
|
)
|
|
(620,523
|
)
|
Deferred
financing costs
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) financing activities
|
|
|
30,844
|
|
|
(489,696
|
)
|
|
|
|
|
|
|
|
|
Net
(decrease) increase in cash
|
|
|
(281,729
|
)
|
|
287,378
|
|
|
|
|
|
|
|
|
|
Cash
at beginning of period
|
|
|
281,729
|
|
|
53,318
|
|
|
|
|
|
|
|
|
|
Cash
at end of period
|
|
$
|
-
|
|
$
|
340,696
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of non-cash financing and investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
cumulative dividends on preferred stock
|
|
$
|
41,275
|
|
$
|
42,400
|
|
|
|
|
|
|
|
|
|
Reversal
of accrued dividends older than four years on preferred
stock
|
|
$
|
-
|
|
$
|
(69,750
|
)
|
|
|
|
|
|
|
|
|
Conversion
of notes payable and interest to common stock
|
|
$
|
-
|
|
$
|
424,317
|
|
|
|
|
|
|
|
|
|
Common
stock and warrants issued for deferred financing costs
|
|
$
|
102,500
|
|
$
|
-
|
|
See
accompanying notes to the condensed consolidated financial
statements.
NEW
CENTURY COMPANIES, INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007
1.
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
And Nature Of Operations
New
Century Companies, Inc. and its wholly owned subsidiary, New Century
Remanufacturing, Inc., (collectively, the "Company"), a California corporation,
was incorporated March 1996 and is located in Southern California. The Company
provides after-market services, including rebuilding, retrofitting and
remanufacturing of metal cutting machinery.
The
Company currently sells its services by direct sales and through a network
of
machinery dealers across the United States. Its customers are generally medium
to large manufacturing companies in various industries where metal cutting
is an
integral part of their businesses. The Company grants credit to its customers
who are predominately located in the western United States.
The
Company trades on the OTC Bulletin Board under the symbol
"NCNC.OB".
Principles
Of Consolidation
The
condensed consolidated financial statements include the accounts of New Century
Companies, Inc. and its wholly owned subsidiary, New Century Remanufacturing,
Inc.. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Basis
Of Presentation
The
accompanying unaudited interim condensed consolidated financial statements
have
been prepared by the Company, pursuant to the rules and regulations of the
United States Securities and Exchange Commission (the "SEC"). Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”) have been omitted pursuant to such SEC rules
and regulations; nevertheless, the Company believes that the disclosures are
adequate to make the information presented not misleading. These financial
statements and the notes hereto should be read in conjunction with the
consolidated financial statements, accounting policies and notes thereto
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2007, filed with the SEC. In the opinion of management, all
adjustments necessary to present fairly, in accordance with GAAP, the Company's
financial position as of June 30, 2008, and the results of operations and cash
flows for the interim periods presented, have been made. Such adjustments
consist only of normal recurring adjustments. The results of operations for
the
three and six months ended June 30, 2008 are not necessarily indicative of
the
results for the full year ending December 31, 2008. Amounts related to
disclosure of December 31, 2007 balances within these interim condensed
consolidated financial statements were derived from the audited 2007
consolidated financial statements and notes thereto.
Going
Concern
The
accompanying condensed consolidated financial statements have been prepared
assuming the Company will continue as a going concern, which contemplates,
among
other things, the realization of assets and satisfaction of liabilities in
the
normal course of business. The Company has losses from operations year to date
of approximately $849,000, an accumulated deficit of approximately $13,098,000
and a negative working capital balance of approximately $701,000. These factors,
among others, raise substantial doubt about the Company's ability to continue
as
a going concern. The Company intends to fund operations through anticipated
increased sales along with renegotiated or new debt and equity financing
arrangements which management believes may be insufficient to fund its capital
expenditures, working capital and other cash requirements for the year ending
December 31, 2008. Therefore, the Company will be required to seek additional
funds to finance its long-term operations.
In
response to these problems, management has taken the following actions:
· |
The
Company continues its aggressive program for selling inventory.
|
· |
The
Company continues to implement plans to further reduce operating
costs.
|
· |
The
Company is seeking investment capital through the public and private
markets.
|
· |
The
Company has successfully restructured its debt, eliminating the penalties
and interest for past default and extending the repayment term (See
Note
3).
|
The
successful outcome of future activities cannot be determined at this
time
and there is no assurance that if achieved, the Company will have sufficient
funds to execute its intended business plan or generate positive operating
results.
The
condensed
consolidated
financial statements do not include any adjustments related to recoverability
and classification of asset carrying amounts or the amount and classification
of
liabilities that might result should the Company be unable to continue as a
going concern.
Inventory
Inventories
are stated at the lower of cost or net realizable value. Cost is determined
under the first-in, first-out method. Inventories represent cost of work in
process on units not yet under contract. Cost includes all direct material
and
labor, machinery, subcontractors and allocations of indirect overhead cost,
offset by reserve for estimated markdowns on inventory costs.
Inventory
costs as of June 30, 2008 and December 31, 2007:
|
|
June
30, 2008
|
|
December
31, 2007
|
|
|
|
|
|
|
|
Cost
of labor
|
|
$
|
67,000
|
|
$
|
86,000
|
|
Cost
of materials
|
|
|
451,000
|
|
|
615,000
|
|
Cost
of subcontracted services
|
|
|
42,000
|
|
|
61,000
|
|
Allocation
of indirect overhead cost
|
|
|
380,000
|
|
|
410,000
|
|
|
|
|
|
|
|
|
|
Gross
inventory
|
|
$
|
940,000
|
|
$
|
1,172,000
|
|
|
|
|
|
|
|
|
|
Reserve
for estimated markdowns on inventory costs
|
|
|
(286,000
|
)
|
|
(286,000
|
)
|
|
|
|
|
|
|
|
|
Net
inventory
|
|
$
|
654,000
|
|
$
|
886,000
|
|
Revenue
Recognition
The
Company's revenues consist primarily of contracts with customers. The Company
uses the percentage-of-completion method of accounting to account for long-term
contracts and, therefore, takes into account the cost, estimated earnings and
revenue to date on fixed-fee contracts not yet completed. The
percentage-of-completion method is used because management considers total
cost
to be the best available measure of progress on the contracts. Because of
inherent uncertainties in estimating costs, it is at least reasonably possible
that the estimates used will change within the near term. The Company recognizes
revenue on contracts pursuant to Statements of Position 81-1, “Accounting for
Performance of Construction-Type and Certain Production-Type
Contracts.”
For
revenues from stock inventory the Company follows Staff Accounting Bulletin
("SAB") No. 104, "Revenue Recognition", which outlines the basic criteria that
must be met to recognize revenue other than revenue on contacts, and provides
guidance for presentation of this revenue and for disclosure related to these
revenue recognition policies in financial statements filed with the SEC.
For
contracts, the amount of revenue recognized at the financial statement date
is
the portion of the total contract price that the cost expended to date bears
to
the anticipated final cost, based on current estimates of cost to complete.
It
is not related to the progress billings to customers. Contract costs include
all
materials, direct labor, machinery, subcontract costs and allocations of
indirect overhead.
Because
contracts may extend over a period of time, changes in job performance, changes
in job conditions and revisions of estimates of cost and earnings during the
course of the work are reflected in the accounting period in which the facts
that require the revision become known. At the time a loss on a contract becomes
known, the entire amount of the estimated ultimate loss is recognized in the
financial statements.
Contracts
that are substantially complete are considered closed for financial statement
purposes. Costs incurred and revenue earned on contracts in progress in excess
of billings (under billings) are classified as a current asset. Amounts billed
in excess of costs and revenue earned (over billings) are classified as a
current liability.
The
Company accounts for shipping and handling fees and costs in accordance with
Emerging Issues Task Force ("EITF") Issue No. 00-10, "Accounting for Shipping
and Handling Fees and Costs." Shipping and handling fees and costs incurred
by
the Company are immaterial to the operations of the Company and are included
in
cost of sales.
In
accordance with Statements of Financial Accounting Standards ("SFAS") No. 48,
"Revenue Recognition when Right of Return Exists," revenue is recorded net
of an
estimate for markdowns, price concessions and warranty costs. Such reserve
is
based on management's evaluation of historical experience, current industry
trends and estimated costs. As of June 30, 2008, the Company estimated the
markdowns, price concessions and warranty costs and concluded amounts are
immaterial and did not record any adjustment to revenues.
Basic
And Diluted Loss Per Common Share
Basic
net
income (loss) per share is computed by dividing net income (loss) by the
weighted average number of common shares outstanding for the period. Diluted
net
income (loss) per share is computed by dividing net income (loss) by the
weighted average number of common shares and dilutive common stock equivalents
outstanding for each respective period.
Common
stock equivalents, representing convertible preferred stock, convertible debt,
options and warrants totaling approximately 1,352,000 at June 30, 2008 and
6,192,972 at December 31, 2007 are not included in the diluted loss per share
as
they would be anti-dilutive. Accordingly, diluted and basic loss per common
share are the same at June 30, 2008 and December 31, 2007.
Stock
Based Compensation
Effective
January 1, 2006, we adopted the fair value method of accounting for employee
stock compensation cost pursuant to SFAS No. 123-R, “Share-Based
Payments”.
Prior
to that date, the Company used the intrinsic value method under Accounting
Policy Board Opinion No. 25 to recognize compensation cost.
Under
the
modified prospective method of adoption for SFAS No. 123-R, the compensation
cost recognized by the Company beginning January 1, 2006 includes compensation
cost for all equity incentive awards granted subsequent to January 1, 2006,
based on the grant-date fair value estimated in accordance with the provisions
of SFAS No. 123-R. The Company had no equity incentive awards granted prior
to
January 1, 2006 that were not yet vested. Accordingly, $0 and $86,400 of
share-based compensation expense was recognized in the accompanying condensed
consolidated financial statements for the three month periods ended June 30,
2008 and 2007, respectively. $0 and $216,000 of share-based compensation expense
was recognized in the accompanying condensed consolidated financial statements
for the six month periods ended June 30, 2008 and 2007,
respectively.
From
time
to time, the Company's Board of Directors grants common share purchase options
or warrants to selected directors, officers, employees, consultants and advisors
in payment of goods or services provided by such persons on a stand-alone basis
outside of any of the Company's formal stock plans. The terms of these grants
are individually negotiated and generally expire within five years from the
grant date.
Under
the
terms of the Company's 2000 Stock Option Plan, options to purchase an aggregate
of 5,000,000 shares of common stock may be issued to officers, key employees
and
consultants of the Company. The exercise price of any option generally may
not
be less than the fair market value of the shares on the date of grant. The
term
of each option generally may not be more than five years.
On
November 13, 2006, the Company granted 2,000,000 options to key employees.
At
June 30, 2008, the Company had 1,050,000 options available for future issuance
under their equity compensation plans.
There
is
no share-based compensation resulting from the application of SFAS No. 123-R
to
options granted outside of the Company's Stock Option Plan for the three or
six
months ended June 30, 2008 and 2007. Share-based compensation recognized as
a
result of the adoption of SFAS No. 123-R use the Black-Scholes option pricing
model for estimating fair value of options granted.
In
accordance with SFAS No. 123-R, the Company’s policy is to adjust share-based
compensation on a quarterly basis for changes to the estimate of expected award
forfeitures based on actual forfeiture experience. The effect of adjusting
the
forfeiture rate for all expense amortization after December 31, 2007 is
recognized in the period the forfeiture estimate is changed, no changes occurred
in the period ended June 30, 2007.
Options
outstanding that have vested and are expected to vest as of June 30, 2008 are
as
follows:
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Weighted
|
|
Average
|
|
|
|
|
|
|
|
Average
|
|
Remaining
|
|
Aggregate
|
|
|
|
Number
of
|
|
Exercise
|
|
Contractual
|
|
Intrinsic
|
|
|
|
Shares
|
|
Price
|
|
Term
in Years
|
|
Value
(1)
|
|
Vested
(2)
|
|
|
3,950,000
|
|
$
|
0.20
|
|
|
0.97
|
|
$
|
|
|
Expected
to vest
|
|
|
—
|
|
|
|
|
|
|
|
$
|
|
|
Total
|
|
|
3,950,000
|
|
|
|
|
|
|
|
$
|
|
|
(1) |
These
values are calculated as the difference between the exercise price
and
$0.13, the closing market price of the Company's common stock on
June 30,
2008 as quoted on the Over-the-Counter Bulletin Board under the symbol
"NCNC.OB" for all in-the-money options
outstanding.
|
(2) |
Includes
800,000 options that became fully vested on March 14, 2008 and are
valued
at $120,000 based on the stock market price of the shares at the
contract
date.
|
Options
outstanding that are expected to vest are net of estimated future forfeitures
which are estimated when compensation costs are recognized in accordance
with
the provisions of SFAS No. 123-R, Additional information with respect to
stock
option activity is as follows:
|
|
|
|
Outstanding
Options
|
|
|
|
Shares
|
|
|
|
Weighted
|
|
Aggregate
|
|
|
|
Available
|
|
Number
of
|
|
Average
|
|
Intrinsic
|
|
|
|
for
Grant
|
|
Shares
|
|
Exercise
Price
|
|
Value
(1)
|
|
|
|
|
|
|
|
|
|
|
|
December
31, 2007
|
|
|
1,050,000
|
|
|
3,950,000
|
|
$
|
0.20
|
|
$
|
79,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercises
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30, 2008
|
|
|
1,050,000
|
|
|
3,950,000
|
|
$
|
0.20
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
exercisable at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30, 2008
|
|
|
|
|
|
3,950,000
|
|
$
|
0.20
|
|
|
|
|
December
31, 2007
|
|
|
|
|
|
3,150,000
|
|
$
|
0.20
|
|
|
|
|
(1) |
Represents
the difference between the exercise price and the closing market
price of
the Company's common stock at the end of the reporting period (as
of June
30, 2008 and December 31, 2007, the market price of the Company's
common
stock was $0.13 and $0.22, respectively) for all in-the-money options
outstanding..
|
The
Company follows SFAS No. 123-R (as interpreted by EITF Issue No. 96-18,
"Accounting for Equity Instruments That Are Issued To Other Than Employees
for
Acquiring, or in Conjunction with Selling, Goods or Services") to account for
transactions involving services provided by third parties where the Company
issues equity instruments as part of the total consideration. Pursuant to
paragraph 7 of SFAS No. 123 (R), the Company accounts for such transactions
using the fair value of the consideration received (i.e. the value of the goods
or services) or the fair value of the equity instruments issued, whichever
is
more reliably measurable. The Company applies EITF Issue No. 96-18 in
transactions when the value of the goods and/or services are not readily
determinable the fair value of the equity instruments is more reliably
measurable and the counterparty receives equity instruments in full or partial
settlement of the transactions using the following methodology:
a)
For
transactions where goods have already been delivered or services rendered,
the
equity instruments are issued on or about the date the performance is complete
(and valued on the date of issuance).
b)
For
transactions where the instruments are issued on a fully vested, non-forfeitable
basis, the equity instruments are valued on or about the date of the
contract.
c)
For
any transactions not meeting the criteria in (a) or (b) above, the Company
re-measures the consideration at each reporting date based on its then current
stock value.
Deferred
Financing Costs
Note
Payable
Direct
costs of securing debt financing are capitalized and amortized over the term
of
the related debt. When a loan is paid in full, any unamortized financing costs
are removed from the related accounts and charged to operations.
In
June
2008, in connection with the CAMOFI debt reduction as discussed in Note 3,
the
Company entered into a contract with a third party for financial services.
The
Company issued 300,000 shares of common stock valued at $36,000, based on the
market price of the shares on the date of the agreement. The fee is capitalized
and amortized over the term of the related debt.
During
the three months ended June 30, 2008 and 2007, the Company amortized
approximately $90,000 to interest expense. During the six months ended June
30,
2008 and 2007, the Company amortized approximately $181,000 to interest expense.
At June 30, 2008, the unamortized portion of deferred financing costs for the
CAMOFI note payable is approximately $275,000.
Real
Estate Lease
On
April
1st,
2008,
the company entered into a commercial lease agreement to lease its premises
for
ten years. Per the lease, the Company incurred a brokerage fee of approximately
$72,500. This cost is capitalized and amortized over the term of the lease.
During
the three months ended June 30, 2008, the Company amortized approximately $1,800
to rent expense. At June 30, 2008, the unamortized portion of deferred brokerage
fees for the lease payable is approximately $70,000.
Income
Taxes
We
adopted the provisions of Financial Standards Accounting Board Interpretation
No. 48 Accounting for Uncertainty in Income Taxes ("FIN 48") an interpretation
of FASB Statement No. 109 ("SFAS 109") on January 1, 2007. The implementation
of
FIN 48 did not result in any adjustment to the Company's beginning tax
positions. The Company continues to fully recognize its tax benefits which
are
offset by a valuation allowance to the extent that it is more likely than not
that the deferred tax assets will not be realized. As of June 30, 2008, the
Company did not have any unrecognized tax benefits. The Company files a
Consolidated Federal income tax return in the U.S. The Company files a separate
income tax return in the State of California. The Company is no longer subject
to U.S. Federal tax examinations for the years before 2004, and to the State
of
California for the years before 2003.
Significant
Recent Accounting Pronouncements
In
December 2007, the FASB issued SFAS No. 141(R), Business
Combinations.
SFAS
No. 141(R) retains the fundamental requirements in SFAS No. 141, Business
Combinations,
that
the acquisition method of accounting be used for all business combinations
and
for an acquirer to be identified for each business combination. SFAS No. 141(R)
requires an acquirer to recognize the assets acquired, the liabilities assumed,
and any noncontrolling interest in the acquiree at the acquisition date,
measured at their fair values as of that date, with limited exceptions specified
in SFAS No. 141(R). In addition, SFAS No. 141(R) requires acquisition costs
and
restructuring costs that the acquirer expected but was not obligated to incur
to
be recognized separately from the business combination, therefore, expensed
instead of part of the purchase price allocation. SFAS No. 141(R) will be
applied prospectively to business combinations for which the acquisition date
is
on or after the beginning of the first annual reporting period beginning on
or
after December 15, 2008. Early adoption is prohibited. The Company expects
to
adopt SFAS No. 141(R) to any business combinations with an acquisition date
on
or after January 1, 2009.
In
December 2007, the FASB issued SFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements, an amendment to ARB No.
51.
SFAS
No. 160 changes the accounting and reporting for minority interests, which
will
be recharacterized as noncontrolling interests and classified as a component
of
equity. SFAS No. 160 is effective for fiscal years, and interim periods within
those fiscal years, beginning on or after December 15, 2008. Early adoption
is
prohibited. The Company is currently evaluating the impact SFAS No. 160 may
have
on its consolidated financial statements.
In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.”
SFAS No. 157 defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles and expands disclosures about
fair value measurements. SFAS No. 157 applies under other accounting
pronouncements that require or permit fair value measurements, the FASB having
previously concluded in those accounting pronouncements that fair value is
the
relevant measurement attribute. Accordingly, SFAS No. 157 does not require
any
new fair value measurements. SFAS No. 157 is effective for fiscal years
beginning after December 15, 2007. The adoption of SFAS No. 157 did
not have a significant impact on the Company’s financial
statements.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities.” SFAS No. 159 expands the scope
of specific types of assets and liabilities that an entity may carry at fair
value on its statement of financial position, and offers an irrevocable option
to record the vast majority of financial assets and liabilities at fair value,
with changes in fair value recorded in earnings. SFAS No. 159 is effective
for fiscal years beginning after November 15, 2007. The adoption of SFAS
No. 159 did not have a significant impact on the Company’s financial
statements.
Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force, or “EITF”), the AICPA, and the SEC did not or are not
believed by management to have a material impact on the Company’s present or
future consolidated financial statements.
2.
CONTRACTS IN PROGRESS
Contracts
in progress which include completed contracts not completely billed,
approximate:
|
|
June
30, 2008
|
|
December
31, 2007
|
|
|
|
|
|
|
|
Cumulative
costs to date
|
|
$
|
5,017,000
|
|
$
|
7,007,000
|
|
Cumulative
gross profit to date
|
|
|
4,007,000
|
|
|
7,893,000
|
|
|
|
|
|
|
|
|
|
Cumulative
revenue earned
|
|
|
9,024,000
|
|
|
14,900,000
|
|
Less
progress billings to date
|
|
|
(8,918,000
|
)
|
|
(14,350,000
|
)
|
|
|
|
|
|
|
|
|
Net
under billings
|
|
$
|
106,000
|
|
|
|
|
The
following approximate amounts are included in the accompanying condensed
consolidated balance sheets under these captions:
|
|
June
30, 2008
|
|
December
31, 2007
|
|
|
|
|
|
|
|
Costs
and estimated earnings in excess of billings on uncompleted
contracts
|
|
$
|
435,000
|
|
$
|
571,000
|
|
Billings
in excess of costs and estimated earnings on uncompleted
contracts
|
|
|
(329,000
|
)
|
|
(88,000
|
)
|
|
|
|
|
|
|
|
|
Net
under billings
|
|
$
|
106,000
|
|
$
|
483,000
|
|
3.
CAMOFI Master LDC (“CAMOFI”) DEBT
On
February 28, 2006, the Company secured a 12% senior convertible promissory
note
with CAMOFI Master LDC. As of June 26, 2008 an aggregate of $3,800,890
principal, interest and penalties were due under the note.
Pursuant
to a letter agreement dated June 26, 2008 (the “Letter Agreement”) between New
Century Companies, Inc. (the “Company”) and CAMOFI Master LDC (“CAMOFI”), CAMOFI
agreed to waive certain penalties and default interest which have been accrued
under the transaction documents previously entered into with CAMOFI, including
a
12% Senior Secured Convertible Promissory Note due February 20, 2009 in the
original principal amount of $3,500,000, Security Agreement, an Amended and
Restated Registration Rights Agreement, and a Subsidiary Guaranty. The waiver
is
subject to the Company’s performance of its obligations under the Letter
Agreement and the execution of further documentation to be prepared in
connection with the Letter Agreement. Pursuant to the Letter Agreement, the
Company issued an amended and restated Note (the “Amended Note”) in the
principal amount of $2,950,000 with a new maturity date of August 1, 2010.
Additionally,
under the Letter Agreement, the Company issued 725,000 shares of common stock
and 725,000 five year warrants with an exercise price of $0.10 and 725,000
five
year warrants with an exercise price of $0.20. Commencing on August 1, 2008,
and
continuing thereafter on the first business day of every month for the next
twenty-four months, the Company has the obligation to pay to CAMOFI the amount
of $70,000, allocated first to the payment of interest and second to the payment
of principal on the Amended and Restated Note. On or before August 1, 2010,
the
Company shall pay to CAMOFI all amounts still outstanding under the Amended
and
Restated Note, whether of principal, interest or otherwise.
The
transaction qualified as Troubled Debt Restructuring under SFAS No. 15 due
to
the company’s current financial difficulties and the concessions granted by
CAMOFI. In accordance with SFAS No. 15, no gain on the forgiveness of
interest and penalties was recognized as the carrying value of the
note did not exceed the future cash payment at the time of transaction.
The fair value of the warrants and stock given to CAMOFI was approximately
$233,000 based on the Black Scholes pricing model and was recorded as a
reduction to the note The remaining forgiveness of the interest and
penalties of $624,000 were recorded as a deferred gain.
The
assumptions used in the Black-Scholes pricing model for this transaction were
as
following, risk free rate of 3.44%, expected life of 5 years and an implied
volatility of 187%.
CAMOFI
also cancelled 3,476,190 warrants with a term of five years, which were issued
on February 28, 2006 with an exercise price of $0.63 and 1,500,000 warrants
dated December 19, 2006 with an exercise price of $0.35. The fair value of
such
warrants on June 26, 2008 was approximately $530,000, based on the Black-Scholes
pricing model and recorded as a deferred gain to be amortized to
interest expense over the life of the debt.
Stock
Purchase Warrants Issued and Cancelled in connection with CAMOFI
note
In
2006,
the Company granted warrants in connection with the issuance of 12% Senior
Secured Convertible Promissory Note. Under Accounting Principles Board Opinion
No. 14, "Accounting
for Convertible Debt and Debt Issued With Stock Purchase
Warrants,"
the
relative estimated fair value of such warrants represents a discount from the
face amount of the notes payable. Such discounts are amortized to interest
expense over the term of the notes. During the three months ended June 30,
2008
and 2007, the Company amortized approximately $175,000 and $348,000,
respectively, to interest expense. During the six months ended June 30, 2008
and
2007, the Company amortized approximately $333,000 and $531,000, respectively,
to interest expense.
Beneficial
Conversion Feature Of CAMOFI Convertible Notes Payable discontinued on June
26,
2008 for restructured debt
The
convertible feature of certain notes payable provide for a rate of conversion
that is below market value. Such feature is normally characterized as a
"Beneficial
Conversion Feature"
("BCF"). Pursuant to EITF Issue No. 98-5, "Accounting
for Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratio"
and
EITF No. 00-27, "Application
of EITF Issue No. 98-5 To Certain Convertible Instruments,"
the
estimated fair value of the BCF is recorded in the condensed consolidated
financial statements as a discount from the face amount of the notes. Such
discounts are amortized to interest expense over the term of the notes. During
the three months ended June 30, 2008 and 2007, the Company amortized
approximately $84,000 and $208,000, respectively, to interest expense. During
the six months ended June 30, 2008 and 2007, the Company amortized approximately
$178,000 and $318,000, respectively, to interest expense. As part of the
restructuring of the CAMOFI debt as discussed in Note 3, the CAMOFI debt no
longer has a conversion feature.
For
the
three and six months ended June 30, 2008, no principal payments were made on
the
CAMOFI note. As of June 30, 2008 and December 31, 2007, the principal balance
is
approximately $2,950,000 and $2,567,000, respectively, which is presented net
of
debt discounts totaling approximately $664,000 and $1,176,000,
respectively.
4.
EQUITY TRANSACTIONS
Equity
Compensation
In
June
2008, the Company entered into a 19 day contract with a third party for public
relations services valued at $18,000. The fee was paid in the form of 200,000
shares of the Company’s common stock based on the stock market price of the
shares at the contract date. The value of the common stock on the date of the
transaction was recorded as a deferred charge and is amortized to operating
expense over the life of the agreement. At June 30, 2008, the remaining deferred
consulting fees under this contract totaled $15,000.
In
February 2008, the Company entered into a one-year contract with a third party
for public relations services valued at $30,000. The fee was paid in the form
of
150,000 shares of the Company’s common stock and the value was based on the
stock market price of the shares at the contract date. The fee was recorded
as a
deferred charge and is amortized to operating expense over the life of the
agreement. At June 30, 2008, the remaining deferred consulting fees under this
contract totaled $17,500.
In
February 2008, the Company entered into a three month contract with a third
party for public relations services valued at $20,000. The fee was paid in
the
form of 100,000 shares of the Company’s common stock and the value was based on
the market price of the shares at the contract date. The fee was recorded as
a
deferred charge and was amortized to operating expense over the life of the
agreement. At June 30, 2008, the fee was amortized entirely.
In
March
2008, the Company entered into a one month contract with a third party for
public and financial communication services
valued at $25,000. The fee was paid in the form of 125,000 shares of the
Company’s common stock and the value was based on the market price of the shares
at the contract date. The fee was recorded as a deferred charge and was
amortized to operating expense over the life of the agreement. At June 30,
2008,
the fee was amortized entirely.
In
May
2007, the Company issued 100,000 shares of common stock valued at $70,000 (based
on the market price of the shares) to a third party for public investor
relations services under a one year contract. The common stock was recorded
at
the estimated fair value of the common stock on the date of the transaction
and
was amortized over the life of the agreement and recorded as deferred
compensation expense.
In
June
2007, the Company issued 300,000 shares of common stock valued at $210,000
(based on the market price of the shares) to a third party for internet public
investor relations services under a three year contract. The common stock was
recorded at the estimated fair value of the common stock on the date of the
transaction and is amortized over the life of the agreement. At June 30, 2008,
the remaining deferred consulting fees under this contract totaled
$134,167.
In
June
2007, the Company issued 15,000 shares of common stock valued at $10,500 (based
on the market price of the shares) to a third party for public investor
relations services under a 90 day contract. The common stock was recorded at
the
estimated fair value of the common stock on the date of the transaction and
was
amortized over the life of the agreement.
In
June
2007, the Company issued 75,000 shares of common stock valued at $52,500
(based
on the market price of the shares) to a third party for corporate consulting
and
market services under a 6 month contract. The common stock was recorded at
the
estimated fair value of the common stock on the date of the transaction and
was
amortized over the life of the agreement.
In
February 2007, the Company issued 150,000 shares of common stock valued at
$60,000, based on the market price of the shares on the date the services
were
completed, to a third party for investor marketing services under a one month
contract. The fee was recorded as public company expense in the first quarter
of
2007.
In
February 2007, the Company issued 100,000 shares of common stock valued at
$36,000, based on the market price of the shares on the date the services
were
completed, to a third party for financial consulting services under a 13
day
contract. The fee was recorded as public company expense in the first quarter
of
2007.
In
February 2007, the Company issued 300,000 shares of common stock valued at
$126,000, based on the market price of the shares on the date the services
were
completed, to a third party for investor relation services under a one month
contract. The fee was recorded as public company expense in the first quarter
of
2007.
In
accordance with EITF 96-18, “Accounting for Equity Instruments That Are Issued
to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods
or
Services,” since the value of the services were not readily determinable on
transactions that occurred in 2007 and the fair value of the equity instruments
was more reliably measurable, the value of the services were based on the market
price of the shares. Further, under these arrangements, the performance criteria
required for a measurement date was not reached until the service period was
completed. As a result, the Company was required to re-measure the consideration
at each reporting date based on its then current stock value. During the three
and six months ended June 30, 2008, the Company recorded a decrease of
approximately $10,000 on such services.
During
the three months ended June 30, 2008 and 2007, the Company amortized
approximately $90,000 of consulting expense related to deferred consulting
fees
on such equity based compensation arrangements. During the six months ended
June
30, 2008 and 2007, the Company amortized approximately $179,000 of consulting
expense related to deferred consulting fees on such equity based compensation
arrangements.
As
of
June 30, 2008 and December 31, 2007, the unamortized portion of consulting
fees
on such equity based compensation arrangements approximate $167,000 and
$234,000, respectively.
Dividends
on preferred stock
The
preferred Series C shares and preferred Series D shares have a mandatory
cumulative dividend of $1.25 per share, which is payable on a semi-annual basis
in September and December each year to holders of record on November 30 and
May
31. The preferred shareholders do not have any voting rights and have
liquidation preferences.
At
June
30, 2008 and December 31, 2007, the Company had a total of 26,680 preferred
Series C shares and 11,640 preferred Series D shares issued and outstanding.
As
of June 30, 2008 and December 31, 2007, the Company has accumulated dividends
payable balances of $418,000 and $376,725, respectively. The Company did not
declare and does not intend to declare any dividends as of June 30, 2008.
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF
OPERATIONS
The
following discussion should be read in conjunction with the Company's
consolidated financial statements and the notes thereto appearing elsewhere
in
this Form 10-Q. Certain statements contained herein that are not related to
historical results, including, without limitation, statements regarding the
Company's business strategy and objectives, future financial position,
expectations about pending litigation and estimated cost savings, are
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Securities Exchange Act") and involve risks and uncertainties. Although the
Company believes that the assumptions on which these forward-looking statements
are based are reasonable, there can be no assurance that such assumptions will
prove to be accurate and actual results could differ materially from those
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, regulatory
policies, and market and general policies, competition from other similar
businesses, and market and general economic factors. All forward-looking
statements contained in this Form 10-Q are qualified in their entirety by this
statement.
OVERVIEW
The
Company is engaged in acquiring, re-manufacturing and selling pre-owned Computer
Numerically Controlled ("CNC") machine tools to manufacturing customers. The
Company provides rebuilt, retrofit and remanufacturing services for numerous
brands of machine tools. The remanufacturing of a machine tool, typically
consisting of replacing all components, realigning the machine, adding updated
CNC capability and electrical and mechanical enhancements, generally takes
two
to four months to complete. Once completed, a remanufactured machine is a "like
new," state-of-the-art machine with a price ranging from $275,000 to $1,000,000,
which is substantially less then the price of an equivalent new machine. The
Company also manufactures original equipment CNC large turning lathes and
attachments under the trade name Century Turn.
CNC
machines use commands from onboard computers to control the movements of cutting
tools and rotation speeds of the parts being produced. Computer controls enable
operators to program operations such as part rotation, tooling selection and
tooling movement for specific parts and then store the programs in memory for
future use. The machines are able to produce parts while left unattended.
Because of this ability, as well as superior speed of operation, a CNC machine
is able to produce the same amount of work as several manually controlled
machines, as well as reduce the number of operators required; generating higher
profits with less re-work and scrap. Since the introduction of CNC tooling
machines, continual advances in computer control technology have allowed for
easier programming and additional machine capabilities.
A
vertical turning machine permits the production of larger, heavier and more
oddly shaped parts on a machine, which uses less floor space when compared
to
the traditional horizontal turning machine because the spindle and cam are
aligned on a vertical plane, with the spindle on the bottom.
The
primary industry segments in which the Company’s machines are utilized to make
component parts are in aerospace, power generation turbines, military, component
parts for the energy sector for natural gas and oil exploration and medical
fields. The Company sells its products to customers located in the United
States, Canada and Mexico.
Over
the
last four years, the Company has designed and developed a large horizontal
CNC
turning lathe with productivity features new to the metalworking industry.
The
Company believes that a potential market for the Century Turn Lathe, in addition
to the markets mentioned above, is aircraft landing gear.
We
provide our manufactured and remanufactured machines as part of the machine
tool
industry. The machine tool industry worldwide is approximately a 30 billion
dollar business annually. The industry is sensitive to market conditions and
generally trends downward prior to poor economic conditions, and improves prior
to an improvement in economic conditions.
Our
machines are utilized in a wide variety of industry segments as follows:
aerospace, energy, valves, fittings, oil and gas, machinery and equipment,
and
transportation. With the recent downturn in the aerospace industry, we have
seen
an increase in orders from new industries such as defense and medical
industries.
The
Company's current strategy is to expand its customer sales base with its present
line of machine products. The Company's growth strategy also includes strategic
acquisitions in addition to growing the current business. Plans for expansion
are funded through current working capital from ongoing sales. A significant
acquisition will require additional financing.
RESULTS
OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2008 COMPARED TO JUNE 30,
2007.
Revenues.
The
Company generated revenues of $1,434,676 for the three months ended June 30,
2008, which was a $1,165,471 or 45% decrease from $2,600,147 for the three
months ended June 30, 2007. The decrease is the result of lower than usual
sales
volume, a tighter credit market, and manufacturing inefficiencies caused by
the
relocation of the Company’s operations to a new facility.
Gross
Profit.
Gross
profit for the three months ended June 30, 2008, was $71,062 or 5% of revenues,
compared to $711,002 or 27% of revenues for the three months ended June 30,
2007, a 90% decrease. The decrease in gross profit is due to certain fixed
overhead expenses applied to lower revenues and increased cost of sales due
to
setting up a new plant after relocation.
Operating
Loss.
Operating loss for the three months ended June 30, 2008, was $355,500 compared
to operating income of $192,616 for the three months ended June 30, 2007. The
increase in loss of $548,116 is primarily due to decreased revenues and lower
gross profit on jobs in progress for the quarter ended June 30, 2008.
Interest
Expense and Debt Discount Amortization.
Interest
expense for the three months ended June 30, 2008, was $497,382 compared with
$722,273 for the three months ended June 30, 2007. The decrease of $224,891
or
31% in interest expenses is primarily due to $278,000
of debt discount charged to interest expense related to the conversion of
$350,000 of principal from the CAMOFI Note into the Company’s common stock
during the three months
ended June 30, 2007.
RESULTS
OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2008 COMPARED TO JUNE 30,
2007.
Revenues.
The
Company generated revenues of $2,961,278 for the six months ended June 30,
2008,
which was a $2,824,338 or 49% decrease from $5,785,616 for the six months ended
June 30, 2007. The decrease is the result of lower than usual sales volume,
a
tighter credit market, and business interruption and manufacturing
inefficiencies caused by the relocation of the Company’s operations to a new
facility.
Gross
Profit.
Gross
profit for the six months ended June 30, 2008, was $289,185 or 10% of revenues,
compared to $1,896,241 or 33% of revenues for the six months ended June 30,
2007, a 85% decrease. The decrease in gross profit is due to certain fixed
overhead expenses applied to lower revenues and increased cost of sales due
to
relocation.
Operating
Loss.
Operating loss for the six months ended June 30, 2008, was $900,286 compared
to
operating income of $658,582 for the six months ended June 30, 2007. The
increase in loss of $1,558,868 is primarily due to one time relocation expenses,
decreased revenues and lower gross profit on jobs in progress for the six months
ended June 30, 2008.
Interest
Expense and Debt Discount Amortization.
Interest
expense for the six months ended June 30, 2008, was $984,151 compared with
$1,187,514 for the six months ended June 30, 2007. The decrease of $203,363
or
17% in interest expenses is primarily due to $278,000
of debt discount charged to interest expense related to the conversion of
$350,000 of principal from the CAMOFI Note into the Company’s common stock
during the six months
ended June 30, 2007.
FINANCIAL
CONDITION, LIQUIDITY, CAPITAL RESOURCES
The
net
cash decrease during the six months ended June 30, 2008 was $281,729. The
decrease is due to $312,573 net cash used in operating activities.
For
the
six months ended June 30, 2008, the cash provided by financing activities was
$30,844, compared with $489,696 cash used in financing activities in the six
months ended June 30, 2007. For the six months ended June 30, 2007, cash was
used to make principal payments on the CAMOFI loan. For the six months ended
June 30, 2008, no principal payments were made on the CAMOFI loan.
GOING
CONCERN
The
accompanying condensed consolidated financial statements have been prepared
assuming the Company will continue as a going concern, which contemplates,
among
other things, the realization of assets and satisfaction of liabilities in
the
normal course of business. The Company has losses from operations year to date
of approximately $849,000, an accumulated deficit of approximately $13,098,000
and a negative working capital balance of approximately $701,000. These factors,
among others, raise substantial doubt about the Company's ability to continue
as
a going concern. The Company intends to fund operations through anticipated
increased sales along with renegotiated or new debt and equity financing
arrangements which management believes may be insufficient to fund its capital
expenditures, working capital and other cash requirements for the year ending
December 31, 2008. Therefore, the Company will be required to seek additional
funds to finance its long-term operations.
In
response to these problems, management has taken the following actions:
· |
The
Company continues its aggressive program for selling inventory.
|
· |
The
Company continues to implement plans to further reduce operating
costs.
|
· |
The
Company is seeking investment capital through the public and private
markets.
|
· |
The
Company has successfully restructured its debt, eliminating the penalties
and interest for past default and extending the repayment term (See
Note
3).
|
The
successful outcome of future activities cannot be determined at this
time
and there is no assurance that if achieved, the Company will have sufficient
funds to execute its intended business plan or generate positive operating
results.
The
condensed
consolidated
financial statements do not include any adjustments related to recoverability
and classification of asset carrying amounts or the amount and classification
of
liabilities that might result should the Company be unable to continue as a
going concern.
INFLATION
AND CHANGING PRICES
The
Company does not foresee any adverse effects on its earnings as a result of
inflation or changing prices.
CRITICAL
ACCOUNTING POLICIES
The
preparation of financial statements and related disclosures in conformity with
accounting principles generally accepted in the United States of America
requires management to make judgments, assumptions and estimates that affect
the
amounts reported in our consolidated financial statements and the accompanying
notes. The amounts of assets and liabilities reported on our balance sheet
and
the amounts of revenues and expenses reported for each of our fiscal periods
are
affected by estimates and assumptions, which are used for, but not limited
to,
the accounting for revenue recognition, accounts receivable, doubtful accounts
and inventories. Actual results could differ from these estimates. The
accounting policies stated below are significantly affected by judgments,
assumptions and estimates used in the preparation of the financial statements:
Revenue
Recognition
The
Company's revenues consist primarily of contracts with customers. The Company
uses the percentage-of-completion method of accounting to account for long-term
contracts and, therefore, takes into account the cost, estimated earnings and
revenue to date on fixed-fee contracts not yet completed. The
percentage-of-completion method is used because management considers total
cost
to be the best available measure of progress on the contracts. Because of
inherent uncertainties in estimating costs, it is at least reasonably possible
that the estimates used will change within the near term. The Company recognizes
revenue on contracts pursuant to Statements of Position 81-1, “Accounting for
Performance of Construction-Type and Certain Production-Type
Contracts.”
For
revenues from stock inventory the Company follows Staff Accounting Bulletin
("SAB") No. 104, "Revenue Recognition", which outlines the basic criteria that
must be met to recognize revenue other than revenue on contacts, and provides
guidance for presentation of this revenue and for disclosure related to these
revenue recognition policies in financial statements filed with the SEC.
For
contracts, the amount of revenue recognized at the financial statement date
is
the portion of the total contract price that the cost expended to date bears
to
the anticipated final cost, based on current estimates of cost to complete.
It
is not related to the progress billings to customers. Contract costs include
all
materials, direct labor, machinery, subcontract costs and allocations of
indirect overhead.
Because
contracts may extend over a period of time, changes in job performance, changes
in job conditions and revisions of estimates of cost and earnings during the
course of the work are reflected in the accounting period in which the facts
that require the revision become known. At the time a loss on a contract becomes
known, the entire amount of the estimated ultimate loss is recognized in the
financial statements.
Contracts
that are substantially complete are considered closed for financial statement
purposes. Costs incurred and revenue earned on contracts in progress in excess
of billings (under billings) are classified as a current asset. Amounts billed
in excess of costs and revenue earned (over billings) are classified as a
current liability.
The
Company accounts for shipping and handling fees and costs in accordance with
Emerging Issues Task Force ("EITF") Issue No. 00-10, "Accounting for Shipping
and Handling Fees and Costs." Shipping and handling fees and costs incurred
by
the Company are immaterial to the operations of the Company and are included
in
cost of sales.
In
accordance with Statements of Financial Accounting Standards ("SFAS") No. 48,
"Revenue Recognition when Right of Return Exists," revenue is recorded net
of an
estimate for markdowns, price concessions and warranty costs. Such reserve
is
based on management's evaluation of historical experience, current industry
trends and estimated costs. As of June 30, 2008, the Company estimated the
markdowns, price concessions and warranty costs and concluded amounts are
immaterial and did not record any adjustment to revenues.
Inventory
Inventories
are stated at the lower of cost or net realizable value. Cost is determined
under the first-in, first-out method. Inventories represent cost of work in
process on units not yet under contract. Cost includes all direct material
and
labor, machinery, subcontractors and allocations of indirect overhead. (See
Note
1 to Condensed Consolidated Financial Statements, Inventory
section)
Other
Significant Accounting Policies
Other
significant accounting policies not involving the same level of measurement
uncertainties as those discussed above, are nevertheless important to an
understanding of the financial statements. The policies related to consolidation
and loss contingencies require difficult judgments on complex matters that
are
often subject to multiple sources of authoritative guidance. Certain of these
matters are among topics currently under reexamination by accounting standards
setters and regulators. Although no specific conclusions reached by these
standards setters appear likely to cause a material change in our accounting
policies, outcomes cannot be predicted with confidence. Also see Note 1 of
Notes
to Condensed Consolidated Financial Statements, Summary of Significant
Accounting Policies, which discusses accounting policies that must be selected
by management when there are acceptable alternatives.
ITEM
3. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not
applicable.
ITEM
4T. CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
We
conducted an evaluation under the supervision and with the participation of
our
management, including our Chief Executive Officer,
who is
also our Chief Financial Officer,
of the
effectiveness of the design and operation of our disclosure controls and
procedures. The term “disclosure controls and procedures,” as defined in Rules
13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as
amended (“Exchange Act”), means controls and other procedures of a company that
are designed to ensure that information required to be disclosed by the company
in the reports it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission’s rules and forms. Disclosure controls and
procedures also include, without limitation, controls and procedures designed
to
ensure that information required to be disclosed by a company in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the company’s management, including its principal executive and principal
financial officers, or persons performing similar functions, as appropriate,
to
allow timely decisions regarding required disclosure. Based on this evaluation,
our Chief Executive Officer concluded as of June 30, 2008 that our disclosure
controls and procedures were not effective at the reasonable assurance level
due
to the material weaknesses discussed immediately below.
Management’s
Report on Internal Control Over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act. Our internal control over financial reporting is
designed 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. Our internal control
over financial reporting includes those policies and procedures
that:
|
(i) |
pertain
to the maintenance of records that, in reasonable detail, accurately
and
fairly reflect the transactions and dispositions of our
assets;
|
|
(ii) |
provide
reasonable assurance that transactions are recorded as necessary
to permit
preparation of financial statements in accordance with generally
accepted
accounting principles, and that our receipts and expenditures are
being
made only in accordance with authorizations of our management and
directors; and
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(iii) |
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that
could have
a material affect on our financial
statements.
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Because
of its inherent limitations, internal control over financial reporting may
not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
A
material weakness in internal control over financial reporting is defined by
the
Public Company Accounting Oversight Board’s Audit Standard No. 5 as being a
deficiency, or combination of deficiencies, that results in a reasonable
possibility that a material misstatement of the financial statements would
not
be prevented or detected on a timely basis. A significant deficiency is a
control deficiency, or combination of control deficiencies, such that there
is a
reasonable possibility that a significant misstatement of the company’s annual
or interim financial statements will not be prevented or detected.
Management
assessed and evaluated the effectiveness of our internal control over financial
reporting as of December 31, 2007. Management identified five material
weaknesses relating to our internal control over financial reporting, as
follows:
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(1)
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We
had not effectively implemented comprehensive entity-level internal
controls.
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|
|
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(2)
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We
did not have a sufficient complement of personnel with appropriate
training and experience in generally accepted accounting principals,
or
GAAP.
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|
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(3)
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We
did not adequately segregate the duties of different personnel within
our
accounting group due to an insufficient complement of
staff.
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(4)
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We
did not implement financial controls that were properly designed
to meet
the control objectives or address all risks of the processes or the
applicable assertions of the significant accounts.
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(5)
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Due
to the material weaknesses identified at our entity level controls
we did
not test whether our financial activity level controls or our information
technology general controls were operating sufficiently to identify
a
deficiency, or combination of deficiencies, that may result in a
reasonable possibility that a material misstatement of the financial
statements would not be prevented or detected on a timely
basis.
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The
foregoing material weaknesses are described in detail below under the caption
“Material Weaknesses.” As
a
result of these material weaknesses, our Chief Executive Officer concluded
that
we did not maintain effective internal control over financial reporting as
of
December 31, 2007.
In
making
its assessment of our internal control over financial reporting, management
used
criteria issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”) in its Internal
Control-Integrated Framework.
Because
of the material weaknesses described above, management believes that, as of
December 31, 2007, we did not maintain effective internal control over financial
reporting.
An
independent firm assisted management with its assessment of the effectiveness
of
our internal control over financial reporting, including scope determination,
planning, staffing, documentation, testing, and overall program management
of
the assessment project.
Inherent
Limitations on the Effectiveness of Controls
Management
does not expect that our disclosure controls and procedures or our internal
control over financial reporting will prevent or detect all errors and all
fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control
systems are met. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in
a
cost-effective control system, no evaluation of internal control over financial
reporting can provide absolute assurance that misstatements due to error or
fraud will not occur or that all control issues and instances of fraud, if
any,
have been or will be detected.
These
inherent limitations include the realities that judgments in decision-making
can
be faulty and that breakdowns can occur because of a simple error or mistake.
Controls can also be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the controls.
The
design of any system of controls is based in part on certain assumptions about
the likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions. Projections of any evaluation of controls effectiveness to future
periods are subject to risks. Over time, controls may become inadequate because
of changes in conditions or deterioration in the degree of compliance with
policies or procedures.
Material
Weaknesses
Material
Weaknesses
1.
We
had
not effectively implemented comprehensive entity-level internal controls,
as
evidenced by the following deficiencies:
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·
|
We
did not establish an independent Audit Committee who are responsible
for
the oversight of the financial reporting process, nor was an Audit
Committee Charter defined. At the current time we do not have any
independent members of the Board who could comprise this
committee.
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·
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We
did not establish an adequate Whistle Blower program for the receipt,
retention, and treatment of complaints received by the issuer regarding
accounting, internal accounting controls, or auditing matters; and
the
confidential, anonymous submission by employees of the issuer of
concerns
regarding questionable accounting or auditing matters to the Audit
Committee and Board of Directors.
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·
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We
did not have an individual on our Board, nor on the Audit Committee,
who
meets the “Financial Expert”
criteria.
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·
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We
did not maintain documentation evidencing quarterly or other meetings
between the Board, senior financial managers and our General Counsel.
Such
meetings include reviewing and approving quarterly and annual filings
with
the Securities and Exchange Commission and reviewing on-going activities
to determine if there are any potential audit related issues which
may
warrant involvement and follow-up action by the Board.
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·
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We
did not follow a formal fraud assessment process to identify and
design
adequate internal controls to mitigate those risks not deemed to
be
acceptable.
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·
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We
did not conduct annual performance reviews or evaluations of our
management and staff employees.
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2.
We did
not have a sufficient complement of personnel with appropriate training and
experience in GAAP, as evidenced by the following deficiencies:
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·
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We do not have a formally trained
Chief
Financial Officer who is responsible for the oversight of the accounting
function. Currently the CEO is responsible for this function, but
has not
had formal accounting or auditing
experience.
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·
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The
Controller is the only individual with technical accounting experience
in
our company but is limited in the exposure to SEC filings and disclosures
and is not a full-time employee of the
company.
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·
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We
have not consulted with other outside parties to assist us in the
SEC
filings and disclosures prior to the December 31, 2007 10-KSB filing
during 2007.
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3.
We did
not adequately segregate the duties of different personnel within our accounting
group due to an insufficient complement of staff and inadequate management
oversight.
4. We
did
not adequately design internal controls as detailed by the
following:
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·
|
The
controls identified in the process documentation were not designed
effectively and had no evidence of operating effectiveness for testing
purposes.
|
|
·
|
The
controls identified in the process documentation did not cover all
the
risks for the specific process
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|
·
|
The
controls identified in the process documentation did not cover all
applicable assertions for the significant
accounts.
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5. Due
to
the material weaknesses identified at our entity level controls we did not
test
whether our financial activity level controls or our information technology
general controls were operating sufficiently to identify a deficiency, or
combination of deficiencies, that may result in a reasonable possibility that
a
material misstatement of the financial statements would not be prevented or
detected on a timely basis.
We
are in
the process of remediation of the above noted weaknesses and are evaluating
the
most efficient method to complete this task. However, based on our review,
management has concluded that the financial statements included in this report
fairly present in all material respects our financial position, results of
operations and cash flows for the periods presented in conformity with generally
accepted accounting principles.
Changes
In Controls and Procedures
There
have been no changes in our internal controls over financial reporting that
occurred during our quarter ended June 30, 2008 that have materially affected,
or are reasonably likely to materially affect, our internal controls over
financial reporting.
PART
II. OTHER INFORMATION
Item
1.
Legal Proceedings
None.
Item
2.
Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item
3.
Defaults Upon Senior Securities
None.
Item
4.
Submission of Matters to a Vote of Security Holders
None.
Item
5.
Other Information
None.
Item
6.
Exhibits
Exhibit
31.1 Certification required by Rule 13a-14(a) or Rule 15d-14(d) and under
Section 302 of the Sarbanes-Oxley act of 2002 by Chief Executive Officer
and
Exhibit
31.2 Certification required by Rule 13a-14(a) or Rule 15d-14(d) and under
Section 302 of the Sarbanes-Oxley act of 2002 by Chief
Financial Officer
Exhibit
32.1 Certification required by Rule 13a-14(a) or Rule 15d-14(d) and under
Section 906 of the Sarbanes-Oxley act of 2002
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the Company caused
this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
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NEW
CENTURY COMPANIES, INC.
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Date:
August
14, 2008 |
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/s/
DAVID DUQUETTE
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Name:
David Duquette
Title:
Chairman, President and
Director
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In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Company and in the capacities and on the
dates indicated.
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Date:
August
14, 2008 |
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/s/
DAVID DUQUETTE
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Name:
David Duquette
Title:
Chairman, President and
Director
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Date:
August
14, 2008 |
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/s/
JOSEF CZIKMANTORI
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Name:
Josef Czikmantori
Title:
Secretary and
Director
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