Washington, D.C. 20549
Commission File No. 333-184832
NEXUS ENTERPRISE SOLUTIONS, INC.
Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(Section 232.405 of this chapter) during the preceding 12 months(or such shorter period that the registrant was required to submit and post such files. Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “small reporting company” in Rule 12b-2 of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o No þ
NEXUS ENTERPRISE SOLUTIONS, INC.
NEXUS ENTERPRISE SOLUTIONS, INC.
Notes to the Financial Statements
(Unaudited)
NOTE 4 – NOTES PAYABLE TO RELATED PARTIES
As of September 30, 2015 and December 31, 2014, the Company had outstanding notes payable to related parties of $127,485. These notes are unsecured, bear interest between 0% and 6% and are due on demand.
NOTE 5 – NOTES PAYABLE
In April 2013, the Company and a third party reached an agreement for Nexus to use certain intellectual property in its lead generation business into perpetuity in exchange for a $150,000 note and 500,000 common shares which were previously issued during February 2012 (the fair value of these shares of $125,000 was reclassified from deposits to intangible assets during the year ended December 31, 2013). The note will be repaid in 18 monthly installments, with the monthly payments varying based on the Company's gross profit for that month. The monthly payments range from $5,000 to $25,000. The note does not bear interest unless a monthly payment is not made, at which time the note will bear interest at 12.5% until the non-payment is cured. During 2014 and 2013, the Company made payments of $65,500 and $54,000, respectively. As of September 30, 2015 and December 31, 2014, the outstanding balance under this note payable was $0 and $30,500, respectively.
On June 4, 2014, the Company borrowed $387,000 from an unrelated third party entity in the form of a convertible note. The note bears a zero percent interest rate until December 31, 2014, at which point the note will accrue interest at a rate of 8 percent per annum commencing on January 1, 2015. The principal balance of the note with accrued interest is due on February 15, 2017. Monthly payments commence in January 2015, with the first payment of $17,500 due on January 15, 2015 and every payment due on or near the 15th of each month thereafter. On January 15, 2016, the monthly payments decrease to $15,000 per month until maturity. The Holder is prohibited from converting all or any portion of the outstanding principal and accrued interest provided timely monthly payments are received by the Holder pursuant to the terms set forth in the payment schedule. If the note becomes convertible due to timely monthly payments not being made, the note will be convertible into common stock at 55% of the lowest closing bid price of the Company's common stock during the 25 trading days preceding the date of conversion. The Company evaluated the convertible note under FASB ASC 815 and determined it does not qualify as a derivative liability as of September 30, 2015. As of September 30, 2015, the outstanding balance under this note was $210,000 and accrued interest was $19,039.
NOTE 6 – STOCKHOLDERS' EQUITY
During the year ended December 31, 2013, the Company granted 300,000 common shares to a new Board member, Stanley Rapp. The shares vest on September 16, 2015. The fair value of the award was determined to be $78,000 and it is being expensed over the vesting period. During the nine months ended September 30, 2015, an aggregate of $27,674 was expensed under this award. Nothing remains to be expensed as of September 30, 2015. The 300,000 shares were issued during January 2014.
On June 13, 2014, the Company granted 50,000 common shares to a new Chief Technology Officer. The shares vest on April 13, 2015. The fair value of the award was determined to be $11,940 and it is being expensed over the vesting period. During the nine months ended September 30, 2015, an aggregate of $4,045 was expensed under this award. Nothing remains to be expensed as of September 30, 2015. On April 13, 2015, the 50,000 shares were issued.
On April 28, 2015, the Company granted 100,000 common shares to Scott Schluer (Chief Technology Officer) and 50,000 common shares to TMG Interactive for services. The shares were valued and expensed at $12,000 during the nine months ended September 30, 2015.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The following discussion of our financial condition and results of operations should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and notes thereto included in Item 1 in this Quarterly Report on Form 10-Q. This item contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those indicated in such forward-looking statements.
Forward-Looking Statements
This Quarterly Report on Form 10-Q and the documents incorporated herein by reference contain forward-looking statements. Such forward-looking statements are based on current expectations, estimates, and projections about our industry, management beliefs, and certain assumptions made by our management. Words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", variations of such words, and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. However, readers should carefully review the risk factors set forth herein and in other reports and documents that we file from time to time with the Securities and Exchange Commission, particularly the Report on Form 10-K, Form 10-Q and any Current Reports on Form 8-K.
Overview and History
Nexus Enterprise Solutions, Inc. ("Nexus") was incorporated in the State of Wyoming on October 19, 1995 as Global Link Technologies, Inc. On June 10, 2008, Global Link Technologies filed Articles of Amendment with the State of Wyoming changing its name to MutuaLoan Corporation. On June 16, 2011 (as filed with the State of Wyoming on September 16, 2011), MutuaLoan Corporation entered into a business combination with Nexus Enterprise Solutions, Inc. ("Nexus Florida"). The business combination was accounted for as a reverse merger recapitalization. The accounting target/legal acquirer was MutuaLoan. The accounting acquirer/legal target was Nexus Florida. Nexus is currently conducting operations and generating revenue.
The Company operations are currently being conducted out of the Company office located at 5340 N Federal Hwy STE 206 Lighthouse Point, FL 33406 1375; (561) 767-4346. It considers that the current principal office space arrangement adequate and will reassess its needs based upon the future growth of the Company. Its fiscal year end is December 31st.
Our Company's primary service is lead generation for its customers. The Company's target customers are currently companies in the insurance and financial service industries, but we intend to expand to additional industries in the future. Our Company uses both online leads and offline lead generation techniques in order to generate revenue by selling such leads, as well as various other services, to our customers.
Online Generation
There are many ways to generate leads online. Each has its own formula that needs to be perfected in order to find the balance between quantity and quality. The online lead generation methods used by our Company include, but are not limited to, Proprietary Lead Portals, Pay Per Click Advertising, Email Advertising and Website Banners.
Offline Lead Generation
Using a combination of a predictive dialer call center solution and an overseas outsourced call center solution, our Company is able to generate custom live transfer leads for our customers. We utilize this method of lead generation in situations where we are confident that a high volume of live leads can be generated and sold for a profit.
Revenue Model and Distribution methods of the products or services
Our revenue model is based on customer development. We either purchase leads from accredited brokers or locate leads based on the methods described above, and then resell those leads to our customers through our automated system. The leads must meet the stringent criteria of our system. The leads are vetted through our fraud filters in order to ensure quality.
We are currently focusing our attention on the auto insurance market, but expect to expand to other industries in the very near future. The Company will identify and address additional target markets for its services other than the insurance and financial industries with market research and feedback from its customers.
Results of Operations
For the Three Months Ended September 30, 2015 Compared to the Three Months Ended September 30, 2014
The Company generated $312,409 in revenue for the three month period ended September 30, 2015, which compares to revenue of $328,845 for the three month period ended September 30, 2014. Our revenues decreased slightly during the three month period ended September 30, 2015 due to decreased sales of our services to our current customers during this three month period.
Cost of sales for the three month period ended September 30, 2015 was $187,394, which compares to cost of sales of $204,504 for the three month period ended September 30, 2014. Our revenues decreased during the three months ended September 30, 2015, and as our sales revenue decreased, our cost of sales correspondingly decreased.
Operating expenses, which consisted solely of general and administrative expenses, and consulting and professional fees for the three month period ended September 30, 2015, were $138,626. This compares with operating expenses for the three month period ended September 30, 2014 of $145,254. The major components of general and administrative expenses include accounting fees, legal and professional fees. Our operating expenses decreased during the period primarily because we had decrease in our dependence on consulting services.
As a result of the foregoing, we had a net loss of $19,141 for the three month period ended September 30, 2015. This compares with net loss for the three month period ended September 30, 2014 of $20,913.
For the Nine Months Ended September 30, 2015 Compared to the Nine Months Ended September 30, 2014
The Company generated $1,374,577 in revenue for the nine month period ended September 30, 2015, which compares to revenue of $956,034 for the nine month period ended September 30, 2014. Our revenues increased during the nine month period ended September 30, 2015 due to the fact that we were able to secure new lead generation relationships as compared to the nine month period ended September 30, 2014, which enabled us to increase our sales revenue.
Cost of sales for the nine month period ended September 30, 2015 was $786,220, which compares to cost of sales of $593,268 for the nine month period ended September 30, 2014. Our revenues increased during the nine months ended September 30, 2015, and as our sales revenue increased during the period, our cost of sales correspondingly increased.
Operating expenses, which consisted solely of general and administrative expenses, and consulting and professional fees for the nine month period ended September 30, 2015, were $468,481. This compares with operating expenses for the nine month period ended September 30, 2014 of $477,183. The major components of general and administrative expenses include accounting fees, legal and professional fees. Our operating expenses decreased during the period primarily because we had a decrease in fees related to professional services.
As a result of the foregoing, we had a net income of $100,284 for the nine month period ended September 30, 2015. This compares with a net loss for the nine month period ended September 30, 2014 of $115,539.
In its audited financial statements as of December 31, 2014, the Company was issued an opinion by its auditors that raised substantial doubt about the ability to continue as a going concern based on the Company's current financial position. Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to successfully develop and market our products and our ability to generate revenues.
Liquidity and Capital Resources
As of September 30, 2015 we had cash or cash equivalents of $4,675. As of December 31, 2014, we had cash or cash equivalents of $31,575.
We believe that with our existing cash flows we have sufficient cash to meet our operating requirements for the next twelve months due to the fact that we believe our revenue will increase throughout the year. We believe that the amount of revenue we are generating will allow us to meet our operating requirements during the next twelve months. If our revenue is not sufficient to allow us to meet our cash requirements during the next twelve months, the company may need to raise additional funds through the sale of its equity securities. We cannot guarantee that we will be successful in generating sufficient revenues or other funds in the future to cover these operating costs. Failure to generate sufficient revenues or additional financing when needed could cause us to go out of business.
Net cash provided by operating activities was $180,600 for the nine month period ended September 30, 2015. This compares to net cash provided by operating activities of $21,434 for the nine month period ended September 30, 2014. This change is due to an increase in accounts payable, as well as the fact that we had net income of $100,284 for the nine months ended September 30, 2015, as compared to a net loss of $115,539 for the nine months ended September 30, 2014.
Cash flows from investing activities were $0 for the nine month period ended September 30, 2015 and 2014. We do not anticipate significant cash outlays for investing activities over the next twelve months.
Cash flows used in financing activities was $207,500 for the nine month period ended September 30, 2015 which compares to cash flows used in financing activities of $20,374 for the nine month period ended September 30, 2014. The change in cash flows related to financing activities is due to the fact that we have increased repayment of notes payable and decreased proceeds from sales of convertible notes during the nine months ended September 30, 2015, as compared with the nine months ended September 30, 2014.
As of September 30, 2015, our total assets were $442,865 and our total liabilities were $755,357. As of December 31, 2014, our total assets were $602,782 and our total liabilities were $1,059,277.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Plan of Operation
Our plan for the twelve months beginning September 30, 2015 is to operate at a profit or at break even. Our plan is to attract sufficient additional product sales and services within our present organizational structure and resources to become profitable in our operations.
Our revenue model is based on customer development. We either purchase leads from accredited brokers or locate leads based on the methods described above, and then resell those leads to our customers through our automated system. The leads must meet the stringent criteria of our system. The leads are vetted through our fraud filters in order to ensure quality.
We are currently focusing our attention on the auto insurance market, but expect to expand to other industries in the very near future.
Nexus Enterprise Solutions, Inc. (Nexus) is redefining the current prospect and lead generation and acquisition industry by developing an information exchange service which allows sellers and buyers of leads, and other information assets, to operate in an optimized, transparent, and efficient way to transact deals in a more efficient manner than what is experienced in today's markets and systems. This is accomplished primarily through systems and processes which enable enhanced business intelligence and management thereby empowering stakeholders on both sides of the transaction to make well-informed and meaningful connections with each other.
Our Company generates revenue through its lead generation services, which are comprised of the lead generation methods described above and are accessed by our customers through our automated system. The cost of developing an automated system such as ours is prohibitive for a majority of companies. We fulfill a need by allowing these companies to use our technology, forms, landing pages etc, for a fee. We currently are back logged with the amount of companies looking to buy and sell leads to us, our carriers and agencies. In return, we get compensated when we sell a lead by charging our customers a fee for each lead purchased.
The Company will identify and address additional target markets for its services other than the insurance and financial industries with market research and feedback from its customers.
Recently Issued Accounting Pronouncements
We have reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations.
Seasonality
We do not expect our revenues to be impacted by seasonal demands for our services.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Not applicable.
ITEM 4T. CONTROLS AND PROCEDURES
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), our management carried out an evaluation, with the participation of our Chief Executive Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) of the Exchange Act), as of the period covered by this report. Disclosure controls and procedures are defined as controls and other procedures that are designed to ensure that information required to be disclosed by us in reports filed with the SEC under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to the Company's management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based upon their evaluation, our management (including our Chief Executive Officer) concluded that our disclosure controls and procedures were not effective as of September 30, 2015, based on the material weaknesses defined below:
(i) inadequate segregation of duties consistent with control objectives; and
(ii) ineffective controls over period end financial disclosure and reporting processes.
Management's Remediation Plan
We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes in the future:
(i) (ii) | appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and adopt sufficient written policies and procedures for accounting and financial reporting. |
The remediation efforts set out in (i) is largely dependent upon our company generating the necessary revenue to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
Management believes that despite our material weaknesses set forth above, our unaudited interim consolidated financial statements for the three months ended September 30, 2015 are fairly stated, in all material respects, in accordance with US GAAP.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings, to which we are a party, which could have a material adverse effect on our business, financial condition or operating results.
ITEM 1A. RISK FACTORS
There have been no changes to our Risk Factors included in our Annual Report for the year ended December 31, 2014, filed with the Securities and Exchange Commission on April 14, 2015.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
EXHIBITS. The following exhibits required by Item 601 to be filed herewith are incorporated by reference to previously filed documents:
Exhibit Number | | Description |
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| 31.1 | | Certification of Chief Executive Officer pursuant to Section 302 |
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| 31.2 | | Certification of Chief Financial Officer pursuant to Section 302 |
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| 32.1 | | Certification of Chief Executive Officer pursuant to Section 906 |
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| 32.2 | | Certification of Chief Financial Officer pursuant to Section 906 |
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| 101.INS** | | XBRL Instance Document |
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| 101.SCH** | | XBRL Taxonomy Schema |
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| 101.CAL** | | XBRL Taxonomy Calculation Linkbase |
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| 101.DEF** | | XBRL Taxonomy Definition Linkbase |
| | | |
| 101.LAB** | | XBRL Taxonomy Label Linkbase |
| | | |
| 101.PRE ** | | XBRL Taxonomy Presentation Linkbase |
** Furnished herewith. XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on November 12, 2015.
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| | | Nexus Enterprise Solutions, Inc. |
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| | | By: | /s/ James Bayardelle |
| | | | James Bayardelle, President |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacity and on the date indicated.
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| /s/ James Bayardelle | | President, Chief Executive Officer, Principal Accounting Officer, Chief Financial Officer and Director | | November 12, 2015 | | |
| James Bayardelle | | Title | | Date | | |
