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UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
NEXLAND, INC.
Arizona 65-0782410
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1101 Brickell Avenue, Suite 200, North Tower Miami, Florida 33131
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Address of principal executive offices (Zip code)
(305) 358-7771
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Registrant's telephone number, including area code
(1) Registrant 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
1. [X] Yes [ ] No
2. [X] Yes [ ] No
As of May 18, 2000, there were 35,678,916 shares outstanding of issuer's common
stock.
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TABLE OF CONTENTS
PART I.....................................................................3
Financial Statements
Consolidated Balance Sheets ......................................3
Consolidated Statements of Operations.............................4
Consolidated Statements of Cash Flows.............................5
Notes to The Consolidated Financial Statements....................6
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations.........................................7
Forward-looking Statements And Associated Risks...................7
Going Concern ....................................................7
Changes in The Number of Employees................................7
Management's Discussion And Analysis..............................7
Revenue...........................................................7
Cost of Sales ....................................................7
Gross Profit .....................................................8
Selling, General And Administrative...............................8
Liquidity And Capital Resources...................................8
PART II....................................................................9
ITEM 1. Legal Proceedings.........................................9
ITEM 2. Changes In Securities and Use of Proceeds ................9
ITEM 3. Defaults Upon Senior Securities ..........................9
ITEM 4. Submission of Matters to a Vote of Security Holders.......9
ITEM 5. Other Information.........................................9
ITEM 6. Exhibits .................................................9
SIGNATURES................................................................11
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Part 1 - Financial Statements
NEXLAND, INC.
BALANCE SHEETS
March 31, 2000 Dec.31, 1999
Unaudited
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ASSETS
CURRENT
Cash and cash equivalents $ 160,528 $ 4,231
Accounts receivable 104,227 78,597
Inventory 205,478 56,467
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TOTAL CURRENT ASSETS 470,233 139,295
EQUIPMENT, NET 12,315 4,775
OTHER ASSETS 3,180 3,180
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$ 485,728 $ 147,250
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LIABILITIES AND CAPITAL DEFICIT
CURRENT LIABILITIES
Accounts payable $ 463,877 $ 196,061
Accrued expenses 55,803 53,939
Notes payable 19,553 19,553
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TOTAL CURRENT LIABILITIES 539,233 $ 269,553
NOTES PAYABLE - RELATED PARTIES 201,917 201,917
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741,150 $ 471,470
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CAPITAL DEFICIT
PREFERRED STOCK, 10,000,000 SHARES AUTHORIZED,
$0.0001 PAR VALUE; NO SHARES OUTSTANDING -- --
COMMON STOCK, 50,000,000 SHARES AUTHORIZED, -- --
$0.0001 PAR VALUE; 34,308,916 and 34,094,703
ISSUED AND OUTSTANDING 3,431 3,410
ADDITIONAL PAID-IN CAPITAL 492,033
ACCUMULATED DEFICIT (750,886) (327,630)
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TOTAL CAPITAL DEFICIT (255,422) (324,220)
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$ 485,728 $ 147,250
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SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
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NEXLAND, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE FOR THE
THREE THREE
MONTHS MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2000 1999
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SALES $ 208,607 $ 3,887
COST OF SALES 85,732 5,938
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GROSS PROFIT 122,875 (2,051)
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OPERATING EXPENSES:
SELLING, GENERAL AND ADMINISTRATIVE 539,755 5,565
DEPRECIATION 840 --
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TOTAL OPERATING EXPENSES 540,595 5,565
INTEREST EXPENSE 5,536 --
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NET (LOSS) (423,256) $ (7,616)
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 34,128,708 29,500,000
NET (LOSS) PER COMMON SHARE ($ .01) --
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
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NEXLAND, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE FOR THE
THREE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, MARCH 31,
2000 1999
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OPERATING ACTIVITIES:
NET LOSS $(423,256) $ (7,616)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
PROVISION FOR BAD DEBTS 8,996 --
DEPRECIATION 840 --
EXPENSES PAID BY ISSUANCE OF
COMMON STOCK 332,054 --
(INCREASE) IN ACCOUNTS RECEIVABLE (34,626) --
(INCREASE) IN INVENTORY (149,012) (6,505)
INCREASE IN ACCOUNTS PAYABLE
AND ACCRUED EXPENSES 269,681 14,696
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TOTAL ADJUSTMENTS 427,933 8,191
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NET CASH PROVIDED BY
OPERATING ACTIVITIES 4,677 575
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INVESTING ACTIVITIES:
PURCHASE OF EQUIPMENT (8,380) --
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FINANCING ACTIVITIES:
PROCEEDS FROM ISSUANCE OF EXERCISE
OF OPTIONS 160,000 --
ADVANCES FROM STOCKHOLDER -- 2,968
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NET CASH PROVIDED BY
FINANCING ACTIVITIES 160,000 2,968
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NET INCREASE IN CASH AND CASH
EQUIVALENTS 156,297 3,543
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 4,231 23
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CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 160,528 $ 3,566
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SUPPLEMENTAL DISCLOSURES:
CASH PAID FOR TAXES $ -- $ --
CASH PAID FOR INTEREST $ -- $ --
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
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NEXLAND, INC.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
1. FINANCIAL STATEMENTS
In the opinion of the Company, the accompanying unaudited financial
statements have been prepared in accordance with the instructions to Form 10-Q
and include all adjustments (consisting only of normal recurring accruals) which
are necessary for a fair presentation of the results for the periods presented.
Certain information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. The balance sheet information for December 31, 1999 was
derived from the audited financial statements included in the Company's Form
10K. It is suggested that these financial statements be read in conjunction with
the Company's Annual Report on Form 10-K for the year ended December 31, 1999.
The results of operations for the three months ended March 31, 2000 are not
necessarily indicative of the results to be expected for the full year.
2. EARNINGS PER SHARE
The following reconciles the components of the earnings per share (EPS)
computation.
For the three months ended March 31, 2000 For the three months ended March 31, 1999
--------------------------------------------- ------------------------------------------
Loss Shares Per Share Loss Share Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
- ---------------------------------------------------------------------------------------------------------------------------
Loss per common share-
basic and diluted $(423,256) 34,128,708 ($.01) $(7,616) 29,500,000 $ --
Net loss per share of common stock is based on the weighted average number of
common shares outstanding during each period. Diluted loss per share of common
stock is computed on the basis of the weighted average number of common shares
and diluted options and warrants outstanding. Dilutive options and warrants
having an anti-dilutive effect are excluded from the calculation.
3. Capital Deficit
During the three months ended March 31, 2000, the Company issued 15,000 shares
of common stock to a consultant for services rendered and recorded a charge to
consulting fees with a corresponding credit to additional paid-in capital in the
amount of $91,875.
During the three months ended March 31, 2000, the Company issued 39,213 shares
of common stock in connection with the late filing of the Company's Form S-1 and
recorded a charge to penalty expense with a corresponding credit to additional
paid-in capital in the amount of $240,179.
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
INTRODUCTORY STATEMENTS
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS.
This Quarterly Report contains forward-looking statements, including
statements regarding, among other things, (a) the growth strategies of Nexland,
Inc. (the "COMPANY"), (b) anticipated trends in the Company's industry, (c) the
Company's future financing plans and (d) the Company's ability to obtain
financing and continue operations. In addition, when used in this Quarterly
Report, the words "believes," "anticipates," "intends," "in anticipation of,"
and similar words are intended to identify certain forward-looking statements.
These forward-looking statements are based largely on the Company's expectations
and are subject to a number of risks and uncertainties, many of which are beyond
the Company's control. Actual results could differ materially from these
forward-looking statements as a result of changes in trends in the economy and
the Company's industry, reductions in the availability of financing and other
factors. In light of these risks and uncertainties, there can be no assurance
that the forward-looking statements contained in this Quarterly Report will in
fact occur. The Company does not undertake any obligation to publicly release
the results of any revisions to these forward-looking statements that may be
made to reflect any future events or circumstances.
GOING CONCERN
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. This basis of accounting contemplates
the recovery of the Company's assets and the satisfaction of its liabilities in
the normal course of operation. The Company's ultimate ability to attain
profitable operations is dependent upon obtaining additional financing adequate
to complete its marketing and promotional activities, and to achieve a level of
sales adequate to support its cost structure. Through March 31, 2000, the
Company has incurred losses totaling $423,256 and is developing a customer base
for its product, all of which raise substantial doubt about the Company's
ability to continue as a going concern.
As previously reported in its Form 10-K ("FORM 10-K") for the year
ended December 31, 1999, the Company needed to increase the sales of the
Company's product and raise additional capital to continue its operations.
Management believes that resources will be available from private and public
sources in 2000 to continue the marketing of its internet sharing devices.
Management has established plans designed to increase the sales of the Company's
products. Management intends to seek new capital from new equity securities
offerings that will provide funds needed to increase liquidity, fund internal
growth and implement its business plan. The Company has no commitment for any
additional capital and no assurances can be given that the Company will be
successful in raising any new capital. The Company's inability to increase its
sales and/or to raise new capital will have a material adverse effect on the
Company's ability to continue its operations and financial condition and on its
ability to continue as a going concern. See "Management's Plan of Operations and
Discussion and Analysis - Liquidity and Capital Resources."
SIGNIFICANT PLANT OR EQUIPMENT PURCHASES. The Company does not
currently anticipate any significant plant or equipment purchases during the
next twelve months.
CHANGES IN THE NUMBER OF EMPLOYEES. The Company currently has eight (8)
employees. If the Company is successful in increasing its sales level or in
raising significant new capital, the Company anticipates hiring seventeen (17)
additional personnel during the remainder of 2000. The Company believes that
these personnel will be adequate to accomplish the tasks set forth in its plan.
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the quarter ended March 31, 2000 and 1999:
(1) Revenues. For the quarter ended March 31, 2000, the
Company had $208,607 in revenue from the sale of 763 units of
shared Internet access "hardware routers" for home and small
office users. During the same period in 1999, when sales first
began, the Company had sales of $3,887.
(2) Cost of Sales. Cost of product sales for the quarter ended
March 31, 2000 was $85,732 as compared to $5,938 for the same
period in 1999. The increase of $79,794 consisted of the
purchase price and in-bound freight of pre-assembled finished
goods inventory from subcontractors in Taiwan, Republic of
China. The Company expects the dollar amount of purchases of
pre-assembled finished goods inventory from subcontractors to
increase in the future as the Company increases sales.
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(3) Gross Profit. The gross profit of our products was
approximately 59% for the quarter ended March 31, 2000. The
Company expects pricing pressures from its competition, but
will attempt to lower its cost procurement from subcontractors
by obtaining the benefits of lower product costs through
volume purchases. In order to maximize the Company's growth
from sales, the Company may in the future reduce selling
prices to take advantage of large volume sales opportunities,
thus, the gross margin could be lower in the future.
(4) Selling, General and Administrative Expenses. Selling,
general and administrative expenses increased to $539,755 for
the quarter ended March 31, 2000 as compared to $5,565 for the
quarter ended March 31, 1999. The increase of $534,190 is
primarily a result of the Company's growth, increase in
personnel and other related costs which are explained below.
The Company's payroll costs increased by $47,000, its
facilities expenses increased by $10,000, professional fees
increased by $93,000 and other expenses increased by
approximately $52,000 for the quarter ended March 31, 2000 as
compared to the quarter ended March 31, 1999. In addition, the
Company recorded a charge in the amount of $332,054 in
connection with the issuance of common stock to a consultant
($91,875) and for penalties ($240,179) as a result of the
Company's late filing of its Form S-1 Registration Statement.
The Company expects to increase its selling, general and
administrative expenses in the future in proportion to the
Company's anticipated growth in sales.
LIQUIDITY AND CAPITAL RESOURCES.
Since inception, the Company has relied principally upon the proceeds
of private equity financings and loans to fund its working capital requirements
and capital expenditures. The Company has generated only minimal revenues from
operations to date. The Company's net cash provided by operating activities for
the three months ended March 31, 2000 was $4,677 compared to $575 for the three
months ended March 31, 1999, an increase of $4,102. This increase resulted from
increases in the Company's net loss, which included a non-cash charge of
$332,054 for expenses paid by issuance of common stock, and increases in
receivables and inventories offset by increases in accounts payable and accrued
expenses. These increases resulted from the expansion of the Company's
operations. The Company's net cash from financing activities increased by
approximately $160,000 from the proceeds received from an option exercised by a
consultant.
The Company's short-term and long term liquidity requirements are
expected to result from working capital needs to purchase inventory and pay
other operating expenses. Although, the Company cannot accurately predict the
precise timing of its future capital, the Company estimates that it will need to
expend approximately $2,000,000, within the next twelve months. The Company
estimates that of that amount (i) $1,000,000 will be for pre-assembled finished
goods inventory from subcontractors, (ii) $250,000 for sales and marketing
forces (iii) $250,000 for professional fees and (iv) $500,000 for other
operating expenses, such as payroll, rent and office expenses.
The Company has no assured available financial resources to meet its
March 31, 2000 working capital deficit of $69,000 and future operating costs.
The Company is seeking additional equity capital from private and
public offerings. There is no assurance, that the Company will be able to raise
such additional capital during the next 12 months. If the Company is unable to
obtain necessary additional capital, the Company may be required to change its
proposed business plan and decrease its planned operations, which could have a
material adverse effect upon its business, financial condition, or results of
operations
Although, the Company may be able to raise additional capital through
the exercise of the Class A and Class B Warrants for shares of common stock
there is no assurance, that the Company will be able to raise such additional
capital.
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Part II
ITEM 1. Legal Proceedings
None.
ITEM 2. Changes In Securities And Use of Proceeds
On April 25, 2000, pursuant to an employment agreement between the
Company and Enrique Dillon, the Company issued 1,170,000 shares of common stock
to Enrique Dillon. On May 1, 2000, pursuant to an employment agreement between
the Company and Martin Dell'Oca, the Company issued 200,000 shares of common
stock to Martin Dell'Oca. Because the shares were issued for services, neither
transaction involved the payment of money to the Company. The shares under both
employment agreements, are subject to forfeiture in the event the employees
resign or are terminated for cause prior to the initial two-year terms of their
respective employment agreements. Pending the forfeiture periods, the shares are
held in escrow. The Company relied upon the exemption provided by ss.4(2) of the
Securities Act, for "transactions by an issuer not involving any public
offering."
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
The Company has amended its 10K for the fiscal year ended 1999. The
method of accounting for business combinations employed in connection with the
Form 10K dated April 14, 2000 has been determined to be inappropriate. The
Company has corrected these financial statements for the effects of these
combinations. Accordingly, 1999, 1998 and 1997 financial statements have been
restated.
ITEM 6. Exhibits and Reports on Form 8-K
The following documents are incorporated by reference from the
Registrant's Form S-1 Registration Statement filed with the Securities and
Exchange Commission (the "Commission") Commission File No. 333-3074 on April 1,
1996 and declared effective by the Commission on August 16, 1996
Number Document
- ------ --------
3.1 Articles of Incorporation
3.2 Amended Articles of Incorporation
3.3 Bylaws of the Company
4.1 Specimen certificate for Common Stock
4.2 Specimen certificate for Class A Redeemable Warrant
4.3 Specimen certificate for Class B Redeemable Warrant
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The following documents are incorporated by reference from the
Registrant's Form 10-K Annual Report for the period ended December 31, 1997:
Number Document
- ------ --------
99.1 Stock Purchase Agreement
99.2 Employment Agreement with Fred Schmid
The following documents are incorporated by reference from the
Registrant's Form 10-K Annual Report for the period ended December 31, 1998:
Number Document
- ------ --------
3.3 Amended Articles of Incorporation dated December 31, 1997
3.4 Amended Articles of Incorporation dated April 15, 1998
The following documents are incorporated by reference from the
Registrant's Form 8-K Report filed with the Securities and Exchange Commission
(the "Commission") Commission file #333-3074, on December 3, 1999:
Number Document
- ------ --------
10.1 March 14, 2000 Consulting Agreement between Nexland S.A. and the
Company
10.2 November 17, 1999, Mutual Non-Competition Agreement between Nexland,
S.A. and the Company
10.3 November 17, 1999, Co-Operation Agreement between Smerwick, Ltd. And
the Company
The following documents are incorporated by reference from the
Registrant's Form 8-K filed with the Securities and Exchange Commission (the
"Commission") Commission file #333-3074, on March 14, 2000
Independent Auditor's Report
Financial Statements and Pro Forma Financial Statements for the periods
ending December 31, 1997, December 31, 1998 and November 17, 1999.
The following documents are incorporated by reference from the
Registrant's Form 8K filed with the Securities and Exchange Commission (the
"Commission") Commission file #333-3074 on May 12, 2000.
10.4 Employment Contract of Enrique Dillon
10.5 Employment Contract of Martin Dell'Oca
The following documents are filed herewith:
27 Financial Data Schedule
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Nexland, Inc.
Dated: March 5, 2001 By: /s/ Gregory S. Levine
-------------------------------
Gregory S. Levine
President
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