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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K/A
(Amendment No. 3)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the fiscal year ended March 31, 2008.
[ ] OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission File No. 0-50863
NEXXNOW, INC.
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(Name of Registrant in its Charter)
New York 30-0299889
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(State or other jurisdiction (I.R.S. Employer ID Number)
of incorporation or organization)
37 Hamburg Street, East Aurora, NY 14052
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(Address of principal executive offices)
Issuer's Telephone Number, including Area Code: 716-714-7102
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 406 of the Securities Act. Yes No X
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes No X
i
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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
Indicate by check mark disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (ss. 229.405) is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check One)
Large accelerated filer Accelerated filer
Non-accelerated filer Small reporting company X
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes No X
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates, computed by reference to the price at which the common equity
was sold, or the average bid and ask prices of such common equity, as of a
specified date within the past 60 days.
The aggregate market value of the Registrant's common stock, $.01 par value,
held by non-affiliates as of July 11, 2008 was $11,170,667.
As of July 11, 2008 the number of shares outstanding of the Registrant's common
stock was 14,505,941 shares, $.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE: None
Amendment No. 1
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This amendment is being filed in order to make the following changes to the text
originally filed:
o Add to Item 1 ("Business") a section entitled "Business
Development;"
o Add to Item 5(a) ("Market Information") disclosure of the market
price of the Company's shares before adjustment for reverse stock
splits;
o Add to Item 5(d) ("Sale of Unregistered Securities") disclosure
regarding shares sold during the fiscal year for which disclosure
was not made in previous filings;
o Amend the second risk factor in Item 6 ("Management's Discussion
and Analysis: Risk Factors That May Affect Future Results");
ii
o Add certain disclosures in Item 12 ("Certain Relationships:
Related Party Transactions");
o Identify on the Signature Page the Company's Principal Accounting
Officer; and
o Restate the financial statements to the extent disclosure in Note
J to the Financial Statements.
In addition, pursuant to the Rules of the Securities and Exchange Commission,
certain portions of this document have been re-formatted to comply with
Regulation S-K, as Regulation S-B is no longer in effect.
Except as set forth above, the disclosures in this document have not been
amended or updated. For current information regarding the Company, please refer
to the filings made by the Company during the fiscal year ending March 31, 2010.
iii
FORWARD-LOOKING STATEMENTS: NO ASSURANCES INTENDED
In addition to historical information, this Annual Report contains
forward-looking statements, which are generally identifiable by use of the words
"believes," "expects," "intends," "anticipates," "plans to," "estimates,"
"projects," or similar expressions. These forward-looking statements represent
Management's belief as to the future of NexxNow. Whether those beliefs become
reality will depend on many factors that are not under Management's control.
Many risks and uncertainties exist that could cause actual results to differ
materially from those reflected in these forward-looking statements. Factors
that might cause such a difference include, but are not limited to, those
discussed in the section entitled "Risk Factors." Readers are cautioned not to
place undue reliance on these forward-looking statements. We undertake no
obligation to revise or publicly release the results of any revision to these
forward-looking statements.
PART 1
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Item 1. Business
NexxNow, Inc. began to develop its current business operations in
February 2004 under the name "Centale, Inc." By the end of fiscal 2006, which
ended on March 31, 2006, NexxNow had completed the development of its core
technology, acquired complementary technologies and businesses, and expanded its
business scope. The technological core of our business was a desktop
communications platform that is programmable and interactive. The application
can be distributed either as a downloadable hyperlink on a website, or as an
e-mail attachment. The application has broad potential utility - ergo, a broad
potential market - since it can be a platform for whatever text, graphics or
functions a customer wants to communicate directly through the desktops of its
end users.
Unfortunately, a lack of working capital defeated our efforts to
develop the potential market for our software. Through fiscal 2007 and fiscal
2008 we implemented a number of marketing initiatives, none of which were
successful. As fiscal 2008 ended, we determined that we could not be successful
as a company based on the exploitation of a single technology, but that the
technology could be a valuable component of a more balanced media company. For
that reason, in April 2008 we acquired ownership of NexxNow China, Inc., an
enterprise organized to provide multi-media, sports-related advertising
platforms focused on penetrating the Chinese consumer marketplace. Our software
application, which we now call the "Audience Communication Executable" ("ACE"),
will serve as one aspect, but not the exclusive aspect, of those marketing
programs.
NexxNow China
NexxNow China was organized to organize Internet and televised
broadcasts of US sports-related entertainment to The People's Republic of China.
Its initial project is to achieve broadcast distribution of basketball games
played by the NexxNow Dragons, a professional basketball team owned by NexxNow.
The NexxNow Dragons compete in the Premier Basketball League, which hosts its
games throughout North America from December through April. NexxNow management
has designed the NexxNow Dragons to appeal to the Chinese media market by
filling its roster with a balance of Chinese nationals and U.S.-born players.
1
The media mix now being pursued for the NexxNow Dragon broadcasts
includes both Chinese television and Internet broadcasts accessible within
China. In addition, NexxNow plans to distribute a NexxNow Dragons ACE to its
fans, in order to take advantage of the ACE's powerful audience retention
capabilities.
ACE - The Audience Communication Executable
The ACE was developed by NexxNow to capitalize on the growing Internet
community. The ACE resides, after download, on the end user's computer desktop.
Through the ACE NexxNow or NexxNow's licensee can establish 1-to-1 "real-time"
communication direct to the end user's desktop 24/7 in audio, video, rich media,
animation, and/or text. We can customize the platforms to satisfy the particular
communication needs of each of our advertising customers.
Business Development
Our plan of operations for the coming twelve months involves the
solicitation of business relationships in The People's Republic of China that
will enable us to establish a position in the Chinese market for sports
entertainment. We intend to utilize the marketing advantages of our ACE to offer
potential business affiliates a more complex and financially potent program than
is offered by sports entertainment programming alone. By integrating the ACE
technology into our programs, we will be able to offer potential sponsors of the
sports entertainment programs a complex marketing opportunity that will permit
multi-tiered leveraging of the goodwill gained from sports sponsorship.
To implement this plan, we will require funding for working capital -
primarily staff compensation, travel expenses, and the cost of marketing tools.
In order to implement the plan with any reasonable likelihood of success, we
will require a capital contribution of at least $100,000. That sum will have to
be supplemented by sufficient funds to service our existing accounts payable and
tax liabilities (cumulatively, $154,964 at March 31, 2008). If we are unable to
obtain the requisite funds, we will be unable to implement our business plan. In
its report on our financial statements for the year ended March 31, 2009, our
independent registered public accountant noted that there is substantial doubt
concerning NexxNow's ability to continue as a going concern. This situation will
make it difficult for us to obtain funding, and may necessitate that we accept
funds on onerous terms, such as high interest rates or substantial discounts to
the market price of our common stock.
2
Backlog
We have no backlog of orders at this time.
Employees
We currently employ three individuals, all of whom are involved in
administration and marketing. Two of our employees are employed on a full-time
basis. None of our employees belongs to a collective bargaining unit.
Item 1A. Risk Factors
You should carefully consider the risks described below before buying
our common stock. If any of the risks described below actually occurs, that
event could cause the market value of our common stock to decline, and you could
lose all or part of your investment.
We have no source of revenue at this time.
NexxNow China was organized last year. It has developed a number of
relationships with media providers and with participants in the basketball
industry. None of those relationships, however, has developed into a source of
revenue. The viability of our company will depend on management's success in
developing significant sources of revenue.
Our inability to pay our debts could prevent us from continuing in
business.
At March 31, 2008 we had only $166 in cash and no other current assets
to balance $747,805 in current liabilities. In order for us to continue in
business, it will be necessary that we obtain additional capital. If we are
unable to obtain sufficient capital, we will not survive in business. We have no
commitment from any source to provide us further financing.
We will need to issue a substantial amount of equity in order to fund
our business operations.
Because of our lack of liquid assets, it will be necessary for us to
issue a substantial amount of equity during fiscal 2009 in order to fund our
operations. These sales of equity will dilute the interest of current
shareholders in our company. In addition, to the extent that we sell the equity
for prices below market, the sale of equity will also dilute the value of the
shares held by our current shareholders.
Our technology could be replicated by competitors.
The technology captured within the ACE platform is the result of five
years of development by NexxNow and its predecessors. However, a sophisticated
software development company could replicate our technology today in a matter of
months. If a large software distributor undertook direct competition with us,
its superior capital resources could hinder or defeat our efforts to capture a
significant market position.
3
We rely on outsourcing for design and development.
NexxNow employs no designers, no engineers and no programmers. All of
the development services required to fulfill our contracts for desktop
applications will be performed by companies under contract to us. The
outsourcing process opens us up to several risks, including delays in fulfilling
our contracts, delays in obtaining necessary technology, and potential loss of
our trade secrets.
NexxNow is not likely to hold annual shareholder meetings in the next
few years.
New York corporation law provides that members of the board of
directors retain authority to act until they are removed or replaced at a
meeting of the shareholders. The holders of ten percent of the outstanding
common stock may demand that an annual meeting be held. But absent such a
demand, the board has no obligation to call a shareholders meeting. Unless a
shareholders meeting is held, the existing directors elect directors to fill any
vacancy that occurs on the board of directors. The shareholders, therefore, have
no control over the constitution of the board of directors, unless a
shareholders meeting is held.
NexxNow has never held an annual or a special meeting of shareholders.
The Board of Directors of NexxNow consists of individuals who were elected to
their positions by previous members of the Board of Directors. Management does
not expect to hold annual meetings of shareholders in the next few years, due to
the expense involved. Therefore, any new members of the Board of Directors or
any replacements for current members will be nominated and elected by the
present members of the Board.
Related party transactions may occur on terms that are not favorable to
NexxNow.
On several occasions during the past three years, NexxNow has engaged
in business transactions with its founder, Thaddeus A. Wier, Jr., or with Mr.
Wier's spouse. Among the transactions were several financing transactions in
which Mr. Wier or his spouse loaned money to NexxNow, a transaction in which
NexxNow purchased technology from Mr. Wier, a number of consulting agreements
under which NexxNow paid cash or issued stock to Mr. Wier, and a transaction in
December 2006 when NexxNow issued 600,000 (post-reverse split) shares to Mr.
Wier to compensate him for cancellation of his agency contract. Mr. Wier is
currently a consultant to NexxNow, and his daughter is a member of the NexxNow
Board of Directors and the owner of 38% of NexxNow's outstanding shares. It is
possible that Mr. Wier will engage in other transactions with NexxNow. It is
also possible that NexxNow will engage in financing or other transactions with
other shareholders or members of its Board of Directors. It is unlikely that
NexxNow will obtain independent confirmation that the terms of such related
party transactions are fair. If the terms are unfair to NexxNow, the
transactions could harm our operating results.
The volatility of the market for NexxNow common stock may prevent a
shareholder from obtaining a fair price for his shares.
NexxNow at the present time has fewer than 500 shareholders and only a
small number of market makers. As a result, the market price for our common
stock is volatile, at times moving over 100% in one day. Unless and until the
market for our common stock grows and stabilizes, the common shares you purchase
will remain illiquid. A shareholder in NexxNow who wants to sell his shares,
therefore, runs the risk that at the time he wants to sell, the market price may
be much less than the price he would consider to be fair.
4
Only a small portion of the investment community will purchase "penny
stocks" such as NexxNow common stock.
NexxNow' common stock is defined by the SEC as a "penny stock" because
it trades at a price less than $5.00 per share. SEC Rule 15g-9 under the
Securities Exchange Act of 1934 imposes additional sales practice requirements
on broker-dealers that recommend the purchase or sale of penny stocks to persons
other than those who qualify as an "established customer" or an "accredited
investor." This includes the requirement that a broker-dealer must make a
determination on the appropriateness of investments in penny stocks for the
customer and must make special disclosures to the customer concerning the risks
of penny stocks. Many brokerage firms will discourage their customers from
purchasing penny stocks, and even more brokerage firms will not recommend a
penny stock to its customers. Most institutional investors will not invest in
penny stocks. In addition, many individual investors will not consider a
purchase of a penny stock due, among other things, to the negative reputation
that attends the penny stock market. As a result of this widespread disdain for
penny stocks, there will be a limited market for NexxNow' common stock as long
as it remains a "penny stock." This situation may limit the liquidity of your
shares.
Item 2. Properties
NexxNow occupies an office in East Aurora, New York. The monthly rental
is $800.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters
and Registrant Purchases of Equity Securities
(a) Market Information
The Company's common stock is quoted on the OTC Bulletin Board under
the symbol "NXXN.OB." Set forth below are the high and low bid prices for each
quarter in the past two fiscal years. The reported bid quotations reflect
inter-dealer prices without retail markup, markdown or commissions, and may not
necessarily represent actual transactions.
5
The prices in the table below are the actual high and low bid prices.
The prices do not reflect subsequent reverse stock splits.
Bid
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Quarter Ending High Low
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June 30, 2006 $ 1.50 $ .21
September 30, 2006 $ .26 $ .05
December 31, 2006 $ .10 $ .03
March 31, 2007 $ .06 $ .02
June 30, 2007 $ 2.50 $ .81
September 30, 2007 $ .75 $ .10
December 31, 2007 $ .50 $ .06
March 31, 2008 $ .25 $ .02
The prices in the table below have been adjusted to reflect the
1-for-35 reverse split on March 4, 2008 and the 1-for-4 reverse split on June 6,
2008 as if they have occurred on April 1, 2006.
Bid
---
Quarter Ending High Low
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June 30, 2006 $210.00 $ 29.40
September 30, 2006 $ 36.40 $ 7.00
December 31, 2006 $ 14.00 $ 4.20
March 31, 2007 $ 8.40 $ 2.80
June 30, 2007 $349.65 $ 113.99
September 30, 2007 $104.90 $ 13.99
December 31, 2007 $ 69.93 $ 8.39
March 31, 2008 $ 34.97 $ .08
(b) Shareholders
Our shareholders list contains the names of 178 registered stockholders
of record of the Company's Common Stock.
(c) Dividends
The Company has never paid or declared any cash dividends on its Common
Stock and does not foresee doing so in the foreseeable future. The Company
intends to retain any future earnings for the operation and expansion of the
business. Any decision as to future payment of dividends will depend on the
available earnings, the capital requirements of the Company, its general
financial condition and other factors deemed pertinent by the Board of Directors
6
(d) Sale of Unregistered Securities
(NOTE: The disclosure of share issuances in this section retroactively
reflects the effect of a 1-for-35 reverse stock split in March 2008 and
a 1-for-4 reverse stock split in June 2008.)
In July 2007 NexxNow issued a total of 12,057 shares of common stock to
two investors. The shares were issued in satisfaction of loans and accrued
interest in the aggregate amount of $29,537.50. The sales were exempt pursuant
to Section 4(2) of the Act since the sales were not made in a public offering
and were made to individuals who had access to detailed information about
NexxNow, and were acquiring the shares for their own accounts. There were no
underwriters.
In September 2007 NexxNow issued a total of 107,143 shares of common
stock to five individuals who had performed employment or accounting services
for NexxNow. The shares were issued in satisfaction of accrued payables, based
on contract, in the aggregate amount of $260,000. The sales were exempt pursuant
to Section 4(2) of the Act since the sales were not made in a public offering
and were made to individuals who had access to detailed information about
NexxNow, and were acquiring the shares for their own accounts. There were no
underwriters.
During the period from August 2007 to December 2007 NexxNow issued a
total of 35,714 shares of common stock to a consultant. The shares were issued
in compensation for services, and were valued at $888,273, the market price on
the date of issuance. The sale was exempt pursuant to Section 4(2) of the Act
since the sale was not made in a public offering and was made to an entity whose
principals had access to detailed information about NexxNow, and were acquiring
the shares for its own account. There were no underwriters.
In September 2007 NexxNow issued 23,725 shares of common stock to one
investor. The shares were issued in satisfaction of a loan and accrued interest
in the aggregate amount of $58,125. The sale was exempt pursuant to Section 4(2)
of the Act since the sale was not made in a public offering and was made to an
individual who had access to detailed information about NexxNow, and was
acquiring the shares for his own account. There were no underwriters.
In December 2007 NexxNow issued a total of 54,286 shares of common
stock to four employees. The shares were issued in compensation for accrued
salary in the aggregate amount of $41,014.82. The sales were exempt pursuant to
Section 4(2) of the Act since the sales were not made in a public offering and
were made to individuals who had access to detailed information about NexxNow,
and were acquiring the shares for their own accounts. There were no
underwriters.
In March 2008 NexxNow issued a total of 21,082 shares of common stock
to two individuals. The shares were issued in compensation for accrued payables
arising from consulting services valued, per contract, at $29,514.16. , The
sales were exempt pursuant to Section 4(2) of the Act since the sales were not
made in a public offering and were made to individuals who had access to
detailed information about NexxNow, and were acquiring the shares for their own
accounts. There were no underwriters.
7
In March 2008 NexxNow issued 128,572 shares of common stock to one
investor. The shares were issued in compensation for the extension of a loan to
NexxNow, and were valued at $180,000, the market price on the date of issuance.
The sale was exempt pursuant to Section 4(2) of the Act since the sale was not
made in a public offering and was made to an individual who had access to
detailed information about NexxNow, and was acquiring the shares for his own
account. There were no underwriters.
(e) Repurchase of Equity Securities
The Company did not repurchase any of its equity securities that were
registered under Section 12 of the Securities Act during the 4th quarter of
fiscal 2008.
Item 6. Selected Financial Data
Not applicable
Item 7. Management's Discussion and Analysis
Results of Operations
Due to our lack of funds, our operations during fiscal year 2008 (which
ended on March 31, 2008) were very limited, as we were able to deliver only
three applications to customers. As a result, our revenue for the year ended
March 31, 2008 was only $40,416. In contrast, during the year ended March 31,
2007 we posted $697,216 in revenue, primarily from license fees relating to our
software applications.
Our largest expense in fiscal 2008 was the combination of consulting
fees, officers' compensation and salaries and wages, which totaled $1,270,683.
Only a small portion of these expenses were paid in cash, however. During fiscal
year 2008 the market value of the common stock we issued in exchange for
services totaled $1,218,802.
The second largest category of expense that we incurred during fiscal
2008 was loan fees, which totaled $180,000. This represents the expenses we
incurred in order to fund our operations. The $180,000 in loan fees represented
the value of common stock that we issued to certain shareholders to induce them
to lend us funds for working capital. Because of NexxNow's poor financial
condition, it has not been possible for us to obtain financing on conventional
terms. Until we improve our balance sheet and achieve profitable operations, we
will continue to incur large expenses for financing costs.
Our business activities during fiscal 2008 resulted in $1,718,485 in
expenses. During the year we sold some stock that we received as a fee in 2006,
obtaining an aggregate gain of $87,380. So our net loss for fiscal 2008 was
$1,629,490, compared to a net loss of $5,535,615 in fiscal year 2007. Until the
NexxNow China business begins to generate significant revenue, we will continue
to incur losses.
8
Liquidity and Capital Resources
Since we initiated our current business in 2004, our operations have
been funded primarily by the private sale of equity and debt to investors.
During the year ended March 31, 2008, our operations were funded by loans from
shareholders and investors. The net amount of loans received in fiscal 2008 was
$438,688. Through March 31, 2008, however, we had used virtually all of those
funds for our operations.
When fiscal year 2008 ended on March 31, 2008, our balance sheet showed
a working capital deficit of $766,098. Since that date, however, we have
significantly improved our balance sheet. In April 2008 three creditors agreed
to take common stock in exchange for $401,549 in debt. Subsequently, in June
2008 the five holders of $105,605 in debt assumed by NexxNow in connection with
its acquisition of NexxNow China converted that debt into common stock.
Nevertheless, we currently have very little cash on hand and no other liquid
assets. Therefore, in order to carry on our business, we must obtain additional
capital.
We continue to actively seek investment capital. At the present time,
however, no one has committed to provide us any additional funds.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition
or results of operations.
Application of Critical Accounting Policies
In preparing our financial statements we are required to formulate
working policies regarding valuation of our assets and liabilities and to
develop estimates of those values. In our preparation of the financial
statements for fiscal year 2008, there were two estimates made which were (a)
subject to a high degree of uncertainty and (b) material to our results. The
first was our determination, explained in Note B to the Financial Statements
that we should record a valuation allowance for the full value of the deferred
tax asset created by our net operating loss carry-forward. The primary reason
for the determination was our lack of certainty as to whether NexxNow would
carry on profitable operations in the future. The second material estimate,
explained in Note C to our financial statements, was our determination that the
software technology that we acquired during fiscal 2006 will have a useful life
of five years. Based on that determination, we are amortizing the expenses we
incurred in acquiring and developing that technology over a five year period.
We made no material changes to our critical accounting policies in
connection with the preparation of financial statements for fiscal year 2008.
Impact of Accounting Pronouncements
There were no recent accounting pronouncements that have had a material
effect on the Company's financial position or results of operations. There were
no recent accounting pronouncements that are likely to have a material effect on
the Company's financial position or results of operations.
9
Item 8. Financial Statements and Supplementary Date
The Company's financial statements, together with notes and the Report
of Independent Registered Public Accounting Firm, are set forth immediately
following Item 15 of this Form 10-K/A.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable
Item 9A. Controls and Procedures
a. Evaluation of Disclosure Controls and Procedures.
Paul Riley, our Chief Executive Officer and Chief Financial Officer,
carried out an evaluation of the effectiveness of NexxNow's disclosure controls
and procedures as of March 31, 2008. Pursuant to Rule13a-15(e) promulgated by
the Securities and Exchange Commission pursuant to the Securities Exchange Act
of 1934, "disclosure controls and procedures" means controls and other
procedures that are designed to insure that information required to be disclosed
by NexxNow in the reports that it files with the Securities and Exchange
Commission is recorded, processed, summarized and reported within the time
limits specified in the Commission's rules. "Disclosure controls and procedures"
include, without limitation, controls and procedures designed to insure that
information NexxNow is required to disclose in the reports it files with the
Commission is accumulated and communicated to our Chief Executive Officer and
Chief Financial Officer as appropriate to allow timely decisions regarding
required disclosure. In the course of that review, Mr. Riley identified a
material weakness (as defined in Public Company Accounting Oversight Board
Standard No. 2) in our internal control over financial reporting.
The material weakness consisted of inadequate staffing and supervision
within the bookkeeping and accounting operations of our company. The relatively
small number of employees who have bookkeeping and accounting functions prevents
us from segregating duties within our internal control system. The inadequate
segregation of duties is a weakness because it could lead to the untimely
identification and resolution of accounting and disclosure matters or could lead
to a failure to perform timely and effective reviews. In light of this
situation, management has considered adding personnel to the company's
bookkeeping and accounting operations. However, as there has been no instance
during fiscal 2008 in which the company failed to identify or resolve a
disclosure matter or failed to perform a timely and effective review, management
determined that the addition of personnel to our bookkeeping and accounting
operations is not an efficient use of our limited resources at this time.
10
Based on his evaluation, Mr. Riley concluded that NexxNow's system of
disclosure controls and procedures was effective as of March 31, 2008 for the
purposes described in this paragraph.
b. Changes in Internal Controls.
There was no change in internal controls over financial reporting (as
defined in Rule 13a-15(f) promulgated under the Securities Exchange Act or 1934)
identified in connection with the evaluation described in the preceding
paragraph that occurred during NexxNow's fourth fiscal quarter that has
materially affected or is reasonably likely to materially affect NexxNow's
internal control over financial reporting.
c. Management's Report On Internal Control Over Financial Reporting.
Management of the Company is responsible for establishing and
maintaining adequate internal control over financial reporting as defined in
Rule 13a-15(f) under the Securities Exchange Act of 1934. We have assessed the
effectiveness of those internal controls as of March 31, 2008, using the
Committee of Sponsoring Organizations of the Treadway Commission ("COSO")
Internal Control - Integrated Framework as a basis for our assessment.
Because of inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. 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 and procedures may deteriorate. All internal
control systems, no matter how well designed, have inherent limitations.
Therefore, even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement preparation and
presentation.
A material weakness in internal controls is a deficiency in internal
control, or combination of control deficiencies, that adversely affects the
Company's ability to initiate, authorize, record, process, or report external
financial data reliably in accordance with accounting principles generally
accepted in the United States of America such that there is more than a remote
likelihood that a material misstatement of the Company's annual or interim
financial statements that is more than inconsequential will not be prevented or
detected. In the course of making our assessment of the effectiveness of
internal controls over financial reporting, we identified two material
weaknesses in our internal control over financial reporting. These material
weaknesses consisted of:
a. Inadequate staffing and supervision within the bookkeeping
operations of our company. The relatively small number of employees who are
responsible for bookkeeping functions prevents us from segregating duties within
our internal control system. The inadequate segregation of duties is a weakness
because it could lead to the untimely identification and resolution of
accounting and disclosure matters or could lead to a failure to perform timely
and effective reviews.
b. Outsourcing of portions of the accounting operations of our company.
Because there are few employees in our administration, we outsource a portion of
the accounting functions of our Company to an independent accounting firm. The
employees of this accounting firm are managed by supervisors within the
accounting firm, and are not answerable to the Company's management. This is a
material weakness because it could result in a disjunction between the
accounting policies adopted by our Board of Directors and the accounting
practices applied by the accounting firm.
11
Management is currently reviewing its staffing and their training in
order to remedy the weaknesses identified in this assessment. To date, we are
not aware of significant accounting problems resulting from these weaknesses; so
we have to weigh the cost of improvement against the benefit of strengthened
controls. However, because of the above conditions, management's assessment is
that the Company's internal controls over financial reporting were not effective
as of March 31, 2008.
This annual report does not include an attestation report of the
Company's registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by the
Company's registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management's report in this annual report.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers, and Corporate Governance
The officers and directors of the Company are listed in the table
below.
Name Age Position with the Company Director Since
- ---- --- ------------------------- --------------
Paul Riley 41 Chief Executive Officer, 2008
Chief Financial Officer
Daniel T. Robbie 46 Chairman of the Board 2008
Sterling Shepperd 33 Director, Vice President, 2007
Secretary
Brittany Wier 21 Director 2008
Directors hold office until the annual meeting of the Company's
stockholders and the election and qualification of their successors. Officers
hold office, subject to removal at any time by the Board, until the meeting of
directors immediately following the annual meeting of stockholders and until
their successors are appointed and qualified.
Paul Riley has over fourteen years experience in the telecommunications
industry. From 1994 to 2004 Mr. Riley was employed by the Canadian Broadcast
Company as a producer. In 2004 Mr. Riley was admitted to practice law in Canada,
and has been self-employed since 2004 as an attorney, specializing in
telecommunications matters. Mr. Riley was awarded a Bachelor Degree in Science
1993 by the Universiey of Dalhousianae, a Diploma in Journalism in 1997 by
Humber College, and a Bachelor Degree in Law in 2003 by York University.
12
Daniel T. Robbie has been involved since 2005 with Matrix Healthcare
Solutions, Inc., and is currently employed by Matrix as Vice President,
responsible for marketing software solutions to the medical industry. From 2002
to 2004 Mr. Robbie was engaged as a consultant to Team Marketing, Inc., which
was involved in sports marketing. From 1998 to 2002 Mr. Robbie was involved with
Tek 21, Inc., which designed and marketed desktop software solutions. Mr. Robbie
served at times as Chairman of Tek 21's Board. From 1984 until 1994 Mr. Robbie
was employed by the Miami Dolphins, serving as President of Joe Robbie Stadium
and Executive Vice President of the Dolphins when the team was sold by the
Robbie family.
Sterling Shepperd. Mr. Shepperd has been the Vice President and
Corporate Secretary of NexxNow since July 2004. In 2003 Mr. Shepperd was
employed as Sales Manager for JMT Solutions, LLC, which was engaged in the
business of direct response marketing in Palm Bay, Florida. From 1999 until he
joined JMT Solutions, Mr. Shepperd was employed by DanMark, Inc., an
organization engaged in direct response marketing. Mr. Shepperd served as Sales
Manager and Trainer for two of DanMark's offices.
Brittany Wier is employed by NexxNow as Director of Business
Development. Ms. Wier will graduate in May 2008 from New York University with a
Bachelor Degree, with a concentration in sports management. In the Fall of 2007
Ms. Wier was employed as a Marketing Assistant by Superfly, Inc., which is
engaged in entertainment marketing. Ms. Wier is 21 years old. She is the
daughter of Thaddeus A. Wier, Jr., who was the Chief Executive Officer of
NexxNow until April 25, 2008.
Audit Committee; Compensation Committee
- ---------------------------------------
The Board of Directors has not appointed an Audit Committee or a
Compensation Committee. The Board of Directors does not have an audit committee
financial expert. The Board of Directors has not yet recruited an audit
committee financial expert to join the Board of Directors because the Company
has not yet commenced a significant level of financial operations.
Code of Ethics
- --------------
The Company does not have a written code of ethics applicable to its
executive officers. The Board of Directors has not adopted a written code of
ethics because it has only recently acquired a significant number of members of
management.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
None of the officers, directors or beneficial owners of more than 10%
of the Company's common stock failed to file on a timely basis the reports
required by Section 16(a) of the Exchange Act during the year ended March 31,
2008.
13
Item 11. Executive Compensation
The following table sets forth all compensation awarded to, earned by,
or paid by NexxNow to Thaddeus A. Wier, Jr., who served as its Chief Executive
Officers during the year ended March 31, 2008. On April 25, 2008, upon the
acquisition of NexxNow China, Mr. Wier was replaced in that position by Paul
Riley.
Fiscal Stock Option Other
Year Salary Bonus Awards Awards Compensation
---------- --------- ----------- --------- ----------- ---------- -------------
T. Wier 2008 -- -- -- -- --
2007 $20,000 -- -- -- --
T. Wier 2007 $20,000 -- -- -- --
Employment Agreements
NexxNow has entered into employment agreements with the following
members of management. Each employment agreement is dated April 25, 2008.
Paul Riley. NexxNow's agreement with Paul Riley provides for Mr. Riley
to serve as President of NexxNow. NexxNow will pay Mr. Riley an annual salary of
$90,000 plus an annual bonus in an amount to be determined between $45,000 and
$90,000 by the Board of Directors. The bonus will be payable in cash or in stock
at NexxNow's option. NexxNow will also give Mr. Riley a $6,000 annual car
allowance. The agreement terminates on April 30, 2010. If Mr. Riley's employment
terminates prior to January 1, 2009, the shares of NexxNow common stock that he
received in exchange for his ownership of NexxNow China shares will be
cancelled.
Sterling Shepperd. NexxNow's agreement with Sterling Shepperd provides
for Mr. Shepperd to serve as Vice President of NexxNow. NexxNow will pay Mr.
Shepperd an annual salary of $66,000 plus an annual bonus in an amount to be
determined between $16,500 and $66,000 by the Board of Directors. The bonus will
be payable in cash or in stock at NexxNow's option. The agreement terminates on
April 30, 2010.
Brittany Wier. NexxNow's agreement with Brittany Wier provides for Ms.
Wier to serve as Director of Business Development for NexxNow. NexxNow will pay
Ms. Wier an annual salary of $54,000 commencing on June 1, 2008 plus an annual
bonus in an amount to be determined between $13,500 and $54,000 by the Board of
Directors. NexxNow will also give Ms. Wier a $3,600 annual car allowance and a
$3,600 annual health insurance allowance. The agreement terminates on December
31, 2009.
14
Remuneration of Directors
NexxNow has not adopted any policy regarding compensation of members of
the Board of Directors, and has not paid any cash remuneration to any member of
the Board. However, in December 2006 NexxNow issued 3,571 (adjusted for
subsequent reverse stock splits) shares of common stock to each of its
directors. The shares had a market value of $4.20 each on the date of the grant.
Equity Grants
The following tables set forth certain information regarding the stock
options acquired by the Company's Chief Executive Officer during the year ended
March 31, 2008 and those options held by him on March 31, 2008.
Option Grants in the Last Fiscal Year
Percent
of total Potential realizable
Number of options value at assumed
securities granted to annual rates of
underlying employees Exercise appreciation
option in fiscal Price Expiration for option term
granted year ($/share) Date 5% 10%
- ---------- ------------------------------------------------ ----------- --------
T. Wier 0 -- -- -- -- --
- ---------- ------------------------------------------------ ----------- --------
The following tables set forth certain information regarding the stock
grants received by the executive officers named in the table above during the
year ended March 31, 2008 and held by them unvested at March 31, 2008.
Unvested Stock Awards in the Last Fiscal Year
Number of Market Value
Shares That of Shares That
Have Not Have Not
Vested Vested
------------- -------------- ------------------
T. Wier 0 --
------------- -------------- ------------------
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information known to us with respect to
the beneficial ownership of our common stock as of the date of this prospectus
by the following:
o each shareholder known by us to own beneficially more than 5% of
our common stock;
o Paul Riley, our Chief Executive Officer
o each of our directors; and
o all directors and executive officers as a group.
15
There are 14,505,941 shares of our common stock outstanding on the date
of this report. Except as otherwise indicated, we believe that the beneficial
owners of the common stock listed below have sole voting power and investment
power with respect to their shares, subject to community property laws where
applicable. Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission.
In computing the number of shares beneficially owned by a person and
the percent ownership of that person, we include shares of common stock subject
to options or warrants held by that person that are currently exercisable or
will become exercisable within 60 days. We do not, however, include these
"issuable" shares in the outstanding shares when we compute the percent
ownership of any other person.
Amount and Nature
Name and Address of of Beneficial Percentage
Beneficial Owner(1) Ownership(2) of Class
------------------- ----------------- ----------
Paul Riley 2,492,754(3) 17.2%
Daniel Robbie 155,497 1.1%
Sterling Shepperd 198,865 1.4%
Brittany Wier 5,452,899 37.6%
All officers and directors
as a group (4 persons) 8,300,015 57.2%
Thaddeus A. Wier, Jr. 1,278,118(4) 8.8%
Kenneth Keller 1,401,363 9.7%
1206 Carriage Road
East Aurora, NY 14052
- -------------------------------
(1) Except as otherwise indicated, the address of the shareholder is
c/o NexxNow, Inc., 37 Hamburg Street, East Aurora, NY 14052
(2) Except as otherwise noted, all shares are owned of record and
beneficially.
(3) Mr. Riley's employment agreement with NexxNow provides that these
shares will be surrendered and cancelled if Mr. Riley's employment
by NexxNow terminates prior to January 1, 2009.
(4) Does not include shares issuable pursuant to the Market Vision
Consulting Agreement. In this agreement, Market Vision Consulting
agreed to advise the management of NexxNow and to provide public
relations services. In compensation for the services, NexxNow will
pay Market Vision Consulting $12,500 per month in cash and $50,000
per month in common stock. However, payment cannot be made in
stock to the extent that the payment would cause Market Vision
Consulting or any of its affiliates to own more than 9.9% of the
outstanding common shares of NexxNow. Thaddeus A. Wier, Jr. is the
sole shareholder of Market Vision Consulting, Inc.
16
Equity Compensation Plan Information
The information set forth in the table below regarding equity
compensation plans (which include individual compensation arrangements) was
determined as of March 31, 2008.
Number of
Weighted securities
Number of average remaining
securities exercise available
to be issued price of for future
upon exercise outstanding issuance under
of outstanding options, equity
options, warrants warrants compensation
and rights and rights plans
- --------------------------------------------------------------------------------
Equity compensation
plans approved by
security holders 0 -- 0
Equity compensation
plans not approved
by security holders 0 -- 761,000
Total 0 -- 761,000
Item 13. Certain Relationships and Related Transactions and Director
Independence
Related Party Transactions
--------------------------
On April 25, 2008 NexxNow completed the acquisition of the outstanding
capital stock of NexxNow China, Inc., a Delaware corporation. In exchange for
ownership of NexxNow China, NexxNow issued 10,750,000 shares of its common stock
to the shareholders of NexxNow China. Included in those shares were shares
issued to individuals who are now members of NexxNow's Board of Directors, thus:
Paul Riley - 2,492,754 shares
Sterling Shepperd - 103,865 shares
Daniel Robbie - 155,797 shares
Brittany Wier - 5,452,899 shares
Of those four individuals, only Mr. Shepperd was affiliated with
NexxNow prior to the acquisition. Ms. Wier is the daughter of Thaddeus A. Wier,
Jr., who was the Chief Executive Officer of NexxNow at the time of the
acquisition.
17
Director Independence
---------------------
The following member of our Board of Directors is independent, as
"independent" is defined in the rules of the NASDAQ National Market System:
Daniel T. Robbie.
Item 14. Principal Accountant Fees and Services
Audit Fees
Rotenberg & Co. LLP billed $19,600 in connection with the audit of the
Company's financial statements for the year ended March 31, 2008 and $11,000 in
connection with the audit of the Company's financial statements for the year
ended March 31, 2007. Also included in those billings were services performed in
connection with the reviews of the Company's financial statements for the
interim quarterly periods as well as those services normally provided by the
accountant in connection with the Company's statutory and regulatory filings for
fiscal 2007 and 2006.
Audit-Related Fees
Rotenberg & Co., LLP billed the Company $10,500 for Audit-Related fees
during the year ended March 31, 2008 and $11,000 for Audit-related fees during
the year ended March 31, 2007.
Tax Fees
Rotenberg & Co., LLP billed $0 to the Company in the year ended March
31, 2008 for professional services rendered for tax compliance, tax advice and
tax planning. Rotenberg & Co., LLP billed $0 to the Company in the year ended
March 31, 2007 for professional services rendered for tax compliance, tax advice
and tax planning.
All Other Fees
Rotenberg & Co., LLP the Company $1,950 for other services during the
year ended March 31, 2008. Rotenberg & Co., LLP billed the Company $0 for other
services during the year ended March 31, 2007.
It is the policy of the Company that all services other than audit,
review or attest services must be pre-approved by the Board of Directors. All of
the services described above were approved by the Board of Directors.
18
Item 15. Exhibit List
(a) Financial Statements
Report of Independent Registered Public Accounting Firm
Balance Sheets - March 31, 2008 and 2007
Statements of Operations - Years ended March 31, 2008 and 2007
Statements of Changes in Stockholders' Equity (Deficit) - Years Ended
March 31, 2008 and 2007
Statements of Cash Flows - Years ended March 31, 2008 and 2007
Notes to Financial Statements
(b) Exhibit List
3-a Certificate of Incorporation, as amended through June 2004 - filed as
an exhibit to the Registration Statement on Form 10-SB (File No.:
000-50863) and incorporated herein by reference.
3-a(1) Certificate of Amendment of Certificate of Incorporation executed on
November 25, 2005 - filed as an exhibit to the Current Report on Form
8-K dated November 29, 2005 and incorporated herein by reference.
3-a(2) Certificate of Amendment of Certificate of Incorporation effective on
March 4, 2008 - filed as an exhibit to the Current Report on Form 8-K
filed on March 6, 2008 and incorporated herein by reference.
3-a(3) Certificate of Amendment of Certificate of Incorporation effective on
June 6, 2008 - filed as an exhibit to the Current Report on Form 8-K
filed on June 9, 2008 and incorporated herein by reference.
3-b Second Amended and Restated By-laws - filed as an exhibit to the
Company's Current Report on Form 8-K dated November 17, 2005 and
incorporated herein by reference.
10-a Consulting Agreement dated April 25, 2008 between Centale, Inc. and
Market Vision Consulting, Inc. - filed as an exhibit to the Company's
Current Report on Form 8-K filed on May 5, 2008 and incorporated herein
by reference.
10-b Employment Agreement dated April 25, 2008 between Centale, Inc. and
Paul Riley - filed as an exhibit to the Company's Current Report on
Form 8-K filed on May 5, 2008 and incorporated herein by reference.
10-c Employment Agreement dated April 25, 2008 between Centale, Inc. and
Sterling Shepperd - filed as an exhibit to the Company's Current Report
on Form 8-K filed on May 5, 2008 and incorporated herein by reference.
21 Subsidiaries - NexxNow China, Inc., a Delaware corporation
19
31.1 Rule 13a-14(a) Certification - CEO
31.2 Rule 13a-14(a) Certification - CFO
32 Rule 13a-14(b) Certifications
20
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of NexxNow, Inc.
We have audited the accompanying balance sheets of NexxNow, Inc.
(formerly Centale, Inc.) as of March 31, 2008 and 2007, and the related
statements of operations, changes in stockholders' equity (deficit), and cash
flows for the years then ended. NexxNow Inc.'s management is responsible for
these financial statements. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of NexxNow, Inc. as of
March 31, 2008 and 2007, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
As discussed in Note J to the financial statements, the financial
statements have been restated to reflect the retroactive effect of the reverse
stock splits identified in Note H and Note I, and to reclassify $26,450
previously classified as "Gain on Sale of Investments" on the Statement of Cash
Flows as "Sale of Investment in Circle Group and Pet Ecology."
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note G to the
financial statements, the Company's significant operating losses and inability
to generate revenue from operations raise substantial doubt about its ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Rotenberg & Co., llp
Rochester, New York
July 14, 2008 (September 18, 2009 as to effects of the
restatements discussed in Note J)
F-1
NEXXNOW, INC. (f/k/a CENTALE, INC.)
BALANCE SHEETS
MARCH 31, 2008 AND 2007
2008 2007
-------------------------------
(restated)
ASSETS
Current Assets
Cash and Cash Equivalents 166 275
Accounts Receivable
(net of allowance of $12,916
and $0 respectively) 0 0
-------------- --------------
Total Current Assets 166 275
-------------- --------------
Other Assets
Software Development 153,479 153,479
Software Technology 129,950 129,950
Less: Accumulated Amortization (188,795) (132,119)
Investment in Circle Group Holdings 0 50,000
Investment in Pet Ecology 0 13,500
-------------- --------------
Total Other Assets 94,634 214,810
-------------- --------------
TOTAL ASSETS 94,800 215,085
============== ==============
LIABILITIES & EQUITY
Current Liabilities
Accounts Payable 144,792 319,582
Accrued Expenses 31,520 203,470
Loans Payable 196,155 36,716
L/P -Stockholders 365,166 173,579
Payroll Tax Liabilities 10,172 10,176
-------------- --------------
Total Current Liabilities 747,805 743,523
-------------- --------------
Total Liabilities 747,805 743,523
-------------- --------------
Equity
Common Stock: $.01 Par, 250,000,000
Authorized 1,621,944 and 1,239,368
Shares Issued and Outstanding as
of March 31, 2008 and March 31,
2007 respectively 16,219 12,394
Preferred Stock: $.01 Par, 5,000,000
Shares Authorized No Shares Outstanding
Additional Paid In Capital 9,600,452 8,117,813
Accumulated Deficit (10,269,676) (8,658,645)
-------------- --------------
Total Stockholders' Equity (Deficit) (653,005) (528,438)
-------------- --------------
TOTAL LIABILITIES & EQUITY 94,800 215,085
============== ==============
The accompanying notes are an integral part of these financial statements.
F-2
NEXXNOW, INC. (f/k/a CENTALE, INC.)
STATEMENTS OF OPERATIONS
THE YEARS ENDED MARCH 31, 2008 AND 2007
March 31, March 31,
2008 2007
-------------------------------
(restated)
ORDINARY INCOME / (EXPENSE)
REVENUES 40,416 697,216
DIRECT COSTS:
Commissions 0 21,585
Subcontracted Labor 16,750 4,600
Technology services 22,051 126,562
-------------- --------------
Total Direct Costs 38,801 152,747
-------------- --------------
GROSS MARGIN 1,615 544,469
EXPENSES
Advertising 3,817 208,018
Agency Termination Fee 0 842,250
Amortization 56,676 80,121
Bad Debt 33,508 286,651
Consulting Services 930,591 1,870,550
Depreciation 0 16,234
Impairment of Goodwill 0 525,000
Impairment of Intangible Assets 0 81,458
Insurance Expense 20,798 42,537
Interest Expense 12,663 127,165
Loan Fees 180,000 703,750
Loss on Disposal of Assets 0 67,685
Miscellaneous 24,947 17,767
Office Expense 18,108 94,862
Officers' Compensation 256,000 263,265
Professional Services 73,955 249,964
Rent 14,634 141,099
Salaries & Wages 84,092 467,649
Travel Expense 8,696 35,455
-------------- --------------
Total Expense 1,718,485 6,121,480
-------------- --------------
Loss from Operations (1,716,870) (5,577,011)
Other Income / (Expense)
Other Income / (Expense) 105,839 41,396
-------------- --------------
NET LOSS FOR THE PERIOD (1,611,031) (5,535,615)
============== ==============
LOSS PER SHARE:
Basic (1.09) (7.53)
-------------- --------------
Fully Diluted (1.09) (7.53)
-------------- --------------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic 1,472,470 735,200
Fully Diluted 1,472,470 735,200
The accompanying notes are an integral part of these financial statements.
F-3
NEXXNOW, INC. (f/k/a CENTALE, INC.)
STATEMENT OF CASH FLOWS
FOR YEARS ENDED MARCH 31, 2008 AND 2007
March 31, March 31,
2008 2007
-------------------------------
(restated)
CHANGES IN ASSETS AND LIABILITIES
Net Loss for the Period (1,611,031) (5,535,615)
NON-CASH ADJUSTMENTS
Depreciation and Amortization 56,676 96,355
Bad Debt 33,508 286,651
Agency Termination Fee 0 842,250
Impairment of Goodwill 0 525,000
Impairment of Intangible Assets 0 81,458
Loss on Disposal of Assets 0 67,685
Common Stock issued in exchange for services 1,218,802 2,025,589
Common Stock issued in exchange for loan fee 180,000 703,750
Commons Stock issued in exchange for interest
expense 0 51,506
Gain on Sale of Investments (35,575) 0
Note Payable in exchange for services 0 771,600
Cash Flows from Operating Activities
Accounts Receivable (33,508) (335,763)
Employee Advance 0 1,500
Security Deposit 0 16,405
Accounts Payable, Accrued Expenses and
Payroll Tax Liabilities (346,744) 257,135
-------------- --------------
Net cash provided by Operating Activities (537,872) (144,494)
Cash Flows from Investing Activities
Purchases of Computer software 0 (3,479)
Sale of Investment in Circle Group
Ecology 99,075 0
Purchases of Furniture, Fixtures, Equipment 0 (38,562)
-------------- --------------
Net Cash Used in Investing Activities 99,075 (42,041)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Loans to Stockholders 279,249 0
Proceeds from Loan Payable 159,439 36,716
Proceeds from Issuance of Common Stock 0 120,709
-------------- --------------
Net cash provided by Financing Activities 438,688 157,425
-------------- --------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (109) (29,110)
CASH AND CASH EQUIVALENTS -BEGINNING OF PERIOD 275 29,385
-------------- --------------
CASH AND CASH EQUIVALENTS - END OF PERIOD 166 275
============== ==============
SUPPLEMENTAL DISCLOSURES
Interest Paid 0 0
============== ==============
Income Taxes Paid 100 100
============== ==============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Common Stock issued for Intangible Assets 0 1,367,250
============== ==============
Common Stock Returned for Release of
Intangible Assets 0 (550,000)
============== ==============
Common Stock issued in Satisfaction of
Notes Payable 87,662 1,420,581
============== ==============
The accompanying notes are an integral part of these financial statements.
F-4
NEXXNOW, INC. (f/k/a CENTALE, INC.)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
MARCH 31, 2008 AND 2007
COMMON STOCK ADDITIONAL STOCKHOLDER
NUMBER OF PAID IN ACCUMULATED EQUITY
SHARES VALUE CAPITAL DEFICIT (DEFICIT)
BALANCE - MARCH 31,
2006 149,928 1,499 2,989,323 (3,123,030) (132,208)
Common Stock Issued
for Cash 8,503 85 120,624 120,709
Common Stock Issued
for Intangible
Assets 17,857 179 524,821 525,000
Common Stock Issued
for Agency
Termination Fee 601,607 6,016 836,234 842,250
Common Stock Returned
for Release of
Intangible Asset (3,571) (36) (549,964) (550,000)
Common Stock Issued
in Satisfaction of
Notes Payable 319,041 3,191 1,417,390 1,420,581
Common Stock Issued
in Exchange for
Services 80,999 810 2,024,779 2,025,589
Common Stock Issued
in Exchange for
Loan Fee 28,214 282 703,468 703,750
Common Stock Issued
in Exchange for
Interest Expense 36,790 368 51,138 51,506
Net Loss for the
Period (unaudited) (5,535,615) (5,535,615)
----------------------------------------------------------
BALANCE - MARCH 31,
2007 1,239,368 12,394 8,117,813 (8,658,645) (528,438)
Common Stock Issued
in Satisfaction of
Notes Payable 35,781 358 87,304 87,662
Common Stock Issued
in Exchange for
Services 218,224 2,182 1,216,620 1,218,802
Common Stock Issued
in Exchange for
Loan Fee 128,571 1,285 178,715 180,000
Net Loss for the
Period (1,611,031) (1,611,031)
----------------------------------------------------------
BALANCE - MARCH 31,
2008 1,621,944 16,219 9,600,452 (10,269,676) (653,005)
F-5
NEXXNOW, INC. (f/k/a CENTALE, INC.)
NOTES TO FINANCIAL STATEMENTS
March 31, 2008 and 2007
AUDITED
NOTE A - THE COMPANY
History
The Company was incorporated under the laws of the State of New York on
November 12, 1998 as Safe Harbour Health Care Properties, Ltd. In July 2004, the
Company changed its name to Centale, Inc. The Company was engaged in the
business of leasing real estate to health care facilities. During 1999, the
Company ceased its operations and commenced actions to voluntarily seek
protection from creditors under the bankruptcy code. During 2003, the Company
distributed its assets to the creditors in satisfaction of its outstanding
liabilities. The bankruptcy was subsequently dismissed. The Company remained
dormant until 2004, when one of the Company's shareholders purchased a
controlling interest. In February 2004, the Company began its development stage
as a internet based marketing company. The development stage ended within the
fiscal year ended March 31, 2006. The Company, as of December 2007 discontinued
its internet marketing due to difficulties with service providers and subsequent
cancellations by customers. Both Florida and the former Advance Theory, Inc.
offices were closed as a result, in an attempt to reduce future overhead
expenses.
On March 28, 2008, the Company entered into a Share Exchange Agreement
with the shareholders of NexxNow China, Inc., a Delaware corporation. The
agreement provides that, when conditions for closing have been satisfied, the
shareholders will transfer to the Company, all of the outstanding capital stock
of NexxNow China, and the Company will issue 43 million shares of its common
stock to the shareholders. The Company will also issue promissory notes to be
distributed among the shareholders pro rata to their interests in NexxNow China.
The notes will be payable one year after the closing with an interest at 10% per
annum, and be secured by a pledge of all of Centale's assets. The new direction
of the Company will be to engage in the business of marketing sporting events in
The People's Republic of China.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting
The financial statements of Centale, Inc. (the "Company" included
herein) have been prepared by the Company pursuant to the rules and regulations
of the Security Exchange Commission (the "SEC"). The Company maintains its books
and prepares its financial statements on the accrual basis of accounting.
The accompanying financial statements reflect all adjustments of a
normal and recurring nature which are, in the opinion of management, necessary
to present fairly the financial position, results of operations and cash flows
of the Company for the year ended March 31, 2008. Factors that affect the
comparability of financial data from year to year include nonrecurring expenses
associated with the Company's registration with the SEC, costs incurred to raise
capital and stock awards.
F-6
NEXXNOW, INC. (f/k/a CENTALE, INC.)
NOTES TO FINANCIAL STATEMENTS
March 31, 2008 and 2007
AUDITED
Cash and Cash Equivalents
Cash and cash equivalents include time deposits, certificates of
deposits and all highly liquid debt instruments with original maturities of
three months or less.
The Company maintains cash and cash equivalents at financial
institutions, which periodically may exceed federally insured amounts.
Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109
"Accounting for Income Taxes" using the asset and liability approach, which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between the carrying amounts
and the tax basis of such assets and liabilities. This method utilizes enacted
statutory tax rates in effect for the year in which the temporary differences
are expected to reverse and gives immediate effect to changes in the income tax
rates upon enactment. Deferred tax assets are recognized, net of any valuation
allowance, for temporary differences and net operating loss and tax credit carry
forwards. Deferred income tax expense represents the change in net deferred
assets and liability balances. The Company had no material deferred tax assets
or liabilities for the period presented. Deferred income taxes result from
temporary differences between the basis of assets and liabilities recognized for
differences between the financial statement and tax basis thereon, and for the
expected future benefits to be derived from net operating losses and tax credit
carry forwards. The Company has had significant operating losses and a valuation
allowance is recorded for the entire amount of the deferred tax assets.
Impairment of Assets
The Company evaluates its long-lived assets for financial impairment on
a regular basis in accordance with Statement of Financial Accounting Standards
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets".
The Company evaluates the recoverability of long-lived assets not held
for sale by measuring the carrying amount of assets against the estimated
discounted future cash flows associated with them. At the time such evaluations
indicate that the future discounted cash flows of certain long-lived assets are
not sufficient to recover the carrying value of such assets, therefore, the
assets are adjusted to their fair values.
F-7
NEXXNOW, INC. (f/k/a CENTALE, INC.)
NOTES TO FINANCIAL STATEMENTS
March 31, 2008 and 2007
AUDITED
In September 2006, the FASB issued Statement of Financial Accounting
Standard ("SFAS") No. 157, Fair Value Measurements. SFAS 157 defines fair value,
establishes a framework for measuring fair value, and expands disclosures about
fair value measurements. SFAS 157 applies to other accounting pronouncements
that require or permit fair value measurements, but does not require any new
fair value measurements. SFAS 157 is effective for financial statements issued
for fiscal years beginning November 2007, and interim periods within those
years.
Loss per Common Share
Earnings (loss) per common share is computed in accordance with SFAS
No. 128 "Earnings by Share" by dividing income available to common stockholders
by weighted average number of common shares outstanding for each period.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reported
period. Actual results can differ from those estimates.
Revenue Recognition
Revenue from execution of license agreements consists of a one-time
development fee and periodic maintenance fees. The revenue is earned and
recognized in conjunction with the provisions of the agreements.
New Pronouncements
In September 2006, the FASB issued Statement of Financial Accounting
Standard ("SFAS") No. 157, Fair Value Measurements. SFAS 157 defines fair value,
establishes a framework for measuring fair value, and expands disclosures about
fair value measurements. SFAS 157 applies to other accounting pronouncements
that require or permit fair value measurements, but does not require any new
fair value measurements. SFAS 157 is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those years. The Company is currently evaluating the effect of the guidance
contained in SFAS 157 and does not expect the implementation to have a material
effect on the Company's financial statements.
In December 2007, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard ("SFAS") No. 160, "Noncontrolling
Interests in Consolidated Financial Statements, an amendment of ARB No. 51".
SFAS 160 establishes accounting and reporting standards for the noncontrolling
interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160
is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. As such, the Company is required to
adopt these provisions at the beginning of the fiscal year ended March 31,
2009/2010. The Company is currently evaluating the impact of SFAS 160 on its
consolidated financial statements but does not expect it to have a material
effect.
F-8
NEXXNOW, INC. (f/k/a CENTALE, INC.)
NOTES TO FINANCIAL STATEMENTS
March 31, 2008 and 2007
AUDITED
In December 2007, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard ("SFAS") No. 141(R), "Business
Combinations". SFAS 141(R) establishes principles and requirements for how the
acquirer, recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, an any noncontrolling interest in the
acquiree, recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase, and determines what information
to disclose to enable users of the financial statements to evaluate the nature
and financial effects of the business combination. SFAS 141(R) is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008. As such, the Company is required to adopt these
provisions at the beginning of the fiscal year ended March 31, 2009/2010. The
Company is currently evaluating the impact of SFAS 141(R) on its consolidated
financial statements but does not expect it to have a material effect.
NOTE C - OTHER ASSETS
During the fiscal year ended March 31, 2006, the Company began using
Software Development and Software Technology intangible assets. The Company is
amortizing the cost of such intangible assets over their estimated useful lives
of 5 years, using the straight-line method.
Estimated annual amortization expenses for the five years succeeding
March 31, 2008 are as follows:
2009 2010 2011 2012 2013
---- ---- ---- ---- ----
$55,990 $25,990 $12,654 $0 $0
F-9
NEXXNOW, INC. (f/k/a CENTALE, INC.)
NOTES TO FINANCIAL STATEMENTS
March 31, 2008 and 2007
AUDITED
NOTE D - NOTES PAYABLE - STOCKHOLDERS
March 31, March 31,
2008 2007
-------------------------------
Note Payable - Stockholder, executed
March 28, 2006, payable upon demand,
unsecured with monthly interest only
payments was originally stated as
$25,000 and was corrected to actual
amount of $12,500. Common stock was
issued in lieu of payment of
interest, 15% annum, in December 2006.
Common stock was issued in
satisfaction of debt $ - $ 12,500
Note Payable - Stockholder, executed
March 28, 2006, payable upon demand,
unsecured with monthly interest only
payments was originally stated as
$25,000 and was corrected to actual
amount of $12,500. Common stock
was issued in lieu of payment of
interest, 15% annum, in December
2006. Common stock was issued in
satisfaction of debt. $ - $ 12,500
Note Payable - Stockholder, originally
stated as an account payable and later
reclassed as a unsecured, non-interest
bearing note payable in April 2006. $ - $ 33,479
Note Payable - Stockholder, executed
April 13, 2006, payable upon demand.
This note is a unsecured, 15%
interest annum bearing note. Common
stock was issued in satisfaction
of debt. $ - $ 50,000
Note Payable - Stockholder, originally
executed on February 1, 2006, in the
amount of $150,000, payable upon
demand with monthly interest only
payments and was a secured loan.
Common stock was issued in September
2006 for the release of debt.
Additional amounts were borrowed
in the current year. The note is not
interest bearing and unsecured. $ 150,166 $ 65,100
Note Payable - Stockholder, executed
May 29, 2007, payable upon demand.
This note is secured and bearing
interest of 5.2%. $ 180,000 $ -
Note Payable - Stockholder, executed
November 20, 2007, payable upon demand.
This note is unsecured and not
interest bearing. $ 35,000 $ -
-------------- --------------
Total Amount of Note Payable - Stockholder $ 365,166 $ 173,579
The five year maturities of debt are as follows:
2009 2010 2011 2012 2013
----- ---- ---- ---- ----
$365,166 $ 0 $ 0 $ 0 $ 0
F-10
NOTE E - LOANS PAYABLE
Loans payable consists of professional services that were converted
from accounts payable to a loan payable during the year. These loans have no
specific retainment terms, but have been converted to stock after March 31,
2008.
NOTE F - COMMON STOCK
During the twelve months ended March 31, 2008, the Company raised
capital through issuance of 53,560,703 shares of common stock.
The Company issued 30,551,416 shares of its common stock for services.
There were 5,009,287 shares issued in satisfaction of Notes Payable and
18,000,000 shares issued in exchange for Loan Fee.
Centale is entered into an agreement with Big Apple Consulting and
ended December 27, 2007. As compensation, Big Apple had the option to purchase
25,000,000 shares of Centale's common stock. The options were never exercised
and expired on December 27, 2007.
NOTE G - GOING CONCERN
The Company's financial statements have been presented on the basis
that it is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company has
reported net losses and an accumulated deficit totaling $10,269,676 for the
period from date of inception (November 12, 1998) through March 31, 2008.
The Company's continued existence is dependent upon its ability to
raise capital or to successfully market and sell its product. The Company plans
to raise working capital through equity offerings and future profitable
operations. The financial statements do not include any adjustments that might
be necessary, should the Company be unable to continue as a going concern.
NOTE H - REVERSE STOCK SPLIT
On March 4, 2008 the Company implemented a 1-for-35 reverse split of
its common stock. All quantifications involving common stock in these statements
reflect the 1-for-35 reverse split as if it happened at the beginning of the
reporting period.
F-11
NOTE I - SUBSEQUENT EVENT: REVERSE STOCK SPLIT
On June 6, 2008 the Company implemented a 1-for-4 reverse split of its
common stock. All quantifications involving common stock in these statements
reflect the 1-for-4 reverse split as if it happened at the beginning of the
reporting period.
NOTE J - RESTATEMENT
These financial statements have been restated in September 2009. The
effect of the restatement was to:
o Reflect the retroactive effect of the reverse stock splits
identified in Note H and Note I; and
o Reclassify $26,450 previously classified as "Gain on Sale of
Investments" on the Statement of Cash Flows as "Sale of Investment
in Circle Group and Pet Ecology.
F-12
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NexxNow, Inc.
By:/s/ Gary Berthold
-----------------------------------
Gary Berthold, Chief Executive Officer
In accordance with the Exchange Act, this Report has been signed below
on December 14, 2009 by the following persons, on behalf of the Registrant and
in the capacities and on the dates indicated.
/s/ Gary Berthold
----------------------------
Gary Berthold, CEO, Director
/s/ Jan Kaplan
----------------------------
Jan Kaplan, Chief Financial Officer,
Principal Accounting Officer
/s/ Sharon Berthold
----------------------------
Sharon Berthold, Director
* * * * *
F-13
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