x |
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
OF
1934
|
o |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
CALIFORNIA
|
95-2873122
|
(STATE
OF INCORPORATION)
|
(I.R.S.
EMPLOYER IDENTIFICATION NUMBER)
|
Page
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3
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18
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18
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19
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19
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19
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25
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25
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25
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25
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27
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30
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31
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32
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33
|
·
|
Open
architecture and collections technology to accommodate multiple locations
and multiple data sources without adverse impact on the
network.
|
·
|
ODBC
data collector (OmniCollector) to collect and combine data from disparate
data sources.
|
·
|
System
reliability for virtually flawless
performance.
|
·
|
Cross-brand
collection aggregation, alerting and reporting technology, not centric
to
any hardware or ACD manufacturer.
|
·
|
Targeted
and profiled real time alerts, which provides multiple levels of
alarm
conditions.
|
·
|
Combine
metrics across disparate sources for unified
viewing.
|
·
British
Telecom
·
NatWest
Bank
·
Cable
& Wireless
·
Barclays
Bank
·
ABN-AMRO
Bank
|
·
Esso/Imperial
Oil
·
American
Express
·
Citicorp
·
Anheuser
Busch
·
MicroSoft
|
·
Financial
·
Inventory
·
Sales
·
CRM
·
Business
Intelligence
|
·
Internet,
e-commerce systems
·
Supply
chain, MIS
·
Human
Resources
·
Any
other open data source
|
·
|
Data
collection architecture:
The
CenterStats engine has virtually no limit to the type or volume of
data it
collects. The strength of CenterStats is not only in what it collects
but
how it collects. Because it is not centric to a certain industry
or
market, there are no design limits on the type of data collected.
It can
therefore fit into virtually any
industry.
|
·
|
Real
time data collector/alarms:
The CenterStats real time data collector is not only powerful, but
unique
in that it collects data in intervals as frequent as needed (or is
available). Alarms data is taken directly from the source and is
not
impaired by having to move through duplicated databases. Real time
information is constantly updated with each refresh cycle. Furthermore,
users can set different types of data to refresh every second, others
every hour, day, etc., since mission critical data may be needed
more
frequently than other types of information. Different individuals
can
receive different alarms.
|
·
|
Refined
information databases:
The database created on the CenterStats server is comprised of only
information that is identified as being critical to the user. Unlike
other
systems, which replicate entire databases, CenterStats only brings
together information that is already identified as being useful.
This
results in an “intelligent” database that allows faster throughput and
more refined data mining. The
|
·
|
Expertise
in telecommunications and ACDs:
The CenterStats collectors are able to connect and extract data from
the
most popular ACD/Contact Center
systems.
|
·
|
Kaiser
Permanente
|
·
|
County
of Fairfax, Virginia
|
·
|
Wellness
Plan
|
·
|
20th
Century Fox
|
·
|
CEI
|
·
|
Petro
Canada
|
Distributor
|
FY2006
|
FY2005
|
|||||
Dacon
(British Telecom)
|
$
|
399,466
|
$
|
671,916
|
|||
America
Latina Tecnologia
|
358,524
|
0
|
|||||
Alcatel
|
82,367
|
82,940
|
|||||
Avaya
de Mexico
|
255,222
|
261,571
|
|||||
First
Point Contact/Rockwell
|
60,939
|
196,253
|
|||||
Siemens
de Mexico
|
91,714
|
159,371
|
1. |
Not
as flexible in collecting across multiple ACD
brands;
|
2. |
Lack
of sophisticated threshold alerting and key performance indicator
(KPI)
building;
|
3. |
Unable
to collect and combine metrics from other media such as e-mail, IVR,
Workforce Management
systems, CRM systems, Web service,
etc;
|
4. |
Weak
capability to create “smart” metrics as combined performance indicators;
and
|
5. |
Lack
of publishing options such as ability for metrics to be browser-viewed
and
accessible via wireless
devices.
|
Registered
Trademarks
|
Unregistered
Trademarks
|
|
Centergistic
Solutions
|
AgentView
Enterprise
|
|
CenterStats
|
AgentView
Enterprise EPM
|
|
AgentView
|
AgentView
Web
|
|
AgentLink
|
AgentView
WAP
|
|
PowerUser
|
||
Advanced
Threshold Handling
|
||
Performance
Indicator Builder
|
||
CenterStats
OmniCollector
|
• |
market
acceptance of our CenterStats product,
|
• |
the
timing, size and execution of orders and shipments,
|
• |
lengthy
and unpredictable sales cycles,
|
• |
the
timing of introduction and market acceptance of new products or product
enhancements by us or our
competitors,
|
• |
product
and price competition,
|
• |
the
relative proportions of revenues derived from license fees and services,
|
• |
changes
in our operating expenses,
|
• |
our
success in increasing our direct sales force,
|
• |
our
success in maintaining relationships with our third-party distributors
and
adding new ones, and
|
• |
fluctuations
in general economic conditions.
|
• |
financial
difficulties and bankruptcies of major providers such as Global Crossing
and Worldcom;
|
• |
competitive
concerns centered around large-scale price cutting;
|
• |
reluctance
of industry companies to place purchase orders for capital expenditures;
and
|
• |
lack
of increasing customer demand for premium and high-speed services.
|
• |
be
expensive and time consuming to defend,
|
• |
cause
us to cease making, licensing or using products that incorporate
the
challenged intellectual property,
|
• |
require
us to redesign our products, if feasible,
|
• |
divert
management’s attention and resources, and
|
• |
require
us to enter into royalty or licensing agreements in order to obtain
the
right to use necessary
technologies.
|
·
|
we
have persuasive evidence that an arrangement exists. For all sales,
we use
a binding purchase order and sales order confirmation as evidence
of an
arrangement. Sales through certain of our distributors are evidenced
by a
master agreement governing the relationship, together with binding
purchase orders on a transaction by transaction
basis;
|
·
|
the
product is delivered to the customer under the terms of the arrangement
and title passes. Passage of title generally occurs when the product
is
delivered to a common carrier, but in some cases occurs when the
customer
receives the product;
|
·
|
the
revenue is fixed and determinable. At the time of the transaction,
we
assess whether the fee associated with our revenue transactions is
fixed
and determinable based on the payment terms associated with the
transaction. If a significant portion of a fee is due after our normal
payment terms, which are 30 to 75 days from invoice date, then we
account
for the fee as not being fixed and determinable. In these cases,
we
recognize revenue as the fees become due;
and
|
·
|
collection
of the resulting receivable is reasonably assured. We assess collection
based on a number of factors, including past transaction history
with the
customer and the credit-worthiness of the customer. We do not request
collateral from our customers. If we determine that collection of
a fee is
not reasonably assured, then we defer the fee and recognize revenue
at the
time collection becomes reasonably assured, which generally is upon
receipt of cash.
|
Year
Ended June 30,
(In
thousands)
|
|||||||||||||
2006
|
%
Of
Revenue
|
2005
|
%
Of
Revenue
|
||||||||||
Centergistic
Solutions
|
$
|
1,629
|
51.4
|
%
|
$
|
2,019
|
59.4
|
%
|
|||||
Mexico
and Latin America
|
$
|
1,541
|
48.6
|
%
|
$
|
1,381
|
40.6
|
%
|
|||||
Total
|
$
|
3,170
|
100.0
|
%
|
$
|
3,400
|
100.0
|
%
|
(A) |
PREVIOUS
INDEPENDENT ACCOUNTANTS.
|
|
(i)
|
On
October 20, 2006, the Board of Directors approved the dismissal
of Haskell
& White LLP as its independent registered public accounting firm
effective immediately. During the two most recent fiscal years
and the
subsequent interim period through October 20,2006, there were
no
disagreements between us and Haskell & White LLP, whether resolved or
not resolved, on any matter of accounting principles or practices,
financial statements disclosures or auditing scope and procedures,
which
would cause them to make reference to the subject matter of a
disagreement
in connection with their report. On October 20, 2006 the Company
provided
Haskell & White LLP with its disclosures in this Form 8-K and
requested in writing that Haskell & White LLP furnish the Company with
a letter addressed to the Securities and Exchange Commission
stating
whether or not they agree with such disclosures. Such letter
is included
as an Exhibit of this filing.
|
|
(ii)
|
The
report of Haskell & White LLP, on the financial statements for the
fiscal year ended June 30, 2005, contained no adverse opinion
or
disclaimer of opinion and was not qualified or modified as to
audit scope
or accounting principle.
|
|
(iii)
|
In
connection with its audit for the fiscal year ended June 30,
2005 and
through October 20, 2006, there have been no disagreements with
Haskell
& White LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure,
which
disagreements, if not resolved to the satisfaction of Haskell
& White
LLP, would have caused them to make reference thereto in their
report on
the financial statements for such year.
|
|
(iv)
|
During
the fiscal year ended June 30, 2005, and through October 20,
2006, there
have been no reportable events (as defined in Regulation S-K,
Item
304(a)(1)(v)).
|
(B) |
NEW
INDEPENDENT ACCOUNTANTS.
|
|
(i)
|
the
application of accounting principles to a specific transaction,
either
completed or proposed; nor the type of audit opinion that might
be
rendered on the Registrant’s financial statements; nor has any written
report or oral advice been provided to the Registrant by Moore
&
Associates.
|
|
(ii)
|
any
matter that was either the subject of a disagreement, as that
term is
defined in Item 304(a) (1) (iv) of Regulation S-K and the related
instructions to Item 304 of Regulation S-K, or a reportable event,
as that
term is defined in Item 304(a) (1) (iv) of Regulation S-K. The
Registrant
has engaged Moore & Associates as its new independent accountants as
of October 20, 2006.
|
Name
|
Age
|
Office
|
||
Ricardo
G. Brutocao
|
60
|
Chief
Executive Officer and Director
|
||
David
M. Cunningham
|
46
|
President,
Chief Operating Officer, Chief Financial Officer, Secretary and
Director
|
||
Jerome
Fahey
|
78
|
Chairman
of the Board and Director
|
||
Jay
Kurtz
|
69
|
Director
|
||
William
J. Battison
|
56
|
Director
|
Annual
Compensation
|
Long
Term Compensation
Awards
|
||||||||||||
Name
and Principal
Position
|
Fiscal
Year
|
Salary
|
Bonus
|
Securities
Underlying Options
|
|||||||||
Ricardo
G. Brutocao,
|
2006
|
$
|
113,243
|
—
|
—
|
||||||||
Chief
Executive
Officer
|
2005
|
$
|
205,575
|
—
|
100,000
|
||||||||
2004
|
$
|
185,625
|
—
|
96,000
|
|||||||||
David
M. Cunningham, President and
|
2006
|
$
|
99,479
|
—
|
—
|
||||||||
Chief
Operating Officer and Chief Financial
Officer
|
2005
|
$
|
106,500
|
—
|
100,000
|
||||||||
2004
|
$
|
89,100
|
—
|
80,000
|
Name
|
Number
of Securities Underlying Options Granted
(#)
(1)
|
Percentage
of
Total
Options Granted to Employees in
Fiscal
Year (%)
|
Exercise
Price
($
per share)
|
Market
Price
($
per share)
|
Expiration
Date
|
|||||||||||
Ricardo
G. Brutocao
|
—
|
—
|
—
|
—
|
—
|
|||||||||||
David
M. Cunningham
|
—
|
—
|
—
|
—
|
—
|
|||||||||||
(1) |
Both
Mr. Brutocao’s and Mr. Cunningham’s stock options become 50% vested on the
2-year anniversary of the option grant, and another 25% vested on
the
3rd
and 4th
year anniversary of the option
grant.
|
Name
and Address of Beneficial Owner
|
Number
of Shares of
Common
Stock
Beneficially Owned
(1)
|
Percentage
of Shares of Common
Stock
Outstanding
(2)
|
|||||
Ricardo
G. Brutocao (Chief Executive Officer and director)
2045
W. Orangewood Avenue
Orange,
California 92868
|
5,881,227
(3)(4
|
)
|
52.4
|
%
|
|||
David
M. Cunningham (President, Chief Operating Officer, Chief Financial
Officer, Secretary and director)
2045
W. Orangewood Avenue
Orange,
California 92868
|
2,596,499
(4)(5
|
)
|
23.5
|
%
|
|||
Jerome
Fahey (director)
920
Spring Meadow Dr.
West
Covina, California 91791
|
259,152
(6
|
)
|
2.4
|
%
|
|||
Jay
Kurtz (director)
2616
Queda Way
Laguna
Beach, California 92652
|
112,000
(7
|
)
|
1.0
|
%
|
|||
William
J. Battison (director)
334
Meadow Grove
La
Cãnada Flintridge, CA 91011
|
73,600(8
|
)
|
0.7
|
%
|
|||
Michael
Atlas
13036
Lake Wildwood Dr.
Penn
Valley, California 95946
|
1,958,720(9
|
)
|
18.3
|
%
|
|||
Venture
Communications Corporation
5362
Runningbrook Road
Las
Vegas, Nevada 89120
|
1,894,776
|
17.7
|
%
|
||||
MKB
Associates, Inc.
25412
Wagon Wheel Circle
Laguna
Hills, California 92653
|
707,416
|
6.6
|
%
|
||||
All
executive officers and directors as
a group (5 persons)
|
11,867,512(4)(10
|
)
|
58.1
|
%
|
|||
(1) |
Beneficial
ownership is determined in accordance with the rules of the Securities
and
Exchange Commission and generally includes voting or investment power
with
respect to securities. Shares of common stock subject to options,
warrants
and convertible notes currently exercisable or convertible, or exercisable
or convertible within 60 days after June 30, 2006, are deemed beneficially
owned and outstanding for computing the percentage of the person
holding
such securities, but are not considered outstanding for computing
the
percentage of any other person.
|
(2) |
Percentage
of ownership is based on 10,724,312 shares of common stock outstanding
on
June 30, 2006.
|
(3) |
Includes
508,000 shares subject to options currently exercisable or convertible
within 60 days after June 30, 2006. Includes 55,555 shares issuable
upon
exercise of warrants for guarantee of line of credit. Includes 707,416
shares owned by MKB Associates, Inc., a corporation owned by Mr.
Brutocao’s children and of which Mr. Brutocao’s wife is president. Mr.
Brutocao disclaims beneficial ownership of such securities held by
MKB
Associates, Inc. Includes 1,894,776 shares owned by Venture Communications
Corporation of which Mr. Brutocao is a director. Mr. Brutocao disclaims
beneficial ownership of such securities held by Venture Communications
Corporation, except to the extent of his pecuniary interest therein.
Does
not include 198,104 shares held by the Centergistic ESOT for the
benefit
of Mr. Brutocao, since
these shares are already included in the total number of shares held
in
the Centergistic ESOT and deemed to be beneficially owned by him
by virtue
of his shared voting power as described in footnote (4) to this
table.
|
(4) |
Includes
2,031,792 shares held by the Centergistic ESOT, of which Mr. Brutocao
and
Mr. Cunningham are co-trustees and have shared voting power as to
certain
matters, including election of the Centergistic Board of Directors.
Messrs. Brutocao and Cunningham disclaim beneficial ownership of
the
shares held by the Centergistic ESOT except to the extent of their
respective pecuniary interests
therein.
|
(5) |
Includes
312,000 shares subject to options currently exercisable or convertible
within 60 days after June 30, 2006. Includes 55,555 shares issuable
upon
exercise of warrants for guarantee of line of credit. Does not include
72,936 shares held by the Centergistic ESOT for the benefit of Mr.
Cunningham, since these shares are already included in the total
number of
shares held in the Centergistic ESOT and deemed to be beneficially
owned
by him by virtue of his shared voting power as described in footnote
(4)
to this table.
|
(6) |
Includes
137,600 shares subject to options currently exercisable or exercisable
within 60 days after June 30, 2006.
|
(7) |
Includes
112,000 shares subject to options currently exercisable or exercisable
within 60 days after June 30, 2006.
|
(8) |
Includes
73,600 shares subject to options currently exercisable or exercisable
within 60 days after June 30, 2006.
|
(9) |
Includes
1,768,176 shares held by the Atlas Family Trust. Also includes 181,072
shares held by the Centergistic ESOT for the benefit of Mr. Atlas
and
9,472 shares held by the Centergistic ESOT for the benefit of Mr.
Atlas’
wife.
|
(10) |
Includes
an aggregate of 1,143,200 shares subject to options, warrants and
convertible notes held by all executive officers and directors that
are
currently exercisable or convertible or exercisable or convertible
within
60 days after June 30, 2006. Includes 111,110 shares issuable upon
exercise of warrants for guarantee of line of credit. Includes the
707,416
shares owned by MKB Associates, Inc., as to which Mr. Brutocao disclaims
beneficial ownership. Includes the 1,894,776 shares owned by Venture
Communications Corporation, as to which Mr. Brutocao disclaims beneficial
ownership, except to the extent of his pecuniary interest therein.
Does
not include an aggregate of 271,040 shares held by the Centergistic
ESOT
for the benefit of our executive officers since these shares are
already
included in the total number of shares held in the Centergistic ESOT
and
deemed to be beneficially owned by Messrs. Brutocao and Cunningham
by
virtue of their shared voting power as described in footnote (4)
to this
table. Messrs. Brutocao and Cunningham disclaim beneficial ownership
of
the shares held by the Centergistic ESOT except to the extent of
their
respective pecuniary interests
therein.
|
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
|
Weighted
average exercise price of outstanding options, warrants and
rights
|
Number
of securities remaining available for future issuance
|
|||||||
Equity
compensation plans approved by security holders
|
2,436,200
|
$
|
0.51
|
1,163,800
|
||||||
Equity
compensation plans not approved by security holders
|
—
|
—
|
—
|
|||||||
Total
|
2,436,200
|
$
|
0.51
|
1,163,800
|
(a)
|
Exhibit
Index:
|
EXHIBIT
NO.
|
TITLE
|
|
3.1
|
Articles
of Incorporation of the Registrant.*
|
|
3.2
|
Certificate
of Amendment of Articles of Incorporation of the
Registrant.*
|
|
3.3
|
Certificate
of Amendment of Articles of Incorporation of the
Registrant.*
|
|
3.4
|
Certificate
of Amendment of Articles of Incorporation of the
Registrant.*
|
|
3.5
|
Certificate
of Amendment of Articles of Incorporation of the
Registrant.*
|
|
3.6
|
Certificate
of Amendment of Articles of Incorporation of the
Registrant.*
|
|
3.7
|
Certificate
of Amendment of Articles of Incorporation of the
Registrant.*
|
|
3.8
|
Certificate
of Amendment of Articles of Incorporation of the
Registrant.*
|
|
3.9
|
Certificate
of Amendment of Articles of Incorporation of the
Registrant.*
|
|
3.9.1
|
Certificate
of Amendment of Articles of Incorporation of the
Registrant.*
|
|
3.10
|
Bylaws
of the Registrant*
|
|
10.1
|
Lease
Agreement with Park Orangewood LLC dated June 17,
2003.*
|
|
10.2
|
Consulting
Agreement with Hanover Capital Corp dated July 1,
2003.*
|
|
10.3
|
Consulting
Agreement with Hanover Capital Corp. dated July 1,
2003.*
|
|
10.4
|
Consulting
Agreement with The Bosphorous Group, Inc. dated August 1,
2002.*
|
|
10.5
|
Consulting
Agreement with The Bosphorous Group, Inc. dated October 1,
2003.*
|
|
10.6
|
Common
Stock Purchase Warrant with The Bosphorous Group dated September
1,
2003.*
|
|
10.7
|
Common
Stock Purchase Warrant with Venture Communications Corporation dated
June
26, 1998.*
|
|
10.8
|
Common
Stock Purchase Warrant with Lenawee Trust dated June 26,
1998.*
|
|
10.9
|
Common
Stock Purchase Warrant with Venture Communications Corporation dated
September 27, 2000.*
|
|
10.10
|
1996
Stock Option Plan and First Amendment thereto.*
|
|
10.11
|
1998
Non-Employee Directors Stock Option Plan.*
|
|
10.12
|
Executive
Employment Agreement with Ricardo G. Brutocao dated May 1,
1988.*
|
|
10.13
|
Form
of Convertible Subordinated Promissory Note of the Registrant dated
September 1, 2003 issued to certain lenders to evidence loans in
the
aggregate principal amount of $490,000.*
|
|
10.14
|
Form
of Common Stock Purchase Warrant of the Registrant dated September
1, 2003
issued to holders of the Registrant’s Convertible Subordinated Promissory
Notes to purchase an aggregate of 74,016 shares of the Registrant’s common
stock.*
|
|
10.15
|
Secured
Promissory Note of the Registrant dated July 1, 2003 payable to Al
Wild in
the principal amount of $44,220.28.*
|
|
10.16
|
Secured
Promissory Note of the Registrant dated December 31, 2002 payable
to
Ricardo G. Brutocao in the principal amount of
$16,875.*
|
|
10.17
|
Secured
Promissory Note of the Registrant dated December 31, 2002 payable
to David
M. Cunningham in the principal amount of $8,100.*
|
|
10.18†
|
Distribution
Agreement with Dacon Electronics Limited dated August 1,
2000.*
|
|
10.19
|
Judgment
Purchase Agreement with Venture Communications Corporation dated
September
27, 2000.*
|
|
10.20
|
Agreement
between Lynch, Young & Co. and Los Angeles Department of Water and
Power dated September 1, 2002.*
|
|
10.21
|
Entry
into Material Definitive Agreement**
|
|
21
|
Subsidiaries
of the Registrant.*
|
|
Certification
of the President and Chief Executive Officer
|
||
Certification
of the Chief Financial Officer
|
||
Certificate
of the President and Chief Executive Officer pursuant to 18 U.S.C
§1350
|
||
Certificate
of the Chief Financial Officer pursuant to 18 U.S.C
§1350
|
||
* |
Incorporated
by reference to exhibits of the same number filed with our Registration
Statement on Form SB-2 (File No. 333-111378), which became effective
on
April 28, 2004.
|
** |
Incorporated
by reference to exhibit file as Form 8-K on September 7,
2005.
|
† |
We
obtained confidential treatment from the Securities and Exchange
Commission with respect to certain portions of this exhibit. A complete
version of this exhibit has been filed separately with the
Commission.
|
Page
|
|
F-2
|
|
Consolidated
Financial Statements
|
|
F-4
|
|
F-6
|
|
F-7
|
|
F-8
|
|
F-10
|
/s/
HASKELL & WHITE LLP
|
ASSETS
|
||||
Current
|
||||
Cash
and cash equivalents
|
$
|
58,992
|
||
Trade
receivables, less allowance for doubtful
|
||||
accounts
of $59,250
|
772,750
|
|||
Inventories
|
120,245
|
|||
Prepaid
expenses
|
33,703
|
|||
Miscellaneous
receivables
|
37,329
|
|||
Total
current assets
|
1,023,019
|
|||
Property,
equipment, and leasehold
|
||||
improvements,
net of accumulated depreciation of $731,396
|
70,234
|
|||
Capitalized
software development costs,
|
||||
net
of accumulated amortization of $1,823,322
|
30,265
|
|||
Other
assets
|
||||
Deferred
offering costs
|
540,754
|
|||
Other
|
21,035
|
|||
Total
other assets
|
561,789
|
|||
$
|
1,685,307
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
||||
Current
liabilities
|
||||
Notes
payable - related parties
|
$
|
47,997
|
||
Line
of credit - related party
|
396,000
|
|||
Accounts
payable
|
459,539
|
|||
Accrued
expenses
|
220,812
|
|||
Deferred
income
|
306,301
|
|||
Total
liabilities, all current
|
1,430,649
|
|||
Commitments
and contingencies
|
||||
(Notes
4 through 7)
|
||||
Stockholders’
equity (deficit)
|
||||
Common
stock, no par value, 80,000,000 shares authorized;
|
||||
10,724,312
shares issued and outstanding
|
3,058,510
|
|||
Additional
paid-in capital
|
296,462
|
|||
Accumulated
deficit
|
(3,068,354
|
)
|
||
Unearned
stock compensation
|
(6,202
|
)
|
||
Common
stock to be redeemed
|
(25,758
|
)
|
||
Total
stockholders’ equity (deficit)
|
254,658
|
|||
Total
liabilities and stockholders’
|
||||
equity
(deficit)
|
$
|
1,685,307
|
||
Years
Ended June 30,
|
|||||||
2006
|
2005
|
||||||
Revenues:
|
|||||||
Software
and service revenues
|
$
|
2,749,083
|
$
|
3,018,436
|
|||
Professional
services
|
80,199
|
16,560
|
|||||
Hardware
sales
|
340,711
|
365,366
|
|||||
Total
revenues
|
3,169,993
|
3,400,362
|
|||||
Cost
of revenues:
|
|||||||
Software
and service costs
|
584,852
|
674,708
|
|||||
Professional
services
|
20,011
|
4,780
|
|||||
Hardware
costs
|
275,896
|
348,858
|
|||||
Total
cost of revenues
|
880,759
|
1,028,346
|
|||||
Gross
profit
|
2,289,234
|
2,372,016
|
|||||
Operating
expenses:
|
|||||||
Selling
and marketing
|
578,133
|
737,764
|
|||||
Research
and development
|
287,947
|
397,815
|
|||||
General
and administrative
|
1,685,010
|
1,862,192
|
|||||
Total
operating expenses
|
2,551,090
|
2,997,771
|
|||||
Operating
loss
|
(261,856
|
)
|
(625,755
|
)
|
|||
Other
expense
|
(4,843
|
)
|
(5,130
|
)
|
|||
Interest
expense
|
(44,290
|
)
|
(27,982
|
)
|
|||
Loss
before income taxes
|
(310,989
|
)
|
(658,867
|
)
|
|||
Income
tax provision
|
(3,200
|
)
|
(3,200
|
)
|
|||
Net
loss
|
(314,189
|
)
|
(662,067
|
)
|
|||
Other
comprehensive income, net of tax
|
—
|
—
|
|||||
Comprehensive
loss
|
$
|
(314,189
|
)
|
$
|
(662,067
|
)
|
|
Basis
and diluted net loss per share
|
$
|
(0.03
|
)
|
$
|
(0.06
|
)
|
|
Weighted-average
number of
|
|||||||
common
shares outstanding
|
10,710,065
|
10,555,389
|
|||||
|
||||||||||||||||||||||||||||
|
|
|
Total
|
|||||||||||||||||||||||||
Common
Stock
|
Common
Stock
|
Common
Stock
to be
|
Additional
Paid-In
|
Unearned
Stock
|
Accumulated
|
Notes
|
Stockholders'
Equity
|
|||||||||||||||||||||
Shares
|
Amount
|
Issuable
|
Redeemed
|
Capital
|
Compensation
|
Deficit
|
Receivable
|
(Deficit)
|
||||||||||||||||||||
Balance,
June 30, 2004
|
9,142,864
|
2,432,196
|
$
|
634,375
|
$
|
(20,635
|
)
|
284,892
|
$
|
(21,106
|
)
|
$
|
(2,092,098
|
)
|
$
|
(2,840
|
)
|
$
|
1,214,784
|
|||||||||
Warrants
issued in coonection with
|
—
|
—
|
—
|
|||||||||||||||||||||||||
related
party
line of credit
|
6,570
|
6,570
|
||||||||||||||||||||||||||
Stock
compensation
|
—
|
—
|
—
|
—
|
—
|
7,452
|
—
|
—
|
7,452
|
|||||||||||||||||||
Note
receivable reduction
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
2,840
|
2,840
|
|||||||||||||||||||
Stock
redemption payable
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||
Redemption
of
shares
|
(26,184
|
)
|
(8,061
|
)
|
—
|
8,061
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||
Stock
buyback
payable
|
—
|
—
|
—
|
(13,184
|
)
|
—
|
—
|
—
|
(13,184
|
)
|
||||||||||||||||||
Common
stock
issuable (Note 7)
|
1,582,632
|
634,375
|
(634,375
|
)
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Net
loss for
the year
|
—
|
—
|
—
|
—
|
—
|
—
|
(662,067
|
)
|
—
|
(662,067
|
)
|
|||||||||||||||||
Balance,
June 30, 2005
|
10,699,312
|
3,058,510
|
—
|
(25,758
|
)
|
291,462
|
(13,654
|
)
|
(2,754,165
|
)
|
—
|
556,395
|
||||||||||||||||
Stock
compensation
|
—
|
—
|
—
|
—
|
—
|
7,452
|
—
|
—
|
7,452
|
|||||||||||||||||||
Stock
issued
|
25,000
|
—
|
—
|
5,000
|
—
|
—
|
—
|
5,000
|
||||||||||||||||||||
Stock
buy-back payable
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||||||
Net
loss for
the year
|
—
|
—
|
—
|
—
|
—
|
—
|
(314,189
|
)
|
—
|
(314,189
|
)
|
|||||||||||||||||
Balance,
June 30, 2006
|
10,724,312
|
$
|
3,058,510
|
$
|
—
|
$
|
(25,758
|
)
|
$
|
296,462
|
$
|
(6,202
|
)
|
$
|
(3,068,354
|
)
|
$
|
—
|
$
|
254,658
|
||||||||
Years
Ended June 30,
|
|||||||
2006
|
2005
|
||||||
Cash
flows from operating activities
|
|||||||
Net
loss
|
$
|
(314,189
|
)
|
$
|
(662,067
|
)
|
|
Adjustments
to reconcile net loss to
|
|||||||
net
cash (used) provided by operating activities:
|
|||||||
Depreciation
and amortization
|
144,034
|
177,225
|
|||||
Provision
for doubtful accounts
|
28,750
|
(29,700
|
)
|
||||
Stock
compensation
|
7,452
|
7,452
|
|||||
Non-cash
interest expense
|
—
|
6,570
|
|||||
Increase
(decrease) from changes
|
|||||||
in
assets and liabilities:
|
|||||||
Trade
receivables
|
(242,585
|
)
|
134,904
|
||||
Inventories
|
34,891
|
23,491
|
|||||
Prepaid
expenses
|
29,975
|
12,840
|
|||||
Miscellaneous
receivables
|
(4,579
|
)
|
(8,591
|
)
|
|||
Deposits
|
1,655
|
—
|
|||||
Accounts
payable
|
(14,138
|
)
|
59,839
|
||||
Accrued
expenses
|
91,610
|
(19,681
|
)
|
||||
Deferred
income
|
124,684
|
24,235
|
|||||
Net
cash (used) provided by operating activities
|
(112,440
|
)
|
(273,483
|
)
|
|||
Cash
flows from investing activities
|
|||||||
Proceeds
from sale of securities
|
—
|
—
|
|||||
Additions
to capitalized software development costs
|
—
|
—
|
|||||
Purchase
of equipment
|
(7,384
|
)
|
(23,193
|
)
|
|||
Net
cash used by investing activities
|
(7,384
|
)
|
(23,193
|
)
|
|||
Years
Ended June 30,
|
|||||||
2006
|
2005
|
||||||
Cash
flows from financing activities
|
|||||||
Deferred
offering costs
|
13,580
|
(86,463
|
)
|
||||
Stock
issuance
|
5,000
|
||||||
Borrowings
on short-term debt
|
79,750
|
319,000
|
|||||
Repurchase
of common stock
|
—
|
(8,061
|
)
|
||||
Payments
received on note receivable
|
—
|
2,840
|
|||||
Net
cash provided by financing activities
|
98,330
|
227,316
|
|||||
Net
(decrease) increase in cash and cash equivalents
|
(21,494
|
)
|
(69,360
|
)
|
|||
Cash
and cash equivalents, beginning
of period
|
80,486
|
149,846
|
|||||
Cash
and cash equivalents, end
of period
|
$
|
58,992
|
$
|
80,486
|
|||
Supplemental
Disclosures of Cash Flow
|
|||||||
Information:
|
|||||||
Cash
payments for:
|
|||||||
Interest
|
$
|
42,490
|
$
|
28,187
|
|||
Income
tax payments
|
$
|
3,200
|
$
|
3,997
|
|||
1.
|
Nature
of Business
|
2.
|
Summary
of Significant Accounting
Policies
|
2. |
Summary
of Significant Accounting Policies
(continued)
|
Centergistic
Solutions
|
$
|
4,099,795
|
||
Centergistic
Solutions - Mexico
|
627,934
|
|||
4,727,729
|
||||
Eliminations
|
(3,042,422
|
)
|
||
Total
consolidated assets
|
$
|
1,685,307
|
Year
Ended
|
Year
Ended
|
||||||
June
30, 2006
|
June
30, 2005
|
||||||
Centergistic
Solutions
|
|||||||
Revenues
|
$
|
1,629,037
|
$
|
2,019,384
|
|||
Gross
profit
|
$
|
1,333,130
|
$
|
1,662,200
|
|||
Net
income (loss)
|
$
|
(295,843
|
)
|
$
|
(712,539
|
)
|
|
Centergistic
Solutions - Mexico
|
|||||||
Revenues
|
$
|
1,540,956
|
$
|
1,380,978
|
|||
Gross
profit
|
$
|
956,104
|
$
|
709,816
|
|||
Net
income (loss)
|
$
|
(18,346
|
)
|
$
|
50,472
|
2. |
Summary
of Significant Accounting Policies
(continued)
|
2. |
Summary
of Significant Accounting Policies
(continued)
|
Office
and computer equipment
|
3
-
7 years
|
Trade
show equipment
|
5
-
10 years
|
2. |
Summary
of Significant Accounting Policies
(continued)
|
Date
Technological
|
|||||||
Feasibility
|
Estimated
|
||||||
Established
|
Life
|
||||||
CenterStats
|
December
2001
|
5
years
|
|||||
AgentView
|
June
1999
|
5
years
|
June
30, 2006
|
||||
CenterStats
|
$
|
401,498
|
||
AgentView
(fully amortized)
|
307,476
|
|||
Other
fully amortized products
|
1,144,177
|
|||
1,853,151
|
||||
Accumulated
amortization
|
(1,822,886
|
)
|
||
$
|
30,265
|
2. |
Summary
of Significant Accounting Policies
(continued)
|
2. |
Summary
of Significant Accounting Policies
(continued)
|
Years
Ended June 30,
|
|||||||
2006
|
2005
|
||||||
Net
loss, as reported
|
$
|
(314,189
|
)
|
$
|
(662,067
|
)
|
|
Add:
Stock compensation expense recorded in accordance with APB Opinion
No.
25
|
7,452
|
7,452
|
|||||
Deduct:
Total stock-based employee compensation expense determined under
fair
value based method for all stock options, net of related tax
effects
|
(18,052
|
)
|
(23,644
|
)
|
|||
Pro
forma net loss
|
$
|
(324,789
|
)
|
$
|
(678,259
|
)
|
2.
|
Summary
of Significant Accounting Policies
(continued)
|
§
|
Software
license fees for site licenses and master license agreements are
recognized as revenue upon delivery of the software, and when remaining
obligations are not significant. The Company’s software licensing
agreement provides the customer with a 90-day warranty and return
provision, including a limited time to test the software. If the
customer
can prove that the software is not functioning, the Company has the
opportunity to remedy the problem and, if not resolved, the customer
may
return the software. The Company considers the need for a reserve
for
warranty and returns on a quarterly basis; however, such occurrences
have
historically not been significant.
|
§
|
Advance
contract payments for software services, consisting primarily of
software
maintenance and support, are recorded as deferred income until the
services are provided. After the expiration of the software license
warranty period, the Company commences recognition of the contract
payments ratably over the term of the maintenance period. All subsequent
software maintenance and support is billed separately and recognized
ratably over the life of the maintenance period.
|
2.
|
Summary
of Significant Accounting Policies
(continued)
|
§
|
Revenues
from software sold to distributors are recognized upon delivery since
title passes upon delivery. The distributor is subject to a restocking
fee
of 10%-25% if an order is returned; however, historically, such returns
have been insignificant. Special orders are
non-cancelable.
|
§
|
Software
and service revenues include services related to maintenance, time
and
materials contracts, installation and training. Such revenues are
recognized as the services are
rendered.
|
§
|
Revenues
from the sale of computer and display hardware are recognized upon
shipment, which is generally concurrent with the passage of
title.
|
§
|
Professional
services revenues are derived from the services provided by the Company’s
consulting business. Such revenues are recognized as the services
are
rendered.
|
3. |
Income
Taxes
|
Deferred
tax liabilities:
|
||||
Capitalized
software development costs
|
$
|
(45,800
|
)
|
|
Deferred
tax assets:
|
||||
Net
operating loss carryforwards
|
763,000
|
|||
Accrued
expenses
|
10,500
|
|||
Allowance
for doubtful accounts
|
8,800
|
|||
Stock-based
compensation
|
45,800
|
|||
Depreciation
and amortization
|
2,000
|
|||
830,100
|
||||
Less
valuation allowance
|
(784,300
|
)
|
||
Net
deferred tax assets (liabilities)
|
$
|
—
|
2006
|
2005
|
||||||
Current:
|
|||||||
Federal
|
$
|
—
|
$
|
—
|
|||
State
|
3,200
|
3,200
|
|||||
3,200
|
3,200
|
||||||
Deferred:
|
|||||||
Federal
|
$
|
—
|
$
|
—
|
|||
State
|
—
|
—
|
|||||
|
—
|
—
|
|||||
$
|
3,200
|
$
|
3,200
|
2006
|
2005
|
||||||
Computed
expected statutory expense (benefit)
|
$
|
(95,600
|
)
|
$
|
(225,100
|
)
|
|
Increase
in rate resulting from:
|
|||||||
State
income taxes, net of federal benefit
|
3,200
|
2,100
|
|||||
Change
in valuation allowance
|
91,500
|
172,600
|
|||||
Other
|
4,100
|
53,600
|
|||||
$
|
3,200
|
$
|
3,200
|
3.
|
Income
Taxes (continued)
|
4.
|
Related
Party Borrowings
|
5. |
Commitments
and Contingencies
|
Year
Ending June 30,
|
||||
2007
|
$
|
67,038
|
||
2008
|
13,368
|
|||
2009
|
8,514
|
|||
2010
|
7,140
|
|||
2011
|
3,018
|
|||
$
|
99,078
|
5. |
Commitments
and Contingencies
(continued)
|
6. |
Stockholders’
Equity
|
2006
|
2005
|
||||||||||||
Fixed
Options
|
Shares
|
Weighted
Average Exercise Price
|
Shares
|
Weighted
Average Exercise Price
|
|||||||||
Outstanding
at beginning of
period
|
2,623,400
|
$
|
0.53
|
2,418,800
|
$
|
0.56
|
|||||||
Granted
|
83,200
|
0.36
|
537,200
|
0.42
|
|||||||||
Expired
|
(270,400
|
)
|
(0.60
|
)
|
(332,600
|
)
|
(0.42
|
)
|
|||||
Outstanding
at end of period
|
2,436,200
|
$
|
0.51
|
2,623,400
|
$
|
0.53
|
|||||||
Exercisable
at end of period
|
1,649,500
|
$
|
0.57
|
1,638,600
|
$
|
0.61
|
|||||||
Weighted
average fair value of options granted during the period
|
$
|
0.36
|
$
|
0.42
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||
Fixed
Options
|
Number
Outstanding
|
Weighted
Average Remaining Contractual
Life
|
Weighted
Average
Exercise
Price
|
Number
Exercisable
|
Weighted
Average Exercise
Price
|
|||||||||||
$0.30
to $0.47
|
1,487,400
|
7.10
|
$
|
0.38
|
700,700
|
$
|
0.37
|
|||||||||
$0.52
to $0.79
|
948,800
|
2.15
|
0.71
|
948,800
|
0.71
|
|||||||||||
2,436,200
|
$
|
0.51
|
1,649,500
|
$
|
0.57
|
6. |
Stockholders’
Equity (continued)
|
7.
|
Private
Placement of Debt
|
7. |
Private
Placement of Debt
(continued)
|