UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 13, 2003
NETWORK INSTALLATION CORP.
------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 000-25499 88-0390360
------------------ ---------- --------------
(State or other
jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification No.)
18 Technology Dr., Suite 140A
Irvine, CA 92618
Facsimile: (949)753-7499
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949)753-7551
ITEM 1. Changes in Control of Registrant.
The Registrant has previously filed its Current Report on Form 8-K,
dated June 13, 2003 (pertaining to the acquisition of 100% of the issued and
outstanding shares of the common stock of Network Installation Corporation in
exchange for $50,000 cash and 7,382,000 shares of the registrant's common stock)
without certain financial information required by Item 7 of such Form 8-K.
The Registrant hereby amends Item 5 and 7, subparagraph (a) of the Current
Report on Form 8-K to read as follows:
ITEM 2. Acquisition of Assets.
Not applicable.
ITEM 3. Bankruptcy or Receivership.
Not applicable.
ITEM 4. Changes in Registrant's Certifying Accountant.
Not applicable.
ITEM 5. Other Events.
Not applicable.
ITEM 6. Resignations of Registrant's Directors.
Not applicable.
ITEM 7. Financial Statements, Pro Forma Financial Information of Combined
Entity and Exhibits
(a) Balance Sheets as of December 31, 2002 and as of December
31, 2001
Statements of Operations for the years ended December
31, 2002 and 2001
Statement of Stockholders' deficit for the year ended
December 31, 2002 and 2001
Statements of Cash Flows for the years ended December 31,
2002 and 2001
Notes to Financial Statements for 2002 and 2001
(b) Unaudited Balance Sheets as of March 31, 2003 and as of
March 31, 2002
Unaudited Statements of Operations for the periods ended
March 31, 2003 and 2002
Unaudited Statement of Stockholders' deficit for the periods
ended March 31, 2003 and 2002
Unaudited Statements of Cash Flows for the periods ended
March 31, 2003 and 2002
Notes to Unaudited Financial Statements for the periods ended
March 31, 2003 and 2002
(c) Pro-forma
Unaudited Pro-forma combined statements derived from
the audited financial statements of Network Installation
Corporation for the year ended December 31, 2002 and the
audited financial statements of Flexxtech Corporation for
the year ended December 31, 2002
(d) Pro-forma
Unaudited Pro-forma combined statements derived from
the unaudited financial statements of Network Installation
Corporation for the period ended March 31, 2003 and the
audited financial statements of Flexxtech Corporation for
the period ended March 31, 2003
(e) Report of Kabani & Company, Inc., Independent
Certified Public Accountants for the years ended December
31, 2002 and 2001
(a) FINANCIAL STATEMENTS AT AND FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001:
NETWORK INSTALLATION CORPORATION
BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
ASSETS
----------
2002 2001
---------- ----------
CURRENT ASSETS:
Cash & cash equivalents. . . . . . . . . . . . . . . . $ 17,319 $ 13,577
Accounts receivable. . . . . . . . . . . . . . . . . . - 50,219
---------- ----------
Total current assets . . . . . . . . . . . . . . . . 17,319 63,796
PROPERTY AND EQUIPMENT, NET. . . . . . . . . . . . . . . 10,262 7,917
RECEIVABLE FROM RELATED PARTY. . . . . . . . . . . . . . 73,206 73,206
---------- ----------
$ 100,787 $ 144,919
========== ==========
LIABILITIES AND STOCKHOLDER'S DEFICIT
-----------------------------------------------
CURRENT LIABILITIES:
Accounts payable & accrued expenses. . . . . . . . . . $ 430,462 $ 330,646
Note payable . . . . . . . . . . . . . . . . . . . . . 50,000 50,000
---------- ----------
Total current liabilities. . . . . . . . . . . . . . 480,462 380,646
COMMITMENT & CONTINGENCY
STOCKHOLDER'S DEFICIT
Common stock, no par value; Authorized shares 500,000,
Issued and outstanding shares 10,000. . . . . . . . . 10,000 10,000
Accumulated deficit. . . . . . . . . . . . . . . . . . (389,675) (245,727)
---------- ----------
Total stockholder's deficit. . . . . . . . . . . . . (379,675) (235,727)
---------- ----------
$ 100,787 $ 144,919
========== ==========
The accompanying notes are an integral part of these financial statements.
NETWORK INSTALLATION CORPORATION
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
---------- ----------
NET REVENUE . . . . . . . . . . . . . . . . . . $ 804,080 $ 294,271
COST OF REVENUE . . . . . . . . . . . . . . . . 568,444 171,635
---------- ----------
GROSS PROFIT. . . . . . . . . . . . . . . . . . 235,636 122,636
Operating expenses. . . . . . . . . . . . . . . 340,267 304,364
---------- ----------
LOSS FROM OPERATIONS . . . . . . . . . (104,631) (181,728)
Non-operating income (expense):
Interest expense. . . . . . . . . . . . . . . (4,375) (1,405)
Litigation. . . . . . . . . . . . . . . . . . - (125,000)
---------- ----------
Total non-operating income (expense). . . . . (4,375) (126,405)
---------- ----------
LOSS BEFORE INCOME TAX. . . . . . . . . . . . . (109,006) (308,133)
Provision for income tax. . . . . . . . . . . . 800 800
---------- ----------
NET LOSS. . . . . . . . . . . . . . . . . . . . $(109,806) $(308,933)
========== ==========
---------- ----------
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF
COMMON STOCK OUTSTANDING. . . . . . . . . . 10,000 10,000
========== ==========
---------- ----------
BASIC AND DILUTED NET LOSS PER SHARE. . . . . . $ (10.98) $ (30.89)
========== ==========
The accompanying notes are an integral part of these financial statements.
NETWORK INSTALLATION CORPORATION
STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001.
COMMON STOCK RETAINE TOTAL
------------ EARNINGS STOCKHOLDER'S
NUMBER OF (ACCUMULATED EQUITY
SHARES AMOUNT DEFICIT) (DEFICIT)
------------ -------------- ---------- ----------
BALANCE AT JANUARY 1, 2001. . . . . . . . . . . 10,000 $ 10,000 $ 63,206 $ 73,206
Net loss for the year 2001. . . . . . . . . . . - - (308,933) (308,933)
------------ -------------- ---------- ----------
BALANCE AT DECEMBER 31, 2001. . . . . . . . . . 10,000 10,000 (245,727) (235,727)
Distribution. . . . . . . . . . . . . . . . . . - - (34,142) (34,142)
Net loss for the year 2002. . . . . . . . . . . - - (109,806) (109,806)
------------ -------------- ---------- ----------
BALANCE AT DECEMBER 31, 2002. . . . . . . . . . 10,000 $ 10,000 $(389,675) $(379,675)
============ ============== ========== ==========
The accompanying notes are an integral part of these financial statements.
NETWORK INSTALLATION CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss. . . . . . . . . . . . . . . . . . . . . . . $(109,806) $(308,933)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization . . . . . . . . . . . 3,355 343
(Increase) decrease in current assets:
Accounts receivables. . . . . . . . . . . . . . . 50,219 (50,219)
Increase (decrease) in current liabilities:
Accounts payable and accrued expense. . . . . . . 99,816 330,646
---------- ----------
Total Adjustments . . . . . . . . . . . . . . . . . . 153,390 280,770
---------- ----------
Net cash provided by (used in) operating activities 43,584 (28,163)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property & equipment . . . . . . . . (5,700) (8,260)
---------- ----------
Net cash used in investing activities . . . . . . . (5,700) (8,260)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to shareholder . . . . . . . . . . . . (34,142) -
Proceed from line of credit . . . . . . . . . . . . - 50,000
---------- ----------
Net cash provided by (used in) financing activities (34,142) 50,000
---------- ----------
NET INCREASE IN CASH & CASH EQUIVALENTS . . . . . . . . 3,742 13,577
CASH & CASH EQUIVALENTS, BEGINNING BALANCE. . . . . . . 13,577 -
---------- ----------
CASH & CASH EQUIVALENTS, ENDING BALANCE . . . . . . . . $ 17,319 $ 13,577
========== ==========
The accompanying notes are an integral part of these financial statements.
NETWORK INSTALLATION CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SEGMENTS
Network Installation Corporation ("the Company"), a privately held corporation
was organized on July 18, 1997, under the laws of the State of California. The
Company is a full service computer cabling, networking and telecommunications
integrator contractor, providing networks from stem to stem in house. The
Company participates in the worldwide network infrastructure market to end
users, structured cabling market and the telephony services.
On May 23, 2003, all the outstanding Common Shares of the Company were acquired
by Flexxtech Corporation, a Nevada corporation. The purchase price consisted of
$50,000 cash, 7,382,000 shares of Flexxtech Corporation's common stock and five
year option to purchase an additional 618,000 shares of Flexxtech Corporation's
stock if the Company's total revenue exceeds $450,000 for the period beginning
on June 1, 2003 and ending August 31, 2003. The option is exercisable at a price
equal to the closing bid price of the stock on August 31, 2003.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all liquid investments with a maturity of three months or
less from the date of purchase that are readily convertible into cash to be cash
equivalents.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
In determining the allowance to be maintained, management evaluates many factors
including industry and historical loss experience. The allowance for doubtful
accounts is maintained at an amount management deems adequate to cover estimated
losses. The Company considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is required.
PROPERTY & EQUIPMENT
Property and equipment is carried at cost. Depreciation of property and
equipment is provided using the declining balance method over the estimated
useful lives of the assets at five to seven years. Expenditures for maintenance
and repairs are charged to expense as incurred.
LONG-LIVED ASSETS
In August 2001, the FASB issued Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("FAS 144"). FAS 144 clarifies the
accounting for the impairment of long-lived assets and for long-lived assets to
be disposed of, including the disposal of business segments and major lines of
business. The Company has implemented FAS 144 for this fiscal year. Long-lived
assets are reviewed when facts and circumstances indicate that the carrying
value of the asset may not be recoverable. When necessary, impaired assets are
written down to estimated fair value based on the best information available.
Estimated fair value is generally based on either appraised value or measured by
discounting estimated future cash flows. Considerable management judgment is
necessary to estimate discounted future cash flows. Accordingly, actual results
could vary significantly from such estimates.
As of December 31, 2002, no impairment has been indicated.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of financial accounting standard No. 107, Disclosures about fair value
of financial instruments, requires that the Company disclose estimated fair
values of financial instruments. The carrying amounts reported in the statements
of financial position for current assets and current liabilities qualifying as
financial instruments are a reasonable estimate of fair value.
REVENUE RECOGNITION
The Company's revenue recognition policies are in compliance with all applicable
accounting regulations, including American Institute of Certified Public
Accountants (AICPA) Statement of Position (SOP) 81-1, Accounting for Performance
of Construction-Type and Certain Production-Type Contracts. Revenues from
installations, cabling and networking contacts are recognized when the contracts
are completed (Completed-Contract Method). The completed-contract method is used
because the contracts are short-term in duration or the Company is unable to
make reasonably dependable estimates of the costs of the contracts.
Under the Completed-Contract Method, revenues and expenses are recognized when
services have been performed and the projects have been completed. For projects,
which have been completed but not yet billed to customers, revenue is recognized
based on management's estimates of the amounts to be realized. When such
projects are billed, any differences between the initial estimates and the
actual amounts billed are recorded as increases or decreases to revenue.
Expenses are recognized in the period in which the corresponding liability is
incurred. Because of short duration of the contracts, the Company did not have
any work in progress as of June 30, 2003.
The Company's revenue recognition policy for sale of network products is in
compliance with Staff accounting bulletin (SAB) 101. Revenue from the sale of
network products is recognized when a formal arrangement exists, the price is
fixed or determinable, the delivery is completed and collectibility is
reasonably assured. Generally, the Company extends credit to its customers and
does not require collateral. The Company performs ongoing credit evaluations of
its customers and historic credit losses have been within management's
expectations.
ADVERTISING
The Company expenses advertising costs as incurred. Advertising expenses for the
year ended December 31, 2002 and 2001 were $-0- .
INCOME TAXES
The Company had elected for federal income tax purposes, under the Internal
Revenue Code and the States of Texas and California, to be an S-corporation. In
lieu of corporation income taxes, the stockholders of an S-corporation are taxed
on their proportionate share of the Company's taxable income. Therefore, no
provision or liability for federal or state income taxes other than state
franchise tax for California and Texas have been included in these financial
statements.
SEGMENT REPORTING
Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure
About Segments of an Enterprise and Related Information" requires use of the
"management approach" model for segment reporting. The management approach model
is based on the way a company's management organizes segments within the company
for making operating decisions and assessing performance. Reportable segments
are based on products and services, geography, legal structure, management
structure, or any other manner in which management disaggregates a company. SFAS
131 has no effect on the Company's consolidated financial statements as
substantially all of the Company's operations are conducted in one industry
segment.
RISKS AND UNCERTAINTIES
VULNERABILITY DUE TO SUPPLIER CONCENTRATIONS - The Company had a major source
for the supply of materials in 2002 and 2001. The percentages of purchases from
this source were 94% and 93% of total purchases in the year ended December 31,
2002 and 2001, respectively. Total outstanding balances due this supplier as of
December 31, 2002 and 2001 were $84,452 and $20,312, respectively. The effect of
the loss of any of these sources or a disruption in their business will depend
primarily upon the length of time necessary to find a suitable alternative
source and could have a material adverse effect on the Company's results of
operations.
VULNERABILITY DUE TO CUSTOMER CONCENTRATIONS - Total sales to three major
customers in the year ended December 31, 2002 amounted to approximately $428,000
and to four major customers in the year ended December 31, 2001 amounted to
$277,000. The Company had receivable balance of $-0- from these customers as of
December 31, 2002 and $1,372 as of December 31, 2001.
RECENT PRONOUNCEMENTS
In May 2002, the Board issued SFAS No. 145, Rescission of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections ("SFAS
145"). SFAS 145 rescinds the automatic treatment of gains or losses from
extinguishments of debt as extraordinary unless they meet the criteria for
extraordinary items as outlined in APB Opinion No. 30, Reporting the Results of
Operations, Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions. SFAS
145 also requires sale-leaseback accounting for certain lease modifications that
have economic effects that are similar to sale-leaseback transactions and makes
various technical corrections to existing pronouncements. The provisions of SFAS
145 related to the rescission of FASB Statement 4 are effective for fiscal years
beginning after May 15, 2002, with early adoption encouraged. All other
provisions of SFAS 145 are effective for transactions occurring after May 15,
2002, with early adoption encouraged. The adoption of SFAS 145 does not have a
material effect on the earnings or financial position of the Company.
In June 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated with
exit or Disposal Activities." This Statement addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." This Statement requires
that a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. Under Issue 94-3 a liability for an
exit cost as defined, was recognized at the date of an entity's commitment to an
exit plan. The adoption of SFAS 146 does not have a material effect on the
earnings or financial position of the Company.
In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions." SFAS No. 147 removes the requirement in SFAS No. 72 and
Interpretation 9 thereto, to recognize and amortize any excess of the fair value
of liabilities assumed over the fair value of tangible and identifiable
intangible assets acquired as an unidentifiable intangible asset. This statement
requires that those transactions be accounted for in accordance with SFAS No.
141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." In addition, this statement amends SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," to include certain financial
institution-related intangible assets. The adoption of SFAS 147 does not have
a material effect on the earnings or financial position of the Company.
In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (FIN 45). FIN 45 requires that upon
issuance of a guarantee, a guarantor must recognize a liability for the fair
value of an obligation assumed under a guarantee. FIN 45 also requires
additional disclosures by a guarantor in its interim and annual financial
statements about the obligations associated with guarantees issued. The
recognition provisions of FIN 45 are effective for any guarantees issued or
modified after December 31, 2002. The disclosure requirements are effective for
financial statements of interim or annual periods ending after December 15,
2002The adoption of this pronouncement does not have a material effect on the
earnings or financial position of the Company.
In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock Based
Compensation-Transition and Disclosure". SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock Based Compensation", to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this Statement amends the
disclosure requirements of Statement 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used, on reported
results. The Statement is effective for the Companies' interim reporting period
ending January 31, 2003. The adoption of SFAS 148 does not have a material
effect on the earnings or financial position of the Company.
On April 30, 2003, the FASB issued FASB Statement No. 149 (FAS 149), Amendment
of Statement 133 on Derivative Instruments and Hedging Activities. FAS 149
amends and clarifies the accounting guidance on (1) derivative instruments
(including certain derivative instruments embedded in other contracts) and (2)
hedging activities that fall within the scope of FASB Statement No. 133 (FAS
133), Accounting for Derivative Instruments and Hedging Activities. FAS 149 also
amends certain other existing pronouncements, which will result in more
consistent reporting of contracts that are derivatives in their entirety or that
contain embedded derivatives that warrant separate accounting. FAS 149 is
effective (1) for contracts entered into or modified after June 30, 2003, with
certain exceptions, and (2) for hedging relationships designated after June 30,
2003. The guidance is to be applied prospectively. The Company does not expect
the adoption of SFAS No. 149 to have a material impact on its financial position
or results of operations or cash flows.
On May 15, 2003, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 150 (FAS 150), Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. FAS 150 changes the accounting
for certain financial instruments that, under previous guidance, could be
classified as equity or "mezzanine" equity, by now requiring those instruments
to be classified as liabilities (or assets in some circumstances) in the
statement of financial position. Further, FAS 150 requires disclosure regarding
the terms of those instruments and settlement alternatives. FAS 150 affects an
entity's classification of the following freestanding instruments: a)
Mandatorily redeemable instruments b) Financial instruments to repurchase an
entity's own equity instruments c) Financial instruments embodying obligations
that the issuer must or could choose to settle by issuing a variable number of
its shares or other equity instruments based solely on (i) a fixed monetary
amount known at inception or (ii) something other than changes in its own equity
instruments d) FAS 150 does not apply to features embedded in a financial
instrument that is not a derivative in its entirety. The guidance in FAS 150 is
generally effective for all financial instruments entered into or modified after
May 31, 2003, and is otherwise effective at the beginning of the first interim
period beginning after June 15, 2003. For private companies, mandatorily
redeemable financial instruments are subject to the provisions of FAS 150 for
the fiscal period beginning after December 15, 2003. The Company does not expect
the adoption of SFAS No. 150 to have a material impact on its financial position
or results of operations or cash flows.
3. GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of the
Company as a going concern. However, the Company has accumulated deficit of
$389,675 at December 31, 2002, including net losses of $109,806 and $308,933 for
the years ended December 31, 2002 and 2001, respectively. The Company's total
liabilities exceeded its total assets by $379,675 as of December 31, 2002. The
continuing losses have adversely affected the liquidity of the Company. The
Company faces continuing significant business risks, including but not limited
to, its ability to maintain vendor and supplier relationships by making timely
payments when due.
In view of the matters described in the preceding paragraph, recoverability of a
major portion of the recorded asset amounts shown in the accompanying balance
sheet is dependent upon continued operations of the Company, which in turn is
dependent upon the Company's ability to raise additional capital, obtain
financing and to succeed in its future operations. The financial statements do
not include any adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern.
Management has taken the following steps to revise its operating and financial
requirements, which it believes are sufficient to provide the Company with the
ability to continue as a going concern. Management devoted considerable effort
during the period ended December 31, 2002, towards (i) reduction of salaries and
general and administrative expenses. In that regard, the Company consummated a
transaction whereby 100% of the Company's outstanding shares were acquired by
Flexxtech Corporation (note 12).
4. PROPERTY AND EQUIPMENT
Property and equipment comprised of following on December 31, 2002 and 2001:
2002 2001
---- ----
Furniture & fixtures $ 3,160 $ 3,160
Machinery & Equipment 10,800 5,100
------- -------
13,960 8,260
Less Accumulated
Depreciation ( 3,698) (343)
------- -------
$ 10,262 $ 7,917
======== ========
5. RECEIVABLE FROM RELATED PARTY
On January 1, 2001, the Company sold all the assets and liabilities for $73,206
to an entity related by a common officer and shareholder. The amount is due on
demand and bears no interest. The Company did not have any activities from
January 1, 2001 to September 30, 2001 and resumed the operation in October 2001.
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of following on December 31,
2002 and 2001:
2002 2001
---- ----
Accounts payable $ 141,275 $ 81,265
Payroll taxes payable 122,123 122,123
Accrued expenses 167,064 127,258
-------- ---------
$ 430,462 $ 330,646
========== =========
The payroll taxes liabilities are for the calendar years from 1999 through 2001.
The Company has agreed to pay $6,500 per month to the tax collecting
authorities, beginning March 15, 2003 until the entire amount is paid in full.
7. NOTE PAYABLE
The Company has an unsecured note of $50,000, guaranteed by the officer and
shareholder of the Company, bearing an interest rate of 8.75%. The note was
payable through a revolving line of credit, which commenced on November 6,
2001, the date of the note, and was to be expired in three years following the
note date. The Company was to pay a total of 36 payments of interest only on the
disbursed balance beginning one month from the note date and every month
thereafter. The term period was to commence upon the termination of the
revolving line of credit period. During the term period, the Company was to pay
principal and interest payments in equal installment sufficient to fully
amortize the principal balance outstanding, beginning one month from the
commencement of the term period. All remaining principal and accrued interest
was due and payable 7 years from the date of the note.
As a result of acquisition by Flexxtech (note 12) subsequent to the year ended
December 31, 2002, the Company was in default on this note, since the note
prohibited a change of ownership over 25% of the Company's common stock
outstanding. The entire principal amount became due upon default and the
revolving line of credit is no longer available to the Company. The Company is
in the process of making payment arrangement with the financing institution.
The interests on this note were $4,375 and $729 for the year ended December 31,
2002 and 2001, respectively.
8. COMMITMENT & LITIGATION
Lease:
The Company paid the usage charge each month for its office space. On February
5, 2003, the Company entered into short term rental agreement for 90 days and
month to month thereafter. The monthly rental is $2,289.
The rent expenses were $12,323 and $ 10,199 for the year ended December 31, 2002
and 2001, respectively.
Litigation:
The Company was the defendant in a collection action brought by a vendor. The
allegation is that the Company failed to pay for goods and services provided by
the vendor in the amount of $125,000. This amount was accrued in the financial
statements for the year ended December 31, 2001.
9. STOCKHOLDERS' EQUITY
During the years ended December 31, 2002 and 2001, the Company did not issue any
additional shares. Company has 10,000 issued and outstanding shares at the end
of December 31, 2002 and 2001.
10. BASIC AND DILUTED NET LOSS PER SHARE
Basic and diluted net loss per share for the twelve-month period ended December
31, 2002 and 2001 were determined by dividing net loss for the periods by the
weighted average number of basic and diluted shares of common stock outstanding.
11. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
The Company prepares its statements of cash flows using the indirect method as
defined under the Financial Accounting Standard No. 95.
The Company paid interest of $3,526 and $676 during the year ended December 31,
2002 and 2001, respectively. The Company paid income taxes of $-0- during the
years ended December 31, 2002 and 2001.
12. SUBSEQUENT EVENT
On May 23, 2003, Flexxtech Corporation (Flex) and the Company closed a purchase
agreement whereby Flex acquired 100% of the issued and outstanding common stock
of the Company. The purchase price consisted of $50,000 cash, 7,382,000 shares
of Flex's common stock and five year option to purchase an additional 618,000
shares of Flex's if the Company's total revenue exceeds $450,000 for the period
beginning on June 1, 2003 and ending August 31, 2003. The option is exercisable
at a price equal to the closing bid price of the stock on August 31, 2003.
Pursuant to the terms of the share exchange agreement, control of the combined
companies passed to the former shareholders of the Company. This type of share
exchange has been treated as a capital transaction accompanied by
recapitalization of the Company in substance, rather than a business
combination, and is deemed a "reverse acquisition" for accounting purposes since
the former owners of the Company controlled majority of the total common shares
outstanding immediately following the acquisition. No pro forma financial
statements are being presented as Flex had no significant asset prior to the
acquisition.
(b) UNAUDITED FINANCIAL STATEMENT AT AND FOR THE THREE MONTH PERIODS ENDED MARCH
31, 2003 & 2002:
NETWORK INSTALLATION CORPORATION
BALANCE SHEETS
MARCH 31, 2003 AND 2002
(UNAUDITED)
ASSETS
----------
2003 2002
---------- ----------
CURRENT ASSETS:
Cash & cash equivalents. . . . . . . . . . . . . . . . . . . $ 9,593 $ -
Accounts receivable. . . . . . . . . . . . . . . . . . . . . 268,318 11,364
Deposit. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,289 -
---------- ----------
Total current assets . . . . . . . . . . . . . . . . . . . 280,200 11,364
PROPERTY AND EQUIPMENT, NET. . . . . . . . . . . . . . . . . . 9,421 7,077
RECEIVABLE FROM RELATED PARTY. . . . . . . . . . . . . . . . . 73,206 73,206
---------- ----------
$ 362,827 $ 91,647
========== ==========
LIABILITIES AND STOCKHOLDER'S DEFICIT
-----------------------------------------
CURRENT LIABILITIES:
Accounts payable & accrued expenses. . . . . . . . . . . . . $ 650,036 $ 334,618
Advance from officer . . . . . . . . . . . . . . . . . . . . - 14,711
Due to factor. . . . . . . . . . . . . . . . . . . . . . . . 48,992 -
Note payable . . . . . . . . . . . . . . . . . . . . . . . . 47,500 50,000
---------- ----------
Total current liabilities. . . . . . . . . . . . . . . . . 746,528 399,329
COMMITMENT & CONTINGENCY
STOCKHOLDER'S DEFICIT
Common stock, no par value; authorized shares 500,000,
issued and outstanding shares 10,000 . . . . . . . . . . . . 10,000 10,000
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . (393,701) (317,682)
---------- ----------
Total stockholder's deficit. . . . . . . . . . . . . . . . (383,701) (307,682)
---------- ----------
$ 362,827 $ 91,647
========== ==========
The accompanying notes are an integral part of these financial statements.
NETWORK INSTALLATION CORPORATION
STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
2003 2002
--------- ---------
NET REVENUE. . . . . . . . . . . . . . . . . . . . . . . . $442,606 $ 39,451
COST OF REVENUE. . . . . . . . . . . . . . . . . . . . . . 186,359 16,547
--------- ---------
GROSS PROFIT . . . . . . . . . . . . . . . . . . . . . . . 256,247 22,904
Operating expenses . . . . . . . . . . . . . . . . . . . . 192,001 91,996
--------- ---------
INCOME (LOSS) FROM OPERATIONS. . . . . . . . . . . . . . . 64,246 (69,092)
Non-operating Income (expense):
Interest expense . . . . . . . . . . . . . . . . . . . . (1,094) (2,063)
--------- ---------
INCOME (LOSS) BEFORE INCOME TAX. . . . . . . . . . . . . . 63,152 (71,155)
Provision for income tax . . . . . . . . . . . . . . . . . 800 800
--------- ---------
NET INCOME (LOSS). . . . . . . . . . . . . . . . . . . . . $ 62,352 $(71,955)
========= =========
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF
COMMON STOCK OUTSTANDING . . . . . . . . . . . . . . . 10,000 10,000
========= =========
--------- ---------
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE. . . . . . . $ 6.24 $ (7.20)
========= =========
The accompanying notes are an integral part of these financial statements.
NETWORK INSTALLATION CORPORATION
STATEMENTS OF STOCKHOLDER'S DEFICIT
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
COMMON STOCK
------------- TOTAL
NUMBER OF ACCUMULATED STOCKHOLDER'S
SHARES AMOUNT DEFICIT DEFICIT
------------- ------------- --------------- ----------
BALANCE AT JANUARY 1, 2002 . . . . . . . . . . . . . . . . . 10,000 $ 10,000 $ (245,727) $(235,727)
Net loss for the three month period ended March 31, 2002. . (71,955) (71,955)
------------- ------------- --------------- ----------
BALANCE AT MARCH 31, 2002. . . . . . . . . . . . . . . . . . 10,000 10,000 (317,682) (307,682)
Distribution . . . . . . . . . . . . . . . . . . . . . . . . - - (34,142) (34,142)
Net loss from April 1, 2002 to December 31, 2002 . . . . . . - - (37,851) (37,851)
------------- ------------- --------------- ----------
BALANCE AT DECEMBER 31, 2002 . . . . . . . . . . . . . . . . 10,000 10,000 (389,675) (379,675)
Deemed dividend (note 10). . . . . . . . . . . . . . . . . . (66,378) (66,378)
Net income for the three month period ended March 31, 2003. 62,352 62,352
------------- ------------- --------------- ----------
BALANCE AT MARCH 31, 2003. . . . . . . . . . . . . . . . . . 10,000 $ 10,000 $ (393,701) $(383,701)
============= ============= =============== ==========
The accompanying notes are an integral part of these financial statements.
NETWORK INSTALLATION CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
2003 2002
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss). . . . . . . . . . . . . . . . . . . . $ 62,352 $(71,955)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization. . . . . . . . . . . . . 841 840
(Increase) decrease in current assets:
Accounts receivables . . . . . . . . . . . . . . . . (334,696) 38,855
Deposit. . . . . . . . . . . . . . . . . . . . . . . (2,289) -
Increase in current liabilities:
Accounts payable and accrued expense . . . . . . . . 219,574 3,972
---------- ---------
Total Adjustments. . . . . . . . . . . . . . . . . . . . (116,570) 43,667
---------- ---------
Net cash used in operating activities. . . . . . . . . (54,218) (28,288)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan from officer. . . . . . . . . . . . . . . . . . . - 14,711
Payment on note. . . . . . . . . . . . . . . . . . . . (2,500) -
Proceed from factor. . . . . . . . . . . . . . . . . . 48,992 -
---------- ---------
Net cash provided by financing activities . . . . . . 46,492 14,711
---------- ---------
NET DECREASE IN CASH & CASH EQUIVALENTS. . . . . . . . . . (7,726) (13,577)
CASH & CASH EQUIVALENTS, BEGINNING BALANCE . . . . . . . . 17,319 13,577
---------- ---------
CASH & CASH EQUIVALENTS, ENDING BALANCE. . . . . . . . . . $ 9,593 $ -
========== =========
The accompanying notes are an integral part of these financial statements.
NETWORK INSTALLATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SEGMENTS
Network Installation Corporation ("the Company"), a privately held corporation
is organized on July 18, 1997, under the laws of the State of California. The
Company is a full service computer cabling, networking and telecommunications
integrator contractor, providing networks from stem to stem in house. The
Company participates in the worldwide network infrastructure market to end
users, structured cabling market and the telephony services.
On May 23, 2003, 100% of the outstanding Common Shares of the Company were
acquired by Flexxtech Corporation, a Nevada corporation. The purchase price
consisted of $50,000 cash, 7,382,000 shares of Flexxtech Corporation's common
stock and five year option to purchase an additional 618,000 shares of Flexxtech
Corporation's stock if the Company's total revenue exceeds $450,000 for the
period beginning on June 1, 2003 and ending August 31, 2003. The option is
exercisable at a price equal to the closing bid price of the stock on August 31,
2003.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all liquid investments with a maturity of three months or
less from the date of purchase that are readily convertible into cash to be cash
equivalents.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
In determining the allowance to be maintained, management evaluates many factors
including industry and historical loss experience. The allowance for doubtful
accounts is maintained at an amount management deems adequate to cover estimated
losses. The Company considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is required.
PROPERTY & EQUIPMENT
Property and equipment is carried at cost. Depreciation of property and
equipment is provided using the declining balance method over the estimated
useful lives of the assets at five to seven years. Expenditures for maintenance
and repairs are charged to expense as incurred.
LONG-LIVED ASSETS
In August 2001, the FASB issued Statement No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("FAS 144"). FAS 144 clarifies the
accounting for the impairment of long-lived assets and for long-lived assets to
be disposed of, including the disposal of business segments and major lines of
business. The Company has implemented FAS 144 for this fiscal year. Long-lived
assets are reviewed when facts and circumstances indicate that the carrying
value of the asset may not be recoverable. When necessary, impaired assets are
written down to estimated fair value based on the best information available.
Estimated fair value is generally based on either appraised value or measured by
discounting estimated future cash flows. Considerable management judgment is
necessary to estimate discounted future cash flows. Accordingly, actual results
could vary significantly from such estimates.
As of December 31, 2002, no impairment has been indicated.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of financial accounting standard No. 107, Disclosures about fair value
of financial instruments, requires that the Company disclose estimated fair
values of financial instruments. The carrying amounts reported in the statements
of financial position for current assets and current liabilities qualifying as
financial instruments are a reasonable estimate of fair value.
REVENUE RECOGNITION
The Company's revenue recognition policies are in compliance with all applicable
accounting regulations, including American Institute of Certified Public
Accountants (AICPA) Statement of Position (SOP) 81-1, Accounting for Performance
of Construction-Type and Certain Production-Type Contracts. Revenues from
installations, cabling and networking contacts are recognized when the contracts
are completed (Completed-Contract Method). The completed-contract method is used
because the contracts are short-term in duration or the Company is unable to
make reasonably dependable estimates of the costs of the contracts.
Under the Completed-Contract Method, revenues and expenses are recognized when
services have been performed and the projects have been completed. For projects,
which have been completed but not yet billed to customers, revenue is recognized
based on management's estimates of the amounts to be realized. When such
projects are billed, any differences between the initial estimates and the
actual amounts billed are recorded as increases or decreases to revenue.
Expenses are recognized in the period in which the corresponding liability is
incurred. Because of short duration of the contracts, the Company did not have
any work in progress as of June 30, 2003.
The Company's revenue recognition policy for sale of network products is in
compliance with Staff accounting bulletin (SAB) 101. Revenue from the sale of
network products is recognized when a formal arrangement exists, the price is
fixed or determinable, the delivery is completed and collectibility is
reasonably assured. Generally, the Company extends credit to its customers and
does not require collateral. The Company performs ongoing credit evaluations of
its customers and historic credit losses have been within management's
expectations.
ADVERTISING
The Company expenses advertising costs as incurred. Advertising expenses for the
three-month period ended March 31, 2003 and 2002 were $-0- .
INCOME TAXES
The Company has elected for federal income tax purposes, under the Internal
Revenue Code and the States of Texas and California, to be an S-corporation. In
lieu of corporation income taxes, the stockholders of an S-corporation are taxed
on their proportionate share of the Company's taxable income. Therefore, no
provision or liability for federal or state income taxes other than state
franchise tax for California and Texas have been included in these financial
statements.
SEGMENT REPORTING
Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure
About Segments of an Enterprise and Related Information" requires use of the
"management approach" model for segment reporting. The management approach model
is based on the way a company's management organizes segments within the company
for making operating decisions and assessing performance. Reportable segments
are based on products and services, geography, legal structure, management
structure, or any other manner in which management disaggregates a company. SFAS
131 has no effect on the Company's consolidated financial statements as
substantially all of the Company's operations are conducted in one industry
segment.
RISKS AND UNCERTAINTIES
VULNERABILITY DUE TO SUPPLIER CONCENTRATIONS - The Company had two major sources
for the supply of materials in the three-month period ended March 31, 2003,
which accounted for 85% of total purchases of the Company. Total outstanding
balance due this supplier as of March 31, 2003 was $153,307. There was no major
supplier, purchases from which exceeded 10% of the Company's total purchases, in
the three-month period ended March 31, 2002. The effect of the loss of any of
these sources or a disruption in their business will depend primarily upon the
length of time necessary to find a suitable alternative source and could have a
material adverse effect on the Company's results of operations.
VULNERABILITY DUE TO CUSTOMER CONCENTRATIONS - In the period ended March 31,
2003, total sales to three major customers, sales to which exceeded 10% of the
Company's total annual sales, amounted to approximately $335,000 and to a major
customer in the period ended March 31, 2002 amounted to $38,000. There was
receivable balance of $169,915 from these customers as of March 31, 2003 and
$9,807 as of March 31, 2002.
RECENT PRONOUNCEMENTS
On April 30, 2003, the FASB issued FASB Statement No. 149 (FAS 149), Amendment
of Statement 133 on Derivative Instruments and Hedging Activities. FAS 149
amends and clarifies the accounting guidance on (1) derivative instruments
(including certain derivative instruments embedded in other contracts) and (2)
hedging activities that fall within the scope of FASB Statement No. 133 (FAS
133), Accounting for Derivative Instruments and Hedging Activities. FAS 149 also
amends certain other existing pronouncements, which will result in more
consistent reporting of contracts that are derivatives in their entirety or that
contain embedded derivatives that warrant separate accounting. FAS 149 is
effective (1) for contracts entered into or modified after June 30, 2003, with
certain exceptions, and (2) for hedging relationships designated after June 30,
2003. The guidance is to be applied prospectively. The Company does not expect
the adoption of SFAS No. 149 to have a material impact on its financial position
or results of operations or cash flows.
On May 15, 2003, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 150 (FAS 150), Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. FAS 150 changes the accounting
for certain financial instruments that, under previous guidance, could be
classified as equity or "mezzanine" equity, by now requiring those instruments
to be classified as liabilities (or assets in some circumstances) in the
statement of financial position. Further, FAS 150 requires disclosure regarding
the terms of those instruments and settlement alternatives. FAS 150 affects an
entity's classification of the following freestanding instruments: a)
Mandatorily redeemable instruments b) Financial instruments to repurchase an
entity's own equity instruments c) Financial instruments embodying obligations
that the issuer must or could choose to settle by issuing a variable number of
its shares or other equity instruments based solely on (i) a fixed monetary
amount known at inception or (ii) something other than changes in its own equity
instruments d) FAS 150 does not apply to features embedded in a financial
instrument that is not a derivative in its entirety. The guidance in FAS 150 is
generally effective for all financial instruments entered into or modified after
May 31, 2003, and is otherwise effective at the beginning of the first interim
period beginning after June 15, 2003. For private companies, mandatorily
redeemable financial instruments are subject to the provisions of FAS 150 for
the fiscal period beginning after December 15, 2003. The Company does not expect
the adoption of SFAS No. 150 to have a material impact on its financial position
or results of operations or cash flows.
3. GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles which contemplate continuation of the
Company as a going concern. However, the Company has accumulated deficit of
$393,701. The continuing losses have adversely affected the liquidity of the
Company. The Company faces continuing significant business risks, including but
not limited to, its ability to maintain vendor and supplier relationships by
making timely payments when due.
In view of the matters described in the preceding paragraph, recoverability of a
major portion of the recorded asset amounts shown in the accompanying balance
sheet is dependent upon continued operations of the Company, which in turn is
dependent upon the Company's ability to raise additional capital, obtain
financing and to succeed in its future operations. The financial statements do
not include any adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern.
Management has taken the following steps to revise its operating and financial
requirements, which it believes are sufficient to provide the Company with the
ability to continue as a going concern. Management devoted considerable effort
during the period ended March 31, 2003 in reduction of salaries and general and
administrative expenses. In that regard, the Company consummated a transaction
whereby 100% of the Company's outstanding shares were acquired by Flexxtech
Corporation (note 13).
4. PROPERTY AND EQUIPMENT
Property and equipment comprised of following on March 31, 2003 and 2002:
2003 2002
---- ----
Furniture & fixtures $ 3,160 $ 3,160
Machinery & Equipment 10,800 5,100
------ -----
13,960 8,260
Less Accumulated
Depreciation ( 4,539) (1,182)
------- ------
$ 9,421 $ 7,077
======= ======
5. RECEIVABLE FROM RELATED PARTY
On January 1, 2001, the Company sold all the assets and liabilities of the
Company for $73,206, to an entity related by a common officer and shareholder.
The amount is due on demand and is interest free.
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of following on March 31, 2003
and 2002:
2003 2002
---- ----
Accounts payable $ 317,072 $ 83,347
Payroll tax payable 148,123 122,123
Accrued expenses 184,841 129,148
---------- ---------
$ 650,036 $ 334,618
========== ==========
The payroll liability of $122,123 is for the calendar years 1999 to 2001. The
Company agreed to pay $6,500 per month beginning March 15, 2003 until the
balance is fully paid.
7. NOTE PAYABLE
The Company has an unsecured note of $50,000, guaranteed by the officer and
shareholder of the Company, bearing an interest rate of 8.75%. The note was
payable through a revolving line of credit, which commenced on November 6,
2001, the date of the note, and was to be expired in three years following the
note date. The Company was to pay a total of 36 payments of interest only on the
disbursed balance beginning one month from the note date and every month
thereafter. The term period was to commence upon the termination of the
revolving line of credit period. During the term period, the Company was to pay
principal and interest payments in equal installment sufficient to fully
amortize the principal balance outstanding, beginning one month from the
commencement of the term period. All remaining principal and accrued interest
was due and payable 7 years from the date of the note.
As a result of acquisition by Flexxtech (note 12) subsequent to the period ended
March 31, 2003, the Company was in default on this note, since the note
prohibited a change of ownership over 25% of the Company's common stock
outstanding. The entire principal amount became due upon default and the
revolving line of credit is no longer available to the Company. The Company is
in the process of making payment arrangement with the financing institution.
The interests on this note were $1,094 for the periods ended March 31, 2003 and
2002.
8. DUE TO FACTOR
On February 27, 2003, the Company entered into a factoring and security
agreement to sell, transfer and assign certain accounts receivable to Orange
Commercial Credit (OCC). OCC may on its sole discretion purchase any specific
account. All accounts sold are with recourse on seller. All of the Company's
property including accounts receivable, inventories, equipment and promissory
notes are collateral under this agreement. OCC will advance 80% of the face
amount of each account. The difference between the face amount of each purchased
account and advance on the purchased account shall be reserve and will be
released after deductions of discount and charge backs on the 15th and the last
day of each month. OCC charges 1% of gross face value of purchased receivable
for finance charge and 1% for administrative fees with minimum charge of $750 on
each settlement date. As of March 31, 2003, the Company factored receivables of
approximately $59,500. In connection with the factoring agreement, the Company
included fees of $575 in the period ended March 31, 2003.
9. COMMITMENT & LITIGATION
Lease:
The Company did not have a lease agreement during the period ended March 31,
2002. The Company paid the usage charge each month. On February 5, 2003, the
Company entered into short term rental agreement for 90 days and month to month
thereafter. The monthly rental is $2,289.
The rent expenses were $9,156 and $100 for the period ended March 31, 2003 and
2002, respectively.
Litigation:
The Company was the defendant in a collection action brought by a vendor. The
allegation is that the Company failed to pay for goods and services provided by
the vendor in the amount of $125,000. This amount was accrued in the financial
statements for the year ended December 31, 2001.
10. RELATED PARTY TRANSACTIONS
The Company earned revenue from an entity related by a common officer and
shareholder, amounting $98,791 during the three month period ended March 31,
2003. The account receivable balance of $66,378 from this entity was written
off as of March 31, 2003. The entire amount of write-off has been recorded as
deemed dividend in the accompanying financial statements.
11. BASIC AND DILUTED NET LOSS PER SHARE
Basic and diluted net loss per share for the three-month period ended March 31,
2003 and 2002 were determined by dividing net loss for the periods by the
weighted average number of basic and diluted shares of common stock outstanding.
Weighted average number of shares used to compute basic and diluted loss per
share is the same since the effect of dilutive securities is anti-dilutive.
12. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
The Company prepares its statements of cash flows using the indirect method as
defined under the Financial Accounting Standard No. 95.
The Company paid interest of $-0- and $969 during the period ended March 31,
2003 and 2002, respectively. The Company paid income taxes of $-0- during the
period ended March 31, 2003 and 2002.
13. SUBSEQUENT EVENT
On May 23, 2003, Flexxtech Corporation (Flex) and the Company closed a purchase
agreement whereby Flex acquired 100% of the issued and outstanding common stock
of the Company. The purchase price consisted of $50,000 cash, 7,382,000 shares
of Flex's common stock and five year option to purchase an additional 618,000
shares of Flex's if the Company's total revenue exceeds $450,000 for the period
beginning on June 1, 2003 and ending August 31, 2003. The option is exercisable
at a price equal to the closing bid price of the stock on August 31, 2003.
Pursuant to the terms of the share exchange agreement, control of the combined
companies passed to the former shareholders of the Company. This type of share
exchange has been treated as a capital transaction accompanied by
recapitalization of the Company in substance, rather than a business
combination, and is deemed a "reverse acquisition" for accounting purposes since
the former owners of the Company controlled majority of the total common shares
outstanding immediately following the acquisition. No pro forma financial
statements are being presented as Flex had no significant asset prior to the
acquisition.
(c) PROFORMA FINANCIAL INFORMATION.
NETWORK INSTALLATION CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2002
(UNAUDITED)
The following unaudited Pro Forma Statement of operations has been derived from the audited financial statements
statements of Flexxtech (A) for the year ended December 31, 2002 and the audited
financial statements of Network Installation Corporation. (B) for the year ended December 31, 2002.
The Pro Forma Statements of Operations reflects the acquisition of B by A (a reporting company)
on 5/23/2003 in a acquisition using reverse acquisition method of accounting and assumes that
such acquisition was consummated as of January 1, 2002.
The Pro Forma Statement of Operations and financial conditions should be read in
conjunction with the Financial Statements of A, the Financial Statements of B and the Notes to the
financial statements. The Pro Forma Statements do not purport to represent what the Company's results
of operations and financial conditions would actually have been if the acquisition of A had occurred on the date
indicated or to project the company's results of operations for any future period or date. The Pro Forma
adjustments, as described in the accompanying data, are based on available information and the
assumption set forth in the foot notes below, which management believes are reasonable.
Flexxtech Network Ins. Pro Forma Pro Forma
(Historical) (Historical) Adjustment Combined
------------- -------------- ------------ ------------
Net Revenue . . . . . . . . . . . . . . . . . . . . . . $ - $ 804,080 $ - $ 804,080
Cost of revenue . . . . . . . . . . . . . . . . . . . . - 568,444 - 568,444
------------- -------------- ------------ ------------
Gross profit. . . . . . . . . . . . . . . . . . . . . . - 235,636 - 235,636
Operating expenses. . . . . . . . . . . . . . . . . . . 1,685,298 340,267 - 2,025,565
------------- -------------- ------------ ------------
Loss from operations. . . . . . . . . . . . . . . . . . (1,685,298) (104,631) - (1,789,929)
Non-operating income (Expenses) . . . . . . . . . . . . (601,283) (4,375) - (605,658)
------------- -------------- ------------ ------------
Income before provision for income taxes. . . . . . . . (2,286,581) (109,006) - (2,395,587)
Provision for taxes . . . . . . . . . . . . . . . . . . 1,600 800 - 2,400
------------- -------------- ------------ ------------
LOSS FROM CONTINUING OPERATIONS . . . . . . . . . . . . (2,288,181) (109,806) - (2,397,987)
DISCONTINUED OPERATIONS:
Loss from operations of subsidiary disposed in 2002. (1,513,889) - - (1,513,889)
Gain (loss) on disposal of subsidiary, net. . . . . . 452,498 - - 452,498
------------- -------------- ------------ ------------
(1,061,391) - - (1,061,391)
------------- -------------- ------------ ------------
NET LOSS. . . . . . . . . . . . . . . . . . . . . . . . $ (3,349,572) $ (109,806) $ - $(3,459,378)
============= ============== ============ ============
EARNINGS PER SHARE
Weighted -average number of
shares outstanding . . . . . . . . . . . . . . . . . 193,260 10,000 7,382,000 7,575,260
============= ============== ============
Loss per share . . . . . . . . . . . . . . . . . . . $ (17.33) $ (10.98) $ (0.46)
============= ============== ============
NOTES:
(1) Loss per share data shown above are applicable for both primary and fully diluted.
(2) Weighted-average number of shares outstanding for the combined entity includes all shares issued
before the acquisition as if outstanding as of January 1, 2002.
(3) Weighted average number of shares outstanding for combined entity includes 193,260 shares of A
(after 200:1 reverse split on January 23, 2003) of the outstanding shares as of December 31, 2002 and
7,382,000 shares of common stock issued to the shareholders of (B) pursuant to the stock acquisition
and reorganization agreement.
PRO FORMA STATEMENT OF FINANCIAL CONDITIONS
FOR THE PERIOD ENDED DECEMBER 31, 2002
(UNAUDITED)
The following unaudited Pro Forma Statement of financial conditions has been derived from the audited
financial statements of Flexxtech (A) as of December 31, 2002 and the audited financial
statements of Network Installation Corporation (B) as of December 31, 2002. The unaudited Pro Forma Statements
of financial conditions reflects the acquisition of B by A (a reporting company)
in a merger using reverse acquisition method of accounting.
Flexxtech Network Ins. Pro Forma Pro Forma
(Historical) (Historical) Investment Adjustment Combined
------------- -------------- ----------- ------------- ------------
ASSETS
Current Assets. . . . . . . . . . . $ 13,989 $ 17,319 - $ - $ 31,308
Property & equipment, net . . . . . 3,683 10,262 - - 13,945
Receivable from related party . . . - 73,206 - - 73,206
Investment. . . . . . . . . . . . . - - 1,157,300 (2) (1,157,300) (4) -
------------- -------------- ----------- ------------- ------------
TOTAL ASSETS. . . . . . . . . . . . $ 17,672 $ 100,787 $ 1,157,300 $ (1,157,300) $ 118,459
============= ============== =========== ============= ============
LIABILITIES & STOCKHOLDERS' DEFICIT
Current liabilities . . . . . . . . $ 2,808,613 $ 480,462 (2A) 50,000 (2A) $ - $ 3,339,075
Long term liabilities . . . . . . . 140,000 - - - 140,000
------------- -------------- ----------- ------------- ------------
Total liabilities . . . . . . . 2,948,613 480,462 50,000.00 - 3,479,075
------------- -------------- ----------- ------------- ------------
Stockholders' deficit;
Common stock. . . . . . . . . . . 428 10,000 7,382 (2) (10,000) (1) 7,810
Additional paid in capital. . . . 14,638,462 - 1,099,918 (2) (17,584,581) (3) -
1,846,201 (3)
Shares to be issued . . . . . . . 14,750 - 14,750
Retained earnings (deficit) . . . (17,584,581) (389,675) 17,584,581 (3) (3,383,176)
(1,846,201) (3)
(1,147,300) (4)
------------- -------------- ----------- ------------- ------------
Total stockholders' equity . . (2,930,941) (379,675) 1,107,300 (1,157,300) (3,360,616)
------------- -------------- ----------- ------------- ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT . . . . . . . $ 17,672 $ 100,787 $ 1,157,300 $ (1,157,300) $ 118,459
============= ============== =========== ============= ============
NOTES;
(1) Elimination of Common stock of (B) before the acquisition
(2) Issuance of shares of common stock to shareholder of (B) valued at $1,107,300
(2A) As a part of acquisition, payment of $50,000 to be made along with issuance of shares.
(3) Elimination of pre-acquisition retained earnings of (B)
(4) Elimination of investment in subsidiary on consolidation
NETWORK INSTALLATION CORPORATION
PRO FORMA STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED MARCH 31, 2003
(UNAUDITED)
The following unaudited Pro Forma Statement of operations has been derived from
the unaudited financial statements statements of Flexxtech (A) for the three
month period ended March 31, 2003 and the unaudited financial statements of
Network Installation Corporation (B) for the three month period ended March 31,
2003.
The Pro Forma Statements of Operations reflects the acquisition of B by A (a
reporting company) on 5/23/2003 in a acquisition using reverse acquisition
method of accounting and assumes that such acquisition was consummated as of
January 1, 2003.
The Pro Forma Statement of Operations and financial conditions should be read in
conjunction with the Financial Statements of A, the Financial Statements of B
and the Notes to the financial statements. The Pro Forma Statements do not
purport to represent what the Company's results of operations and financial
conditions would actually have been if the acquisition of A had occurred on the
date indicated or to project the company's results of operations for any future
period or date. The Pro Forma adjustments, as described in the accompanying
data, are based on available information and the assumption set forth in the
foot notes below, which management believes are reasonable.
Flexxtech Network Ins. Pro Forma Pro Forma
(Historical) (Historical) Adjustment Combined
------------- -------------- ----------- -----------
Net Revenue . . . . . . . . . . . . . . . $ - $ 442,606 $ - $ 442,606
Cost of revenue . . . . . . . . . . . . . - 186,359 - 186,359
------------- -------------- ----------- -----------
Gross profit. . . . . . . . . . . . . . . - 256,247 - 256,247
Operating expenses. . . . . . . . . . . . 50,530 192,001 - 242,531
------------- -------------- ----------- -----------
Loss from operations. . . . . . . . . . . (50,530) 64,246 - 13,716
Non-operating income (Expenses) . . . . . (12,605) (1,094) - (13,699)
------------- -------------- ----------- -----------
Income before provision for income taxes. (63,135) 63,152 - 17
Provision for taxes . . . . . . . . . . . 800 800 - 1,600
------------- -------------- ----------- -----------
NET INCOME (LOSS) . . . . . . . . . . . . $ (63,935) $ 62,352 $ - $ (1,583)
============= ============== =========== ===========
EARNINGS PER SHARE
Weighted -average number of
shares outstanding . . . . . . . . . . 485,907 10,000 7,382,000 7,867,907
============= ============== ===========
Loss per share . . . . . . . . . . . . $ (0.13) $ 6.24 $ (0.00)
============= ============== ===========
NOTES:
(1) Loss per share data shown above are applicable for both primary and fully diluted.
(2) Weighted-average number of shares outstanding for the combined entity
includes all shares issued before the acquisition as if outstanding as of
January 1, 2003.
(3) Weighted average number of shares outstanding for combined entity includes
193,260 shares of A (after 200:1 reverse split on January 23, 2003) of the
outstanding shares as of March 31, 2003 and 7,382,000 shares of common stock
issued to the shareholders of (B) pursuant to the stock acquisition and
reorganization agreement.
(4) Weighted average number of shares used to compute basic and diluted loss per
share is the same since the effect of dilutive securities is
anti-dilutive.
PRO FORMA STATEMENT OF FINANCIAL CONDITIONS
AS AT MARCH 31, 2003
(UNAUDITED)
The following unaudited Pro Forma Statement of financial conditions has been derived from the unaudited financial statements
of Flexxtech (A) as of March 31, 2003 and the unaudited financial statements of Network Installation Corporation (B)
as of March 31, 2003. The unaudited Pro Forma Statements of financial conditions reflects the acquisition
of B by A (a reporting company) in a merger using reverse acquisition method of accounting.
Flexxtech Network Ins. Pro Forma Pro Forma
(Historical) (Historical) Investment Adjustment Combined
------------- -------------- ----------- ------------- ------------
ASSETS
Current Assets . . . . . . . . . . . . . . . $ 45,335 $ 280,200 $ - $ - $ 325,535
Property & equipment, net. . . . . . . . . . - 9,421 - - 9,421
Receivable from related party. . . . . . . . - 73,206 - - 73,206
Investment . . . . . . . . . . . . . . . . . - - 1,157,300 (2) (1,157,300) (4) -
------------- -------------- ----------- ------------- ------------
TOTAL ASSETS . . . . . . . . . . . . . . . . $ 45,335 $ 362,827 $ 1,157,300 $ (1,157,300) $ 408,162
============= ============== =========== ============= ============
LIABILITIES & STOCKHOLDERS' DEFICIT
Current liabilities. . . . . . . . . . . . . $ 2,894,311 $ 746,528 $ 50,000 (2A) - $ 3,690,839
Long term liabilities. . . . . . . . . . . . 140,000 - - - 140,000
------------- -------------- ----------- ------------- ------------
Total liabilities. . . . . . . . . . . . 3,034,311 746,528 50,000 - 3,830,839
------------- -------------- ----------- ------------- ------------
Stockholders' deficit:
Common stock . . . . . . . . . . . . . . . 503 10,000 7,382 (2) (10,000) (1) 7,885
Additional paid in capital . . . . . . . . 14,642,137 - 1,099,918 (2) (17,584,581) (3) 3,675
1,846,201 (3)
Shares to be issued. . . . . . . . . . . . 16,900 - - - 16,900
Retained earnings (deficit). . . . . . . . (17,648,516) (393,701) - 17,584,581 (3) (3,451,137)
(1,846,201) (3)
(1,147,300) (4)
------------- -------------- ----------- ------------- ------------
Total stockholders' deficit . . . . . . (2,988,976) (383,701) 1,107,300 (1,157,300) (3,422,677)
------------- -------------- ----------- ------------- ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) . . . . . . . $ 45,335 $ 362,827 $ 1,157,300 $ (1,157,300) $ 408,162
============= ============== =========== ============= ============
NOTES;
(1) Elimination of Common stock of (B) before the acquisition
(2) Issuance of shares of common stock to shareholder of (B) valued at $1,107,300
(2A) As a part of acquisition, payment of $50,000 to be made along with issuance of shares.
(3) Elimination of pre-acquisition retained earnings of (B)
(4) Elimination of investment in subsidiary on consolidation
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Stockholders and Board of Directors
Network Installation Corporation
We have audited the accompanying balance sheets of Network Installation
Corporation, a California Corporation, as of December 31, 2002 and 2001 and the
related statements of operations, stockholders' equity (deficit) and cash flows
for each of the two years in the period ended December 31, 2002. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes 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 Network Installation
Corporation as of December 31, 2002 and 2001 and the results of its operations
and its cash flows for each of the two years in the period ended December 31,
2002, in conformity with accounting principles generally accepted in the United
States of America.
The Company's financial statements are prepared using the generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has accumulated deficit of $389,675 and the Company's
total liabilities exceeded the total assets by $379,675 and $235,727 as of
December 31, 2002 and 2001, respectively. These factors as discussed in Note 3
to the financial statements, raises substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 3. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
KABANI & COMPANY, INC.
CERTIFIED PUBLIC ACCOUNTANTS
Fountain Valley, California
July 1, 2003
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Network Installation Corporation
(Registrant)
Date: March 19, 2004 /s/ Michael Cummings
-----------------------------------------
Name: Michael Cummings
Title: CEO and Director