Attached files
file | filename |
---|---|
EX-32.1 - Exobox Technologies Corp. | ex32-1.htm |
EX-31.2 - Exobox Technologies Corp. | ex31-2.htm |
EX-32.2 - Exobox Technologies Corp. | ex32-2.htm |
EX-31.1 - Exobox Technologies Corp. | ex31-1.htm |
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
____________________________________________________
FORM
10-Q
þ QUARTERLY REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
quarterly period ended October 31, 2009
o TRANSITION REPORT UNDER
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
transition period from ______ to ______
Commission
File Number 0-02555
[Missing Graphic Reference]
Exobox
Technologies Corp.
(Name
of Small Business Issuer in its charter)
Nevada
|
88-0456274
|
(State
or other jurisdiction of incorporation)
|
(I.R.S.
Employer Identification No.)
|
2121
Sage Road, Suite 200, Houston, Texas
|
77056
|
(Address
of principal executive offices)
|
(Zip
code)
|
Securities
registered under Section 12(g) of the Exchange Act:
Common
Stock
(Title of
class)
Indicate
by check mark whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirement for the
past 90 days. Yes þ
No o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files) þ Yes o
No
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Smaller
reporting Company þ
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o No
þ
As of
December 18, 2009, 333,817,053shares of the registrant's common stock were
outstanding.
FORM
10-Q FOR THE QUARTER ENDED OCTOBER 31, 2009
INDEX
PART
I. FINANCIAL INFORMATION
|
Page
No.
|
|
|
Item
1. Financial Statements
|
|
Balance
Sheets as of October 31, 2009 and July 31, 2009
(Unaudited).
|
F-1
|
Statements
of
Operations for the three months ended October 31,
2009 and2008
and for the period from October
21, 2002 (Inception) to October
31,
2009 (Unaudited).
|
F-2
|
Statements
of Cash Flows for the threemonths
ended October
31, 2009 and 2008 and
for the period from October 21, 2002 (Inception) to October
31,
2009 (Unaudited).
|
F-3
|
Notes
to the Financial Statements (Unaudited)
|
F-4
|
Item
2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
|
3
|
Item
3. Quantitative and Qualitative Disclosures about Market
Risk
|
6 |
Item
4. Controls and Procedures
|
6 |
PART
II. OTHER INFORMATION
|
|
Item
1. Legal Proceedings
|
6
|
Item
2. Recent Sales of Unregistered Securities
|
7
|
Item
3. Defaults Upon Senior Securities
|
8
|
Item
4. Submission of Matters to a Vote of Security
Holders
|
8
|
Item
5. Other Information
|
8
|
Item
6. Exhibits
|
8
|
Signatures
|
9
|
EXOBOX
TECHNOLOGIES CORP.
(A
DEVELOPMENT STAGE COMPANY)
BALANCE
SHEETS
(Unaudited)
October
31, 2009
|
July
31, 2009
|
|||||||
ASSETS
|
||||||||
Current
Assets:
|
||||||||
Cash
|
$ | 28,575 | 3 | |||||
Accounts
Receivable
|
2,706 | - | ||||||
Other
Current Assets
|
11,194 | 8,561 | ||||||
Total
Current Assets
|
42,475 | 8,564 | ||||||
Furniture,
fixtures and equipment, net
|
365,709 | 395,338 | ||||||
Other
Assets:
|
||||||||
Patents,
net
|
- | 1 | ||||||
Intangibles,
net
|
6,568 | 6,568 | ||||||
TOTAL
ASSETS
|
$ | 414,752 | 410,471 | |||||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
||||||||
Current
Liabilities:
|
||||||||
Accounts
Payable
|
$ | 572,491 | 432,621 | |||||
Accounts
Payable-Stockholders
|
2,576 | 2,594 | ||||||
Accrued
Liabilities
|
467,492 | 314,964 | ||||||
Advances
from Stockholders
|
883,343 | 875,081 | ||||||
Note
Payable
|
30,000 | 30,000 | ||||||
Deferred
Income
|
- | 1,400 | ||||||
Total
Current Liabilities
|
1,955,902 | 1,656,660 | ||||||
TOTAL
LIABILITIES
|
1,955,902 | 1,656,660 | ||||||
STOCKHOLDERS'
DEFICIT
|
||||||||
Preferred
stock:
|
||||||||
Series
A convertible preferred stock, $0.001 par, 2,500,000 shares authorized,
1,378 and 1,378 shares issued and outstanding as of October 31, 2009 and
July 31, 2009, respectively
|
1 | 1 | ||||||
Series
E convertible preferred stock, $0.001 par, 0 and 0 shares
issued and outstanding as of October 31, 2009 and July 31, 2009,
respectively
|
- | -- | ||||||
Common
stock, $0.001 par value, 500,000,000 shares authorized,
371,250,303
and
460,664,395 shares issued and outstanding at October 31, 2009 and July 31
2009, respectively
|
371,250 | 460,664 | ||||||
Additional
paid-in capital
|
15,798,206 | 14,481,168 | ||||||
Deficit
accumulated during development stage
|
(17,710,607 | (16,188,022 | ) | |||||
Total
stockholders' deficit
|
(1,541,150 | ) | (1,246,189 | ) | ||||
TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
$ | 414,752 | 410,471 |
See
accompanying notes to the financial statements
F-1
EXOBOX
TECHNOLOGIES CORP.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF OPERATIONS
For the
Quarters Ended October 31, 2009 and 2008,
and the
period from October 21, 2002 (Inception) to October 31, 2009
(Unaudited)
Quarter
Ended October 31, 2009
|
Quarter
Ended October 31, 2008
|
Period
from October 21, 2002 (Inception) To October 31,
2009
|
||||||||||
|
|
|||||||||||
Revenues
|
$
|
3,900
|
$
|
-
|
$
|
3,900
|
||||||
Cost
of Revenue
|
9,057
|
-
|
23,714
|
|||||||||
Gross
Loss
|
5,157
|
-
|
19,814
|
|||||||||
Operating
Expenses:
|
||||||||||||
General
& administrative
|
1,153,356
|
158,746
|
5,831,533
|
|||||||||
Depreciation
and amortization
|
28,779
|
20,785
|
157,115
|
|||||||||
Professional
fees
|
135,069
|
403,497
|
4,347,407
|
|||||||||
Payroll
expenses
|
273,295
|
311,470
|
6,153,442
|
|||||||||
Software
Development Expense
|
-
|
902,824
|
||||||||||
Loss
on disposal of assets
|
-
|
9,855
|
||||||||||
Loss
on impairment of assets
|
-
|
50,591
|
||||||||||
Research
and development
|
21,094
|
-
|
309,353
|
|||||||||
Total
Operating Expenses
|
1,611,593
|
894,498
|
17,762,120
|
|||||||||
Loss
from Operations
|
1,611,593
|
894,498
|
17,781,934
|
|||||||||
Other
Income (Expenses):
|
||||||||||||
Gain
on derivatives
|
-
|
-
|
100,000
|
|||||||||
Gain
on sale of patent
|
95,000
|
95,000
|
||||||||||
Gain
on extinguishment of Accounts Payable
|
-
|
84,065
|
||||||||||
Gain
on extinguishment of note
|
-
|
-
|
7,137
|
|||||||||
Interest
income
|
1,323
|
3,578
|
||||||||||
Interest
expense
|
(835
|
)
|
(625)
|
(218,453)
|
||||||||
Total
Other Income
|
94,165
|
698
|
71,327
|
|||||||||
Loss
Before Income Taxes
|
1,522,585
|
893,800
|
17,710,607
|
|||||||||
Provision
for Income Taxes
|
-
|
-
|
-
|
|||||||||
Net
Loss
|
$
|
(1,522,585
|
)
|
$
|
(893,800
|
)
|
$
|
(17,710,607)
|
||||
Basic
and diluted
|
||||||||||||
Net
loss per common share-basic and diluted
|
$
|
(0.003
|
)
|
$
|
(0.00
|
)
|
||||||
Weighted average shares outstanding-basic and diluted |
463,996,587
|
398,844,984 |
F-2
EXOBOX
TECHNOLOGIES CORP.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF CASH FLOWS
For the
Quarters Ended October 31, 2009 and 2008,
and
period from October 21, 2002 (Inception) to October 31, 2009
(Unaudited)
Quarter
Ended October 31,
|
Quarter
Ended October 31,
|
October 21,
2002 (Inception) to October 31,
|
||||||||
2009
|
2008
|
2009
|
||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||||
Net
Loss
|
$
|
(1,522,585)
|
$
|
(893,800
|
)
|
$
|
(17,710,607)
|
|||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||
Shares
issued for services
|
1,059,191
|
-
|
4,761,445
|
|||||||
Warrant
issued for consulting services
|
-
|
-
|
446,660
|
|||||||
Loss
on disposal of assets
|
-
|
-
|
9,856
|
|||||||
Loss
on impairment of assets
|
-
|
-
|
50,591
|
|||||||
Depreciation
and amortization
|
28,779
|
20,785
|
157,117
|
|||||||
Share-based
compensation
|
6,112
|
186,740
|
2,902,889
|
|||||||
(Gain)
Loss on derivative
|
-
|
-
|
5,000
|
|||||||
Gain
on debt extinguishment
|
-
|
-
|
(7,137)
|
|||||||
(Gain)Loss
on accounts payable
|
-
|
-
|
(84,065)
|
|||||||
(Gain)Loss
on sale of patent
|
(95,000)
|
(95,000)
|
||||||||
Contributed
capital
|
12,911
|
-
|
75,433
|
|||||||
Amortization
of debt discount
|
304
|
-
|
80,304
|
|||||||
Changes
in operating assets and liabilities
|
|
|||||||||
Prepaid
and other current assets
|
(2,633)
|
44,577
|
(11,194)
|
|||||||
Accounts
payable
|
140,720
|
99,429
|
693,264
|
|||||||
Accounts
receivable
|
(2,706)
|
(2,706)
|
||||||||
Accrued
expenses
|
152,528
|
(9,160)
|
2,220,659
|
|||||||
Deferred
income
|
(1,400)
|
-
|
-
|
|||||||
Accounts
payables to stockholders
|
(17)
|
2,576
|
||||||||
NET
CASH USED IN OPERATING ACTIVITIES
|
(223,796)
|
(551,429
|
)
|
(6,504,915
)
|
||||||
CASH
FLOW FROM INVESTING ACTIVITIES
|
||||||||||
Proceeds
from sale of patents
|
95,000
|
-
|
95,000
|
|||||||
Investment
in patents
|
-
|
-
|
(67,233)
|
|||||||
Investment
in intangible assets
|
-
|
-
|
(16,000)
|
|||||||
Investment
in property and equipment
|
-
|
(195,121)
|
(458,498)
|
|||||||
NET
CASH USED IN INVESTING ACTIVITIES
|
95,000
|
(195,121)
|
(446,731)
|
|||||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||||
Proceeds
from sale of stock
|
112,000
|
-
|
5,395,200
|
|||||||
Advances
from stockholders
|
6,368
|
-
|
1,434,949
|
|||||||
Proceeds
from warrants exercised
|
9,000
|
-
|
546,502
|
|||||||
Repayment
of advances from stockholders
|
-
|
-
|
(501,430)
|
|||||||
Convertible
note proceeds
|
30,000
|
-
|
210,000
|
|||||||
Proceeds
from third party debt, net
|
-
|
-
|
(105,000)
|
|||||||
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
157,368
|
-
|
6,980,221
|
|||||||
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
28,572
|
(746,550)
|
28,575
|
|||||||
Cash
and cash equivalents at beginning of period
|
3
|
767,338
|
-
|
|||||||
Cash
and cash equivalents at end of period
|
$
|
28,575
|
$
|
20,788
|
$
|
28,575
|
||||
SUPPLEMENTAL
DISCLOSURES
|
||||||||||
Cash
paid for interest
|
$
|
$
|
625
|
|||||||
Cash
paid for income taxes
|
-
|
|||||||||
NON-CASH
TRANSACTIONS
|
||||||||||
Shares
Returned and Cancelled
|
$
|
128,069
|
$
|
-
|
||||||
Discount
on Convertible Note
|
28,410
|
-
|
See accompanying notes to the financial
statements
F-3
EXOBOX
TECHNOLOGIES CORP.
NOTES TO
THE FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 –
NATURE OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES
The
accompanying unaudited interim financial statements of Exobox Technologies
Corp., a Nevada corporation, have been prepared in accordance with accounting
principles generally accepted in the United States of America and the rules of
the Securities and Exchange Commission and should be read in conjunction with
the audited financial statements and notes thereto contained in our latest
Annual Report filed with the SEC on Form 10-K. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of financial position and the results of operations for the interim
periods presented have been reflected herein. The results of operations for
interim periods are not necessarily indicative of the results to be expected for
the full year.
Notes to
the financial statements which would substantially duplicate the disclosure
contained in the audited financial statements for the most recent fiscal year,
July 31, 2009, as reported in Form 10-K, have been omitted.
Certain
prior quarter amounts have been reclassified to conform with the current quarter
presentation.
Exobox is
an enterprise and home user network and data security development company formed
to capitalize upon the growing need for a modern, reliable, efficient, effective
and proactive network and data security solutions. Exobox is the
parent company to its wholly-owned subsidiary, Exbx Energy, Inc., a Texas
corporation (“Exbx Energy”) since its formation in October, 2009.
NOTE 2 -
GOING CONCERN
From Inception to October 31, 2009,
Exobox has accumulated losses of $17,710,607. The ability of Exobox to emerge
from the development stage with respect to any planned principal business
activity is dependent upon its success in raising additional equity or debt
financing and/or attaining profitable operations. Management has plans to seek
additional capital. There is no guarantee that Exobox will be able to complete
any of the above objectives. These factors raise substantial doubt regarding
Exobox's ability to continue as a going concern.
F-4
NOTE 3 –
PATENTS
Patents
are mainly comprised of legal services paid to a shareholder and patent
application fees. Exobox began amortizing these costs since the
patents have been granted. Patents were impaired as of July 31, 2009 in
the amount of $50,591.
On
September 15, 2009, Exobox Technologies, Corp. sold all right, title, and
interest of all the SOS Patents to Scott Copeland in return for $95,000,
resulting in a gain from assignment of patents of $95,000. On November
1st,
2009, Scott Copeland re-assigned all the SOS patents to Exobox Technologies,
Corp. in exchange for a royalty equal to three percent (3%) of the net proceeds,
if any, derived by Exobox from the SOS technology and issue directly to three
(3) other individuals or entities of Copeland’s choosing, a collective total of
1,250,000 shares of Exobox common stock restricted under Rule 144.
In June
2009, Exobox issued an unsecured promissory note with RSA Corp pursuant to an
agreement for employee recruiting services dated November 7, 2008 by converting
the $35,000 outstanding accounts payable balance to the note. The note
bears interest of 0% per year and matures December 1, 2009. The loans
totaled to $30,000 as of October 31, 2009.
In
September 2009, Exobox borrowed $30,000 under convertible notes payable to two
individuals. The notes bear interest at 10% per year, matured on September
4, 2009, and are convertible into common shares at $0.03 per share. In
connection with the notes, Exobox issued warrants to purchase 990,000 common
shares at $0.03 per share for a term of three years. Exobox evaluated
the terms of the notes in accordance with FASC 815 (formerly SFAS No. 133,
“Accounting for Derivative
Instruments and Hedging Activities”, and EITF Issue 00-19, “Accounting for Derivative Financial
Instruments to and Potentially Settled in a Company’s Own
Stock”). Exobox determined that the convertible notes are not
derivative instruments. Exobox evaluated the conversion feature under
FASC 470 (formerly EITF 98-5 and EITF 00-27) and determined that a beneficial
conversion feature should be recognized and gave rise to a debt discount of
$28,410.
NOTE 5 –
STOCKHOLDERS’ EQUITY
Treasury
Stock
During
October, 2009, several shareholders agreed to return over 128 million shares of
the Company’s common stock to the Company’s treasury. Treasury stocks were
valued at par of $128,069.
Stock
Issued for Services
During
the quarter ended October 31, 2009, we issued 29,554,501 common shares to
consultants and employees pursuant to consulting and employment agreements with
a value of $1,059,191
F-5
Stock
Issued for Cash
During
the quarter ended October 31, 2009, we issued 8,950,000 common shares for
$112,000 in cash.
Stock
Issued for Warrants Exercised
During
the quarter ended October 31, 2009, we issued 150,000 common shares in relation
to warrants exercised for $9,000.
OPTIONS
In the
quarter ended October 31, 2009, Exobox granted an employee of Exobox an option
to purchase 25,000 shares with an exercise price of $0.25 a
share. The 25,000 shares vested immediately.
The
following assumptions were applied to value the options:
Expected volatility 174%- 243% | ||||
Term
(years)
|
1.5 – 3 | |||
Risk-free
interest rate
|
1.16% - 3.01 | % | ||
Expected
dividend yield
|
0 | % |
Black-Scholes
was applied to value the options and Exobox recognized $6,112 of stock based
compensation expense for the quarter ended October 31, 2009. The
remaining 386,198 unvested shares have an unrecognized value of
$34,833. The options intrinsic value is $0 as of October 31,
2009.
The
status of the options as of October 31, 2009, is as follows:
Options
|
Weighted
Average Exercise Price
|
|||||||
Outstanding
July 31, 2009
|
20,225,000
|
0.28
|
||||||
Granted
|
25,000
|
0.25
|
||||||
Expired
|
-
|
-
|
||||||
Exercised
|
-
|
-
|
||||||
Outstanding,
October 31, 2009
|
20,250,000
|
$
|
0.28
|
F-6
Following
is the details of options outstanding as of October 31, 2009:
Number
of Common Stock Equivalents
|
Expiration
Date
|
Remaining
Contracted Life (Years)
|
Exercise
Price
|
||||||||
50,000
|
10/14/2011
|
2.00
|
0.25
|
||||||||
25,000
|
11/14/2011
|
2.08
|
0.25
|
||||||||
50,000
|
12/7/2011
|
2.17
|
0.25
|
||||||||
75,000
|
12/16/2011
|
2.17
|
0.25
|
||||||||
50,000
|
10/14/2012
|
3.00
|
0.25
|
||||||||
25,000
|
11/14/2012
|
3.08
|
0.25
|
||||||||
50,000
|
10/14/2013
|
4.00
|
0.25
|
||||||||
25,000
|
11/14/2013
|
4.08
|
0.25
|
||||||||
50,000
|
10/14/2014
|
5.00
|
0.25
|
||||||||
25,000
|
11/14/2014
|
5.08
|
0.25
|
||||||||
25,000
|
4/1/2012
|
2.42
|
0.25
|
||||||||
50,000
|
4/28/2012
|
2.50
|
0.25
|
||||||||
25,000
|
5/28/2012
|
2.58
|
0.25
|
||||||||
25,000
|
6/17/2012
|
2.67
|
0.25
|
||||||||
25,000
|
6/28/2012
|
2.67
|
0.25
|
||||||||
25,000
|
7/28/2012
|
2.75
|
0.25
|
||||||||
25,000
|
8/28/2012
|
2.83
|
0.25
|
||||||||
25,000
|
9/28/2012
|
2.92
|
0.25
|
||||||||
25,000
|
10/28/2012
|
3.00
|
0.25
|
||||||||
25,000
|
4/1/2013
|
3.42
|
0.25
|
||||||||
25,000
|
4/1/2014
|
4.42
|
0.25
|
||||||||
25,000
|
4/1/2015
|
5.42
|
0.25
|
||||||||
2,500,000
|
1/1/2014
|
4.17
|
0.15
|
||||||||
1,500,000
|
1/1/2014
|
4.17
|
0.25
|
||||||||
1,500,000
|
1/1/2014
|
4.17
|
0.40
|
||||||||
1,000,000
|
1/1/2014
|
4.17
|
0.15
|
||||||||
1,000,000
|
1/1/2014
|
4.17
|
0.25
|
||||||||
2,500,000
|
5/18/2011
|
1.58
|
0.15
|
||||||||
2,000,000
|
5/18/2011
|
1.58
|
0.25
|
||||||||
1,500,000
|
5/18/2011
|
1.58
|
0.40
|
||||||||
2,500,000
|
5/18/2011
|
1.58
|
0.15
|
||||||||
2,000,000
|
5/18/2011
|
1.58
|
0.25
|
||||||||
1,500,000
|
5/18/2011
|
1.58
|
0.40
|
||||||||
20,250,000
|
3.00
|
0.28
|
F-7
WARRANTS
At
October 31, 2009, we had outstanding and exercisable warrants to purchase an
aggregate of 15,844,284 shares of common stock with an intrinsic value of
$0. The weighted average remaining life is 2.58 years and the
weighted average price per share is $0.47 per share.
The
status of the warrants as of October 31, 2009, is as follows:
Warrants
Outstanding and Exercisable
|
Warrants
|
Weighted
Average Exercise Price
|
||||||
Outstanding,
July 31, 2009
|
15,994,284
|
$
|
0.47
|
|||||
Granted
|
-
|
-
|
||||||
Expired
|
-
|
-
|
||||||
Exercised
|
(150,000
|
)
|
(.06)
|
|||||
Outstanding,
October 31, 2009
|
15,844,284
|
$
|
0.41
|
Following
is the details of warrants outstanding as of October 31, 2009:
Number
of Common Stock Equivalents
|
Expiration
Date
|
Remaining
Contracted Life (Years)
|
Exercise
Price
|
|||||
2,902,500 |
10/31/2010
|
1.00
|
$
|
0.20
|
||||
50,000 |
7/31/2011
|
1.75
|
$
|
0.25
|
||||
5,400,000 |
12/31/2011
|
2.17
|
$
|
1.00
|
||||
1,600,000 |
4/30/2012
|
2.50
|
$
|
0.03
|
||||
825,000 |
6/1/2012
|
2.58
|
$
|
0.03
|
||||
2,075,000 |
6/4/2012
|
2.58
|
$
|
0.03
|
||||
83,333 |
6/12/2012
|
2.58
|
$
|
0.03
|
||||
1,408,451 |
6/29/2012
|
2.66
|
$
|
0.03
|
||||
1,500,000 |
9/24/2012
|
2.92
|
$
|
0.30
|
NOTE 6 –
SUBSEQUENT EVENTS
Subsequent
events through December 21, 2009, are as follows:
Oil
& Gas Properties
On
October 22, 2009, Exobox Technologies Corp. purchased 17 oil & gas wells
located in Ohio that produce from the Clinton and Marcellus Shale formations
(the “Assets”) from a private oil & gas company. Although this
transaction closed on October 22, 2009, Exobox Technologies will be accounting
for it on November 1, 2009. The Assets acquired were purchased for $5.9
million, which includes:
(a)
|
The
assumption of approximately $3.0 million in total existing debt associated
with these Assets. Debt is valued at face value of $3 million which
approximates the market value on October 22,
2009.
|
(b)
|
5-year, 7.5% convertible note in
the amount of $1.5 million and convertible into common stock at $0.21 per
share. Debt is valued at face value of $1.5 million which
approximates the market value on October 22,
2009.
|
(c)
|
1,163,000
shares of Series E Convertible Preferred Stock which is convertible into
common stock at $0.04 for stock value of $949,929. The stock value is
based on the closing market value on October 22,
2009.
|
(d)
|
3,000,000
shares of restricted Exobox common stock for value of $120,000. The
stock value is $.04 which is based on the closing market value on the
October 22, 2009.
|
The
entire purchase price was allocated to proved oil and gas properties as this was
the only asset acquired.
On
a fully-converted basis, the shares issuable upon conversion of the convertible
note and the convertible preferred stock, along with the restricted common
stock, would represent 34,500,000 shares of common stock, or approximately 9.9%
of the total common shares outstanding, after giving effect to (i) the shares
issuable pursuant to the Purchase and Sale Agreement on a fully-converted basis,
and (ii) the 150 million shares being returned to the company by certain
shareholders, as previously announced on October 16, 2009.
F-8
The
following pro forma balance sheet shows the pro forma effects of the acquisition
of the Assets based on the assumption that the transaction occurred effective
October 31, 2009.
Exobox
Historical
|
October 31, 2009 Purchase price allocation |
Pro
Forma
|
||||||||||
Current
Assets:
|
||||||||||||
Cash
|
28,575 | - | $ | 28,575 | ||||||||
Accounts
Receivable
|
2,706 | 3,883 | 6,589 | |||||||||
Other
Current Assets
|
11,194 | - | 11,194 | |||||||||
Total
Current Assets
|
42,475 | 3,883 | 46,358 | |||||||||
Oil
and gas properties:
|
||||||||||||
Proved
Properties, net
|
- | 5,957,127 | 5,957,127 | |||||||||
Furniture,
fixtures and equipment, net
|
365,709 | - | 365,709 | |||||||||
Other
Assets:
|
||||||||||||
Patents,
net
|
- | - | - | |||||||||
Intangibles,
net
|
6,568 | - | 6,568 | |||||||||
TOTAL
ASSETS
|
414,752 | 5,961,010 | 6,375,762 | |||||||||
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
||||||||||||
Current
Liabilities:
|
||||||||||||
Accounts
Payable
|
572,491 | 204,059 | 776,550 | |||||||||
Accounts
Payable-Stockholders
|
2,576 | - | 2,576 | |||||||||
Advances
from Stockholders
|
883,343 | - | 883,343 | |||||||||
Note
Payable
|
30,000 | - | 30,000 | |||||||||
Accrued
Liabilities
|
467,492 | 467,492 | ||||||||||
Deferred
Income
|
- | - | - | |||||||||
Total
Current Liabilities
|
1,955,902 | 204,059 | 2,159,961 | |||||||||
Long
Term Liabilities:
|
||||||||||||
Long
Term Note (5 yr, 7.5% interest, Convertible at $0.21 per
share)
|
- | 1,500,000 | 1,500,000 | |||||||||
Asset
Retirement Obligation
|
273,075 | 273,075 | ||||||||||
Discount
on Convertible Note
|
- | (1,285,714 | (1,285,714 | ) | ||||||||
Long
Term Debt
|
- | 2,800,000 | 2,800,000 | |||||||||
Total
Long Term Liabilities
|
- | 3,287,361 | 3,287,361,3 | |||||||||
TOTAL
LIABILITIES
|
1,955,902 | 3,491,420 | 5,447,322 | |||||||||
STOCKHOLDERS'
EQUITY (DEFICIT)
|
||||||||||||
Preferred
stock:
|
||||||||||||
Series
A convertible preferred stock, $0.001 par, 2,500,000 shares authorized,
1,378 and 6,378 shares issued and outstanding as of October 31, 2009
and July 31, 2009, respectively
|
1 | - | 1 | |||||||||
Series
E convertible preferred stock, $0.001 par, 1,163,000 shares authorized,
1,163,000 and 0 shares issued and outstanding as of October 31, 2009 and
July 31, 2009, respectively
|
- | - | - | |||||||||
Common
stock, $0.001 par value, 500,000,000 shares authorized, 371,137,803 and
460,664,395 shares issued and outstanding at October 31, 2009 and July 31
2009, respectively
|
371,250 | 27,357 | 398,607 | |||||||||
Additional
paid-in capital
|
15,798,206 | 2,445,285 | 18,243,491 | |||||||||
Deficit
accumulated during development stage
|
(17,710,607 | ) | (3,052 | ) | (17,713,659 | ) | ||||||
Total
stockholders' equity (deficit)
|
(1,541,150 | ) | 2,469,590 | 928,440 | ||||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
414,752 | 5,961,010 | 6,375,762 |
F-9
These oil
& gas wells have a represented PV10 reserve value of approximately $22.75
million (based on current NYMEX pricing).
The
purchase of the oil & gas assets occurred under the prior CEO of the
company. Exobox’s current management believes that these assets
have value but are not a good fit for the company as current
management’s priority is software development. As such, the company
is prepared to divest itself of these oil & gas assets and related debt and
is prepared to solicit reasonable offers to complete a sale. Gains,
if any, from the sale of these assets would be directed towards the goal of
software development.
Employment
and Consulting Agreements
On
November 1, 2009, the Company hired Mr. Richard J. Kampa to serve as President,
Chief Executive Officer and a Director. The agreement, with a term of six
months, calls for a salary of $20,000 per month and an initial issuance of
1,000,000 common shares. When the agreement continues beyond six
months, Mr. Kampa will receive 100,000 shares of common stock for each month the
agreement remains in effect.
On
December 1, 2009, the Company hired Mr. Michael G. Wirtz to return and serve as
Vice President and Chief Financial Officer. Mr. Wirtz had served in the same
position from 2006 through May 6, 2009.
Shareholders
Return of their Common Stock
During
December 2009, a shareholder has agreed to return almost 6 million shares of the
Company’s common stock to the Company’s treasury. It is expected that all
of the shares will be returned to the Company’s treasury in the near future thus
reducing the number of the company’s outstanding common shares.
Lease
Agreement
On
November 12, 2009, the Company’s office space lessor amended its lease whereby
the $49,565 the company owed to the Lessor at that time was amortized into the
monthly lease payment. The monthly rent payment will increase by
$1,371 to $11,153 per month over the remaining 41.5 months of the lease
term. The amortization will use an 8% interest rate.
Stock
Issued
In
November 2009, 1,500,000 common shares were sold to an entity 25% owned by Mr.
Wirtz and 50% owned by former management or board members for $30,000 in cash
proceeds to the company.
Promissory
Note
In
December 2009, an entity 25% owned by Mr. Wirtz and 50% owned by former
management or board members loaned the company $20,000 in exchange for a
promissory note at 12% per anum interest which is due on May 31,
2010.
F-10
This
report on Form 10-Q contains forward-looking statements that relate to the
Company's expectations regarding future events or future financial performance.
Any statements contained in this report that are not statements of historical
fact may be deemed forward-looking statements. In some cases, forward-looking
statements can be identified by terminology such as "may," "will," "should,"
"expect," "plan," "anticipate," "intend", "believe," "estimate," "predict,"
"potential" or "continue," or the negative of such terms or other comparable
terminology. These statements are only predictions. Actual events or results may
differ materially.
Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Moreover, neither we, nor any other entity, assume
responsibility for the accuracy and completeness of the forward-looking
statements. We are under no obligation to update any of the forward-looking
statements after the filing of this Form 10-Q to conform such statements to
actual results or to changes in our expectations.
The
following discussion should be read in conjunction with our condensed
consolidated financial statements, related notes and the other financial
information appearing elsewhere in this Form 10-Q. Readers are also urged to
carefully review and consider the various disclosures made by us, which attempt
to advise interested parties of the factors which affect our business, including
without limitation, the disclosures made under Item 1A. Risk
Factors. The risk factors below supplement and should be read in
conjunction with “ Risk Factors” under Item I in our Annual Report on Form 10-K
for the fiscal year ended July 31, 2009.
-3-
Overview
Exobox
Technologies Corp. develops and delivers information risk management and
security software solutions that help organizations protect and recover their
most valuable information assets. We are committed to our vision of creating a
more secure environment for the information-centric community through the
development of new technologies and security services. This
information-centric community is primarily comprised of companies that must
abide by Governance, Risk and Compliance (GRC) policies - Fortune 500 public
companies; the secondary target audience are those companies with valuable
at-risk information, which includes financial services providers, healthcare
providers and high-technology providers.
Information
follows a typical path, or lifecycle: creation, distribution,
storage, copying, transformation, and disposal. Throughout this data
lifecycle, an organization’s information or intellectual property is at risk to
exposure of being in the wrong hands or in the wrong place. Nearly
every organization has been exploited through data leaks. Intellectual property,
financial information, confidential client lists, customer, patient and employee
data . . . it is all at risk of exposure from both internal and external
threats. The biggest contributors to information security risks are the open
exchange of information through the Internet, especially via web 2.0
applications such as social-networking sites, video-sharing sites and blogs, the
rapid growth of a mobile workforce, the termination of employment, the lack of
understanding that information is confidential – just to name a
few. In fact, the market is so concerned about these issues that
security software revenue is expected to exceed $13.1 billion by 2012 or a
compound average growth rate (CAGR) of 10.5% by 2012 according to
Gartner.
Recently,
we have achieved several key milestones:
|
·
|
We
appointed Richard J. Kampa as President, Chief Executive Officer and
Director to lead the strategic and daily operations of the company and
brought back Michael G. Wirtz as Chief Financial
Officer.
|
|
·
|
We
brought the ExoDetect™ product to general
availability. ExoDetect™ is our first
product.
|
|
·
|
We
released ExoDetect™ at the end of June 2009. This first product
is an affordable, software-as-a-service (SaaS) data leak detection (DLD)
software solution that discovers and rates the risk of unauthorized “data
in the wild.” ExoDetect™ reports on the knowledge needed to
tighten an organization’s data leak prevention (DLP) controls, while
providing the first step in mitigating the financial and legal risks
associated with stolen or misappropriated confidential
information. ExoDetect ™ performs scans for compromised data on
any exposed area in the Internet Cloud; classifies the discovered
information according to confidence and severity ratings; and captures the
forensic evidence needed to address the breach, including litigation or
prosecution. We have an ongoing process of updating and refining
the ExoDetect™ product.
|
|
·
|
The
Company is focused on marketing to its clients its current products,
ExoDetect™ and ExoWatch™ and developing its other proprietary
technology.
|
|
·
|
The
purchase of the oil & gas assets occurred under the prior CEO of the
company. Exobox’s current management believes that these
assets have value but are not a good fit for the company as
current management’s priority is software development. As such,
the company is prepared to divest itself of these oil & gas assets and
related debt and is prepared to solicit reasonable offers to complete a
sale. Gains, if any, from the sale of these assets would be
directed towards the goal of software
development.
|
Exobox
was founded in 2002 and, in conjunction with becoming a publicly-traded company
in September 2005, merged with a successor Nevada corporation which was
originally incorporated in 1999.
-4-
Three
Months Ended October 31, 2009 Compared to Three Months Ended October
31, 2008
Net Sales. Sales during the
quarter ended October 31, 2009, were $3,900 compared to $0 for the quarter ended
October 31, 2008. These are the first sales for the company as
the company brought its first product, ExoDetect™ to market earlier this
year.
Research and Development Expenses.
Research and development expenses consist primarily of compensation and related
costs for personnel responsible for the research and development of new products
and services, and in the future will include those costs and expenses related to
significant improvements to existing products and services. We have expensed
research and development costs as they have been incurred. We had research and
development expenses of $21,094 for the three months ended October 31,
2009 as compared to $0 incurred in the same period of 2008. The increased
research and development expenses in 2009 relate to the costs of developing
ExoDetect™.
Sales and Marketing Expenses.
Sales and marketing expenses consist primarily of compensation and related costs
for personnel engaged in customer service, sales, and sales support functions,
as well as advertising and promotional expenditures. In preparation for the
upcoming release of our first product, ExoDetect™, we had sales and marketing
expenses of $52,260 for the three months ended October 31, 2009 as compared
to $ 0 incurred in the same period of 2008.
General and Administrative Expenses
(“G&A”). General
and administrative expenses consist primarily of compensation and related costs
for personnel and facilities related to our finance, human resources,
facilities, information technology and legal organizations, and fees for
professional services. Professional services are principally comprised of
outside legal, audit, information technology consulting, general business
consulting and outsourcing services. G&A expenses for the three months ended
October 31, 2009 as compared to 2008 increased from $158,746 to $1,153,356. The
increase was primarily due to the ramp up in our operations related to
the release of our first product, ExoDetect™.
Net Loss. Net loss for
the three months ended October 31, 2009 and 2008 was $1,522,585 and $893,800,
respectively. The increased loss
was
primarily due to the ramp up in our operations related to the release
of our first product, ExoDetect™.
Liquidity
and Capital Resources
As of
October 31, 2009, we had a working capital deficit of $1,913,427. Our
current liquidity position does not allow us to meet our nominal working capital
need which has required us to leverage off our vendors and seek loans from
certain shareholders. Historically, our working capital resulted from best
efforts equity financing and shareholder loans. During the three months ended
October 31, 2009, we borrowed $30,000 from certain shareholders on a short
term basis . To date, we have repaid $501,430 of this indebtedness,
although it should be expected that we will borrow additional amounts in the
future. It is likely we will have to issue additional shares of
our common stock in the future in an attempt to conserve cash. We will need to
obtain working capital of at least $2,000,000 to fund our minimum operating
expenses for the twelve months. In order to fund our full product
development, including marketing and testing, we will need to raise at least an
additional $9,000,000. We have no external credit or debt facilities
in place to provide financing. We will be reliant upon best efforts debt or
equity financing to provide necessary working capital. Accordingly,
there can be no assurance we will be able obtain necessary funding to meet
working capital requirements, the failure of which will result in our curtailing
operations and/or selling assets.
Off-Balance
Sheet Arrangements
None.
-5-
Contractual
Commitments
None.
Not
applicable.
ITEM
4. CONTROLS AND PROCEDURES
We have
carried out an evaluation, under the supervision and with the participation of
our management, including our Chief Executive Officer (the "CEO") and our Chief
Financial Officer (the "CFO"), of the effectiveness of the design and operation
of our disclosure controls and procedures (as defined in Rule 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Act")) as
of the end of the fiscal quarter covered by this report. Based upon that
evaluation, our CEO and CFO concluded that our disclosure controls and
procedures are not effective in providing reasonable assurance that (a) the
information required to be disclosed by us in the reports that we file or submit
under the Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms,
and (b) such information is accumulated and communicated to our management,
including our CEO and CFO, as appropriate to allow timely decisions regarding
required disclosure. Specifically, our independent auditor identified weaknesses
in our disclosure controls related to valuing and accounting for share-based
payments, derivative financial instruments and accrued expenses. We plan to
remediate this deficiency in disclosure controls by increasing the supervision
and training of accounting employees.
There has
been no change in our internal control over financial reporting during the
quarter ended October 31, 2009, covered by this report that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting
We are
not a party to any litigation and to the best of our knowledge no litigation is
threatened.
ITEM
1A.
|
RISK
FACTORS
|
Certain
Factors that May Affect Future Performance
The risk
factors below supplement and should be read in conjunction with “ Risk Factors”
under Item I in our Annual Report on Form 10-K for the fiscal year ended July
31, 2009.
We
have a limited operating history with significant losses and expect losses to
continue for the foreseeable future.
We have
incurred annual operating losses since our inception. As a result, at October
31, 2009, we had an accumulated deficit of $17,710,607. We had gross revenues of
$3,900 for the quarter ended October 31, 2009, and a loss from operations of
$1,522,585. As we pursue our business plan, we expect our operating expenses to
increase significantly, especially in the areas of sales and marketing. As a
result, we expect continued losses in fiscal 2010 and thereafter.
-6-
We may not be able to meet our
current and future liabilities and remain in operation until we receive
additional capital.
As of
October 31, 2009, we have current assets of $42,475 and current liabilities of
$1,955,902. Our current liquidity position only allows us to meet
nominal working capital needs. We will need $2,000,000 to meet our
working capital needs through fiscal 2010. Any failure to obtain such
financing could force us to abandon or curtail our operations.
Ours
auditor has substantial doubts as to our ability to continue as a going
concern.
Our
auditor's quarterly report as of October 31, 2009 expresses an opinion that
substantial doubt exists as to whether we can continue as an ongoing
business. Because we do not have sufficient capital, we may be
required to suspend or cease the implementation of our business plans within 12
months. Because we have been issued an opinion by its auditors that substantial
doubt exists as to whether we can continue as a going concern, it may be more
difficult for us to attract investors. Our future is dependent upon
our ability to obtain financing and upon future profitable operations from the
sale of our products.
Set forth
below is certain information concerning issuances of common stock that were not
registered under the Securities Act of 1933 (“Securities Act”) that occurred in
the first quarter of fiscal 2010.
During
August, 2009, an unaffiliated third party acquired 450,000 shares of our common
stock in consideration of $27,000.
During
August, 2009, three unaffiliated third parties acquired 150,000 shares of our
common stock through the exercise of warrants at $0.06 per share for a total
consideration of $9,000
On August
15, 2009, September 15, 2009 and October 15, 2009 we issued a total of 1,847,001
shares of common stock to Mr. Dillon (1,154,376 shares) and Mr. Wirtz
(692,625 shares) in accordance with the terms of their separation
agreements.
In
August, September and October, 2009, the Company granted 27,707,500 shares of
common stock to consultants for services performed . The shares were
valued at $966,841 on the date of issuance.
During
October, 2009, Mr. Wittenburg, a former officer and director acquired 5,000,000
shares of our restricted common stock in consideration of $50,000.
During
October, 2009, Mr. Dillon, a former officer and director acquired 3,500,000
shares of our restricted common stock in consideration of $35,000.
The
issuances referenced above were consummated pursuant to Section 4(2) of the
Securities Act and the rules and regulations promulgated thereunder on the basis
that such transactions did not involve a public offering and the offerees were
sophisticated, accredited investors with access to the kind of information that
registration would provide. The recipients of these securities represented their
intention to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof and appropriate legends
were affixed to the share certificates and other instruments issued in such
transactions. No sales commissions were paid in connection with these issuances
listed above.
-7-
None.
None.
None.
ITEM
6. EXHIBITS
(a)
|
Exhibits
|
EXHIBIT
NUMBER
|
DESCRIPTION
OF EXHIBIT
|
|
31.1
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
32.1
|
Certification
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
32.2
|
Certification
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
-8-
EXOBOX
TECHNOLOGIES CORP.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf of the undersigned thereunto
duly authorized.
EXOBOX
TECHNOLOGIES CORP.
Dated:
December 21, 2009
|
By: /s/
Richard J. Kampa
|
Richard
J. Kampa
|
|
Chief
Executive Officer and Director
|
|
(Principal
Executive Officer)
|
Dated:
December 21, 2009
|
By:
/s/ Michael G. Wirtz
|
Michael
G. Wirtz
|
|
Chief
Financial Officer
|
|
(Principal
Financial and Accounting Officer)
|
|
-9-