Attached files
| file | filename |
|---|---|
| EX-32.1 - Exobox Technologies Corp. | ex32-1.htm |
| EX-32.2 - Exobox Technologies Corp. | ex32-2.htm |
| EX-31.1 - Exobox Technologies Corp. | ex31-1.htm |
| EX-31.2 - Exobox Technologies Corp. | ex31-2.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 April 30, 2010
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
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88-0456274
|
|
(State or other jurisdiction of incorporation)
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(I.R.S. Employer Identification No.)
|
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3315 Marquart, Suite 205, Houston, Texas
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77027
|
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(Address of principal executive offices)
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(Zip code)
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(Former name or former address, if changed since last report.)
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2121 Sage Road, Suite 200
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Houston, Texas 77056
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(713) 877-1516
(Telephone number, including area 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.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting Company þ
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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 June 14, 2010, 395,770,805 of the registrant's common stock were outstanding.
EXOBOX TECHNOLOGIES CORP.
FORM 10-Q FOR THE QUARTER ENDED APRIL 30, 2010
INDEX
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PART I. FINANCIAL INFORMATION
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Page No.
|
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Item 1. Financial Statements
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|
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Balance Sheets as of April 30, 2010 and July 31, 2009 (Unaudited).
|
3
|
|
Statements of Operations for the three months ended April 30, 2010 and 2009, for the nine months ended April 30, 2010 and 2009 and for the period from October 21, 2002 (Inception) to April 30, 2010 (Unaudited).
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4
|
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Statements of Cash Flows for the nine months ended April 30, 2010 and 2009 and for the period from October 21, 2002 (Inception) to April 30, 2010 (Unaudited).
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5
|
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Notes to the Financial Statements (Unaudited)
|
7
|
|
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
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12
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
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14
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Item 4. Controls and Procedures
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14
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PART II. OTHER INFORMATION
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|
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Item 1. Legal Proceedings
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14
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Item 2. Recent Sales of Unregistered Securities
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15
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Item 3. Defaults Upon Senior Securities
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16
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Item 4. Submission of Matters to a Vote of Security Holders
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16
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Item 5. Other Information
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16
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Item 6. Exhibits
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16
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Signatures
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17
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EXOBOX TECHNOLOGIES CORP.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(Unaudited)
|
April 30, 2010
|
July 31, 2009
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|||||||
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ASSETS
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||||||||
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Current Assets:
|
||||||||
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Cash
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$ | 11,798 | $ | 3 | ||||
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Accounts Receivable
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2,791 | - | ||||||
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Other Current Assets
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2,633 | 8,561 | ||||||
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Total Current Assets
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17,222 | 8,564 | ||||||
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Furniture, fixtures and equipment, net
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5,156 | 395,338 | ||||||
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Other Assets:
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||||||||
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Patents, net
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- | 1 | ||||||
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Intangibles, net
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12,369 | 6,568 | ||||||
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TOTAL ASSETS
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$ | 34,747 | $ | 410,471 | ||||
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LIABILITIES AND STOCKHOLDERS' DEFICIT
|
||||||||
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Current Liabilities:
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||||||||
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Accounts Payable
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$ | 389,799 | $ | 432,621 | ||||
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Accounts Payable-Stockholders
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- | 2,594 | ||||||
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Accrued Liabilities
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2,005,815 | 314,964 | ||||||
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Advances from Stockholders
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700,615 | 875,081 | ||||||
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Note Payable
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75,000 | 30,000 | ||||||
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Secured Notes Payable
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340,000 | - | ||||||
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Deferred Income
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- | 1,400 | ||||||
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Total Current Liabilities
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3,511,229 | 1,656,660 | ||||||
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TOTAL LIABILITIES
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3,511,229 | 1,656,660 | ||||||
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STOCKHOLDERS' DEFICIT
|
||||||||
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Preferred stock:
|
||||||||
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Series A convertible preferred stock, $0.001 par, 2,500,000 shares authorized, 1,378 and 1,378 shares issued and outstanding as of April 30, 2010 and July 31, 2009, respectively
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1 | 1 | ||||||
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Common stock, $0.001 par value, 500,000,000 shares authorized, 395,770,805
and 460,664,395 shares issued and outstanding at April 30, 2010 and July 31 2009, respectively
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395,770 | 460,664 | ||||||
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Additional paid-in capital
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16,741,217 | 14,481,168 | ||||||
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Deficit accumulated during development stage
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(20,613,470 | ) | (16,188,022 | ) | ||||
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Total stockholders' deficit
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(3,476,482 | ) | (1,246,189 | ) | ||||
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
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$ | 34,747 | 410,471 | |||||
See accompanying notes to the financial statements
-3-
EXOBOX TECHNOLOGIES CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
For the Quarters Ended April 30, 2010 and 2009,
and the period from October 21, 2002 (Inception) to April 30, 2010
(Unaudited)
|
Three Months
Ended
April 30,
2010
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Three Months
Ended
April 30,
2009
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Nine Months
Ended
April 30,
2010
|
Nine Months
Ended
April 30,
2009
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Inception
(October 21,
2002)
to April 30,
2010
|
||||||||||||
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Revenues
|
- | - | 14,420 | - | 14,420 | |||||||||||
|
Cost Of Revenues
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14,664 | - | 29,883 | - | 44,540 | |||||||||||
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Net Revenue/Gross Loss
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(14,664 | ) | - | (15,463 | ) | (30,120 | ) | |||||||||
|
General & Administrative
|
74,844 | 1,355,434 | 1,927,107, | $ | 2,282,549 | $ | 6,605,284 | |||||||||
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Depreciation and amortization
|
30,884 | 29,262 | 90,131 | 76,478 | 218,467 | |||||||||||
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Professional Fees
|
98,243 | 236,685 | 296,378 | 628,614 | 4,508,716 | |||||||||||
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Payroll Expenses
|
137,658 | 329,289 | 1,840,716 | 1,035,577 | 7,720,863 | |||||||||||
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Loss on Disposal of Assets
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230,789 | - | 230,789 | - | 240,644 | |||||||||||
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Loss on Impairment of Assets
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- | - | - | - | 50,591 | |||||||||||
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Research and Development
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- | 336,062 | 35,674 | 410,141 | 1,226,757 | |||||||||||
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Total Operating Expenses
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572,418 | 2,286,732 | 4,420,795 | 4,433,359 | 20,571,322 | |||||||||||
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Loss from Operations
|
(587,082 | ) | (2,286,732 | ) | (4,436,258 | ) | (4,433,359 | ) | (20,601,442 | ) | ||||||
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Gain on Derivatives
|
- | 100,000 | ||||||||||||||
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Gain on sale of patent and impairment of patent
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- | 38,750 | 38,750 | |||||||||||||
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Gain on Extinguishment of AP
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- | - | 84,065 | |||||||||||||
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Gain on Extinguishment of Note
|
3,000 | - | 10,137 | |||||||||||||
|
Interest Income
|
- | 33 | - | 1,485 | 3,578 | |||||||||||
|
Interest Expense
|
(13,777 | ) | (3,005 | ) | (30,940 | ) | (4,042 | ) | (248,558 | ) | ||||||
|
Total Other Income (Expenses)
|
(13,777 | ) | (2,972 | ) | 10,810 | (2,557 | ) | (12,028 | ) | |||||||
|
Net Loss before Discontinued Operations
|
(600,859 | ) | (2,289,704 | ) | (4,425,448 | ) | $ | (4,435,916 | ) | $ | (20,613,470 | ) | ||||
| Discontinued Operations | ||||||||||||||||
| Net Loss on Oil and Gas Wells | - | - | (22,009 | ) | - | (22,009 | ) | |||||||||
| Discontinued Operations | ||||||||||||||||
| Gain on Disposition | - | - | 22,009 | - | 22,009 | |||||||||||
| NET LOSS | $ | (600,859 | ) | $ | (2,289,704 | ) | $ | (4,425,448 | ) | $ | (4,435,916 | ) | $ | (20,613,470 | ) | |
| Basic and diluted | ||||||||||||||||
| Net loss per common share-basic and diluted | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) | - | |||
| Weighted average shares outstanding-basic and diluted | 393,968,813 | 413,046,029 | 412,349,218 | 404,191,419 | - | |||||||||||
-4-
EXOBOX TECHNOLOGIES CORP.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
For the nine months Ended April 30, 2010 and 2009,
and period from October 21, 2002 (Inception) to April 30, 2010
(Unaudited)
|
Nine Months
Ended April 30,
|
Nine Months Ended April 30,
|
October 21, 2002 (Inception) to
April 30,
|
||||||||||
|
2010
|
2009
|
2010
|
||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
|
Net Loss
|
$ | (4,425,448 | ) | $ | (4,435,916 | ) | $ | (20,613,470 | ) | |||
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||||||
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Shares issued for services
|
1,721,207 | 1,604,349 | 5,423,461 | |||||||||
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Warrant issued for consulting services
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- | 434,165 | 446,660 | |||||||||
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Loss on impairment of assets
|
- | - | 50,591 | |||||||||
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Depreciation and amortization
|
90,131 | 76,478 | 218,468 | |||||||||
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Share-based compensation
|
13,420 | 16,597 | 2,910,197 | |||||||||
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(Gain) Loss on derivative
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- | - | 5,000 | |||||||||
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Gain on debt conversion
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(3,000 | ) | - | (10,137 | ) | |||||||
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(Gain)Loss on accounts payable
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- | - | (84,065 | ) | ||||||||
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(Gain)Loss on sale of patent
|
(38,750 | ) | - | (38,750 | ) | |||||||
|
Contributed capital
|
23,739 | - | 86,261 | |||||||||
|
Amortization of debt discount
|
- | - | 80,000 | |||||||||
|
Loss on disposal of furnitures, fixtures and equipment
|
230,789 | 240,645 | ||||||||||
|
Changes in operating assets and liabilities
|
||||||||||||
|
Prepaid and other current assets
|
5,928 | 28,291 | (2,633 | ) | ||||||||
|
Accounts payable
|
(42,822 | ) | 523,833 | 509,722 | ||||||||
|
Accounts receivable
|
(2,791 | ) | - | (2,791 | ) | |||||||
|
Accrued expenses
|
1,791,880 | 330,906 | 3,860,011 | |||||||||
|
Deferred income
|
(1,400 | ) | - | - | ||||||||
|
Accounts payables to stockholders
|
(54 | ) | - | 2,540 | ||||||||
|
NET CASH USED IN OPERATING ACTIVITIES
|
(637,171 | ) | (1,855,462 | (6,918,290 | ) | |||||||
|
CASH FLOW FROM INVESTING ACTIVITIES
|
||||||||||||
|
Proceeds from sale of patents
|
- | - | - | |||||||||
|
Proceeds from sale of property
|
- | - | ||||||||||
|
Investment in patents
|
95,000 | - | 27,767 | |||||||||
|
Investment in intangible assets
|
(8,467 | ) | - | (24,467 | ) | |||||||
|
Investment in property and equipment
|
- | (271,951 | ) | (458,498 | ) | |||||||
|
NET CASH USED IN INVESTING ACTIVITIES
|
86,533 | (271,951 | ) | (455,198 | ) | |||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
|
Proceeds from sale of stock
|
142,000 | - | 5,425,200 | |||||||||
|
Advances from stockholders
|
111,434 | 1,283,081 | 1,540,015 | |||||||||
|
Proceeds from warrants exercised
|
8,999 | - | 546,501 | |||||||||
|
Repayment of advances from stockholders
|
- | - | (501,430 | ) | ||||||||
|
Convertible Promissory Notes proceeds
|
30,000 | 80,000 | 210,000 | |||||||||
|
Proceeds from third party debt, net
|
270,000 | - | 165,000 | |||||||||
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
562,433 | 1,363,081 | 7,139,208 | |||||||||
-5-
|
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
11,795 | (764,332 | ) | 11,798 | ||||||||
|
Cash and cash equivalents at beginning of period
|
3 | 767,338 | - | |||||||||
|
Cash and cash equivalents at end of period
|
$ | 11,797 | $ | 3,006 | $ | 11,798 | ||||||
|
SUPPLEMENTAL DISCLOSURES
|
||||||||||||
|
Cash paid for interest
|
$ | 1,695 | $ | 875 | ||||||||
|
Cash paid for income taxes
|
- | |||||||||||
|
NON-CASH TRANSACTIONS
|
||||||||||||
|
Conversion of Preferred Shares to Common Shares
|
- | 2,078 | ||||||||||
|
Shares Returned and Cancelled
|
$ | 128,069 | $ | - | ||||||||
|
Debt Forgiveness
|
$ | 202,539 | ||||||||||
|
Stock issued for patent buyback
|
$ | 56,250 | ||||||||||
|
Conversion of Note Payable to stock
|
$ | 27,000 | ||||||||||
|
Settlement of rent payable by furniture, fixtures and equipment.
|
$ | 71,929 | ||||||||||
|
Stock issued for accrued salaries
|
(145,300 | ) | ||||||||||
|
Stock Issued for purchase of Oil and Gas Assets
|
$ | 27,357 | ||||||||||
|
Note Issued for purchase of Oil and Gas Assets
|
$ | 1,500,000 | ||||||||||
|
Debt assumed for purchase of Oil and Gas Assets
|
$ | 204,059 | ||||||||||
|
Note assumed for purchase of Oil and Gas Assets
|
$ | 2,800,000 | ||||||||||
|
Removal of stock issuance related to the discontinued operation
|
$ | (27,357 | ) | |||||||||
|
Removal of note assumed for rescission of Oil and Gas Asset purchase
|
$ | (1,500,000 | ) | |||||||||
|
Removal of Debt assumed for rescission of Oil and Gas Asset purchase
|
$ | (204,059 | ) | |||||||||
|
Removal of Note assumed for rescission of Oil and Gas Asset purchase
|
$ | (2,800,000 | ) | |||||||||
|
Shares Issued for Services
|
$ | 27,283 |
-6-
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 April 30, 2010, Exobox has accumulated losses of $20,613,470. 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.
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 for $50,591.
On September 15, 2009, Exobox sold its SOS Patents to Scott Copeland for $95,000. On November 1, 2009, Copeland sold these SOS patents back to Exobox for 1,250,000 common shares valued at $56,250 and also a royalty of 3% of any net proceeds derived from the SOS technology. Exobox recorded gain on sale of patent of $38,750.
NOTE 4 – FURNITURES, FIXTURES and EQUIPMENT
Due to the severe financial problems encountered, the company was not able to keep up with lease payments for its office at 2121 Sage Road Ste. 200 Houston, Texas 77056. When Exobox abandoned the lease in April 2010, all furniture, fixtures and equipment except computers that were in this office were handed over to the lessor to settle $67,376 of rent payable.. Net book value of the furniture, fixtures and equipment at the time of the closed office was $298,165 For the quarter ended April 30, 2010, the company recorded a loss on settled rent payable of $230,789.
As of April 30, 2010, furniture, fixtures and equipment consists of computers costing $69,924 with $64,352 accumulated depreciation. Net book value of furniture, fixtures and equipment is $5,156.
NOTE 5 – DEBT
In June 2009, Exobox issued an unsecured promissory note to RSA Corp by converting the $35,000 previously outstanding account payable balance. The note bears interest of 0% per year and matured December 1, 2009. The loans totaled to $31,400 which includes $1,400 in interest as of April 30, 2010. On November 3, 2009, the Company received a demand for payment. To date, no suit has been filed.
-7-
In December 2009 and January 2010, four individuals, including two members of management, loaned the company a total of $90,000 in exchange for 10% notes with a nine month maturity. The notes are secured by the Company’s technology. Upon payment of the notes, the security interest of the debtor in the technology will be released back to the Company.
On December 8, 2009, the company received a demand to repay Reginald Goodman $227, 301 ($210,400 principal and $16,970 in accrued interest). To date, no suit has been filed.
On December 8, 2009, Mr. Kampa loaned the company $3,000 through a non-interest bearing promissory note which was due on April 30, 2010. On April 1, 2010, the note was paid in full.
In March, 2010, one of holders of the 10% notes loaned an additional $25,000 to the company in exchange for a 10% note with a six month maturity. In addition two individuals loaned the company a total of $150,000 in exchange for 10% notes with a six month maturity. In addition, Mr. Kampa was issued a $44,000 10% note with a six month maturity in exchange for $40,000 of salary and a $4,000 expense owed to him. Mr. Wirtz was issued a $15,000 10% note with a six month maturity in exchange for $15,000 of salary owed to him and a former employee and current consultant was issued a $16,000 10% note with a six month maturity in exchange for $16,000 of salary owed to him. All of these notes are secured by the Company’s technology. Upon payment of the notes, the security interest of the debtor in the technology will be released back to the Company. These notes total $340,000 as of April 30, 2010.
In April, 2010, Mr. Wirtz agreed to release, in his notes totaling $20,000, the security interest in the technology in exchange for an unsecured, interest free note or company stock at some conversion price acceptable to the Company.
In May, 2010, one of the holders of a $30,000 note, agreed to release the security interest in the technology in exchange for an unsecured, interest free note or company stock at some conversion price acceptable to the Company.
The company intends to negotiate with the other holders of the secured notes totaling $290,000 releases of the security interest in the technology in exchange for an unsecured, interest free notes or company stock at some conversion price acceptable to the Company.
NOTE 6 – STOCKHOLDERS’ EQUITY
Stock Issued for Services
During the nine months ended April 30, 2010, we issued 50,325,003 common shares to consultants and employees pursuant to consulting and employment agreements with a value of $1,721,207.
Stock Issued for Cash
During the nine months ended April 30, 2010, we issued 10,450,000 common shares for $142,000 in cash.
Stock Issued for Warrants Exercised
During the nine months ended April 30, 2010, we issued 150,000 common shares in relation to warrants exercised for $9,000.
Stock Issued for Debt
During the nine months ended April 30, 2010, we issued 1,000,000 common shares in relation to convertible note.
Stock Issued for Patents
During the nine months ended April 30, 2010, we issued 1,250,000 common shares valued at $56,250. (see Note 3 above)
Stock Option, Stock Warrant and Stock Award Plan
OPTIONS
In the nine months ended April 30, 2010, Exobox granted an employee an option to purchase 25,000 shares with exercise price of $0.25 a share. The shares were vested immediately. During the nine months ended April 30, 2010, 12,650,000 shares expired due to 90 days passing of the termination of employment of several option holders as called for in the 2007 Stock Option Plan.
-8-
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 $13,420 of stock based compensation expense for the nine months ended April 30, 2010. The remaining 24,479 unvested shares have an unrecognized value of $3,975 The options intrinsic value is $0 as of April 30, 2010.
The status of the options as of April 30, 2010, is as follows:
|
Options
|
Weighted Average Exercise Price
|
|||||||
|
Outstanding July 31, 2009
|
20,225,000
|
0.28
|
||||||
|
Granted
|
25,000
|
-
|
||||||
|
Expired
|
12,650,000
|
0.25
|
||||||
|
Exercised
|
-
|
-
|
||||||
|
Outstanding, April 30, 2010
|
7,600,000
|
$
|
0.35
|
|||||
Following is the details of options outstanding as of April 30, 2010:
|
Number of Common Stock Equivalents
|
Expiration Date
|
Remaining Contracted Life (Years)
|
Exercise Price
|
|||
|
25,000
|
4/1/2012
|
2.17
|
0.25
|
|||
|
25,000
|
4/1/2013
|
3.17
|
0.25
|
|||
|
25,000
|
4/1/2014
|
4.17
|
0.25
|
|||
|
25,000
|
4/1/2015
|
5.17
|
0.25
|
|||
|
2,500,000
|
12/1/2013
|
3.84
|
0.15
|
|||
|
1,500,000
|
12/1/2013
|
3.84
|
0.25
|
|||
|
1,500,000
|
12/1/2013
|
3.84
|
0.40
|
|||
|
1,000,000
|
12/1/2013
|
3.84
|
0.50
|
|||
|
1,000,000
|
12/1/2013
|
3.84
|
0.75
|
|||
|
7,600,000
|
3.83
|
0.35
|
The following is a summary of non-vested shares:
|
OPTIONS
|
||||
|
Non-vested shares at July 31, 2009
|
386,198 | |||
|
Granted
|
0 | |||
|
Vested
|
(170,313 | ) | ||
|
Forfeited
|
(191,406 | ) | ||
|
Expired
|
- | |||
|
Exercised
|
- | |||
|
Non-vested shares at April 30, 2010
|
24,479 | |||
WARRANTS
At April 30, 2010, 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 1.35 years and the weighted average price per share is $0.42 per share.
The status of the warrants as of April 30, 2010, 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)
|
(0.06
|
) | |||||
|
Outstanding, April 30, 2010
|
15,844,284
|
$
|
0.41
|
|||||
-9-
Following is the details of warrants outstanding as of April 30, 2010:
|
Number of Common Stock Equivalents
|
Expiration Date
|
Remaining Contracted Life (Years)
|
Exercise Price
|
|||||||||
|
2,902,500
|
10/31/2010
|
0.50
|
$
|
0.20
|
||||||||
|
50,000
|
7/31/2011
|
1.25
|
$
|
0.25
|
||||||||
|
5,400,000
|
12/31/2011
|
1.42
|
$
|
1.00
|
||||||||
|
1,600,000
|
4/30/2012
|
1.75
|
$
|
0.03
|
||||||||
|
825,000
|
6/1/2012
|
1.83
|
$
|
0.03
|
||||||||
|
2,075,000
|
6/4/2012
|
1.83
|
$
|
0.03
|
||||||||
|
83,333
|
6/12/2012
|
1.83
|
$
|
0.03
|
||||||||
|
1,408,451
|
6/29/2012
|
1.92
|
$
|
0.03
|
||||||||
|
1,500,000
|
9/24/2012
|
1.17
|
$
|
0.30
|
||||||||
NOTE 7 – COMMITMENTS AND CONTINGENCIES
On November 25, 2009, former employee Theodore Ernst filed suit in the 434th District Court of Fort Bend County, Texas claiming unspecified damages. On January 11, 2010, Exobox through its attorneys filed a motion to transfer venue, an application to compel arbitration and answered the Plaintiff’s petition. The motion was granted on April 30, 2010. The Company has begun discussions to an agreement with Mr. Ernst. As of April 30, 2010, the company accrued approximately $440,831 of damages related to this litigation as part of accrued expenses.
On December 8, 2009, the company received a demand to repay Reginald Goodman $227, 301 ($210,400 principal and $16,970 in accrued interest). To date, no suit has been filed.
On January 22, 2010, an attorney representing former employee Gary Leibowitz sent the Company a demand letter asking the company pay him $640,000 in termination damages as called for in his employment agreement, $56,532 in compensation not paid and $1,079 in reimbursable expenses. In addition, a Notice of Default and demand letter was received demanding payment of a total of $16,551 ($15,988 promissory note and $563 of accrued interest) be made or Mr. Leibowitz would file suit. The company has begun discussions to come to an agreement with Mr. Leibowitz.As of April 30, 2010, the past due loan and accrued interest were included part of the advances from stockholder.
On March 8, 2010 the Company received several Preliminary Wage Determination Order from the Texas Workforce Commission to pay unpaid wages to several employees totaling $69,740. The company intends to make payment in the near future.
On May 5, 2010, an attorney representing Behr Construction, Inc. sent the Company a demand letter asking the company pay $6,634 owed to Behr Construction or Behr Construction would file suit. The company intends to discuss a potential agreement with Behr Construction on these demands.As of April 30, 2010, the construction expenses were included in the accounts payable.
On May 7, 2010, an attorney representing former employee Donald Baird sent the Company a demand letter asking the company pay him $16,200 in compensation not paid. In addition, a Notice of Default and demand letter was received demanding payment of a total of $25,988 ($25,000 promissory note, $2,188 of accrued interest and $800 in legal fees) be made or Mr. Baird would file suit. The company intends to open discussions with Mr. Baird. The note payable and accrued interest were included as part of notes payable as of April 30, 2010.
On May 18, 2010, an attorney representing a Consultant to the Company sent the Company a demand letter to register him the shares due to him under his consulting agreement and additional shares as penalty for delay in registering the original shares. The company intends to come to an agreement and issue the additional shares as called for in the demand letter. As of April 30, 2010, both the original and additional shares that related to the consulting agreement and the demand letter were accounted for in the stockholders’ deficit. The shares have already been expensed in the first and second quarters.
Except for the above mentioned liabilities, the company has not yet accrued for any additional loss associated with these contingencies due to that it is too early to access the outcome.
NOTE 8-OIL AND GAS PROPERTIES
On October 22, 2009, Exobox Technologies Corp. purchased 17 oil & gas wells located in Ohio from a private company for $5.9 million, which includes:
|
|
·
|
$3.0 million in total existing debt.
|
|
|
·
|
$1.5 million 5-year, 7.5% convertible note.
|
|
|
·
|
1,163,000 shares of Series E Convertible Preferred Stock, valued at $974,286.
|
|
|
·
|
3,000,000 common shares valued at $120,000.
|
|
|
·
|
$273,075 assumed asset retirement obligation
|
-10-
On January 13, 2010, Exobox and the seller mutually agreed to rescind the transaction, with cancelation of all obligations and securities issued.
A summary of the well income and expenses during the ownership period is as follows:
|
10/23/2009 to 1/13/2010
|
||||
|
Revenue – sales of oil & gas
|
$ | 81,031 | ||
|
EXPENSES
|
||||
|
Depletion Expense
|
21,282 | |||
|
Expenses of Wells
|
53,633 | |||
|
Interest on $1.5m Note
|
28,125 | |||
|
Total Expenses
|
103,040 | |||
|
Net Income on Wells
|
$ | (22,009 | ) | |
During the time of the ownership of the oil and gas properties, there was no cash inflows or outflows. Thus, there was no impact on the cash flows statement for the nine months ended April 30, 2010 related to discontinued operation.
-11-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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.
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.
DISCONTINUED OPERATION
Exobox recorded no loss or gain on the discontinued operation of the oil and gas assets acquired on October 22, 2009. On January 13, 2010, Exobox Technologies Corp. (“Exobox”) and SPQR Energy, Inc. (“SPQR”) entered into a Rescission Agreement (“Rescission Agreement”) to unwind, rescind and render null and void the Purchase and Sale Agreement dated October 22, 2009 by and between Exobox and SPQR (“Purchase and Sale Agreement”). In addition, Exobox and SPQR have agreed that both have no further rights, entitlements, liabilities or obligations with respect to the Purchase and Sale Agreement and each party further expressly, fully and completely releases the other with respect to all claims it has, had or may have against the other with respect thereto.
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.
-12-
Three Months Ended April 30, 2010 Compared to Three Months Ended April 30, 2009
Net Sales. Sales during the quarter ended April 30, 2010, were $0 compared to $0 for the quarter ended April 30, 2009. Some of the first sales for the company were made during the current fiscal year but not during the current quarter as the company brought its first product, ExoDetect™ to market earlier this year.
Research and Software Development Expenses. Research and software 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 $0 for the three months ended April 30, 2010 as compared to $336,062 incurred in the same period of 2009. The increased research and development expenses in 2010 relate to the costs of developing and maintaining 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. We had sales and marketing expenses of $0 for the three months ended April 30, 2010 as compared to $ 0 incurred in the same period of 2009. We expect to incur costs in the fourth quarter of 2010 as we are currently marketing the ExoDetect™ product.
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 April 30, 2010 as compared to 2009 decreased from $1,355,434 to $74,844. The decrease was primarily due to the decreased number of employees.
Payroll expense . Payroll expenses consist primarily of compensation and related costs for our current officers and ex-employees. Payroll expense for the three months ended April 30, 2010 as compared to 2009 decreased from $329,289 to $137,658. The decrease was primarily due to retaining a limited number of company employees.
Net Loss. Net loss for the three months ended April 30, 2010 and 2009 was $600,859 and $2,289,704, respectively. The decreased loss
was primarily due to limited operations.
Nine Months Ended April 30, 2010 Compared to Nine Months Ended April 30, 2009
Net Sales. Sales during the nine months ended April 30, 2010, were $14,420 compared to $0 for the nine months ended April 30, 2009. These are some of the first sales for the company as the company brought its first product, ExoDetect™ to market earlier this year.
Research and Software 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 $35,674 for the nine months ended April 30, 2010 as compared to $410,141 incurred in the same period of 2009. The decreased research and development expenses in 2010 relate to the limited operations of the company.
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 $0 for the nine months ended April 30, 2010 as compared to $ 0 incurred in the same period of 2009. We expect to incur costs in the fourth quarter of 2010 as we are currently marketing the ExoDetect™ product.
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 nine months ended April 30, 2010 as compared to 2009 decreased to $1,927,107 from $2,282,549. The decrease was primarily due to decreased number of employees.
-13-
Payroll expense . Payroll expenses consist primarily of compensation and related costs for our current officers and ex-employees. Payroll expense for the nine months ended April 30, 2010 as compared to 2009 increased from $1,035,577 to $1,840,716. The decrease was primarily due to less employees employed during the last nine months which also offset by the termination payments due to the terminated employees under their employment agreements.
Net Loss. Net loss for the nine months ended April 30, 2010 and 2009 was $4,425,448 and $4,435,916, respectively. The decreased loss
was primarily due to limited operations which also offset by additional termination payments due to the terminated employees.
Liquidity and Capital Resources
As of April 30, 2010, we had a working capital deficit of $3,494,007. 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 nine months ended April 30, 2010, we borrowed $381,434 from certain shareholders on a short term basis. To date, we have repaid $534,430 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 $3,000,000 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 $3,000,000 to $6,000,000. 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.
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 April 30, 2010, covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting
PART II – OTHER INFORMATION
On November 25, 2009, former employee Theodore Ernst filed suit in the 434th District Court of Fort Bend County, Texas claiming unspecified damages. On January 11, 2010, Exobox through its attorneys filed a motion to transfer venue, an application to compel arbitration and answered the Plaintiff’s petition. The motion was granted on April 30, 2010. The Company has begun discussions to come to an agreement with Mr. Ernst.
-14-
On December 8, 2009, the company received a demand to repay Reginald Goodman $227, 301 ($210,400 principal and $16,970 in accrued interest). To date, no suit has been filed.
On January 22, 2010, an attorney representing former employee Gary Leibowitz sent the Company a demand letter asking the company pay him $640,000 in termination damages as called for in his employment agreement, $56,532.47 in compensation not paid and $1,079.37 in reimbursable expenses. In addition, a Notice of Default and demand letter was received demanding payment of a total of $16,551.13 ($15,987.63 promissory note and $563.50 of accrued interest) be made or Mr. Leibowitz would file suit. The company has begun discussions to come to an agreement with Mr. Leibowitz.
On March 8, 2010 the Company received several Preliminary Wage Determination Order from the Texas Workforce Commission to pay unpaid wages to several employees totaling $69,740.00. The company intends to make payment in the near future.
On May 5, 2010, an attorney representing Behr Construction, Inc. sent the Company a demand letter asking the company pay $6,633.85 owed to Behr Construction or Behr Construction would file suit The company intends to discuss a potential agreement with Behr Construction on these demands.
On May 7, 2010, an attorney representing former employee Donald Baird sent the Company a demand letter asking the company pay him $16,200 in compensation not paid. In addition, a Notice of Default and demand letter was received demanding payment of a total of $25,987.50 ($25,000.00 promissory note, $2,187.50 of accrued interest and $800 in legal fees) be made or Mr. Baird would file suit The company intends to open discussions with Mr. Baird.
On May 18, 2010, an attorney representing a Consultant to the Company, sent the Company a demand letter asking the Company issue him the shares due to him under his consulting agreement with the Company. The company intends to come to an agreement and issue the shares as called for in the consulting agreement. The shares have already been expensed in the first and second quarters.
We know of no other material, active or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
We will vigorously defend ourselves in these lawsuits. We believe that any of these matters could, individually or in the aggregate, have a material adverse effect on our business or financial condition. We cannot give assurance, however, that one or more of these lawsuits will not have a material adverse effect on our results of operations for the period in which they are resolved.
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 April 30, 2010, we had an accumulated deficit of $20,613,470 We had gross revenues of $14,420 for the nine months ended April 30, 2010, and a loss from operations of $4,425,448. 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.
We may not be able to meet our current and future liabilities and remain in operation until we receive additional capital.
As of April 30, 2010, we have current assets of $17,222 and current liabilities of $3,511,229. Our current liquidity position only allows us to meet nominal working capital needs. We will need $3,000,000 to meet our working capital needs through fiscal 2010. Any failure to obtain such financing could force us to abandon or curtail our operations.
Our auditor has substantial doubts as to our ability to continue as a going concern.
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 of our going concern issue, 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 second quarter of fiscal 2010.
-15-
On February 15, 2010, March 15, 2010 and April 15, 2010 we issued a total of 1,385,251 shares of common stock to Mr. Dillon (1,154,376 shares) and Mr. Wirtz (230,875, shares) in accordance with the terms of their separation agreements. As part of his previous employment agreement Mr. Wirtz agreed to forego the December 2009 through March 2010 payments called for in his May 6, 2009 Termination Agreement.
In March 2010, the Company granted 750,000 shares of common stock to consultants for services performed. The shares were valued at $7,500 on the date of issuance.
In April 2010, 1,000,000 common shares were issued to Mr. Studdard as part of his consulting agreement. The shares were valued at $6,500 on the date of issuance.
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.
None.
None.
On March 30, 2010, Exobox was granted its first patent relating to its Secure Environmentalization software.
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
|
-16-
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: June 17, 2010
|
By: /s/ Norman D. Smith
|
|
Norman D. Smith
|
|
|
Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
|
Dated: June 17, 2010
|
By: /s/ Michael G. Wirtz
|
|
Michael G. Wirtz
|
|
|
Chief Financial Officer
|
|
|
(Principal Financial and Accounting Officer)
|
-17-