Attached files
file | filename |
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EX-31 - JUNIPER GROUP INC | ex31.htm |
EX-32 - JUNIPER GROUP INC | ex32.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-Q
(Mark
One)
x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For
the quarterly period ended June 30, 2010
OR
¨ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the
transition period from _____________ to ______________
COMMISSION
FILE NUMBER 0-19170
[Missing Graphic Reference]
(Exact
name of small business issuer as specified in its charter)
Nevada
|
11-2866771
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
(IRS
Employer Identification No.)
|
20283
State Road 7, Suite 300
Boca
Raton, Florida 33498
---------------------------------------------------------------
(Address
of principal executive offices)
(561)
807-8990
-----------------------------------
(Issuer's
telephone number)
Indicate
by check whether the issuer (1) has 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 for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes x
No
Indicate
by check mark 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 (section 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). Yes 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. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
Accelerated Filer
|
Accelerated
Filer
|
Non-Accelerated
Filer
|
Smaller
Reporting Company x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes No x
Number of
shares outstanding of the issuer’s common stock as of the latest practicable
date: 287,293,882 shares of common stock, $.0001 par value per share, as of
August 13, 2010.
JUNIPER
GROUP, INC. and SUBSIDIARIES
QUARTERLY
REPORT ON FORM 10-Q
INDEX
PART
I:
|
FINANCIAL
INFORMATION
|
PAGE
NO.
|
Item
1.
|
Financial
Statements
|
|
Condensed
Consolidated Balance Sheets as of June 30, 2010 (unaudited) and December
31, 2009 (audited)
|
4
|
|
Condensed
Consolidated Statements of Operations for the three months ended June 30,
2010 and 2009 (unaudited)
|
5
|
|
Condensed
Consolidated Statements of Operations for the six months ended June 30,
2010 and 2009 (unaudited)
|
6
|
|
Condensed
Consolidated Statements of Cash Flows for the six months ended June 30,
2010 and 2009 (unaudited)
|
7
|
|
Condensed
Consolidated Statement of Changes in Stockholders’ Deficit as of June 30,
2010 (unaudited)
|
8
|
|
Notes
To Condensed Consolidated Financial Statements (unaudited)
|
9
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition
|
20
|
Item
4.
|
Controls
and Procedures
|
27
|
PART
II:
|
OTHER
INFORMATION
|
|
Item
1.
|
Legal
Proceedings
|
28
|
Item
1A.
|
Risk
Factors
|
31
|
Item
2.
|
Unregistered
Sale of Equity Securities and Use of Proceeds
|
31
|
Item
3.
|
Defaults
Upon Senior Securities
|
31
|
Item
4.
|
Removed
and Reserved
|
32
|
Item
5.
|
Other
Information
|
32
|
Item
6.
|
Exhibits
|
32
|
SIGNATURES
|
33
|
|
Index
to Exhibits
|
34
|
PART 1. FINANCIAL
INFORMATION
As used
herein, the terms “Us,” “Ours,” “We,” "Juniper" or "the Company" refers to
Juniper Group, Inc., a Nevada corporation, its subsidiary corporations and
predecessors unless otherwise indicated. The accompanying unaudited, condensed
consolidated interim financial statements have been prepared in accordance with
the instructions to Form 10-Q pursuant to the Securities and Exchange Commission
and, therefore, do not include all information and footnotes necessary for a
complete presentation of our financial position, results of operations, cash
flows and stockholders' equity in conformity with generally accepted accounting
principles in the United States of America. In the opinion of management, all
adjustments considered necessary for a fair presentation of the results of
operations and financial position have been included and all such adjustments
are of a normal recurring nature.
This
Quarterly Report contains statements that constitute forward-looking information
within the meaning of the Private Securities Litigation Reform Act of
1995. In this Quarterly Report there are statements concerning our future
operating and future financial performance. Words such as “expects”,
“anticipates”, “believes”, “estimates”, “may”, “will”, “should”, “could”,
“potential”, “continue”, “intends”, “plans” and similar words and terms used in
the discussion of future operating and future financial performance identify
forward-looking statements. Investors are cautioned that such
forward-looking statements are not guarantees of future performance or results
and involve risks and uncertainties and that actual results or developments may
differ materially from the forward-looking statements as a result of various
factors. Factors that may cause such differences to occur include, but are
not limited to:
|
·
|
the
level of our revenues;
|
|
·
|
competition
from existing competitors and new competitors entering our
industry;
|
|
·
|
demand
for our services;
|
|
·
|
the
cost of industry conditions;
|
|
·
|
changes
in the laws or regulations affecting the industry in which we
operate;
|
|
·
|
the
outcome of litigation and other proceedings, including the matters
described under Part II, Item 1. Legal Proceedings and
Note 9 of the condensed consolidated financial
statements;
|
|
·
|
general
economic conditions in the areas in which we
operate;
|
|
·
|
the
state of the market for debt securities and bank
loans;
|
|
·
|
the
level of our expenses; and
|
|
·
|
the
factors described in our filings with the Securities and Exchange
Commission, including under the sections entitled “Risk Factors” and
“Management’s Discussion
and Analysis of Financial Condition and Results of Operations”
contained therein.
|
ITEM
1. Financial
Statements
|
JUNIPER
GROUP, INC.
AND
SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
AS
OF JUNE 30, 2010 AND DECEMBER 31, 2009
June
30
|
December
31,
|
|||||||
2010
|
2009
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
|
$ | 26,885 | $ | 87,663 | ||||
Accounts
receivable-trade (net of allowance)
|
533,281 | 466,041 | ||||||
Unbilled
accounts receivable
|
309,270 | 99,462 | ||||||
Inventory
|
19,037 | - | ||||||
Other
current assets
|
37,117 | 33,679 | ||||||
Total
current assets
|
925,590 | 686,845 | ||||||
Property
and equipment, net
|
109,132 | 122,034 | ||||||
Note
receivable
|
605,000 | 605,000 | ||||||
Other
assets
|
14,032 | 14,050 | ||||||
Total
assets
|
$ | 1,653,754 | $ | 1,427,929 | ||||
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
||||||||
Current
Liabilities:
|
||||||||
Bank
overdraft
|
$ | 30,512 | $ | - | ||||
Accounts
payable and accrued expenses
|
2,795,614 | 2,802,868 | ||||||
Convertible
debentures and notes payable – current portion
|
2,589,624 | 2,256,056 | ||||||
Preferred
stock dividend payable
|
50,197 | 47,154 | ||||||
Due
to officer
|
973,992 | 866,503 | ||||||
Due
to shareholders & related parties
|
40,649 | 12,495 | ||||||
Total
current liabilities
|
6,480,588 | 5,985,076 | ||||||
Convertible
debentures and notes payable, less current portion
|
1,310,848 | 924,336 | ||||||
Derivative
liability related to convertible debentures
|
13,636,306 | 16,053,105 | ||||||
Warrant
liability related to convertible debentures
|
1,398 | 7,550 | ||||||
Total
liabilities
|
21,429,140 | 22,970,067 | ||||||
Stockholders’
Deficit:
|
||||||||
12%
Non-voting convertible redeemable preferred stock: $0.10 par value, 25,357
shares authorized: 25,357 shares issued and
outstanding at June 30, 2010 and December 31,
2009: aggregate liquidation preference, $50,714 at June 30, 2010 and
December 31, 2009
|
||||||||
2,536 | 2,536 | |||||||
Voting
convertible redeemable series B preferred stock: $0.10 par value 135,000
shares authorized: 106,294 shares issued and outstanding at June 30, 2010,
and 106,670 shares issued and outstanding at December 31,
2009
|
||||||||
10,629 | 10,667 | |||||||
Voting
convertible redeemable series C preferred stock: $0.10 par value 300,000
shares authorized, issued and outstanding at June 30, 2010 and December
31, 2009
|
||||||||
30,000 | 30,000 | |||||||
Voting
non-convertible series D preferred stock: $0.001 par value 6,500,000
shares authorized, issued and outstanding at June 30, 2010 and December
31, 2009
|
||||||||
6,500 | 6,500 | |||||||
Voting
non-convertible series E preferred stock: $0.001 par value, 100,000,000
shares authorized: 31,000,000 shares issued and outstanding at June 30,
2010 and December 31, 2009
|
||||||||
31,000 | 31,000 | |||||||
Common
Stock: $0.0001 par value, 10,000,000,000 shares authorized; 241,766,460
shares issued and outstanding at June 30, 2010 and 81,807,548 shares
issued and outstanding at December 31, 2009
|
||||||||
24,176 | 8,181 | |||||||
Additional
paid-in capital:
|
||||||||
Attributed
to 12% preferred stock non-voting
|
22,606 | 22,606 | ||||||
Attributed
to series B preferred stock voting
|
2,433,113 | 2,444,367 | ||||||
Attributed
to series C preferred stock voting
|
22,000 | 22,000 | ||||||
Attributed
to common stock
|
24,051,441 | 23,628,851 | ||||||
Accumulated
deficit
|
(46,409,387 | ) | (47,748,846 | ) | ||||
Total
stockholders’ deficit
|
(19,775,386 | ) | (21,542,138 | ) | ||||
Total
liabilities & stockholders’ deficit
|
$ | 1,653,754 | $ | 1,427,929 | ||||
See
Notes to Condensed Consolidated Financial Statements
|
- 4
-
JUNIPER
GROUP, INC.
AND
SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR
THE THREE MONTHS ENDED JUNE 30, 2010 AND 2009
(UNAUDITED)
Three
Months Ended June 30,
|
|||||||||
2010
|
2009
|
||||||||
Revenues:
|
|||||||||
Wireless
infrastructure services
|
$ | 707,785 | $ | 109,073 | |||||
Total
revenues
|
707,785 | 109,073 | |||||||
Operating
costs:
|
|||||||||
Wireless
infrastructure services
|
355,519 | 53,255 | |||||||
Total
operating costs
|
355,519 | 53,255 | |||||||
Gross
profit
|
352,266 | 55,818 | |||||||
Costs
and expenses:
|
|||||||||
Selling,
general and administrative expenses
|
460,578 | 325,501 | |||||||
Impairment
of film licenses
|
- | 6,891 | |||||||
Total
costs and expenses
|
460,578 | 332,392 | |||||||
Net
(loss) before other income (expense)
|
(108,312 | ) | (276,574 | ) | |||||
Other
income (expense):
|
|||||||||
Loss on
adjustment of derivative and warrant liabilities to fair
value
|
(2,903,595 | ) | (6,311,243 | ) | |||||
Amortization
of debt discount
|
(380,258 | ) | (335,605 | ) | |||||
Interest
expense
|
(114,240 | ) | (108,198 | ) | |||||
Settlement
Income
|
- | (3,000 | ) | ||||||
(3,398,083 | ) | (6,758,046 | ) | ||||||
Loss
before provision for income taxes
|
(3,506,405 | ) | (7,034,620 | ) | |||||
Provision
for income taxes
|
- | - | |||||||
Loss
before preferred stock dividends
|
(3,506,405 | ) | (7,034,620 | ) | |||||
Preferred
stock dividend
|
(1,522 | ) | (1,522 | ) | |||||
Net
loss available to common stockholders
|
$ | (3,507,927 | ) | $ | (7,036,142 | ) | |||
Weighted
average number of shares outstanding
|
250,960,731 | 5,252,408 | |||||||
Basic
and diluted net loss per common share
|
|
$ | (0.01 | ) | $ | (1.34 | ) |
See Notes
to Condensed Consolidated Financial Statements
- 5
-
JUNIPER
GROUP, INC.
AND
SUBSIDIARIES,
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR
THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009
(UNAUDITED)
Six
Months Ended June 30,
|
||||||||
2010
|
2009
|
|||||||
Revenues:
|
||||||||
Wireless
infrastructure services
|
$ | 1,698,456 | $ | 109,073 | ||||
Total
revenues
|
1,698,456 | 109,073 | ||||||
Operating
costs:
|
||||||||
Wireless
infrastructure services
|
1,169,179 | 57,229 | ||||||
Total
operating costs
|
1,169,179 | 57,229 | ||||||
Gross
profit
|
529,277 | 51,844 | ||||||
Costs
and expenses:
|
||||||||
Selling,
general and administrative expenses
|
1,022,672 | 560,083 | ||||||
Impairment
of film licenses
|
- | 6,891 | ||||||
Total
costs and expenses
|
1,022,672 | 566,974 | ||||||
Net
(loss) before other income (expense)
|
(493,395 | ) | (515,130 | ) | ||||
Other
income (expense):
|
||||||||
Gain
on adjustment of derivative and warrant liabilities to fair
value
|
2,714,203 | 38,427,556 | ||||||
Amortization
of debt discount
|
(625,277 | ) | (505,160 | ) | ||||
Interest
expense
|
(253,029 | ) | (220,076 | ) | ||||
Settlement
Income
|
- | (16,000 | ) | |||||
1,835,897 | 37,686,320 | |||||||
Income
before provision for income taxes
|
1,342,502 | 37,171,190 | ||||||
Provision
for income taxes
|
- | - | ||||||
Income
before preferred stock dividends
|
1,342,502 | 37,171,190 | ||||||
Preferred
stock dividend
|
(3,043 | ) | (3,043 | ) | ||||
Net
income available to common stockholders
|
$ | 1,339,459 | $ | 37,168,147 | ||||
Weighted
average number of shares outstanding
|
175,889,165 | 3,235,383 | ||||||
Basic
net income per common share
|
$ | 0.01 | $ | 11.49 | ||||
Fully
diluted weighted average number of shares outstanding
|
175,889,165 | 91,724,959 | ||||||
Fully
diluted net income per common share
|
$ | 0.01 | $ | 0.41 |
- 6
-
JUNIPER
GROUP, INC.
AND
SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR
THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009,
(UNAUDITED)
Six
Months Ended June 30,
|
||||||||
2010
|
2009
|
|||||||
Operating
Activities:
|
||||||||
Net
income
|
$ | 1,339,459 | $ | 37,168,147 | ||||
Adjustments
to reconcile net cash provided by operating activities:
|
||||||||
Unrealized
(gain) loss of derivative liabilities
|
(2,714,203 | ) | (38,427,556 | ) | ||||
Amortization
of debt discount
|
625,277 | 505,160 | ||||||
Depreciation
|
18,582 | 7,298 | ||||||
Issuance
of convertible debentures in exchange for goods and
services
|
114,377 | - | ||||||
Amortization
of film licenses
|
- | 6,891 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
(67,240 | ) | (109,073 | ) | ||||
Unbilled
accounts receivable
|
(209,808 | ) | - | |||||
Inventory
|
(19,037 | ) | - | |||||
Other
current assets
|
(3,438 | ) | (33,898 | ) | ||||
Accounts
payable and accrued expenses
|
365,270 | 284,609 | ||||||
Due
to officers and shareholders
|
135,643 | 85,894 | ||||||
Preferred
stock dividend payable
|
3,043 | 3,043 | ||||||
Net
cash used in operating activities
|
(412,075 | ) | (509,485 | ) | ||||
Investing
activities:
|
||||||||
Purchase
of equipment and licenses
|
(40,523 | ) | (10,500 | ) | ||||
Net
cash used for investing activities:
|
(40,523 | ) | (10,500 | ) | ||||
Financing
activities:
|
||||||||
Bank
overdraft
|
30,512 | - | ||||||
Repayment
of borrowings
|
(22,857 | ) | (14,445 | ) | ||||
Proceeds
from borrowings
|
384,165 | 512,578 | ||||||
Net
cash provided by financing activities:
|
391,820 | 498,133 | ||||||
Net
decrease in cash and equivalents
|
(60,778 | ) | (21,852 | ) | ||||
Cash
at beginning of the period
|
87,663 | 7 | ||||||
Cash
at end of the period
|
$ | 26,885 | $ | (21,845 | ) | |||
Supplemental
cash information:
|
||||||||
Interest
paid
|
$ | - | $ | 429 | ||||
Taxes
paid
|
$ | 1,162 | $ | - | ||||
See
Notes to Condensed Consolidated Financial Statements
|
- 7
-
AND
SUBSIDIARIES
|
||||||||||||||||||||||
CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’
DEFICIT
|
||||||||||||||||||||||
AS
OF JUNE 30, 2010 (UNAUDITED)
|
||||||||||||||||||||||
Preferred
Stock
|
Series
B Preferred Stock
|
Series
C Preferred Stock
|
Series
D Preferred Stock
|
Series
E Preferred Stock
|
Common
Stock
|
Accumulated
Deficit
|
Total
Stockholders’ Deficit
|
|||||||||||||||
Shares
|
Par
|
APIC
|
Shares
|
Par
|
APIC
|
Shares
|
Par
|
APIC
|
Shares
|
Par
|
APIC
|
Shares
|
Par
|
APIC
|
Shares
|
Par
|
APIC
|
|||||
Balances
at December 31, 2009
|
25,357
|
$
|
2,536
|
22,606
|
106,670
|
10,667
|
2,444,367
|
300,000
|
30,000
|
22,000
|
6,500,000
|
6,500
|
-
|
31,000,000
|
31,000
|
-
|
81,807,548
|
8,181
|
23,628,851
|
(47,748,846)
|
$
|
(21,542,138)
|
Common
stock issued in exchange for current
liabilities
|
2,500,000
|
250
|
10,875
|
11,125
|
||||||||||||||||||
Common
stock issued in exchange for Series B preferred stock
|
(376)
|
(38)
|
(11,254)
|
4,577,000
|
457
|
10,835
|
-
|
|||||||||||||||
Common
Stock issued in exchange of convertible debentures
|
152,881,912
|
15,288
|
400,880
|
416,168
|
||||||||||||||||||
Net
income
|
1,339,459
|
1,339,459
|
||||||||||||||||||||
Balances
at June 30, 2010
|
25,357
|
$
|
2,536
|
22,606
|
106,294
|
10,629
|
2,433,113
|
300,000
|
30,000
|
22,000
|
6,500,000
|
6,500
|
-
|
31,000,000
|
31,000
|
-
|
241,766,460
|
24,176
|
24,051,441
|
(46,409,387)
|
$
|
(19,775,386)
|
,
See Notes
to Condensed Consolidated Financial Statements
- 8
-
JUNIPER
GROUP, INC.
AND
SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – BUSINESS
Our
wireless infrastructure services operating subsidiaries primarily focus their
activities in the Eastern and Central United States, under a new business model
and with new management and new staff. Our intention is to restore our
presence in order to be able to support the increased demand in the deployment
of wireless infrastructure services with leading wireless telecommunication
companies in providing them with maintenance and upgrading of wireless
telecommunication network sites, site acquisitions, site surveys, co-location
facilitation, tower construction and antenna installation to tower system
integration, hardware and software installations.
NOTE 2 - BASIS OF
PRESENTATION
The
accompanying unaudited condensed consolidated financial statements for Juniper
Group, Inc. and Subsidiaries (“Juniper” or “the Company”) have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles in the United States of America have been condensed or omitted in
accordance with such rules and regulations. The information furnished in the
interim condensed consolidated financial statements includes normal recurring
adjustments and reflects all adjustments, which, in the opinion of management,
are necessary for a fair presentation of such financial statements. Although
management believes the disclosures and information presented are adequate to
make the information not misleading, it is suggested that these interim
condensed consolidated financial statements be read in conjunction with the
Company’s most recent annual consolidated financial statements and notes thereto
included in its December 31, 2009 Annual Report on Form 10-K. Operating results
for the three and six months ended June 30, 2010 are not indicative of the
results that may be expected for the year ending December 31, 2010.
NOTE 3 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Accounting Standards
Codification. In June 2009, the Financial Accounting
Standards Board (“FASB”) issued guidance now codified under Accounting Standards
Codification (“ASC”) Topic 105-10, which establishes the FASB Accounting
Standards Codification (the “Codification”) as the source of authoritative
accounting principles recognized by the FASB to be applied in the preparation of
financial statements in conformity with GAAP. ASC Topic 105-10 explicitly
recognizes rules and interpretive releases of the SEC under federal
securities laws as authoritative GAAP for Securities and Exchange Commission
(“SEC”) registrants. Upon adoption of this guidance under ASC Topic
105-10, the Codification superseded all then-existing non-SEC accounting and
reporting standards. All other non-grandfathered non-SEC accounting literature
not included in the Codification became non-authoritative. The guidance
under ASC Topic 105-10 became effective for the Company as of December 31,
2009. References made to authoritative FASB guidance throughout this
document have been updated to the applicable Codification
section.
- 9
-
Consolidation.
The condensed consolidated financial statements include the accounts of Juniper
and its wholly-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation.
Use of Estimates. The
preparation of the condensed consolidated financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Revenue and Cost
Recognition. In the wireless infrastructure construction
services, the Company enters into contracts principally on the basis of
competitive bids, the final terms and prices of which are frequently negotiated
with the customer. Although the terms of its contracts vary considerably, most
services are made on a cost- plus or time and materials basis. The Company
completes most projects within six months.
The
Company follows the guidance in the ASC 605-25 in recognizing income. Revenue is
recognized when all of the following conditions exist: persuasive evidence of an
arrangement exists; services have been rendered or delivery occurred; the price
is fixed or determinable; and collectability is reasonably assured. The actual
costs required to complete a project and, therefore, the profit eventually
realized, could differ materially in the near term. .
Accounts
Receivable. Accounts receivable is stated at the amount billed
to customers. The Company provides allowances for doubtful accounts, which are
based upon a review of outstanding receivables, historical performance and
existing economic conditions. Accounts receivable are ordinarily due 30
to 60 days after issuance of the invoice. The Company establishes reserves
against receivables by customers whenever it is determined that there may be
corporate or market issues that could eventually affect the stability or
financial status of these customers or their payments to the Company. The
Company’s policy is not to accrue interest on past due trade
receivables.
Unbilled Accounts Receivable.
Unbilled accounts receivable represents revenue on work performed for which the
Company is waiting to receive a purchase order from the customer. Due
to the nature of the industry, customers often request that maintenance and
repair and emergency work be performed prior to issuing purchase
orders.
Concentration of Credit
Risk. Financial instruments which potentially subject the
Company to significant concentrations of credit risk are principally trade
accounts receivable. Concentration of credit risk with respect to the wireless
infrastructure and entertainment services segments are primarily subject to the
financial condition of the segment's largest customers.
Property and
Equipment. Property and equipment, including assets under
capital leases, are stated at cost. Depreciation is computed generally on the
straight-line method for financial reporting purposes over their estimated
useful lives, which generally ranges from 3 to 5 years. Expenditures
for normal repairs and maintenance are charged to operations as
incurred. The cost of property or equipment retired are otherwise
disposed of and the related accumulated depreciation are removed from the
accounts in the period of disposal with the resulting gain or loss reflected in
earnings or in the cost of the replacement.
Financial
Instruments. The estimated fair values of accounts payable and
accrued expenses approximate their carrying values because of the short maturity
of these instruments. The Company's debt (i.e., notes payable, convertible
debentures and other obligations) does not have a ready market. These debt
instruments are shown on a discounted basis using market rates applicable at the
effective date. If such debt were discounted based on current rates, the fair
value of this debt would not be materially different from their carrying
value.
- 10
-
ASC
815-10 requires that due to indeterminable number of shares which might be
issued the imbedded convertible host debt feature of the Callable Secured
Convertible Notes, the Company is required to record a liability relating to
both the detachable warrants and embedded convertible feature of the notes
payable (included in the liabilities as a “derivative liability”) and to all
other warrants issued and outstanding as of December 28, 2005, except those
issued to employees. The result of adjusting these derivative
liabilities to market generated an unrealized loss of approximately $2.9 million
and $6.3 million for the three months ended June 30, 2010 and 2009,
respectively, and an unrealized gain of approximately $2.7 million and $38.4
million for the six months ended June 30, 2010 and 2009,
respectively.
Stock-Based
Compensation. In February 2007, the Financial Accounting
Standards Board (“FASB”) adopted ASC 825-10 which provides companies with an
option to report selected financial assets and financial liabilities at fair
value. Unrealized gains and losses on items for which the fair value
option has been elected are reported in earnings at each subsequent reporting
date. SFAS 159 is effective for fiscal years beginning after November
15, 2007. We have adopted this process. There was no
compensation expense for stock options calculated in 2010 and 2009.
Derivative
Instruments. Effective December 28, 2005, the Company adopted
ASC 815. ASC 815 requires that all derivative instruments be recorded on the
balance sheet at fair value. Changes in the fair value of derivatives are
reported as other income or expense in the period of the change.
Income Taxes. The
Company provides for income taxes in accordance with ASC 740-10 which requires
the recognition of deferred tax liabilities and assets for the expected future
tax consequences of temporary differences between the financial statement
carrying amounts and the tax basis of assets and liabilities.
Net Income (loss) per Common
Share. Earnings per share have been calculated in accordance
with Topic 260 “Earnings Per Share” (“EPS”). Topic 260 requires dual
presentation of basic EPS and diluted EPS for all entities with complex capital
structures. Basic EPS is computed as net income divided by the
weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur
from common shares issuable through stock options, warrants and convertible
debentures.
Net
income per common share for the three and six months ended June 30, 2010 and
2009 has been computed by dividing the net income available to common
stockholders by the weighted average number of common shares outstanding
throughout the quarter.
All of
the weighted average number of common shares outstanding has been adjusted to
reflect the one-for-five hundred reverse stock split on August 27,
2009.
Warrants Issued With Convertible
Debt. The Company has issued and anticipates issuing warrants
along with debt and equity instruments to third parties. These issuances are
recorded based on the fair value of these instruments. Warrants and equity
instruments require valuation using the Black-Scholes model and other
techniques, as applicable, and consideration of assumptions including but not
limited to the volatility of the Company’s stock, and expected lives of these
equity instruments.
Reclassifications. Certain
amounts in the 2009 condensed consolidated financial statements were
reclassified to conform to the 2010 presentation.
New Accounting
Pronouncements. In June 2009, the Financial Accounting
Standards Board (“FASB”) issued Statement of Financial Accounting Standards
No.168, The FASB Accounting
Standards
- 11
-
Codification and Hierarchy of
Generally Accepted Accounting Principles – a replacement of FASB Statement
No.162 (the “Codification”) The Codification reorganized existing U.S.
accounting and reporting standards issued by the FASB and other related private
sector standard setters into a single source of authoritative accounting
principles arranged by topic. The Codification supersedes all existing U.S.
accounting standards; all other accounting literature not included in the
Codification (other than Securities and Exchange Commission guidance for
publicly-traded companies) is considered non-authoritative. The Codification is
effective on a prospective basis for interim and annual reporting periods ending
after September 15, 2009. The adoption of the Codification changed how the
Company refers to U.S. GAAP accounting standards but did not impact the
Company’s results of operations, financial position or liquidity.
In May
2009, the FASB issued new guidance for accounting for subsequent events. The new
guidance, which is now part of Accounting Standards Codification (“ASC”) 855,
incorporates the subsequent events guidance contained in the auditing standards
literature into authoritative accounting literature. It also requires entities
to disclose the date through which they have evaluated subsequent events and
whether the date corresponds with the release of their financial statements. ASC
855 is effective for all interim and annual periods ending after September 15,
2009. We adopted ASC 855 upon its issuance and it had no material impact on our
financial statements.
Film Licenses. Film
costs are stated at the lower of estimated net realizable value determined on an
individual film basis, or cost, net of amortization. Film costs represent the
acquisition of film rights for cash and guaranteed minimum
payments.
The
Company is currently directing all its resources and efforts toward building the
Company's wireless infrastructure services business. Due to the limited
availability of capital, personnel and resources, the volume of film sales
activity has been significantly diminished. Although we have not
fully discontinued the film distribution business, due to the limited
availability of capital and personnel management has determined that it will not
aggressively devote resources of the Company in this area.
Subsequent
Events. In preparing the accompanying condensed consolidated
financial statements, in accordance with FASB ASC No. 855, the Company has
reviewed events that have occurred after June 30, 2010, through the date of
issuance of the financial statements on August 13, 2010. During this period the
Company did not have any material subsequent events that have not been disclosed
herein.
NOTE
4 – OTHER CURRENT ASSETS
At June
30, 2010 and December 31, 2009, other current assets consisted primarily of
prepaid insurance of approximately $31,500 and $25,000,
respectively.
NOTE
5 - PROPERTY AND EQUIPMENT
Depreciation
expense for the six months ended June 30, 2010 and 2009 was $18,582 and $1,032,
respectively. At June 30, 2010 and December 31, 2009, property and equipment
consisted of the following:
June
30,
|
December
31,
|
|||||||
2010
|
2009
|
|||||||
Vehicles
|
$ | 62,266 | $ | 62,266 | ||||
Equipment
|
116,601 | 85,662 | ||||||
Website
costs
|
14,891 | 43,131 | ||||||
Leasehold
improvements
|
23,337 | 23,337 | ||||||
Furniture
and fixtures
|
25,388 | 25,388 | ||||||
Total
property and equipment
|
242,483 | 239,784 | ||||||
Accumulated
depreciation
|
133,351 | 117,750 | ||||||
Property
and equipment, net
|
$ | 109,132 | $ | 122,034 |
NOTE
6 – CONVERTIBLE DEBENTURES AND NOTES PAYABLE
The
following is a summary of the convertible debentures and notes payable on the
balance sheet at June 30, 2010 and December 31, 2009.
June
30,
|
December
31,
|
|||||||
Description
|
2010
|
2009
|
||||||
Note
payable to bank
|
$ | 321,907 | $ | 321,907 | ||||
Notes
payable to others
|
55,300 | 106,207 | ||||||
Callable
Secured Convertible Notes (net of unamortized debt discount of $297,929 at
June 30, 2010 and $576,782 at December 31, 2009)
|
2,234,183 | 1,955,330 | ||||||
2009
Convertible Notes (net of unamortized debt discount of $601,913 at June
30, 2010 and $810,970 at December 31, 2009)
|
340,585 | 176,530 | ||||||
2010
Convertible Notes (net of unamortized debt discount of $49,680 at June 30,
2010)
|
320 | - | ||||||
Convertible
Notes (net of unamortized debt discount of $1,246,285 at June 30, 2010 and
$1,142,079 December 31, 2009)
|
948,177 | 620,418 | ||||||
3,900,472 | 3,180,392 | |||||||
Less:
current portion
|
2,589,624 | 2,256,056 | ||||||
$ | 1,310,848 | $ | 924,336 |
A
subsidiary of the Company had a bank line of credit of approximately
$322,000, including accrued interest, all of which was outstanding at June 30,
2010 and December 31, 2009, at an interest rate of 7.75% with a maturity on June
6, 2008. The obligation to the bank has not been repaid and remains payable at
June 30, 2010 and December 31, 2009.
A 7%
Convertible Note matured in 2007 and is currently classified in the current
portion of Notes Payable as terms for an extension are currently being
negotiated.
Notes
payable at December 31, 2009 includes the settlement of a lawsuit against a
former consultant originally for $310,000. As of June 30, 2010 this obligation
had been fully satisfied.
Callable Secured Convertible
Notes. The Company entered into a series of Securities
Purchase Agreements with New Millennium Capital Partners II, LLC, AJW Qualified
Partners, LLC, AJW Offshore, Ltd. and AJW Partners, LLC (collectively referred
to hereinafter as “NIR Group”) starting in December 28, 2005, with the last
financing for $50,000 occurring on March 11, 2009. Various Callable
Secured Notes (the “Callable Notes”) initially bore interest at a rate of 8%
with the right to convert into shares of Common Stock at a discount of 65% based
upon the average of the three lowest intraday trading prices for
the
- 12
-
Common
Stock for the 20 trading days before, but not including, the conversion
date. As a result of various adjustments and the receipt of
additional financing from NIR Group, the interest rate on all of the Callable
Notes was adjusted to 15%. Furthermore, the discount conversion rate
was increased from 65% to 72% on a majority of the Callable Notes. In connection
with the Callable Notes, as adjusted for reverse stock splits, the NIR Group
also received warrants to purchase a total of 500,317 shares of Common Stock of
the Company at exercise prices ranging from $0.50 to $5,000 per share and expire
on dates through December 2015 (see footnote 7). On January 31, 2008 and
November 10, 2008 the NIR Group agreed to convert an aggregate of $338,642 of
accrued interest into Callable Notes bearing interest at 2%. The
total principal outstanding relating to all of the Callable Notes at June 30,
2010 was $2,532,114, of which $1,918,099, including $1,171,703 which is past
due, is classified as a current liability in the accompanying condensed
consolidated balance sheet.
In
addition, the conversion price of the Callable Notes and the exercise price of
the warrants will be adjusted in the event that we issue Common Stock at a price
below the fixed conversion price, below market price, with the exception of any
securities issued in connection with the Securities Purchase Agreement. The
conversion price of the Callable Notes and the exercise price of the warrants
may be adjusted in certain circumstances such as if we pay a stock dividend,
subdivide or combine outstanding shares of Common Stock into a greater or lesser
number of shares, or take such other actions as would otherwise result in
dilution of the selling stockholder's position. The selling stockholders have
contractually agreed to restrict their ability to convert or exercise their
warrants and receive shares of our Common Stock such that the number of shares
of Common Stock held by them and their affiliates after such conversion or
exercise does not exceed 4.99% of the then issued and outstanding shares of
Common Stock. In addition, NIR Group may have a security interest in
substantially all of our assets and registration rights.
2009 Convertible Notes. On
May 11, 2009 the Company entered into a financing agreement with JMJ Financial
(“JMJ”). The Company issued a Convertible Promissory Note to JMJ (the “JMJ
Note”) in the amount of $825,000 with an interest rate of 13.2% and JMJ issued a
Secured & Collateralized Promissory Note to the Company in the amount of
$750,000 with an interest rate of 12%. Both notes mature three years from the
effective date. The interest on both notes was incurred as a one-time charge on
the effective date of the notes and is equal to $99,000 on each note. As of June
30, 2010 the Company has received $145,000 toward the satisfaction of the
Secured & Collateralized Promissory Note from JMJ. The JMJ Note is
convertible into the Common Stock of the Company at a conversion price based on
70% of the lowest trade price in the 20 trading days prior to the
conversion. Any conversions by JMJ are limited to the JMJ remaining
under 4.99% ownership of the outstanding Common Stock of the
Company. Pursuant to the terms of the note, the Company is not
permitted to prepay the note unless approved by JMJ.
On August
20, 2009, the Company entered into a $50,000 convertible note with Redwood
Management LLC. (“Redwood Note-I”) The Redwood Note-I has a three
year term, bears interest at 10% and is convertible into Common Stock at an
exercise price equal to 40% of the lowest closing bid price for the 10 trading
days prior to conversion. Pursuant to the terms of the Redwood Note-I, the
Company may prepay the note in whole or in part at 125% of the amount to be
prepaid upon seven (7) days notice prior to redemption.
On
October 19, 2009, the Company entered into a $12,500 convertible note with
Redwood Management LLC. (“Redwood Note-II”) The Redwood Note-II has a
three year term, bears interest at 10% and is convertible into Common Stock at
an exercise price equal to 40% of the lowest closing bid price for the 10
trading days prior to conversion. Pursuant to the terms of the Redwood Note-II,
the Company may prepay the note in whole or in part at 125% of the amount to be
prepaid upon seven (7) days notice prior to redemption.
- 13
-
The JMJ
Note together with Redwood Note-I and Redwood Note-II are collectively referred
to as the 2009 Convertible Notes. All of the 2009 Convertible Notes, totaling
$972,500 at June 30, 2010, are classified as a long term liability in the
accompanying condensed consolidated balance sheet.
2010 Convertible
Notes. On June 23, 2010, the Company entered into a $50,000
convertible note with Redwood Management LLC. (“Redwood Note-III”)
The Redwood Note-III has a three year term, bears interest at 7% and is
convertible into Common Stock at an exercise price equal to 50% of the lowest
closing bid price for the 10 trading days prior to conversion. Pursuant to the
terms of the Redwood Note-III, the Company may prepay the note in whole or in
part at 125% of the amount to be prepaid upon seven (7) days notice prior to
redemption.
Convertible
Notes. The Company has entered into a series of convertible
notes (the “Convertible Notes”) in exchange for cash proceeds, accrued interest
payable, goods or services. The Convertible Notes have maturities
ranging from two to seven years and accruing interest at rates ranging from 2%
to 15%. The Convertible Notes are generally convertible into Common
Stock of the Company at an exercise price equal to the lowest closing bid price
for the 10 trading days prior to conversion. The Company issued approximately
$386,000 of new Convertible Notes during the six months ended June 30, 2010. At
June 30, 2010 the Convertible Notes had an aggregate outstanding principal
balance of approximately $2,194,000 of which approximately $297,000 is
classified as a current liability in the accompanying condensed consolidated
balance sheet.
Due to
the indeterminate number of shares which might be issued under the convertible
conversion feature of the Callable Notes, the 2009 Convertible Notes and the
Convertible Notes outstanding, the Company is required to record a liability
relating to both the detachable warrants and embedded convertible feature of the
convertible debentures payable which is included in the liabilities in the
accompanying condensed consolidated balance sheets as a “derivative
liability”.
The
accompanying condensed consolidated financial statements comply with current
requirements relating to warrants and embedded derivatives as
follows:
|
a.
|
The
Company treats the full fair market value of the derivative and warrant
liability on the convertible secured debentures as a discount on the
debentures (limited to their face value). The excess, if any, is recorded
as an increase in the derivative liability and warrant liability with a
corresponding increase in loss on adjustment of the derivative and warrant
liability to fair value.
|
b.
|
Subsequent
to the initial recording, the change in the fair value of the detachable
warrants, determined under the Black-Scholes option pricing formula and
the change in the fair value of the embedded derivative (utilizing the
Black-Scholes option pricing formula) in the conversion feature of the
convertible debentures are recorded as adjustments to the liabilities as
of each balance sheet date with a corresponding change in Loss on
adjustment of the derivative and warrant liability to fair
value.
|
|
c.
|
The
expense relating to the change in the fair value of the Company’s stock
reflected in the change in the fair value of the warrants and derivatives
(noted above) is included in other income in the accompanying consolidated
statements of operations.
|
NOTE
7 - PREFERRED STOCK
Convertible
Preferred Stock. The Articles of Incorporation of the Company
authorized the issuance of 375,000 shares of 12% non-voting convertible
redeemable preferred stock at $0.10 par value per share and up to 500,000 shares
of “blank check” preferred stock, from time to time in one or more
series. Such shares upon issuance will be subject to the limitations
contained in the Articles of Incorporation and any
- 14
-
limitations prescribed by law to
establish and designate any such series and to fix the number of shares and the
relative rights, voting rights and terms of redemption and liquidation
preferences. In 2006, the
total Preferred Shares authorized was increased to 10 million shares.
On April 24, 2008, the
Company increased its total authorized Preferred Shares from 10 million shares
to 500 million shares. All Preferred Stock authorized by the Company was created
from this “blank check” pool.
12% Convertible Non-Voting Preferred
Stock. The
Company's 12% non-voting convertible redeemable preferred stock (“12% Non-Voting
Preferred Stock”) entitles the holder to dividends equal to 12% of the 12%
Non-Voting Preferred Stock liquidation preference of $2.00 per annum, or $.24
per annum per share, payable quarterly on March 1, June 1, September 1, and
December 1 in cash or common stock of the Company having an equivalent fair
market value. At June 30, 2010 and December 31, 2009, 25,357 shares of the 12%
Non-Voting Preferred Stock were issued and outstanding.
On
February 15, 2010, the Board of Directors authorized the payment of the accrued
12% Non-Voting Preferred Stock dividend to be settled in shares of the Company's
common stock or cash, at the discretion of the Chief Executive Officer. Accrued
and unpaid dividends at June 30, 2010 were $50,197. Dividends will
accumulate until such time as earned surplus is available to pay a cash dividend
or until a post effective amendment to the Company's registration statement
covering a certain number of common shares reserved for the payment of the 12%
Non-Voting Preferred Stock dividend is filed and declared effective, or if such
number of common shares are insufficient to pay cumulative dividends, then until
additional common shares are registered with the Securities and Exchange
Commission (“SEC”).
The
Company's 12% Non-Voting Preferred Stock is convertible into shares of Common
Stock at a rate of two shares of Common Stock (subject to adjustments) for
each share of 12% Non-Voting Preferred Stock. The 12% Non-Voting Preferred Stock
is redeemable at the option of the Company, at any time on not less than 30 days
written or published notice to the holders of record of the 12% Non-Voting
Preferred Stock, at a price $2.00 per share (plus all accrued and unpaid
dividends). The holders of the Preferred Stock shall have the opportunity to
convert shares of 12% Non0Voting Preferred Stock into Common Stock during the
notice period. The Company does not have nor does it intend to establish a
sinking fund for the redemption of the 12% Non-Voting Preferred Stock. As
adjusted, the 12% Non-Voting Preferred Stock is currently convertible into an
aggregate of fifteen shares of Common Stock.
Series B Voting
Preferred Stock. The Company filed a Certificate of
Designation of Convertible Redeemable Series B Preferred Stock (“Series B
Preferred Stock”) on January 4, 2006, pursuant to which the Company authorized
for issuance 135,000 shares of Series B Preferred Stock, par value $0.10 per
share, which shares are convertible at a conversion price equal to the volume
weighted average price of our common stock, as reported by Bloomberg, during the
ten consecutive trading days preceding the conversion date. The holders of
Series B Preferred Stock have the right to vote together with holders of the
Corporation’s common stock, on a 30 votes per share basis, not as a separate
class, on all matters presented to the holders of the common stock. As of
June 30, 2010 and December 31, 2009, 106,294 and 106,670 shares of Series B
Preferred Stock, respectively, were issued and outstanding.
Shares of
Series B Preferred Stock are convertible into shares of common stock of the
Company at a conversion price equal to 50% of the closing bid price of the
Company’s common stock.
Series C Voting
Preferred Stock. The Company filed a Certificate of
Designation of Convertible Redeemable Series C Preferred Stock (“Series C
Preferred Stock”) on March 23, 2006, pursuant to which the Company authorized
for issuance 300,000 shares of Series C Preferred Stock, par value $0.10 per
share, which shares are convertible after (i) the market price of the common
stock is above $1.00 per share; (ii) the Company’s common stock is trading on
the OTCBB market or the AMEX; (iii) the Company is in good standing; (iv) the
Company must have more than 500 stockholders; (v) the Company must have annual
revenue of at least $4 million; (vi) the Company has a minimum of $100,000 EBITA
for the
- 15
-
fiscal
year preceding the conversion request. The holders of the Series C Preferred
Stock shall have the right to vote together with the holders of the
Corporation’s common stock, on a 30 votes per share basis, not as a separate
class, on matters presented to the holders of the common stock. On February
14, 2008, 220,000 shares of Series C Preferred Stock were issued to the
Company’s President. As of June 30, 2010 and December 31, 2009, 300,000 shares
of Series C Preferred Stock were issued and outstanding.
Non-Convertible
Series D Voting Preferred Stock. The Company filed a
Certificate of Designation of Series D Preferred Stock (“Series D Preferred
Stock”) on February 5, 2007 and a Certificate of Change of Number of Authorized
Shares and Par Value of Series D Preferred Stock on March 26, 2007, pursuant to
which the Company authorized for issuance 6,500,000 of shares of Series D
Preferred Stock, par value $0.001 per share. Holders of the
Series D Preferred Stock have the right to vote together with holders of the
Company’s common stock, on a 60 votes per share basis, and not as a separate
class, on all matters presented to the holders of the common
stock. The shares of Series D Preferred Stock are not convertible
into common stock of the Company. The Company issued 6,500,000 shares
of Series D Preferred Stock to the Company’s President all of which was
outstanding at June 30, 2010 and December 31, 2009.
Non-Convertible
Series E Voting Preferred Stock. On July 7, 2009 the
Board of Directors unanimously approved for issuance 100,000,000 shares of
Series E Preferred Stock, par value $0.001 per share The Company filed a
Certificate of Designation of Series E Preferred Stock (”Series E Preferred
Stock”) on July 10, 2009. Holders of Series E Preferred Stock have the right to
vote together with holders of the Company’s common stock, on a 95 votes per
share basis, not as a separate class, on all matters presented to the holders of
the common stock. The shares of the Series E Preferred Stock are not
convertible into common stock of the Company. The Company issued
31,000,000 shares of Series E Preferred Stock to the Company’s President, all of
which was outstanding at June 30, 2010 and December 31, 2009.
Warrants. A
summary of warrants outstanding at June 30, 2010, after giving effect to
the one for five hundred reverse stock split on August 27, 2009 is as
follows:
Warrants
|
Date
Issued
|
Expiration
Date
|
Price
|
317
|
Various
|
Various
through 6/15/15
|
$500
- $5,000
|
70,000
|
7/29/08
|
7/29/15
|
$2.50
|
100,000
|
9/24/08
|
9/24/15
|
$2.50
|
50,000
|
11/5/08
|
11/5/15
|
$0.50
|
180,000
|
12/3/08
|
12/3/15
|
$0.50
|
100,000
|
12/5/08
|
12/5/15
|
$0.25
|
500,317
|
NOTE
8 - RELATED PARTY TRANSACTIONS
The
Company’s subsidiary, Juniper Services, Inc., entered into a sublease for its
New York offices from a company owned 100% by the Company’s President. The
lease and the sublease on this space expires on November 30,
2016. The rent paid and terms under the sublease are the same as
those under the affiliate’s lease agreement with the
landlord Rent expense for the six and three months ended June
30, 2010 and 2009 was approximately $32,600 and $16,000,
respectively.
Throughout
2010 and 2009, the Company's principal shareholder and officer made loans to,
and payments on behalf of, the Company and received payments from the Company
from time to time. The
- 16
-
net
outstanding balance due to the officer at June 30, 2010 and December 31, 2009
was approximately $974,000 and $867,000, respectively.
NOTE
9 - COMMITMENTS AND CONTINGENCIES
Employment
Agreements
Mr.
Hreljanovic has an Employment Agreement with the Company, which has been
extended by the Board of Directors to August 31, 2010 and provides for his
employment as President and Chief Executive Officer at an annual salary of
approximately $242,000, as adjusted the CPI, and for the reimbursement of
certain expenses and insurance. Additionally, the Employment Agreement provides
that Mr. Hreljanovic may receive shares of the Company’s Common Stock as
consideration for services rendered to the Company. Due to a working capital
deficit, for the six months ended June 30, 2010 Mr. Hreljanovic actually
received compensation of $30,500 and the balance due of $90,500 was accrued at
June 30, 2010.
Under the
terms of this extended employment agreement, our Chief Executive Officer is
entitled to receive a cash bonus of a percentage of our pre-tax profits if our
pre-tax profit exceeds $100,000.
Mr.
Hreljanovic has accrued salary of approximately $961,000 which is included in
due to officer at June 30, 2010. Mr. Hreljanovic incorporated Tower
West Communications, Inc. a Florida corporation, organized on January 2009
(“Tower West”) and Ryan Pierce Group, Inc., organized in July 2009 (“Ryan
Pierce”). Mr. Hreljanovic paid all fees and costs associated with the
organization of these companies. Juniper Services, Inc. owns a
100% interest in Tower West and Ryan Pierce subject to a first position security
interest held by Mr. Hreljanovic. Mr. Hreljanovic’s security interest in Tower
West and Ryan Pierce extinguishes upon payment in full of all compensation owed
him.
Additionally,
if the employment agreement is terminated early by us after a change in control
(as defined by the agreement), the officer is entitled to his accrued salary and
to a lump sum cash payment equal to approximately three times his current base
salary.
The
Company subleases its New York office from Entertainment Financing Inc. (“EFI”);
an entity owned 100% by the Company’s Chief Executive Officer. The master lease
and the Company’s sublease on this space expire on November 30, 2016. EFI has
agreed that for the term of the sublease the rent paid to it will be
substantially the same rent that it pays under its master lease to the landlord.
Rent due under the lease with EFI is as follows:
Year
|
Amount
|
2010
|
$32,600
|
2011
|
$67,200
|
2012
|
$69,200
|
2013
|
$71,300
|
2014
|
$73,400
|
Thereafter
|
$153,500
|
On March
19, 2010, the Company received a “Notice of Default and Demand for Payment” from
JMJ Financial (“JMJ”). The letter states that as a result of the alleged
defaults the holder is accelerating the notes and demanded full payment of the
outstanding balance of principal and interest on the original Note on or before
April 2, 2010. The Company believes it has meritorious defenses and
disputes JMJ’s claim.
- 17
-
On May
10, 2010 Ryan Pierce and Tower West, both indirect, wholly owned subsidiaries of
Juniper, secured a temporary restraining order prohibiting certain former
employees from soliciting current employees of the subsidiaries or using or
disclosing the subsidiaries’ proprietary information pending a preliminary
injunction hearing.
The court
has now extended the order, insofar as it pertains to any use or dissemination
of Juniper’s proprietary information, property or software, for the duration of
the litigation. The two subsidiaries filed suit in the Supreme Court of the
State of New York in the county of Nassau against five former employees and a
consultant. Among other things the complaint against alleges that the
former employees acted in concert and conspired to misappropriate the business,
good will, employees and proprietary information of the Company and to
intentionally and maliciously damage the business of the Company. The complaint
seeks injunctive relief and damages arising out of the actions of the former
employees and consultant.
NOTE
10 - INCOME TAXES
No
provision has been made for Federal and state income taxes due to the losses
incurred. As a result of losses incurred through December 31, 2009, the Company
has net operating loss carry forwards of approximately $28.8 million. These
carry forwards expire through 2028.
In
accordance with ASC 740, the Company recognized deferred tax assets of
approximately $11.6 million at December 31, 2009. A full valuation allowance has
been established due to the uncertainly regarding the Company’s ability to
generate income sufficient to utilize the tax losses during the carryforward
period.
NOTE
11 -STOCK SPLITS
On July
10, 2009, the Company’s shareholders approved a one-for-five hundred reverse
stock split of the Company’s common stock. Accordingly, on July 10,
2009 the Board of Directors authorized a one-for-five hundred reverse split that
took effect on August 27, 2009. In addition, the authorized common stock of
the Company was amended to ten billion shares (10,000,000,000) and the par value
was changed to $0.0001 per share
Unless
stated otherwise, all amounts from prior periods have been restated after
giving effect to the reverse stock split.
NOTE
12 -GOING CONCERN
The
Company's condensed consolidated financial statements are prepared using
accounting principles generally accepted in the United States of America
applicable to a going concern which contemplates the realization of assets and
liquidation of liabilities in the normal course of business. At June 30, 2010
the Company had a working capital deficit of approximately $5.6 million and a
stockholders’ deficit of approximately $19.8 million. In addition, the Company
has defaulted on several of its liabilities and has discontinued the operations
of New Wave. These matters raise substantial doubt about the Company’s ability
to continue as a going concern.
- 18
-
Primarily,
revenues have not been sufficient to cover the Company’s operating costs.
Management’s plans to enable the Company to continue as a going concern include
the following:
•
|
Obtaining
additional wireless and broadband
contracts;
|
•
|
Using
stock and stock option-based compensation to cover payroll and other
permissible labor costs;
|
•
|
Raising
additional capital through the sale of various debt and/or equity
instruments;
|
•
|
Leveraging
the Companies’ resources by retaining and increasing our work force
through subcontractors;
|
•
|
Negotiating
and settling existing debts for less than current amounts
owed;
|
•
|
Reducing
expenses through consolidating or disposing of certain subsidiary
companies;
|
•
|
Converting
certain debt into shares of the Company’s common stock;
|
•
|
Implementing
a major marketing campaign to increase the demand for our broadband and
wireless services; and
|
•
|
Seeking
strategic acquisition candidates to guarantee its growth in the broadband
and wireless sectors.
|
There can
be no assurance that the Company can or will be successful in implementing any
of its plans or that it will be successful in enabling the Company to continue
as a going concern. The Company’s consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
NOTE
13 - SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
During
the six months ended June 30, 2010 and 2009 the Company:
|
·
|
issued
approximately 152,882,000 and 1,834,866 shares, respectively,
of its Common Stock upon conversion of approximately $416,000 and $65,000,
respectively, of its Convertible
Debentures;
|
|
·
|
issued
2,500,000 and approximately 680,000 shares, respectively, of its Common
Stock upon conversion of approximately $11,000 and $101,000, respectively,
of current liabilities;
|
|
·
|
issued
approximately 4,577,000 and 6,289,000 shares, respectively, of its Common
Stock upon conversion of 376 and 11,640 shares, respectively,
of Series B Preferred Stock;
|
|
·
|
issued
0 and 31,000,000 shares, respectively, of Series E Preferred Stock to the
Company’s President as settlement of $31,000 of the accrued
compensation;
|
|
·
|
recognized
approximately $291,000 and $0, respectively, of unamortized debt discount
and $291,000 and $0, respectively, of derivative liability relating to the
issuance of new convertible
debentures;
|
|
·
|
returned
property and equipment originally purchased in 2009 thereby reducing
property and equipment by $37,069, accumulated depreciation of $2,208 and
accounts payable of $34,861. and
|
|
·
|
issued
$326,500 and $0, respectively, of convertible debentures in exchange for
current liabilities.
|
NOTE
14 – SUBSEQUENT EVENTS
Subsequent
to June 30, 2010 the Company issued an additional 2010 Convertible Note to
Redwood Management, Inc. (”Redwood Note IV”) in the amount of $30,000 bearing
interest at 12% with other terms substantially the same as Redwood Note
I. In connection with the issuance of the Redwood Note IV, the
conversion discount was amended from 40% to 75%.
- 19
-
In
addition the Company has repaid approximately $275,000 due to the outside
staffing company, which provides the company with labor for
operations. The funds used to repay this vendor were received through
collections of accounts receivable.
On August
3, 2010 the Company filed a definitive Schedule 14C with the Securities and
Exchange Commission. The information statement was mailed to the
shareholders on August 4, 2010. The purpose of the statement was to
notify the Company’s shareholders that the Board of Directors, with
the written consent of a stockholder holding a majority of the Company’s voting
power, have approved a one for three hundred (1-for-300) reverse stock split
(the “Stock Split”). The Stock Split cannot be effectuated until 20 days after
the date of mailing at a date and time to be determined by the Board of
Directors, if it deems it advisable, within the next 12 months, and then after
the filing of a Certificate of Amendment to our Certificate of Incorporation
with the Secretary of State of the State of Nevada.
ITEM
2. Management’s Discussion and Analysis of Financial Condition and Result of
Operations
This
Management’s Discussion and
Analysis of Financial Condition and Results of Operations and
other parts of this quarterly report contain forward-looking statements that
involve risks and uncertainties. Forward-looking statements can also be
identified by words such as “anticipates,” “expects,” “believes,” “plans,”
“predicts,” and similar terms. Forward-looking statements are not guarantees of
future performance and our actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such differences include but are not limited to those discussed in the
subsection entitled Forward-Looking Statements and
Factors That May Affect Future Results and Financial Condition below. The
following discussion should be read in conjunction with our financial statements
and notes thereto included in this report. Information presented herein is based
on the six and three month periods ended June 30, 2010 and 2009. Our fiscal year
end is December 31.
Company
Overview
Juniper
Group, Inc. is a holding company (herein after referred to as “We,” “Us,” “Our,”
“Juniper” or “the Company”). Our business is composed of two segments
(1) wireless infrastructure services and (2) film distribution
services. Currently, film distribution services consist of a
financially insignificant portion of our operations. The Company’s
headquarters are located in Boca Raton, FL and our business is conducted through
several subsidiaries.
The
Company’s predominant focus is on wireless infrastructure
service. These services are conducted through Juniper Services, Inc.
(“JSI”), which is wholly owned by Juniper Entertainment, Inc. (“JEI”), a wholly
owned subsidiary of the Juniper Group, Inc.
Management’s
strategic focus is to support the growth of its operations by increasing
revenues, managing costs and creating earnings growth. The Company’s
strategy is to seek strategic acquisitions to guarantee its growth in the
broadband and wireless infrastructure business. The Company is
directing its infrastructure services and its marketing effort to a national
customer base utilizing subcontractors.
Wireless
Infrastructure Services
The
Company’s wireless infrastructure services are conducted by Tower West and Ryan
Pierce both are wholly owned subsidiaries of JSI. The Company’s wireless
installation services are performed on a national basis. Services are aimed at
supporting the demand in the deployment and maintenance of wireless, tower
systems services with leading telecommunication companies, providing site
surveys, tower construction, microwave system and software installations for
leading telecommunications companies.
- 20
-
Operations
primarily consist of infrastructure services for the maintenance of wireless
towers and other structures. The Company is able to leverage its
abilities to perform its infrastructure services on a nationwide basis by using
local subcontractors in various regions that it obtains contracts throughout the
United States. As a result of using subcontractors, we should be
capable of providing our services anywhere within the United
States.
We
currently have contracts with Verizon, Clearwire (currently in process of
building out nationwide mobile WIMAX network and is on track to cover over 120
million people in 80 markets by the end of 2010), American Tower, Ericsson,
Cricket, SBA, Aero Solutions, Global Wireless Construction, and Oddville
Communications. We expect to utilize our new abilities to provide our
wireless and broadband infrastructure services nationwide. In some
instances, our current clients may be used as the platform for our national
expansion aspirations and fuel what could be substantial future
growth.
Management
has or will take the following actions to improve the operating performance of
its wireless infrastructure services: (1) utilize staffing agencies; (2) hire
new management teams and reorganize management’s responsibilities; (3)
align labor costs with market conditions; (4) evaluate our geographic footprint
and customer needs with customer contracts; and (5) utilize accounts receivable
financing.
We
believe that the demand for wireless infrastructure services will increase in
the wireless broadband segment during the balance of 2010 and beyond through the
continued support of the cellular market and through a robust wireless
industry. More specifically, the consumer demand for smartphones is
increasing which will require more and more bandwidth on millions of these
wireless devices throughout the United States. This demand is fueling
the need to update existing towers or the construction of new towers that
support third generation (“3G”) and/or fourth generation (“4G”) technologies at
increasing rates. The increased consumer demand is expected to propel
the Company’s business well into the future. Consequently, the Company’s efforts
are focused on being able to handle these opportunities with existing and new
staff in order to meet its client’s needs utilizing staffing
agencies.
The
Company through its marketing program is exploring new opportunities in its
wireless infrastructure and broadband service business. The Company will seek to
achieve a greater more diversified balance in its business base among the
various competing segments of rapidly expanding wireless
providers. The Company will continue to evaluate potential
opportunities in terms of the capital investments required, cash flow
requirements of the opportunity, and the margins achievable in each market
segment.
The
Company plans to concentrate its efforts for the balance of 2010 on providing
its services to key national wireless and broadband providers on a national
platform with support from its staffing agencies. The Company believes that this
strategy will allow the Company to grow while maintaining cost
controls. As the economic environment improves, the Company believes
that its future prospects for the expansion of its services in the wireless
Infrastructure segment will remain strong. Management believes that
infrastructure build-out, technology introduction, new applications and
broadband deployment, integration and support will continue to be outsourced to
qualified service providers such as Juniper.
The
opportunity for Juniper to exploit the broadband installation and wireless
infrastructure services and to take advantage of future wireless opportunities
are limited by its ability to:
(i) Financially
support national agreements entered into and to finance continuing growth and
fund management recruitment, certifications, training and payroll, as well as
the financing of operating cash flow requirements to support staffing costs.
This will require additional financing on a timely basis;
- 21
-
(ii) Maximizing
capital availability for potential new services being developed by providers in
the wireless market. The Company evaluates opportunities for services
to its customers based on capital investment requirements, the potential profit
margin, and the customer’s payment practices; and
(iii) Focusing
on outsourcing staff requirements and possibly accounts receivable financing
which may increase available cash flow. The issues that rank high on evaluating
new business opportunities are the customer’s qualification to meet the accounts
receivable financing requirements.
Results of
Operations
Reader’s
should note that in November 2008 the Company ceased operations of New Wave
Communications, Inc. (“New Wave”) due to the alleged malicious acts of Michael
and James Calderhead as more fully disclosed under Part II-Item 1 Legal
Proceedings. The Calderhead’s alleged bad acts forced Juniper
to close New Wave which in turn precipitated the creation of two new operating
subsidiaries: Tower West and Ryan Pierce (the “Operating Subsidiaries”). These
new subsidiaries were formed at great expense and the effects of the
Calderhead’s alleged malicious behavior have cause financial reverberations
throughout the Company’s operations as indicated in the comparisons
below.
Results
of Operations for the Six Months Ended June 30, 2010 and 2009
Revenue
Gross
revenues for the six months ended June 30, 2010 and 2009 were $1,698,456 and
$109,073, respectively. The significant increase in revenues of approximately
$1,589,000 is attributable to the Operating Subsidiaries commencing operations
in the second half of 2009 and continuing to expand through 2010. The
lack of revenues in 2009 is a direct result of the Company terminating the
operations of New Wave in 2008 resulting in an immaterial amount of revenues
during the first half of 2009.
Gross
Profit (Loss) and Operating Expenses
Juniper
recorded gross profit of $529,277 for the six month period ended June 30, 2010,
compared to $51,844 for the comparable period in 2009. The increase in gross
profit of $477,433 for the six months ended June 30, 2010 versus 2009 was a
result of the Company growing its wireless infrastructure service business
versus minimal operations in the comparable period in the prior year. The gross
profit percent of 31.2% was in line with management’s expectations.
Net
Income
Juniper
recorded net income of $1,339,459 for the six month period ended June 30, 2010,
as compared to net income of $37,168,147 for the comparable period in 2009. The
decrease in net income is predominately due to a decrease in the gain on
adjustment of derivative and warrant liabilities of $35,713,353.
Juniper
may not operate at a profit through the remainder of 2010. Juniper's
revenues are tied to its ability to obtain additional wireless infrastructure
service contracts. Juniper is entering new markets and expects to
obtain additional contracts prior to the end of 2010; however no assurance can
be given that such additional contracts will be obtained prior to the end of the
year. Nonetheless, management does not anticipate generating
sufficient revenues from new contracts such that Juniper will have operating
profits by December 31, 2010. There can be no guarantee that profitability or
revenue growth can be realized in the future.
Expenses
- 22
-
Selling,
general and administrative expenses for the six month periods ended June 30,
2010 and 2009 were $1,022,672 and $560,083, respectively. The increase of
$462,589, or 82.6%, in 2010 was due primarily to the building and strengthening
of the Company’s internal infrastructure in 2010 in order to support our new
business model. This included the addition of three sales and marketing
personnel (approximately $165,000), travel and entertainment expenses
(approximately $31,000), the addition of three support staff and a full time
controller (approximately $225,000), and an increase in legal fees
(approximately $92,000) offset by a reduction in consulting expense
(approximately $30,000) and the annual audit accrual (approximately
$29,000). The cessation of the operations of New Wave in 2008
resulted in minimal selling, general and administrative expenses in
2009.
Impairment
of film licenses was $0 for the six months ended June 30, 2010 versus $6,891 for
the same period in 2009. In late 2009 we decided not to devote the
resources of the Company in the area of film licenses and determined that the
film licenses remaining at that time should be fully written
off. Although we have not fully discontinued this line of business
and will engage in the sale or exploitation of film licenses if and when
opportunities are available.
Other
Income (Expense)
The gain
on the adjustment of derivative and warrant liability decreased to $2,714,203
from $38,427,556 for the six month period ended June 30, 2010 versus 2009,
respectively. The decrease is a result of the change in the fair market value of
the Company’s common stock and the significant increase in the number of shares
of Common Stock that would need to be issued in the event that all of the
Company’s Convertible Debentures were converted into Common Stock. Gains and
losses on derivative liabilities and amortization of discounts represent
significant components of net income or loss and can swing dramatically from
period to period based on factors beyond the Company’s control, most
importantly, the fair market value of its common stock.
The
amortization of debt discount increased by $120,117 to $625,277 for the six
month period June 30, 2010 versus $505,160 for the six month period ended June
20, 2009. The increase in the amortization of debt discount is a
result of an increase in amount of debt incurred by the Company from 2009 to
2010.
Interest
expense increased by $32,953 to $253,029 for the six month period ended June 30,
2010 versus $220,076 for the six month period ended June 30,
2010. The increase in interest expense is a result of an increase in
debt from 2009 to 2010.
Results
of Operations for the Three Months Ended June 30, 2010
Revenue
Gross
revenues for the three months ended June 30, 2010 and 2009 were $707,785 and
$109,073, respectively. The increase in revenues of approximately $598,712 is
attributable to the Operating Subsidiaries commencing operations in the second
half of 2009 and continuing to expand into 2010. The lack of revenues
in 2009 is a direct result of the Company terminating the operations of New Wave
in 2008 resulting in an immaterial amount of revenues during the first half of
2009.
Gross
Profit (Loss) and Operating Expenses
Juniper
recorded gross profit of $352,266 for the three month period ended June 30,
2010, compared to a gross profit of $55,818 for the comparable period in 2009.
The increase in gross profit for the three months ended June 30, 2010 versus the
prior year was a result of the Company growing its wireless infrastructure
service business versus minimal operations in the comparable period in the prior
year. The
- 23
-
gross
profit percent of 49.8% exceeded expectations as a result of highly profitable
work performed in one market.
Net
Loss
Juniper
recorded a net loss of $3,507,927 for the three month period ended June 30,
2010, as compared to a net loss of $7,036,142 for the comparable period in 2009.
The decrease in net loss is predominately due to a decrease in the loss on the
adjustment of derivative and warrant liabilities of $3,407,648 in 2010 versus
2009.
Expenses
Selling,
general and administrative expenses for the three month periods ended June 30,
2010 and 2009 were $460,578 and $325,501, respectively. The increase of
$135,077, or 41.5% in 2010 was due to the continued strengthening of the
Company’s internal infrastructure in 2010 in order to support the new business
model. This included additional sales and marketing personnel (approximately
$65,000), the addition of support staff and a full time controller
(approximately $88,000), and an increase in legal fees due to ongoing litigation
disclosed elsewhere in the document (approximately $66,000) offset by the
reduction in consulting expenses (approximately $35,000) and the annual audit
accrual (approximately $30,000)
Other
Income (Expense)
The loss
on the adjustment of derivative and warrant liability decreased to $2,903,595
from $6,311,243 for the three month period ended June 30, 2010 versus 2009,
respectively. The decrease in the loss is a result of the change in the fair
market value of the Company’s common stock as well as the significant increase
in the number of shares of Common Stock that would need to be issued in the
event that all of the Company’s Convertible Debentures were converted into
Common Stock. Gains and losses on derivative liabilities and amortization of
discounts represent significant components of net income or loss and can swing
dramatically from period to period based on factors beyond the Company’s
control, most importantly, the fair market value of its common
stock.
The
amortization of debt discount increased by $44,653 to $380,258 in the three
month period June 30, 2010 versus $335,605 for the three months ended March 31,
2009. The increase in the amortization of debt discount is a result
of an increase in discounted debt incurred by the Company from 2009 to
2010.
Liquidity
and Capital Resources
On June
30, 2010, Juniper had current assets of $925,590 compared to current assets of
$686,845 at December 31, 2009 and a working capital deficit of $5,554,998 at
June 30, 2010, as compared to a working capital deficit of $5,298,231 at
December 31, 2009. The increase in the working capital deficit of $256,767 is
due primarily to increases in accounts payable and accrued expenses of
approximately $326,314, an increase in due to officer of $107,489, a
decrease in cash of $60,778 offset by an increase in the
accounts receivable and unbilled accounts receivable
of $277,048.
Net cash
used in operating activities for the six months ended June 30, 2010 was $412,075
compared to $509,485 for the six months ended June 30,
2009. The decrease of $97,410 in cash used in operating
activities was due to the increase in accounts receivable and unbilled accounts
receivable offset by an increase in accounts payable and accrued expenses. Among
the obligations that the Company has not had sufficient cash to pay include
repayment of debt obligations, certain payroll, payroll taxes and the funding of
its subsidiary operations. Certain employees, creditors and consultants have
agreed, from time to time, to receive the Company’s Common Stock in lieu of
cash. In these instances, the Company
- 24
-
determined
the number of shares to be issued based upon the unpaid compensation and the
current market price of the stock. Additionally, the Company registers these
shares so that the shares can immediately be sold in the open
market.
With
regard to the balance of the past due payroll taxes, the Company has hired tax
counsel to negotiate with New York State and with the Internal Revenue Service
and has entered into payment plans with both the New York State Department of
Finance and Internal Revenue Service.
Net cash
provided by financing activities for the six months ended June 30, 2010 was
$391,824 as compared to $498,133 for the comparable period in 2009. The Company
also issued a total of $114,377 of convertible debentures in exchange for
equipment, goods and services.
We
believe that we will not have sufficient liquidity to meet our operating
cash requirements for the current level of operations during the remainder of
2010. In addition, any event of default such as our failure to repay the
principal or interest on our Convertible Debentures when due, our failure to
issue shares of Common Stock upon conversion by the holder, or the breach of any
covenant, representation or warranty in the Securities Purchase Agreement would
have an impact on our ability to meet our operating requirements. We anticipate
that the full amount of the Convertible Debentures will be converted into shares
of our Common Stock, in accordance with the terms of the Convertible Debentures.
If we are required to repay the Convertible Debentures, we would be required to
use our limited working capital and raise additional funds. If we were unable to
repay the Convertible Debentures when required, the debenture holders could
commence legal action against us and foreclose on all of our assets to recover
the amounts due. Any such action would require us to curtail or cease
operations. Our ability to continue as a going concern is dependent upon
receiving additional funds either through the issuance of debt or the sale of
additional Common Stock and the success of management's plan to expand
operations. Although we may obtain external financing through the sale
of our securities, there can be no assurance that such financing will be
available, or if available, that any such financing would be on terms acceptable
to us. If we are unable to fund our cash flow needs, we may have to reduce
or stop planned expansion or scale back operations and reduce our staff. As
discussed more fully in Part II-Item 3 – Legal Proceedings - a
complaint has been filed against Juniper which alleges breach of the terms of
certain convertible debentures and seeks equitable relief and monetary damages
of $7.46 million Juniper has denied the allegations in the complaint and
asserted counterclaims. A motion for preliminary injunctive relief is
pending. While no estimate of the outcome can be made, the Company believes it
has meritorious defenses and will prevail in this matter. However,
there can be no assurance that we will be successful in defending against these
claims. New Millennium et. al. is the note holder of our Callable
Secured Convertible Notes with outstanding principal at June 30, 2010 of
approximately $2.6 million.
Financing
On
December 28, 2005, we entered into a financing arrangement involving the sale of
an aggregate of $1,000,000 principal amount of Callable Secured Convertible
Notes and warrants to purchase 1,000,000 shares of our Common
Stock. On December 28, 2005 we closed on $500,000 of principal and
500,000 of stock purchase warrants. The balance of the financing was
closed on May 18, 2007. On March 14, 2006, we entered into a
financing arrangement involving the sale of an additional $300,000 principal
amount of Callable Secured Convertible Notes and stock purchase warrants to
purchase 7,000,000 shares of our Common Stock, and on September 13, 2007, we
entered into a financing arrangement involving the sale of an additional
$600,000 principal amount of Callable Secured Convertible Notes and stock
purchase warrants to purchase 20,000,000 shares of our Common
Stock. As part of the September 2007 financing, our Chief Executive
Officer was required to personally guarantee the September 2007 note and the
discount rate on the market value of our stock used for conversion calculations
was reduced from 50% to 35%. The Callable Secured Convertible Notes are due and
payable, with 8% interest, unless sooner converted into shares of our Common
Stock. On December 26, 2007, we entered into a financing arrangement involving
the sale of an additional $100,000 principal
- 25
-
amount of
Callable Secured Convertible Notes and warrants to purchase 1,000,000 shares of
our Common Stock. On March 14, 2008 we entered into a financing
agreement involving the sale of an additional $50,000 principal amount of
callable Secured Notes and Stock Purchase Warrants to purchase 500,000 shares of
Common Stock. On June 20, 2008, we entered into a financing agreement involving
the sale of additional $50,000 principal amount of Callable Secured
Notes. On July 29, 2008, we entered into a financing agreement
involving the sale of additional $75,000 principal amount of Callable Secured
Notes and the interest rate on all of the Callable Secured Notes increased to
12%. On September 24, 2008, we entered into a financing agreement
involving the sale of additional $70,000 principal amount of Callable Secured
Notes. On November 5, 2008, we entered into a financing
agreement involving the sale of additional $61,000 principal amount of Callable
Secured Notes and the interest rate on all the Callable Secured Notes increased
to 15% and the discount rate on the market value of our stock used for
conversion calculations was reduced from 35% to 28%. On December 3,
2008, we sold $4,000 Stock Purchase Warrants to purchase 180,000 shares of
Common Stock. On December 5, 2008, we entered into a financing
agreement involving the sale of additional $75,000 principal amount of Callable
Secured Notes and the interest rate on the Callable Secured Notes at 15% and the
discount rate of 28%. On March 11, 2009, we entered into a financing
agreement involving the sale of additional $50,000 principal amount of Callable
Secured Notes, and the interest rate on the Callable Secured Notes at 15% and
the discount rate of 28%. Several of the Callable Secured Notes had
warrants attached. Due to the reverse stock splits in 2008 and 2009
the number of shares of Common Stock that can be purchased pursuant to these
warrants had been reduced to approximately 500,000 with exercise prices ranging
from $0.25 to $5,000.
We
currently have approximately $2,400,000 Callable Secured Convertible Notes
outstanding, after giving effect to conversions throughout the year. On January
31, 2008 and November 10, 2008, $147,542 and $191,100 respectively, of accrued
interest on these notes was converted to a debenture with similar terms and
conditions, bearing interest at 2% per annum. In addition, upon any event of
default, such as our failure to repay the principal or interest when due, our
failure to issue shares of Common Stock upon conversion by the holder, our
failure to timely file a registration statement or have such registration
statement declared effective, or breach of any covenant, representation or
warranty in the Securities Purchase Agreement, the full amount of the Callable
Secured Convertible Notes would immediately become due,. The registration
statement was declared effective on May 11, 2007. The conversion
price of the notes is dependent on the publicly traded market price of the
Company’s Common Stock. As such, the conversion price may change as
the market value of the Company’s commons stock rises and
falls. While we anticipate that the full amount of the Callable
Secured Convertible Notes will be converted into shares of our Common Stock, in
accordance with the terms of the Callable Secured Convertible Notes, the full
conversion of these notes is dependent on the amount of the Company’s authorized
Common Stock. The Company filed an Information Statement on
September 15, 2008, pursuant to section 14 (c) of the Securities Exchange Act of
1934, as amended, to increase the number of authorized shares of
Common Stock, $.001 par value, from 200 million to 5
billion, and our preferred stock, par value $0.001, to 500
million. If we are required to repay the Callable Secured Convertible
Notes, we would be required to use our limited working capital and raise
additional funds. If we were unable to repay the notes when required, the note
holders could commence legal action against us and foreclose on all of our
assets to recover the amounts due. Any such action would require us to curtail
or cease operations. As discussed more fully in Part II-Item 3 – Legal Proceedings - a
complaint has been filed against Juniper which alleges breach of the terms of
certain convertible debentures and seeks equitable relief and monetary damages
of $7.46 million Juniper has denied the allegations in the complaint and
asserted counterclaims. A motion for preliminary injunctive relief is
pending. While no estimate of the outcome can be made, the Company believes it
has meritorious defenses and will prevail in this matter. However,
there can be no assurance that we will be successful in defending against these
claims. Millennium et. al. is the note holder of our Callable Secured
Convertible Notes with outstanding principal at December 31, 2009 of
approximately $2.6 million.
- 26
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On May
11, 2009 the Company entered into a financing agreement for Convertible
Promissory Notes in the amount of $825,000 in exchange for the delivery to the
Company of a Secured & Collateralized Promissory Notes in the amount of
$750,000. As of December 31, 2009 the Company has received $145,000 toward
satisfaction of this note as of this date.
The
Convertible Promissory Note matures three years from the effective date and
bears a one-time interest equal to 12% and the obligation is convertible into
Common Stock of the Company at a conversion rate based on 70% of the lowest
trade price in the 20 trading days previous to the conversion. Any
conversions by the Holder of these note is limited to the Holder remaining under
4.99% ownership of the outstanding voting Common Stock of the
Company. By the terms of this note prepayment is not permitted unless
approved by the lender.
The
Secured & Collateralized Promissory Notes mature three years from the
effective date and bear a one-time interest charge of 13.2% and are secured by
securities in the amount of 750,000.
In
August 2009 and October 2009 the Company entered into convertible notes in the
amount of $50,000 and $12,500, respectively, with Redwood Management LLC
(“Redwood”). As amended, these notes bear interest at 10%
and are convertible into Common Stock at an exercise price equal to 75% and 40%,
respectively, of the lowest closing bid price for the 10 trading days prior to
conversion. Pursuant to the terms of the note the Company may prepay the note in
whole or in part at 125% of the amount prepaid.
In June
and July 2010 the Company entered into convertible notes in the amount of
$50,000 and $30,000, respectively, with Redwood. The note has a three
year term, bears interest at 7% and 12%, respectively, and is convertible into
Common Stock at an exercise price equal to 50% and 75%, respectively, of the
lowest closing bid price for the 10 trading days prior to conversion. Pursuant
to the terms of the Redwood Note-III, the Company may prepay the note in whole
or in part at 125% of the amount to be prepaid upon seven (7) days notice prior
to redemption.
During
the three month period ended June 30, 2010, the Company converted approximately
$326,500 of loans and advances received from various parities and accrued
interest payable into Convertible Notes. The Convertible Notes mature three
years from the effective date with an interest rates ranging from 2% of 14% per
annum.
Due to
the indeterminate number of shares of common stock which may be issued under the
conversion feature of the Callable Notes. These conversion features
pose a significant risk for substantial dilution.
Forward
Looking Statements
Forward-looking
statements involve known and unknown risks, uncertainties and other factors
which could cause the actual results, performance (financial or operating) or
achievements expressed or implied by such forward-looking statements not to
occur or be realized. Statements contained in this document, as well
as some statements by the Company in periodic press releases and oral statements
of Company officials during presentations about the Company constitute “forward
looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995 (the “Act). The words
“expect,” “estimate,” “anticipate,” “predict,” “believe” and similar
expressions and variations thereof are intended to identify forward looking
statements. These statements appear in a number of places in this report and
include statements regarding the intent, belief or current expectations of the
Company, it directors or its officers with respect to, among other things,
trends affecting the Company’s financial condition or results of operations. The
readers of this report are cautioned that any such forward looking statements
are not guarantees of future performance and involve risks and uncertainties
that could cause actual results to differ materially. Such factors
include:
·the
continued historical lack of profitable
operations;
|
·the continued working capital
deficit;
|
·the ongoing
need to raise additional capital to fund operations and growth on a timely
basis;
|
·the success of the expansion into
the wireless infrastructure services and the ability to provide adequate
working capital required for this expansion, and dependence
thereon;
|
· the Company’s revenue is mostly
derived from a selected number of customers;
|
· the ability to develop
long-lasting relationships with customers and attract new
customers;
|
· the competitive environment
within the industries in which the Company
operates;
|
· the
ability to attract and retain qualified personnel, particularly the
Company’s CEO;
|
· the effect on its financial
condition resulting from delays in payments received from third
parties;
|
· the
ability to manage a new business with limited
management;
|
· the rapid technological changes
in the industry; and
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· other factors set forth in our
other filings with the Securities and Exchange
Commission.
|
Seasonality
The
provision of services for wireless infrastructure deployment is affected by
adverse weather conditions and the spending patterns of our customers, exposing
us to variable quarterly results. Inclement weather may lower the demand for our
services in the winter months, as well as other times of the year. Furthermore,
the weather can delay our crew’s ability to perform services. Natural
catastrophes, such as the recent hurricanes in the United States, could also
have a negative impact on the economy overall and on our ability to perform
outdoor services in affected regions or utilize equipment and crew stationed in
those regions, which in turn could significantly impact the results of any one
or more reporting periods. However, these natural catastrophes historically have
generated additional revenue subsequent to the event.
Inflation
We
believe that inflation has generally not had a material impact on our
operations.
Off
Balance Sheet Arrangements
We do not
have any off-balance sheet financing arrangements.
ITEM
4. Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
In
connection with the preparation of this report on Form 10-Q, an evaluation was
carried out by the Company’s management, with the participation of the chief
executive officer and the chief financial officer, of the effectiveness of the
Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)).
Disclosure controls and procedures are designed to ensure that information
required to be disclosed in reports filed or submitted under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified
in the Commission’s rules and forms and that such information is accumulated and
communicated to management, including the chief executive officer and the chief
financial officer, to allow timely decisions regarding required
disclosures.
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Based on
that evaluation, the Company’s management concluded, as of the end of the period
covered by this report, that the Company’s disclosure controls and procedures
were effective in recording, processing, summarizing, and reporting information
required to be disclosed, within the time periods specified in the Commission’s
rules and forms.
Changes
in Internal Control over Financial Reporting
There
have been no changes in internal control over financial reporting (as defined in
Rule 13a-15(f) of the Exchange Act) during the period ended June 30, 2010, that
materially affected, or are reasonably likely to materially affect, the
Company’s internal control over financial reporting.
PART
II: OTHER INFORMATION
ITEM
1. Legal Proceedings
Since the
filing of Juniper's Form 10-K for the period ended December 31, 2009, no
material changes have occurred to the legal proceedings reported therein. For
more information, please see Juniper's Form 10-K for the year ended December 31,
2009 filed May 15, 2010.
The
litigation involving Michael and James Calderhead is disclosed below due to the
alleged significant damage that their actions have caused the
Company. The Calderheads’ bad acts forced Juniper to close New Wave
Communications, Inc. which in turn precipitated the creation of new operating
subsidiaries, Tower West and Ryan Pierce, in the wireless and broadband
infrastructure construction services business. These new subsidiaries
were formed at great expense and the effects of the Calderhead’s alleged
malicious behavior have caused financial reverberations throughout the Company’s
operations as noted in the Part I, Item 2. Management’s Discussion and Analysis
of Financial Condition and Result of Operations.
Juniper
Group, Inc. v. Michael and James Calderhead. On
June 15, 2007, the Company, through its subsidiaries, commenced a lawsuit
against Michael Calderhead and James Calderhead (the “Calderheads”) former
employees, in the United States District Court for the Eastern District of New
York (Case No. 07-CV-2413). The complaint asserts claims against the
Calderheads for breaches of a stock exchange agreement, breaches of an
employment agreement, and breaches of fiduciary duties owed to Juniper and its
wholly-owned subsidiary New Wave Communications, Inc. (“New
Wave”). Juniper alleges the Calderheads committed serious, material
breaches of their agreements with Juniper. Indeed, almost immediately
after Juniper’s acquisition of New Wave, and while still employed by Juniper
and/or New Wave and bound by their agreements with Juniper, the Calderheads made
preparations to form and operate a rival business to compete with Juniper and
New Wave.
In
February 2006, a mere two months after Juniper’s acquisition of New Wave, the
Calderheads met with possible financiers to discuss incorporating a new company
that would compete with New Wave and Juniper. Juniper alleges that
the meeting involved at least James Calderhead, a Juniper executive and the
President of New Wave; Michael Calderhead, a New Wave Chief Operating Officers;
another New Wave executive who had worked with Michael Calderhead prior to the
Juniper acquisition; and a local businessman in Franklin, Indiana, and the owner
of several businesses.
At the
time of the February 2006 meeting, and at all relevant times thereafter, James
Calderhead was subject to the Employment Agreement and Michael Calderhead was
subject to the Stock Exchange Agreement. Following the alleged
February 2006 meeting, the Calderheads, along with others, continued their
efforts to form and operate a new company which came to be called Heartland
Solutions Corp.
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(“HSC”)
(formerly Communications Infrastructure, Inc.). According to the
online records of the Indiana Secretary of State, HSC was organized as a
for-profit domestic corporation on January 19, 2007.
According
to HSC’s advertisements and representations in the marketplace, it is a
competitor of Juniper and New Wave. Specifically, HCS’s website
states that “HSC brings the combined experience of its owners in all areas of
Cellular Site Construction,” including project management, civil construction,
tower erection, and maintenance and troubleshooting.
At no
time did the Calderheads inform New Wave or Juniper of the formation of HSC,
their intentions or activities regarding HSC, or their intent or design to form
a new company that would compete with New Wave or Juniper. At no time
did New Wave or Juniper consent to any activities by the Calderheads with
respect to HSC or setting up a rival company.
On or
about January 17, 2007, Michael Calderhead announced that he would resign from
New Wave. Michael Calderhead, however, did not formally end his
employment relationship with New Wave until on or about March 27,
2007. Juniper subsequently learned that Michael Calderhead had been
working, and was continuing to work, for HSC.
In late
2006 and early 2007, New Wave’s business suddenly, and substantially,
declined. Contracts were lost, customer and vendor relationships were
ended, and new business opportunities were not pursued. New
Wave alleged and believes that some former customers of Juniper and New Wave
were transferred to HSC during this period, and believes that discovery will
establish that the Calderheads were involved in soliciting business for HSC and
soliciting New Wave’s customers and employees were essentially stolen from New
Wave.
The
substantial declines in New Wave’s business continued throughout early
2007. These declines were not reported to Juniper’s management in a
timely manner and, when they were reported, the declines were not explained in a
reasonable or clear manner. It was not until May, 2007 that Juniper
became aware of HSC’s growing presence in the marketplace; the involvement of
Michael Calderhead in HSC’s business; and that HSC was directly competing with
New Wave for customers.
On
Friday, May 18, 2007, ten New Wave employees abruptly announced that they were
resigning their positions at New Wave. Most of these former New Wave
employees indicated that they would begin work for HSC, joining Michael
Calderhead. Indeed, in the course of little more than a year from the date that
Juniper purchased New Wave from Michael Calderhead and installed the Calderheads
as New Wave executives, New Wave had gone from being a growing, profitable
business to a business on the verge of financial collapse.
On
Tuesday, May 22, 2007, Juniper terminated James Calderhead for
cause. Some, although not all, of the grounds for James Calderhead’s
termination are set forth above and in a termination letter.
Juniper
seeks injunctions restraining the Calderheads from, among other things,
competing with Juniper and New Wave, as well as compensatory damages in the
amount believed to be $10,000,000, punitive damages in the amount of
$5,000,000 and attorneys fees, costs and expenses. On September 29,
2007, the Court issued a preliminary injunction against Michael Calderhead
enjoining him from disclosing Juniper/New Wave’s customer list and from
soliciting, directly or indirectly, any of Juniper/New Wave’s existing
customers; denied the Calderheads’ motion to dismiss the complaint; and granted
Juniper’s motion for expedited discovery.
On
October 16, 2007, Michael Calderhead answered the complaint and asserted
counterclaims against Juniper for alleged breaches of, and fraud in connection
with, the stock exchange agreement and for alleged abuse of process in
connection with Juniper’s application for injunctive relief. Michael
Calderhead seeks compensatory and punitive damages. On October 16,
2007, James Calderhead answered the
- 29
-
complaint
and asserted counterclaims against Juniper for alleged breaches of the
employment agreement and for alleged abuse of process in connection with
Juniper’s application for injunctive relief. James Calderhead seeks
compensatory and punitive damages. The Company believes that none of
the counterclaims asserted by the Calderheads have any merit.
The
Company is vigorously prosecuting the claims asserted against the Calderheads
and is vigorously defending the counterclaims asserted by the
Calderheads. The outcome of this litigation may materially affect the
Company.
On May 8,
2008, Alan Andrus filed an action against Juniper Group, Inc. in the United
States District Court for the Eastern District of New York Index No. 08 Civ.
1900. The complaint, against us, a subsidiary and Mr. Hreljanovic, asserts
claims for fees of $195,000 plus interest for services rendered. Discovery is
now complete and the court has indicated that trial will occur during the fall
of 2010. While no estimate of the outcome can be made, the Company
believes it has meritorious defenses and will prevail in this
matter.
In Re New Wave
Communications, Inc. a Chapter 11 Bankruptcy petition was filed on
November 7, 2008 in the U.S. Bankruptcy Court for the Southern District of
Indiana (Indianapolis) and assigned case #08-13975-JKC-11. The
petition was voluntarily dismissed at the request of New Wave Communications,
Inc. on March 6, 2009.
On
December 18, 2009, New Millennium Capital Partners III, LLC; ASW Partners, LLC;
ASW Offshore II, Ltd.; ASW Qualified Partners II, LLC; ASW Master Fund II, Ltd.;
(“NIR Group”) filed an action entitled New Millennium, et. al. versus Juniper
Group, Inc. in the Supreme Court of the State of New York County of New York
Index No. 603782/09. The complaint alleges breach of the terms of certain
convertible debentures and seeks equitable relief and monetary damages of $7.46
million Juniper has denied the allegations in the complaint and asserted
counterclaims. A motion for preliminary injunctive relief is pending.
While no estimate of the outcome can be made, the Company believes it has
meritorious defenses and will prevail in this matter. However, there can be no
assurance that we will be successful in defending against these claims. The NIR
Group is the note holder of our Callable Secured Convertible Notes with
outstanding principal at December 31, 2009 of approximately $2.6
million.
On March
19, 2010, the Company received a “Notice of Default and Demand for Payment” from
JMJ Financial (“JMJ”). The letter states that as a result of the alleged
defaults the holder is accelerating the notes and is demanding full payment of
the outstanding balance of principal and interest on the original Note on or
before April 2, 2010. The Company believes it has meritorious
defenses and disputes JMJ’s claim.
On May
10, 2010 Ryan Pierce and Tower West, both indirect wholly owned subsidiaries of
Juniper, secured a temporary restraining order prohibiting certain former
employees from soliciting current employees of the subsidiaries or using or
disclosing the subsidiaries’ proprietary information pending a preliminary
injunction hearing.
The court
has now extended the order, insofar as it pertains to any use or dissemination
of Juniper’s proprietary information, property or software, for the duration of
the litigation. The two subsidiaries filed suit in the Supreme Court of the
State of New York in the county of Nassau against five former employees and a
consultant. Among other things the complaint against alleges that the
former employees acted in concert and conspired to acted to misappropriate the
business, good will, employees and proprietary information of the Company and to
intentionally and maliciously damage the business of the Company. The complaint
seeks injunctive relief and damages arising out of the actions of the former
employees and consultant.
- 30
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ITEM
1A. Risk Factors
There
have been no material changes with regard to the risk factors previously
disclosed in our Annual Report on Form 10-K for the period ended December 31,
2009.
ITEM
2. Unregistered Sale of Equity Securities and Use of Proceeds
During
the six month period ended June 30, 2010, the Company converted approximately
$326,500 of loans and advances received from various parities and accrued
interest payable into Convertible Notes. The Convertible Notes mature three
years from the effective date with an interest rates ranging from 2% of 14% per
annum. We relied on exemptions from registration afforded by Section
4(2) of the Securities Act of 1933 for the issuance of the Convertible Notes to
investors and the issue of shares upon conversion of convertible notes. We
believe that we have complied with the manner of sale, access to information and
investor accreditation requirements of such exemptions.
The
Company approved the conversion of Callable Notes and the conversion of Series B
Preferred Stock, (collectively referred to as the “Convertible Securities”) into
unrestricted shares of common stock pursuant to the provisions of Rule
144(b)(1). The Convertible Securities were originally issued under
4(2) as private transactions exempt from registration and in all recent
conversions the provisions of Rule 144(c)(1) were met in that the Company is a
reporting issuer, the recipients were non-affiliates of the Company and each had
held the Convertible Securities in excess of a full year. A total of
157,458,912 shares of unrestricted stock were issued during the six months ended
June 30, 2010 in exchange for the conversion of $416,168 in Convertible
Securities. The conversions were made in response to the request of the holders
of the Convertible Securities and upon satisfactory compliance with the
provisions of Rule 144 and its provisions as set forth above.
We relied
on exemptions from registration afforded by Section 4(2) of the Securities Act
of 1933 and Rule 506 of Regulation D of the General Rules and Regulations
thereunder for the sale of the Convertible Notes and warrants to investors and
the issue of shares upon conversion of convertible notes, debentures and
preferred stock. We believe that we have complied with the manner of sale,
access to information and investor accreditation requirements of such
exemptions.
ITEM 3.
Defaults upon Senior Securities
On
December 18, 2009, New Millennium Capital Partners III, LLC; ASW Partners, LLC;
ASW Offshore II, Ltd.; ASW Qualified Partners II, LLC; ASW Master Fund II, Ltd.;
(“NIR Group”) filed an action entitled New Millennium, et. al. versus Juniper
Group, Inc. in the Supreme Court of the State of New York County of New York
Index No. 603782/09. The complaint alleges breach of the terms of certain
convertible debentures and seeks equitable relief and monetary damages of $7.46
million Juniper has denied the allegations in the complaint and asserted
counterclaims. A motion for preliminary injunctive relief is pending.
While no estimate of the outcome can be made, the Company believes it has
meritorious defenses and will prevail in this matter. However, there can be no
assurance that we will be successful in defending against these claims. The NIR
Group is the note holder of our Callable Secured Convertible Notes with
outstanding principal at June 30, 2010 of approximately $2.4
million.
On March
19, 2010, the Company received a “Notice of Default and Demand for Payment” from
JMJ Financial (“JMJ”). The letter states that as a result of the alleged
defaults the holder is accelerating the
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notes and
is demanding full payment of the outstanding balance of principal and interest
on the original Note on or before April 2, 2010. The Company believes
it has meritorious defenses and disputes JMJ’s claim. JMJ is the note holder of
our Callable Secured Convertible Notes with outstanding principal at June 30,
2010 of approximately $91,000.
ITEM
4. Removed and Reserved
ITEM
5. Other Information
None.
ITEM 6. Exhibits
31
|
Certification
of the Chief Executive Officer and Chief Financial Officer pursuant to
Rule 13a-14 of the Securities and Exchange Act of 1934, as amended, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(attached).
|
32
|
Certification
of the Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(attached).
|
- 32
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SIGNATURES
In
accordance with the requirements of the Exchange Act, the Registrant caused this
report to be signed by the undersigned, thereunto duly authorized.
JUNIPER
GROUP, INC.
Date:
August 13, 2010
By: /s/
Vlado P. Hreljanovic
---------------------------------------
Vlado P.
Hreljanovic
Chairman
of the Board, President,
Chief
Executive Officer and
Chief
Financial Officer
- 33
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Index to Exhibits
Exhibit
|
Description
|
31
|
Certification
of the Chief Executive Officer and Chief Financial Officer pursuant to
Rule 13a-14 of the Securities and Exchange Act of 1934, as amended, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(attached).
|
32
|
Certification
of the Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(attached).
|
- 34
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