mainbody.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
(Mark
One)
|
x
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
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For
the quarterly period ended: December 31, 2008
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¨
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TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For the
transition period from
to
Commission
File Number: 000-18296
Xstream Mobile Solutions
Corp.
(Exact
name of registrant as specified in its charter)
|
Delaware
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62-1265486
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|
(State
or other jurisdiction of incorporation or organization)
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(IRS
Employer Identification No.)
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14422 Edison Drive, Unit D, New Lenox,
Illinois 60451
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(Address
of principal executive offices)
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(708) 205-2222
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(Registrant’s
telephone number, including area code)
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________________________________________________________________
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(Former
name, former address and former fiscal year, if changed since last
report)
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Indicate
by check mark whether the registrant (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 issuer was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.¨
Yes ý
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,” “non-accelerated filer,” and “a smaller reporting company”
in Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer ¨
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Accelerated
filer ¨
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Non-accelerated
filer ¨ (Do not
check if a smaller reporting company)
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Smaller
reporting company ý
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). ¨ Yes ý No
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date:
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Class
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Outstanding
at April 30, 2009
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Common
Stock, $0.001 par value
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15,030,917
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FORM
10-Q
XSTREAM
MOBILE SOLUTIONS CORP.
December
31, 2008
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Page
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PART I – FINANCIAL INFORMATION
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Item
1.
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3
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Item
2.
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4
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Item
3.
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7
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Item
4T.
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7
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PART II – OTHER INFORMATION
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Item
1.
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9
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Item
1A.
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9
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Item
2.
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9
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Item
3.
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9
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Item
4.
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9
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Item
5.
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9
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Item
6.
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9
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PART
I - FINANCIAL INFORMATION
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Our
unaudited condensed consolidated financial statements included in this
Form 10-Q are as follows:
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F-1
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Condensed
Consolidated Balance Sheets as of December 31, 2008 and September 30,
2008.
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F-2
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Condensed
Consolidated Statements of Operations for the Three Months ended
December 31, 2008 and 2007 (unaudited).
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F-3
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Condensed
Consolidated Statements of Cash Flows for the Three Months ended
December 31, 2008 and 2007 (unaudited).
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F-4
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Notes
to Condensed Consolidated Financial Statements
(unaudited).
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|
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These
unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial information and the SEC instructions to Form
10-Q. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating
results for the interim period ended December 31, 2008 are not necessarily
indicative of the results that can be expected for the full year.
XSTREAM MOBILE SOLUTIONS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
|
ASSETS
|
|
|
|
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|
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|
|
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|
|
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December
31,
|
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September
30,
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2008
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|
2008
|
|
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|
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CURRENT
ASSETS
|
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|
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Cash
and cash equivalents
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$ |
8,801 |
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$ |
24,097 |
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Total
current assets
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8,801 |
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24,097 |
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FIXED
ASSETS
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|
|
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Equipment,
net
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|
5,141 |
|
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5,554 |
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OTHER
ASSETS
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Investment
in Triex
|
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|
10,000 |
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|
10,000 |
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TOTAL
ASSETS
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|
$ |
23,942 |
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$ |
39,651 |
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LIABILITIES AND STOCKHOLDERS'
(DEFICIT)
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|
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LIABILITIES
|
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|
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Accounts
payable and accrued expenses
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$ |
34,374 |
|
|
$ |
34,214 |
|
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Convertible
debenture
|
|
|
187,500 |
|
|
|
177,500 |
|
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Short
term loan payable
|
|
|
4,200 |
|
|
|
- |
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Stock
to be issued
|
|
|
15,000 |
|
|
|
15,000 |
|
|
|
|
|
|
|
|
|
|
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Total
Current Liabilities
|
|
|
241,074 |
|
|
|
226,714 |
|
|
|
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|
|
|
|
|
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STOCKHOLDERS'
(DEFICIT)
|
|
|
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|
|
|
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Preferred
Stock Series A, $.001 Par Value; 990,000 shares
|
|
|
|
|
|
|
|
|
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authorized
and none issued and outstanding
|
|
|
- |
|
|
|
- |
|
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Preferred
Stock Series B, $.001 Par Value; 9,000,000
shares
|
|
|
|
|
|
|
|
|
|
authorized
and none issued and outstanding
|
|
|
- |
|
|
|
- |
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Preferred
Stock Series C, $.001 Par Value; 10,000 shares
|
|
|
|
|
|
|
|
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authorized
and none issued and outstanding
|
|
|
- |
|
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|
- |
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Common
Stock $.001 Par Value; 90,000,000 shares
|
|
|
|
|
|
|
|
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authorized
and 5,580,917 and 5,580,917 shares, respectively, issued
|
|
|
|
|
|
|
|
|
|
and
5,186,065 and 5,186,065 shares, respectively outstanding
|
|
|
5,582 |
|
|
|
5,582 |
|
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Additional
Paid-in Capital
|
|
|
6,161,562 |
|
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|
6,161,562 |
|
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Other
accumulated comprehensive income
|
|
|
- |
|
|
|
8,574 |
|
|
Accumulated
Deficit
|
|
|
(6,086,971 |
) |
|
|
(6,065,476 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,173 |
|
|
|
110,242 |
|
|
Less:
Cost of treasury stock, 394,852 shares
|
|
|
(297,305 |
) |
|
|
(297,305 |
) |
|
|
|
|
|
|
|
|
|
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Total
Stockholders' (Deficit)
|
|
|
(217,132 |
) |
|
|
(187,063 |
) |
|
|
|
|
|
|
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|
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TOTAL
LIABILITIES AND
|
|
|
|
|
|
|
|
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STOCKHOLDERS'
(DEFICIT)
|
|
$ |
23,942 |
|
|
$ |
39,651 |
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
XSTREAM MOBILE SOLUTIONS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER
31, 2007 AND 2007
(UNAUDITED)
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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OPERATING
REVENUES
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
413 |
|
|
|
276 |
|
|
General
and administrative expenses
|
|
|
25,467 |
|
|
|
84,872 |
|
|
|
|
|
|
|
|
|
|
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Total
operating expenses
|
|
|
25,880 |
|
|
|
85,148 |
|
|
|
|
|
|
|
|
|
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LOSS
BEFORE OTHER INCOME (EXPENSES)
|
|
|
(25,880 |
) |
|
|
(85,148 |
) |
|
|
|
|
|
|
|
|
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OTHER
INCOME (EXPENSES)
|
|
|
|
|
|
|
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|
Gain
on short-term securities -net
|
|
|
8,290 |
|
|
|
- |
|
|
Interest
income
|
|
|
5 |
|
|
|
102 |
|
|
Interest
expense
|
|
|
(3,910 |
) |
|
|
- |
|
|
Total
other income (expense)
|
|
|
4,385 |
|
|
|
102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
LOSS
BEFORE PROVISION FOR INCOME TAXES
|
|
|
(21,495 |
) |
|
|
(85,046 |
) |
|
Provision
for Income Taxes
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS APPLICABLE TO COMMON SHARES
|
|
$ |
(21,495 |
) |
|
$ |
(85,046 |
) |
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER BASIC AND DILUTED SHARES
|
|
$ |
(0.00 |
) |
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
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|
WEIGHTED
AVERAGE NUMBER OF COMMON
|
|
|
|
|
|
|
|
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|
SHARES
OUTSTANDING
|
|
|
5,580,917 |
|
|
|
4,774,140 |
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
XSTREAM MOBILE SOLUTIONS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
FOR THE THREE MONTHS ENDED DECEMBER
31, 2008 AND 2007
(UNAUDITED)
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOW FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(21,495 |
) |
|
$ |
(85,046 |
) |
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
|
(used
in) operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
413 |
|
|
|
276 |
|
|
Gain
on short term investment - net
|
|
|
(8,574 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in assets and liabilities
|
|
|
|
|
|
|
|
|
|
Increase
in accounts payable and
|
|
|
|
|
|
|
|
|
|
accrued
expenses
|
|
|
160 |
|
|
|
2,999 |
|
|
Total
adjustments
|
|
|
(8,001 |
) |
|
|
3,275 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash (used in) operating activities
|
|
|
(29,496 |
) |
|
|
(81,771 |
) |
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOW FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Sale
of common stock
|
|
|
- |
|
|
|
37,850 |
|
|
Proceeds
from short term loan
|
|
|
4,200 |
|
|
|
- |
|
|
Proceeds
from convertible debentures
|
|
|
10,000 |
|
|
|
- |
|
|
Repurchase
of stock
|
|
|
- |
|
|
|
(1,250 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
14,200 |
|
|
|
36,600 |
|
|
|
|
|
|
|
|
|
|
|
|
NET
(DECREASE) IN
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS
|
|
|
(15,296 |
) |
|
|
(45,171 |
) |
|
|
|
|
|
|
|
|
|
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|
CASH
AND CASH EQUIVALENTS -
|
|
|
|
|
|
|
|
|
|
BEGINNING
OF PERIOD
|
|
|
24,097 |
|
|
|
51,724 |
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS - END OF PERIOD
|
|
$ |
8,801 |
|
|
$ |
6,553 |
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
Cash
paid during the year for:
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
$ |
- |
|
|
$ |
- |
|
|
Interest
|
|
$ |
- |
|
|
$ |
- |
|
The accompanying notes are an integral part of
these condensed consolidated financial statements.
XSTREAM
MOBILE SOLUTIONS CORP.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31,
2008 AND 2007
(UNAUDITED)
NOTE
1
-
ORGANIZATION AND BASIS
OF PRESENTATION
The
condensed consolidated unaudited interim financial statements included herein
have been prepared, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. The condensed consolidated financial
statements and notes are presented as permitted on Form 10-Q and do not contain
information included in the Company’s annual statements and notes. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted pursuant to such rules
and regulations, although the Company believes that the disclosures are adequate
to make the information presented not misleading. It is suggested
that these condensed consolidated financial statements be read in conjunction
with the September 30, 2008 audited financial statements and the accompanying
notes thereto. While management believes the procedures followed in
preparing these condensed financial statements are reasonable, the accuracy of
the amounts are in some respects dependent upon the facts that will exist, and
procedures that will be accomplished by the Company later in the
year.
These
condensed consolidated unaudited financial statements reflect all adjustments,
including normal recurring adjustments which, in the opinion of management, are
necessary to present fairly the operations and cash flows for the periods
presented.
The
Company was incorporated on May 10, 1998, under the laws of the State of
Delaware. The business purpose of the Company was originally to
engage in environmental monitoring and testing. However, on December
31, 2001, the Company liquidated those operating assets. The Company
has adopted a fiscal year ending September 30.
On
February 3, 2005 the Company changed its name to Netchoice, Inc. On
December 19, 2005 the Company changed its name to Xstream Mobile Solutions Corp.
On January 1, 2006 the Company began operations in software acquisition,
development and marketing. The Company acquired a related company in October
2006 (see Note 9).
XSTREAM
MOBILE SOLUTIONS CORP.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER
31, 2008 AND 2007
(UNAUDITED)
NOTE
2
-
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Principles of
Consolidation
The condensed consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiaries. All significant inter-company accounts and transactions
have been eliminated in consolidation.
Use of
Estimates
The
preparation of 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 disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash and Cash
Equivalents/Investments
The
Company considers all highly liquid debt instruments and other short-term
investments with an initial maturity of three months or less to be cash
equivalents. There were $8,801 and $24,097 cash equivalents as of December 31,
2008 and September 30, 2008.
The
Company maintains cash and cash equivalent balances at one financial institution
that is insured by the Federal Deposit Insurance Corporation up to
$250,000. At December
31, 2008, the Company had no funds in excess of the insured
limit.
XSTREAM
MOBILE SOLUTIONS CORP.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER
31, 2008 AND 2007
(UNAUDITED)
NOTE
2
-
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Revenue and Cost
Recognition
Revenue
is recognized under the accrual method of accounting when the services are
rendered and the customer has been billed, rather than when cash is collected
for the services provided. Specifically, the terms of the contracts call for a
fixed set fees based on an hourly rate per individual.
Cost is
recorded on the accrual basis as well, when the services are incurred rather
than paid for.
Start-up
Costs
In
accordance with the American Institute of Certified Public Accountants Statement
of Position 98-5, “Reporting
on the Costs of Start-up Activities,” the Company expenses all costs
incurred in connection with the start-up and organization of the
Company.
Common Stock Issued for
Other Than Cash
Services
purchased and other transactions settled in the Company’s common stock are
recorded at the estimated fair value of the stock issued if that value is more
readily determinable than the fair value of the consideration
received.
Equipment
The cost
of office and computer equipment is capitalized and depreciated over its useful
life using the straight-line method of depreciation. For all
equipment presently owned the estimated useful life is 60
months. Repairs that substantially extend the useful life of the
assets are capitalized and those that do not are charged to
operations. Depreciation expense for the three months ended December
31, 2008 and 2007 was $413 and $276, respectively.
Income
Taxes
The
income tax benefit is computed on the pretax loss based on the current tax law.
Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax basis of assets and liabilities and their financial
reporting amounts at each year-end based on enacted tax laws and statutory tax
rates. The Company has not established a provision due to the losses
sustained.
XSTREAM
MOBILE SOLUTIONS CORP.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31,
2008 AND 2007
(UNAUDITED)
NOTE
2
-
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Earnings (Loss) Per Share of
Common Stock
Historical
net (loss) per common share is computed using the weighted average number of
common shares outstanding. Diluted earnings per share (EPS) include additional
dilution from common stock equivalents, such as stock issuable pursuant to the
exercise of stock options and warrants. Common stock equivalents were not
included in the computation of diluted earnings per share when the Company
reported a loss because to do so would be antidilutive for periods
presented.
The
following is a reconciliation of the computation for basic and diluted
EPS:
|
|
|
Decemeber
31,
|
|
|
Decemeber
31,
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$ |
(21,495 |
) |
|
$ |
(85,046 |
) |
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding (Basic)
|
|
|
5,580,917 |
|
|
|
4,774,140 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
common stock equivalents:
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
- |
|
|
|
- |
|
|
Warrants
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding (Diluted)
|
|
|
5,580,917 |
|
|
|
4,774,140 |
|
Options
and warrants outstanding to purchase stock were not included in the computation
of diluted EPS because inclusion would have been
antidilutive.
XSTREAM
MOBILE SOLUTIONS CORP.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31,
2008 AND 2007
(UNAUDITED)
NOTE 2
- SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting
Pronouncements
In
September 2006, the FASB issued SFAS No. 157 “Fair Value
Measurements,” which provides a definition of fair value, establishes a
framework for measuring fair value and requires expanded disclosures about fair
value measurements. SFAS No. 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007 and interim
periods within those fiscal years. The provisions of SFAS No. 157
should be applied prospectively.
In
February 2008, FASB Staff Position ("FSP") FAS No. 157-2, "Effective
Date of FASB Statement No. 157" ("FSP No. 157-2") was issued. FSP
No. 157-2 defers the effective date of SFAS No. 157 to fiscal years
beginning after December 15, 2008, and interim periods within those fiscal
years, for all nonfinancial assets and liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). Examples of items within the scope of FSP
No. 157-2 are nonfinancial assets and nonfinancial liabilities initially
measured at fair value in a business combination (but not measured at fair value
in subsequent periods), and long-lived assets, such as property, plant and
equipment and intangible assets measured at fair value for an impairment
assessment under SFAS No. 144.
The
partial adoption of SFAS No. 157 on October 1, 2008 with respect to
financial assets and financial liabilities recognized or disclosed at fair value
in the financial statements on a recurring basis did not have a material impact
on the Company's financial statements. See Note 11 for the fair value
measurement disclosures for these assets and liabilities. The Company is in the
process of analyzing the potential impact of SFAS No. 157 relating to its
planned October 1, 2009 adoption of the remainder of the standard.
In
September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined
Benefit Pension and Other Postretirement Plans -- An Amendment of FASB
Statements No. 87, 88, 106, and 132R." This standard requires an employer to:
(a) recognize in its statement of financial position an asset for a plan's
overfunded status or a liability for a plan's underfunded status; (b) measure a
plan's assets and its obligations that determine its funded status as of the end
of the employer's fiscal year (with limited exceptions); and (c) recognize
changes in the funded status of a defined benefit postretirement plan in the
year in which the changes occur. Those changes will be reported in comprehensive
income. The requirement to recognize the funded status of a benefit plan and the
disclosure requirements are effective as of the end of the fiscal year ending
after December 15, 2006. The requirement to measure plan assets and benefit
obligations as of the date of the employer's fiscal year-end statement of
financial position is effective for fiscal years ending after December 15,
2008.
XSTREAM
MOBILE SOLUTIONS CORP.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31,
2008 AND 2007
(UNAUDITED)
NOTE 2
- SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting
Pronouncements (Continued)
In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities - Including an amendment of SFAS
No. 115 (“SFAS No. 159”), which provides all
entities, including not-for-profit organizations, with an option to report
selected financial assets and liabilities at fair value. The objective of SFAS
No. 159 is to improve financial reporting by providing entities with the
opportunity to mitigate volatility in earnings caused by measuring related
assets and liabilities differently without having to apply the complex
provisions of hedge accounting. Certain specified items are eligible for the
irrevocable fair value measurement option as established by SFAS No. 159.
SFAS No. 159 is effective as of the beginning of the Company’s year
beginning after October 1, 2008. The Company does not believe this
statement will have a material impact on its financial position and results of
operations upon adoption.
In
December 2007, the FASB issued FAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements-an amendment of ARB No. 51” (“FAS
No. 160”). FAS No. 160 establishes accounting and reporting standards for
the non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a non-controlling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. FAS No. 160 is effective for the
Company in its fiscal year beginning October 1, 2010. The Company does not
believe this statement will have a material impact on its financial position and
results of operations upon adoption.
In
December 2007, the FASB issued FAS No. 141 R “Business Combinations” (“FAS
No. 141R”). FAS No. 141R establishes principles and requirements for
how the acquirer of a business recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, and any
non-controlling interest in the acquire. FAS No. 141R also provides
guidance for recognizing and measuring the goodwill acquired in the business
combination and determines what information to disclose to enable users of the
financial statements to evaluate the nature and financial effects of the
business combination. FAS No. 141R is effective for the Company’s fiscal
year beginning October 1, 2010.
NOTE
3
- INVESTMENT IN
TRIEX
The
Company purchased 10,000 shares of Triex Financial Services, Inc. at a price of
$1 per share. The Company has obtained a valuation response from an independent
appraiser, who noted that as of December 31, 2008 the fair market value of Triex
Financial Services, Inc. stock was at $1 per share.
XSTREAM
MOBILE SOLUTIONS CORP.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER
31, 2008 AND 2007
(UNAUDITED)
NOTE
4 –
SHORT TERM
LOAN-RELATED PARTY
The short
term loan payable bears no interest and has no specified terms of
repayment.
NOTE 5
-
FIXED
ASSETS
Fixed
assets consisted of the following:
|
|
|
December
31,
|
|
|
September
30,
|
|
|
|
|
2008
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Equipment
|
|
$ |
8,262 |
|
|
$ |
8,262 |
|
|
|
|
|
|
|
|
|
|
|
|
Less:
Accumulated Depreciation
|
|
|
(3,121 |
) |
|
|
(2,708 |
) |
|
Fixed
Assets - Net
|
|
$ |
5,141 |
|
|
$ |
5,554 |
|
NOTE 6
-
CONVERTIBLE
DEBENTURES
The
Company issued convertible debentures to investors. The debentures will pay
interest at a rate of 6% to 12% per annum, have a term of 12 months and are
convertible into the Company’s common stock at any time at the option of the
investor. As of December 31, 2008, the Company has received investments in
aggregate of $187,500. The Company will determine the best use of the proceeds
based on the corporate strategy and immediate needs.
XSTREAM
MOBILE SOLUTIONS CORP.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER
31, 2008 AND 2007
(UNAUDITED)
NOTE
7
-
STOCKHOLDERS’
(DEFICIT)
Preferred
Stock
On
December 3, 2004 the Company changed the number of Preferred Stock from one
class of stock consisting of 10,000,000 shares with a par value of $0.01 to
three separate series of preferred stock and changed the par value to
$0.001. They are as follows:
Preferred
Stock Series A
990,000
shares with a par value of $0.001 per share, participating, voting and
convertible with a liquidation value of $1,000.
Preferred Stock Series
B
9,000,000
shares with a par value of $0.001 per share, participating; voting and
convertible with a liquidation value of $3 each.
Preferred Stock Series
C
10,000
shares with a par value of $0.001 per share, with a liquidation value of $10
each.
All
preferred stock series A, B and C are convertible to 4,000 common shares as well
as 4,000 votes for each share held. In addition, in all cases, the
holders of the Preferred Stock C will vote cumulatively at least fifty-one
percent (51%) of all votes cast regardless of the amount of series C shares
issued, at any meeting of shareholders or any major issue put before the Company
for voting of shareholders.
Common
Stock
The
following is a list of the common stock transactions during the three
months ended December 31, 2007:
On
December 19, 2007 the company repurchased 1,250 shares and refunded cash of
$1,250.
As of
December 31, 2007, there were 90,000,000 shares authorized and 4,773,067 shares
issued and 4,378,215 shares outstanding of the Company’s common stock with a par
value of $0.001.
XSTREAM
MOBILE SOLUTIONS CORP.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER
31, 2008 AND 2007
(UNAUDITED)
NOTE
7
- STOCKHOLDERS’ EQUITY
(DEFICIT) (CONTINUED)
Common Stock
(Continued)
There
were no common stock transactions during the period ended December 31,
2008.
As of
December 31, 2008, there were 90,000,000 shares authorized and 5,580,917 shares
issued and 5,186,065 shares outstanding of the Company’s common stock with a par
value of $0.001.
NOTE
8
- INCOME
TAXES
There was
no income tax benefit recognized at December 31, 2008 and 2007.
The net
deferred tax assets in the accompanying balance sheet include benefit of
utilizing net operating losses of approximately $6,086,971 (at December 31,
2008) and $6,065,476 (at September 30, 2008). However due to the uncertainty of
utilizing the net operating losses, an offsetting valuation allowance has been
established.
NOTE
9
- RELATED PARTY
TRANSACTIONS
On
October 9, 2006 the Company approved 1,517,992 shares of its common stock to
acquire Xstream Mobile Solutions, Inc., an Illinois company. The Company
acquired Xstream Mobile Solutions Inc. from a related party. Under FASB 141
Business Combinations, when accounting for a transfer of assets or exchange of
shares between entities under common control, the entity that receives the net
assets or the equity interests shall initially recognize the assets and
liabilities transferred at their carrying amounts in the accounts of the
transferring entity at the date of transfer.
An
affiliated company of which a stockholder is a principal has contracted with the
Company to provide programming services and technical communications support for
its operations. The total charged to the Company for these services
for the three months ended December 31, 2008 and 2007 is $ 14,451 and $ 50,754,
respectively.
XSTREAM
MOBILE SOLUTIONS CORP.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER
31, 2008 AND 2007
(UNAUDITED)
NOTE
10- GOING
CONCERN
As shown
in the accompanying condensed consolidated financial statements, the Company
incurred substantial net losses for the period ended December 31, 2008 and 2007
and for the years ended September 30, 2008 and 2007, respectively. There is no
guarantee whether the Company will be able to generate enough revenue and/or
raise capital to support those operations. This raises substantial
doubt about the Company’s ability to continue as a going
concern. Management believes the Company’s capital requirement will
depend on many factors, including the success of the Company to raise
money. The Company continues to search for acquisition candidates to
fund operations. The condensed consolidated financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
NOTE
11- FAIR VALUE
MEASUREMENTS
On
October 1, 2008, the Company adopted SFAS No. 157 “Fair Value
Measurements” (“SFAS 157”). SFAS 157 defines fair value, provides a consistent
framework for measuring fair value under Generally Accepted Accounting
Principles and expands fair value financial statement disclosure requirements.
SFAS 157’s valuation techniques are based on observable and unobservable inputs.
Observable inputs reflect readily obtainable data from independent sources,
while unobservable inputs reflect our market assumptions. SFAS 157 classifies
these inputs into the following hierarchy:
Level 1
Inputs– Quoted prices for identical instruments in active markets.
Level 2
Inputs– Quoted prices for similar instruments in active markets; quoted prices
for identical or similar instruments in markets that are not active; and
model-derived valuations whose inputs are observable or whose significant value
drivers are observable.
Level 3
Inputs– Instruments with primarily unobservable value drivers.
The
following table represents the fair value hierarchy for those financial assets
and liabilities measured at fair value on a recurring basis as of December 31,
2008.
XSTREAM
MOBILE SOLUTIONS CORP.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER
31, 2008 AND 2007
(UNAUDITED)
NOTE
11-
FAIR
VALUE MEASUREMENTS (CONTINUED)
Fair
Value Measurements on a Recurring Basis as of December 31, 2008:
|
Assets
|
|
Level
I
|
|
|
Level
II
|
|
|
Level
III
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
equivalents
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
$ |
- |
|
|
$ |
187,500 |
|
|
$ |
- |
|
|
$ |
187,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
$ |
- |
|
|
$ |
187,500 |
|
|
$ |
- |
|
|
$ |
187,500 |
|
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
This
Quarterly Report on Form 10-Q contains forward-looking statements regarding our
capital needs, business plans and expectations. Words such as
“expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates”
and similar expressions or variations of such words are intended to identify
forward-looking statements, but are not deemed to represent an all-inclusive
means of identifying forward-looking statements as denoted in this Quarterly
Report on Form 10-Q. Additionally, statements concerning future
matters are forward-looking statements.
Although
forward-looking statements in this Quarterly Report on Form 10-Q reflect the
good faith judgment of our management, such statements can only be based on
facts and factors currently known by us. Consequently,
forward-looking statements are inherently subject to risks and uncertainties and
actual results and outcomes may differ materially from the results and outcomes
discussed in or anticipated by the forward-looking statements. We
caution the reader that numerous important factors, including those factors
discussed in our Annual Report on Form 10-K for the fiscal year ended
September 30, 2008, which are incorporated herein by reference, could affect our
actual results and could cause our actual consolidated results to differ
materially from those expressed in any forward-looking statement made by, or on
behalf of, Xstream Mobile Solutions Corp. Readers are urged not to place
undue reliance on these forward-looking statements, which speak only as of the
date of this Quarterly Report on Form 10-Q. We file reports with the
Securities and Exchange Commission (the “SEC” or “Commission”). You
can also read and copy any materials we file with the SEC at the SEC’s Public
Reference Room at 450 Fifth Street, NW, Washington, DC 20549. You can
obtain additional information about the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains
an internet site (www.sec.gov) that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC, including us.
We
undertake no obligation to revise or update any forward-looking statements in
order to reflect any event or circumstance that may arise after the date of this
Quarterly Report on Form 10-Q. Readers are urged to carefully review
and consider the various disclosures made throughout the entirety of this
Quarterly Report, which attempt to advise interested parties of the risks and
factors that may affect our business, financial condition, results of operations
and prospects.
As used
in this Quarterly Report, the terms “we,” “us,” “our,” and “Xstream Mobile
Solutions Corp.” mean Xstream Mobile Solutions Corp., unless otherwise
indicated.
Overview
We were
incorporated as a Delaware corporation on May 10, 1998 under the name
Environmental Monitoring and Testing Corporation. Since our
incorporation, we provided electronic filing services to companies that are
required to electronically file disclosure information with the Securities and
Exchange Commission "SEC."
The
Company filed a Form 8-K with the Securities and Exchange Commission and changed
its name to Netchoice, Inc., effective February 3, 2005.
Subsequent
to the reporting period, the Company filed a Form 8-K with the Securities and
Exchange Commission and changed its name to Xstream Mobile Solutions Corp.
effective December 19, 2005.
Business
of the Issuer
Description
of Business
We are
creating and marketing Software for the emergency text message
market. Xstream Safe© allows your organization to easily
send messages to anyone or everyone in a database from any
internet accessible computer. DBM-1©: Database Migration Software
creates databases automatically for an organization. Import/Export:
provides the ability to import and export existing contact databases, if
needed. Archive of sent messages Two methods of Delivery: Send Text,
E-mail or both simultaneously. Cell-Enabled Message Interface: Send messages
from internet capable devices (cell phones, PDA’s, etc.) Message Storage: Store
messages for easy retrieval when seconds count. Both Client-Side and Server-Side
Capabilities: This means that sensitive personal data is stored on your server,
not a server in another state or country. Certification Indicator: Lets you know
that people in groups have tested and registered their phones. Contact Size:
Scalable from small groups of 1-100 up to large groups encompassing tens of
thousands.
Patents,
Licenses, Trademarks, Intellectual Property, Franchises, Concessions, Royalty
Agreements, or Labor Contracts
We do not
own any interest in a patent, trademark, license, franchise, concession, or
royalty agreement.
Employees
We
currently have two full-time administrative employees. Our employees
are not represented by labor unions or collective bargaining
agreements. Our key employees are Mr. Michael See, founder, Chief
Executive Officer, and Chairman of the Board of Directors and Mr. Joseph F.
Johns, III, Director, President and Chief Financial Officer
Government
Regulation
We are
not aware of any existing or probable governmental regulation that will have a
material impact on our company.
We are
not subject to any compliance with environmental laws.
Research
and Development
We did
not incur any research or development expenditures during the quarter ended
December 31, 2008.
Compliance
with Environmental Laws
We did
not incur any costs in connection with the compliance with any federal, state,
or local environmental laws.
Plan
of Operations
We are
currently in the communications business specializing in entertainment, safety
and security. Since this time, we have attempted to identify and
evaluate other business and technology opportunities in order to proceed with an
active business operation. At the present time, we have not identified any other
business and/or technology opportunities that our management believes are
consistent with the best interest of the company. Our plan of operations is to
continue our attempts to identify and evaluate other business and technology
opportunities in order to proceed with an active business
operation.
We
currently have forecasted the expenditure of approximately $20,000 during the
next twelve months in order to remain in compliance with the Securities Exchange
Act of 1934 and to identify additional business and/or technology for
acquisition. We can provide no assurance that we will be successful in acquiring
other businesses or technology due to our limited working capital. We anticipate
that if we are successfully able to identify any technology or business for
acquisition, we will require additional financing in order for us to complete
the acquisition. We can provide no assurance that we will receive additional
financing if sought.
We do not
anticipate purchasing any real property or significant equipment in the next
twelve months.
We have
two (2) employees at this time. We do not anticipate hiring any
additional employees until such time as we are able to acquire any additional
businesses and/or technology.
Results
of Operations for the Three Months Ended December 31, 2008 and
2007
We earned $0 of revenues for three months ended December 31, 2008 and no
revenues were earned during the same period in 2007. We hope that our
earnings will increase as our name is established in the market for our
products.
We
incurred operating expenses in the amount of $25,880 for the three months
ended December 31, 2008, compared to operating expenses of $85,148 for the
three months ended December 31, 2007. Our operating
expenses for the three month period ended December 31, 2008 were primarily
attributable to selling, general and administrative expenses of $25,467 and
depreciation of $413. Our operating expenses for the three month
period ended December 31, 2007 were primarily attributable to selling,
general and administrative expenses of $84,872.
We have
incurred a net loss of ($21,495) for the three months ended December 31,
2008, compared to ($85,046) for the three months ended December
31, 2007.
Liquidity
and Capital Resources
As of December 31, 2008, we had total current assets of $8,801 and total assets
in the amount of $23,942. Our total current liabilities as of
December 31, 2008 were $241,074. As a result, on December 31, 2008,
we had a working capital deficit of ($232,273).
We are not certain as to whether our current
cash balance will be sufficient to fund our operations for the next nine (9)
months, as well as meet the requirements for promotion our
products. In order to support our working capital needs and to
provide for previously unanticipated legal expenses, we are considering the
possibility of raising additional capital as well as other strategic
options.
Off
Balance Sheet Arrangements
We do not
have any off-balance sheet debt nor did we have any transactions, arrangements,
obligations (including contingent obligations) or other relationships with any
unconsolidated entities or other persons that may have material current or
future effect on financial conditions, changes in the financial conditions,
results of operations, liquidity, capital expenditures, capital resources, or
significant components of revenue or expenses.
Going
Concern
We have
incurred net losses for the period from inception on May 10, 1998 to December
31, 2008 of ($6,086,971) and we have small sources of revenue thus
far. The continuity of our future operations is dependent on our
ability to obtain financing and upon future acquisition, exploration and
development of profitable operations from our software
development. These conditions raise substantial doubt about our
ability to continue as a going concern.
Critical
Accounting Policies
In
December 2001, the SEC requested that all registrants list their most “critical
accounting polices” in the Management Discussion and Analysis. The
SEC indicated that a “critical accounting policy” is one which is both important
to the portrayal of a company’s financial condition and results, and requires
management’s most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain. We believe that the following accounting policies fit this
definition.
Item 3. Quantitative
and Qualitative Disclosures About Market Risk
Not
Applicable.
Evaluation
of Disclosure Controls and Procedures
We maintain a set of disclosure controls and procedures designed to ensure that
information we are required to disclose in reports filed under the Securities
Exchange Act is recorded, processed, summarized and reported within the time
periods specified by the SEC’s rules and forms. Disclosure controls
are also designed with the objective of ensuring that this information is
accumulated and communicated to our management, including our chief executive
officer and chief financial officer, as appropriate, to allow timely decisions
regarding required disclosure.
Based upon their evaluation as of the end of the period covered by this report,
our chief executive officer and chief financial officer concluded that our
disclosure controls and procedures are not effective to ensure that information
required to be included in our periodic SEC filings is recorded, processed,
summarized, and reported within the time periods specified in the SEC rules and
forms.
Our Board of Directors were advised by Bagell, Josephs, Levine & Company,
LLC, the Company’s independent registered public accounting firm, that during
their performance of audit procedures for 2008 Bagell, Josephs, Levine &
Company, LLC identified a material weakness as defined in Public Company
Accounting Oversight Board Standard No. 5 in the Company’s internal control over
financial reporting.
This deficiency consisted primarily of inadequate staffing and supervision that
could lead to the untimely identification and resolution of accounting and
disclosure matters and failure to perform timely and effective
reviews. However, the size of the Company prevents us from being able
to employ sufficient resources to enable us to have adequate segregation of
duties within our internal control system. Management is required to
apply its judgment in evaluating the cost-benefit relationship of possible
controls and procedures.
PART
II – OTHER INFORMATION
We are
not a party to any pending legal proceeding. We are not aware of any
pending legal proceeding to which any of our officers, directors, or any
beneficial holders of five percent or more of our voting securities are adverse
to us or have a material interest adverse to us.
Not
Applicable.
Item
2. Unregistered Sales
of Equity Securities and Use of Proceeds
The Company sold 22,850 shares of its
common stock at $1.00 per share for a total of $22,850 as of December 31,
2007. In addition, existing shareholders exercised warrants for
15,000 shares @ $1.00 per share.
Item 3. Defaults
upon Senior Securities
None.
Item 4. Submission
of Matters to a Vote of Security Holders
No
matters have been submitted to our security holders for a vote, through the
solicitation of proxies or otherwise, during the quarterly period ended December
31, 2008
None.
See the
Exhibit Index following the signatures page of this report, which is
incorporated herein by reference.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
Xstream
Mobile Solutions Corp.
|
|
|
|
|
Date:
|
June
22, 2009
|
|
|
|
|
|
By:
/s/ Michael
See
Michael
See
Title: Chief
Executive Officer and Director
|
|
Date:
|
June
22, 2009
|
|
|
By: /s/ Joseph Johns,
III
Joseph
Johns, III
Title: Chief
Financial Officer
|
XSTREAM
MOBILE SOLUTIONS CORP.
(the
“Registrant”)
(Commission
File No. 000-18296)
to
Quarterly
Report on Form 10-Q
for
the Quarter Ended December 31, 2008
|
Exhibit
No.
|
Description
|
Incorporated
Herein by
Reference
to
|
Filed
Herewith
|
|
|
|
|
X
|
|
31.2
|
|
|
X
|
|
32.1
|
|
|
X
|