UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
|
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended September 30, 2010
|
¨
|
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 000-105778
JUMA
TECHNOLOGY CORP.
(Exact
Name of Registrant as Specified in its Charter)
|
Delaware
|
|
68-0605151
|
|
(State
or other jurisdiction of incorporation
or
organization)
|
|
(I.R.S.
Employer Identification
No.)
|
|
154
TOLEDO STREET, FARMINGDALE, NY
|
|
11735
|
|
(Address
of Principal Executive Offices)
|
|
(Zip
Code)
|
(631)
300-1000
(Registrant’s
telephone number, including area code)
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 registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
x
Yes
¨
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 (§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
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
¨
(Do not check if
a smaller reporting company)
|
Smaller
reporting company
þ
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
¨
No
x
Indicate
the number of shares outstanding of each of the issuer’s classes of common
equity, as of the latest practicable date. 46,468,945 Common Shares as
of November 8, 2010
TABLE OF
CONTENTS
|
|
|
Page
|
|
PART
I – FINANCIAL INFORMATION
|
|
|
|
|
|
|
Item
1.
|
Financial
Statements
|
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets as of September 30, 2010 and
December 31, 2009
|
3
|
|
|
Condensed
Consolidated Statements of Operations for the three and nine
months ended September 30, 2010 and 2009
|
4
|
|
|
Condensed
Consolidated Statements of Cash Flows for the nine months ended September
30, 2010 and 2009
|
5
|
|
|
Notes
to Condensed Consolidated Financial Statements
|
6-12
|
|
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
|
|
|
|
|
|
|
Results
of Operations for the three and nine months ended September 30, 2010 and
2009
|
13-14
|
|
|
Liquidity
and Capital Resources
|
14-16
|
|
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
16
|
|
|
|
|
|
Item
4.
|
Controls
and Procedures
|
16
|
|
|
|
|
|
PART
II – OTHER INFORMATION
|
|
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
17
|
|
|
|
|
|
Item
1A.
|
Risk
Factors
|
17
|
|
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
17
|
|
|
|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
17
|
|
|
|
|
|
Item
4.
|
(Removed
and Reserved)
|
17
|
|
|
|
|
|
Item
5.
|
Other
Information
|
17
|
|
|
|
|
|
Item
6.
|
Exhibits
|
17
|
|
|
|
|
|
|
Signatures
|
18
|
|
|
|
|
|
|
Certifications
|
|
PART
I - FINANCIAL INFORMATION
Item
1. Financial Statements
Juma
Technology Corp. and Subsidiaries
Condensed
Consolidated Balance Sheets
|
|
|
September 30,
2010
|
|
|
December 31,
2009
|
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
|
|
$
|
392,857
|
|
|
$
|
961,001
|
|
|
Accounts
receivable, (net of allowance of $271,998 and $213,471,
respectively)
|
|
|
2,415,252
|
|
|
|
2,175,034
|
|
|
Inventory
|
|
|
171,789
|
|
|
|
161,770
|
|
|
Prepaid
expenses
|
|
|
44,465
|
|
|
|
26,837
|
|
|
Other
current assets
|
|
|
133,889
|
|
|
|
133,889
|
|
|
Total
current assets
|
|
|
3,158,252
|
|
|
|
3,458,531
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
assets, (net of accumulated depreciation of $1,132,926 and $827,839,
respectively)
|
|
|
966,260
|
|
|
|
1,224,120
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
assets
|
|
|
173,887
|
|
|
|
248,509
|
|
|
Total
assets
|
|
$
|
4,298,399
|
|
|
$
|
4,931,160
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIENCY
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Notes
payable, (net of discount of $165,987 and $0,
respectively)
|
|
$
|
1,613,184
|
|
|
$
|
279,172
|
|
|
Convertible
notes payable, (plus premium of $46,769 and net of discount of $604,435,
respectively)
|
|
|
16,016,045
|
|
|
|
12,099,346
|
|
|
Current
portion of capital leases payable
|
|
|
61,166
|
|
|
|
174,115
|
|
|
Accounts
payable
|
|
|
1,626,117
|
|
|
|
2,022,532
|
|
|
Accrued
expenses and taxes payable
|
|
|
154,807
|
|
|
|
309,962
|
|
|
Accrued
interest payable
|
|
|
2,506,280
|
|
|
|
1,394,162
|
|
|
Deferred
revenue
|
|
|
40,071
|
|
|
|
76,174
|
|
|
Total
current liabilities
|
|
|
22,017,670
|
|
|
|
16,355,463
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
leases payable, net of current maturities
|
|
|
962
|
|
|
|
25,466
|
|
|
Convertible
notes payable
|
|
|
-
|
|
|
|
700,000
|
|
|
Total
liabilities
|
|
|
22,018,632
|
|
|
|
17,080,929
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
deficiency
|
|
|
|
|
|
|
|
|
|
Series
A Preferred stock, $0.0001 par value, 8,333,333 shares authorized,
8,333,333 shares issued and outstanding
|
|
|
833
|
|
|
|
833
|
|
|
Series
B Preferred stock, $0.0001 par value, 1,666,667 shares authorized,
1,666,500 shares issued and outstanding
|
|
|
167
|
|
|
|
167
|
|
|
Series
C Preferred Stock, $0.0001 par value, 10,000,000 shares authorized,
1,970,756 and 0 shares issued and outstanding,
respectively
|
|
|
197
|
|
|
|
-
|
|
|
Common
stock, $0.0001 par value, 900,000,000 shares authorized, and 46,648,945
shares issued and outstanding
|
|
|
4,646
|
|
|
|
4,646
|
|
|
Additional
paid in capital
|
|
|
37,972,809
|
|
|
|
32,901,105
|
|
|
Warrants
|
|
|
1,027,689
|
|
|
|
3,155,145
|
|
|
Retained
deficit
|
|
|
(56,726,574
|
)
|
|
|
(48,211,665
|
)
|
|
Total
stockholders' deficiency
|
|
|
(17,720,233
|
)
|
|
|
(12,149,769
|
)
|
|
Total
liabilities and stockholders' deficiency
|
|
$
|
4,298,399
|
|
|
$
|
4,931,160
|
|
The
accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.
Juma
Technology Corp. and Subsidiaries
Condensed
Consolidated Statements of Operations
For
the three and nine months ended September 30,
|
|
|
Three months
ended
September 30, 2010
|
|
|
Three months
ended
September 30, 2009
|
|
|
Nine months
ended
September 30, 2010
|
|
|
Nine months
ended
September 30, 2009
|
|
|
Sales
|
|
$
|
2,331,645
|
|
|
$
|
1,896,250
|
|
|
$
|
8,078,829
|
|
|
$
|
9,936,932
|
|
|
Cost
of goods sold
|
|
|
1,498,431
|
|
|
|
1,004,817
|
|
|
|
5,660,003
|
|
|
|
6,637,904
|
|
|
Gross
margin
|
|
|
833,214
|
|
|
|
891,433
|
|
|
|
2,418,826
|
|
|
|
3,299,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
|
|
|
413,887
|
|
|
|
387,970
|
|
|
|
1,324,678
|
|
|
|
1,160,958
|
|
|
Research
and development
|
|
|
48,420
|
|
|
|
59,136
|
|
|
|
167,248
|
|
|
|
315,735
|
|
|
General
and administrative
|
|
|
2,009,609
|
|
|
|
1,871,910
|
|
|
|
4,968,353
|
|
|
|
6,115,533
|
|
|
Total
operating expenses
|
|
|
2,471,916
|
|
|
|
2,319,016
|
|
|
|
6,460,279
|
|
|
|
7,592,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
from operations
|
|
|
(1,638,702
|
)
|
|
|
(1,427,583
|
)
|
|
|
(4,041,453
|
)
|
|
|
(4,293,198
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of premium and (discount) on notes, net
|
|
|
40,510
|
|
|
|
(984,286
|
)
|
|
|
(2,507,528
|
)
|
|
|
(4,025,866
|
)
|
|
Interest
(expense), net
|
|
|
(471,013
|
)
|
|
|
(339,249
|
)
|
|
|
(1,362,592
|
)
|
|
|
(952,376
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
before income taxes
|
|
|
(2,069,205
|
)
|
|
|
(2,751,118
|
)
|
|
|
(7,911,573
|
)
|
|
|
(9,271,440
|
)
|
|
Provision
for income taxes
|
|
|
7,031
|
|
|
|
193
|
|
|
|
12,109
|
|
|
|
7,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)
|
|
$
|
(2,076,236
|
)
|
|
$
|
(2,751,311
|
)
|
|
$
|
(7,923,682
|
)
|
|
$
|
(9,279,082
|
)
|
|
Deemed
preferred stock dividend
|
|
|
-
|
|
|
|
-
|
|
|
|
591,227
|
|
|
|
7,266,107
|
|
|
Net
(loss) attributable to common shareholders
|
|
$
|
(2,076,236
|
)
|
|
$
|
(2,751,311
|
)
|
|
$
|
(8,514,909
|
)
|
|
$
|
(16,545,189
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted net (loss) per share
|
|
$
|
(0.04
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(0.36
|
)
|
|
Weighted
average common shares outstanding
|
|
|
46,468,945
|
|
|
|
46,452,641
|
|
|
|
46,468,945
|
|
|
|
46,380,575
|
|
The
accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.
Juma
Technology Corp. and Subsidiaries
Condensed
Consolidated Statements of Cash Flows
For
the nine months ended September 30,
|
|
|
2010
|
|
|
2009
|
|
|
Operating
Activities
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(7,923,682
|
)
|
|
$
|
(9,279,082
|
)
|
|
Adjustments
to reconcile net (loss) to net cash (used) by operating
activities
|
|
|
|
|
|
|
|
|
|
Depreciation
expense
|
|
|
305,087
|
|
|
|
288,493
|
|
|
Stock
option compensation expense
|
|
|
226,372
|
|
|
|
630,562
|
|
|
Amortization
of discount on notes payable
|
|
|
2,507,528
|
|
|
|
4,025,866
|
|
|
Bad
debt expense
|
|
|
81,127
|
|
|
|
(141,518
|
)
|
|
Amortization
of loan costs
|
|
|
74,623
|
|
|
|
84,850
|
|
|
Non-current
interest expense
|
|
|
-
|
|
|
|
450,000
|
|
|
Early
extinguishment of debt
|
|
|
-
|
|
|
|
1,116,192
|
|
|
Common
stock and warrants issued for services
|
|
|
105,000
|
|
|
|
88,999
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(321,345
|
)
|
|
|
386,972
|
|
|
Inventory
|
|
|
(10,019
|
)
|
|
|
74,074
|
|
|
Prepaid
expenses
|
|
|
(17,628
|
)
|
|
|
(23,423
|
)
|
|
Other
current assets
|
|
|
-
|
|
|
|
63,033
|
|
|
Accounts
payable and accrued expenses
|
|
|
(551,570
|
)
|
|
|
(1,596,033
|
)
|
|
Accrued
interest payable
|
|
|
1,112,118
|
|
|
|
774,246
|
|
|
Deferred
revenue
|
|
|
(36,103
|
)
|
|
|
(738,380
|
)
|
|
Net
cash flows (used) by operating activities
|
|
|
(4,448,492
|
)
|
|
|
(3,795,149
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities
|
|
|
|
|
|
|
|
|
|
Acquisition
of fixed assets
|
|
|
(47,227
|
)
|
|
|
(86,721
|
)
|
|
Increase
in other assets
|
|
|
-
|
|
|
|
(54,177
|
)
|
|
Net
cash flows (used) by investing activities
|
|
|
(47,227
|
)
|
|
|
(140,898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of convertible notes payable
|
|
|
3,000,000
|
|
|
|
5,511,281
|
|
|
Proceeds
from issuance of nonconvertible notes payable
|
|
|
1,500,000
|
|
|
|
-
|
|
|
Repayment
of convertible promissory notes
|
|
|
(434,972
|
)
|
|
|
-
|
|
|
Repayment
of capital leases payable
|
|
|
(137,453
|
)
|
|
|
(164,981
|
)
|
|
Net
cash flows provided by financing activities
|
|
|
3,927,575
|
|
|
|
5,346,300
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in cash
|
|
|
(568,144
|
)
|
|
|
1,410,253
|
|
|
Cash,
beginning of period
|
|
|
961,001
|
|
|
|
364,046
|
|
|
Cash,
end of period
|
|
$
|
392,857
|
|
|
$
|
1,774,299
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
95,713
|
|
|
$
|
189,492
|
|
|
Income
taxes paid
|
|
|
12,109
|
|
|
|
9,518
|
|
The
accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.
Juma
Technology Corp. and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
September
30, 2010
NOTE 1 – ORGANIZATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Juma
Technology, LLC, was formed in the State of New York on July 12, 2002. On
November 14, 2006, Juma Technology, LLC consummated an agreement with X and O
Cosmetics, Inc. to merge 100% of its member interests (“Reverse Merger”) in
exchange for 33,250,731 shares of common stock in X and O Cosmetics, Inc. The
transaction was treated for accounting purposes as a recapitalization by Juma
Technology, LLC as the accounting acquirer.
As part
of the Reverse Merger, the former officer and director of X and O Cosmetics,
Inc., Glen Landry returned 251,475,731 of his shares of common stock back to
treasury, so that following the transaction there were 41,535,000 shares of
common stock issued and outstanding.
On
January 28, 2007, X and O Cosmetics, Inc. changed its name to Juma Technology
Corp.
Juma
Technology Corp. (the “Company”) is a highly specialized convergence systems
integrator with a complete suite of services for the implementation and
management of an entity’s data, voice and video requirements. The Company is
focused on providing converged communications solutions for various vertical
markets with an emphasis in driving long-term professional services engagements,
maintenance, monitoring and management contracts. The Company utilizes several
different technologies in order to provide its expertise and solutions to
clients across a broad spectrum of business-critical requirements, regardless of
the objectives. The Company, through its wholly owned subsidiary Nectar
Services Corp, “Nectar”, offers various software products which are used to
monitor, manage and route complex VoIP networks. These tools are sold
under a Software as a Service, “SaaS”, model through a channel of Nectar
business partners. The SaaS model allows for software deployment whereby a
provider licenses an application to customers for use as a service on demand and
invoices the customer monthly over a multi-year contract.
The
Company’s wholly-owned subsidiary, AGN Networks, Inc. (“AGN”) was acquired on
March 6, 2007 utilizing another wholly-owned subsidiary of the Company, Juma
Acquisition Corp. (“Juma Acquisition”). In February 2008, AGN Networks, Inc.
changed its name to Nectar Services Corp. (“Nectar”).
While the
Company operates through different subsidiaries, management believes that all
such subsidiaries constitute a single operating segment since the subsidiaries
have similar economic characteristics.
The
financial statements include the accounts of the Company and its wholly-owned
subsidiaries Nectar and Juma Acquisition. All material intercompany balances and
transactions have been eliminated in the consolidated financial
statements.
The
accompanying interim condensed consolidated financial statements have been
prepared, without audit, in accordance with the instructions to Form 10-Q for
interim financial reporting pursuant to the rules and regulations of the
Securities and Exchange Commission. While these statements reflect all normal
recurring adjustments which are, in the opinion of management, necessary for a
fair presentation of the results of the interim period, they do not include all
of the information and footnotes required by U.S. generally accepted accounting
principles for complete financial statements. Therefore, the interim condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes included in the Company’s annual
report filed on Form 10-K for the fiscal year ended December 31,
2009.
The
results and trends on these interim condensed consolidated financial statements
for the three and nine months ended September 30, 2010 and 2009 may not be
representative of those for the full fiscal year or any future
periods.
Revenue
Recognition
The
Company derives revenue primarily from the sale and service of communication
systems and applications. The Company recognizes revenue when persuasive
evidence of an arrangement exists, delivery has occurred, the fee is fixed and
determinable, collectability is reasonably assured, contractual obligations have
been satisfied, and title and risk of loss have been transferred to the
customer. Revenues from the sales of products that include installation services
are recognized on the percentage of completion basis pursuant to the provisions
of ASC 605-35 “Construction-type and Production-type
Contracts.”
Juma
Technology Corp. and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
September
30, 2010
For each
contract, the Company compares the costs incurred in the course of performing
such contract during a reporting period to the total estimated costs of full
performance of the contract and recognizes a proportionate amount of revenue for
such period. Revenue from the sales of products that include installation
services is recognized at the time the products are installed, after
satisfaction of all the terms and conditions of the underlying customer
contract. The Company also derives revenue from maintenance services, including
services provided under contracts and on a time and materials basis. Maintenance
contracts typically have terms that range from one to five years. Revenue from
services performed under maintenance contracts is deferred and recognized
ratably over the term of the underlying customer contract or at the end of the
contract, when obligations have been satisfied. For services performed on a time
and materials basis, revenue is recognized upon performance of the services. The
Company also earns commissions on maintenance contracts. Commissions are
recognized as revenue over the term of the related maintenance contract. Revenue
from the provision of services by Nectar Services is recognized when the
services are provided.
Inventory
Inventory,
which consists of finished goods, is valued at the lower of cost or market. The
first-in, first-out method is used to value the inventory.
Earnings Per
Share
Basic
earnings per share are calculated by dividing net income (loss) by the weighted
average of common shares outstanding during the period. Diluted earnings per
share is calculated by using the weighted average of common shares outstanding
adjusted to include the potentially dilutive effect of outstanding stock
options, warrants, convertible loans and other convertible securities utilizing
the treasury stock method. There were 194,779,142 and
195,233,687 potentially dilutive shares for the three and nine months ended
September 30, 2010, respectively. There were 159,567,555 and 157,787,363
potentially dilutive shares for the three months and nine months ended September
30, 2009, respectively. The effect of the potentially convertible shares has
been ignored, as it would be antidilutive.
Reclassifications
Certain
amounts included for the period ended September 30, 2009 in the financial
statements have been reclassified to conform to the presentation for the period
ended September 30, 2010.
Assets Subject to
Lien
The
Company’s major supplier has a $2,000,000 lien on the Company’s
assets.
NOTE 2 – ACCOUNTS
RECEIVABLE
Accounts
receivable consists of the following:
|
|
|
September
30,
2010
|
|
|
December 31, 2009
|
|
|
Billed
|
|
$
|
1,948,643
|
|
|
$
|
1,814,132
|
|
|
Unbilled
|
|
|
738,607
|
|
|
|
574,373
|
|
|
Allowance
for doubtful accounts
|
|
|
(271,998
|
)
|
|
|
(213,471
|
)
|
|
|
|
$
|
2,415,252
|
|
|
$
|
2,175,034
|
|
NOTE 3 – NOTE
RECEIVABLE
On
December 15, 2006, the Company loaned $250,000 to AGN Networks, Inc. a Florida
corporation (“AGN”), pursuant to the terms of a Promissory Note (the “Note”).
The Note is unsecured and bears interest at the rate of 8% per annum payable to
the Company on or about December 15, 2007. On March 6, 2007, the Company entered
into and closed on an agreement and plan of merger with AGN and as a result AGN
has become a wholly-owned subsidiary of the Company. The Company forgave
$125,000 of the Note, which had been assumed by Avatel Technologies,
Inc.
On
September 18, 2007, an addendum to the merger agreement between the Company and
AGN stated, among other items, that if the Company does not acquire the business
of Avatel Technologies, Inc. then the forgiveness of the $125,000 is void and
the $125,000 would be payable to the Company upon written notice. In March 2008,
the Company exercised its right to receive payment of $125,000 under this
note.
Juma
Technology Corp. and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
September
30, 2010
NOTE 4 – ACQUISITION OF
AGN NETWORKS, INC.
On March
6, 2007, the Company completed the acquisition of AGN through the merger of AGN
into a newly formed wholly-owned subsidiary of the Company, Juma Acquisition,
pursuant to an Agreement and Plan of Merger, dated March 6, 2007 (the
"Agreement").
In
accordance with the terms and provisions of the Agreement, in exchange for all
of the capital stock of AGN, the Company paid a total of $200,000 to the
shareholders of AGN, who included Mr. Ernie Darias and Mr. Albert Rodriquez.
This amount was paid by issuing ninety-day promissory notes to each of Mr.
Darias and Mr. Rodriquez. In addition, the Agreement provides that Juma will
forgive $125,000 of the loan previously made to AGN. Also, the Company issued an
aggregate of 320,000 shares of common stock to the shareholders of AGN in
connection with the Agreement. The Company committed that the 320,000 shares
will have a value of at least $640,000 one year from the date of the Agreement
or the Company will issue to the AGN shareholders a two-year promissory note
reflecting the difference between the value of the 320,000 shares and $640,000.
The Company also paid off certain obligations of AGN to Avatel Technologies,
Inc., an entity owned by certain shareholders of AGN, in the aggregate amount of
$675,000 by paying $200,000 in cash and by issuing a promissory note for the
balance. The Company has entered into an employment agreement with Mr.
Rodriquez. The employment agreement with Mr. Rodriquez is for a term of two
years and a base salary of $125,000 per annum.
On
September 18, 2007, an Addendum (the “Addendum”) was added to the Agreement. The
Addendum stated that AGN would pay an additional $188,216 towards obligations
due to Avatel Technologies, Inc. in exchange for the forgiveness of any
intercompany loans or claims that Avatel Technologies, Inc. and its shareholders
may have against the Company or AGN. The Addendum also stated that $125,000 of
the Note which was forgiven would be payable to the Company, at any time, if the
Company does not acquire the business of Avatel Technologies, Inc. (See Note
3)
Associated
with the acquisition of AGN the Company recorded goodwill of $1,870,259, which
was deemed impaired in March 2007. In September 2007, a reduction to the
impaired goodwill of $425,779 was recorded. This adjustment to the impaired
goodwill is related to the Addendum and the forgiveness of any intercompany
loans. As of September 30, 2007, the impaired goodwill was
$1,444,480.
In March
2008, the Company recorded a loan for $329,600 to the shareholders of AGN,
pursuant to the agreement. This loan bears interest at a rate of 7.5%, and
principal and interest are payable in quarterly installments over two years.
Concurrent with the execution of this loan, the Company exercised its right to
receive the $125,000 due to the Company based on the Addendum signed on
September 18, 2007. The net effect of these transactions resulted in an
adjustment to the purchase price and the creation of goodwill of $204,600, which
was deemed impaired.
NOTE 5 –CONVERTIBLE NOTES
PAYABLE and WARRANTS TO PURCHASE COMMON STOCK
On
February 9, 2009 the Company issued to Vision Opportunity Master Fund a
convertible promissory note with principal amount $1,500,000 and a warrant to
purchase 3,000,000 shares of common stock in exchange for $1,500,000 in cash.
The promissory note matures one year from the date of issuance, bears interest
at an annual rate of 10% and is initially convertible into shares the Company’s
common stock at a conversion price of $0.25. The warrants have an exercise price
of $0.25 and a term of five years. The conversion price of the promissory notes
and the exercise price of the warrants are subject to adjustment upon the
occurrence of certain events. The Company recognized a beneficial conversion
feature of $360,000 in connection with the issuance of the convertible
promissory note, which was expensed since the notes can be converted at any
time. The note was cancelled on May 21, 2009 under the provisions of a new
financing transaction. On December 23, 2009 the exercise price of the warrants
was changed to $0.15, and on April 30, 2010 the warrants were exchanged for
shares of the Company’s series C preferred stock.
On May
21, 2009 the Company issued to Vision Opportunity Master Fund a convertible
promissory note with principal amount $4,542,500 and a warrant to purchase
15,141,667 shares of common stock in exchange for cancellation of the promissory
note with principal amount $1,500,000 issued on February 9, 2009 and $3,000,000
in cash. The promissory note matures one year from the date of issuance, bears
interest at an annual rate of 10% and is initially convertible into shares of
the Company’s common stock at a conversion price of $0.15. The
warrants have an exercise price of $0.15 per share and a term of five years. In
addition, the following price protection provisions were invoked: the conversion
price on all convertible notes held by Vision was reduced from $0.25 to $0.15;
the conversion price of the Series A Preferred Stock was reduced from $0.25 to
$0.15; and the exercise price of the Series B Warrants held by Vision was
reduced from $0.46 to $0.25. On April 30, 2010 the warrants were exchanged for
shares of the Company’s series C preferred stock, and on May 21, 2010 the
maturity date of the notes was extended to November 29, 2010.
Juma
Technology Corp. and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
September
30, 2010
The
Company recognized a beneficial conversion feature of approximately $2,422,000
in connection with the convertible promissory notes issued on May 21, 2009. The
beneficial conversion feature was expensed immediately since the notes can be
converted into shares of common stock at any time. The Company recognized a loss
of approximately $97,000 on the early extinguishment of debt related to
cancellation of the promissory note with principal amount of $1,500,000 issued
on February 9, 2009. The reduction in the conversion price on all convertible
notes held by Vision from $0.25 to $0.15 resulted in a loss on the early
extinguishment of debt of $1,018,810. The reduction in the conversion
price of the Series A Preferred Stock from $0.25 to $0.15 resulted in a deemed
dividend of $1,666,667. The reduction in the exercise price of the
Series B Warrants held by Vision from $0.46 to $0.25 resulted in increase of
additional paid-in capital allocated to warrants of $259,516.
On
September 24, 2009 the Company issued to Vision Capital Advantage Fund, LP a
convertible promissory note with principal amount $1,036,280.53 and a warrant to
purchase 3,454,268 shares of common stock in exchange for
$1,036,280.53 in cash. The promissory note matures in May 2010, bears interest
at an annual rate of 10% and is initially convertible into shares of the
Company’s common stock at a conversion price of $0.15. The warrants have an
exercise price of $0.15 and expire in May 2014. The conversion price of the
promissory notes and the exercise price of the warrants are subject to
adjustment upon the occurrence of certain events. The Company recognized a
beneficial conversion feature of $691,000 in connection with the issuance of the
convertible promissory note, which was expensed since the notes can be converted
at any time. On April 30, 2010 the warrants were exchanged for shares of the
Company’s series C preferred stock, and on May 21, 2010 the maturity date of the
notes was extended to November 29, 2010.
On
December 23, 2009, Company issued to Vision Opportunity Master Fund, Ltd., a
convertible promissory note with principal amount $500,000 and a warrant to
purchase 1,666,667 shares of the Company’s common stock in exchange for $500,000
in cash. The promissory note matures in May 2010, bears interest at an annual
rate of 10% and is initially convertible into shares of the Company’s common
stock at a conversion price of $0.15. The warrants have an exercise price of
$0.15 and expire in May 2014. The conversion price of the promissory notes and
the exercise price of the warrants are subject to adjustment upon the occurrence
of certain events. In addition, the exercise price of warrants to
purchase 3,000,000 shares of the Company’s common stock issued in February 2009
was reduced from $0.25 to $0.15 per share pursuant to price protection
provision. The Company recognized a beneficial conversion feature of $333,333 in
connection with the issuance of the convertible promissory note, which was
expensed since the notes can be converted at any time. The reduction in the
exercise price of the warrants resulted in decrease of additional paid-in
capital allocated to warrants of $51,401. On April 30, 2010 the
warrants were exchanged for shares of the Company’s series C preferred stock,
and on May 21, 2010 the maturity date of the notes was extended to November 29,
2010.
On
January 28, 2010 the Company issued to Vision Opportunity Master Fund, Ltd. a
convertible promissory note with principal amount $500,000 and a warrant to
purchase 1,666,667 shares of common stock in exchange for $500,000 in cash. The
promissory note matures in May 2010, bears interest at an annual rate of 10% and
is initially convertible into shares of the Company’s common stock at a
conversion price of $0.15. The warrants have an exercise price of $0.15 and
expire in May 2014. The Company recognized a beneficial conversion feature of
$166,667 in connection with the issuance of the convertible promissory note,
which was expensed since the note can be converted at any time. On April 30,
2010 the warrants were exchanged for shares of the Company’s series C preferred
stock, and on May 21, 2010 the maturity date of the notes was extended to
November 29, 2010.
On
February 25, 2010 the Company issued to Vision Opportunity Master Fund, Ltd. a
convertible promissory note with principal amount $500,000 and a warrant to
purchase 1,666,667 shares of common stock in exchange for $500,000 in cash. The
promissory note matures in May 2010, bears interest at an annual rate
of 10% and is initially convertible into shares of the Company’s common stock at
a conversion price of $0.15. The warrants have an exercise price of $0.15 and
expire in May 2014. The Company recognized a beneficial conversion feature of
$266,667 in connection with the issuance of the convertible promissory note,
which was expensed since the note can be converted at any time. On April 30,
2010 the warrants were exchanged for shares of the Company’s series C preferred
stock, and on May 21, 2010 the maturity date of the notes was extended to
November 29, 2010.
On March
31, 2010 the Company issued to Vision Opportunity Master Fund, Ltd. a
convertible promissory note with principal amount $2,000,000 and a warrant to
purchase 6,666,666 shares of the Company’s common stock in exchange for
$2,000,000 in cash. The promissory note matures in May 2010, bears interest at
an annual rate of 10% and is initially convertible into shares of the Company’s
common stock at a conversion price of $0.15. The warrants have an exercise price
of $0.15 and expire in May 2014. The Company recognized a beneficial conversion
feature of $400,000 in connection with the issuance of the convertible
promissory note, which was expensed since the note can be converted at any time.
On May 21, 2010 the maturity date of the notes was extended to November 29,
2010.
Juma
Technology Corp. and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
September
30, 2010
On April
30, 2010 Vision Opportunity Master Fund, Ltd. and Vision Capital Advantage Fund,
L.P. exchanged their holdings of warrants to purchase 32,845,936 shares
of the Company’s common stock for 1,970,756 shares of the
Company’s Series C Preferred Stock. Warrants to purchase 23,595,936 shares at
$0.15 per share expiring in May 2014, 3,000,000 shares at $0.15 per share
expiring in February 2014 and 6,250,000 shares at $0.25 per share expiring in
August 2012 were exchanged. Vision Opportunity Master Fund, Ltd. retained their
holding of warrants to purchase 6,666,666 shares at $0.15 expiring in March
2015. The Company recognized a beneficial conversion feature of $591,227 in
connection with the issuance of the series C preferred stock, which was recorded
as a dividend since the preferred stock can be converted at any
time.
On June
25, 2010, August 6, 2010 and September 29, 2010 the Company issued to Vision
Opportunity Master Fund, Ltd. non-convertible promissory notes with principal
amount $500,000 and warrants to purchase 3,333,333 shares of the Company’s
common stock in exchange for $500,000 in cash. The promissory notes mature in
November 2010 and bear interest at an annual rate of 10%. The warrants have an
exercise price of $0.15 and expire in March 2015.
NOTE 6 - CAPITAL LEASE
OBLIGATIONS
CitiCorp Vendor Finance,
Inc.
The
Company leases software and computer equipment under capital lease arrangements
with CitiCorp Vendor Finance, Inc. Pursuant to the lease, the lessor retains
actual title to the leased property until the termination of the lease, at which
time the property can be purchased for one dollar.
The lease
dated June 2, 2006 is for software and computer equipment for the Company. The
term of the lease is sixty months with monthly payments of $3,461, which is
equal to the cost to amortize $172,187 over a five-year period at an interest
rate of 7.6% per annum.
Var Resources
Inc.
The
Company leases computer equipment under capital lease arrangements with Var
Resources, Inc. Pursuant to the lease, the lessor retains actual title to the
leased property until the termination of the lease, at which time the property
can be purchased for one dollar.
There are
five leases dated November 19, 2007 for software and computer equipment used at
the Company’s various data centers. The terms of the leases are thirty-six
months with total monthly payments of $8,600, which is equal to the cost to
amortize $253,174 over a 3-year period at an interest rate of 13.5% per
annum.
Hitachi Data
Systems
The
Company leases software and computer equipment under capital lease arrangements
with Hitachi Data Systems. Pursuant to the lease, the lessor retains actual
title to the leased property until the termination of the lease, at which time
the property can be purchased for one dollar.
The lease
dated December 31, 2007 is computer equipment used at the Company’s various data
centers. The term of the lease is thirty-six months with monthly payments of
$4,296.04, which is equal to the cost to amortize $130,658 over a 3-year period
at an interest rate of 11.3% per annum.
Future
minimum lease payments are as follows:
|
Year
|
|
Total
Payments
|
|
|
Interest
Payments
|
|
|
Principal
Payments
|
|
|
2010
|
|
|
38,069
|
|
|
|
1,407
|
|
|
|
36,662
|
|
|
2011
|
|
|
26,537
|
|
|
|
1,071
|
|
|
|
25,466
|
|
NOTE 7 – LEASE
COMMITMENTS
The
Company leases its Farmingdale, NY (from a related party) and New York, NY
premises pursuant to individual sublease agreements accounted for as operating
leases. The lease on the Farmingdale, NY premises expires on May 31, 2016, and
the lease on the New York, NY premises lease expires on November 30, 2011. Both
premises are under a non-cancelable operating lease.
Juma
Technology Corp. and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
September
30, 2010
The
Company also has operating leases for office equipment. The operating leases are
for forty-eight months and expire April 30, 2011.
NOTE 8 – STOCK
OPTIONS
On
January 28, 2007 the Company adopted the 2006 Stock Option Plan of Juma
Technology Corp., (the “2006 Plan”). The Plan provides for up to 6,228,750
shares of incentive and non-qualified options that may be granted to employees,
directors and certain key affiliates. Under the Plan, incentive options may be
granted at not less than the fair market value on the date of grant and
non-statutory options may be granted at or below fair market value. The Company
wishes to utilize the Plan to attract, maintain and develop management by
encouraging ownership of the Company's common stock by key employees, directors,
and others. Options under the Plan will be either “incentive options” under
Section 422A of the Internal Revenue Code of 1986, as amended, or “non-qualified
stock options” which are not intended to so qualify.
At
September 30, 2010, the Company has 5,682,860 stock options to officers,
employees and consultants outstanding at exercise prices ranging from $0.17 to
$1.33 per share under the 2006 Plan. These options carry a ten year term and
vest ratably over five years. The options vested during the first twelve months
shall not be available to the optionee until the first anniversary of the stock
option grant. Options for officers are issued at a 15% premium over fair market
value, carry a five year life and vest ratably over one year. Using the
Black-Scholes pricing model the Company has determined that the fair value of
these options is approximately $ 944,118.
On August
31, 2007 the Company adopted the 2007 Stock Option Plan of Juma Technology
Corp., (the “2007 Plan”). The Plan provides for up to 6,228,750 shares of
incentive and non-qualified options that may be granted to employees, directors
and certain key affiliates. Under the Plan, incentive options may be granted at
not less than the fair market value on the date of grant and non-statutory
options may be granted at or below fair market value. The Company wishes to
utilize the Plan to attract, maintain and develop management by encouraging
ownership of the Company's Common Stock by key employees, directors, and others.
Options under the Plan will be either “incentive options” under Section 422A of
the Internal Revenue Code of 1986, as amended, or “non-qualified stock options”
which are not intended to so qualify.
At
September 30, 2010, the Company has 5,998,750 stock options to
officers, employees and consultants outstanding at exercise prices ranging from
$0.20 to $0.60 per share under the 2007 Plan. These options carry a ten year
term and vest ratably over various terms. The options vested during the first
twelve months shall not be available to the optionee until the first anniversary
of the stock option grant. Options for officers are issued at a 15% premium over
fair market value, carry a five year life and vest ratably over various terms.
Using the Black-Scholes pricing model the Company has determined that the fair
value of these options is approximately $ 629,788.
On
December 17, 2008 the Company adopted the 2008 Stock Option Plan of Juma
Technology Corp., (the “2008 Plan”). The Plan provides for up to 6,228,750
shares of incentive and non-qualified options that may be granted to employees,
directors and certain key affiliates. Under the Plan, incentive options may be
granted at not less than the fair market value on the date of grant and
non-statutory options may be granted at or below fair market value. The Company
wishes to utilize the Plan to attract, maintain and develop management by
encouraging ownership of the Company's Common Stock by key employees, directors,
and others. Options under the Plan will be either “incentive options” under
Section 422A of the Internal Revenue Code of 1986, as amended, or “non-qualified
stock options” which are not intended to so qualify.
At
September 30, 2010, the Company has 5,738,250 stock options to officers,
employees and consultants outstanding at exercise prices ranging from $0.14 to
$0.16 per share under the 2008 Plan. These options carry a ten year term and
vest ratably over various terms. Options for officers are issued at a 15%
premium over fair market value, carry a five year life and vest ratably over a
one year term. Using the Black-Scholes pricing model the Company has determined
that the fair value of these options is approximately $407,925.
On July
16, 2009 the Company adopted the 2009 Stock Option Plan of Juma Technology
Corp., (the “2009 Plan”).The Plan provides for up to 10,000,000 shares of
incentive and non-qualified options that may be granted to employees, directors
and certain key affiliates. Under the Plan, incentive options may be granted at
not less than the fair market value on the date of grant and non-statutory
options may be granted at or below fair market value. The Company wishes to
utilize the Plan to attract, maintain and develop management by encouraging
ownership of the Company's Common Stock by key employees, directors, and others.
Options under the Plan will be either “incentive options” under Section 422A of
the Internal Revenue Code of 1986, as amended, or “non-qualified stock options”
which are not intended to so qualify. Through September 30, 2010 no options have
been issued under the 2009 Plan.
Juma
Technology Corp. and Subsidiaries
Notes
to Condensed Consolidated Financial Statements
September
30, 2010
NOTE 9 – PREFERRED
STOCK
On
February 9, 2009, the per share conversion price of the series B preferred stock
was reduced from $0.50 to $0.25 pursuant to its price protection provisions. The
Company recognized a deemed dividend to preferred shareholders of $5,599,440 as
a result.
On May
21, 2009, the per share conversion price of the series A preferred stock was
reduced from $0.25 to $0.15 pursuant to its price protection provisions. The
Company recognized a deemed dividend to preferred shareholders of $1,666,667 as
a result.
In
November 2009, the shareholders of the Company approved an amendment to the
Company’s certificate of incorporation increasing the number of authorized
shares by 10,000,000 shares of preferred stock.
On April
30, 2010 Vision Opportunity Master Fund, Ltd. and Vision Capital Advantage Fund,
L.P. exchanged their holdings of warrants to purchase 32,845,936 shares
of the Company’s common stock for 1,970,756 shares of the
Company’s Series C Preferred Stock. The Company recognized a deemed dividend to
preferred shareholders of $591,227 as a result.
As of
September 30, 2010, there were $920,548 in accrued unpaid dividends on the
series A convertible preferred stock.
NOTE 10 – SALE OF JUMA
SOLUTIONS AND MAINTENANCE BUSINESS
On
September 17, 2010, the Company entered into a letter of intent (the “Letter of
Intent”) with ConvergeOne Holdings Corp (“Converge”) Under the terms
of the Letter of Intent, Converge, through a subsidiary (the
“Purchaser”), will acquire from the Company the assets of the Company’s
solutions and maintenance business, free and clear of liens and
encumbrances. The base purchase price is $800,000 in cash to be paid
at closing; a twelve-month earn-out and bonus, if and as earned, are also part
of the purchase price.
The
transaction, which is subject to a complete due diligence, the execution of a
definitive acquisition agreement and the satisfaction of closing conditions, is
expected to close in the fourth quarter of 2010. There is no assurance that the
previously described asset acquisition will be consummated.
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Item 2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
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Forward-Looking
Statements
Historical
results and trends should not be taken as indicative of future operations.
Management’s statements contained in this Report that are not historical facts
are forward-looking statements. Actual results may differ materially from those
included in the forward-looking statements. Forward-looking statements, which
are based on certain assumptions and describe future plans, strategies and
expectations of the Company, are generally identifiable by use of the
words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,”
“prospects,” or similar expressions. The Company’s ability to predict results or
the actual effect of future plans or strategies is inherently uncertain. Factors
which could have a material adverse affect on the operations and future
prospects of the Company on a consolidated basis include, but are not limited
to: changes in economic conditions, legislative/regulatory changes, availability
of capital, interest rates, competition, significant restructuring and
acquisition activities, and generally accepted accounting principles. These
risks and uncertainties should be considered in evaluating forward-looking
statements and undue reliance should not be placed on such statements. Further
information concerning the Company and its business, including additional
factors that could materially affect the Company’s financial results, is
included herein and in the Company’s other filings with the SEC.
Information
regarding market and industry statistics contained in this Report is included
based on information available to the Company that it believes is accurate. It
is generally based on industry and other publications that are not produced for
purposes of securities offerings or economic analysis. We have not reviewed or
included data from all sources, and cannot assure investors of the accuracy or
completeness of the data included in this Report. Forecasts and other
forward-looking information obtained from these sources are subject to the same
qualifications and the additional uncertainties accompanying any estimates of
future market size, revenue and market acceptance of products and services. The
Company does not undertake any obligation to publicly update any forward-looking
statements. As a result, investors should not place undue reliance on these
forward-looking statements.
Results
of Operations for the three months ended September 30, 2010
Revenues
for the three months ended September 30, 2010 increased $435,395 or 23% to
$2,331,645, compared with revenues of $1,896,250 for the three months ended
September 30, 2009. The increase in revenues was predominantly due to increased
sales to new and existing customers.
Cost of
goods sold for the three months ended September 30, 2010 increased $493,614 or
49% to $1,498,431, compared to $1,004,817 for the three months ended September
30, 2009. The increase in cost of goods sold is primarily attributable to the
increase in revenue.
Gross
margin for the three months ended September 30, 2010 decreased $58,219 or 7% to
$833,214, compared to $891,433 for the three months ended September 30, 2009.
The decrease is directly attributable to the increase in cost of goods
sold.
Selling
expenses increased by $25,917 or 7% to $413,887 for the three months ended
September 30, 2010, compared to $387,970 for the three months ended September
30, 2009. The increase was predominantly due to an increase in marketing
efforts.
Research
and development expenses decreased by $10,716 or 18% to $48,420 for the three
months ended September 30, 2010, compared to $59,136 for the three months ended
September 30, 2009. The decrease is primarily attributable to a decrease in the
use of consultants. All research and development expenses were incurred by
Nectar.
General
and administrative expenses increased by $137,699 or 7% to $2,009,609 for the
three months ended September 30, 2010, compared to $1,871,910 for the three
months ended September 30, 2009. Salary expense increased $310,719 due to an
increase in engineering personnel idle time that is attributable to a decrease
in project sales. This was offset by a decrease in stock option expense of
$115,877 that was attributable to certain stock option grants becoming fully
vested.
Amortization
of premium and (discounts), net on notes increased $1,024,796 or 104% to
$40,510 for the three months ended September 30, 2010 compared to ($984,286) for
the three months ended September 30, 2009. In September 2009 the Company
recognized a beneficial conversion feature of approximately $691,000 in
connection with the issuance of a convertible promissory note, which was
expensed since the notes can be converted at any time.
Interest
expense, net totaled $471,013 for the three months ended September 30, 2010
compared to $339,249 for the three months ended September 30, 2009. The increase
is primarily attributable to the issuance of additional convertible promissory
notes.
The
Company incurred a net loss of $2,076,236 for the three months ended September
30, 2010 compared to a net loss of $2,751,311 for the three months ended
September 30, 2009. Nectar incurs significant operational and development
expenses that management believes will continue for the foreseeable future.
Nectar generated a net loss of approximately $460,000 for the three months ended
September 30, 2010. The Company expects Nectar’s loss to continue until new
sales outpace the current level of costs.
Results
of Operations for the nine months ended September 30, 2010
Revenues
for the nine months ended September 30, 2010 decreased $1,858,103 or 19% to
$8,078,829 compared with revenues of $9,936,932 for the nine months ended
September 30, 2009. The decrease in revenues was predominantly due to decreased
sales to existing customers.
Cost of
goods sold for the nine months ended September 30, 2010 decreased $977,901 or
15% to $5,660,003, compared to $6,637,904 for the nine months ended September
30, 2009. The decrease in cost of goods sold is primarily attributable to the
decrease in revenue.
Gross
margin for the nine months ended September 30, 2010 decreased $880,202 or 27% to
$2,418,826, compared to $3,299,028 for the nine months ended September 30, 2009.
The decrease is directly attributable to the decrease in revenue.
Selling
expenses increased by $163,720 or 14% to $1,324,678 for the nine months ended
September 30, 2010, compared to $1,160,958 for the nine months ended September
30, 2009. The increase was predominantly due to an increase in marketing
efforts.
Research
and development expenses decreased by $148,487 or 47% to $167,248 for the nine
months ended September 30, 2010, compared to $315,735 for the nine months ended
September 30, 2009. The decrease is primarily attributable to a decrease in the
use of consultants. All research and development expenses were incurred by
Nectar.
General
and administrative expenses decreased by $1,147,180 or 19% to $4,968,353 for the
nine months ended September 30, 2010, compared to $6,115,533 for the nine months
ended September 30, 2009. The Company recognized a loss from the early
extinguishment of debt of $1,116,191 during the nine months ended September 30,
2009.
Amortization
of premium and (discounts), net on notes increased $1,518,338 or 38% to
($2,507,528) for the nine months ended September 30, 2010 compared to
($4,025,866) for the nine months ended September 30, 2009. The recognition of
beneficial conversion features decreased approximately $2,640,000 in the nine
months ended September 30, 2010 compared to the nine months ended September 30,
2009. The beneficial conversion features were expensed when recognized since the
notes can be converted at any time. Amortization of discounts on convertible
notes payable over the terms of the notes increased approximately $1,122,000 in
the nine months ended September 30, 2010 compared to the nine months ended
September 30, 2009.
Interest
(expense), net totaled $1,362,592 for the nine months ended September 30, 2010
compared to $952,376 for the nine months ended September 30, 2009. The increase
is primarily attributable to the issuance of additional convertible promissory
notes.
The
Company incurred a net loss of $7,923,682 for the nine months ended September
30, 2010 compared to a net loss of $9,279,082 for the nine months ended
September 30, 2009. Nectar incurs significant operational and development
expenses that management believes will continue for the foreseeable future.
Nectar generated a net loss of approximately $1,738,000 for the nine months
ended September 30, 2010. The Company expects Nectar’s loss to continue until
new sales outpace the current level of costs.
In April
2010, the Company recognized a beneficial conversion feature of $591,227 in
connection with the issuance of 1,970,756 shares of the Company’s series C
preferred stock in exchange for warrants to purchase 32,845,936 shares of the
Company’s stock. The beneficial conversion feature was recorded as a dividend
since the preferred stock can be converted at any time. In May 2009, the Company
recognized a deemed dividend to preferred shareholders of $1,666,667 as a result
of a decrease in the per share conversion price of the series A
preferred stock from $0.25 to $0.15 pursuant to its price protection provisions.
In February 2009, the Company recognized a deemed dividend to preferred
shareholders of $5,599,440 as a result of a decrease in the per share
conversion price of the series B preferred stock from $0.50 to $0.25 pursuant to
its price protection provisions.
Liquidity
and Capital Resources
As of
September 30, 2010, the Company had total current assets of $3,158,252, and
total current liabilities of $22,017,670, resulting in a current working capital
deficit of $18,859,418. Also, on September 30, 2010 the Company had
$392,857 in cash. Management does not believe that these amounts will be
sufficient for the upcoming year, nor does it believe that the current business
will be able to sustain the anticipated growth of the operations. Management
will attempt to rely on external sources of capital to finance the execution of
our business plan. We do not have any firm commitments to raise additional
capital nor is there any assurance additional capital will be available at
acceptable terms. We continue to seek additional sources of funding for working
capital purposes.
On
February 9, 2009 the Company issued to Vision Opportunity Master Fund a
convertible promissory note with principal amount $1,500,000 and a warrant to
purchase 3,000,000 shares of common stock in exchange for $1,500,000 in cash.
The promissory note matures one year from the date of issuance, bears interest
at an annual rate of 10% and is initially convertible into shares the Company’s
common stock at a conversion price of $0.25. The warrants have an exercise price
of $0.25. The conversion price of the promissory notes and the exercise price of
the warrants are subject to adjustment upon the occurrence of certain events.
The note was cancelled on May 21, 2009 under the provisions of a new financing
transaction. On December 23, 2009 the exercise price of the warrants was changed
to $0.15, and on April 30, 2010 the warrants were exchanged for shares of the
Company’s series C preferred stock.
Also on
February 9, 2009 the conversion price of the series B preferred stock was
reduced from $0.50 to $0.25 pursuant to its price protection
provisions.
On May
21, 2009 the Company issued to Vision Opportunity Master Fund a convertible
promissory note with principal amount $4,542,500 and a warrant to purchase
15,141,667 shares of common stock in exchange for cancellation of the promissory
note with principal amount $1,500,000 issued on February 9, 2009 and $3,000,000
in cash. The promissory note issued matures one year from the date of issuance,
bears interest at an annual rate of 10% and is initially convertible into shares
of the Company’s common stock at a conversion price of $0.15. The warrants have
an exercise price of $0.15 per share and a term of five years. In addition, the
following price protection provisions were invoked: the conversion price on all
convertible notes held by Vision was reduced from $0.25 to $0.15; the conversion
price of the Series A Preferred Stock was reduced from $0.25 to $0.15; and the
exercise price of the Series B Warrants held by Vision was reduced from $0.46 to
$0.25. On April 30, 2010 the warrants were exchanged for shares of the Company’s
series C preferred stock, and on May 21, 2010 the maturity date of the notes was
extended to November 29, 2010.
On
September 24, 2009 the Company issued to Vision Capital Advantage Fund, LP a
convertible promissory note with principal amount $1,036,281 and a warrant
to purchase 3,454,268 shares of common stock in exchange for
$1,036,281 in cash. The promissory note matures in May 2010, bears interest at
an annual rate of 10% and is initially convertible into shares the Company’s
common stock at a conversion price of $0.15. The warrants have an exercise price
of $0.15 and expire in May 2014. The conversion price of the promissory notes
and the exercise price of the warrants are subject to adjustment upon the
occurrence of certain events. On April 30, 2010 the warrants were exchanged for
shares of the Company’s series C preferred stock, and on May 21, 2010 the
maturity date of the notes was extended to November 29, 2010.
On
December 23, 2009, Company issued to Vision Opportunity Master Fund, Ltd., a
convertible promissory note with principal amount $500,000 and a warrant to
purchase 1,666,667 shares of the Company’s common stock in exchange for $500,000
in cash. The promissory note matures in May 2010, bears interest at an annual
rate of 10% and is initially convertible into shares of the Company’s common
stock at a conversion price of $0.15. The warrants have an exercise price of
$0.15 and expire in May 2014. The conversion price of the promissory notes and
the exercise price of the warrants are subject to adjustment upon the occurrence
of certain events. In addition pursuant to price protection
provision, the exercise price on warrants to purchase 3,000,000 shares of the
Company’s common stock issued in February 2009 was reduced from $0.25 to $0.15
per share. On April 30, 2010 the warrants were exchanged for shares of the
Company’s series C preferred stock, and on May 21, 2010 the maturity date of the
notes was extended to November 29, 2010.
On
January 28, 2010 the Company issued to Vision Opportunity Master Fund, Ltd. a
convertible promissory note with principal amount $500,000 and a warrant to
purchase 1,666,667 shares of common stock in exchange for $500,000 in cash. The
promissory note matures in May 2010, bears interest at an annual rate of 10% and
is initially convertible into shares of the Company’s common stock at a
conversion price of $0.15. The warrants have an exercise price of $0.15 and
expire in May 2014. On April 30, 2010 the warrants were exchanged for shares of
the Company’s series C preferred stock, and on May 21, 2010 the maturity date of
the notes was extended to November 29, 2010.
On
February 25, 2010 the Company issued to Vision Opportunity Master Fund, Ltd. a
convertible promissory note with principal amount $500,000 and a warrant to
purchase 1,666,667 shares of common stock in exchange for $500,000 in cash. The
promissory note matures in May 2010, bears interest at an annual rate
of 10% and is initially convertible into shares of the Company’s common stock at
a conversion price of $0.15. The warrants have an exercise price of $0.15 and
expire in May 2014. On April 30, 2010 the warrants were exchanged for shares of
the Company’s series C preferred stock, and on May 21, 2010 the maturity date of
the notes was extended to November 29, 2010.
On March
31, 2010 the Company issued to Vision Opportunity Master Fund, Ltd. a
convertible promissory note with principal amount $2,000,000 and a warrant to
purchase 6,666,666 shares of the Company’s common stock in exchange for
$2,000,000 in cash. The promissory note matures in May 2010, bears interest at
an annual rate of 10% and is initially convertible into shares of the Company’s
common stock at a conversion price of $0.15. The warrants have an exercise price
of $0.15 and expire in May 2014. On May 21, 2010 the maturity date of the notes
was extended to November 29, 2010.
On April
30, 2010 Vision Opportunity Master Fund, Ltd. and Vision Capital Advantage Fund,
L.P. exchanged their holdings of warrants to purchase 32,845,936 shares
of the Company’s common stock for 1,970,756 shares of the
Company’s Series C Preferred Stock. Warrants to purchase 23,595,936 shares at
$0.15 per share expiring in May 2014, 3,000,000 shares at $0.15 per share
expiring in February 2014 and 6,250,000 shares at $0.25 per share expiring in
August 2012 were exchanged. Vision Opportunity Master Fund, Ltd. retained their
holding of warrants to purchase 6,666,666 shares at $0.15 expiring in March
2015.
On June
25, 2010, August 6, 2010 and September 29, 2010 the Company issued to
Vision Opportunity Master Fund, Ltd. a non-convertible promissory notes with
principal amount $500,000 and a warrants to purchase 3,333,333 shares of the
Company’s common stock in exchange for $500,000 in cash. The promissory notes
mature in November 2010 and bear interest at an annual rate of 10%. The warrants
have an exercise price of $0.15 and expire in March 2015.
Cash flow
used in operations totaled $4,448,492 for the nine months ended September 30,
2010 compared to $3,795,149 for the nine months ended September 30, 2009.
The increase is cash flow used in operations is attributable primarily to
a decrease in amortization of discount on notes payable and early extinguishment
of debt and a decrease in the change of accounts receivable which was offset by
an increase in the change of accounts payable and accrued expenses, accrued
interest payable, and a decrease in net loss.
Cash flow
used by investing activities was $47,227 for the nine months ended September 30,
2010 compared to $140,898 for the nine months ended September 30, 2009. The
decrease in cash flow used in investing activities is due primarily to a
decrease in the acquisition of other assets.
Cash flow
provided by financing activities decreased to $3,927,575 for the nine months
ended September 30, 2010 compared to cash flow provided by financing activities
of $ 5,346,300 for the nine months ended September 30, 2009. The decrease is
attributable to decrease in the issuance of promissory notes and to an increase
in their repayment.
Item
3. Quantitative and Qualitative Disclosures about Market Risk
Not
applicable.
Item
4. Controls and Procedures
Evaluation of Disclosure
Controls and Procedures
We
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of September 30, 2010. This evaluation was carried
out under the supervision and with the participation of our Chief Executive
Officer, Mr. Anthony M. Servidio and Chief Financial Officer, Mr. Anthony
Fernandez. Based upon that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that, as of September 30, 2010, our disclosure
controls and procedures are effective.
Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act are recorded, processed, summarized and
reported, within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports filed under the Exchange Act is accumulated and communicated to
management, including our Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosure.
Changes in Internal Control
over Financial Reporting
There
have been no changes in our internal controls over financial reporting during
the quarter ended September 30, 2010 that have materially affected or are
reasonably likely to materially affect such controls.
Limitations on the
Effectiveness of Internal Controls
Our
management does not expect that our disclosure controls and procedures or our
internal control over financial reporting will necessarily prevent all fraud and
material error. Our disclosure controls and procedures are designed to provide
reasonable assurance of achieving our objectives and our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures are effective at that reasonable assurance level. Further, the design
of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within the Company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the internal control. The design of
any system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions.
Over time, control may become inadequate because of changes in conditions, or
the degree of compliance with the policies or procedures may
deteriorate.
PART
II-OTHER INFORMATION
Item
1. Legal Proceedings
None.
Item
1A. Risk Factors
Not
applicable.
Item 2.
Unregistered Sales of Equity
Securities and Use of Proceeds
None.
Item
3. Defaults Upon Senior Securities
None.
Item 4.
(Removed and
Reserved).
Item
5. Other Information
None.
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Item 6.
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Exhibits
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31.1
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Certification
by Chief Executive Officer pursuant to Rule 13a-14
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31.2
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Certification
by Chief Financial Officer pursuant to Rule 13a-14
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32.1
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Certification
by Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
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32.2
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Certification
by Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
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Juma Technology Corp.
(Registrant)
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Date:
November 10, 2010
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/s/ Anthony M. Servidio
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Anthony
M. Servidio
Chief
Executive Officer and Chairman
(Principal
Executive Officer)
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Date:
November 10, 2010
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/s/ Anthony Fernandez
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Anthony
Fernandez
Chief
Financial Officer
(Principal
Financial and Accounting
Officer)
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Juma Technology (CE) (USOTC:JUMT)
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