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[QUOTE]Originally posted by Dustoff101: [QB] 10QSB: SOFTNET TECHNOLOGY CORP. By Edgar Online - (EDG = 10Q, 10K) Last Update: 5/22/2006 2:19:17 PM Data provided by (EDGAR Online via COMTEX) -- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Introduction and Forward Looking Statements This document contains forward-looking statements which may involve known and unknown risks, uncertainties and other factors that may cause SoftNet Technology Corp's ("SoftNet") actual results and performance in future periods to be materially different from any future results or performance suggested by these statements. SoftNet cautions investors not to place undue reliance on forward-looking statements, which speak only to management's expectations on this date. Certain statements contained herein, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act"). Such forward-looking statements are identified by words such as "intends", "anticipates", "hopes" and "expects", among others, and include, without limitation, statements regarding the Company's plan of business operations, anticipated revenues, related expenditures, and the results of any business transactions. Factors that could cause actual results to differ materially include, among others, the following: acceptability of the Company's services in the market place, general economic conditions, political and economic conditions in the United States and abroad, and competition. The following discussion and analysis highlights the financial position and results of operations of SoftNet as of and for the three months ended March 31, 2006 compared to the three months ended March 31, 2005. The business activities of the Company are now that of the two wholly owned subsidiaries: Indigo Technical Services, Inc. and InsPara Networking Technologies, Inc. The Company anticipates that their sources of liquidity will come from the private sale of the Company's securities to cover the funding of corporate expenses, such as legal and accounting and filing fees, as well as Sarbanes-Oxley compliance. As disclosed in the Company's 8-K dated January 17, 2006, the Company entered into a certain Plan and Agreement of Reorganization (the Agreement) with Inspara, Inc. (InsPara) pursuant to which InsPara would merge with and into the Company (the Merger). The closing of the Agreement took place on January 18, 2006 and the Merger became effective retroactively to January 1, 2006. The Merger was accomplished pursuant to the Agreement which was attached to the Company's 8-K dated January 17, 2006 and is incorporated herein by reference. Under the Agreement, the stockholders of InsPara will receive, pro rata, a total of 49,999,998 shares of this Company's Common Stock (the Acquisition Shares). The Acquisition Shares are unregistered shares and will only be free trading upon a filing of a Registration Statement for the Acquisition Shares, or an exemption from the registration thereof. Immediately following the closing of the Merger, Doug Wetzel resigned from the Board of Directors of the Company and Kevin Holt, the Chairman and C.E.O. of InsPara, was appointed to fill the vacancy created by Mr. Wetzels resignation. Prior to the execution of the Agreement, there were no material relationships between (i) InsPara or any of its affiliates, or any officer or director of InsPara, and During the three months ended March 31, 2006, the Company sold Solutions Technology, Inc. for $100,000, and also disposed of its German subsidiary SoftNet International, Inc. The resulting gains from disposal are included in the Company's financials for the three months ended March 31, 2006. Results of Operations Three Months Ended March 31, 2006 and March 31, 2005 Revenues for the three months ended March 31, 2006 were $1,093,523 as compared to $231,683 for the three months ended March 31, 2005. As mentioned, the Company's acquisition of Inspara and combination of business operations with Indigo Technology Services consulting were the reasons that the Company experienced very fast revenue growth. Cost of sales for the three months end March 31, 2006 was $733,973 compared to $97,174 for the three months ended March 31, 2005. The increase in cost of sales was manly due to the increased operations of the Company from the acquistion of Inspara. Operating expenses for the three months ended 2006 were $2,033,602 as compared to $1,877,131 in the first quarter of 2005, an increase of approximately $156,000 due in large part to the decrease in marketing and promotional activity and in corporate expenses for legal and accounting and operating expenditures. However, the operating expense did include a large one time impairment of goodwill of $1,149,510 from the acquisition of Inspara. This will not be recorded going forward and should lead to better profitability of the overall company being reporting in the coming quarters. Other income (expense) was $(5,552) for the first quarter of 2006 compared to $(5,308) for the first quarter of 2005. The gross margin of (33%) in the first quarter of 2006 was attributable to the acquisition and operations of Inspara being brought into the overall company. This figure is not being compared to previous years of operations as the operations of the Company are significantly different than previous years. Going forward these margins should remain steady and there is no reason to believe outside competitive pressure would cause a decrease. Liquidity and Capital Resources For the three-months ended March 31, 2006, the Company used (2,033,602) in operating activities compared to ($1,877,131) for the three-months ended March 31, 2005. The decrease in cash used in operating activities of approximately $156,000 is most attributable to the decrease in shares of stock being issued for services. The Company has continued to borrow certain amounts from related parties to finance the quickened growth of the new enterprise solutions operations brought in to the company through the acquisition of Inspara. However, the Company would not require any additional capital to simply sustain operations and grow at a slower pace. The Company has made significant progress with respect to future funding. Funding is expected shortly, which will enable the Company to market, and continue to expand operations at a quickened pace. The current funding that is being contemplated would be through a loan from the Current CEO. Terms of this transaction are still being discussed. We anticipate that going forward; we will continue to streamline administrative, and professional fees to conserve cash flow. Once the recognition of increased revenues occurs, certain expenses will increase, but only in accordance with the increase in revenues. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has suffered recurring losses from operations and at March 31, 2006 had working capital deficits as noted above. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. However, with the acquisition of Inspara and the combining of all corporate operations, the Company is now in a position to sustain operations without further capital infusion. Additional capital would only be required to increase the pace of growth for the overall company. It is expected in the coming 12 to 18 months that through organic growth and strategically targeted acquisitions that the Company will be able to sustain a very high rate of growth and not require additional capital. However, the Company has chosen a path of a high rate of growth and there for will require additional capital in order to meet these goals at the present time. May 22, 2006 [/QB][/QUOTE]
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