UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
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[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
September 30, 2011
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[
]
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Transition
Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
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For
the transition period from
to
__________
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Commission
File Number:
333-147835
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PrismOne
Group, Inc
.
(Exact name of registrant as specified in its charter)
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Nevada
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80-0659092
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(State
or other jurisdiction of incorporation or organization)
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(IRS
Employer Identification No.)
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146
W. Plant Street, Suite 300, Winter Garden, Florida 34787
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(Address
of principal executive offices)
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321-292-1000
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(Registrant’s
telephone number)
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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 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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company.
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[
] Large accelerated filer
[
] Non-accelerated filer
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[
] Accelerated filer
[X]
Smaller reporting company
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[
] Yes [X] No
State
the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 22,731,503
common shares as of November 10, 2011.
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 [X]
PART
I - FINANCIAL INFORMATION
Item
1. Financial Statements
Our
financial statements included in this Form 10-Q are as follows:
These
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 September 30, 2011 are not
necessarily indicative of the results that can be expected for the full year.
PrismOne
Group, Inc
Balance
Sheets
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ASSETS
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September 30,
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December 31,
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2011
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2010
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CURRENT ASSETS
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(unaudited)
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(audited)
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Cash
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$
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4,802
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$
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23
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Accounts receivable, net of allowance for doubtful accounts of $65,432 and $65,769 as of September 30, 2011 and December 31, 2010, respectively
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74,730
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19,567
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Investment in equity securities
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650
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2,000
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Prepaid expenses
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12,194
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—
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Total current assets
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92,376
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21,590
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Fixed assets, net
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186,885
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141,463
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Deposits, other
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2,006
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—
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Total long term assets
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188,891
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141,463
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TOTAL ASSETS
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$
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281,267
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$
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163,053
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LIABILITIES AND STOCKHOLDERS' DEFICIT
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CURRENT LIABILITIES
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Bank overdrafts
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$
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—
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$
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4,275
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Accounts payable and accrued expenses
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395,565
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327,816
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Capital lease - current portion
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42,307
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30,705
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Preferred dividends accrued - related party
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125,711
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84,800
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Deferred revenue
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14,020
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11,190
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Due to related party
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519,646
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207,778
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Total current liabilities
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1,097,249
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666,563
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Capital lease
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2,995
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19,996
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Total long term liabilities
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2,995
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19,996
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TOTAL LIABILITIES
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1,100,244
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686,559
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STOCKHOLDERS' DEFICIT
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Preferred stock, $0.001 par value 10,000,000 shares authorized; issued and outstanding 274,000
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274
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274
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Common stock, $0.001 par value 90,000,000 shares authorized; issued and outstanding 22,731,503
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22,732
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22,732
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Additional paid in capital
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1,249,270
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1,165,681
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Accumulated other comprehensive loss
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0
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0
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Accumulated deficit
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(2,091,253
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)
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(1,712,193
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)
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Total stockholders' deficit
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(818,977
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)
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(523,506
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)
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
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$
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281,267
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$
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163,053
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The
accompanying notes are an integral part of these financial statements.
PrismOne
Group, Inc
Statements
of Operations
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For the Three
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For the Nine
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Months Ended
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Months Ended
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September 30,
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September 30,
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2011
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2010
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2011
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2010
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REVENUES
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$
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254,690
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$
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257,128
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$
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531,886
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$
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487,757
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COST OF GOODS SOLD
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89,444
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73,832
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188,604
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156,855
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GROSS PROFIT
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165,246
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183,296
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343,282
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330,902
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OPERATING EXPENSES
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General and administrative
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63,015
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55,297
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155,969
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125,639
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Professional fees
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19,099
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—
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68,717
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—
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Management fees -related party
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—
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47,250
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94,500
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141,750
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Payroll expenses
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103,742
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100,657
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323,030
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278,051
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Licenses and permits -related party
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—
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30,000
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30,000
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90,000
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Total Operating Expenses
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185,856
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233,204
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672,216
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635,440
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INCOME (LOSS) FROM OPERATIONS
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(20,610
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)
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(49,908
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)
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(328,934
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)
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(304,538
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)
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OTHER EXPENSES
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Other income(expense)
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38
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—
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38
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—
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Interest expense
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(17,217
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)
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(9,050
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)
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(48,814
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)
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(24,602
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)
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Realized gain/(loss) on investment
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100
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—
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(1,350
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)
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—
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Total Other Expenses
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(17,079
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)
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(9,050
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)
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(50,126
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)
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(24,602
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)
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NET INCOME(LOSS)
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$
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(37,689
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)
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$
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(58,958
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)
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$
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(379,060
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)
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$
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(329,140
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)
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Comprehensive loss:
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|
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Unrealized loss in equity securities held
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—
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(8,550
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)
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—
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(30,000
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)
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Total comprehensive loss
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|
$
|
(37,689
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)
|
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$
|
(67,508
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)
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$
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(379,060
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)
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$
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(359,140
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)
|
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Net loss per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Basic and fully diluted
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.02
|
)
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Basic and fully diluted
|
|
|
22,731,503
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|
|
|
22,731,503
|
|
|
|
22,731,503
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|
|
|
22,731,503
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|
The
accompanying notes are an integral part of these financial statements.
PrismOne Group, Inc
Statements of Cash Flows
(Unaudited)
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For the Nine
|
|
|
|
Months Ended
|
|
|
|
9/30/2011
|
|
9/30/2010
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(379,060
|
)
|
|
$
|
(166,361
|
)
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
26,145
|
|
|
|
5,467
|
|
|
Donated services
|
|
|
124,500
|
|
|
|
47,250
|
|
|
Realized loss on investment
|
|
|
1,350
|
|
|
|
—
|
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
Change in accounts receivable
|
|
|
(55,163
|
)
|
|
|
5,006
|
|
|
Change in accounts receivable - related party
|
|
|
—
|
|
|
|
(4,747
|
)
|
|
Change in prepaid expenses
|
|
|
(12,194
|
)
|
|
|
|
|
|
Change in other assets
|
|
|
(2,006
|
)
|
|
|
|
|
|
Change in deferred revenue
|
|
|
2,830
|
|
|
|
|
|
|
Change in accounts payable and accrued expenses
|
|
|
67,749
|
|
|
|
94,823
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(225,849
|
)
|
|
|
(18,562
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment
|
|
|
(71,567
|
)
|
|
|
—
|
|
|
Net cash used in investing activities
|
|
|
(71,567
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in bank overdraft
|
|
|
(4,275
|
)
|
|
|
(4,172
|
)
|
|
Payments for capital lease obligation
|
|
|
(5,398
|
)
|
|
|
(4,893
|
)
|
|
Proceeds from notes payable related party
|
|
|
337,719
|
|
|
|
30,575
|
|
|
Payments for notes payable related party
|
|
|
(25,851
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
302,195
|
|
|
|
21,510
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH
|
|
|
4,779
|
|
|
|
2,948
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AT BEGINNING OF PERIOD
|
|
|
23
|
|
|
|
1,077
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AT END OF PERIOD
|
|
|
4,802
|
|
|
|
4,025
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH PAID FOR:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
—
|
|
|
|
564
|
|
|
Income Taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
NON CASH
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on equities held
|
|
|
—
|
|
|
|
15,000
|
|
|
Dividends Payable
|
|
|
40,911
|
|
|
|
—
|
|
The
accompanying notes are an integral part of these financial statements.
PrismOne
Group, Inc
Notes
to Financial Statements
NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature
of Business
PrismOne
Group, Inc., a Nevada corporation, develops ideas into practical solutions that apply non-traditional thinking, process review
and technology to real world challenges.
Over
the past five years, we have taken that approach and developed relevant solutions that address the current challenges in the market.
We address the challenge, conceptualize a solution, develop a prototype, and operate the solution to gain real-world insight and
feedback prior to marketing to potential clients. Core to any solution is the focus to enable and support our client’s business
sustainability efforts to enhance overall operational efficiencies and corporate social responsibility initiatives by deploying
technologies and processes to reduce their environmental and energy impact via verifiable and documented means. We currently provide
consulting, design, procurement, installation, integration, support and management services related to our Solutions & Services,
and are continually refining our Service offerings through research and assessments. The Company has two office locations in Central
Florida.
Presentation
of Interim Information
The
financial information at September 30, 2011 is unaudited, but includes all adjustments (consisting only of normal recurring adjustments)
that the Company considers necessary for a fair presentation of the financial information set forth herein, in accordance with
accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information, and
with the instructions to Form 10-Q. Accordingly, such information does not include all of the information and footnotes required
by U.S. GAAP for annual financial statements. For further information, refer to the consolidated financial statements and footnotes
thereto included in the Company’s annual Report on Form 10-K for the year ended December 31, 2010.
The
results for the nine months ended September 30, 2011 may not be indicative of results for the year ending December 31, 2011 or
any future periods.
Going
Concern
Our
financial statements have been prepared on a going concern basis, which assume that we will continue to realize our assets and
discharge our liabilities in the normal course of business. As of September 30, 2011 we had an accumulated deficit of $2,091,253
and a working capital deficit of $818,977. This raises substantial doubt about our ability to continue as a going concern. Management’s
plans for our continuation as a going concern are dependent upon the attainment of profitable operations and our ability to raise
equity or debt financing if and when needed. Our financial statements do not include any adjustments relating to the recoverability
and classification of recorded asset amounts and classifications of liabilities that might be necessary should we be unable to
continue as a going concern.
The
success of our business plan during the next 12 months and beyond is contingent upon us generating sufficient revenue to cover
our costs of operations, or upon us obtaining additional financing. Should our revenues be less than anticipated or our expenses
be greater than anticipated, then we may need to delay payment of management and license fees to our related party and/or obtain
business capital through the use of private equity fundraising or stockholder loans. We do not have any formal commitments or
arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional
financing will be available to us on acceptable terms, or at all. Similarly, there can be no assurance that we will be able to
generate sufficient revenue to cover the costs of our business operations.
Reclassification
Certain
reclassifications have been made to the nine months ended September 30, 2010 financial statements to conform to the nine months
ended September 30, 2011 financial statement presentation. These reclassifications had no effect on net loss or cash flows as
previously reported.
Cash
and cash equivalents
For
the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are
considered to be cash equivalents. The carrying value of these investments approximates fair value. As of September 30, 2011 and
December 31, 2010, there are no cash equivalents.
Accounts
receivable
Accounts
receivable are reported at the customers' outstanding balances less any allowance for doubtful accounts. Interest is not accrued
on overdue accounts receivable.
Allowance
for doubtful accounts
The
Company maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivables. The allowance for doubtful
accounts is based on specific identification of certain receivables that are at risk of not being paid. The allowance for doubtful
accounts was $65,432 and $65,769 as of September 30, 2011 and December 31, 2010, respectively.
Fixed
Assets
Fixed
assets are stated at cost. Major renewals and improvements are charged to the asset accounts while replacements, maintenance
and repairs, which do not improve or extend the lives of the respective assets, are expensed. At the time property
and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the
applicable amounts. Gains or losses from retirements or sales are credited or charged to income.
The
Company depreciates its fixed assets on a straight line basis over a three year life.
Capital
Leases
Management
evaluates each lease and leases of property and equipment in which the Company, as lessee, has substantially all the risks and
rewards of ownership are classified as capital leases in accordance with current accounting guidelines. Capital leases are capitalized
at the lease’s inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments.
The corresponding rental obligations, net of interest charges, are included in the borrowings. Each lease payment is allocated
between the liability and the interest charge. The interest cost is charged to profit and loss over the lease period so as to
produce a constant periodic rate of interest on the remaining balance of the liability for each period. Property and equipment
acquired under capital leases is depreciated over the asset’s useful life or over the short of the asset’s useful
life and the lease term if there is no reasonable certainty that the Company will obtain ownership at the end of the lease term.
Leases
in which a significant portion of the risks and rewards of ownership are not transferred to the Company as lessee are classified
as operating leases. Payments made under operating leases are charged to profit or loss on straight-line basis over the period
of the lease.
Revenue
Recognition
The
Company recognizes revenue for Quartz installation services related to the initial setup of hardware and communications systems
upon completion of the installation and acceptance by the customer.
The
Company revenues related to Quartz services (voice, data, and communications services) are billed at the beginning of each month
for the devices and services delivered and recognized in accordance with current accounting guidance. If a customer adds lines/services,
the following month, invoices are adjusted. All long distance is passed to each customer in the following month after service.
The
Company revenue for Quartz IT Support services are billed at the beginning of each month for the services provided and recognized
in accordance with current accounting guidance. If a customer engages the Company for services out-of-scope, invoices are adjusted
the following month.
The
Company recognizes revenue for Emerald and is billed to the client once a waste diversion cycle is completed at the customer’s
location(s).
The
Company recognizes revenue for Amber and is billed to the client once an item has been inventoried and entered into the system.
Deferred
Revenue
Amounts
invoiced and collected in advance of product delivery or providing services are recorded as deferred revenue. The Company recognizes
revenue for Emerald and is billed to the client once a waste diversion cycle is completed at the customer’s location(s).
Earnings
(Loss) per Common Share
Basic
income (loss) per common share is computed by dividing net income (loss) by the weighted average shares outstanding. Diluted income
(loss) per common share is computed by dividing adjusted net income by the weighted average shares outstanding plus potential
common shares which would arise from conversion of preferred stock. Potential common shares related to conversion of preferred
stock were not included in diluted income (loss) per share since their effects were anti-dilutive.
Income
Taxes
Deferred
income taxes are recognized for the tax consequences of temporary differences between the financial reporting bases and the tax
bases of the Company’s assets and liabilities. Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus
or minus the change during the period in deferred tax assets and liabilities.
The
Company follows the provisions of the FASB Accounting ASC 740,
Income Taxes
(“ASC 740”) (formerly referenced
as FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes- an interpretation of FASB Statement No. 109
). ASC
740 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in
a tax return. The Company has not recognized a liability as a result of the implementation of ASC 740. A
reconciliation of the beginning and ending amount of unrecognized tax benefits has not been provided since there is no unrecognized
benefit as of the date of adoption. The Company has not recognized interest expense or penalties as a result of the
implementation of ASC 740. If there were an unrecognized tax benefit, the Company would recognize interest accrued
related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company files income
tax returns in the U.S. federal jurisdiction and in various states.
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 disclosure
of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expense during
the reporting period. Actual results could differ from those estimates.
Financial
Instruments
In
January 2008, the Company adopted FASB ASC 820,
Fair Value Measurements and Disclosures
(“ASC 820”)
(Formerly
referenced as SFAS No. 157
, Fair Value Measurements
)
,
to value its financial assets and liabilities. The adoption
of ASC 820 did not have a significant impact on the Company’s results of operations, financial position or cash flows. ASC
820 defines fair value, establishes a framework for measuring fair value under GAAP and expands disclosures about fair value measurements. ASC
820 defines fair value as the exchange price that would be paid by an external party for an asset or liability (exit price).
ASC
820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the
use of unobservable inputs when measuring fair value. Three levels of inputs may be used to measure fair value:
|
·
|
Level 1 –
Active market provides quoted prices for identical assets or liabilities;
|
|
·
|
Level 2 –
Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable with market data;
and
|
|
·
|
Level 3 –
Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions
about the assumptions that market participants would use in pricing.
|
Fair
value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as
of September 30, 2011. The Company uses the market approach to measure fair value for its Level 1 financial assets
and liabilities. The market approach uses prices and other relevant information generated by market transactions involving
identical or comparable assets or liabilities.
The
respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial
instruments which include cash, accounts receivable, accounts payable and accrued liabilities are valued using Level 1 inputs
and are immediately available without market risk to principal. Fair values were assumed to approximate carrying values
for these financial instruments since they are short term in nature and their carrying amounts approximate fair values or they
are receivable or payable on demand. The carrying value of note payable to stockholder approximates its fair value
because the interest rates associated with the instrument approximates current interest rates charged on similar current borrowings.
The Company does not have other financial assets that would be characterized as Level 2 or Level 3 assets.
The
following table presents assets that are measured and recognized at fair value on a recurring basis as of September 30, 2011:
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Gains
|
|
Description
|
|
Level
1
|
|
Level
2
|
|
Level
3
|
|
(Losses)
|
|
Investment- common stock
|
|
$
|
650
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1,350
|
)
|
The
following table presents assets that are measured and recognized at fair value on a recurring basis as of December 31, 2010:
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
Gains
|
|
Description
|
|
Level
1
|
|
Level
2
|
|
Level
3
|
|
(Losses)
|
|
Investment - common stock
|
|
$
|
2,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(30,000
|
)
|
Recent
Accounting Pronouncements
In
May 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-19 (ASU 2010-19), Foreign Currency
(Topic 830): Foreign Currency Issues: Multiple Foreign Currency Exchange Rates. The amendments in this Update are effective as
of the announcement date of March 18, 2010. The Company does not expect the provisions of ASU 2010-19 to have a material effect
on the financial position, results of operations or cash flows of the Company.
In
April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-18 (ASU 2010-18), Receivables
(Topic 310): Effect of a Loan Modification When the Loan is Part of a Pool That Is Accounted for as a Single Asset-a consensus
of the FASB Emerging Task Force. The amendments in this Update are effective for modifications of loans accounted for
within pools under Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010. The
amendments are to be applied prospectively. Early application is permitted. The Company does not expect the provisions
of ASU 2010-18 to have a material effect on the financial position, results of operations or cash flows of the Company.
In
April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-17 (ASU 2010-17), Revenue
Recognition-Milestone Method (Topic 605): Milestone Method of Revenue Recognition. The amendments in this Update are
effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on
or after June 15, 2010. Early adoption is permitted. If a vendor elects early adoption and the period of adoption is
not the beginning of the entity’s fiscal year, the entity should apply the amendments retrospectively from the beginning
of the year of adoption. The Company does not expect the provisions of ASU 2010-17 to have a material effect on the
financial position, results of operations or cash flows of the Company.
In
April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-16 (ASU 2010-16), Entertainment-Casinos
(Topic 924): Accruals for Casino Jackpot Liabilities-a consensus of the FASB Emerging Issues Task. The amendments in
this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2010. The
amendments should be applied by recording a cumulative-effect adjustment to opening retained earnings in the period of adoption. The
Company does not expect the provisions of ASU 2010-16 to have a material effect on the financial position, results of operations
or cash flows of the Company.
In
April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-15 (ASU 2010-15), Financial
Services-Insurance (Topic 944): How Investments held through Separate Accounts Affect an Insurer’s Consolidation Analysis
of Those Investments-a consensus of the FASB Emerging Issues Task Force. The amendments in this Update are effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2010. Early adoption
is permitted. The amendments in this Update should be applied retrospectively to all prior periods upon the date of
adoption. The Company does not expect the provisions of ASU 2010-15 to have a material effect on the financial position,
results of operations or cash flows of the Company.
In
April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-14 (ASU 2010-14), Accounting
for Extractive Activities – Oil & Gas - Amendments to Paragraph 932-10-S99-1 (SEC Update). The Amendments
are designed to modernize and update the oil and gas disclosure requirements to align them with current practices and changes
in technology. The Company does not expect the provisions of ASU 2010-14 to have a material effect on the financial position,
results of operations or cash flows of the Company.
In
April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-13 (ASU 2010-13), Compensation-Stock
Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market
in Which the Underlying Equity Security Trades - a consensus of the FASB Emerging Issues Task Force. The amendments
in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15,
2010. Earlier application is permitted. The Company does not expect the provisions of ASU 2010-13 to have
a material effect on the financial position, results of operations or cash flows of the Company.
In
April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-12 (ASU 2010-12), Income Taxes
(Topic 740): Accounting for Certain Tax Effects of the 2010 Health Care Reform Acts. After consultation with the FASB,
the SEC stated that it “would not object to a registrant incorporating the effects of the Health Care and Education Reconciliation
Act of 2010 when accounting for the Patient Protection and Affordable Care Act”. The Company does not expect the provisions
of ASU 2010-12 to have a material effect on the financial position, results of operations or cash flows of the Company.
In
March 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-11 (ASU 2010-11), Derivatives
and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives. The amendments in this Update are
effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early
adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this Update. The
Company does not expect the provisions of ASU 2010-11 to have a material effect on the financial position, results of operations
or cash flows of the Company.
In
February 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-10 (ASU 2010-10), Consolidation
(Topic 810): Amendments for Certain Investment Funds. The amendments in this Update are effective as of the beginning
of a reporting entity’s first annual period that begins after November 15, 2009 and for Interim periods within that first
reporting period. Early application is not permitted. The Company does not expect the provisions of ASU 2010-10 to
have a material effect on the financial position, results of operations or cash flows of the Company.
In
February 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-09 (ASU 2010-09), Subsequent
Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements. This amendment addresses both the
interaction of the requirements of this Topic with the SEC’s reporting requirements and the intended breadth of the reissuance
disclosure provision related to subsequent events (paragraph 855-10-50-4). All of the amendments in this Update are
effective upon issuance of the final Update, except for the use of the issued date for conduit debt obligors. That amendment is
effective for interim or annual periods ending after June 15, 2010. The Company does not expect the provisions of ASU
2010-09 to have a material effect on the financial position, results of operations or cash flows of the Company.
In
February 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-08 (ASU 2010-08), Technical
Corrections to Various Topics. This amendment eliminated inconsistencies and outdated provisions and provided the needed
clarifications to various topics within Topic 815. The amendments are effective for the first reporting period (including
interim periods) beginning after issuance (February 2, 2010), except for certain amendments. The amendments to the
guidance on accounting for income taxes in reorganization (Subtopic 852-740) should be applied to reorganizations for which the
date of the reorganization is on or after the beginning of the first annual reporting period beginning on or after December 15,
2008. For those reorganizations reflected in interim financial statements issued before the amendments in this Update
are effective, retrospective application is required. The clarifications of the guidance on the embedded derivates
and hedging (Subtopic 815-15) are effective for fiscal years beginning after December 15, 2009, and should be applied to existing
contracts (hybrid instruments) containing embedded derivative features at the date of adoption. The Company does not
expect the provisions of ASU 2010-08 to have a material effect on the financial position, results of operations or cash flows
of the Company.
In
January 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-07 (ASU 2010-07), Not-for-Profit
Entities (Topic 958): Not-for-Profit Entities: Mergers and Acquisitions. This amendment to Topic 958 has occurred as
a result of the issuance of FAS 164. The Company does not expect the provisions of ASU 2010-07 to have a material effect
on the financial position, results of operations or cash flows of the Company.
In
January 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-06 (ASU 2010-06), Fair Value
Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. This amendment to Topic
820 has improved disclosures about fair value measurements on the basis of input received from the users of financial statements. This
is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases,
sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures
are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early
adoption is permitted. The Company does not expect the provisions of ASU 2010-06 to have a material effect on the financial
position, results of operations or cash flows of the Company.
In
January 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-05 (ASU 2010-05), Compensation
– Stock Compensation (Topic 718). This standard codifies EITF Topic D-110 Escrowed Share Arrangements and the
Presumption of Compensation.
In
January 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-04 (ASU 2010-04), Accounting
for Various Topics—Technical Corrections to SEC Paragraphs.
NOTE
2 – ACCOUNTS RECEIVABLE
|
|
|
September
30, 2011
|
|
December
31, 2010
|
|
Accounts receivable
|
|
|
140,162
|
|
|
|
85,336
|
|
|
Allowance for doubtful accounts
|
|
|
(65,432
|
)
|
|
|
(65,769
|
)
|
|
Accounts receivable, net
|
|
|
74,730
|
|
|
|
19,567
|
|
NOTE
3 – FIXED ASSETS
Property
and equipment consisted of the following at September 30, 2011 and December 31, 2010:
|
|
|
September
30, 2011
|
|
December
31, 2010
|
|
Furniture & equipment
|
|
|
255,991
|
|
|
|
184,425
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
(69,106
|
)
|
|
|
(42,962
|
)
|
|
Fixed assets,
net
|
|
$
|
186,885
|
|
|
$
|
141,463
|
|
Property
under capital leases and the related obligation for future lease payments are recorded at an amount equal to the initial present
value of those lease payments. Properties under capital leases are amortized on the straight-line method over the life of the
lease, or over their estimated service lives. Maintenance and repairs are expensed as they occur. Upon disposition,
the cost and related accumulated depreciation are removed from the accounts, and the resulting gain or loss is reflected in current
operations.
Depreciation
expense for the nine months ended September 30, 2011 and September 30, 2010 was $26,145 and $15,859, respectively.
NOTE
4 – INVESTMENTS
As
of September 30, 2011 the fair value of the Blue Earth common stock had increased to $0.0013 per share. Accordingly, the Company
increased the amount of the investment to $650. The gain was realized and classified as Other Expenses due to the Company’s
determination that the devaluation of the shares was “other than temporary.”
NOTE
5 – RELATED PARTY TRANSACTIONS
Note
Payable from Shareholder and Due to Shareholder
On
July 20, 2010, Jamie Zweifel, a Company Director and stockholder loaned the Company $50,000. The loan is unsecured, is due 36-months
from the date of issuance, and bears interest at 8.0% per annum. As of September 30, 2011 and December 31, 2010, $54,833 and $51,833,
respectively was due Mr. Zweifel.
In
addition to rental payments, on occasion, an entity wholly owned by the company’s CEO and majority stockholder loans the
Company funds. The loan is unsecured, is due 36-months from the date of issuance, and bears interest at 8.0% per annum. As of
September 30, 2011 and December 31, 2010 $79,330 and $19,298 respectively, was due to Burshan LLC.
On
occasion, the company’s CEO and majority stockholder loans the Company funds. The loan is unsecured, is due 36-months from
the date of issuance, and bears interest at 8.0% per annum. As of September 30, 2011 and December 31, 2010 $187,432 and $67,325,
respectively, was due to the CEO.
On
occasion, an entity wholly owned by the Company CEO’s spouse loaned the Company funds. The loan is unsecured, is due 36-months
from the date of issuance, and bears interest at 8.0% per annum. As of September 30, 2011 and December 31, 2010, $233,967 and
$83,810, respectively, was due to Kaleida Ventures LLC.
Interest
expense for the quarter ended September 30, 2011 and September 30, 2010 was $17,217and 9,050 respectively. Interest expense for
the nine month period ended September 30, 2011 and September 30, 2010 was $48,814 and $24,602 respectively.
License
Agreements
The
Company licenses certain proprietary intellectual property and technology to support its clients from Burshan LLC, an entity owned
and controlled by the Company’s CEO, Samir Burshan. On January 1, 2009 the license fees were reduced from $10,000 to $5,000
per month at the existing location. A second location was added effective March 1, 2009 at an additional $5,000 per month. The
terms of both agreements are 10 years with a 5 year rolling renewal. Related party license fees are recorded as operating expenses
and for the nine months ended September 30, 2011 and September 30, 2010 $30,000 and $90,000, respectively.
As
of September 30, 2011 and December 31, 2010, the license fees owed were waived by Burshan, LLC. Thus, the Company recorded the
amount forgiven as additional paid in capital. Additionally, effective December 31, 2010, all License Agreements between PrismOne
and Burshan LLC are inactivated for a period of 2 years. Accordingly, all fees are recorded and the amount forgiven is and will
be treated as additional paid in capital. On April 1, 2011, the license agreements were cancelled. There were no fees recorded
in the quarter ended September 30, 2011.
Management
Agreements
The
Company leases furnished office space as well as computer equipment, networking gear and communications equipment in the form
of a management agreement with Burshan LLC. On January 1, 2009 the Management agreement was revised to reduce the monthly payment
to $10,500 per month from $15,500 for the existing location. In addition, on March 1, 2009, the Company entered into a second
management agreement with Burshan LLC in which it leased a second fully furnished and equipped location for $21,000 per month.
The agreements are for a period of 10 years with rolling renewals for 5 years. Management fees to related party are recorded as
operating expenses and for the nine months ended September 30, 2011 and 2010 were $94,500 and $141,750, respectively.
As
of September 30, 2011 and December 31, 2010, the management fees owed were waived by Burshan LLC. Thus, the Company recorded the
amount forgiven as additional paid in capital. Additionally, effective December 31, 2010, all Management Agreements between PrismOne
and Burshan LLC are inactivated for a period of 2 years. Accordingly, all fees are recorded and the amount forgiven is and will
be treated as additional paid in capital. As of April 1, 2011, the Company and Burshan LLC have agreed to terminate the Management
Agreements. In exchange for the termination of the Management Agreement, the Company will pay rent and common area maintenance
to Burshan LLC based on current market rates. In addition, the Company will assume all utilities on the related leased spaces.
At
Location 1, The Company agreed to pay for the 9 months remaining in 2011, starting April 1, 2011, a rate of $ 7,659 per month
plus CAM fees of $ 1,094 per month and for the twelve (12) month period starting January 1, 2012, to pay a rate of $ 5,744 per
month plus CAM fees of $ 821 per month.
At
Location 2, The Company agreed to pay for the 9 months remaining in 2011, starting April 1, 2011, a rate of $ 3,728 per month
plus CAM fees of $ 877 per month and for the twelve (12) month period starting January 1, 2012, to pay a rate of $ 2,796 per month
plus CAM fees of $ 658 per month.
NOTE
6 - STOCKHOLDERS’ DEFICIT
Preferred
Stock- Series A
The
Company has authorized 10,000,000 shares of $0.00 par value preferred stock available for issuance. 274,000 shares
of preferred stock are outstanding as of September 30, 2011 and December 31, 2010.
Common
Stock
The
authorized common stock is 90,000,000 shares at no par value. As of December 31, 2010 and 2009, the Company had 22,731,503
shares of common stock issued and outstanding.
The
holders of the preferred stock are entitled to dividends at the rate of 6.5% (the Dividend Rate) calculated annually in December
in arrears, when and as if declared by the Board of Directors. The Dividend Rate shall not exceed 1% of gross revenue but cannot
less than 2% of the Stated Value of the Series A Preferred Stock. The Stated Value is defined as $10.00 per outstanding share
of Series A Preferred Stock. Dividends declared although remaining unpaid as of March 31, 2011 were as follows:
|
Year
|
|
Amount
|
|
2011
|
|
$
|
40,911
|
|
|
2010
|
|
|
54,800
|
|
|
2009
|
|
|
30,000
|
|
|
Total
|
|
$
|
125,711
|
|
The
preferred shares have fifty votes per share on all matters submitted to a vote of the common stockholders of the Corporation,
receive preference to common stockholders with respect to liquidation of the Company and are redeemable in the form of cash or
stock at the option of the Company. In the event of notification of the Company’s intent to redeem the preferred stock,
the preferred stock holders may elect to convert the shares to 50 shares of common stock.
Additional
Paid In Capital
License
fees owed in the amount of $30,000 and $113,545 as of
September 30, 2011 and December 31, 2010
,
respectively, were waived and were recorded as additional paid in capital.
Management
fees owed in the amount of $94,500 and $356,137 as of
September 30, 2011 and December 31, 2010
,
respectively, were waived and were recorded as additional paid in capital.
NOTE
7 – CONCENTRATIONS
As
of September 30, 2011, there were three significant customers who account of 10.3%, 11.5% and 50.8% of the total sales for the
quarter ended September 30, 2011. As of September 30, 2011 there were three significant customers who account for 7.7%, 15.4%
and 42% of the total sales for the nine months ended September 30, 2011. As of December 31, 2010, there were three significant
customers who account for 11%, 18% and 32% of the total sales for the year ended December 31, 2010.
As
of September 30, 2011, there were two significant customers who account for 78% and 13% of the total accounts receivable for the
quarter ended September 30, 2011. As of December 31, 2010 there were two significant customers who account for 72% and 12% of
the total accounts receivable for the year ended December 31, 2010.
NOTE
8 – COMMITMENTS AND CONTINGENCIES
Capital
Leases
The
Company entered into a capital lease for equipment on September 2, 2009. The lease term is 36 months with monthly installments
of $1,690 and an interest rate of 17.90%. In addition, the Company entered into a capital lease for equipment on February 18,
2010. The lease term is 36 months with monthly installments of $670 and an interest rate of 8%.
Future
minimum lease payments (principal and interest) as of September 30, 2011 were:
|
|
|
Amount
|
|
Year One
|
|
$
|
33,349
|
|
|
Year Two
|
|
|
11,9538
|
|
|
Total
|
|
|
45,302
|
|
Operating
Leases
The
Company currently leases two locations from a related party. Each lease is for a period of twenty one (21) months with rolling
renewals for a period of three years each. Future minimum lease payments as of September 30, 2011 were:
|
Year
Payable
|
|
Location
1
|
|
Location
2
|
|
Total
|
|
2011
|
|
|
26,259
|
|
|
|
13,813
|
|
|
|
40,072
|
|
|
2012
|
|
|
78,778
|
|
|
|
41,439
|
|
|
|
120,217
|
|
|
Total
|
|
|
105,037
|
|
|
|
55,252
|
|
|
|
160,289
|
|
Legal
Matters
The
Company is not currently involved in any litigation that would have a material adverse effect on the Company’s financial
position, results of operations, or cash flows.
NOTE
9 – INCOME TAXES
At
September 30, 2011 and December 31, 2010, the Company had a federal operating loss carry forwards of $1,254,029 and $1,026,964,
which begins to expire in 2027.
Components
of net deferred tax assets, including a valuation allowance, are as follows at September 30, 2011 and December 31, 2010:
|
|
|
2011
|
|
2010
|
|
Deferred tax assets:
|
|
|
|
|
|
Net
operating loss carry forward
|
|
$
|
438,910
|
|
|
$
|
377,256
|
|
|
Total
deferred tax assets
|
|
|
438,910
|
|
|
|
377,256
|
|
|
Less: Valuation allowance
|
|
|
(438,910
|
))
|
|
|
(377,256
|
)
|
|
Net
deferred tax assets
|
|
$
|
—
|
|
|
$
|
—
|
|
The
valuation allowance for deferred tax assets as of September 30, 2011 and December 31, 2010 was $438,910 and $377,256, respectively. In
assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income in the periods in which those temporary differences become deductible. Management
considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies
in making this assessment. As a result, management determined it was more likely than not the deferred tax assets would
not be realized as of September 30, 2011 and December 31, 2010 and maintained a full valuation allowance.
Reconciliation
between the statutory rate and the effective tax rate is as follows at September 30, 2011 and December 31, 2010:
|
|
|
2011
|
|
2010
|
|
Federal statutory rate
|
|
|
(35.0
|
)%
|
|
|
(35.0
|
)%
|
|
State taxes, net of federal benefit
|
|
|
(0.00
|
)%
|
|
|
(0.00
|
)%
|
|
Change in valuation allowance
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
Effective tax rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
NOTE
10 – SEGMENT INFORMATION
Description
of Segments
The
Company is principally organized by line of business. While the CEO evaluates results in a number of different ways, the lines
of business of the operation is the primary basis for which the allocations of resources and financial results are assessed. The
revenues are reported by the following two segments:
-
Business Infrastructure – marketed under the brand as PrismOne
Quartz
, is a managed technology service targeted to
vertical market clients with either a high number of employees, multi-locations, or growth challenges.
-
Waste Diversion Management – a solution identified under the brand
PrismOne
Emerald
(
E
nhanced
M
aterial Management and
E
lectronic
R
eporting
with
A
uditable
L
ife-cycle
D
ocumentation), is a web-based Environmental Management System that tracks and certifies the volume of
waste stream that is diverted from landfill for select clients.
INFORMATION
ABOUT REPORTABLE SEGMENT
|
September
30, 2011
|
|
Business
Infrastructure
|
|
Waste
Diversion Management
|
|
Total
|
|
Total sales revenue
|
|
|
128,487
|
|
|
|
126,203
|
|
|
|
254,690
|
|
|
Other revenue/income
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Total segment revenue
|
|
|
128,487
|
|
|
|
126,203
|
|
|
|
254,690
|
|
|
Segment EBIT
|
|
|
(48,962
|
)
|
|
|
28,352
|
|
|
|
(20,610
|
)
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
(17,179
|
)
|
|
Unrealized loss on equities securities
held
|
|
|
|
|
|
|
|
|
|
|
100
|
|
|
Income(loss) before taxes
|
|
|
|
|
|
|
|
|
|
|
(37,689
|
)
|
|
Segment total assets
|
|
|
85,843
|
|
|
|
195,424
|
|
|
|
281,267
|
|
|
Segment total liabilities
|
|
|
1,076,689
|
|
|
|
23,555
|
|
|
|
1,100,244
|
|
|
Net liabilities
|
|
|
(990,846
|
)
|
|
|
171,869
|
|
|
|
(818,977
|
)
|
NOTE
11 – SUBSEQUENT EVENTS
The
Company evaluated and noted no subsequent events through the date the financial statements were issued.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking
Statements
Certain
statements, other than purely historical information, including estimates, projections, statements relating to our business plans,
objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking
statements”. These forward-looking statements generally are identified by the words “believes,” “project,”
“expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,”
“may,” “will,” “would,” “will be,” “will continue,” “will likely
result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are
subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements.
Our
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 our operations and future prospects on a consolidated basis include, but are not limited to: changes
in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted
accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue
reliance should not be placed on such statements.
Company
Overview and Plan of Operation
PrismOne
Group, Inc., a Nevada corporation, develops ideas into practical solutions that incorporate non-traditional process review and
technology, and driven by the ambition to make our clients lifestyle and workscape easier by applying non-traditional thinking
to real world challenges.
Over
the past five years, we have taken that approach and developed relevant solutions that address the current challenges in the market.
We address the challenge, conceptualize a solution, develop a prototype, and operate the solution to gain real-world insight and
feedback prior to marketing to potential clients. Core to any solution is the focus to enable and support our client’s business
sustainability efforts to enhance overall operational efficiencies and corporate social responsibility initiatives by deploying
technologies and processes to reduce their environmental and energy impact via verifiable and documented means. We currently provide
consulting, design, procurement, installation, integration, support and management services related to our Solutions & Services,
and are continually refining our Service offerings through research and assessments. The Company has two office locations in Central
Florida. Our principal executive offices are located at 146 W. Plant Street, Suite 300, Winter Garden, Florida 34787.
Sales
and Distribution Strategy
In
2011, PrismOne rolled out the first version of EMERALD (
E
nhanced
M
aterial Management and
E
lectronic
R
eporting
with
A
uditable
L
ife-cycle
D
ocumentation), a web based Environmental
Management System that tracks and certifies the volume of waste stream that is diverted from landfill to select clients. During
the course of 2011, PrismOne will continue to develop and enhance EMERALD to incorporate client comments as well as address local
municipal, State and Federal suggestions. Additionally PrismOne will engage with other current and potential clients to introduce
them to EMERALD. Our expectations are for the gradual increase in quantity managed by EMERALD which has seen a 100% increase month
over month. EMERALD will be integrated with other offerings from PrismOne currently under development.
With
the evident weakness in the residential housing market, our initial goal for deployment of PRISM (
P
resence
R
esponse
and
I
ntegrated
S
ystems
M
anagement) has been put on hold pending improvement in economic outlook for that
industry and review of competitor offerings.
In
order to achieve our goal, we intend to increase awareness of our Products and Services with potential customers, who we anticipate
will be business owners, building managers, and community managers, and to actively partner with or acquire technologies or companies
that enhance our product offering. Currently, beyond the web presence of www.prismone.com, we do not actively market our products
or services but have relied on a word-of-mouth process to attract clients. While this has been successful, we believe that a much
greater growth can be realized with the introduction of a coordinated marketing campaign. We intend to do this by engaging in
the following:
|
-
|
Attending
national and regional networking, communications, and building technology events and conferences that incorporate sustainability
and a “green” focus. There are events and conferences managed by regional and central institutions and organizations
to promote products and services related to the sustainability within various vertical markets and include computer networking,
communications, and building technology industries. We plan to attend a number of events attended by merchants and representatives
in these industries in order to further expose our product. These events will include trade meetings, promotional events,
seminars, and conferences.
|
|
-
|
Developing
direct marketing programs. In addition to attending the foregoing conferences and seminars, we intend to market directly to
business owners, building managers, community managers, local, regional and state governments. Our marketing will include
conducting seminars and the use of online and traditional advertising media such as newspapers and trade publications.
|
|
-
|
Promoting
to the public through internet-based and traditional media advertising. We intend to use Internet-based and social media to
promote our product directly to the public to raise public awareness of our Products and Services. A priority for marketing
will be to enhance our current client facing web presence, www.prismone.com and to further engage the public via Facebook
pages for PrismOne, PrismOne Emerald and PrismOne Quartz.
|
We
do not currently employ any sales personnel. In the short term, we intend continue to use the services of our management to sell
our Product. As we expand our business operations, however, we plan to employ sales representatives to promote and sell our products
and services to potential customers nationally and internationally. These sales representatives will be responsible for soliciting,
selecting and securing accounts within a particular regional territory. We expect to pay such sales representatives on a commission
basis. In addition, we may pay each sales representative a base salary. We expect to provide service and support to our sales
representatives, including advertising and sales materials.
Research
and Development
If
we can generate sufficient working capital, we plan to continually enhance existing solutions and develop new complementary solutions
and services utilizing our existing technology and we plan to bring new products to market as they become available throughout
2011. New solutions and services in Business Infrastructure and Waste Diversion will be built upon the core Quartz and Emerald
platforms respectively now in place. We believe that our next generation platform offers more functionality and covers more of
the market place that our research shows is there. There can be no assurance that we will have sufficient working capital to undertake
these activities.
Sales
Personnel
We
do not currently employ any sales personnel. In the short term, we intend continue to use the services of our management to sell
our Product. As we expand our business operations, however, we plan to employ sales representatives to promote and sell our products
and services to potential customers nationally and internationally.
Results
of Operations for the three and nine months ended
September 30, 2011
and
September
30, 2010.
Income
.
We recorded $254,690 in total revenues for the three months ended September 30, 2011. Our cost of goods sold for the three months
ended September 30, 2011 was $89,444, resulting in gross profit of $165,246. By comparison, we recorded $257,128 in revenues for
the three months ended September 30, 2010. Our cost of goods sold for the three months ended September 30, 2010 were $73,832 resulting
in gross profit of $183,296.
We
recorded $531,886 in total revenues for the nine months ended September 30, 2011. Our cost of goods sold for the nine months ended
September 30, 2011 was $188,604, resulting in gross profit of $343,282. By comparison, we recorded $487,757 in revenues for the
nine months ended September 30, 2010. Our cost of goods sold for the nine months ended September 30, 2010 was $156,855 resulting
in gross profit of $330,902.
Operating
and Other Expenses
. Operating expenses were $185,856 for the three months ended September 30, 2011, compared to $233,204
for the three months ended September 30, 2010. Our operating expenses for both quarters consisted of administrative expenses,
payroll, licenses and permits. During the three months ended September 30, 2011, we incurred net other expenses in the amount
of $17,079. During the three months ended September 30, 2010, we experienced other expenses of $9,050.
Operating
expenses were $672,216 for the nine months ended September 30, 2011, compared to $635,440 for the nine months ended September
30, 2010. Our operating expenses for both nine-month periods consisted of administrative expenses, payroll, management fees and
licenses and permits. During the nine months ended September 30, 2011, we incurred net other expenses in the amount of $50,126.
During the nine months ended September 30, 2010, we experienced other expenses of $24,602.
Net
Losses
. We incurred a net loss of $37,689 for the three months ended September 30, 2011, compared to a net loss of $58,958
for the three months ended September 30, 2010. For the nine months ended September 30, 2011, we incurred a net loss of $379,060,
compared to a net loss of $359,140 for the nine months ended September 30, 2010.
Liquidity
and Capital Resources
At
September 30, 2011, we had $92,376 in current assets and $1,097,249 in current liabilities, resulting in a working capital deficit
of $1,004,873.
At
present, we have only $4,802 in cash on hand. We anticipate that we will require approximately $500,000 in order to fully implement
our business plan. Our revenues are not sufficient to cover our business operations at their current or expanded levels, and we
may need to obtain additional debt or equity financing. We do not currently have any arrangements in place to secure such financing,
and there is no guarantee that we will be able to obtain financing should it be required. In connection with raising this additional
capital, we would incur appropriate accounting and legal fees. Should our revenues be sufficient to cover the costs of any such
expansion, we will not seek additional financing.
Off
Balance Sheet Arrangements
We
do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that are material to our investors.
Going
Concern
Our
financial statements have been prepared on a going concern basis, which assumes that we will continue to realize our assets and
discharge our liabilities in the normal course of business. During the three months ended September 30, 2011, we generated a net
loss of $37,689, and ended the period with a working capital deficit of $1,004,873. These circumstances have raised a substantial
doubt about our ability to continue as a going concern. Management’s plans for our continuation as a going concern are dependent
upon the continuing attainment of profitable operations, and our ability to raise equity or debt financing if and when needed.
Our financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and
classification of liabilities that might be necessary should we be unable to continue as a going concern.
The
success of our business plan during the next 12 months and beyond is contingent upon us generating sufficient revenue to cover
our costs of operations, or upon us obtaining additional financing. Should our revenues be less than anticipated or our expenses
are greater than anticipated, then we may need to delay payment of management and license fees to a related party and/or seek
to obtain business capital through the use of private equity fundraising or shareholders loans. We do not have any formal commitments
or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional
financing will be available to us on acceptable terms, or at all. Similarly, there can be no assurance that we will be able to
generate sufficient revenue to cover the costs of our business operations.
C
ritical
Accounting Policies and Estimates
Management’s
discussion and analysis of our financial condition and results of operations are based upon the Company’s financial statements,
which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of
these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates,
including those related to revenue recognition and allowance for uncollectable accounts receivable. Management bases its estimates
on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results could differ from those estimates given a change in conditions or assumptions that have been
consistently applied.
The
critical accounting policies used by management and the methodology for its estimates and assumptions are as follows:
Revenue
Recognition.
The Company revenues related to Quartz services (voice, data, and communications services) are billed
at the beginning of each month for the devices and services delivered and recognized in accordance with current accounting guidance.
If a customer adds lines/services, the following month, invoices are adjusted. All long distance is passed to each customer in
the following month after service.
The
Company revenue for Quartz IT Support services are billed at the beginning of each month for the services provided and recognized
in accordance with current accounting guidance. If a customer engages the Company for services out-of-scope, invoices are adjusted
the following month.
The
Company recognizes revenue for Emerald and is billed to the client once a waste diversion cycle is completed at the customer’s
location(s).
Deferred
Revenue.
Amounts invoiced and collected in advance of product delivery or providing services are recorded as deferred revenue.
The Company recognizes revenue for Emerald and is billed to the client once a waste diversion cycle is completed at the customer’s
location(s).
Allowance
for Uncollectable Accounts.
The Company maintains an allowance for doubtful accounts to reserve for potentially uncollectible
receivables. The allowance for doubtful accounts is based on specific identification of certain receivables that are at risk of
not being paid.
Recently
Issued Accounting Pronouncements
In
May 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-19 (ASU 2010-19), Foreign Currency
(Topic 830): Foreign Currency Issues: Multiple Foreign Currency Exchange Rates. The amendments in this Update are effective as
of the announcement date of March 18, 2010. The Company does not expect the provisions of ASU 2010-19 to have a material effect
on the financial position, results of operations or cash flows of the Company.
In
April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-18 (ASU 2010-18), Receivables
(Topic 310): Effect of a Loan Modification When the Loan is Part of a Pool That Is Accounted for as a Single Asset-a consensus
of the FASB Emerging Task Force. The amendments in this Update are effective for modifications of loans accounted for
within pools under Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010. The
amendments are to be applied prospectively. Early application is permitted. The Company does not expect the provisions
of ASU 2010-18 to have a material effect on the financial position, results of operations or cash flows of the Company.
In
April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-17 (ASU 2010-17), Revenue
Recognition-Milestone Method (Topic 605): Milestone Method of Revenue Recognition. The amendments in this Update are
effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on
or after June 15, 2010. Early adoption is permitted. If a vendor elects early adoption and the period of adoption is
not the beginning of the entity’s fiscal year, the entity should apply the amendments retrospectively from the beginning
of the year of adoption. The Company does not expect the provisions of ASU 2010-17 to have a material effect on the
financial position, results of operations or cash flows of the Company.
In
April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-16 (ASU 2010-16), Entertainment-Casinos
(Topic 924): Accruals for Casino Jackpot Liabilities-a consensus of the FASB Emerging Issues Task. The amendments in
this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2010. The
amendments should be applied by recording a cumulative-effect adjustment to opening retained earnings in the period of adoption. The
Company does not expect the provisions of ASU 2010-16 to have a material effect on the financial position, results of operations
or cash flows of the Company.
In
April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-15 (ASU 2010-15), Financial
Services-Insurance (Topic 944): How Investments held through Separate Accounts Affect an Insurer’s Consolidation Analysis
of Those Investments-a consensus of the FASB Emerging Issues Task Force. The amendments in this Update are effective
for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2010. Early adoption
is permitted. The amendments in this Update should be applied retrospectively to all prior periods upon the date of
adoption. The Company does not expect the provisions of ASU 2010-15 to have a material effect on the financial position,
results of operations or cash flows of the Company.
In
April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-14 (ASU 2010-14), Accounting
for Extractive Activities – Oil & Gas - Amendments to Paragraph 932-10-S99-1 (SEC Update). The Amendments
are designed to modernize and update the oil and gas disclosure requirements to align them with current practices and changes
in technology. The Company does not expect the provisions of ASU 2010-14 to have a material effect on the financial position,
results of operations or cash flows of the Company.
In
April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-13 (ASU 2010-13), Compensation-Stock
Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market
in Which the Underlying Equity Security Trades - a consensus of the FASB Emerging Issues Task Force. The amendments
in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15,
2010. Earlier application is permitted. The Company does not expect the provisions of ASU 2010-13 to have
a material effect on the financial position, results of operations or cash flows of the Company.
In
April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-12 (ASU 2010-12), Income Taxes
(Topic 740): Accounting for Certain Tax Effects of the 2010 Health Care Reform Acts. After consultation with the FASB,
the SEC stated that it “would not object to a registrant incorporating the effects of the Health Care and Education Reconciliation
Act of 2010 when accounting for the Patient Protection and Affordable Care Act”. The Company does not expect the provisions
of ASU 2010-12 to have a material effect on the financial position, results of operations or cash flows of the Company.
In
March 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-11 (ASU 2010-11), Derivatives
and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives. The amendments in this Update are
effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early
adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this Update. The
Company does not expect the provisions of ASU 2010-11 to have a material effect on the financial position, results of operations
or cash flows of the Company.
In
February 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-10 (ASU 2010-10), Consolidation
(Topic 810): Amendments for Certain Investment Funds. The amendments in this Update are effective as of the beginning
of a reporting entity’s first annual period that begins after November 15, 2009 and for Interim periods within that first
reporting period. Early application is not permitted. The Company does not expect the provisions of ASU 2010-10 to
have a material effect on the financial position, results of operations or cash flows of the Company.
In
February 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-09 (ASU 2010-09), Subsequent
Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements. This amendment addresses both the
interaction of the requirements of this Topic with the SEC’s reporting requirements and the intended breadth of the reissuance
disclosure provision related to subsequent events (paragraph 855-10-50-4). All of the amendments in this Update are
effective upon issuance of the final Update, except for the use of the issued date for conduit debt obligors. That amendment is
effective for interim or annual periods ending after June 15, 2010. The Company does not expect the provisions of ASU
2010-09 to have a material effect on the financial position, results of operations or cash flows of the Company.
In
February 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-08 (ASU 2010-08), Technical
Corrections to Various Topics. This amendment eliminated inconsistencies and outdated provisions and provided the needed
clarifications to various topics within Topic 815. The amendments are effective for the first reporting period (including
interim periods) beginning after issuance (February 2, 2010), except for certain amendments. The amendments to the
guidance on accounting for income taxes in reorganization (Subtopic 852-740) should be applied to reorganizations for which the
date of the reorganization is on or after the beginning of the first annual reporting period beginning on or after December 15,
2008. For those reorganizations reflected in interim financial statements issued before the amendments in this Update
are effective, retrospective application is required. The clarifications of the guidance on the embedded derivates
and hedging (Subtopic 815-15) are effective for fiscal years beginning after December 15, 2009, and should be applied to existing
contracts (hybrid instruments) containing embedded derivative features at the date of adoption. The Company does not
expect the provisions of ASU 2010-08 to have a material effect on the financial position, results of operations or cash flows
of the Company.
In
January 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-07 (ASU 2010-07), Not-for-Profit
Entities (Topic 958): Not-for-Profit Entities: Mergers and Acquisitions. This amendment to Topic 958 has occurred as
a result of the issuance of FAS 164. The Company does not expect the provisions of ASU 2010-07 to have a material effect
on the financial position, results of operations or cash flows of the Company.
In
January 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-06 (ASU 2010-06), Fair Value
Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. This amendment to Topic
820 has improved disclosures about fair value measurements on the basis of input received from the users of financial statements. This
is effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases,
sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures
are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. Early
adoption is permitted. The Company does not expect the provisions of ASU 2010-06 to have a material effect on the financial
position, results of operations or cash flows of the Company.
In
January 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-05 (ASU 2010-05), Compensation
– Stock Compensation (Topic 718). This standard codifies EITF Topic D-110 Escrowed Share Arrangements and the
Presumption of Compensation.
In
January 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-04 (ASU 2010-04), Accounting
for Various Topics—Technical Corrections to SEC Paragraphs.
Item
3. Quantitative and Qualitative Disclosures About Market Risk
A
smaller reporting company is not required to provide the information required by this Item.
Item
4. Controls and Procedures
We carried
out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and
chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined) in Exchange Act Rules 13a
– 15(c) and 15d – 15(e)). Based upon that evaluation, our chief executive officer and chief financial officer concluded
that, as of the end of the period ended September 30, 2011, our disclosure controls and procedures were not effective (
1) to
ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the SEC’s rules and forms and (2) to ensure that information
required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to
us, including our chief executive and chief financial officers, as appropriate to allow timely decisions regarding required disclosure.
A
material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there
is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or
detected on a timely basis. Our management assessed the effectiveness of our internal control over financial reporting as of September
30, 2011. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on this assessment, Management has identified the
following four material weaknesses that have caused management to conclude that, as of September 30, 2011, our disclosure controls
and procedures, and our internal control over financial reporting, were not effective at the reasonable assurance level:
1.
As of September 30, 2011, we did not maintain effective controls over the control environment. Specifically we have not developed
and effectively communicated to our employees our accounting policies and procedures. This has resulted in inconsistent practices. Further,
the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial
expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the
organization, management has determined that these circumstances constitute a material weakness. Since these entity level programs
have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.
2.
As of September 30, 2011, we did not maintain effective controls over financial statement disclosure. Specifically, controls were
not designed and in place to ensure that all disclosures required were originally addressed in our financial statements.
Accordingly, management has determined that this control deficiency constitutes a material weakness.
3.
As of September 30, 2011, we did not maintain effective controls over financial reporting. Specifically
controls were not designed and in place to ensure that the financial impact of certain complex equity and liability transactions
were appropriately and correctly reported. The transactions were identified by the auditors and calculated and reported correctly
as of September 30, 2011.
There
was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-
15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this report that has materially affected, or
is reasonably likely to materially affect, our internal control over financial reporting.
PART
II – OTHER INFORMATION
Item
1. Legal Proceedings
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 5% or more of our voting securities are adverse to us or have a material interest adverse
to us.
Item
1A. Risk Factors
A
smaller reporting company is not required to provide the information required by this Item.
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
Item
6. Exhibits
SIGNATURES
In
accordance with the requirements of the Securities and 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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PrismOne
Group, Inc.
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Date:
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November
14, 2011
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By:
/s/
Samir Burshan
Samir
Burshan
Title:
Chief
Executive Officer and Director
|
PrismOne (CE) (USOTC:PMOZ)
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