Attached files
| file | filename |
|---|---|
| EX-10.1 - FUTUREIT, INC. | exhibit_10-1.htm |
| EX-31.2 - FUTUREIT, INC. | exhibit_31-2.htm |
| EX-32.1 - FUTUREIT, INC. | exhibit_32-1.htm |
| EX-32.2 - FUTUREIT, INC. | exhibit_32-2.htm |
| EX-31.1 - FUTUREIT, INC. | exhibit_31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period September 30, 2009 or |
| o | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ____to ___ |
Commission file number: 0-30105
FUTUREIT, INC.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 98-0517683 |
| (State or Other Jurisdiction of | (I.R.S. Employer |
| Incorporation or Organization) | Identification No.) |
4 Hamelacha Street
North Industrial Area,
Lod 71520, Israel
(Address of Principal Executive Offices)
(011) (972) (8)925-8070
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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.
Yes x No o
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 (ss.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 o No o
Indicate by check mark whether the registrant is large accelerated filer, an accelerated filer, or a non-accelerated filer. See of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer o | Accelerated filer o |
| Non-accelerated filer o | Smaller reporting company x |
| (Do not check if smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
As of November 10, 2009 the issuer had 24,390,000 shares of Common Stock, par value $0.0001, outstanding.
INTRODUCTION
We are engaged in the development, marketing, sale and support of software products that provide easy-to-use comprehensive database management and monitoring solutions for small/medium sized enterprises, or SMEs, and larger enterprises, running different applications in a Microsoft Structured Query Language, or SQL Server, environment, versions 2000, 2005 and 2008, supporting all editions as well as Microsoft SQL Server Desktop Engine, or MSDE, and SQL Express.
As used in this report, the terms "we," "us" and "our" mean FutureIT, Inc. and its subsidiaries, unless otherwise indicated.
Our consolidated financial statements appearing in this report are prepared in U.S. dollars and in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. All references in this report to "dollars" or "$" are to U.S. dollars and all references in this report to "NIS" are to New Israeli Shekels.
Statements made in this report concerning the contents of any contract, agreement or other document are summaries of such contracts, agreements or documents and are not complete descriptions of all of their terms. If we filed any of these documents as an exhibit to this report or to any previous filing with the Securities and Exchange Commission, you may read the document itself for a complete recitation of its terms.
Except for the historical information contained in this report, the statements contained in this report are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Private Securities Litigation Reform Act of 1995, as amended, with respect to our business, financial condition and results of operations. Such forward-looking statements reflect our current view with respect to future events and financial results. We urge you to consider that statements which use the terms "anticipate," "believe," "do not believe," "expect," "plan," "intend," "estimate," "anticipate" and similar expressions are intended to identify forward-looking statements. We remind readers that forward-looking statements are merely predictions and therefore inherently subject to uncertainties and other factors and involve known and unknown risks that could cause the actual results, performance, levels of activity, or our achievements, or industry results, to be materially different from any future results, performance, levels of activity, or our achievements expressed or implied by such forward-looking statements. Such forward-looking statements are included in Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations." Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as required by applicable law, including the securities laws of the United States, we undertake no obligation to publicly release any update or revision to any forward-looking statements to reflect new information, future events or circumstances, or otherwise after the date hereof. We have attempted to identify significant uncertainties and other factors affecting forward-looking statements in the Risk Factors section that appears in our annual report on Form 10-K in Item 1A. "Risk Factors."
FUTUREIT, INC. AND SUBSIDIARIES
INDEX
1
Item 1. Financial Statements
FUTUREIT, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
| September 30, |
December 31, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2009 |
2008 | |||||||
| (U.S. dollars) | ||||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | 22,836 | $ | 44,445 | ||||
| Trade account receivable | 29,133 | 43,846 | ||||||
| Other receivables and prepaid expenses | 6,849 | 20,443 | ||||||
| Total current assets | 58,818 | 108,734 | ||||||
| Property and equipment | ||||||||
| Cost | 56,249 | 54,695 | ||||||
| Less - Accumulated depreciation and amortization | 42,422 | 31,552 | ||||||
| Property and equipment, net | 13,827 | 23,143 | ||||||
| Long-term deposits | 20,976 | 4,163 | ||||||
| Total assets | $ | 93,621 | $ | 136,040 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIENCY | ||||||||
| Current liabilities | ||||||||
| Short-term loans from shareholders | $ | 657,628 | $ | 234,210 | ||||
| Current maturities of long-term debt | 654,168 | 491,773 | ||||||
| Trade accounts payable | 81,830 | 43,540 | ||||||
| Other payables and accrued expenses | 854,540 | 582,037 | ||||||
| Deferred revenue | 218,979 | 155,399 | ||||||
| Total current liabilities | 2,467,145 | 1,506,959 | ||||||
| Long term loans | ||||||||
| Loan from bank | 125,000 | 250,146 | ||||||
| Loan from related party | 162,499 | 324,997 | ||||||
| Total long term loans | 287,499 | 575,143 | ||||||
| Accrued severance pay, net | 5,407 | 5,225 | ||||||
| Stockholders' deficiency | ||||||||
| Share Capital - Common Stock of $ 0.0001 par value: | ||||||||
| Authorized -35,000,000 as of December 31, 2008 and as of | ||||||||
| September 30, 2009; Issued and Outstanding - 24,340,000 as of | ||||||||
| December 31, 2008 and 24,390,000 as of September 30, 2009 | 2,437 | 2,434 | ||||||
| Additional paid in capital | 2,194,428 | 2,090,892 | ||||||
| Accumulated deficiency | (4,863,295 | ) | (4,044,613 | ) | ||||
| Total Stockholders' deficiency | (2,666,430 | ) | (1,951,287 | ) | ||||
| Total liabilities and Stockholders' deficiency | $ | 93,621 | $ | 136,040 | ||||
The accompanying notes are an integral part of the financial statements.
2
FUTUREIT, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
AND COMPREHENSIVE
INCOME (LOSS) (UNAUDITED)
| For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2009 |
2008 |
2009 |
2008 | |||||||||||
| Revenues | $ | 160,698 | $ | 140,483 | $ | 442,981 | $ | 493,554 | ||||||
| Cost of revenues | 12,464 | 45,171 | 68,713 | 112,673 | ||||||||||
| Gross profit | 148,234 | 95,312 | 374,268 | 380,881 | ||||||||||
| Research and development expenses | 38,074 | 65,866 | 149,471 | 178,494 | ||||||||||
| Selling and marketing expenses | 106,238 | 104,760 | 280,697 | 347,136 | ||||||||||
| General and | ||||||||||||||
| administrative | 157,301 | 266,129 | 539,459 | 738,518 | ||||||||||
| Operating loss before | ||||||||||||||
| financial expenses, net | (153,379 | ) | (341,443 | ) | (595,359 | ) | (883,267 | ) | ||||||
| Financial expenses | ||||||||||||||
| (income), net | 120,965 | (48,845 | ) | 216,817 | 52,685 | |||||||||
| Loss before taxes | (274,344 | ) | (292,598 | ) | (812,176 | ) | (935,952 | ) | ||||||
| Taxes | 3,088 | - | 6,506 | 1,261 | ||||||||||
| Loss for the period | (277,432 | ) | (292,598 | ) | (818,682 | ) | (937,213 | ) | ||||||
| Basic and diluted net | ||||||||||||||
| loss per share | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.04 | ) | ||
| Number of shares used | ||||||||||||||
| in computing basic and | ||||||||||||||
| diluted net loss per | ||||||||||||||
| share | 24,382,663 | 24,340,000 | 24,354,744 | 24,340,000 | ||||||||||
The accompanying notes are an integral part of the financial statements.
3
FUTUREIT, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF
CASH FLOWS (UNAUDITED)
| Nine Months Ended September 30, |
||||||||
|---|---|---|---|---|---|---|---|---|
| 2009 |
2008 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (818,682 | ) | $ | (937,213 | ) | ||
| Adjustments required to reconcile net loss to net cash used in | ||||||||
| operating activities: | ||||||||
| Depreciation | 10,870 | 10,072 | ||||||
| Amortization of deferred compensation | 32,211 | 38,094 | ||||||
| Amortization of loan discounts | 52,975 | - | ||||||
| Increase in value of long-term deposits | (16,813 | ) | 1,092 | |||||
| Accrued severance pay, net | 182 | 873 | ||||||
| Decrease in trade receivables | 14,713 | 19,217 | ||||||
| Decrease (increase) in other accounts receivable and prepaid expenses | 13,594 | (29,215 | ) | |||||
| Increase in trade payables | 38,290 | 51,500 | ||||||
| Increase (decrease) in other payables | 272,503 | 239,891 | ||||||
| Increase (decrease) in deferred revenues | 63,580 | (118,314 | ) | |||||
| Net cash (used in) operating activities | (336,577 | ) | (724,003 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (1,554 | ) | (2,535 | ) | ||||
| Investment in subsidiary | - | (100,000 | ) | |||||
| Net cash used in investing activities | (1,554 | ) | (102,535 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Increase (decrease) in bank credit | - | (41,667 | ) | |||||
| Loan repayment | (125,250 | ) | (75,000 | ) | ||||
| Issuance of Share Capital | 7,497 | 50 | ||||||
| Loan from stockholder | 370,445 | - | ||||||
| Warrants issued in connection with loan | 63,830 | - | ||||||
| Net cash provided by financing activities | 316,522 | (116,617 | ) | |||||
| Increase (decrease) in cash and cash equivalents | (21,609 | ) | (943,155 | ) | ||||
| Cash and cash equivalents at the beginning of the period | $ | 44,445 | $ | 1,020,767 | ||||
| Cash and cash equivalents at the end of the period | $ | 22,836 | $ | 77,612 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
4
FUTUREIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| NOTE 1: | – | BASIS OF PRESENTATION |
The accompanying condensed unaudited interim consolidated financial statements have been prepared by FUTUREIT, INC. (the “Company”) in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. These financial statements reflect all adjustments, consisting of normal recurring adjustments and accruals, which are, in the opinion of management, necessary for a fair presentation of the financial position of the Company as of September 30, 2009 and the results of operations and cash flows for the interim periods indicated in conformity with generally accepted accounting principles applicable to interim periods. Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These financial statements should be read in conjunction with the audited financial statements and notes thereto of the Company for the year ended December 31, 2008 that are included in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission on March 25, 2009 (the”2008 10-K”). The interim financial statements of the Company as of September 30, 2009 and for the three and nine month periods then ended are unaudited. These results are not necessarily indicative of the results expected for the calendar year ending December 31, 2009. The accompanying financial statements and notes thereto do not reflect all disclosures required under U.S. GAAP. Please see the audited financial statements of the Company in its 2008 10-K for additional information, including significant accounting policies.
| NOTE 2 | – | GENERAL |
| a. | Background |
| The Company was incorporated in the State of Delaware on October 27, 2006 and is a 64.73% owned subsidiary of DataSafe Group Ltd., an Israeli IT holding company. |
| On January 8, 2007, the Company entered into an agreement with Future I.T. Ltd., an Israeli company controlled by Omer Nir-Hod (98%), a director and president of the Company who is a controlling shareholder of DataSafe Group Ltd., and with Shamad Orlan Ltd. (2%), an Israeli company controlled by Shmuel Bachar, Chairman of the Board of Directors of the Company. Pursuant to the agreement, the Company purchased 90% of the outstanding shares of Future I.T. Ltd. and on January 15, 2008 it purchased the remaining 10% interest in that company for $100,000. Future I.T. Ltd. began selling the EZ Manage SQL standard edition software product in December 2005. |
| In accordance with Statement of Financial Accounting Standards (SFAS) 141 “Business Combinations” this transaction was accounted for as a reorganization of entities under common control. Accordingly, the consolidated financial statements of the Company for all periods are presented as if the reorganization occurred at the beginning of the earliest period presented and include the accounts of Future I.T. Ltd. on a historical cost basis, in a manner similar to a pooling of interests. |
5
FUTUREIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| The Company markets and sells its products primarily through distributors and resellers in Israel and European countries but revenues to date have been generated mainly from Israel. The Company has two wholly owned subsidiaries – Future I.T. Ltd., an Israeli company, engaged mainly in research & development, sales & marketing and support, and Future I.T. Software Limited, a UK company. |
| The Company does not hold any patents and relies upon a combination of security devices, copyrights, trade secret laws and contractual restrictions to protect its rights in the products. |
| b. | Going Concern |
| The Company’s net loss and decrease in cash and cash equivalents for the nine month period ended September 30, 2009 were $818,682 and $21,609, respectively. The Company’s ability to continue operating as a “going concern” is dependent on its ability to raise sufficient additional working capital. Management’s plans in this regard include raising additional cash from current and potential stockholders and increasing the marketing of its products. |
| c. | Short Term Loans From Shareholders |
| In November 2009, the Company signed an agreement with its parent, DataSafe Group, pursuant to which DataSafe Group agreed to provide $500,000 in loans to the Company, effective as of October 1, 2009, bearing annual interest of 10%. The interest and the principal is payable in full on October 1, 2010. The Company also issued DataSafe Group warrants to purchase 500,000 shares of the Company’s common stock at an exercise price of $0.50 per share. DataSafe Group will be entitled to participate in any future financings by converting each $1.00 of outstanding principal amount of the loan to $1.00 of such financing. |
| In June 2009, the Company signed an agreement with DataSafe Group pursuant to which DataSafe Group agreedto provide $400,000 in loans to the Company bearing annual interest of 10%. The interest and the principal is payable in full on June 3, 2010. The Company also issued DataSafe Group warrants to purchase 400,000 shares of the Company’s common stock at an exercise price of $0.50 per share. DataSafe Group will be entitled to participate in any future financings by converting each $1.00 of outstanding principal amount of the loan to $1.00 of such financing. |
| In December 2008, the Company signed an agreement with DataSafe Group and Nicolas, the Viscount Bearsted (together the “Lenders”). According to the agreement, the Lenders agreed to provide $300,000 in loans to the Company bearing annual interest of 10%, of which $275,000 was received on December 31, 2008, and the remaining $25,000 during January 2009. The interest is payable in two semi-annual installments and the principal amount is repayable on December 31, 2009. The Company also issued the Lenders warrants to purchase 300,000 shares of the Company’s common stock at an exercise price of $0.50 per share. The Lenders will be entitled to participate in any future financings by converting each $1.00 of the outstanding principal amount of the loan provided to $1.00 of such financing. |
| To reflect the value of the warrants, the Company recorded a discount of $103,883 on the two loans existing as of September 30, 2009 ($300,000 taken in December 2008 and $400,000 taken in June 2009) which will be amortized over the terms of the loans. |
6
FUTUREIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Recent Accounting Pronouncements
In April 2009, the FASB issued an amendment to ASC 820 FASB staff position 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions that are Not Orderly” (“ASC 820-10-65”). This amendment applies to all assets and liabilities within the scope of accounting pronouncements that require or permit fair value measurements, except as discussed in ASC 820-15-2. The amendment is effective for interim and annual reporting periods ending after June 15, 2009, and shall be applied prospectively. ASC 820-10-65 relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales. It reaffirms the objective of fair value measurement, as stated in ASC 820 to reflect how much an asset would be sold for in an orderly transaction (as opposed to a distressed or forced transaction) at the date of the financial statements under current market conditions. Specifically, it reaffirms the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive. The amendment provides guidance on (1) estimating the fair value of an asset or liability (financial and nonfinancial) when the volume and level of activity for the asset or liability have significantly decreased and (2) identifying transactions that are not orderly. The adoption of this standard did not have any impact on the consolidated results of operations or financial position of the Company.
In April 2009, the FASB issued an amendment to ASC 320-10-65 (Investments – Debt and Equity Securities) through the issuance of FASB staff position 115-2 and 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“OTTI”) for investment in debt securities. This amendment applies to all entities and is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. Under the amendment, the primary change to the OTTI model for debt securities is the change in focus from an entity’s intent and ability to hold a security until recovery. Instead, an OTTI is triggered if (1) an entity has the intent to sell the security, (2) it is more likely than not that it will be required to sell the security before recovery, or (3) it does not expect to recover the entire amortized cost basis of the security. In addition, the amendment changes the presentation of an OTTI in the income statement if the only reason for recognition is a credit loss (i.e., the entity does not expect to recover its entire amortized cost basis). That is, if the entity has the intent to sell the security or it is more likely than not that it will be required to sell the security, the entire impairment (amortized cost basis over fair value) will be recognized in earnings. However, if the entity does not intend to sell the security and it is not more likely than not that the entity will be required to sell the security, but the security has suffered a credit loss, then the impairment charge will be separated into the credit loss component, which is recorded in earnings, and the remainder of the impairment charge, which is recorded in other comprehensive income. The adoption of ASC 320-10-65 did not have any impact on the consolidated results of operations or financial position of the Company.
In April 2009, the FASB amended the disclosure requirements in section 825-10 and 270-10 of the ASC through the issuance of FASB staff position ASC 825-10 (FSP FAS 107-1 and APB 28-1), “Interim Disclosures about Fair Value of Financial Instruments” This amendment applies to all financial instruments within the scope of ASC 825 held by publicly traded companies, as defined by ASC 270-20 (Interim Reporting) and are effective for interim and annual reporting periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. ASC 825-10 (Financial Instruments) requires fair value disclosures for any financial instruments that are not currently reflected on the balance sheet of companies at fair value. Prior to issuing of this amendment, fair values for these assets and liabilities were only disclosed once a year. The amendment now requires these disclosures on a quarterly basis, providing qualitative and quantitative information about fair value estimates for all those financial instruments not measured on the balance sheet at fair value.
7
FUTUREIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Recent Accounting Pronouncements (continued)
In May 2009, FASB ASC 855 Subsequent Events was issued, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. FASB ASC 855 provides guidance on the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. FASB ASC 855 is effective for interim or annual financial periods ending after June 15, 2009. Accordingly, the Company adopted FASB ASC 855 for the period ended June 30, 2009 and subsequent financial periods, and its application had no impact on the Company’s condensed financial statements. Events subsequent to the balance sheet date have been evaluated for inclusion in the accompanying financial statements through the issuance date, November 10, 2009.
In June 2009, the FASB issued ASC 105 (SFAS No.168), “The FASB Accounting Standards Codification’ and the Hierarchy of Generally Accepted Accounting Principles”. ASC 105 establishes the “FASB Accounting Standards Codification” (“Codification”), and was officially launched on July 1, 2009, for the purpose of serving as the source of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The subsequent issuances of new standards will be in the form of Accounting Standards Updates that will be included in the Codification. In general, the Codification is not expected to change U.S. GAAP. All other accounting literature excluded from the Codification will be considered non- authoritative. ASC 105 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. Effective September 30, 2009, all references made to GAAP in our consolidated financial statements include the new Codification numbering system along with original references.
In June 2009, the FASB issued SFAS No.166 “Accounting for Transfers of Financial Assets” (ASC 860). This SFAS is a revision to Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, and will require more information about transfers of financial assets, including securitization transactions, and continued exposure to the risks related to transferred financial assets. It eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures. SFAS No. 166 enhances information reported to users of financial statements by providing greater transparency about transfers of financial assets and a company’s continuing involvement in transferred financial assets. SFAS No. 166 will be effective at the start of a company’s first fiscal year beginning after November 15, 2009. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.
In June 2009, the FASB issued SFAS No. 167 “Amendments to FASB Interpretation No. 46(R))” (ASC 810) (“SAFS No. 167”), which changes the way entities account for securitizations and special-purpose entities. SAFS No. 167 is a revision to FIN 46(R), Consolidation of Variable Interest Entities, and changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. This SFAS will require a company to provide additional disclosures about its involvement with variable interest entities and any significant changes in risk exposure due to that involvement. A company will be required to disclose how its involvement with a variable interest entity affects the company’s financial statements. SFAS No. 167 will be effective at the start of a company’s first fiscal year beginning after November 15, 2009. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.
8
FUTUREIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Recent Accounting Pronouncements (continued)
In June 2009, the FASB issued ASC 105 (SFAS No.168), “The FASB Accounting Standards Codification’ and the Hierarchy of Generally Accepted Accounting Principles”. ASC 105 establishes the “FASB Accounting Standards Codification” (“Codification”), and was officially launched on July 1, 2009, for the purpose of serving as the source of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The subsequent issuances of new standards will be in the form of Accounting Standards Updates that will be included in the Codification. In general, the Codification is not expected to change U.S. GAAP. All other accounting literature excluded from the Codification will be considered non- authoritative. ASC 105 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. Effective September 30, 2009, all references made to GAAP in our consolidated financial statements include the new Codification numbering system along with original references.
In October 2009, the FASB issued the “Accounting Standards Update (“ASU”) 2009-13 Multiple Deliverable Revenue Arrangements a consensus of EITF” (formerly topic 08-1) an amendment to ASC 605-25... The update provides amendments to the criteria in Subtopic 605-25 for separating consideration in multiple-deliverable arrangements. The amendments in this update establish a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific objective evidence nor third-party evidence is available. The amendments in this update also will replace the term “fair value” in the revenue allocation guidance with the term “selling price” in order to clarify that the allocation of revenue is based on entity-specific assumptions rather than assumptions of a marketplace participant. The amendments will also eliminate the residual method of allocation and require that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method. The relative selling price method allocates any discount in the arrangement proportionally to each deliverable on the basis of each deliverable’s selling price. The update will be effective for revenue arrangements entered into or modified in fiscal year beginning on or after June 15, 2010 with earlier adoption permitted. The adoption of this standard is not expected to have material impact on the Company’s consolidated financial statements.
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
This information should be read in conjunction with the condensed consolidated financial statements and notes included in Item 1 of Part I of this Quarterly Report and the audited consolidated financial statements and notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2008 contained in our 2008 Annual Report on Form 10-K. The discussion and analysis which follows may contain trend analysis and other forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 which reflect our current views with respect to future events and financial results. These include statements regarding our earnings, projected growth and forecasts, and similar matters that are not historical facts. We remind shareholders that forward-looking statements are merely predictions and therefore are inherently subject to uncertainties and other factors that could cause the future results to differ materially from those described in the forward-looking statements.
The following is management’s discussion and analysis of certain significant factors which have affected our financial position and operating results during the periods included in the accompanying consolidated financial statements, as well as information relating to the plans of our current management.
Background
We were incorporated in the State of Delaware on October 26, 2006 under the name FutureIT, Inc. On January 8, 2007 we entered into an agreement with Future I.T. Ltd. Pursuant to the agreement, Future I.T. Ltd. issued to us shares constituting 90% of its issued and outstanding share capital. In consideration we provided Future I.T. Ltd. with guarantees for all of the debt incurred by it in the ordinary course of its business. Pursuant to an option provided in the agreement, on January 15, 2008 we purchased the remaining 10% interest in Future I.T. Ltd. for additional consideration of $100,000. Our consolidated financial statements are prepared in U.S. dollars and in accordance with generally accepted accounting principles in the United States, or U.S. GAAP.
Overview
We are engaged in the development, marketing, sale and support of software products that provide affordable easy-to-use comprehensive database management and monitoring solutions for SMEs and larger enterprises, running different applications in a SQL Server environment, versions 2000, 2005 and 2008, supporting all editions as well as MSDE and SQL Express.
As a software provider we generate revenues from sales of our products to both small and medium sized enterprises and larger corporations and enterprises. Accordingly, our business is affected by economic conditions and the financial health of the corporations and enterprises. The continuing volatile economic conditions in 2009 have slowed-down our sales process and complicated our ability to conduct transactions. The current economic climate and the uncertainty in the global economic conditions have negatively impacted our customers’ ability to make capital expenditures, thereby affecting their ability to purchase our products. However, there are small signs of stabilization, and if they continue, we expect to see a resumption in sales growth. The turmoil in the financial markets has also limited our ability to obtain financing in 2009.
Most of our sales are currently denominated in dollars, while the majority of our operating expenses are incurred in foreign currencies, principally in NIS. As a result, the decrease in the value of the U.S. dollar against the NIS in the first nine months of 2009 has resulted in increased expenses for our company. In the nine months ended September 30, 2009, the U.S. dollar depreciated against the NIS by approximately 1.2%. We expect that exchange rate fluctuations and especially larger periodic devaluations will continue to have an impact on our profitability and period-to-period comparisons of our results. We cannot assure you that in the future our results of operations may not be materially adversely affected by currency fluctuations.
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Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of the financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. Though we evaluate our estimates and assumptions on an ongoing basis, our actual results may differ from these estimates.
Certain of our accounting policies that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s subjective judgments are described below to facilitate better understanding of our business activities. We base our judgments on our experience and assumptions that we believe are reasonable and applicable under the circumstances.
Revenue Recognition
We recognize revenues pursuant to the provisions of American Institute of Certified Public Accountants Statement of Position, or ASC 985-605-15( SOP, 97-2), “Software Revenue Recognition,” or ASC 985-605-15 (SOP 97-2), as amended by SOP 98-9, “Modification of ASC 985-605-15( SOP, 97-2), Software Revenue Recognition With Respect to Certain Transactions.” Accordingly, Revenues from software licensing are recognized when all the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) our fee is fixed or determinable, and (iv) collectibility is probable.
We are unable to establish vendor-specific objective evidence or VSOE on our post-contact customer support, or PCS, services for all arrangements. Accordingly, when PCS is an element of these sale arrangements (which is the case with most of our sales) , revenue on the entire arrangement is deferred and recognized over the initial customer support period of twelve months.
Functional Currency and Financial Statements in U.S. dollars
Our functional currency is the U.S. dollar, as the U.S dollar is the primary currency of the economic environment in which we have operated and expect to continue to operate in the foreseeable future. The vast majority of our revenues is determined, and denominated in U.S. dollars. The majority of our operations is currently conducted in Israel and most of the expenses in Israel are currently paid in NIS. However, most of our total expenses are denominated and determined in U.S dollars. Financing activities including loans, equity transactions cash investments, are made in U.S dollars.
Our transactions and balances denominated in U.S dollars are presented at their original amounts. Non-dollar transactions and balances have been remeasured to U.S dollars in accordance with statement No. 52 of the Financial Accounting Standard Board (“FASB”). All transaction gains and losses from remeasurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statements of operations as financial income or expenses, as appropriate.
Concentrations of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents and trade receivables. We maintain cash and cash equivalents and investments with major financial institutions and limit the amount of credit exposure with any institution.
Stock-Based Compensation
We adopted ASC 718-10 (SFAS No. 123 (revised 2004)), “Share-Based Payment” ASC 718-10 (SFAS No. 123R) requiring that compensation cost relating to share-based payment awards made to employees and directors be recognized in the financial statements. The cost for such awards is measured at the grant date based on the calculated fair value of the award. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods (generally the vesting period of the equity award) in our consolidated statement of operations.
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Stock-based compensation cost relating to stock options recognized in 2007 and 2008 is based on the value of the portion of the award that is ultimately expected to vest. ASC 718-10 (SFAS No. 123R) requires forfeitures to be estimated at the time of grant in order to estimate the portion of the award that will ultimately vest.
The exercise price of the options granted under the plan is the nominal value of the shares into which such options are exercised, which is deemed insignificant. As such, the values of the options are similar to the values of restricted shares. Accordingly, the value of the award is based on the fair value of the shares of our common stock at the date of grant. Such values were determined based on the proceeds of our Private Placement.
Research and Development
FASB ASC 730, “Accounting for the Costs of Computer Software to Be Sold, Leased or Otherwise Marketed” requires capitalization of certain software development costs subsequent to the establishment of technological feasibility.
Based on our product development process, technological feasibility is established upon completion of a working model, as a result, research and development costs incurred by us to date have been charged to operating expenses.
Sources of Revenues
We generate revenues from the sale of software licenses as well as from maintenance and support services. Our customers generally enter into a standard license agreement with us under which they are granted license to use our software and are offered the right to purchase phone support and software maintenance that provides updates and upgrades to our software if and when made available.
Cost of Revenues and Operating Expenses
Cost of Revenues. Cost of revenues consists primarily of salaries of employees engaged in phone support and maintenance services and royalty payments to Microsoft.
Research and Development Expenses. Research and development expenses consist primarily of salaries of employees in on-going research and development activities, as well as participation in Microsoft and SAP partnerships, purchase of third-party research and development tools, consulting services and software development by sub-contractors, mainly subsidiaries of DataSafe Group.
Selling and Marketing Expenses. Selling and marketing expenses consist primarily of salaries and related expenses for sales and marketing personnel, sales commissions, participation in trade shows, web site related expenses, public relations, promotional materials, travel expenses and trade show exhibit expenses.
General and Administrative Expenses. General and administrative expenses consist primarily of salaries and related expenses for executive, accounting, and administrative personnel, professional fees and other general corporate expenses. We expect that general and administrative expenses will increase for the remainder of the year.
Financial Expenses, Net. Financial expenses, consists primarily of interest on our loans and gains and losses from remeasurement of monetary balance sheet items denominated in non-US$ currencies.
Income Tax Expense. Our taxable income in Israel is subject to corporate tax at the statutory rates of 27% in 2008, 26% in 2009 and 25% in 2010 and thereafter.
Results of Operations
The following discussion of our results of operations for each of the nine months ended September 30, 2008 and 2009, as well as the data presented as a percentage of total revenues in the following table, is based upon our statements of income contained in our financial statements for those periods.
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| Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2009 |
2008 |
2009 |
2008 | |||||||||||
| Total revenues | 100 | % | 100 | % | 100 | % | 100 | % | ||||||
| Cost of revenues | 8 | % | 32 | % | 16 | % | 23 | % | ||||||
| Gross profit | 92 | % | 68 | % | 84 | % | 77 | % | ||||||
| Operating expenses: | ||||||||||||||
| Research and development | 24 | % | 47 | % | 34 | % | 36 | % | ||||||
| Selling and marketing | 66 | % | 75 | % | 63 | % | 70 | % | ||||||
| General and administrative | 98 | % | 189 | % | 122 | % | 150 | % | ||||||
| Total operating expenses | 188 | % | 311 | % | 219 | % | 256 | % | ||||||
| Operating loss | (96 | )% | (243 | )% | (135 | )% | (179 | )% | ||||||
| Financial expenses & tax, net | 77 | % | (35 | )% | 50 | % | 11 | % | ||||||
| Net loss | (173 | )% | (208 | )% | (185 | )% | (190 | )% | ||||||
Three Months Ended September 30, 2009 Compared with Three Months Ended September 30, 2008
Revenues. Revenues from software sales increased to $160,698 for the three months ended September 30, 2009 from $140,483 for the three months ended September 30, 2008. On a sequential basis, our revenues for the three months ended September 30, 2009 increased to $160,698 from $155,270 in the second quarter of 2009. Deferred revenues increased by $63,580 in the third quarter and at September 30, 2009 were approximately $218,979, as compared to $155,399 at December 31, 2008. We recorded deferred revenues in both periods due to the fact that we were unable to implement VSOE relating to software revenue recognition.
Cost of Revenues. Cost of revenues decreased to $12,464 for the three months ended September 30, 2009 from $45,171 for the three months ended September 30, 2008, a decrease of 72%, reflecting the decrease in sales of third party software in the current period.
Gross Profit. Our gross profit increased to $148,234 for the three months ended September 30, 2009 from $95,312 for the three months ended September 30, 2008, an increase of 56%, reflecting both the increase in our revenues for the period and decrease in cost of revenues in the current period.
Research and Development Expenses. Research and development expenses decreased to $38,074 for the three months ended September 30, 2009 from $65,866 for the three months ended September 30, 2008, a decrease of 42%, as a result of a decrease in research and development salary during the 2009 period.
Selling and Marketing Expenses. Selling and marketing expenses increased slightly to $106,238 for the three months ended September 30, 2009 from $104,760 for the three months ended September 30, 2008, an increase of 1%.
General and Administrative Expenses. General and administrative expenses decreased to $157,301 for the three months ended September 30, 2009 from $266,129 for the three months ended September 30, 2008, a decrease of 41%. This decrease resulted from the implementation of our cost cutting measures.
Financial Expenses, Net. Our financial expenses were $120,965 for the three months ended September 30, 2009 compared to financial income of $48,845 for the three months ended September 30, 2008, reflecting the increase in loans from related parties.
As a result of the foregoing, we incurred a net loss of $277,432 for the three months ended September 30, 2008, as compared to a net loss of $292,598 for the three months ended September 30, 2008.
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Nine Months Ended September 30, 2009 Compared with Nine Months Ended September 30, 2008
Revenues. Revenues from software sales decreased to $442,981 for the nine months ended September 30, 2009 from $493,554 for the nine months ended September 30, 2008, reflecting our inability to recover sales lost in the first quarter of this year.. Our deferred revenues at September 30, 2009 were approximately $218,979, as compared to $155,399 in December 31, 2008.
Cost of Revenues. Cost of revenues decreased to $68,713 for the nine months ended September 30, 2009 from $112,673 for the nine months ended September 30, 2008, a decrease of 39%, reflecting the decrease in the number of our employees.
Gross Profit. Our gross profit decreased to $374,268 for the nine months ended September 30, 2009 from $380,881 for the nine months ended September 30, 2008, a decrease of 2%, reflecting the decrease in our revenues for the period.
Research and Development Expenses. Research and development expenses decreased to $149,471 for the nine months ended September 30, 2009 from $178,494 for the nine months ended September 30, 2008, a decrease of 16% reflecting the decrease in research and development salaries.
Selling and Marketing Expenses. Selling and marketing expenses decreased to $280,697 for the nine months ended September 30, 2009 from $347,136 for the nine months ended September 30, 2008, a decrease of 19%, as a result a decrease in the number of our employees.
General and Administrative Expenses. General and administrative expenses decreased to $539,459 for the nine months ended September 30, 2009 from $738,518 for the nine months ended September 30, 2008, a decrease of 27%. This decrease resulted from the implementation of our cost-cutting measures.
Financial Expenses, Net. Our financial expenses amounted to $216,817 for the nine months ended September 30, 2009 compared to financial expenses of $52,685 for the nine months ended September 30, 2008, reflecting the increase in loans from related parties.
As a result of the foregoing, we incurred a net loss of $818,682 for the nine months ended September 30, 2009, as compared to a net loss of $937,213 for the nine months ended September 30, 2008.
Off-Balance Sheet Arrangements
As of September 30, 2009, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.
Liquidity and Capital Resources
As of September 30, 2009, we had approximately $22,836 in cash and cash equivalents and had a deficit in our working capital of approximately $2,189,348, after a deduction of deferred revenue in the amount of approximately $218,979. During the period ended September 30, 2009, we financed our activity with loans from our principal shareholders.
We believe that our existing cash, cash equivalents balances and cash provided by operating activities will be insufficient to meet our working capital, capital expenditure and other cash requirement needs over the next 12 months. We are currently dependant on DataSafe Group’s financial help to support our operations, but have no assurance that DataSafe Group will continue to support us financially. If DataSafe Group should cease to financially support us, we cannot estimate the period of time that our cash, cash equivalents balances and cash provided by operating activities would support our operations. Accordingly, our future is dependent on our ability to raise additional financing and increase our sales to a level that will support our operations. If we fail to do so for any reason, we will not be able to continue as a going concern. We are actively seeking additional funds, but no assurance can be given that we will be successful in our efforts.
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Our future capital requirements will depend on many factors, including our rate of revenue growth, the expansion of our selling and marketing activities, the timing and extent of research and development spending to support product development and enhancement efforts, costs associated with expansion into new territories or markets, the timing of the introduction of new products and services and the enhancement of existing products and the continuing market acceptance of our products and services.
Cash Flows
Our cash and cash equivalents, total current assets, total assets, total current liabilities, and total liabilities as at September 30, 2008 and September 30, 2009 are as follows:
| Nine Months Ended September 30, | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2009 |
2008 | |||||||
| Net cash used in operating activities | $ | (336,577 | ) | $ | (724,003 | ) | ||
| Net cash used in investing activities | (1,554 | ) | (102,535 | ) | ||||
| Net cash provided by financing activities | 316,522 | (116,617 | ) | |||||
| Decrease in cash and cash equivalents | (21,609 | ) | (943,155 | ) | ||||
| Cash and cash equivalents at the beginning of the period | 44,445 | 1,020,767 | ||||||
| Cash and cash equivalents at end of period | 22,836 | 77,612 | ||||||
Operating Activities. Net cash used in operating activities for the nine months ended September 30, 2009 was approximately $336,577 as compared to net cash used in operating activities of approximately $724,003 for the nine months ended September 30, 2008 reflecting the increase in our deferred revenue.
Investing Activities. Net cash used in investing activities for the nine months ended September 30, 2009 was approximately $1,554 as compared to net cash used in investing activities of approximately $102,535 for the nine months ended September, 2008, primarily as a result of our purchase of the remaining 10% interest in Future I.T. Ltd. for $100,000 during the first nine months of 2008.
Financing Activities. During the nine months ended September 30, 2009, we repaid approximately $125,250 in loans as compared to the repayment of $75,000 during the nine months ended September 30, 2008 and received $370,445 in loans from a principal shareholder during the nine months ended September 30, 2009. As a result, net cash provided by financing activities amounted to $316,552 in the nine months ended September 30, 2009.
Contractual Obligations
The following table summarizes our minimum contractual obligations and commercial commitments, as of September 30, 2009 and the effect we expect them to have on our liquidity and cash flow in future periods:
| Payments Due by Period |
|||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Contractual Obligations |
Total |
Less than 1 Year |
1-3 Years |
3-5 Years |
More than 5 Years | ||||||||||||
| Short-term loan | $ | 657,628 | $ | 657,628 | $ | - | - | - | |||||||||
| Long-term debt obligations | 941,667 | 654,168 | 287,499 | ||||||||||||||
| Operating lease obligations | 86,400 | 57,600 | 28,800 | - | - | ||||||||||||
| Estimated long-term interest | 30,186 | 20,124 | 10,062 | - | - | ||||||||||||
| Total | $ | 1,715,881 | $ | 1,389,520 | $ | 362,361 | - | - | |||||||||
As of September 30, 2009, our principal commitments consisted of obligations outstanding under our long term debt, promissory notes and operating leases. We will need to raise additional funds in order to repay our obligations and support our attempts to grow our business and cannot assure you that we will be successful in our efforts. Our capital requirements are dependent on many factors, including market acceptance of our software product offerings and the allocation of resources to our research and development efforts, as well as our marketing and sales activities. We anticipate that our cash resources will be used primarily to fund our operating activities.
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
We do not believe that we have any material exposure to interest rate risk other than sensitivity to prevailing interest rates that may affect income from our cash deposits and marketable securities.
Foreign Exchange Risk
Most of our sales are currently denominated in dollars, while the majority of our operating expenses are incurred in foreign currencies, principally the NIS. As a result, the decrease in the value of the U.S. dollar against these currencies has resulted in increased expenses for our company. In 2006, 2007 and 2008 and the first nine months of 2009, the U.S dollar depreciated against the NIS by approximately 8%, 9%, 1% and 1.2%, respectively.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934, or the Exchange Act, reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our chief executive officer and chief financial officer to allow timely decisions regarding required disclosure. Our management, including our chief executive officer and chief financial officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures, as defined under Exchange Act Rule 13a-15(e), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our chief executive officer and chief financial officer have concluded that, as of such date, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are not presently party to any legal proceedings the resolution of which we believe would have a material adverse effect on our business, operating results, financial condition or cash flows.
Item 1A. Risk Factors
There were no material changes in our risk factors from the risks disclosed in our annual report on Form 10-K for the year ended December 31, 2008. However, we wish to reiterate that our independent public accounting firm has issued an opinion on our consolidated financial statements that states that the consolidated financial statements were prepared assuming we will continue as a going concern and further states that our recurring losses from operations, stockholders’ deficit and inability to generate sufficient cash flow to meet our obligations and sustain our operations raise substantial doubt about our ability to continue as a going concern. Our future is dependent on our ability to raise additional financing and increase our sales to a level that will support our operations. If we fail to do so for any reason, we would not be able to continue as a going concern and could potentially be forced to seek relief through a bankruptcy filing.
For a discussion of the risk factors affecting our company, see “Risk Factors” in Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2008.
Item 4. Submission of Matters to a Vote of Shareholders
During the period ended September 30, 2009, we held our Annual Meeting of Shareholders. At the meeting, held on July 21, 2009, our shareholders voted for:
| 1. | The election of Messrs. Shmuel Bachar, Omer Nirhod, Nicholas, The Viscount, Michael Avnimelech and Tzahi Langer,as directors to hold office for a term until their successors are duly elected and qualified at our 2010 Annual Meeting of Shareholders. |
| 2. | The ratification of the selection of Brightman Almagor Zohar & Co. (Deloitte Touche Tohmatsu) as our independent registered public accounting firm for the fiscal year ending December 31, 2009. |
These two resolutions were unanimously consented and adopted by all the 18,535,000 shareholders that participated in the Annual Meeting.
Item 5. Other Information
In November 2009, the Company signed an agreement with its parent, DataSafe Group, pursuant to which DataSafe Group agreed to provide $500,000 in loans to the Company, effective as of October 1, 2009, bearing annual interest of 10%. The interest and the principal is payable in full on October 1, 2010. The Company also issued DataSafe Group warrants to purchase 500,000 shares of the Company’s common stock at an exercise price of $0.50 per share. DataSafe Group will be entitled to participate in any future financings by converting each $1.00 of outstanding principal amount of the loan to $1.00 of such financing. The loan agreement is attached hereto as an Exhibit 10.1 and is incorporated herein by reference.
We cancelled the consultancy agreement with Stanley Wunderlich that was entered into as of May 28, 2009 and are seeking the return of the 50,000 shares that had been issued under the agreement.
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Item 6. Exhibits
| 10.1 | Loan Agreement with DataSafe Group dated as of October 1, 2009. |
| 31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended. |
| 31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended. |
| 32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: November 10, 2009 |
FUTREIT, INC. By: /s/ Shmuel Bachar —————————————— Shmuel Bachar Chief Executive Officer |
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