Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2008
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT
For the transition period from _________ to __________
Commission File Number: 333-61538
METRO ONE DEVELOPMENT, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 98-0231687
---------------------- --------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
125 Avenida Mesita, San Clemente, California 92673
(Address of principal executive offices)
(949) 682-7891
(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of March 15, 2010 the Issuer had 22,495,969 shares of common stock issued
and outstanding, par value $0.0001 per share.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
METRO ONE DEVELOPMENT, INC.
QUARTERLY REPORT ON FORM 10-QSB/A
FOR THE QUARTER ENDED OCTOBER 31, 2008
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements: Index.........................................3
Balance Sheets as of October 31, 2008 (Unaudited)
and July 31, 2008.................................................F1
Statements of Operations for the Three Months
Ended October 31, 2008 and 2007 (Unaudited).......................F2
Statement of Changes in Stockholders' Equity
For the Three Months Ended October 31, 2008 (Unaudited)...........F3
Statements of Cash Flows for the Three Months Ended
October 31, 2008 and 2007 (Unaudited).............................F4
Notes to Financial Statements (Unaudited).....................F5 - F14
Item 2 - Management's Discussion and Analysis or Plan of Operation............4
Item 3 - Controls and Procedures .............................................9
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings....................................................9
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds.........11
Item 3 - Defaults Upon Senior Securities.....................................11
Item 4 - Submission of Matters to a Vote of Security Holders.................11
Item 5 - Other Information ..................................................11
Item 6 - Exhibits............................................................11
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
METRO ONE DEVELOPMENT, INC.
Financial Statements
Three Months Ended October 31, 2008 and 2007 (Unaudited)
Contents
Financial Statements:
Balance Sheets as of October 31, 2008 (Unaudited)
and July 31, 2008..................................................F1
Statements of Operations for the Three Months
Ended October 31, 2008 and 2007 (Unaudited)........................F2
Statement of Changes in Stockholders' Equity
For the Three Months Ended October 31, 2008 (Unaudited)............F3
Statements of Cash Flows for the Three Months Ended
October 31, 2008 and 2007 (Unaudited)..............................F4
Notes to Financial Statements (Unaudited)......................F5 - F14
3
METRO ONE DEVELOPMENT, INC.
BALANCE SHEETS
OCTOBER 31, 2008 AND JULY 31, 2008
(Restated -
Note 7)
October 31, July 31,
2008 2008
(Unaudited)
------------ ------------
ASSETS
Current assets
Cash $ 2,253 $ --
Due from Vital Products, Inc. 1 1
------------ ------------
Total current assets 2,254 1
------------ ------------
Total assets $ 2,254 $ 1
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Bank overdraft $ 21,289 $ 16,395
Accounts payable and accrued expenses 3,274,112 3,693,578
Loans payable to related party 150,357 158,844
Current portion of long-term debts, net 918,651 917,134
------------ ------------
Total current liabilities 4,364,409 4,785,951
Long-term debts, net -- --
------------ ------------
Total liabilities 4,364,409 4,785,951
------------ ------------
Conditionally redeemable convertible
preferred stock; Series B 1.5%
convertible preferred stock 1,000,000 1,000,000
------------ ------------
Stockholders' deficit
Preferred stock; $0.01 par value;
1,000,000 shares authorized,
224,134 and 229,134 issued
and outstanding, respectively 2,241 2,291
Common stock; $0.0001 par value;
1,000,000,000 shares authorized,
56,658 and 657 issued and
outstanding, respectively 6 0
Additional paid-in capital 21,866,731 21,812,787
Accumulated other comprehensive income 1,358,160 562,341
Accumulated deficit (28,589,293) (28,163,369)
------------ ------------
Total stockholders' deficit (5,362,155) (5,785,950)
------------ ------------
Total liabilities and stockholders' deficit $ 2,254 $ 1
============ ============
The accompanying notes are an integral part of the financial
statements. F1
METRO ONE DEVELOPMENT, INC.
Statements of Operations (Unaudited)
(Restated -
Note 7)
For the three months
ended October 31,
2008 2007
------------ ------------
Sales $ -- $ --
Cost of revenues -- --
------------ ------------
Gross profit -- --
------------ ------------
Operating expenses
Selling, general and administrative 444,764 509,944
------------ ------------
Total operating expenses 444,764 509,944
------------ ------------
Loss from continuing operations ( 444,764) (509,944)
Other income (expense)
Gain on recovery of previously
written-off receivable 63,840 --
Interest and financing expense -- (553,677)
Interest income -- 74,301
------------ ------------
Total other income (expense) 63,840 (479,376)
------------ ------------
Loss before provision for income taxes (380,924) (989,320)
Provision for income taxes -- --
------------ ------------
Net loss from continuing operations (380,924) (989,320)
Net loss from discontinued operations -- (1,866,330)
------------ ------------
Net loss $ (380,924) $(2,855,650)
============ ============
Earnings per share computation:
Net loss from continuing operations per
common share $ (20.64) $ (989,320)
============ ============
Net loss from discontinued operations
per common share $ -- $(1,866,330)
============ ============
Net loss per common share $ (20.64) $(2,855,650)
============ ============
Weighted average common shares outstanding -
basic and diluted 18,455 1
============ ============
The accompanying notes are an integral part of the
financial statements. F2
METRO ONE DEVELOPMENT, INC.
Statement of Changes in Stockholders' Equity
For the Three Months ended October 31, 2008
(Unaudited)
Accumulated (Restated -
Additional Other Note 7) Total
Preferred Stock Common Stock Paid-in Comprehensive Accumulated Stockholders'
Shares Amount Shares Amount Capital Income(Loss) Deficit Equity
--------- ------- ----------- ----------- ----------- ----------- ----------- -----------
Balance,
July 31, 2008 229,134 2,291 657 -- 21,812,787 562,341 (28,163,369) (5,785,950)
Issuance of
common stock
for services -- -- 47,501 5 50,845 -- -- 50,850
Conversion of
preferred stock
into common
stock (5,000) (50) 500 - 50 -- -- --
Issuance of
common stock
as principal
payment on
notes payable -- -- 8,000 1 3,049 -- -- 3,050
Dividends paid
preferred stock,
Series B -- -- -- -- -- -- (45,000) (45,000)
Foreign currency
translation -- -- -- -- -- 795,819 -- 795,819
Net loss -- -- -- -- -- -- (380,924) (380,924)
--------- ------- ----------- ----------- ------------ ----------- ------------ -----------
Balance,
October 31, 2008 224,134 $ 2,241 56,658 $ 6 $ 21,866,731 $ 1,358,160 $(28,589,293) $(5,362,155)
========= ======= =========== =========== ============ =========== ============ ===========
See Accompanying Notes to Financial Statements
F3
METRO ONE DEVELOPMENT, INC.
Statements of Cash Flows (Unaudited)
(Restated -
Note 7)
For the three months
ended October 31,
2008 2007
(unaudited) (unaudited)
------------ ------------
Cash flows from operating activities:
Net loss $ (380,924) $(2,855,650)
Adjustments to reconcile net loss to net
cash used in operating activities:
Stock-based compensation 50,850 442,157
Financing cost related to convertible debt -- 467,735
Depreciation and amortization -- 38,533
Interest earned on Due from Vital Products -- (73,592)
Impairment on assets -- 2,042,274
Changes in operating assets and liabilities:
Change in accounts receivable -- 545,092
Change in inventory -- (39,241)
Change in prepaid expenses -- 13,936
Change in due from Vital Products -- (3,118)
Change in income tax receivable -- (722)
Change in accounts payable and accrued
expenses (419,466) (92,161)
------------ ------------
Net cash provided by (used in)
operating activities (749,540) 485,243
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment -- (1,207)
------------ ------------
Net cash used in investing activities -- (1,207)
------------ ------------
Cash flows from financing activities:
Payments on long term debt -- (6,211,315)
Proceeds from related party loan (8,487) --
Proceeds from long term debt -- 5,349,620
Advance on bank overdraft 4,894 --
Dividend paid on preferred stock (45,000) (45,000)
------------ ------------
Net cash used in by financing activities (48,593) (906,695)
------------ ------------
Effect of foreign currency exchange 800,386 516,116
------------ ------------
Net change in cash 2,253 93,457
Cash, beginning of period -- 882,131
------------ ------------
Cash, end of period $ 2,253 $ 975,588
============ ============
The accompanying notes are an integral part of the
financial statements. F4
METRO ONE DEVELOPMENT, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2008 AND 2007
1. BASIS OF PRESENTATION AND HISTORY OF THE COMPANY
Basis of presentation - The accompanying unaudited financial
statements have been prepared in accordance with Securities and Exchange
Commission requirements for interim financial statements. Therefore, they do
not include all of the information and footnotes required by accounting
principles generally accepted in the United States for complete financial
statements. The financial statements should be read in conjunction with the
Form 10-KSB for the year ended July 31, 2008 of Metro One Development, Inc.
(the "Company").
The interim financial statements present the balance sheet, statements of
operations, stockholders' equity and cash flows of the Company. The financial
statements have been prepared in accordance with accounting principles
generally accepted in the United States.
The interim financial information is unaudited. In the opinion of management,
all adjustments necessary to present fairly the financial position as of
October 31, 2008 and the results of operations, stockholders' equity and cash
flows presented herein have been included in the financial statements. All
such adjustments are the normal and recurring nature. Interim results are not
necessarily indicative of results of operations for the full year.
History of the Company - Metro One Development, Inc. formerly known as On The
Go Healthcare, Inc., (the "Company") was incorporated on July 21, 2000 in the
State of Delaware.
In October 2003, the Company acquired the assets and liabilities of Compuquest,
Inc. through its subsidiary the International Mount Company. Compuquest is an
authorized dealer of computer hardware, software and peripherals for Acer
America, AST Computer, Hewlett-Packard, Microsoft and Toshiba.
On May 18, 2004, the Company signed an agreement to acquire substantially all
of the assets and assume the liabilities of Vital Baby Innovations Inc. The
acquisition was completed in June 2004.
On February 28, 2005, the Company acquired 1637033 Ontario Limited and its
wholly-owned subsidiary, Helios/Oceana Ltd., an Ontario-based company, that
provides IT professional services. The Company paid for this acquisition by
acting on a security agreement on a note receivable.
In June 2005, the Company sold all of the significant assets in its childcare
division to Vital Products, Inc.
On July 19, 2005, the Company acquired Infinity Technologies Inc., a computer
hardware provider.
In October 2005, the Company entered into a Letter of Intent to purchase
Island Corporation, a company involved in computer hardware distribution
focusing in the medical field. The acquisition was completed in January 2006.
In January 2006, the Company completed the purchase of Solutions In Computing
Inc., a supplier of computer hardware and software focusing in the
entertainment field.
During May 2006, the Company amalgamated all of its subsidiaries into On the
Go Technologies, Inc. Accordingly, as of July 31, 2007, the Company conducts
its operations directly.
F5
On March 18, 2008, the Company entered into a binding agreement with FTS Group,
Inc. and OTG Technologies Group, Inc., a Florida corporation and wholly-owned
subsidiary of FTS Group, Inc. (together, "FTS"), whereby FTS agreed to
purchase certain assets of the Company's value-added reseller business unit,
dba On The Go Technologies Group, including its goodwill and intellectual
property. On June 6, 2008, the Company agreed to amend certain terms of the
binding agreement. On July 14, 2008, FTS notified the Company of its
intention to terminate the transaction. The Company believes that FTS'
termination of the transaction constitutes a breach of the binding agreement
and that the promissory note issued pursuant to the binding agreement, as
amended, is in default. The Company intends to pursue all remedies that are
available. As of March 18, 2008, the Company has discontinued all operations
as a valued-added reseller.
As a result of the sale of the value-added reseller business, the Company
changed its business focus to that of a custom builder and property developer
in the Greater Toronto Area in Canada and subsequently changed its name from
On The Go Healthcare, Inc. to Metro One Development, Inc. on April 14, 2008.
Going concern - The accompanying financial statements have been
prepared on a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business.
The Company has assets totaling $2,254, liabilities totalling $4,364,409 and
net losses for the three months ended October 31, 2008 totaling $380,924.
The Company's ability to raise additional capital through the future issuances
of common stock or debt is unknown. The obtainment of additional financing,
the successful development of the Company's contemplated plan of operations,
and its transition, ultimately, to the attainment of profitable operations
are necessary for the Company to continue operations. The ability to
successfully resolve these factors raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements
of the Company do not include any adjustments that may result from the outcome
of these aforementioned uncertainties.
2. SIGNIFICANT ACCOUNTING POLICIES
Use of estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
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 the
reported amounts of revenue and expenses during the reporting period. Financial
statement items subject to significant management judgment include the
allowance for doubtful accounts, the valuation of inventory, the valuation
of due from Vital Products, Inc. and goodwill, as well as income taxes and
loss contingencies. Actual results could differ from those estimates.
Principles of consolidation - The accompanying financial
statements include the accounts of Metro One Development, Inc. and its
wholly-owned subsidiaries, The International Mount Company, 1637033 Ontario
Limited, Helios/Oceana Ltd., Infinity Technologies Inc., 2film Corporation
and Island Corporation. The accompanying financial statements
have been prepared in accordance accounting principles generally accepted
in the United States. All material inter-company accounts and transactions
have been eliminated in consolidation. During May 2006, the Company
amalgamated all the subsidiaries listed above into On The Go Technologies,
Inc. and dissolved all other subsidiaries.
Reclassifications - Certain prior year amounts were reclassified to conform
to current period presentation.
F6
Foreign currency translation - The Company considers the functional currency
to be the local currency and, accordingly, their financial information is
translated into U.S. dollars using exchange rates in effect at year-end for
assets and liabilities and average exchange rates during each reporting period
for the results of operations. Adjustments resulting from translation of
foreign subsidiaries' financial statements are included as a component of
other comprehensive income (loss) within stockholders' equity.
Revenue and expense recognition - The Company recognizes revenue in accordance
with Securities and Exchange Commission Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" ("SAB 101") as modified by
Securities and Exchange Commission Staff Accounting Bulletin No. 104. Under
SAB 101, revenue is recognized at the point of passage to the customer of
title and risk of loss, there is persuasive evidence of an arrangement, the
sales price is determinable, and collection of the resulting receivable is
reasonably assured. The Company generally recognizes revenue at the time of
delivery of goods. Sales are reflected net of discounts and estimated returns.
Amounts billed to customers for shipping and handling are recorded as sales
revenues. Costs incurred for shipping and handling are included in cost of
sales.
Stock based compensation - On January 1, 2006, the Company adopted SFAS No. 123
(R) "Share-Based Payment," which requires the measurement and recognition of
compensation expense for all share-based payment awards made to employees
and directors including employee stock options and employee stock purchases
related to an Employee Stock Purchase Plan based on the estimated fair values.
Earnings (loss) per share - The Company reports earnings (loss) per share in
accordance with SFAS No. 128, "Earnings per Share." Basic earnings (loss) per
share are computed by dividing income (loss) available to common shareholders
by the weighted average number of common shares available. Diluted earnings
(loss) per share are computed similar to basic earnings (loss) per share except
that the denominator is increased to include the number of additional common
shares that would have been outstanding if the potential common shares had
been issued and if the additional common shares were dilutive. Diluted
earnings (loss) per share have not been presented since the effect of the
assumed exercise of options and warrants to purchase common shares would
have an anti-dilutive effect.
Comprehensive income (loss) - The Company has adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," which
establishes standards for reporting and display of comprehensive income, its
components and accumulated balances. Comprehensive income is defined to
include all changes in equity except those resulting from investments by
owners or distributions to owners. Among other disclosures, SFAS No. 130
requires that all items that are required to be recognized under the current
accounting standards as a component of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. Comprehensive income is displayed in the statement of
shareholder's equity and in the balance sheet as a component of shareholders'
equity.
Recent Accounting Pronouncements
In January 2008, Staff Accounting Bulletin ("SAB") 110, "Share-Based Payment"
was issued (codified within ASC 225 ?Income Statement). Registrants may
continue, under certain circumstances, to use the simplified method in
developing estimates of the expected term of share options as initially
allowed by SAB 107, "Share-Based Payment". The adoption of SAB 110 did not
have any material effect on the financial position and results of operations
of the Company.
F7
In May 2008, the FASB issued Staff Position (-FSP) APB 14-1, -Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlements) (codified within ASC 470 -Debt). This
FSP requires a portion of this type of convertible debt to be recorded as
equity and to record interest expense on the debt portion at a rate that
would have been charged on nonconvertible debt with the same terms. This FSP
takes effect in the first quarter of fiscal years beginning after
December 15, 2008 and will be applied retrospectively for all periods
presented. It will be effective for the Company on August 1, 2009. The
adoption of APB 14-1 is not expected to have any material impact on our
financial position, results of operations or cash flows.
In June 2008, the FASB issued FSP EITF 03-6-1, -Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities (codified within ASC 260 -Earnings Per Share). Securities
participating in dividends with common stock according to a formula are
participating securities. This FSP determined that unvested shares of
restricted stock and stock units with nonforfeitable rights to dividends
are participating securities. Participating securities require the -two-class
method to be used to calculate basic earnings per share. This method lowers
basic earnings per common share. This FSP takes effect in the first quarter
of fiscal years beginning after December 15, 2008 and will be applied
retrospectively for all periods presented. It will be effective for the
Company on August 1, 2009. The adoption of FSP EITF 03-6-1 is not expected
to have any material impact on our financial position, results of operations
or cash flows.
In June 2008, the FASB ratified the consensus reached on EITF Issue No. 07-05,
-Determining Whether an Instrument (or Embedded Feature) Is Indexed to an
Entity's Own Stock (-EITF No. 07-05) (codified within ASC 815 -Derivatives
and Hedging). EITF No. 07-05 clarifies the determination of whether an
instrument (or an embedded feature) is indexed to an entity's own stock,
which would qualify as a scope exception under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. EITF No. 07-05 is effective
for financial statements issued for fiscal years beginning after
December 15, 2008. It will be effective for the Company on August 1, 2009.
Early adoption for an existing instrument is not permitted. The adoption of
EITF Issue No. 07-05 is not expected to have any material impact on our
financial position, results of operations or cash flows.
In February 2007 the FASB issued SFAS 159, -The Fair Value Option for
Financial Assets and Financial Liabilities-including an amendment of FASB
Statement No. 115 (codified within ASC 825 -Financial Instruments). The
statement permits entities to choose to measure many financial instruments
and certain other items at fair value. The objective is to improve financial
reporting by providing entities with the opportunity to mitigate volatility
in reported earnings caused by measuring related assets and liabilities
differently without having to apply complex hedge accounting provisions.
The statement is effective as of the beginning of an entity's first fiscal
year that begins after November 15, 2007. The Company will adopt this
pronouncement for its fiscal year beginning August 1, 2008. The adoption of
SFAS 159 did not have a material impact on our financial position, results
of operations or cash flows.
In September 2006, the FASB issued Statement of Financial Accounting Standard
(-SFAS) No. 157, -Fair Value Measurements (-SFAS 157) (codified within
ASC 820). SFAS 157 defines fair value, establishes a market-based framework
or hierarchy for measuring fair value, and expands disclosures about fair
value measurements. SFAS 157 is applicable whenever another accounting
pronouncement requires or permits assets and liabilities to be measured at
fair value. SFAS 157 does not expand or require any new fair value measures;
F8
however the application of this statement may change current practice. The
requirements of SFAS 157 are first effective for our fiscal year beginning
August 1, 2008. In February 2008, the FASB issued FASB Staff Position (FSP)
FAS 157-2 (codified within ASC 820)., Effective Date of FASB Statement
No. 157, which delayed the effective date by one year for all nonfinancial
assets and nonfinancial liabilities, except those that are recognized or
disclosed at fair value in the financial statements on a recurring basis.
In October 2008, the FASB issued FSP FAS 157-3 (codified within ASC 820).,
Determining the Fair Value of a Financial Asset When the Market for That
Asset is Not Active, to clarify the application of SFAS 157 in a market
that is not active and provide an example to illustrate key considerations
in determining the fair value of a financial asset when the market for that
financial asset is not active. This FSP was effective immediately. The
adoption of SFAS 157 did not have a material impact on our financial
position, results of operations or cash flows.
In December 2007, the FASB issued SFAS No. 141(R), - Business Combinations,
(SFAS 141(R)) (codified under ASC 805, - Business Combinations). SFAS 141(R)
establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, the goodwill acquired and any noncontrolling interest
in the acquiree. This statement also establishes disclosure requirements to
enable the evaluation of the nature and financial effect of the business
combination. SFAS 141(R) is effective for fiscal years beginning on or after
December 15, 2008. The adoption of SFAS 141(R) is not expected to have any
material impact on our financial position, results of operations or cash
flows.
In March 2008, the FASB issued SFAS No. 161, - Disclosures About Derivative
Instruments and Hedging Activities - an amendment of FASB Statement No. 133,
(SFAS 161) (codified within ASC 815 - Derivatives and Hedging). SFAS 161 is
intended to improve financial reporting about derivative instruments and
hedging activities by requiring enhanced disclosures to enable investors to
better understand their effects on an entity's financial position, financial
performance, and cash flows. SFAS 161 is effective for fiscal years beginning
after November 15, 2008. The adoption of SFAS 161 did not have any material
impact on our financial position, results of operations or cash flows.
In January 2009, the FASB issued FASB Staff Position No. EITF 99-20-1,
- Amendments to the Impairment Guidance of EITF Issue No. 99-20 (codified
within ASC 325 -Investments). This FSP amends the impairment guidance in
EITF Issue No. 99-20, - Recognition of Interest Income and Impairment on
Purchased Beneficial Interests and Beneficial Interests That Continue to
Be Held by a Transferor in Securitized Financial Assets, to achieve more
consistent determination of whether an other-than-temporary impairment has
occurred. Additionally, the FSP retains and emphasizes the objective of an
other-than-temporary impairment assessment and the related disclosure
requirements in FASB Statement No. 115 -Accounting for Certain Investments
in Debt and Equity Securities, and other related guidance. This guidance is
effective for interim and annual reporting periods ending after
December 15, 2008, and is applied prospectively. The adoption of EITF 99-20-1
is not expected to have any material impact on our financial position,
results of operations or cash flows.
In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, - Recognition and
Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2 and FAS
124-2) (codified within ASC 320 - Investments - Debt and Equity Securities).
FSP FAS 115-2 and FAS 124-2 change the method for determining whether an
other-than-temporary impairment exists for debt securities and the amount of
the impairment to be recorded in earnings. FSP FAS 115-2 and FAS 124-2 are
effective for interim and annual periods ending after June 15, 2009. The
adoption of FSP FAS 115-2 and FAS 124-2 is not expected to have any material
impact on our financial position, results of operations or cash flows.
F9
In April 2009, the FASB issued FSP FAS 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 (codified within
ASC 820 - Fair Value Measurements and Disclosures). FSP FAS 157-4 provides
additional guidance for estimating fair value when the volume and level of
activity for the asset or liability have significantly decreased. It also
includes guidance on identifying circumstances that indicate a transaction
is not orderly. FSP FAS 157-4 becomes effective for interim and annual
reporting periods after June 15, 2009 and shall be applied prospectively.
The adoption of FSP FAS 157 is not expected to have any material impact on
our financial position, results of operations or cash flows.
In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, - Interim
Disclosures about Fair Value of Financial Instruments (FSP FAS 107-1 and
APB 28-1) (codified within ASC 825 - Financial Instruments). FSP FAS 107-1
and APB 28-1 require fair value disclosures in both interim as well as
annual financial statements in order to provide more timely information about
the effects of current market conditions on financial instruments. FSP
FAS 107-1 and APB 28-1 are effective for interim and annual periods ending
after June 15, 2009. The adoption of FSP FAS 107-1 and APB 28-1 are not
expected to have any material impact on our financial position, results of
operations or cash flows.
In May 2009, the FASB issued SFAS No. 165, - Subsequent Events (SFAS 165)
(codified within ASC 855 - Subsequent Events). SFAS 165 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. Specifically, SFAS 165 sets forth 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. SFAS 165 is effective prospectively for interim and annual periods
ending after June 15, 2009. The adoption of SFAS 165 is not expected to have
any material impact on our financial position, results of operations or cash
flows.
In June 2009, the FASB issued SFAS No. 166, - Accounting for Transfers of
Financial Assets (SFAS 166) (codified within ASC 860 -Transfers and Servicing)
. SFAS 166 amends the derecognition guidance in SFAS No. 140, - Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities
(SFAS No. 140). SFAS 166 is effective for fiscal years beginning after
November 15, 2009. The adoption of SFAS 166 is not expected to have any
material impact on our financial position, results of operations or cash
flows.
In June 2009, the FASB issued SFAS No. 167, -Amendments to FASB Interpretation
No. 46(R) (SFAS 167) (codified within ASC 810 -Consolidation). SFAS 167 amends
the consolidation guidance applicable to variable interest entities and
affects the overall consolidation analysis under FASB Interpretation No. 46(R)
. SFAS 167 is effective for fiscal years beginning after November 15, 2009.
The adoption of SFAS 167 is not expected to have any material impact on our
financial position, results of operations or cash flows.
F10
In June 2009, the FASB issued SFAS No. 168, - The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles - a
replacement of FASB Statement No. 162 (SFAS 168) (codified within ASC 105 -
Generally Accepted Accounting Principles). SFAS 168 stipulates that the FASB
Accounting Standards Codification is the source of authoritative U.S. GAAP
recognized by the FASB to be applied by nongovernmental entities. SFAS 168
is effective for interim and annual periods ending after September 15, 2009.
In conjunction with the issuance of SFAS 168, the SEC issued interpretive
guidance Final Rule 80 (FR-80) regarding FASB's Accounting Standards
Codification. Under FR-80, the SEC clarified that the ASC is not the
authoritative source for SEC guidance and that the ASC does not supersede
any SEC rules or regulations. Further, any references within the SEC rules
and staff guidance to specific standards under U.S. GAAP should be understood
to mean the corresponding reference in the ASC. FR-80 is also effective for
interim and annual periods ending after September 15, 2009. The adoption of
SFAS 168 is not expected to have any material impact on our financial
position, results of operations or cash flows.
In August 2009, the FASB issued Accounting Standards Update (ASU) No. 2009-05,
- Measuring Liabilities at Fair Value (ASU 2009-05) (codified within ASC 820
- Fair Value Measurements and Disclosures). ASU 2009-05 amends the fair value
and measurement topic to provide guidance on the fair value measurement of
liabilities. ASU 2009-05 is effective for interim and annual periods beginning
after August 26, 2009. The adoption of ASU 2009-05 is not expected to have
any material impact on our financial position, results of operations or cash
flows.
In September 2009, the FASB issued ASU No. 2009-12, - Investments in Certain
Entities that Calculate Net Asset Value per Share (or its Equivalent)
(ASU 2009-12) (codified within ASC 820 -Fair Value Measurements and
Disclosures). ASU 2009-12 amends the input classification guidance under
ASC Topic 820. ASU 2009-12 is effective for interim and annual periods
ending after December 15, 2009. The adoption of ASU 2009-12 is not expected
to have any material impact on our financial position, results of operations
or cash flows.
In October 2009, the FASB issued ASU No. 2009-13, - Multiple Deliverable
Revenue Arrangements - a consensus of the FASB Emerging Issues Task Force
(ASU 2009-13) (codified within ASC Topic 605). ASU 2009-13 addresses the
accounting for multiple-deliverable arrangements to enable vendors to account
for products or services (deliverables) separately rather than as a combined
unit. ASU 2009-13 is effective prospectively for revenue arrangements entered
into or materially modified in fiscal years beginning on or after
June 15, 2010, with early adoption permitted. The adoption of ASU 2009-13
is not expected to have any material impact on our financial position,
results of operations or cash flows.
In October 2009, the FASB issued ASU 2009-15, - Accounting for Own-Share
Lending Arrangements in Contemplation of Convertible Debt Issuance or Other
Financing. ASU 2009-15 amends the accounting and reporting guidance for debt
(and certain preferred stock) with specific conversion features or other
options. ASU 2009-15 is effective for fiscal years beginning on or after
December 15, 2009. Management should dislose that they are evaluating the
impact of the future adoption of this standard or if already determined
disclose the impact.
In December 2009, the FASB issued ASU 2009-16, - Transfers and Servicing
(Topic 860) - Accounting for Transfers of Financial Assets. ASU 2009-16
amends the accounting for transfers of financials assets and will require
more information about transfers of financial assets, including
securitizations, and where entities have continuing exposure to the risks
related to transferred financial assets. ASU 2009-16 is effective at the
start of a reporting entity's first fiscal year beginning after
November 15, 2009, with early adoption not permitted. The adoption of
ASU 2009-16 is not expected to have any material impact on our financial
position, results of operations or cash flows.
F11
In December 2009, the FASB issued ASU 2009-17, - Consolidations (Topic 810)
- Improvements to Financial Reporting by Enterprises Involved with Variable
Interest Entities. ASU 2009-17 changes how a reporting entity determines when
an entity that is insufficiently capitalized or is not controller through
voting (or similar rights) should be consolidated. ASU 2009-17 also requires
a reporting entity to provide additional disclosures about its involvement
with variable interest entities and any significant changes in risk exposure
due to that involvement. ASU 2009-17 is effective at the start of a reporting
entity's first fiscal year beginning after November 15, 2009, or
January 1, 2010, for a calendar year entity. Early adoption is not permitted.
The adoption of ASU 2009-17 is not expected to have any material impact on
our financial position, results of operations or cash flows.
In January 2010, the FASB issued ASU 2010-01, - Equity (Topic 505) -
Accounting for Distributions to Shareholders with Components of Stock and
Cash. ASU 2010-01 clarifies that the stock portion of a distribution to
shareholders that allows them to elect to receive cash or shares with a
potential limitation on the amount of cash that all shareholders can elect
to receive is considered a share issuance. ASU 2010-01 is effective for
interim and annual periods ending on or after December 15, 2009 and should
be applied on a retrospective basis. The adoption of ASU 2010-01 is not
expected to have any material impact on our financial position, results
of operations or cash flows.
In January 2010, the FASB issued ASU 2010-02, - Consolidation (Topic 810)
- Accounting and Reporting for Decreases in Ownership of a Subsidiary - A
Scope Clarification. ASU 2010-02 clarifies the scope of the decrease in
ownership provisions of Subtopic 810 and expands the disclosure requirements
about deconsolidation of a subsidiary or de-recognition of a group of assets.
ASU 2010-02 is effective beginning in the first interim of annual reporting
period ending on or after December 15, 2009. The amendments in ASU 2010-02
must be applied retrospectively to the first period that an entity adopted
SFAS 160. The adoption of ASU 2010-02 is not expected to have any material
impact on our financial position, results of operations or cash flows.
In January 2010, the FASB issued ASU No. 2010-06, -Improving Disclosures about
Fair Value Measurements (ASU 2010-06) (codified within ASC 820 -Fair Value
Measurements and Disclosures). ASU 2010-06 improves disclosures originally
required under SFAS No. 157. ASU 2010-16 is effective for interim and annual
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 years. The adoption of ASU 2010-06 is not expected to have
any material impact on our financial position, results of operations or
cash flows.
In March 2010, the FASB issued ASU No. 2010-11, - Derivatives and Hedging
(Topic 815): Scope Exception Related to Embedded Credit Derivatives
(ASU 2010-11) (codified within ASC 815 - Derivatives and Hedging). ASU 2010-11
improves disclosures originally required under SFAS No. 161. ASU 2010-11 is
effective for interim and annual periods beginning after June 15, 2010. The
adoption of ASU 2010-11 is not expected to have any material impact on our
financial position, results of operations or cash flows.
3. STOCKHOLDERS' EQUITY
On August 15, 2008, the Company's common stock was adjusted to take into
account a 1,000-to-1 reverse stock split. The Company's common stock has
been adjusted on a retroactive basis; accordingly, all previous balances
have been adjusted for this reverse stock split.
During the three months ended October 31, 2008, there were no new stock
options or warrants granted.
F12
4. GAIN ON RECOVERY OF PREVIOUSLY WRITTEN-OFF RECEIVABLE
During the three months ended October 31, 2008, the Company received
15,200,000 of shares of Vital Product, Inc. with a total fair value of
$63,840 as settlement for amounts due from Vital Products, Inc., which
were previously written-off during the year ended July 31, 2008. As a
result, the Company has recorded a gain for the fair value of these shares
totaling $63,840. During the same three months ended October 31, 2008,
the Company distributed the 15,200,000 shares of Vital Products, Inc. to
pay $63,840 of consulting expenses incurred during this period.
5. DISCONTINUED OPERATIONS
As discussed in Note 1, on March 18, 2008, the Company entered into a binding
agreement with FTS Group, Inc. and OTG Technologies Group, Inc., a Florida
corporation and wholly-owned subsidiary of FTS Group, Inc. (together, "FTS"),
whereby FTS agreed to purchase certain assets of the Company's value-added
reseller business unit, dba On The Go Technologies Group, including its
goodwill and intellectual property. On June 6, 2008, the Company agreed to
amend certain terms of the binding agreement. On July 14, 2008, FTS notified
the Company of its intention to terminate the transaction. The Company
believes that FTS' termination of the transaction constitutes a breach of
the binding agreement and that the promissory note issued pursuant to the
binding agreement, as amended, is in default. The Company intends to pursue
all remedies that are available. As of March 18, 2008, the Company has
discontinued all operations as a valued-added reseller.
The sale of the Company's value-added reseller business operations to FTS
resulted in a loss on sale by the Company totalling $1,773,079 for the year
end July 31,2008.
The sale of the Company's value added reseller business operations has been
accounted for as discontinued operations in the financial
statements for the periods presented herein, in accordance with Statement
of Financial Accounting Standards No. 144, "Accounting for the Impairment
and Disposal of Long-lived Assets."
The following is a summary of the results of discontinued operations in the
statements of operations:
Three months ended October 31, 2007
Net sales $ 5,276,120
Cost of sales 4,369,369
-----------
906,751
Operating expenses 2,773,081
-----------
Income (loss) from
discontinued operations $(1,866,330)
===========
F13
6. SUBSEQUENT EVENTS
On November 3, 2008, the Company issued 24,000 common shares for services.
On February 5, 2009, our common stock was adjusted to take into account a
1,000-to-1 reverse stock split and began trading under the new ticker
symbol "MTRO.PK." The Company's common stock has been adjusted on a
retroactive basis; accordingly, all previous balances have been adjusted
for this reverse stock split.
On February 19, 2009, the Company converted 224,134 of preferred stock into
22,413,400 shares of common stock owned by the Company's President.
7. RESTATEMENT
The balance sheet as of October 31, 2008 and statement of operations for the
three months ended October 31, 2008 included herein were restated to reflect
the effect of changes to the original accounting for the distribution of Vital
Products Inc. common stock ("Vital Stock") for goods and services received by
the Company. The original accounting measured the value of the goods and
services based on the closing price of Vital Stock on the date granted. Vital
Stock for the three month period October 31, 2008 was thinly traded and
illiquid as evidenced by low trading volume and wide bid ask spreads and, as
such, is not a reliably measure of fair value. Accordingly, the distribution
of Vital Stock has been re-measured in these restated financial statements
based on the value of goods and services received. In addition, the
distribution of Vital Stock, in error, was recorded as a payment against
outstanding liabilities at October 31, 2008 and has been reallocated to
operating expenses.
The effect of these changes impacted the balance sheet and
statement of operations from August 2008 through April 2009. These
changes do not impact the cash flows of the Company. The balance
sheet as of October 31, 2008 and statement of operations for the three months
ended October 31, 2008 has been restated as summarized below:
As
Previously As
Reported Adjustment Restated
Balance Sheet as of October 31, 2008
Accounts payable and accrued liabilities $3,021,800 $ 252,312 $3,274,112
Statement of Operations for the three
months ended October 31, 2008
Operating expenses
Selling, general and administrative $ 1,838,612 $(1,393,848) $ 444,764
Other income
Gain on recovery of previously
written-off receivable $ 1,710,000 $(1,646,160) $ 63,840
Net loss $ (128,612) $ (252,312) $ (380,924)
Net loss per common share $ (6.97) $ (13.67) $ (20.64)
F14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
INTRODUCTION
The following discussion and analysis of financial condition and results of
operations is based upon, and should be read in conjunction with, our unaudited
financial statements and related notes thereto included elsewhere
in this report, and in our Form 10-KSB for the year ended July 31, 2008.
Subsequent to the issuance of its financial statements for the fiscal quarter
ended October 31, 2008, the Company identified an error in the accounting for
the distribution of Vital Products Inc. common stock ("Vital Stock") for goods
and services received by the Company. The original accounting measured the
value of the goods and services based on the closing price of Vital Stock on
the date granted. Vital Stock for the three month period October 31, 2008 was
thinly traded and illiquid as evidenced by low trading volume and wide bid
ask spreads and, as such, is not a reliably measure of fair value.
Accordingly, the distribution of Vital Stock has been re-measured in these
restated financial statements based on the value of goods and services
received. In addition, the distribution of Vital Stock, in error, was
recorded as a payment against outstanding liabilities at October 31, 2008
and has been reallocated to operating expenses. The effect of the restatement
is described in Note 7 of the Notes to Financial Statements under Part I,
Item 1, Financial Statements. The following management's discussion and
analysis gives effect to the restatement.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report contains "forward-looking statements" that involve risks and
uncertainties. We generally use words such as "believe," "may," "could,"
"will," "intend," "expect," "anticipate," "plan," and similar expressions to
identify forward-looking statements. You should not place undue reliance on
these forward-looking statements. Our actual results could differ materially
from those anticipated in the forward-looking statements for many reasons,
including general economic conditions, the markets for and market price of
our products, the strength and financial resources of our competitors, our
ability to find and retain skilled personnel, the results of our financing
efforts, regulatory developments and other risks described in our annual
report on Form 10-KSB and our other filings with the Securities and Exchange
Commission and risks described elsewhere in this report. Although we believe
the expectations reflected in the forward-looking statements are reasonable,
they relate only to events as of the date on which the statements are made,
and our future results, levels of activity, performance or achievements may
not meet these expectations. We do not intend to update any of the
forward-looking statements after the date of this document to conform these
statements to actual results or to changes in our expectations, except as
required by law.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported
in the Financial Statements and accompanying notes. Estimates are
used for, but not limited to, the accounting for the allowance for doubtful
accounts, inventories, impairment of long-term assets, income taxes and
loss contingencies. Management bases its estimates on historical experience
and on various other assumptions that are believed to be reasonable under the
circumstances. Actual results could differ from these estimates under different
assumptions or conditions.
We believe the following critical accounting policies, among others, may be
impacted significantly by judgment, assumptions and estimates used in the
preparation of the Financial Statements:
Revenue and expense recognition - We recognize revenue in accordance with
Securities and Exchange Commission Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements," or SAB 101 as modified by SAB 104.
Under SAB 101, revenue is recognized at the point of passage to the customer
of title and risk of loss, there is persuasive evidence of an arrangement,
the sales price is determinable, and collection of the resulting receivable
is reasonably assured. We generally recognize revenue at the time of delivery
of goods. Sales are reflected net of discounts and estimated returns based on
historical patterns.
Allowance for doubtful accounts - The allowance for doubtful accounts is
maintained to provide for losses arising from customers' inability to make
required payments. If there is a deterioration of our customers' credit
worthiness and/or there is an increase in the length of time that the
receivables are past due greater than the historical assumptions used,
additional allowances may be required.
4
Inventory - Inventory is comprised of finished goods held for sale and is
stated at the lower of cost, determined on an average cost basis, or market.
Based on our assumptions about future demand, market conditions and
obsolescence, inventories are written-down to market value. If our assumptions
about future demand change and/or actual market conditions are less favorable
than those projected, additional write-downs of inventories may be required.
We assess the recoverability of long-lived assets whenever events or changes
in business circumstances indicate that the carrying value of an asset may
not be recoverable. An impairment loss is recognized when the sum of the
expected undiscounted future net cash flows over the remaining useful life
is less than the carrying amount of the assets.
Stock-based compensation - On January 1, 2006, we adopted SFAS No. 123(R)
"Share-Based Payment," which requires the measurement and recognition of
compensation expense for all share-based payment awards made to employees
and directors including employee stock options and employee stock purchases
related to an Employee Stock Purchase Plan based on the estimated fair
values.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 31, 2008 AND 2007.
Revenues
We did not generate any revenues from sales for the three months ended
October 31, 2008 due to the sale of our value-added reseller business to
FTS Group.
Cost of Sales
We did not incur any cost of revenues for the period ended October 31, 2008 due
to the sale of our value-added reseller business to FTS Group.
Gross Profit
Our gross profit for the three months ended October 31, 2008 and the three
months ended October 31, 2007 totalled $0.
Selling, General and Administrative Expenses
Selling, General and Administrative Expenses decreased to $444,764 for the
three months ended October 31, 2008, from $509,944 for the three months
ended October 31, 2007. With the sale of our value-added reseller business
to FTS Group, we changed our business focus to that of a custom builder and
property developer. We are continuing to evaluate our staffing needs and
other administrative expenses in order to determine how to operate and grow
our business efficiently as we develop our new business model.
5
Interest and Financing Expense
Interest and financing expense was $0 for the three months
ended October 31, 2008, compared to $553,677 for the three months ended
October 31, 2007. The decrease in the three months ended October 31, 2008
compared to the three months ended October 31, 2007 is primarily the result
of no new promissory notes.
Net loss
Our net loss of $380,924 for the three months ended October 31, 2008, compared
to a net loss of $2,855,650 for the three months ended October 31, 2007, was
attributable to a gain on a previously written-off receivable.
Liquidity and Capital Resources
As of October 31, 2008, we had current assets of $2,254 and current liabilities
of $4,364,409, resulting in a working capital deficit of $(4,362,155).
For the three months ended October 31, 2008, we had cash used in operations
in the amount of $749,540, as compared to cash provided by operations in the
amount of $485,243 for the three months ended October 31, 2007. The decrease
in the cash provided is due to the change in our business model after the sale
of our value-added reseller business to FTS Group.
For the three months ended October 31, 2008, cash used in investing activities
was $0, as compared to $1,207 for the three months ended
October 31, 2007. The decrease in cash used in investing activities is
primarily related to a decrease in purchased property and equipment during the
period ended October 31, 2008, as compared to the prior year.
For the three months ended October 31, 2008, cash (used in) financing
activities was $(48,593) as compared to cash (used in) financing
activities of $(906,695)for the three months ended October 31, 2007. The
primary source of financing for the three months ended October 31, 2008 has
been a bank overdraft.
We believe the cash flow from operating activities and capital raised, as
needed, through existing debt financing will not be sufficient to provide
necessary capital for our operations for the next twelve months.
FINANCING ACTIVITIES
In July 2005, we entered into an equity line of credit agreement through a
convertible debt facility with Laurus Master Fund, Ltd. granting us access to
borrow up to $5,500,000. The financing consisted of a $500,000 secured term
loan and a $5,000,000 secured revolving note. On January 13, 2006, we agreed
to revise the financing facility with Laurus. The revised facility consists
of (i) a $500,000 Secured Convertible Note, (ii) a Secured Convertible Minimum
Borrowing Note, and (iii) a Secured Revolving Note (collectively, the "Amended
and Restated Notes"). The Amended and Restated Notes are secured by a
security interest in substantially all of our assets.
6
Pursuant to the Agreement, we agreed to amend the conversion price to $0.50
and the exercise price of the warrants to $0.65.
As of October 31, 2008, the balance for the Revolving Note totaled $828,861.
On December 6, 2006, we issued to Dutchess a convertible promissory note in
the amount of $1,937,000 for a purchase price of $1,550,000. The Note was due
and payable in full on July 11, 2008. Other than the $387,000 discount
inherent in the purchase price, the Note is non-interest bearing and calls for
monthly payments of $60,000 from January 10, 2007 through July 10, 2007 and
monthly payments of $126,500 from August 10, 2007 and thereafter until the
face amount of the Note is paid in full. The $387,000 inherent discount is
being amortized as debt discount over the term of the note.
In connection with the Note, we paid Dutchess a facility fee of $90,000 and
agreed to issue 400,000 shares of common stock as incentive shares with a fair
value of $264,000. The Note is convertible into shares of common stock at the
election of the Note holders. The conversion rate is at the lesser of (i) 50%
of the lowest closing bid price during the 15 trading days preceding the
conversion notice or (ii) 100% of the lowest bid price for the 20 days
immediately preceding the convertible closing date. The convertible
promissory note agreement contains a conversion limit which limits the
ability of Dutchess to convert the note to not exceed 4.99% of our outstanding
shares of common stock at any given time.
On March 5, 2008, we agreed to amend the terms of the Note. Pursuant to the
terms of the amended Note, payments made by us in satisfaction of the Note
will be in shares of our common stock, which we will issue to Dutchess on
the tenth calendar day of each month until our obligations under the Note
have been satisfied in full. Each payment will be convertible at 80% of the
lowest closing best bid prices of our common stock for the 10 trading days
prior to the payment due date. The maturity date of the Note remains the
same. As of October 31, 2008, the unpaid principal balance on the Note
totaled $88,773.
MATERIAL TRENDS AND UNCERTAINTIES
Effective March 18, 2008, we entered into a binding agreement with FTS Group,
Inc. and OTG Technologies Group, Inc., that was subsequently amended on
June 6, 2008, whereby we agreed to sell certain assets in our value-added
computer reseller business. As part of our decision to sell this business,
we determined that it would be in the best interests of our Company and our
stockholders to divest of the assets related to our value-added computer
reseller business and change our business model to one that focuses on custom
building and property development in the Greater Toronto Area in Canada.
We have not yet fully established our new business model and do not yet
have any projects underway. Additionally, as of February 13, 2009, we did
not have sufficient capital to pursue our new line of business. If we do
not raise sufficient capital to implement our business plan, we will not be
able to generate revenue. However, we will continue to incur expenses in
our next fiscal quarter and beyond associated with our remaining assets,
overhead costs related to remaining a public company and expenses including
salaries and office space for our remaining employees. We may not be
successful in raising capital and implementing our new business model and
this change in business model will have a material impact on our liquidity,
capital resources and results of operations.
7
Our financial condition is uncertain at this time. As discussed below,
Laurus Master Fund, Ltd. has filed a complaint alleging that
we are in default under our Amended and Restated Security Purchase Agreement.
It is too early to predict the outcome of this litigation; however, if Laurus
prevails on even a fraction of the amount they are seeking, we may not have
sufficient assets to pay the judgment. If that outcome occurs, we will likely
have to seek bankruptcy protection. Our Secured Revolving Note with Laurus
was our primary source of financing until March 17, 2008. Without this source
of funding, we no longer have access to capital to allow us to develop our
operations. In addition, having sold our assets as described above, we will
not have a significant source of capital until we either raise funds or
generate revenues pursuant to our business plan. If we do not raise sufficient
funds to cover our debts and overhead, our business will likely fail.
We have, in the past, issued our common stock to employees and consultants to
cover a portion of their compensation. As of February 13, 2009, the closing
price of our common stock, as quoted on the Pink Sheets, was $0.783. Due to
the price of our common stock, we must issue a substantial number of shares
to provide adequate compensation to employees and consultants. Due to our
limited capital resources, we anticipate continuing to issue common stock
to compensate employees and consultants. Our issuances of common stock
will dilute the stockholders of our common stock and will likely cause our
stock price to decline further. As a result, we determined that it would be
in the best interests of our Company and our stockholders to implement a
reverse split of our common stock in order to have sufficient stock to use
for compensation purposes or to raise capital. Our previous reverse stock
splits have resulted in a decline in our stock price and we believe our stock
price will likely decline again, particularly if we have not yet implemented
our new business model.
To the extent that we raise additional capital through the sale of equity or
convertible debt securities, the issuance of such securities may result in
dilution to existing stockholders. If additional funds are raised through
issuance of debt securities, these securities may have rights, preferences
and privileges senior to holders of common stock and the terms of such debt
could impose restrictions on our operations.
8
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off balance sheet arrangements to report for the quarter
ended October 31, 2008.
ITEM 3. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
Our management evaluated, with the participation of our Chief Executive Officer
and our Chief Financial Officer, the effectiveness of our disclosure controls
and procedures as of the end of the period covered by this Quarterly Report on
Form 10-QSB/A. Based on this evaluation, our Chief Executive Officer and our
Chief Financial Officer have concluded that our disclosure controls and
procedures are effective to ensure that information we are required to disclose
in reports that we file or submit under the Securities Exchange Act of 1934
(i) is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms, and (ii) is
accumulated and communicated to our management, including our Chief Executive
Officer and our Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure. Our disclosure controls and
procedures are designed to provide reasonable assurance that such information
is accumulated and communicated to our management. Our disclosure controls
and procedures include components of our internal control over financial
reporting. Management's assessment of the effectiveness of our internal
control over financial reporting is expressed at the level of reasonable
assurance that the control system, no matter how well designed and operated,
can provide only reasonable, but not absolute, assurance that the control
system's objectives will be met.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting that
occurred during our last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On June 23, 2006, Frank Abate, Elaine Abate, John Abate and Gerhard Schmid
filed a Statement of Claim in Ontario Superior Court against On The Go
Healthcare, Inc. for alleged damages for breach of contract in the amount
of $281,522 and damages for wrongful dismissal of Frank Abate and John Abate.
We have paid severance pay for Frank Abate and John Abate's termination and
we believe the plaintiffs' entire claim is frivolous. We cannot predict the
outcome of such allegations; however, we intend to vigorously
defend against the plaintiffs' claim. We have accrued $100,000.
On September 25, 2008, Laurus Master Fund, Ltd. filed a Complaint in the
Supreme Court of the State of New York naming Metro One Development, Inc.
and another party as defendants, alleging a breach of contract and promissory
estoppel and sought damages in the amount of $874,471. The claim relates
to a $5,500,000 financing agreement we entered into with Laurus on
July 14, 2005, as later amended. In its complaint, Laurus alleges that
we are in breach of the security agreement by selling substantially all of
the assets subject to their security interest and failing to direct all
present and future payments constituting collateral into an account under
Laurus' control. While it is too early to determine the outcome of such
allegations, we intend to continue to aggressively defend ourselves against
any claims and assert all available defenses.
9
On October 6, 2008, Arrow Electronics, Inc. sent us and another company a
formal demand for payment of $461,097 relating to product we purchased in
the first nine months of the year ended July 31, 2008. We have accrued
$461,097 as at October 31, 2008.
On July 15, 2008, EqualLogic Inc. filed a motion against us under our previous
trade name in the State of New Hampshire for $658,464 relating to product
we purchased on January 18, 2008. The letter is addressed to a third party
and under a previous trade name that we had been using before selling it to
the third party. We have accrued $658,464 as at October 31, 2008.
On July 31, 2008, Ingram Micro, Inc. sent us a formal demand for payment of
$85,567 relating to product we purchased in the beginning of March 2008
and product purchased by another company. We have accrued $85,567
as at October 31, 2008.
On August 7, 2008, Supercom Canada, Ltd. sent us a formal demand for payment
of $37,771 relating to product we purchased in 2006. We have accrued $37,771
as at October 31, 2008.
On August 7, 2008, Tech Data Canada Corporation sent us a formal demand for
payment of $329,998 relating to product we purchased in the first nine
months of the year ended July 31, 2008. We have accrued $329,998 as
at October 31, 2008.
On August 26, 2008, Isilon Systems Inc. filed a motion of default judgment
in the State of Washington against us and another company for $192,834
relating to products we purchased on October 24, 2007 and December 20, 2007.
We have accrued $192,834 as at October 31, 2008.
On August 28, 2008, Synnex Canada Limited sent a formal demand for payment
of $124,333 relating to products we purchased in March 2008. We have
accrued $124,333 as at October 31, 2008.
On September 3, 2008, Autodesk Inc. sent us a formal demand for payment of
$54,776 relating to product we purchased in January 2008. The letter is
addressed under a previous trade name that had been used before selling it
to a third party. We have accrued $54,776 as at October 31, 2008.
On October 20, 2008, Silicon Graphics Limited filed a claim against us with
the Ontario Superior Court of Justice for $189,134 relating to products we
purchased November 20, 2006. We have accrued $189,134 as at
October 31, 2008.
We may be involved from time to time in ordinary litigation, negotiation and
settlement matters that will not have a material effect on our operations or
finances. Other than the litigation described above, we are not aware of any
pending or threatened litigation against our Company or our officers and
directors in their capacity as such that could have a material impact on
our operations or finances.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Between October 2, 2008 and October 21, 2008, Dutchess converted $3,050
principal amount of a convertible promissory note into an aggregate of 8,000
shares of our common stock, at $0.38125 per share as follows:
* On October 2, 2008, we issued 1,500 shares of our common stock;
* On October 10, 2008, we issued 2,500 shares of our common stock; and
* On October 21, 2008, we issued 4,000 shares of our common stock.
Payments under the note are due on the tenth calendar day of each month and are
convertible into shares of our common stock at eighty percent of the lowest
closing best bid prices of our common stock for the ten trading days prior
to the payment due date.
On August 15, 2008, our common stock was adjusted to take into account a
1,000-to-1 reverse stock split. Additionally, on February 5, 2009, our common
stock was adjusted to take into account a 1,000-to-1 reverse stock split. The
issuances described above have been adjusted for the split that occurred on
August 15, 2008 and on February 5, 2009.
With respect to the issuance of our securities as described above, we relied
on the Section 4(2) exemption from securities registration under the federal
securities laws for transactions not involving any public offering. No
advertising or general solicitation was employed in offering the securities.
The securities were sold to an accredited investor. The securities were
offered for investment purposes only and not for the purpose of resale or
distribution, and the transfer thereof was appropriately restricted by us.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
As of October 31, 2008, we are in default with respect to indebtedness
described above including indebtedness to Laurus Master Fund, Ltd.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the quarter ended October 31, 2008, we did not submit any matters to
a vote of security holders. On November 19, 2008, a majority of the Company's
stockholders representing 86% of the outstanding votes of the Company acted
by written consent to approve a 1 for 1,000 reverse stock split
ITEM 5. OTHER INFORMATION.
On February 5, 2009, our common stock was adjusted to take into account a
1,000-to-1 reverse stock split and began trading under the new ticker
symbol "MTRO.PK." The Company's common stock has been adjusted on a
retroactive basis; accordingly, all previous balances have been adjusted
for this reverse stock split.
ITEM 6. EXHIBITS
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
2.1 Memorandum of Agreement between the Company and Elaine Abate, John Abate,
Gerhard Schmid, Frank Abate, 1066865 Ontario Inc, and Infinity
Technologies Inc., dated July 19, 2005 (included as Exhibit 2.1 to the
Form 8-K filed July 22, 2005, and incorporated herein by reference).
3.1 Restated Certificate of Incorporation (included as Exhibit 3.4 to the
Form 10-KSB filed October 27, 2004, and incorporated herein by
reference).
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3.2 By-laws (included as Exhibit 3.4 to the Form SB-2 filed May 24, 2001,
and incorporated herein by reference).
3.3 Certificate of Amendment of the Certificate of Incorporation (included
as Exhibit 3.5 to the Form 10-KSB filed October 27, 2004, and
incorporated herein by reference).
3.4 Certificate of Amendment of the Certificate of Incorporation, dated
June 6, 2007 (included as Exhibit 3.4 to the Form 10-QSB filed
June 12, 2007, and incorporated herein by reference).
3.5 Certificate of Amendment to the Amended and Restated Certificate of
Incorporation, as amended, dated August 13, 2007 (included as
Exhibit 3.1 to the Form 8-K filed August 17, 2007, and incorporated
herein by reference).
4.1 Certificate of Designation of Series A Convertible Preferred Stock
(included as Exhibit 4.1 to the Form 10-KSB filed October 27, 2004,
and incorporated herein by reference).
4.2 Secured Convertible Term Note between the Company and Laurus Master
Fund, Ltd., dated July 14, 2005 (included as Exhibit 4.1 to the
Form 8-K filed July 20, 2005, and incorporated herein by reference).
4.3 Secured Revolving Note between the Company and Laurus Master Fund,
Ltd., dated July 14, 2005 (included as Exhibit 4.2 to the Form 8-K
filed July 20, 2005, and incorporated herein by reference).
4.4 Secured Convertible Minimum Borrowing Note between the Company and
Laurus Master Fund, Ltd., dated July 14, 2005 (included as Exhibit
4.3 to the Form 8-K filed July 20, 2005, and incorporated herein by
reference).
4.5 Security and Purchase Agreement between the Company and Laurus
Master Fund, Ltd., dated July 14, 2005 (included as Exhibit 4.4 to
the Form 8-K filed July 20, 2005, and incorporated herein by
reference).
4.6 Master Security Agreement between the Company and Laurus Master
Fund, Ltd., dated July 14, 2005 (included as Exhibit 4.5 to the
Form 8-K filed July 20, 2005, and incorporated herein by reference).
4.7 Share Pledge Agreement between the Company and Laurus Master Fund,
Ltd., dated July 14, 2005 (included as Exhibit 4.6 to the Form 8-K
filed July 20, 2005, and incorporated herein by reference).
4.8 Form of Common Stock Purchase Warrant between the Company and Laurus
Master Fund, Ltd., dated July 14, 2005 (included as Exhibit 4.7 to the
Form 8-K filed July 20, 2005, and incorporated herein by reference).
4.9 Subsidiary Guaranty between the Company and Laurus Master Fund, Ltd.,
dated July 14, 2005 (included as Exhibit 4.8 to the Form 8-K filed
July 20, 2005, and incorporated herein by reference).
4.10 Funds Escrow Agreement between the Company and Laurus Master Fund,
Ltd., dated July 14, 2005 (included as Exhibit 4.9 to the Form 8-K
filed July 20, 2005, and incorporated herein by reference).
4.11 Forbearance Agreement between the Company and Laurus Master Fund,
Ltd., dated July 14, 2005 (included as Exhibit 4.10 to the Form 8-K
filed July 20, 2005, and incorporated herein by reference).
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4.12 Joinder Agreement between the Company and Laurus Master Fund, Ltd.,
dated July 20, 2005 (included as Exhibit 4.11 to the Form 8-K filed
July 20, 2005, and incorporated herein by reference).
4.13 Registration Rights Agreement between the Company and Laurus Master
Fund, Ltd., dated July 14, 2005 (included as Exhibit 4.12 to the
Form 8-K filed July 20, 2005, and incorporated herein by reference).
4.14 Amended and Restated Secured Convertible Term Note between the Company
and Laurus Master Fund, Ltd., dated January 13, 2006 (included as
Exhibit 4.1 to the Form 8-K filed January 30 2006, and incorporated
herein by reference).
4.15 Amended and Restated Secured Revolving Note between the Company and
Laurus Master Fund, Ltd., dated January 13, 2006 (included as Exhibit
4.2 to the Form 8-K filed January 30, 2006, and incorporated herein
by reference).
4.16 Amended and Restated Secured Convertible Minimum Borrowing Note
between the Company and Laurus Master Fund, Ltd., dated
January 13, 2006 (included as Exhibit 4.3 to the Form 8-K filed
January 30, 2006, and incorporated herein by reference).
4.17 Amended and Restated Security Purchase Agreement between the Company
and Laurus Master Fund, Ltd., dated January 13, 2006 (included as
Exhibit 4.4 to the Form 8-K filed January 30, 2006, and incorporated
herein by reference).
4.18 Amended and Restated Form of Common Stock Purchase Warrant between
the Company and Laurus Master Fund, Ltd., dated January 13, 2006
(included as Exhibit 4.5 to the Form 8-K filed January 30, 2006, and
incorporated herein by reference).
4.19 Amended and Restated Registration Rights Agreement between the Company
and Laurus Master Fund, Ltd., dated January 13, 2006 (included as
Exhibit 4.6 to the Form 8-K filed January 30, 2006, and incorporated
herein by reference).
4.20 Form of Series "D" Common Stock Purchase Warrant (included as Exhibit
4.22 to the Form SB-2 filed February 21, 2006, and incorporated herein
by reference).
4.21 Omnibus Agreement, dated July 11, 2007 (included as Exhibit 4.7 to the
Form 8-K filed July 17, 2007, and incorporated herein by reference).
4.22 Second Omnibus Agreement, dated September 24, 2007 (included as
Exhibit 4.8 to the Form 8-K filed September 28, 2007, and incorporated
herein by reference).
4.23 Third Omnibus Agreement, dated October 15, 2007 (included as Exhibit
4.9 to the Form 8-K filed October 19, 2007, and incorporated herein
by reference).
10.1 Secured Promissory Note between the Company and Vital Products, Inc.,
dated February 23, 2006 (included as Exhibit 10.1 to the Form 8-K filed
February 27, 2006, and incorporated herein by reference).
10.2 Secured Promissory Note between the Company and Vital Products, Inc.,
dated February 23, 2006 (included as Exhibit 10.2 to the Form 8-K filed
February 27, 2006, and incorporated herein by reference).
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10.3 2007 Stock Option Plan, dated January 16, 2007 (included as Exhibit 10.1
to the Form S-8 filed January 16, 2007, and incorporated herein by
reference).
10.4 Investment Agreement between the Company and Dutchess Private Equities
Fund, Ltd., dated January 16, 2007 (included as Exhibit 10.14 to the
Form SB-2 filed January 16, 2007, and incorporated herein by reference).
10.5 Side Letter Agreement between the Company and Dutchess Private Equities
Fund, Ltd., dated March 19, 2007 (included as Exhibit 10.15 to the Form
SB-2 filed March 20, 2007, and incorporated herein by reference).
10.6 2007 Stock Option Plan, dated April 24, 2007 (included as Exhibit 10.1
to the Form S-8 filed April 25, 2007, and incorporated herein by
reference).
10.7 On The Go Healthcare, Inc. 2007 Stock Option Plan, dated June 6, 2007
(included as Exhibit 10.1 to the Form S-8 filed June 7, 2007, and
incorporated herein by reference).
10.8 On The Go Healthcare, Inc. August 2007 Stock Option Plan, dated
August 14, 2007 (included as Exhibit 10.1 to the Form S-8 filed
August 14, 2007, and incorporated herein by reference).
10.9 2007 Stock Option Plan, dated October 5, 2007 (included as Exhibit 10.1
to the Form S-8 filed October 5, 2007, and incorporated herein by
reference).
10.10 2007 Stock Option Plan, dated October 19, 2007 (included as Exhibit
10.1 to the Form S-8 filed October 19, 2007, and incorporated herein
by reference).
10.11 2007 Stock Option Plan, dated November 19, 2007 (included as Exhibit
10.1 to the Form S-8 filed November 19, 2007, and incorporated herein
by reference).
10.12 On The Go Healthcare, Inc. February 2008 Stock Option Plan, dated
February 26, 2008 (included as Exhibit 10.1 to the Form S-8 filed
February 26, 2008, and incorporated herein by reference).
10.13 Binding Agreement between the Company on one side and FTS Group, Inc.
and OTG Technologies Group, Inc. on the other side, dated March 18, 2008
(included as Exhibit 10.1 to the Form 8-K filed March 27, 2008, and
incorporated herein by reference).
10.14 Metro One Development, Inc. April 2008 Stock Option Plan, dated
April 14, 2008 (included as Exhibit 10.1 to the Form S-8 filed
April 14, 2008, and incorporated herein by reference).
10.15 Amendment No. 1 to Transaction Documents, dated June 6, 2008
(included as Exhibit 10.1 to the Form 8-K filed June 16, 2008, and
incorporated herein by reference).
10.16 Metro One Development, Inc. June 2008 Stock Option Plan, dated
June 18, 2008 (included as Exhibit 10.1 to the Form S-8 filed
June 26, 2008, and incorporated herein by reference).
10.17 Metro One Development, Inc. September 2008 Stock Option Plan, dated
September 10, 2008 (included as Exhibit 10.1 to the Form S-8 filed
September 10, 2008, and incorporated herein by reference).
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21.1 List of Subsidiaries of the Registrant (included as Exhibit 21.1 to
the Form 10-KSB filed October 30, 2006, and incorporated herein by
reference).
31.1 Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of Officers pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
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.
METRO ONE DEVELOPMENT, INC.
Dated: March 15, 2010 By:/s/ Stuart Turk
----------------------------
Stuart Turk, President, CEO
Chairman and Director
Dated: March 15, 2010 By:/s/ Evan Schwartzberg
----------------------------
Evan Schwartzberg, Chief Financial
and Principal Accounting Officer
15
