Attached files
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| EX-32 - EX 32 - Meganet Corp | exhibitthirtytwo.htm |
| EX-31 - EX 31 - Meganet Corp | exhibitthirtyone.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 10-Q
____________________
For the quarterly period ended December 31, 2015
For the transition period from ____________ to____________
Commission File No. 333-176256
MEGANET CORPORATION
(Exact name of Registrant as specified in its charter)
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Nevada
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80-0376822
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(State or Other Jurisdiction of
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(I.R.S. Employer Identification No.)
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incorporation or organization)
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2510 E. Sunset Rd. Unit 5-777
Las Vegas, NV 89120
(Address of Principal Executive Offices)
(702) 987-0087
(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 has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) 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 [ ]
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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ]
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Not applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date: February 18, 2016 – 100,000,000 shares of common stock, $0.001 par value.
- 1 -
MEGANET CORPORATION
Table of Contents
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Page
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PART I – FINANCIAL INFORMATION
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3
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Item 1 Financial Statements
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3
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Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations
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9
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Item 3 Quantitative and Qualitative Disclosures About Market Risk
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12
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Item 4 Controls and Procedures
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12
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PART II – OTHER INFORMATION
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12
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Item 1 Legal Proceedings
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12
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Item 1A Risk Factors
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12
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Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
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12
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Item 3 Defaults Upon Senior Securities
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12
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Item 4 Mine Safety Disclosures
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12
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Item 5 Other Information
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12
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Item 6 Exhibits
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13
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SIGNATURES
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13
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- 2 -
PART I
Item 1. Financial Statements
The Financial Statements of the Registrant required to be filed with this 10-Q Quarterly Report were prepared by management and commence below, together with related notes. In the opinion of management, the Financial Statements fairly present the financial condition of the Registrant.
- 3 -
MEGANET CORPORATION
BALANCE SHEETS
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ASSETS
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December 31,
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March 31,
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||||||
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2015
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2015
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(Unaudited)
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Current assets:
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| Cash | $ | 124 | $ | 94 | ||||
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Total current assets
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124 | 94 | ||||||
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Property and equipment, net
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27,307 | 56,510 | ||||||
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Total assets
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$ | 27,431 | $ | 56,604 | ||||
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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Current liabilities:
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Accounts payable and accrued liabilities
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$ | 1,049,873 | $ | 929,077 | ||||
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Deferred revenue
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- | 40,000 | ||||||
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Officer advances
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753,835 | 666,045 | ||||||
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Total current liabilities
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1,803,708 | 1,635,122 | ||||||
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Total liabilities
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1,803,708 | 1,635,122 | ||||||
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Stockholders' equity (deficit):
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Common stock; $0.001 par value, 100,000,000 shares authorized and
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100,000,000 and 100,000,000 shares issued and outstanding, respectively
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100,000 | 100,000 | ||||||
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Additional paid-in capital
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2,906,391 | 2,853,131 | ||||||
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Accumulated deficit
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(4,782,668 | ) | (4,531,649 | ) | ||||
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Total stockholders' equity (deficit)
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(1,776,277 | ) | (1,578,518 | ) | ||||
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Total liabilities and stockholders' equity (deficit)
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$ | 27,431 | $ | 56,604 | ||||
The accompanying notes are an integral part of these financial statements.
- 4 -
MEGANET CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
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For the Three Months Ended
December 31,
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For the Nine Months Ended
December 31,
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|||||||||||||||
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2015
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2014
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2015
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2014
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Revenues
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$ | 486 | $ | 982 | $ | 82,620 | $ | 12,289 | ||||||||
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Cost of revenues
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-- | -- | -- | 5,500 | ||||||||||||
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Gross profit
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486 | 982 | 82,620 | 6,789 | ||||||||||||
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Operating expenses:
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General and administrative
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7,172 | 25,556 | 66,067 | 40,360 | ||||||||||||
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Depreciation
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11,208 | 11,049 | 33,178 | 35,667 | ||||||||||||
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Compensation and related payroll taxes
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30,049 | 31,228 | 98,262 | 91,228 | ||||||||||||
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Rent
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30,000 | 30,000 | 90,131 | 90,000 | ||||||||||||
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Total operating expenses
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78,429 | 97,833 | 287,638 | 257,255 | ||||||||||||
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Loss before other expenses
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(77,943 | ) | (96,851 | ) | (205,018 | ) | (250,466 | ) | ||||||||
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Other income (expenses)
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Bitcoin mining income
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-- | 18,664 | 7,867 | 18,664 | ||||||||||||
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Bitcoin mining expense
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-- | (133,688 | ) | (608 | ) | (133,688 | ) | |||||||||
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Interest expense
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(20,859 | ) | (15,805 | ) | (53,260 | ) | (43,641 | ) | ||||||||
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Total other income (expenses)
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(20,859 | ) | (130,829 | ) | (46,001 | ) | (158,665 | ) | ||||||||
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Loss before income taxes
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(98,802 | ) | (227,680 | ) | (251,019 | ) | (409,131 | ) | ||||||||
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Provision for income taxes
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- | - | - | - | ||||||||||||
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Net loss
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$ | (98,802 | ) | $ | (227,680 | ) | $ | (251,019 | ) | $ | (409,131 | ) | ||||
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Basic loss per common share
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$ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||
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Basic weighted average common
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shares outstanding
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100,000,000 | 100,000,000 | 100,000,000 | 100,000,000 | ||||||||||||
The accompanying notes are an integral part of these financial statements.
- 5 -
MEGANET CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
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For the Nine Months Ended
December 31,
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2015
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2014
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Cash flows from operating activities:
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Net loss
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$ | (251,019 | ) | $ | (409,131 | ) | ||
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Adjustments to reconcile net loss to net
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cash (used) provided by operating activities:
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Depreciation
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33,178 | 35,667 | ||||||
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Imputed interest on officer advance
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53,260 | 43,641 | ||||||
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Changes in operating assets and liabilities:
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Increase in accounts payable and accrued expenses
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120,796 | 173,092 | ||||||
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Decrease in deferred revenue
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(40,000 | ) | - | |||||
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Net cash used in operating activities
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(83,785 | ) | (156,731 | ) | ||||
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Cash flows from investing activities:
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Purchase of fixed assets
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(3,975 | ) | - | |||||
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Net cash used by investing activities
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(3,975 | ) | - | |||||
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Cash flows from financing activities:
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Advances from officer
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129,575 | 177,734 | ||||||
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Repayment of officer advances
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(41,785 | ) | (10,092 | ) | ||||
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Net cash provided by financing activities
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87,790 | 167,642 | ||||||
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Net change in cash
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30 | 10,911 | ||||||
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Cash, beginning of period
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94 | 131 | ||||||
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Cash, end of period
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$ | 124 | $ | 11,042 | ||||
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
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Cash paid for interest
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$ | - | $ | - | ||||
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Cash paid for taxes
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$ | - | $ | - | ||||
The accompanying notes are an integral part of these financial statements.
- 6 -
MEGANET CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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1.
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ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
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Meganet Corporation was incorporated in Nevada on March 26, 2009 (the “Company” or “Meganet”). Prior to the formation of the current entity, a now dissolved entity under the name Meganet Corporation was incorporated in California with common ownership and similar business objectives. The integration of the Company’s operations from the now dissolved California company to the Nevada company is considered a recapitalization due to the common ownership resulting in the assets and liabilities being recorded at a carryover basis as determined under accounting principles generally accepted in the United States of America. The former entity had been dissolved before incorporation on March 26, 2009.
Meganet is focused on the development of data security solutions for enterprise, large organizations and corporations around the globe, including the U.S. Department of Defense, Military Intelligence and the Federal Government. The Company’s data security solutions include a patented encryption algorithm which enhances security exponentially. The Company out-sources the manufacture of its counter-IED products, including bomb jammers, dismounted backpack portable jammers and facility jammers. The Company also develops and sells cell phone, satellite and wireless interceptors. Other data security solutions include encrypted cell phones, land lines, fax, PDA, radio, and satellites. Intelligence and counter-intelligence solutions include the development of SPY and RAT phones and devices for intelligence gathering. Counter-intelligence solutions include bugs, bug detectors, bomb sniffers, miniature cameras and digital video recorders. The Company maintains technology development, executive and sales offices in Las Vegas, Nevada.
The accompanying unaudited condensed consolidated financial statements have been prepared by Meganet pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim consolidated financial statements include normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim consolidated financial statements be read in conjunction with Meganet’s most recent audited financial statements. Operating results for the nine months ended December 31, 2015 are not necessarily indicative of the results that may be expected for the year ending March 31, 2016.
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2.
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GOING CONCERN
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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 incurred losses since inception and has an accumulated deficit of $4,782,668 as of December 31, 2015. The Company requires capital for its contemplated operational and marketing activities. The Company’s ability to raise additional capital through the future issuances of common stock 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.
Management anticipates that that there will be sales sufficient to cover the next 12 months of cash operating expenses; however, there can be no surety that anticipated sales will materialize. In order to mitigate the risk related with this uncertainty, the CEO has agreed to contribute additional amounts to capital as needed to cover operating expenses.
- 7 -
MEGANET CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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3.
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RELATED PARTY TRANSACTIONS
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Officer loan – During the nine month period ending December 31, 2015, the Company received net cash advances from the president in the amount of $87,790. All amounts advanced to the Company are unsecured, non-interest bearing and due upon demand by the president.
In accordance with FASB ASC 835-30 “Imputation of Interest” interest has been imputed on all advances made to Company by the president. During the nine month period ending December 31, 2015 and 2014, interest has been imputed and charged to additional paid-in capital in the amount of $53,260 and $43,641, respectively.
Employment agreements – as of December 31, 2015 the Company had only one employment agreement which was with the President and majority shareholder. The employment agreement stipulates that the President is to receive a base salary of $120,000 per annum. The agreement also contains a provision allowing for a commission to be paid equal to 10% of gross sales achieved by the President. The total expense related to this agreement was $98,262 and $91,228 for the nine month period ending December 31, 2015 and 2014, respectively. As of December 31, 2015, $753,835 of total compensation was unpaid and accrued in current liabilities.
The Company has accrued for unpaid payroll taxes related to these payroll expenses which amount to $73,714 and $73,714 as of December 31, 2015 and 2014, respectively. These accruals include $1,649 in interest or penalties related to the late status of these payments. Nonetheless, the Company anticipates that it will reasonably be able to negotiate the total past due amount of payroll taxes in order to effectively eliminate penalties and interest.
- 8 -
Item 2. Management’s Discussions and Analysis of Financial Condition and Results of Operations.
Forward-looking Statements
Statements made in this Quarterly Report which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and our business, including, without limitation, (i) our ability to raise capital, and (ii) statements preceded by, followed by or that include the words “may,” “would,” “could,” “should,” “expects,” “projects,” “anticipates,” “believes,” “estimates,” “plans,” “intends,” “targets” or similar expressions.
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, general economic or industry conditions, nationally and/or in the communities in which we may conduct business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our current or potential business and related matters.
Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
Business Operations
Meganet is focused on the development of data security solutions for enterprise, large organizations and corporations around the globe, including the U.S. Department of Defense, Military Intelligence and the Federal Government. The Company has developed and does develop products that it believes are attractive and important to these markets.
Working with government in a business capacity can be a long and arduous process. Governments and their agencies have constant budget restraints and lengthy product procurement processes. In many if not in most cases, a bidding process is required before an order for goods can be placed with a private supplier. Before products can be sold to the U.S. Government or to any of its agencies, the product and/or its supplier must be certified by the U.S. Government, which certification is not easy to obtain. From the time a product is developed until the time it is actually shipped to an agency in return for payment can be months if not years.
The financial statements that form part of this quarterly report 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. Our independent accountants observed that the Company requires capital for its contemplated operational and marketing activities and that the Company’s ability to raise additional capital through the future issuances of common stock is unknown and that the obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and its transition to the attainment of profitable operations are necessary for the Company to continue operations. The independent accountants concluded that the ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern.
Our management has been with Meganet from its inception and has in the past shepherded all software products from the development stage through the government procurement process to final delivery and payment. Management believes that despite the Company’s current illiquid position, the Company is in a good position with respect to the upcoming 18 to 24 months of operations estimating Meganet has more than $10,000,000 of potential product sales in the so-called product pipeline. Being in the pipeline does not mean that product has necessarily been bought, sold or ordered. It does mean that products are somewhere in the bidding and/or procurement process and in management’s opinion have a reasonable chance of becoming orders, having a portion of those orders delivered and thereby producing collected revenues for the Company in material amounts within the next 18 to 24 months. Management expects 50% of the potential product sales in its pipeline to produce revenue. At the present time Meganet has confirmed sales to two third world countries, one in the amount of $30,000,000 and one in the amount of $25,000,000. However, Meganet has not received the up-front cash deposit for either order that it requires before Meganet will begin filling the order. It is the potential of these two orders that account for much of the $10,000,000 pipeline estimate set forth earlier in this paragraph. These two orders have been delayed due to budgetary issues within the respective countries.
The cash deposit necessary to begin the implementation of each sale is $5,000,000. With regard to the $30,000,000 sale, the implementation will take 18 months. The product for this sale will not be delivered and accepted until approximately 18 months after Meganet receives the cash deposit to begin work. Accordingly, revenue for this sale will not be booked for 18 months after receipt of the initial deposit. With regard to the $25,000,000 sale, implementation will take approximately 14 months. In this case, product will be produced and delivered from time to time during the 14 month period. The initial product delivery valued at more than $5,000,000 will take place approximately six months after the receipt of the $5,000,000 deposit. Accordingly, the initial deposit of $5,000,000 will be booked as revenue upon the acceptance of that initial product shipment. It should be noted that when the initial deposits are made is under the sole control of the countries to whom the sales have been made.
- 9 -
The confirmed sales to the two third world countries are for defense/security type products and were originally slated to be procured by the countries out of their respective defense budgets for the 2012 fiscal year. However, in each case, the 2012 defense funds were spent by the countries on other priorities and the purchase of Meganet’s products have now been delayed until 2016. Meganet has been told by each country that monies allocated in their 2016 defense budgets will be allocated to the purchase and the installation of Meganet’s products. It should be noted that Company management will make every effort to finalize these two sales through and including receipt of all payment and believes based upon information it has at this time that it will be successful. However, until payment is actually received, there can be no guarantee that management will be successful in these efforts.
Liquidity
At December 31, 2015, the Company had cash in the amount of $124 compared to $1,803,708 in current liabilities. On a monthly basis the Company has fixed expenditures including without limitation rent and salary in the approximate amount of $25,000. This $25,000 includes the $10,000 monthly salary of our CEO which he does not take but rather accrues if money is not available for payment of the salary. Taking this into consideration, the Company needs $15,000 per month which equals $180,000 for 12 months to sustain operations and estimates it will need $180,000 in additional capital to sustain business operations over the next twelve months. Our CEO will lend the full $180,000 to Meganet, if cash is not otherwise available within the Company.
It is common for companies to resolve illiquid positions by attempting to raise additional working capital through the sale of equity capital or short term borrowing from third parties. However, our management does not believe this will be necessary. Rather management believes there will be sales sufficient to cover the next 18 to 24 months of cash operating expenses; however, there can be no surety that anticipated sales will materialize. Also, in the event that sales anticipated during the next 18 to 24 months are funded in the later end of the 18 to 24 month period, it will be necessary for the Company to procure additional operating capital during the early months of the next 18 to 24 month period. In order to provide for this potential situation, our CEO has agreed to contribute additional amounts to capital as needed to cover operating expenses. However, there is no written agreement between our CEO and the Company for him to provide this funding and therefore his agreement to do so is non-binding upon him.
Background to Understanding the Financial Results for the Past Three Years
To understand Meganet’s financial results for the past three years, it is necessary to understand its sales cycle which is different from traditional companies that may have sales on a daily, weekly and/or monthly basis. Meganet’s sales cycle is highly sporadic as a result of its product lines and its customer mix.
Product Lines
Meganet is a technology company supplying world markets with products primarily instrumental in military defense, personal protection, data protection, home land security and other intelligence and counter-intelligence uses. Examples of products for these uses are bomb jammers and cell phone interceptors.
This product base lends itself to sporadic sales cycles for the following reasons. In times of war which can come upon a country quickly, a country will have immediate need of products for military defense uses such as bomb jammers. In times of peace, bomb jammers may not be needed for many years. To the contrary, as a country develops and implements a long term homeland security strategy, it may put out bids for certain types of intelligence and counter-intelligence products that it may leave out to bid for one to two years. To participate in such a bidding process, Meganet must maintain protectable state of the art technologies over a lengthy bidding process that it can deliver in quick fashion in the event it is awarded the bid for a particular product.
Customer Mix
Meganet’s focus is on government and military markets which has advantages and disadvantages. Advantages include the fact that governments have deep pockets and when they really need a product they can procure it and pay for it. Also, when a company such as Meganet has a technology that a government really needs, the product can sustain a large margin in the sales price. In addition, technology is often scalable. Once developed, products based upon a technology can bring close to a 100% return.
Disadvantages in selling to governments and militaries include the fact that there is fierce competition for these lucrative markets and large suppliers are notorious for using underhanded methods. Also, governments are subject to budgetary issues and budgetary crises and ever changing priorities for fixed budgeted funds. Governments have bidding requirements. This can be good and bad. Bidding does allow for companies such as Meganet to bid against the large suppliers. However, it makes for lengthy and unwieldy sales cycles that make it difficult to predict and sustain cash flow.
- 10 -
Examples Illustrative of Meganet’s Sales Cycle
A good way to understand Meganet’s sales cycle is to see examples of past sales. Meganet obtained its product base and its business plan from a company called Meganet Corporation, a California corporation (“Meganet California”). In 2002, Meganet California made a sale to the U.S. Department of Labor. After soliciting the U.S. Dept of Labor for over a year, Meganet California received a software order for $4,200,000. Development costs of the software had been expensed as they were incurred and since it was software it had no production cost. Therefore the sale was virtually 100% profit to the company at the time it was realized. However, in the 12 months leading to this sale, total sales were only $100,000.
Another example is Meganet California’s sale to the U.S. Department of Transportation (the “DOT”) in 2005. After pursuing a sale for only three months which would typically be just the beginning of a solicitation cycle, an internal security breach at the DOT heightened security concerns and it issued Meganet California a $10,000,000 contract immediately. In the 12 months prior to the sale, Meganet California had sales of under $1,000,000 dollars total.
A third example is a sale to the U.S. Department of Veteran Affairs (the “DVA”) in 2007. Meganet California had been soliciting the DVA’s business for three years trying to sell a biometric USB storage device without success. One day without prior notice, Meganet California was selected as the sole source provider of biometric USB storage devices nationwide to over 5,000 facilities. Like before, sales for the prior 12 months had been under $1,000,000.
The Company’s revenue consists primarily of revenue from the sale of jamming and interceptor hardware and data security software. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collection is probable. Product is considered delivered to the customer once it has been shipped and title and risk of loss have been transferred. For most of the Company’s product sales, these criteria are met at the time the product is shipped. The Company recognizes revenue from the sale of hardware products (e.g., jammers and cell phone interceptors) and software included with hardware that is essential to the functionality of the hardware, in accordance with general revenue recognition accounting guidance. The software inherent to the functionality of the hardware is inseparable from the hardware component and does not have a standalone fair market value.
The Company has no continuing obligations, such as providing software updates, subsequent to the delivery of its products. This is true of software products as well as of hardware products for which software is a component. Accordingly, revenue recognition takes place pursuant to the guidelines in the preceding paragraph without any adjustments that would otherwise be required because of an ongoing obligation to maintain software.
In addition to the software essential to the hardware that is sold, the Company sells off the shelf software to customers that is not related to the hardware that is sold. The Company recognizes revenue in accordance with industry specific software accounting guidance for the following types of sales transactions: (i) standalone sales of software and (ii) sales of software upgrades.
Generally, the Company requires customers to deposit 50% of the gross sales price upon execution of a formal intent to sell with the remaining 50% due upon delivery of the product. The Company records deferred revenue when it receives payments in advance of the delivery of products.
Comparison of the Fiscal Quarters Ended December 31, 2015 and 2014
Operating results for the fiscal quarters ended December 31, 2015 and 2014 yielded gross profit of $486 and $982 respectively, operating expenses of $78,429 and $97,833 respectively and net loss of $98,802 and $227,980 respectively. Non-cash depreciation expense was $11,208 for the quarter ended December 31, 2015 and $11,049 for the quarter ended December 31, 2014, and was responsible for only 14% of the operating expense and net loss for the quarter ended December 31, 2015.
Comparison of the Nine Month Periods Ended December 31, 2015 and 2014
Operating results for the nine month periods ended December 31, 2015 and 2014 yielded gross profit of $82,620 and $6,789 respectively, operating expenses of $287,638 and $257,255 respectively and net loss of $251,019 and $409,131 respectively. Non-cash depreciation expense was $33,178 for the nine month period ended December 31, 2015 and $35,667 for the nine month period ended December 31, 2014, and was responsible for some of the net loss for the two nine month periods.
Contractual Obligations
The Company has no long-term debt obligations, capital lease obligations, purchase obligations or other long-term liabilities. The Company pays rent of $10,000 per month for its office and shop space on a month to month basis.
Off-balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements.
- 11 -
No Undisclosed Material Trends or Events
There are no trends, events or developments that occurred during the fiscal quarter ended December 31, 2015, or from December 31, 2015 through the date of this quarterly report that would indicate or would be a material departure from the financial information set forth in this quarterly report. Furthermore, there are no other undisclosed events or events likely to occur, of which management is aware, that would materially affect the business and/or financial information set forth in this quarterly report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company qualifies as a “smaller reporting company” as defined in 17 C.F.R. §229.10(f)(1), and is not required to provide information by this item.
Item 4. Controls and Procedures.
Evaluation of disclosure controls and procedures
Under the supervision and with the participation of our management including our chief executive officer and chief financial officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, our chief executive officer and our chief financial officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were not effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is not subject to effective duel control allowing for appropriate segregation of duties.
Changes in internal control over financial reporting
Our management, with the participation of the chief executive officer and chief financial officer, has concluded there were no significant changes in our internal controls over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 1A. Risk Factors.
The Company qualifies as a “smaller reporting company” as defined in 17 C.F.R. §229.10(f)(1), and is not required to provide information by this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
In October, 2015, a market maker submitted to FINRA on our behalf an application on Form 211 for purposes of obtaining a trading symbol so our stock can be listed on the OTCQB of the OTC Market System. In January, 2016, FINRA assigned the Company the trading symbol MGNT.
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Item 6. Exhibits.
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Exhibit No.
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Identification of Exhibit
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3.1
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Articles of Incorporation (1)
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3.2
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Bylaws (1)
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31
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Certification Pursuant to Section 302 of the Sarbanes-Oxley Act.
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32
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Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101
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Interactive Data Files
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(1) Attached as an exhibit to Form S-1 filed on August 12, 2011.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized
MEGANET CORPORATION
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Date:
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February 22, 2016 |
By:
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/s/Saul Backal
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Saul Backal, CEO
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