EPAZZ INC – 10-Q – MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
Source: | Edgar Online, Inc. |
ALL STATEMENTS IN THIS DISCUSSION THAT ARE NOT HISTORICAL ARE FORWARD-LOOKING STATEMENTS. STATEMENTS PRECEDED BY, FOLLOWED BY OR THAT OTHERWISE INCLUDE THE WORDS "BELIEVES", "EXPECTS", "ANTICIPATES", "INTENDS", "PROJECTS", "ESTIMATES", "PLANS", "MAY INCREASE", "MAY FLUCTUATE" AND SIMILAR EXPRESSIONS OR FUTURE OR CONDITIONAL VERBS SUCH AS "SHOULD", "WOULD", "MAY" AND "COULD" ARE GENERALLY FORWARD-LOOKING IN NATURE AND NOT HISTORICAL FACTS. THESE FORWARD-LOOKING STATEMENTS WERE BASED ON VARIOUS FACTORS AND WERE DERIVED UTILIZING NUMEROUS IMPORTANT ASSUMPTIONS AND OTHER IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS INCLUDE THE INFORMATION CONCERNING OUR FUTURE FINANCIAL PERFORMANCE, BUSINESS STRATEGY, PROJECTED PLANS AND OBJECTIVES. THESE FACTORS INCLUDE, AMONG OTHERS, THE FACTORS SET FORTH BELOW UNDER THE HEADING "RISK FACTORS." ALTHOUGH WE BELIEVE THAT THE EXPECTATIONS REFLECTED IN THE FORWARD-LOOKING STATEMENTS ARE REASONABLE, WE CANNOT GUARANTEE FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS. MOST OF THESE FACTORS ARE DIFFICULT TO PREDICT ACCURATELY AND ARE GENERALLY BEYOND OUR CONTROL. WE ARE UNDER NO OBLIGATION TO PUBLICLY UPDATE ANY OF THE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS, EXCEPT AS PROVIDED BY LAW. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS. REFERENCES IN THIS FORM 10-Q, UNLESS ANOTHER DATE IS STATED,
Business Overview
The Company was incorporated in the
The Company developed a web portal infrastructure operating system product called BoxesOS v3.0. BoxesOS provides a web portal infrastructure operating system designed to increase the satisfaction of key stakeholders (students, faculty, alumni, employees, and clients) by enhancing the organizational experience through the use of enterprise web-based applications to organize their relationships and improve the lines of communication. BoxesOS decreases an organization's operating expenses by providing development tools to create advanced web applications. The applications can be created by non-technical staff members of each institution. BoxesOS creates sources of revenue for Alumni Associations and Non-Profit organizations through utilizing a web platform to conduct e-commerce and provides e-commerce tools for small businesses to easily create "my accounts" for their customers. It further reduces administrative costs, by combining technology applications into one package, providing an alternative solution to enterprise resource planner ("ERP") modules and showing a return on investment for institutions by reducing the need for 3rd party applications license fees. BoxesOS can also link a college or university's resources with the business community by allowing businesses to better train their employees by utilizing courseware development from higher education institutions.
On or about
(a)Mr. Goes retained the$10,000 originally paid by the Company in connection with the parties' entry into the Letter of Intent; (b) The Company paidMr. Goes $210,000 in cash (the "Cash Consideration") at the Closing (as defined below) of the Purchase Agreement; and (c) The Company provided Mr. Goes with a 7% Promissory Note in the amount of$225,000 (the "Note"), described in greater detail below.
Additionally, the Company agreed to assume an aggregate of approximately
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The Purchase Agreement closed on
The Note accrued interest at the rate of seven percent (7%) per annum and was payable in monthly installments of
PRMI and DFI are separate legal entities, but operate in conjunction. PRMI and DFI share office space and certain employees. DFI's main source of revenue comes from the "
Effective
The Company did not purchase or assume any of Igenti's liabilities in connection with the Software Rights Agreement. The purchase price for the
1)
On or about
(a) The Company paidMr. Prahl $125,000 in cash (the "Cash Consideration") at the Closing (as defined below) of the IntelliSys Purchase Agreement; and (b) The Company providedMr. Prahl with a 6% Promissory Note in the amount of$30,816 (the "IntelliSys Note"), described in greater detail below.
Additionally, the Company agreed to assume an aggregate of approximately
The IntelliSys Purchase Agreement closed on
The Company also agreed to provide
Revenue for the Relevant Year Earn-Out
$0 to $350,000 $0 $350,000.01 to $380,000 $6,675 $380,000.01 to $395,000 $10,012.50 $395,000.01 or more$13,350
Provided that in no event shall the total amount payable to
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IntelliSys Note
The IntelliSys Note bears interest at the rate of six percent (6%) per annum, and all past-due principal and interest (which failure to pay such amounts after a fifteen (15) day cure period, shall be defined herein as an "Event of Default") bear interest at the rate of ten percent (10%) per annum until paid in full. The IntelliSys Note, also provides that the Company shall have two additional fifteen (15) day cure periods during the term of the IntelliSys Note resulting in two thirty (30) day cure periods before an Event of Default occurs.
The principal amount of the IntelliSys Note is due on
Additionally, the Company agreed to secure the payment of the IntelliSys Note with a Uniform Commercial Code Security Interest filing, which the Company agreed to file, at Mr. Prahl's request, at the Company's expense, to grant
Third Party Lender Note
On
The Third Party Lender Note is due and payable on
MB Financial Note
On
Convertible Note Fundings
On
The Convertible Note, which accrues interest at the rate of 8% per annum, is payable, along with interest thereon on
On
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On Deck Capital Loan
On
K9 Bytes Acquisition
On
The K9 Note accrues interest at 6% per annum and is payable in monthly installments of
We raised the funds paid to K9 Bytes in connection with the Purchase Contract through a
K9 Bytes agreed to subordinate the K9 Note to
In connection with the Purchase Contract, the owner of K9 Bytes and the Company (through K9 Sub) entered into a Consulting Agreement, pursuant to which the owner of K9 Bytes agreed to provide part-time consulting services to the Company for a period of four weeks following closing and provide additional consulting services as requested by the Company for up to an additional 30 days at the rate of
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Our Products
The Company currently offers five primary product lines. The EPAZZ BoxesOS v3.0 product is offered through
EPAZZ BoxesOS v3.0
EPAZZ BoxesOS v3.0 (Web Infrastructure Operating System) is the Company's flagship product. It is the core package of
Services include:
· Single sign-on: Provides a powerful single-sign-on with security procedure to product users' information and identity.
· Course Management System: Manage distance, traditional courses and Calendar.
· Enterprise Web Site Content Management: Manage public sites with multi contributors.
· Integration Management Services: Integrated into Enterprise Resource Planning ("ERP") and Mainframes.
· Email Management: Email server and web client.
· Instant Messenger Services: Instant messaging and alerts.
· Customer Relationship Management: Prospective students and alumni.
· Calendar/Scheduler Management: Event directory, groupware, and personal calendar.
·
· Business Services:
BoxesOS software provides: Web Portal Component
BoxesOS Web Portal Component is a gateway to all of an organization's online services and information resources. The Web Portal Component provides a Personal Information System, which refers to the user's entire online environment - the user's resources, information, graphics, color, layout, and organization. All resources are customizable. The Web Portal Component simplifies organizations' ability to create and deploy custom web applications with a common graphic user interface and connectivity to the back-end systems.
Administrative Content Management
BoxesOS Content Management Component provides an organization with enterprise level tools for creating, managing, organizing, archiving and sharing content. Content can be delivered in many forms such as web pages, emails, polls, documents, web forms, rich site summaries ("RSS"), and "hot news." The Content Management Component enables staff members with little technical skills to create web pages and processes without having any programming skills.
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Work Hub
Work Hub provides a host of applications that can empower an organization to increase productivity while decreasing costs. Work Hub helps to manage work flow throughout an organization. Senior management is able to view a document for approval before it is sent out to a client. A company can view all projects of the enterprise in one page. Some of the applications in Work Hub are products/services management, project management, invoice management, time management, content management and sales management. Work Hub has clear graphic charts with detail reports on many areas.
Central Repository
BoxesOS Central Knowledge Repository is a collection and indexing of shareable content. Central Knowledge Repository installs a server index application on the Windows 2003 platform to identify an organization's current knowledge assets. All knowledge assets will be imported into a storage device. The server index application will import the knowledge assets into a temporary folder before moving into a main folder. The server index application will prompt the organization's administrators to add detailed information about the knowledge assets into the database by using a web form. These forms will allow the administrators to add custom fields; therefore, allowing the organization to add custom information to the database in the present and at a future date. The organization would be able to group their knowledge objects by program, course, subject, topic, users, content, or date.
ViewPoint
ViewPoint is BoxesOS central communication hub, calendaring, contact management and scheduling system. ViewPoint works with or can be used as an alternative to MS Outlook/MS Exchange Server. The web applications provide the institution with an extensive range of options including communication system email web client and an email server. Email applications provide features you would find on popular web-based e-mail providers. ViewPoint provides robust threaded discussion boards and a "chatting" environment. ViewPoint provides each user with a personal calendar, which notifies users of scheduling conflicts and appointments priorities. ViewPoint makes it easy to create group calendars and public calendars. With the ViewPoint scheduling system users are able to schedule group meetings together. The scheduling system will view each user's calendar to see the next available time and date the group can meet.
Learning Management System
BoxesOS My Courses is an extensive application for learning management, and e-learning. My Courses is an effective means for managing traditional courses, distance learning courses, and self-paced courses. My Courses is a powerful communication tool that can be effectively used by students, instructors, employees and corporate trainers to make information flow easily, clearly and faster. My Courses provides a robust grade book, powerful authoring content tools, easy to use drop box, sharable folders, wide-ranging course calendar and many more features all designed to provide customization to key stakeholders. Organizations will be able to train their employees on systems using My Courses self-paced settings, as well as test candidates on their skill sets before they are hired.
Single Sign-on
Single Sign-on provides organizations the ability to log into multiple systems with a single unique username and password. The username and password authenticates the user's credentials to make sure the person who is accessing the data is authorized to. BoxesOS uses Microsoft Active Directory Identity Management to accomplish single sign on. Microsoft Active Directory allows institutions to centrally manage and share user information. Active Directory also acts as the single sign on point for bringing systems and applications together. BoxesOS user management integrates with Active Directory.
Pathways Real-time Integration
EPAZZ Pathways is an integration suite enabling real-time connectivity with ERP and Legacy systems. Pathways integration suite allows organizations to retrieve data from ERPs and write data back to ERPs in real-time.
The AutoHire system provides a tool to power career centers, post job ads to sites and job boards, and to collect resumes online. The online processes supported by the system provide the mechanism to comply with the record keeping requirements of Title VII of the Civil Rights Act of 1964, which apply to organizations employing 15 or more persons.
One of the most useful features of the AutoHire system is the interactive question and online screening and ranking system. The interactive question system provides a means for the client to maintain their own library of questions and to attach selected questions to job opportunities posted. Responses obtained can be used to screen and rank candidates to permit hiring managers to focus their attention on only the most suitable candidates. We believe that result can have a substantial impact on the cost of recruiting and the quality of candidates selected.
By attaching interactive questions to job opportunities posted clients can collect information not typically presented in a resume. The additional information can often replace the initial interview process. Questions can be multiple choice or narrative.
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DFI developed the
Key Features of Desk/Flex include:
Quick and Easy Check-In - Check-in and Check-out to a workstation takes less than 8 seconds, and advance reservations take only a few seconds more.
Point-and-Click Floor Maps - Desks that are available are identified by green dots. Those that are in use are identified by red. An employee needs only to click or touch (using an optional touch-screen) a green dot to select his or her desk.
PBX Interaction - Desk/Flex connects to an employee's
Web Browser and Local "Kiosk" Access - On site, the Desk/Flex kiosk(s) makes it easy to select a vacant desk near a co-worker or centrally located at the office. Even before leaving home a worker with access to the company intranet can reserve a desk or locate a co-worker at any desk in the company's office via a web browser.
Advance Reservations - Workers can easily choose and reserve workspaces ahead of time for a particular date or range of dates.
Occupancy Reports - Management reports allow accurate measures of occupancy in total or by type of desk so the total number or mix of desks can be adjusted to meet client demand and save more office space expense in future months.
Desk/Flex is responsive to office size and needs, servicing small to large businesses. Desk/Flex can be configured to administer a single site or multiple sites locally or remotely. Desk/Flex has full integration capabilities with both
Agent Power is a suite of six (6) applications. Each can operate on a stand-alone basis, or can work in conjunction with the other applications. The applications feature the following workforce management components:
· Planning and Scheduling; · Agent Adherence; · Agent Performance; · ACD Group Performance; · Real-Time Agent Status; and · Info Screen.
All modules of Agent Power have full integration capabilities with
SystemView
SystemView displays the system processes and lets users control the system in real time. It displays alarms, equipment status, summary accumulated and trend data.
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Features
•The Alarm/Event Journal records all alarms and status changes and has the flexibility to query history based on tag names and time ranges. •Smart Server provides communication with process control and automatic collections of data. It is designed to normalize data, accumulate and summarize statistics for the plant management and maintenance systems. • Rapid application development tools dramatically reduce system development time. Development tools are included with all applications.
MaintenanceView
MaintenanceView provides the traditional functional functionality of a comprehensive maintenance management system including:
• Fixed asset and rotating equipment. • Preventive scheduling and predictive reports and charts. • Work order management. • Inventory and purchasing. • Manufacture and vendor records. • Parts inventory.
Features
• Ability to track maintenance costs by center, department, and location. • Ability to customize user interface sorting by location, equipment type, department, cost center, manufacturer or vendor. • Ability to customize reports using MS Excel compatible spreadsheets to accommodate users' specific needs.
Report View
Report View provides users with a historic picture of the operation of their plant through centralized storage of data. Realistic graphics can be constructed to assist the user in managing, accessing and analyzing real-time and manually entered process or laboratory data.
Features
• Stores real-time and laboratory data in a secure open database. • Time-based compression stores process information and manually collected data. • Flexible rapid application development tools allow creation of input displays, reports and charts and navigation menus. • Using MS Excel compatible spreadsheet, ReportView combines the user-friendly features of familiar spreadsheet functions with the security of an expandable database. • Reporting tools provide easy access to retrieve summarized or raw data for process-efficiency and compliance reports. • Creates 2D and 3D presentations-quality charts in minutes. • An efficient decision support system and dashboard development tools for operations, maintenance, management and engineering.
Energy View
Energy View is an automated energy management dashboard tool. EnergyView provides smart energy metering and power measurement technology to accurately measure, store, track and analyze energy data. The energy metering and submetering systems can link to SCADA (Supervisory Control and Data Acquisition) or any PC to collect crucial energy data. In addition manual data on other energy sources can be managed as part of the same energy management application.
The combination of hardware and software is designed to provide an end-to-end solution from measurement to billing audits. The objective of the EnergyView application is to improve the speed and quality of energy measurement information, so that facility managers will be able to make better management decisions, conserve energy and reduce operating costs.
Features
• Collect usage data manually and automatically. • Normalize energy variables creating benchmarking variables. • Provide comparisons of hourly usage to previous days. • Calculate operating cost and savings by day, month and year-to-date. • Forecast and alarm peak demands. • Send alarms via local annunciation, email or pagers. • Benchmarking. • Local Factor Analysis. • Automate Energy Billing Audits. • Determine Changes in Energy Usage Patterns. • Setting Saving Targets and Tracking Progress. -9-
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Included in the assets acquired through the Purchase Contract was the K9 Koordinator software. The software was designed to focus on applications related to pet care: pet boarding, daycare, grooming, training, and other pet care services (including dog walking and pet sitting). Products can be used for most animal types such as dogs, cats, horses, birds, rodents, snakes and pigs.
The K9 Koordinator is a complete management system for pet resorts (boarding kennels), pet daycare centers, pet sitters, dog walkers, grooming shops, and mobile groomers. The K9 Koordinator was designed to efficiently and easily manage scheduling, clients, pet information, services, and retail information.
Key components of the K9 Koordinator software include webcam integration, giftcard processing and management, and virtual kennel layout for run assignments.
The K9 Koordinator has over 20 years of development and usage in the pet care industry. K9 Koordinator users include pet resorts, boarding kennels, grooming shops, mobile groomers, trainers, dog walkers, pet sitters, animal hospitals, shelters, rescue organizations, and pet retailers.
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PLAN OF OPERATION
During the next twelve months, we plan to further develop our BoxesOS software, and hope to expand our customer base for our
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
For the three months ended
General and administrative expenses increased by
We had depreciation and amortization expense of
Total operating expenses for the three months ended
We had operating income of
The increase in operating income is due to the Company recognizing income that was deferred in prior periods and to the increase in income received from the company's acquired subsidiaries.
Derivative expense associated with the Company's outstanding Convertible Promissory Notes as described below, was
Interest expense was
We had net loss of
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED
For the nine months ended
General and administrative expenses increased by
We had depreciation and amortization expense of
Total operating expenses for the nine months ended
We had operating income of
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Derivative expense associated with the Company's outstanding Convertible Promissory Notes as described below, was
Interest expense was
We had net loss of
LIQUIDITY AND CAPITAL RESOURCES
We had total current assets of
We had non-current assets of
We had total current liabilities of
We had negative working capital of
We had total liabilities of
Described below; long-term related party debt of
We had net cash provided by operating activities of
We had
On
At
We also borrow from our Chief Executive Officer,
In
On
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Effective
The
On or about
The Company also agreed to provide
Revenue for the Relevant Year Earn-Out
$0 to $350,000 $0 $350,000.01 to $380,000 $6,675 $380,000.01 to $395,000 $10,012.50 $395,000.01 or more$13,350
Provided that in no event shall the total amount payable to
The IntelliSys Note bears interest at the rate of six percent (6%) per annum, and all past-due principal and interest (which failure to pay such amounts after a fifteen (15) day cure period, shall be defined herein as an "Event of Default") bear interest at the rate of ten percent (10%) per annum until paid in full. The IntelliSys Note, also provides that the Company shall have two additional fifteen (15) day cure periods during the term of the IntelliSys Note resulting in two thirty (30) day cure periods before an Event of Default occurs. The principal amount of the IntelliSys Note is due on
Additionally, the Company agreed to secure the payment of the IntelliSys Note with a Uniform Commercial Code Security Interest filing, which the Company agreed to file, at Mr. Prahl's request, at the Company's expense, to grant
On
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On
On
On
On
On
The K9 Note accrues interest at 6% per annum and is payable in monthly installments of
We raised the funds paid to K9 Bytes in connection with the Purchase Contract through a <money>$235,000
K9 Bytes agreed to subordinate the K9 Note to
We have no current commitment from our officers and Directors or any of our shareholders to supplement our operations or provide us with financing in the future. If we are unable to raise additional capital from conventional sources and/or additional sales of stock in the future, we may be forced to curtail or cease our operations. Even if we are able to continue our operations, the failure to obtain financing could have a substantial adverse effect on our business and financial results.
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In the future, we may be required to seek additional capital by selling debt or equity securities, selling assets, or otherwise be required to bring cash flows in balance when we approach a condition of cash insufficiency. The sale of additional equity or debt securities, if accomplished, may result in dilution to our then shareholders. We provide no assurance that financing will be available in amounts or on terms acceptable to us, or at all.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations is based upon our unaudited financial statements, which have been prepared in accordance with accounting principles generally accepted in
Recently issued accounting pronouncements. The Company does not expect the adoption of any recently issued accounting pronouncements to have a significant impact on the Company's results of operations, financial position or cash flows.
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