ITEM 1. BUSINESS
NexxNow, Inc. began to develop its current business operations in February 2004 under the name "Centale, Inc." By the end of fiscal 2006, which ended on March 31, 2006, NexxNow had completed the development of its core technology, acquired complementary technologies and businesses, and expanded its business scope. The technological core of our business was a desktop communications platform that is programmable and interactive. The application can be distributed either as a downloadable hyperlink on a website, or as an e-mail attachment. The application has broad potential utility - ergo, a broad potential market - since it can be a platform for whatever text, graphics or functions a customer wants to communicate directly through the desktops of its end users.
Unfortunately, a lack of working capital defeated our efforts to develop the potential market for our software. Through fiscal 2007 and fiscal 2008 we implemented a number of marketing initiatives, none of which were successful. As fiscal 2008 ended, we determined that we could not be successful as a company based on the exploitation of a single technology, but that the technology could be a valuable component of a more balanced media company. For that reason, in April 2008 we acquired ownership of NexxNow China, Inc., an enterprise organized to provide multi-media, sports-related advertising platforms focused on penetrating the Chinese consumer marketplace. Our software application, which we now call the "Audience Communication Executable" ("ACE"), will serve as one aspect, but not the exclusive aspect, of those marketing programs.
NEXXNOW CHINA
NexxNow China was organized to organize Internet and televised broadcasts of US sports-related entertainment to The People's Republic of China. Its initial project is to achieve broadcast distribution of basketball games played by a team designed to appeal to the Chinese media market by filling its roster
with a balance of Chinese nationals and U.S.-born players. The media mix now being pursued includes both Chinese television and Internet broadcasts accessible within China. In addition, NexxNow plans to distribute a branded ACE to its fans, in order to take advantage of the ACE's powerful audience retention capabilities.
ACE - THE AUDIENCE COMMUNICATION EXECUTABLE
The ACE was developed by NexxNow to capitalize on the growing Internet community. The ACE resides, after download, on the end user's computer desktop. Through the ACE NexxNow or NexxNow's licensee can establish 1-to-1 "real-time" communication direct to the end user's desktop 24/7 in audio, video, rich media, animation, and/or text. We can customize the platforms to satisfy the particular communication needs of each of our advertising customers.
BACKLOG
We have no backlog of orders at this time.
EMPLOYEES
We currently have no employees.
ITEM 1A.
ITEM 1A. RISK FACTORS
You should carefully consider the risks described below before buying our common stock. If any of the risks described below actually occurs, that event could cause the market value of our common stock to decline, and you could lose all or part of your investment.
WE HAVE NO SOURCE OF REVENUE AT THIS TIME.
NexxNow China was organized last year. It has developed a number of relationships with media providers and with participants in the basketball industry. None of those relationships, however, has developed into a source of revenue. The viability of our company will depend on management's success in developing significant sources of revenue.
OUR INABILITY TO PAY OUR DEBTS COULD PREVENT US FROM CONTINUING IN BUSINESS.
At March 31, 2009 we had $15,119 in cash and no other current assets to balance $277,119 in current liabilities. In order for us to continue in business, it will be necessary that we obtain additional capital. If we are unable to obtain sufficient capital, we will not survive in business. We have no commitment from any source to provide us further financing.
WE WILL NEED TO ISSUE A SUBSTANTIAL AMOUNT OF EQUITY IN ORDER TO FUND OUR BUSINESS OPERATIONS.
Because of our lack of liquid assets, it will be necessary for us to issue a substantial amount of equity during the remainder of fiscal 2010 and fiscal 2011 in order to fund our operations. These sales of equity will dilute the
interest of current shareholders in our company. In addition, to the extent that we sell the equity for prices below market, the sale of equity will also dilute the value of the shares held by our current shareholders.
OUR TECHNOLOGY COULD BE REPLICATED BY COMPETITORS.
The technology captured within the ACE platform is the result of five years of development by NexxNow and its predecessors. However, a sophisticated software development company could replicate our technology today in a matter of months. If a large software distributor undertook direct competition with us, its superior capital resources could hinder or defeat our efforts to capture a significant market position.
WE RELY ON OUTSOURCING FOR DESIGN AND DEVELOPMENT.
NexxNow employs no designers, no engineers and no programmers. All of the development services required to fulfill our contracts for desktop applications will be performed by companies under contract to us. The outsourcing process opens us up to several risks, including delays in fulfilling our contracts, delays in obtaining necessary technology, and potential loss of our trade secrets.
NEXXNOW IS NOT LIKELY TO HOLD ANNUAL SHAREHOLDER MEETINGS IN THE NEXT FEW YEARS.
New York corporation law provides that members of the board of directors retain authority to act until they are removed or replaced at a meeting of the shareholders. The holders of ten percent of the outstanding common stock may demand that an annual meeting be held. But absent such a demand, the board has no obligation to call a shareholders meeting. Unless a shareholders meeting is held, the existing directors elect directors to fill any vacancy that occurs on the board of directors. The shareholders, therefore, have no control over the constitution of the board of directors, unless a shareholders meeting is held.
NexxNow has never held an annual or a special meeting of shareholders. The Board of Directors of NexxNow consists of individuals who were elected to their positions by previous members of the Board of Directors. Management does not expect to hold annual meetings of shareholders in the next few years, due to the expense involved. Therefore, any new members of the Board of Directors or any replacements for current members will be nominated and elected by the present members of the Board.
THE VOLATILITY OF THE MARKET FOR NEXXNOW COMMON STOCK MAY PREVENT A SHAREHOLDER FROM OBTAINING A FAIR PRICE FOR HIS SHARES.
NexxNow at the present time has fewer than 500 shareholders and only a small number of market makers. As a result, the market price for our common stock is volatile, at times moving over 400% in one day. Unless and until the market for our common stock grows and stabilizes, the common shares you purchase will remain illiquid. A shareholder in NexxNow who wants to sell his shares, therefore, runs the risk that at the time he wants to sell, the market price may be much less than the price he would consider to be fair.
ONLY A SMALL PORTION OF THE INVESTMENT COMMUNITY WILL PURCHASE "PENNY STOCKS" SUCH AS NEXXNOW COMMON STOCK.
NexxNow' common stock is defined by the SEC as a "penny stock" because it trades at a price less than $5.00 per share. SEC Rule 15g-9 under the Securities Exchange Act of 1934 imposes additional sales practice requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as an "established customer" or an "accredited investor." This includes the requirement that a broker-dealer must make a determination on the appropriateness of investments in penny stocks for the customer and must make special disclosures to the customer concerning the risks of penny stocks. Many brokerage firms will discourage their customers from purchasing penny stocks, and even more brokerage firms will not recommend a penny stock to its customers. Most institutional investors will not invest in penny stocks. In addition, many individual investors will not consider a purchase of a penny stock due, among other things, to the negative reputation that attends the penny stock market. As a result of this widespread disdain for penny stocks, there will be a limited market for NexxNow' common stock as long as it remains a "penny stock." This situation may limit the liquidity of your shares.
ITEM 1B
ITEM 1B UNRESOLVED STAFF COMMENTS
Not Applicable
ITEM 2.
ITEM 2. PROPERTIES
NexxNow occupies an office in East Aurora, New York. The monthly rental is $800.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
(A) MARKET INFORMATION
The Company's common stock is quoted on the OTC Bulletin Board under the symbol "NXXN.OB." Set forth below are the high and low bid prices for each quarter in the past two fiscal years. The reported bid quotations reflect inter-dealer prices without retail markup, markdown or commissions, and may not necessarily represent actual transactions. The prices have been adjusted to reflect the 1-for-35 reverse split on March 4, 2008 and the 1-for-4 reverse split on June 6, 2008 as if they have occurred on April 1, 2007.
BID ____________________ QUARTER ENDING HIGH LOW _______ _______
June 30, 2007 $349.65 $113.99 September 30, 2007 $104.90 $ 13.99 December 31, 2007 $ 69.93 $ 8.39 March 31, 2008 $ 34.97 $ .08
June 30, 2008 $ 2.60 $ 1.00 September 30, 2008 $ 1.89 $ .09 December 31, 2008 $ .55 $ .02 March 31, 2009 $ .25 $ .02
(B) SHAREHOLDERS
Our shareholders list contains the names of 178 registered stockholders of record of the Company's Common Stock.
(C) DIVIDENDS
The Company has never paid or declared any cash dividends on its Common Stock and does not foresee doing so in the foreseeable future. The Company intends to retain any future earnings for the operation and expansion of the business. Any decision as to future payment of dividends will depend on the available earnings, the capital requirements of the Company, its general financial condition and other factors deemed pertinent by the Board of Directors
(D) SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The information set forth in the table below regarding equity compensation plans (which include individual compensation arrangements) was determined as of March 31, 2009.
(E) SALE OF UNREGISTERED SECURITIES
In January 2009 NexxNow issued 35,013,540 shares of common stock to Kenneth Keller in satisfaction of notes payable in the amount of $350,135. The sale was exempt pursuant to Section 4(2) of the Act since the sale was not made in a public offering and was made to an individual who had access to detailed information about NexxNow, and was acquiring the shares for his own account. There were no underwriters.
(F) REPURCHASE OF EQUITY SECURITIES
The Company did not repurchase any of its equity securities that were registered under Section 12 of the Securities Act during the 4th quarter of fiscal 2009.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
Due to our lack of funds, our operations during fiscal year 2009 (which ended on March 31, 2009) were very limited. As a result, our revenue for the year ended March 31, 2009 was only $0. In contrast, during the year ended March 31, 2008 we posted $40,416 in revenue, primarily from license fees relating to our software applications.
Our largest single expense in fiscal 2009 was impairment of goodwill in the amount of $576,129. This represented the remaining book value of our operating assets, which we wrote off due to doubt regarding our ability to realize positive cash flow from operations.
Our second largest expense in fiscal 2009 and the largest in fiscal 2008 was the combination of consulting fees, officers' compensation and salaries and wages, which totaled $451,403 in fiscal 2009 (and consisted entirely of consulting fees) and $1,270,683 in fiscal 2008. Only a small portion of these expenses were paid in cash, however. During fiscal year 2009 the market value of the common stock we issued in exchange for services totaled $335,300. In fiscal 2008 the market value of the common stock issued for services was $1,218,802.
The third largest category of expense that we incurred during the past two fiscal years was loan fees, which totaled $165,500 in fiscal 2009 and $180,000 in fiscal 2008. This represents the expenses we incurred in order to fund our operations. $115,500 of the fiscal 2009 loan fees and all of the fiscal 2008 loan fees represented the value of common stock that we issued to certain shareholders to induce them to lend us funds for working capital. Because of NexxNow's poor financial condition, it has not been possible for us to obtain financing on conventional terms. Until we improve our balance sheet and achieve profitable operations, we will continue to incur large expenses for financing costs.
Our business activities during fiscal 2009 resulted in $1,494,065 in expenses. After reporting "other income" arising from the sale of capital stock that we have received as customer fees in earlier periods, our net loss for fiscal 2009 was $1,373,525, compared to a net loss of $1,611,031 in fiscal year 2008. Until the NexxNow China business begins to generate significant revenue, we will continue to incur losses.
LIQUIDITY AND CAPITAL RESOURCES
Since we initiated our current business in 2004, our operations have been funded primarily by the private sale of equity and debt to investors. During the year ended March 31, 2009, our operations were funded by loans from shareholders and investors. The net amount of loans received in fiscal 2009 was $462,368. Through March 31, 2009, however, we had used virtually all of those funds for our operations.
When fiscal year 2009 ended on March 31, 2009, our balance sheet showed a working capital deficit of $262,000, primarily consisting of loans payable to stockholders. We currently have very little cash on hand and no other liquid assets. Therefore, in order to carry on our business, we must obtain additional capital.
We continue to actively seek investment capital. At the present time, however, no one has committed to provide us any additional funds.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
In preparing our financial statements we are required to formulate working policies regarding valuation of our assets and liabilities and to develop estimates of those values. In our preparation of the financial statements for fiscal year 2009, there were two estimates made which were (a) subject to a high degree of uncertainty and (b) material to our results. The first was our determination, explained in Note B to the Financial Statements that we should record a valuation allowance for the full value of the deferred tax asset created by our net operating loss carry-forward. The primary reason for the determination was our lack of certainty as to whether NexxNow would carry on profitable operations in the future. The second material estimate, explained in Notes H and J to our financial statements, was our determination that we lacked sufficient assurance that our operating assets would produce positive cash flow in the future, which caused us to write off the assets on our balance sheet.
We made no material changes to our critical accounting policies in connection with the preparation of financial statements for fiscal year 2009.
IMPACT OF ACCOUNTING PRONOUNCEMENTS
There were no recent accounting pronouncements that have had a material effect on the Company's financial position or results of operations. There were no recent accounting pronouncements that are likely to have a material effect on the Company's financial position or results of operations.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PAGE(S)
Report of Independent Registered Public Accounting Firm 12
Consolidated Balance Sheets as of March 31, 2009 and 2008 13
Consolidated Statements of Operations for the Years Ended March 31, 2009 and 2008 14
Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the Years Ended March 31, 2009 and 2008 15
Consolidated Statements of Cash Flows for the Years Ended March 31, 2009 and 2008 16
Notes to Consolidated Financial Statements 17
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors NexxNow, Inc.
We have audited the accompanying consolidated balance sheets of NexxNow, Inc. as of March 31, 2009 and 2008, and the related statements of operations, changes in stockholders' equity (deficit), and cash flows for each of the years in the two-year period then ended. NexxNow, Inc.'s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of NexxNow, Inc. as of March 31, 2009 and 2008, and the results of its operations and its cash flows for each of the years in the two-year period ended March 31, 2009 in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note G to the consolidated financial statements, the Company's significant operating losses raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ ROTENBERG & COMPANY LLP _______________________ Rotenberg & Company LLP
Rochester, New York August 11, 2009
NEXXNOW, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2009 AND 2008 AUDITED
NOTE A - THE COMPANY
HISTORY
The Company was incorporated under the laws of the State of New York on November 12, 1998 as Safe Harbour Health Care Properties, Ltd. In July 2004, the Company changed its name to Centale, Inc. The Company was engaged in the business of leasing real estate to health care facilities. During 1999, the Company ceased its operations and commenced actions to voluntarily seek protection from creditors under the bankruptcy code. During 2003, the Company distributed its assets to the creditors in satisfaction of its outstanding liabilities. The bankruptcy was subsequently dismissed. The Company remained dormant until 2004, when one of the Company's shareholders purchased a controlling interest. In February 2004, the Company began its development stage as an internet based marketing company. The development stage ended within the fiscal year ended March 31, 2006. The Company, as of December 2007 discontinued its internet marketing due to difficulties with service providers and subsequent cancellations by customers. Both Florida and the former Advance Theory, Inc. offices were closed as a result, in an attempt to reduce future overhead expenses.
On March 28, 2008, the Company entered into a Share Exchange Agreement with the shareholders of NexxNow China, Inc., a Delaware corporation. The shareholders transferred to the Company all of the outstanding capital stock of NexxNow China, and the Company issued 43 million shares of its common stock to the shareholders. The new direction of the Company will be to engage in the business of marketing sporting events in The People's Republic of China.
NEW PRONOUNCEMENTS
In March 2008, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 161, "DISCLOSURES ABOUT DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES--AN AMENDMENT OF FASB STATEMENT NO. 133". SFAS 161 requires enhanced disclosures about an entity's derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 with early application encouraged. As such, the Company is required to adopt these provisions at the beginning of the next fiscal year on April 1, 2009. The Company is currently evaluation the impact of SFAS 161 on its consolidated financial statements but does not expect it to have a material effect.
In May 2008, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 163, "ACCOUNTING FOR FINANCIAL GUARANTEE INSURANCE CONTRACTS - AN INTERPRETATION OF FASB STATEMENT NO. 60" ("SFAS 163"). SFAS 163 interprets Statement 60 and amends existing accounting pronouncements to clarify their application to the financial guarantee insurance contracts included within the scope of that Statement. SFAS
NEXXNOW, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2009 AND 2008 AUDITED
163 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years. As such, the Company is required to adopt these provisions at the beginning of the next fiscal year on April 1, 2009. The Company is currently evaluating the impact of SFAS 162 on its consolidated financial statements but does not expect it to have a material effect.
In May 2009, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 165, "Subsequent Events" ("SFAS 165"). SFAS 165 establishes principles and requirements for subsequent events. SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009. As such, the Company is required to adopt this standard in the current period. Adoption of SFAS 165 did not have a significant effect on the Company's consolidated financial statements.
In June 2009, the Financial Accounting Standards Board ("FASB") issued SFAS No. 166 "Accounting for Transfers of Financial Assets--an amendment of FASB Statement No. 140" ("SFAS 166"). SFAS 166 improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor's continuing involvement, if any, in transferred financial assets. SFAS 166 is effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. As such, the Company is required to adopt this standard in 2010. The Company is evaluating the impact the adoption of SFAS 166 will have on its consolidated financial statements.
In June 2009, the Financial Accounting Standards Board ("FASB") issued SFAS No. 167 "Amendments to FASB Interpretation No. 46(R)" ("SFAS 167"). SFAS 167 improves financial reporting by enterprises involved with variable interest entities and to address (1) the effects on certain provisions of FASB Interpretation No. 46 (revised December 2003), "Consolidation of Variable Interest Entities", as a result of the elimination of the qualifying special-purpose entity concept in SFAS 166 and (2) constituent concerns about the application of certain key provisions of Interpretation 46(R), including those in which the accounting and disclosures under the Interpretation do not always provide timely and useful information about an enterprise's involvement in a variable interest entity. SFAS 167 is effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. As such, the Company is required to adopt this standard in 2010. The Company is evaluating the impact the adoption of SFAS 167 will have on its consolidated financial statements.
In June 2009, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard ("SFAS") No. 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles".
NEXXNOW, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2009 AND 2008 AUDITED
SFAS 168 replaces SFAS 162 and establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company is currently evaluating the impact of SFAS 168 on its consolidated financial statements but does not expect it to have a material effect.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
METHOD OF ACCOUNTING
The financial statements of NexxNow, Inc. (the "Company" included herein) have been prepared by the Company pursuant to the rules and regulations of the Security Exchange Commission (the "SEC"). The Company maintains its books and prepares its financial statements on the accrual basis of accounting.
The accompanying financial statements reflect all adjustments of a normal and recurring nature which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows of the Company for the year ended March 31, 2009. Factors that affect the comparability of financial data from year to year include nonrecurring expenses associated with the Company's registration with the SEC, costs incurred to raise capital and stock awards.
The consolidated financial statements include the accounts of Nexx Now China, Inc. However, there was no activity or assets or liabilities at March 31, 2009.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include time deposits, certificates of deposits and all highly liquid debt instruments with original maturities of three months or less.
The Company maintains cash and cash equivalents at financial institutions, which periodically may exceed federally insured amounts.
INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109 "Accounting for Income Taxes" using the asset and liability approach, which requires recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of such assets and liabilities. This method utilizes enacted statutory tax rates in effect for the year in which the temporary differences are expected to reverse and gives immediate effect to changes in the income tax
NEXXNOW, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2009 AND 2008 AUDITED
rates upon enactment. Deferred tax assets are recognized, net of any valuation allowance, for temporary differences and net operating loss and tax credit carry forwards. Deferred income tax expense represents the change in net deferred assets and liability balances. The Company had no material deferred tax assets or liabilities for the period presented. Deferred income taxes result from temporary differences between the basis of assets and liabilities recognized for differences between the financial statement and tax basis thereon, and for the expected future benefits to be derived from net operating losses and tax credit carry forwards. The Company has had significant operating losses and a valuation allowance is recorded for the entire amount of the deferred tax assets.
IMPAIRMENT OF ASSETS
The Company evaluates its long-lived assets for financial impairment on a regular basis in accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
The Company evaluates the recoverability of long-lived assets not held for sale by measuring the carrying amount of assets against the estimated discounted future cash flows associated with them. At the time such evaluations indicate that the future discounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, therefore, the assets are adjusted to their fair values.
LOSS PER COMMON SHARE
Earnings (loss) per common share is computed in accordance with SFAS No. 128 "Earnings by Share" by dividing income available to common stockholders by weighted average number of common shares outstanding for each period.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles 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 reported period. Actual results can differ from those estimates.
NEXXNOW, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2009 AND 2008 AUDITED
REVENUE RECOGNITION
Revenue from execution of license agreements consists of a one-time development fee and periodic maintenance fees. The revenue is earned and recognized in conjunction with the provisions of the agreements.
NOTE C - NOTES PAYABLE - STOCKHOLDERS
MARCH 31, 2009 MARCH 31, 2008 ______________ ______________
Note Payable - Converted to Common Stock $ 365,166 ______________ ______________
Note Payable - Stockholder, executed May 23, 2008, payable on May 23, 2009. This note is secured and bears 12% interest. $ 99,301 $ -
Total Amount of Note Payable - Stockholder $ 99,301 $ 365,166
The five year maturities of debt are as follows:
2009 2010 2011 2012 2013 _______ ____ ____ ____ ____
$99,301 $ 0 $ 0 $ 0 $ 0
NOTE D - LOANS PAYABLE
Loans payable consists of professional services that were converted from accounts payable to a loan payable during the year. These loans have no specific repayment terms.
NOTE E - RECLASSIFICATION
Certain reclassifications have been made to the financial statement presentation in the prior year to correspond to the current year's format. Total equity and net income are unchanged by these reclassifications.
NOTE F - COMMON STOCK
During the twelve months ended March 31, 2009, the Company issued 1,096,781 shares for services, 46,250 shares for cash, 10,750,000 shares in exchange for its investment in NexxNow China, Inc., 35,691,973 in satisfaction of notes payable and 212,500 shares issued for loan fees.
NEXXNOW, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2009 AND 2008 AUDITED
On March 4, 2008, the Company effected a reverse stock split of the corporation's common stock in the ratio of 1:35. On June 6, 2008, the Company effected a reverse stock split of the corporation's common stock in the ratio of 1:4. All references to shares in this Report reflect both of the reverse stock splits.
NOTE G - GOING CONCERN
The Company's consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has reported net losses and an accumulated deficit totaling $11,643,201 for the period from date of inception (November 12, 1998) through March 31, 2009.
The Company's continued existence is dependent upon its ability to raise capital or to successfully market and sell its products. The Company plans to raise working capital through equity offerings and future profitable operations. The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
NOTE H - NEXXNOW CHINA, INC. SHARE EXCHANGE AGREEMENT
On April 28, 2008, the Company acquired all of the outstanding capital stock of NexxNow China, Inc., a Delaware corporation. In exchange for the shares of NexxNow China, the Company issued 10,750,000 shares of its common stock to the shareholders of NexxNow China, Inc. The new direction of the Company will be to engage in the business of marketing sporting events in The People's Republic of China. As a result of this transaction, NexxNow, Inc. recorded Intangibles of $576,129 because the liabilities of NexxNow China, Inc., at the time of acquisition, exceeded the assets by $146,129. The purchase price was determined to be $430,000, which is the par value of the stock ($.01) times the 43 million shares (pre 1-for-4 reverse split) issued in the acquisition.
At March 31, 2009 the Company wrote off the Intangible of $576,129, due to doubts regarding the likelihood that NexxNow China will generate positive cash flow in the future.
NOTE I - CONSOLIDATION OF DEBT
On November 7, 2008 NexxNow issued to Kenneth Keller a convertible debenture in satisfaction of obligations of NexxNow to Kenneth Keller in the amount of $321,647 which also includes consideration of a loan by him to NexxNow of $15,000. The debenture matured on January 15, 2009, and was satisfied by the issuance of common stock to Mr. Keller. In connection with that transaction, Mr. Keller agreed to provide the funds required for the Company to complete its SEC filings and maintain its fully reporting status.
NEXXNOW, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2009 AND 2008 AUDITED
On January 15, 2009, the balance due to Kenneth Keller under the Convertible Debenture was $350,135. On that date, pursuant to the terms of the debenture, Mr. Keller converted the debenture into 35,013,540 shares of NexxNow common stock, representing 71% of the outstanding shares.
NOTE J - ACCELERATED AMORTIZATION OF INTANGIBLES
As of December 31, 2008 NexxNow has eliminated from its balance sheet the remaining book value of its software development and software technology assets. The aggregate write-off was $52,641. NexxNow took this action based upon (a) the low level of revenue generated by its software assets during the past 18 months, and (b) the anticipated effect of the global economic slowdown on future revenues. In light of those factors, management determined that any material realization of value from the software assets was not probable.
NOTE K - SUBSEQUENT EVENTS
In August 2009 Gary Berthold purchased 35,013,540 shares of NexxNow common stock from Kenneth Keller, representing a majority of the outstanding shares. In connection with the purchase, all of the directors and officers of the Company resigned from their positions, after first appointing Mr. Berthold to serve as sole director and sole officer.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
A. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.
Gary Berthold, our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of NexxNow's disclosure controls and procedures as of March 31, 2009. Pursuant to Rule13a-15(e) promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, "disclosure controls and procedures" means controls and other procedures that are designed to insure that information required to be disclosed by NexxNow in the reports that it files with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time limits specified in the Commission's rules. "Disclosure controls and procedures" include, without limitation, controls and procedures designed to insure that information NexxNow is required to disclose in the reports it files with the Commission is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure. In the course of that review, Mr. Berthold identified a material weakness (as defined in Public Company Accounting Oversight Board Standard No. 2) in our internal control over financial reporting.
The material weakness consisted of inadequate staffing and supervision within the bookkeeping and accounting operations of our company. The relatively small number of employees who have bookkeeping and accounting functions prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews. In light of this situation, management has considered adding personnel to the company's bookkeeping and accounting operations. However, as there has been no instance during fiscal 2009 in which the company failed to identify or resolve a disclosure matter or failed to perform a timely and effective review, management determined that the addition of personnel to our bookkeeping and accounting operations is not an efficient use of our limited resources at this time.
Based on his evaluation, Mr. Berthold concluded that NexxNow's system of disclosure controls and procedures was not effective as of March 31, 2009 for the purposes described in this paragraph.
B. CHANGES IN INTERNAL CONTROLS.
There was no change in internal controls over financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act or 1934) identified in connection with the evaluation described in the preceding
paragraph that occurred during NexxNow's fourth fiscal quarter that has materially affected or is reasonably likely to materially affect NexxNow's internal control over financial reporting.
C. MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. We have assessed the effectiveness of those internal controls as of March 31, 2009, using the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") Internal Control - Integrated Framework as a basis for our assessment.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects the Company's ability to initiate, authorize, record, process, or report external financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a material misstatement of the Company's annual or interim financial statements that is more than inconsequential will not be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified two material weaknesses in our internal control over financial reporting. These material weaknesses consisted of:
A. INADEQUATE STAFFING AND SUPERVISION WITHIN THE BOOKKEEPING OPERATIONS OF OUR COMPANY. The relatively small number of employees who are responsible for bookkeeping functions prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews.
B. OUTSOURCING OF PORTIONS OF THE ACCOUNTING OPERATIONS OF OUR COMPANY. Because there are few employees in our administration, we outsource a portion of the accounting functions of our Company to an independent accounting firm. The employees of this accounting firm are managed by supervisors within the accounting firm, and are not answerable to the Company's management. This is a material weakness because it could result in a disjunction between the accounting policies adopted by our Board of Directors and the accounting practices applied by the accounting firm.
Management is currently reviewing its staffing and their training in order to remedy the weaknesses identified in this assessment. To date, we are not aware of significant accounting problems resulting from these weaknesses; so we
have to weigh the cost of improvement against the benefit of strengthened controls. However, because of the above conditions, management's assessment is that the Company's internal controls over financial reporting were not effective as of March 31, 2009.
This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
In August 2009 Gary Berthold purchased 35,013,540 shares of NexxNow common stock from Kenneth Keller, representing a majority of the outstanding shares. In connection with the purchase, all of the directors and officers of the Company resigned from their positions, after first appointing Mr. Berthold to serve as sole director and sole officer. Mr. Berthold then re-appointed Sterling Shepperd to serve as Chief Financial Officer and elected Sharon Berthold to serve as a member of the Board of Directors.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.
The officers and directors of the Company are listed in the table below.
DIRECTOR NAME AGE POSITION WITH THE COMPANY SINCE _________________ ___ _________________________________ ________
Gary Berthold 58 Chief Executive Officer, Director 2009 Sharon Berthold 58 Director 2009 Sterling Shepperd 34 Chief Financial Officer --
Directors hold office until the annual meeting of the Company's stockholders and the election and qualification of their successors. Officers hold office, subject to removal at any time by the Board, until the meeting of directors immediately following the annual meeting of stockholders and until their successors are appointed and qualified.
GARY BERTHOLD. Since 2006 Mr. Berthold has been the manager-member of several companies involved in veterinary research: PharmaCom BioVet, Inc., InoVet Ltd., and PharmaCom BioVet , LLC. Since 2004 Mr. Berthold has also owned a Haulmark Motor Home dealership that he represents at AKC dog shows. From 2003 to 2007 Mr. Berthold co-owned a software development company involved in the home automation industry. From 2004 to 2006 he also served as manufacturer's rep for several pet food and pet supply companies. Since 2000 Mr. Berthold has owned and managed a series of retail pet stores. Mr. Berthold is the spouse of Sharon Berthold, a director of the Company.
SHARON BERTHOLD. Since 2007 Ms. Berthold has been engaged as owner of PharmaCom BioVet, LLC, and employed as Executive Vice President, Secretary and Treasurer of PharmaCom BioVet, Inc. and InoVet Ltd. Each of those companies is involved in veterinary research. Ms. Berthold is the spouse of Gary Berthold, a director of the Company.
STERLING SHEPPERD. Mr. Shepperd has been an officer of NexxNow since July 2004. During the greater part of the 2009 fiscal year, Mr. Shepperd served as Chief Financial Officer of NexxNow. From November 21, 2008 until August 2009 he also served as its Chief Executive Officer. In 2003 Mr. Shepperd was employed as Sales Manager for JMT Solutions, LLC, which was engaged in the business of direct response marketing in Palm Bay, Florida. From 1999 until he joined JMT Solutions, Mr. Shepperd was employed by DanMark, Inc., an organization engaged in direct response marketing.
AUDIT COMMITTEE; COMPENSATION COMMITTEE
The Board of Directors has not appointed an Audit Committee or a Compensation Committee. The Board of Directors does not have an audit committee financial expert. The Board of Directors has not yet recruited an audit committee financial expert to join the Board of Directors because the Company has not yet commenced a significant level of financial operations.
CODE OF ETHICS
The Company does not have a written code of ethics applicable to its executive officers. The Board of Directors has not adopted a written code of ethics because it has only recently acquired a significant number of members of management.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
None of the officers, directors or beneficial owners of more than 10% of the Company's common stock failed to file on a timely basis the reports required by Section 16(a) of the Exchange Act during the year ended March 31, 2009.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by, or paid by NexxNow to Sterling Shepperd, who served as its Chief Executive Officer from November 21, 2008 through March 31, 2009, as well as all compensation paid to Thaddeus A Wier, Jr., who served as Chief Executive Officer during the 2007 and 2008 fiscal years.
_______________________________________________________________________
FISCAL STOCK OPTION OTHER YEAR SALARY BONUS AWARDS AWARDS COMPENSATION _______________________________________________________________________
S. Shepperd 2009 -- -- -- -- -- _______________________________________________________________________
T. Wier 2008 -- -- -- -- -- _______________________________________________________________________ 2007 $20,000 -- -- -- -- _______________________________________________________________________
EMPLOYMENT AGREEMENTS
Gary Berthold and Sterling Shepperd serve the Company on an at-will basis.
EQUITY GRANTS
The following tables set forth certain information regarding the stock options acquired by the Company's Chief Executive Officer during the year ended March 31, 2009 and those options held by him on March 31, 2009.
________________________________________________________________________________
OPTION GRANTS IN THE LAST FISCAL YEAR ________________________________________________________________________________ Potential Percent realizable of total value at assumed Number of options annual rates of securities granted to appreciation underlying employees Exercise for option term option in fiscal Price Expiration ________________ Granted Year ($/Share) Date 5% 10% ________________________________________________________________________________
S. Shepperd 0 -- -- -- -- -- ________________________________________________________________________________
The following tables set forth certain information regarding the stock grants received by the executive officers named in the table above during the year ended March 31, 2009 and held by them unvested at March 31, 2009. ______________________________________________
UNVESTED STOCK AWARDS IN THE LAST FISCAL YEAR ______________________________________________
Number of Market Value Shares That of Shares That Have Not Have Not Vested Vested ______________________________________________
S. Shepperd 0 -- ______________________________________________
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information known to us with respect to the beneficial ownership of our common stock as of the date of this prospectus by the following:
o each shareholder known by us to own beneficially more than 5% of our common stock;
o Gary Berthold, our Chief Executive Officer
o each of our directors; and
o all directors and executive officers as a group.
There are 49,419,448 shares of our common stock outstanding on the date of this report. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed below have sole voting power and investment power with respect to their shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission.
In computing the number of shares beneficially owned by a person and the percent ownership of that person, we include shares of common stock subject to options or warrants held by that person that are currently exercisable or will become exercisable within 60 days. We do not, however, include these "issuable" shares in the outstanding shares when we compute the percent ownership of any other person.
AMOUNT AND NATURE NAME OF OF BENEFICIAL PERCENTAGE BENEFICIAL OWNER OWNERSHIP OF CLASS ___________________________________________________________________
Gary Berthold 35,013,540 70.8%
Sharon Berthold 35,013,540(2) 70.8% All officers and directors as a group (3 persons) 35,212,405 71.3%
_______________________________
(1) Except as otherwise noted, all shares are owned of record and beneficially.
(2) Represents shares owned by Gary Berthold, the spouse of Sharon Berthold.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
RELATED PARTY TRANSACTIONS
There were no related party transactions during the fiscal year ended March 31, 2009.
DIRECTOR INDEPENDENCE
None of the members of our Board of Directors is independent, as "independent" is defined in the rules of the NASDAQ Capital Market.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
AUDIT FEES
Rotenberg & Co. LLP billed $12,500 in connection with the audit of the Company's financial statements for the year ended March 31, 2009 and $17,500 in connection with the audit of the Company's financial statements for the year ended March 31, 2008. Also included in those billings were services performed in connection with the reviews of the Company's financial statements for the interim quarterly periods as well as those services normally provided by the accountant in connection with the Company's statutory and regulatory filings for fiscal 2009 and 2008.
AUDIT-RELATED FEES
Rotenberg & Co., LLP billed the Company $12,500 for Audit-Related fees during the year ended March 31, 2009 and $10,500 for Audit-related fees during the year ended March 31, 2008.
TAX FEES
Rotenberg & Co., LLP billed $0 to the Company in the year ended March 31, 2009 for professional services rendered for tax compliance, tax advice and tax planning. Rotenberg & Co., LLP billed $0 to the Company in the year ended March 31, 2008 for professional services rendered for tax compliance, tax advice and tax planning.
ALL OTHER FEES
Rotenberg & Co., LLP the Company $500 for other services during the year ended March 31, 2009. Rotenberg & Co., LLP billed the Company $1,950 for other services during the year ended March 31, 2008.
It is the policy of the Company that all services other than audit, review or attest services must be pre-approved by the Board of Directors. All of the services described above were approved by the Board of Directors.
ITEM 15.
ITEM 15. EXHIBIT LIST
3-a Certificate of Incorporation, as amended through June 2004 - filed as an exhibit to the Registration Statement on Form 10-SB (File No.: 000-50863) and incorporated herein by reference.
3-a(1) Certificate of Amendment of Certificate of Incorporation executed on November 25, 2005 - filed as an exhibit to the Current Report on Form 8-K dated November 29, 2005 and incorporated herein by reference.
3-a(2) Certificate of Amendment of Certificate of Incorporation effective on March 4, 2008 - filed as an exhibit to the Current Report on Form 8-K filed on March 6, 2008 and incorporated herein by reference.
3-a(3) Certificate of Amendment of Certificate of Incorporation effective on June 6, 2008 - filed as an exhibit to the Current Report on Form 8-K filed on June 9, 2008 and incorporated herein by reference.
3-b Second Amended and Restated By-laws - filed as an exhibit to the Company's Current Report on Form 8-K dated November 17, 2005 and incorporated herein by reference.
21 Subsidiaries - NexxNow China, Inc., a Delaware corporation
31.1 Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of The Securities Exchange Act.
31.2 Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a) of The Securities Exchange Act.
32.1 Certification of Chief Executive Officer and Chief Financial Officer under Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NEXXNOW, INC.
By: /s/ GARY BERTHOLD _______________________________ Gary Berthold Chief Executive Officer
In accordance with the Exchange Act, this Report has been signed below on August 12, 2009 by the following persons, on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ GARY BERTHOLD ___________________________ Gary Berthold Chief Executive Officer
/s/ STERLING SHEPPERD ___________________________ Sterling Shepperd Chief Financial Officer
/s/ SHARON BERTHOLD ___________________________ Sharon Berthold Director