NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements have been prepared by the Company 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 omitted in accordance with such rules and regulations. The information furnished in the interim financial statements includes 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 financial statements be read in conjunction with the Company's most recent audited financial statements and related footnotes as disclosed in its 10K filed on May 14, 2010.
Nature of Business
PrismOne Group, Inc., a Nevada corporation, is in the business of enabling and supporting our client’s sustainability efforts to enhance overall operational efficiencies and corporate social responsibility initiatives by deploying technologies and processes to reduce their environmental and energy impact via verifiable and documented means. These enablers include computer, communications, multimedia, and other network systems for businesses, buildings, and communities (our “Products” and “Services”). Our Products and Services allow business or building managers to easily and efficiently consolidate, manage and validate their sustainability efforts via their network infrastructure, communications, multimedia, security, and environmental needs, eliminating the difficulty and frustration of trying to operate numerous separate systems to meet these needs. We currently provide consulting, design, procurement, installation, integration, support and management services related to our Products, and are continually refining our Product offerings through research and assessments. The Company has two office locations in Central Florida.
Merger Transactions
PrismOne Group, LLC (“LLC”) was the accounting predecessor to the Company and on February 9, 2009 all the members of LLC transferred their membership interests to PrismOne Group, Inc., a newly formed corporation, in exchange for all of the issued and outstanding capital stock of PrismOne Group, Inc, consisting at that time of 274,000 shares of preferred stock and 13,700,003 shares of common stock. PrismOne Group, Inc. had no assets or operations prior to this transaction. Accordingly, the financial statements of the Company prior to February 9, 2009 are those of LLC.
On June 16, 2009, the Company consummated a reverse merger transaction in which PrismOne Group, Inc. (“PrismOne”) merged with and into Bright Screens Acquisition Corp. (“Acquisition Sub”), a wholly-owned Nevada subsidiary of Bright Screens, Inc. (“Bright Screens”), a publicly reporting Nevada corporation. On June 17, 2009, Bright Screens merged with the Acquisition Sub in a short-form merger transaction under Nevada law in which Bright Screens was the surviving entity and, in connection with this short form merger, changed its name to PrismOne Group, Inc., effective June 17, 2009.
Pursuant to the terms and conditions of the reverse merger transaction:
·
Each share of PrismOne common stock issued and outstanding immediately prior to the closing of the Merger was converted into the right to receive 0.4 shares of Bright Screens common stock. As a result, the shareholders of PrismOne received 5,480,000 (pre-split) newly issued shares of Bright Screens common stock.
·
Each share of PrismOne Series A Preferred Stock issued and outstanding immediately prior to the closing of the Merger was converted into the right to receive one share of Bright Screens’ newly created Series A Preferred Stock. As a result, the Series A Preferred shareholders of PrismOne received 274,000 newly issued shares of Bright Screens Series A Preferred Stock.
·
Following the closing of the reverse merger, the former president and CEO of Bright Screens, Mr. Carl Wimmer, canceled and returned all 50,000,000 shares of his shares of BrightScreens common stock.
·
Following the closing of the reverse merger, in a separate transaction, the company authorized a forward split of 2.5 shares for each share of common stock issued and outstanding at the time of the split.
All references to common stock in these financial statements have been retroactively restated so as to give effect to this stock-split.
·
As a result, following these events, there were 22,200,003 shares of common stock and 274,000 shares of Series A Preferred Stock issued and outstanding.
The stockholders of PrismOne possess majority voting control of the public company following the reverse merger and now control the board of directors. PrismOne is deemed to be the accounting acquirer in the reverse merger. Accordingly, the financial statements included herein are those of PrismOne Group, Inc. and its predecessor PrismOne Group, LLC.
Going Concern
Our financial statements have been prepared on a going concern basis, which assume that we will continue to realize our assets and discharge our liabilities in the normal course of business. As of September 30, 2010, we had an accumulated deficit of $1,186,456 and a working capital deficit of $602,859. This raises substantial doubt about our ability to continue as a going concern. Management’s plans for our continuation as a going concern are dependent upon the attainment of profitable operations and our ability to extend payment of management and license fees payable to Burshan LLC, a related party, and to raise equity or debt financing if and when needed. Our financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classifications of liabilities that might be necessary should we be unable to continue as a going concern.
The success of our business plan during the next 12 months and beyond is contingent upon us generating sufficient revenue to cover our costs of operations, or upon us obtaining additional financing. Should our revenues be less than anticipated or our expenses be greater than anticipated, then we may need to delay payment of management and license fees to our related party and/or obtain business capital through the use of private equity fundraising or stockholder loans. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all. Similarly, there can be no assurance that we will be able to generate sufficient revenue to cover the costs of our business operations.
Cash and cash equivalents
For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The carrying value of these investments approximates fair value.
Accounts receivable
Accounts receivable are reported at the customers' outstanding balances less any allowance for doubtful accounts. Interest is not accrued on overdue accounts receivable. The Company evaluates receivables on a regular basis for potential reserve.
Fixed Assets
Fixed assets are stated at cost. Major renewals and improvements are charged to the asset accounts while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed. At the time property and equipment are retired or otherwise disposed of, the asset and related accumulated depreciation accounts are relieved of the applicable amounts. Gains or losses from retirements or sales are credited or charged to income.
The Company depreciates its fixed assets on a straight line basis over a three year life.
Revenue Recognition
The Company recognizes revenue for installation services related to the initial setup of hardware and communications systems upon completion of the installation and acceptance by the customer. Revenues related to voice, data, and communications platform services are recognized monthly as the services are provided.
Earnings (Loss) per Common Share
Basic income (loss) per common share is computed by dividing net income (loss) by the weighted average shares outstanding. Diluted income (loss) per common share is computed by dividing adjusted net income by the weighted average shares outstanding plus potential common shares which would arise from conversion of preferred stock. Potential common shares related to conversion of preferred stock were not included in diluted income (loss) per share since their effects were anti-dilutive.
Income Taxes
Deferred income taxes are recognized for the tax consequences of temporary differences between the financial reporting bases and the tax bases of the Company’s assets and liabilities. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.
The Company follows the provisions of the FASB Accounting ASC 740, Income Taxes (“ASC 740”) (formerly referenced as FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes- an interpretation of FASB Statement No. 109). ASC 740 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company has not recognized a liability as a result of the implementation of ASC 740. A reconciliation of the beginning and ending amount of unrecognized tax benefits has not been provided since there is no unrecognized benefit as of the date of adoption. The Company has not recognized interest expense or penalties as a result of the implementation of ASC 740. If there were an unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company files income tax returns in the U.S. federal jurisdiction and in various states.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 reported amounts of revenues and expense during the reporting period. Actual results could differ from those estimates.
Financial Instruments
In January 2008, the Company adopted FASB ASC 820,
Fair Value Measurements and Disclosures
(“ASC 820”)
(Formerly referenced as SFAS No. 157
, Fair Value Measurements
)
,
to value its financial assets and liabilities. The adoption of ASC 820 did not have a significant impact on the Company’s results of operations, financial position or cash flows. ASC 820 defines fair value, establishes a framework for measuring fair value under GAAP and expands disclosures about fair value measurements. ASC 820 defines fair value as the exchange price that would be paid by an external party for an asset or liability (exit price).
ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Three levels of inputs may be used to measure fair value:
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·
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Level 1
– Active market provides quoted prices for identical assets or liabilities;
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·
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Level 2
– Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable with market data; and
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·
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Level 3
– Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.
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Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of September 30, 2010. The Company uses the market approach to measure fair value for its Level 1 financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments which include cash, accounts receivable, accounts payable and accrued liabilities are valued using Level 1 inputs and are immediately available without market risk to principal. Fair values were assumed to approximate carrying values for these financial instruments since they are short term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. The carrying value of note payable to stockholder approximates its fair value because the interest rates associated with the instrument approximates current interest rates charged on similar current borrowings. The Company’s investment in equity securities is a Level 1 asset as defined above and its fair value is determined based on the underlying quoted market price of the shares. The Company does not have other financial assets that would be characterized as Level 2 or Level 3 assets.
Recent Accounting Pronouncements
In May 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-19 (ASU 2010-19), Foreign Currency (Topic 830): Foreign Currency Issues: Multiple Foreign Currency Exchange Rates. The amendments in this Update are effective as of the announcement date of March 18, 2010. The Company does not expect the provisions of ASU 2010-19 to have a material effect on the financial position, results of operations or cash flows of the Company.
NOTE 2 – ACCOUNTS RECEIVABLE
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September 30, 2010
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December 31, 2009
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Accounts receivable
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87,059
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41,725
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Allowance for uncollectible accounts
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(12,074)
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(12,074)
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Accounts receivable, net
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74,986
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29,651
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NOTE 3 – FIXED ASSETS
Property and equipment consisted of the following at:
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September 30,
2010
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December 31, 2009
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Furniture & equipment
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89,216
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82,708
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Accumulated depreciation
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(25,274)
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(9,415)
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Fixed assets, net
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63,942
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73,293
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Depreciation expense for the three and nine months ended September 30, 2010 was $4,926 and $15,859 and 2009 was $2,000 and $2,000, respectively.
NOTE 4 – RELATED PARTY TRANSACTIONS
Accounts Receivable and Termination Agreement- Related Party
On July 10, 2009, the Company entered into a Termination Agreement with a customer Blue Earth Solutions, Inc. (“Blue Earth”). The Company’s CEO, Samir Burshan, was a member of the Board of Directors of Blue Earth until he resigned on October 31, 2009 and a certain executive of Blue Earth is a member on the Board of Directors of the Company. The Termination agreement served to settle all prior existing obligations between the two parties. In exchange, Blue Earth agreed to pay the Company $75,000 in cash and to issue 500,000 shares of its common stock as settlement of all prior obligations owed to the Company.
Immediately prior to the date of the agreement, the Company was owed approximately $195,097 by Blue Earth for services provided during the year ended December 31, 2009. Accordingly, upon execution of the termination agreement, the Company adjusted the receivable to reflect the settled amount of $250,000 consisting of $75,000 receivable in cash and $175,000 in common stock representing 500,000 shares valued based on the market price per share of $0.35 as of the date of the termination agreement. As of December 31, 2009, the fair value of the Blue Earth common stock had declined to $0.005 per share. Accordingly, the Company reduced the amount of the investment in equity to $5,000 and recorded an additional $30,000 unrealized loss in investment in equity during the nine months ending September 30, 2010.
Accounts receivable from Blue Earth was $23,310 net of a $40,000 allowance as of September30, 2010 (including the remaining $40,000 of the $75,000 cash portion of the above settlement).
Loan from Shareholder and due to Shareholder
On May 22, 2009, the Company’s CEO and majority stockholder loaned the Company $200,000. The loan is unsecured, is due 36-months from the date of issuance, and bears interest at 8.0% per annum. The Company recorded $27,485 and $15,517 of related party accrued interest as of September 30, 2010 and December 31, 2009, respectively. Interest expense for the three and nine month period ending September 30, 2010 and 2009 were $4,033 and $0 and $11,967 and $0, respectively.
On occasion, the Company’s CEO and majority stockholder loans the Company funds on a short-term basis with no terms for interest or repayment. As of September 30, 2010 and December 31, 2009, $68.005 and $19,033, respectively, was due to the CEO.
In the current quarter an entity wholly owned by the Company’s CEO loaned the Company funds on a short-term basis with no terms for interest or repayment. As of September 30, 2010 and December 31, 2009, $76,574 and $0, respectively, was due to the Kaleida Holdings.
License Agreements
The Company licenses certain proprietary intellectual property and technology to support its clients from Burshan LLC, an entity owned and controlled by the Company’s CEO, Samir Burshan. During 2008, monthly fees under the agreement were $10,000 for one location. On January 1, 2009 the license fees were reduced to $5,000 per month at the existing location. A second location was added effective March 1, 2009 at an additional $5,000 per month. The terms of both agreements are 10 years with a 5 year rolling renewal. Related party license fees are recorded as operating expenses and for the three and nine months ending September 30, 2010 and 2009 were $30,000 and $30,000 and $90,000 and $80,000, respectively. As of September 30, 2010, License fees owed in the amount of $83,545 were waived and were recorded as additional paid in capital
Management Agreements
The Company leases furnished office space as well as computer equipment, networking gear and communications equipment in the form of a management agreement with Burshan LLC. During 2008 the Company paid $15,500 per month for the use of one location. On January 1, 2009, the Management agreement was revised to reduce the monthly payment to $10,500 per month for the existing location. In addition, on March 1, 2009, the Company entered into a second management agreement with Burshan LLC in which it leased a second fully furnished and equipped location for $21,000 per month. The agreements are for a period of 10 years with rolling renewals for 5 years.
On December 31, 2009, Burshan LLC agreed to waive management fees due and reduce fees by 50% going forward. Management fees to related party are recorded as operating expenses and for the three and nine months ending September 30, 2010 and 2009 were $47,250 and $141,750 and $94,500 and $241,500, respectively.
Management fees owed in the amount of $177,000 as of December 31, 2009 were waived and were recorded as additional paid in capital. As of September 30, 2010, Management fees owed in the amount of $131,084 were waived and were recorded as additional paid in capital.
NOTE 5 - STOCKHOLDERS’ DEFICIT
Preferred Stock
The Company has authorized 10,000,000 shares of $0.001 par value preferred stock available for issuance. 274,000 shares of preferred stock are outstanding as of September 30, 2010.
Preferred Stock- Series A
In connection with the reverse merger as discussed in Note 1, the Company issued 274,000 shares of Series A Preferred Stock. The holders of the preferred stock are entitled to dividends at the rate of 6.0% calculated annually in December in arrears, when and as if declared by the Board of Directors. The preferred shares have fifty votes per share on all matters submitted to a vote of the common stockholders of the Corporation, receive preference to common stockholders with respect to liquidation of the Company and are redeemable in the form of cash or stock at the option of the Company. In the event of notification of the Company’s intent to redeem the preferred stock, the preferred stock holders may elect to convert the shares to 50 shares of common stock.
Common Stock
The authorized common stock is 90,000,000 shares at no par value. As of September 30, 2010, the Company had 22,731,503 shares of common stock issued and outstanding.
NOTE 6 – CONCENTRATIONS
In early October 2009, the Company lost one of its major customers as a result of the customer no longer requiring the Company’s services. The customer accounted for approximately $242,915 and approximately 48% of total revenues for the third quarter ending September 30, 2009. Consequently the three months period ended September 30, 2010 does not include revenue from this customer or any period thereafter.
NOTE 7 – COMMITMENTS
The Company entered into a capital lease for equipment on September 2, 2009. The lease term is 36 months with monthly installments of $1,690.
Future minimum lease payments as of September 30, 2010 were:
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Year Payable
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Amount
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2010
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$
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5,112
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2011
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20,281
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2012
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13,520
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Total
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38,913
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