UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
|
þ
|
ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the fiscal year ended March 31, 2009
|
q
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Commission
file number 001-15385
US
DATAWORKS, INC.
(Exact
name of registrant as specified in its charter)
Nevada
|
84-1290152
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
1
Sugar Creek Center Blvd.
5
th
Floor
Sugar
Land, Texas 77478
(Address
of principal executive offices, including ZIP Code)
(281)
504-8000
(Registrant's
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
Title
of Each Class
|
|
Name
of Exchange on Which Registered
|
|
|
|
Common
Stock, $0.0001 par value
|
|
American
Stock Exchange
|
Securities
registered pursuant to Section 12(g) of the Act:
Title
of Each Class:
None
Indicate
by check mark if the Registrant is a well-known seasoned issuer (as defined in
Rule 405 of the Securities Act). Yes
q
No
þ
Indicate
by check mark if the Registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act. Yes
q
No
þ
Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days: Yes
þ
El
No
q
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
q
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer
q
|
Accelerated
filer
q
|
Non-accelerated
filer
q
|
Smaller
reporting company
q
|
|
|
(Do
not check if a smaller
reporting
company)
|
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
q
No
þ
As of
June 24, 2009, the aggregate market value of the common stock of the Registrant
held by non-affiliates of the Registrant, based on the $0.37 per share price for
the Registrant's common stock as quoted by the American Stock Exchange on June
24, 2009 was $10,228,640 (for purposes of calculating these amounts, only
directors, officers and beneficial owners of 10% or more of the outstanding
capital stock of the Registrant have been deemed affiliates).
As of
June 24, 2009, the number of outstanding shares of common stock of the
Registrant was 32,780,870.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of the Registrant’s definitive proxy statement to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934 with respect to the
2009 Annual Meeting of Stockholders are incorporated by reference into Part III
of this Form 10-K.
US
DATAWORKS, INC.
TABLE
OF CONTENTS
2009
FORM 10-K
|
|
Page
|
PART
I
|
|
|
Item
1.
|
Business
|
2
|
Item
1A.
|
Risk
Factors
|
4
|
Item
1B.
|
Unresolved
Staff Comments
|
8
|
Item
2.
|
Properties
|
8
|
Item
3.
|
Legal
Proceedings
|
8
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
8
|
|
|
|
PART
II
|
|
|
Item
5.
|
Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
|
8
|
Item
7.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
9
|
Item
8.
|
Financial
Statements and Supplementary Data
|
15
|
Item
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
37
|
Item
9A.
|
Controls
and Procedures
|
37
|
Item
9B.
|
Other
Information
|
37
|
|
|
|
PART
III
|
|
|
Item
10.
|
Directors,
Executive Officers and Corporate Governance
|
38
|
Item
11.
|
Executive
Compensation
|
38
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
38
|
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
38
|
Item
14.
|
Principal
Accounting Fees and Services
|
38
|
|
|
|
PART
IV
|
|
|
Item
15.
|
Exhibits,
Financial Statement Schedules
|
38
|
NOTE
REGARDING FORWARD LOOKING STATEMENTS AND CERTAIN TERMS
When used
in this Report, the words “expects,” “anticipates,” “believes,” “plans,” “will”
and similar expressions are intended to identify forward-looking statements.
These are statements that relate to future periods and include, but are not
limited to, statements regarding our critical accounting policies, our operating
expenses, our strategic opportunities, adequacy of capital resources, our
potential professional services contracts and the related benefits, demand for
software and professional services, demand for our solutions, expectations
regarding net losses, expectations regarding cash flow and sources of revenue,
benefits of our relationship with an MSP, statements regarding our growth and
profitability, investments in marketing and promotion, fluctuations in our
operating results, our need for future financing, effects of accounting
standards on our financial statements, our investment in strategic partnerships,
development of our customer base and our infrastructure, our dependence on our
strategic partners, our dependence on personnel, our employee relations,
anticipated benefits of our restructuring, our disclosure controls and
procedures, our ability to respond to rapid technological change, expansion of
our technologies and products, benefits of our products, our competitive
position, statements regarding future acquisitions or investments, our legal
proceedings, and our dividend policy. Forward-looking statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those projected. These risks and uncertainties include,
but are not limited to, those discussed herein, as well as risks related to our
ability to develop and timely introduce products that address market demand, the
impact of alternative technological advances and competitive products, market
fluctuations, our ability to obtain future financing, and the risks set forth
below under “Item 1A. Risk Factors.” These forward-looking statements speak only
as of the date hereof. We expressly disclaim any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statements
contained herein to reflect any change in our expectations with regard thereto
or any change in events, conditions or circumstances on which any such statement
is based.
All
references to “US Dataworks,” the “Company,” “we,” “us,” or “our” means US
Dataworks, Inc.
MICRworks™,
Clearingworks
â
,
Returnworks™, and Remitworks™ are trademarks of US Dataworks. Other trademarks
referenced herein are the property of their respective owners.
PART
I
ITEM
1. BUSINESS
General
US
Dataworks is a developer of payment processing software, serving banking
institutions, credit card issuers, major retailers and the United States
Government. We generate revenue from the licensing, professional services,
transaction processing and maintenance of our core product, Clearingworks. Our
software is designed to enable organizations to process payments from a variety
of sources: paper checks, electronic payments via the Internet or telephone, and
other payment modalities. Our products are designed to provide organizations
with either an in-house solution complementing the organizations’ existing
technologies, systems and operational workflow or by using Clearingworks via the
Internet on an Application Services Provider.
Background
We were
incorporated under the laws of the state of Colorado as JLQ, Inc. in December
1994, and we changed our name to New World Publishing in October 1997. In May
1999, we acquired Communications Television, Inc., a California corporation, and
changed our business to an Internet marketing and technology infrastructure
company specializing in supporting cost effective business-to-business and
business-to-consumer revenue based marketing initiatives. In October 1999, we
changed our name to Sonicport.com, Inc. and in February 2000, we re-incorporated
under the laws of the state of Nevada. In February 2001, we changed our name
again to Sonicport, Inc. In April 2001, we acquired a Delaware
corporation known as US Dataworks, Inc., following which we focused our business
on developing electronic check processing software. In March 2002, we changed
our name to US Dataworks, Inc. and in May 2002, we merged the Delaware
corporation known as US Dataworks, Inc. into the Company.
Products
Clearingworks
is an enterprise payment solution that puts the power of payment processing in
the hands of the customer. This leading-edge solution combines remittance,
retail, check, payment, and return processing into a single consolidated
platform with highly-scalable features to grow in tandem with the customer’s
business operation. Clearingworks’ shared services and data management features
eliminate the need to adopt multiple payment processing systems in order to
process and accommodate different payment types. Clearingworks” Least Cost
Routing/Best Fit Clearing
SM
solution uses the latest industry-leading technology coupled with the customer’s
banking relationships to determine the most efficient method for payment
settlement.
Customers
US
Dataworks’ sells its products into several vertical markets within the market
segments of Corporate Payments, Retail Payments, and Government. Customers
include credit card issuers, major retailers and the United States
Government. Three of our customers, American Express, the Federal
Reserve Bank of Cleveland and Regulus accounted for 47%, 22%, and 9%,
respectively, of our net revenue for the year ended March 31, 2009. Four of our
customers, American Express, the Federal Reserve Bank of Cleveland, Regulus and
Citibank, accounted for 31%, 24%, 11%, and 10%, respectively, of our net revenue
for the year ended March 31, 2008.
Strategic
Business Relationships
We have
enhanced our distribution channel by aligning ourselves with key strategic
distribution partners to sell and distribute our software products will
accelerate our revenue growth and capture of market share. We have aligned
ourselves with several strategic partners as a core component of our sales and
distribution strategy, including Computer Sciences Corporation, eGistics and CDS
Global.
Competition
Our
competitors in the financial services market include Wausau Financial Systems,
J&B Software, Fiserv and Metavante. The services offered by these and other
competitors include electronic billing and payment, electronic funds transfer,
payment solutions, reconciliation, checks by phone and recurring billing, as
well as value-added services such as strategy consulting, marketing and
technology infrastructure.
We
believe that the principal competitive factors influencing our success in these
markets include:
|
·
|
reputation
for reliability and service;
|
|
·
|
serving
multiple market segments;
|
|
·
|
supporting
multiple payment types;
|
|
·
|
breadth
and quality of services;
|
|
·
|
technological
innovation and understanding client strategies and
needs;
|
|
·
|
creative
design and systems engineering
expertise;
|
|
·
|
effective
customer support;
|
|
·
|
processing
speed and accuracy; and
|
We
believe we compete favorably with respect to these factors. However, the market
for payment processing software is highly competitive, rapidly evolving and
subject to significant technological change. As this market grows, we expect
competition to increase. Increased competition may result in price reductions
and reduced margins.
We may
not have the financial resources, technical expertise or marketing, distribution
or support capabilities to compete successfully. If we fail to compete
successfully, we may fail to gain market share or lose existing market share and
our financial condition, operating results and business could be adversely
affected.
Patents
and Trademarks
US
Dataworks has obtained trademarks on the names of our premier products and
services, including Clearingworks. We also have applied for a patent on ImageKey
and Scan-N-Go Process. Our efforts to protect our intellectual property rights
may not prevent the misappropriation of our intellectual property.
Government
Regulation
As a
processor of ACH payments, we must comply with federal laws governing the
processing of electronic transactions. We are in compliance with all such
federal laws and work closely with NACHA to ensure our systems remain compliant
with applicable laws and regulations, as well as NACHA guidelines.
Employees
As of
June 24, 2009, we have 35 employees, all of whom are full-time employees. We are
not a party to any collective bargaining agreement with our employees. We
believe our employee relations to be good.
For fiscal 200
9
and 200
8
we spent approximately
$
911,754
and $
623,312
, respectively
, on
research and development activities.
ITEM
1A. RISK FACTORS
In
addition to the other information in this Report, the following factors should
be considered in evaluating us and our business.
We
have a significant amount of debt coming due in fiscal 2011 that we may not be
able to repay.
We have
approximately $4.2 million of debt that we owe certain company insiders that is
due and payable on July 1, 2010, approximately $3.7 million of which is secured
by a first lien on all of our properties and assets, including all of our
accounts receivable. We may not generate enough cash flow
by July 1, 2010 to pay off these obligations. While we
currently expect to be able to refinance this debt or reach an agreement to
extend the maturity date of this debt, there can be no assurances that this will
in fact occur. Failure to refinance or extend the maturity date of
this debt will give the secured holders of such debt the right to foreclose on
our properties and assets, including our accounts receivables. If
these foreclosure rights are exercised, we will be forced to file for protection
available under federal bankruptcy laws, which will likely render our equity,
including our issued and outstanding common stock, valueless.
We have a general history of losses
and may not operate profitably in the
future.
We have
incurred losses for the last three fiscal years. While we achieved positive
operating cash flow in fiscal 2009, our net losses continued and may continue in
the future. As of March 31, 2009, our accumulated deficit was $64,075,551. We
believe that our planned growth and profitability will depend in large part on
our ability to promote our brand name and gain clients and expand our
relationships with clients for whom we would provide licensing agreements and
system integration. Accordingly, we intend to invest heavily in marketing,
strategic partnership, development of our client base and development of our
marketing technology and operating infrastructure. If we are not successful in
promoting our brand name and expanding our client base, it will have a material
adverse effect on our financial condition and our ability to continue to operate
our business.
Our ability to continue as a going
concern may be contingent upon our ability
to secure capital from prospective
investors or lenders.
The
accompanying consolidated financial statements have been prepared assuming we
will continue on a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business. We
believe we currently have adequate cash to fund anticipated cash needs through
March 31, 2010. However, we may need to raise additional capital in the future.
Any equity financing may be dilutive to shareholders, and debt financing, if
available, will increase expenses and may involve restrictive covenants. We may
be required to raise additional capital, at times and in amounts that are
uncertain, especially under the current capital market conditions. These factors
raise substantial doubt about our ability to continue as a going concern. Under
these circumstances, if we are unable to obtain additional capital or are
required to raise it on undesirable terms, it may have a material adverse effect
on our financial condition, which could require us to:
|
•
|
curtail
our operations significantly;
|
|
•
|
sell
significant assets;
|
|
•
|
seek
arrangements with strategic partners or other parties that may require us
to relinquish significant rights to products, technologies or markets;
or
|
|
•
|
explore
other strategic alternatives including a merger or sale of US
Dataworks.
|
Our
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets or liabilities that might
be necessary should we be unable to continue as a going concern.
Our operating results are subject to
fluctuations caused by many factors that
could cause us to fail to achieve our
revenue or profitability expectations,
which in turn could cause our stock
price to decline.
Our
operating results can vary significantly depending upon a number of factors,
many of which are outside our control. Factors that may affect our quarterly
operating results include:
|
·
|
market
acceptance of and changes in demand for our products and
services;
|
|
·
|
gain
or loss of clients or strategic
relationships;
|
|
·
|
announcement
or introduction of new software, services and products by us or by our
competitors;
|
|
·
|
our
ability to build brand recognition;
|
|
·
|
timing
of sales to customers;
|
|
·
|
our
ability to upgrade and develop systems and infrastructure to accommodate
growth;
|
|
·
|
our
ability to attract and integrate new personnel in a timely and effective
manner;
|
|
·
|
our
ability to introduce and market products and services in accordance with
market demand;
|
|
·
|
changes
in governmental regulation;
|
|
·
|
reduction
in or delay of capital spending by our clients due to the effects of
terrorism, war and political instability;
and
|
|
·
|
general
economic conditions, including economic conditions specific to the
financial services industry.
|
In
addition, from time to time, we derive a portion of our revenue from agreements
signed at the end of the quarter. Our operating results could suffer if the
timing of these agreements is delayed. Depending on the type of agreements we
enter into, we may not be able to recognize revenue under these agreements in
the quarter in which they are signed. Some of all of these factors could
negatively affect demand for our products and services, and our future operating
results.
Most of
our operating expenses are relatively fixed in the short-term. We may be unable
to adjust spending rapidly to compensate for any unexpected sales shortfall,
which could harm our quarterly operating results. Because of the emerging nature
of the markets in which we compete, we do not have the ability to predict future
operating results with any certainty. Because of the above factors, you should
not rely on period-to-period comparisons of results of operation as an
indication of future performances.
We may not be able to develop or
maintain our relationships with distribution partners, which
may cause our cash flow to
decline.
We may
not be able to maintain or develop new relationships with distribution channel
partners. These strategic relationships are a core component of our sales and
distribution strategy and are a part of our growth strategy. The loss of a
distribution channel partner could harm our financial results.
Because a small number of customers
have historically accounted for and may in
future periods account for
substantial portions of our revenue, our revenue
could decline because of delays of
customer orders or the failure to retain
customers.
We have a
small number of customers that account for a significant portion of our revenue.
Our revenue could decline because of a delay in signing agreements with a single
customer or the failure to retain an existing customer. We may not obtain
additional customers. The failure to obtain additional customers and the failure
to retain existing customers will harm our operating results.
If general economic and business
conditions do not improve, we may experience
decreased revenue or lower growth
rates.
The
revenue growth and profitability of our business depends on the overall demand
for computer software and services in the product segments in which we compete.
Because our sales are primarily to major banking and government customers, our
business also depends on general economic and business conditions. A softening
of demand caused by a weakening of the economy may result in decreased revenue
or lower growth rates. As a result, we may not be able to effectively promote
future license revenue growth in our application business.
We may not be able to attract, retain
or integrate key personnel, which may
prevent us from successfully
operating our business.
We may
not be able to retain our key personnel or attract other qualified personnel in
the future. Our success will depend upon the continued service of key management
personnel. The loss of services of any of the key members of our management team
or our failure to attract and retain other key personnel could disrupt
operations and have a negative effect on employee productivity and morale and
harm our financial results.
We operate in markets that are
intensely and increasingly competitive, and if
we are unable to compete
successfully, our revenue could decline and we may be
unable to gain and may lose market
share.
The
market for financial services software is highly competitive. Our future success
will depend on our ability to adapt to rapidly changing technologies, evolving
industry standards, product offerings and evolving demands of the
marketplace.
Some of
our competitors have:
|
·
|
longer
operating histories;
|
|
·
|
larger
installed customer bases;
|
|
·
|
greater
name recognition and longer relationships with clients;
and
|
|
·
|
significantly
greater financial, technical, marketing and public relations resources
than US Dataworks.
|
Our
competitors may also be better positioned to address technological and market
developments or may react more favorably to technological changes. We compete on
the basis of a number of factors, including:
|
·
|
the
breadth and quality of services;
|
|
·
|
creative
design and systems engineering
expertise;
|
|
·
|
technological
innovation; and
|
|
·
|
understanding
clients’ strategies and needs.
|
Competitors
may develop or offer strategic services that provide significant technological,
creative, performance, price or other advantages over the services we offer. If
we fail to gain market share or lose existing market share, our financial
condition, operating results and business could be adversely affected and the
value of the investment in us could be reduced significantly. We may not have
the financial resources, technical expertise or marketing, distribution or
support capabilities to compete successfully.
We may be responsible for maintaining
the confidentiality of our client’s
sensitive information, and any
unauthorized use or disclosure could result in
substantial damages and harm our
reputation.
The
services we provide for our clients may grant us access to confidential or
proprietary client information. Any unauthorized disclosure or use could result
in a claim against us for substantial damages and could harm our reputation. Our
contractual provisions attempting to limit these damages may not be enforceable
in all instances or may otherwise fail to adequately protect us from liability
for damages.
If we do not adequately protect our
intellectual property, our business may
suffer, we may lose revenue or we may
be required to spend significant time and
resources to defend our intellectual
property rights.
We rely
on a combination of patent, trademark, trade secrets, confidentiality procedures
and contractual procedures to protect our intellectual property rights. If we
are unable to adequately protect our intellectual property, our business may
suffer from the piracy of our technology and the associated loss in revenue. Any
patents that we may hold may not sufficiently protect our intellectual property
and may be challenged by third parties. Our efforts to protect our intellectual
property rights, may not prevent the misappropriation of our intellectual
property. These infringement claims or any future claims could cause us to spend
significant time and money to defend our intellectual property rights, redesign
our products or develop or license a substitute technology. We may be
unsuccessful in acquiring or developing substitute technology and any required
license may be unavailable on commercially reasonable terms, if at all. In the
event of litigation to determine the validity of any third party claims or
claims by us against such third party, such litigation, whether or not
determined in our favor, could result in significant expense and divert the
efforts of our technical and management personnel, regardless of the outcome of
such litigation. Furthermore, other parties may also independently develop
similar or competing products that do not infringe upon our intellectual
property rights.
We may be unable to consummate future
potential acquisitions or investments or
successfully integrate acquired
businesses or investments or foreign operations
with our business, which may disrupt
our business, divert management’s
attention and slow our ability to
expand the range of our technologies and
products.
We intend
to continue to expand the range of our technologies and products, and we may
acquire or make investments in additional complementary businesses, technologies
or products, if appropriate opportunities arise. We may be unable to identify
suitable acquisition or investment candidates at reasonable prices or on
reasonable terms, or consummate future acquisitions or investments, each of
which could slow our growth strategy. We have no prior history or experience in
investing in or acquiring and integrating complementary businesses and therefore
may have difficulties completing such transactions or realizing the benefits of
such transactions, or they may have a negative effect on our business. Such
investments or acquisitions could require us to devote a substantial amount of
time and resources and could place a significant strain on our management and
personnel. To finance any acquisitions, we may choose to issue shares of our
common stock, which would dilute your interest in us. Any future acquisitions by
us also could result in significant write-offs or the incurrence of debt and
contingent liabilities, any of which could harm our operating
results.
We
have received notice from NYSE Alternext US, formerly the AMEX, notifying us of
our failure to satisfy several continued listing rules or standards, which
could result us being subject to delisting procedures
Our
common stock is listed on NYSE Alternext US, formerly the AMEX, under the symbol
“UDW.” All companies listed on NYSE Alternext US are required to comply with
certain continued listing standards, including maintaining stockholders’ equity
at required levels, share price requirements and other rules and regulations of
NYSE Alternext US . On July 23, 2008, we received notice from the staff of NYSE
Alternext US indicating that we were not in compliance with certain continued
listing standards of the AMEX Company Guide in that our stockholders’ equity is
less than $4,000,000 and we had losses from continuing operations and net losses
in three of our four most recent fiscal years (Section 1003(a)(ii)) and because
our stockholders’ equity is less than $6,000,000 and we had losses from
continuing operations and net losses in our five most recent fiscal years
(Section 1003(a)(iii)). In addition, NYSE Alternext US advised us that, in
accordance with Section 1003(f)(v) of the AMEX Company Guide, we must effect a
reverse stock split to address its low stock price. Failure to effect a reverse
split within a reasonable amount of time could result in suspension or delisting
of our common stock. On August 27, 2008 we submitted to NYSE Alternext US a Plan
advising NYSE Alternext US of action we have taken, or will take, to bring us in
compliance with Sections 1003(a)(ii) and 1003(a)(iii) of the AMEX Company Guide
within a maximum of 18 months from July 23, 2008. Our Plan was accepted by NYSE
Alternext US on October 9, 2008 subject to periodic review by NYSE Alternext US.
On March 24, 2009, we received a letter from NYSE Alternext US notifying us that
we were no longer in compliance with an additional continued listing standard of
the AMEX Company Guide as a result of our stockholders’ equity having fallen
below $2,000,000 and our having experienced losses from continuing operations
and/or net losses in two out of our most recent three fiscal years (Section
1003(a)(i))
. This
additional deficiency did not require us to submit a new Plan or revise the
original Plan. If we do not show sufficient progress consistent with the Plan,
the Exchange Staff will review the circumstances and may immediately commence
delisting proceedings. In the event that our common stock is delisted from NYSE
Alternext US, our market value and liquidity could be materially adversely
affected.
ITEM
1B. UNRESOLVED STAFF COMMENTS
None.
ITEM
2. PROPERTIES
Our
principal executive offices, which is our only property, currently consisting of
18,790 square feet of office space, are located at 1 Sugar Creek Center Blvd.,
5
th
Floor, Sugar Land, Texas 77478, which is leased through July 2012.
ITEM
3. LEGAL PROCEEDINGS
From time
to time, we may become involved in various legal and other proceedings that are
incidental to the conduct of our business. We are currently not involved in any
such legal proceedings.
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART
II
ITEM
5.
|
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF SECURITIES
|
Market
and Share Prices
During
fiscal 2009 and 2008, our common stock is traded on the American
Stock Exchange (now known as NYSE Alternext US) under the symbol “UDW.” The
following table indicates the high and low per share sale prices as reported by
the American Stock Exchange for the periods indicated.
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
Year
Ended March 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
0.17
|
|
|
$
|
0.11
|
|
|
|
|
|
|
|
|
|
|
Second
Quarter
|
|
|
0.66
|
|
|
|
0.06
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
|
0.30
|
|
|
|
0.11
|
|
|
|
|
|
|
|
|
|
|
Fourth
Quarter
|
|
|
0.32
|
|
|
|
0.12
|
|
|
|
|
|
|
|
|
|
|
Year
Ended March 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
0.67
|
|
|
$
|
0.44
|
|
|
|
|
|
|
|
|
|
|
Second
Quarter
|
|
|
0.70
|
|
|
|
0.35
|
|
|
|
|
|
|
|
|
|
|
Third
Quarter
|
|
|
0.49
|
|
|
|
0.17
|
|
|
|
|
|
|
|
|
|
|
Fourth
Quarter
|
|
|
0.28
|
|
|
|
0.09
|
|
Holders
As of
June 24, 2009, the 32,780,870 issued and outstanding shares of our
common stock were held by 317 stockholders of record. Because many of
the shares of our common stock are held by brokers and other institutions on
behalf of stockholders, we are unable to estimate the total number of beneficial
owners represented by these stockholders of record.
Dividend
Policy
We have
never paid any cash dividends on our common stock and do not anticipate paying
any cash dividends in the foreseeable future. We currently intend to retain
future earnings, if any, to fund the development and growth of our
business.
Securities
Authorized for Issuance under Equity Compensation Plans
Equity
Compensation Plan Information
The
following table sets forth certain information as to our equity compensation
plans as of March 31, 2009.
Plan Category
|
|
Number
of securities to be
issued upon exercise of
outstanding
options,
warrants and
rights
(a)
|
|
|
Weighted
average
exercise price of
outstanding
options,
warrants and
rights
(b)
|
|
|
Number of
securities
remaining
available for
future issuance
under
equity
compensation plans
(excluding
securities
reflected
in column (a))
(c)
|
|
Equity
compensation plans approved by the stockholders
|
|
|
6,964,220
|
|
|
$
|
0.68
|
|
|
|
667,872
|
|
Equity
compensation plans not approved by
the
stockholders
|
|
|
1,160,000
|
|
|
$
|
1.02
|
|
|
|
—
|
|
Total
|
|
|
8,124,220
|
|
|
$
|
0.73
|
|
|
|
667,872
|
|
The
Amended and Restated 2000 Stock Option Plan is our only equity compensation plan
that has been approved by the stockholders. We have also granted non-statutory
stock options to purchase shares of our common stock pursuant to stock option
agreements. Some of these grants were made outside of our 2000 Stock Option
Plan. The exercise prices of these options were equal to the fair market value
of our common stock on the date of grant. These options vest over periods up to
three years from the date of grant and have a duration of ten years
(1,160,000). The exercise price may be paid in cash or by a net issuance through
a cashless exercise.
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The
following discussion and analysis of our financial condition and results of
operations should be read with the consolidated financial statements and related
notes included elsewhere in this Report.
Critical
Accounting Policies
The
following discussion and analysis of our financial condition and results of
operations is based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities. On an
on-going basis, we evaluate these estimates, including those related to revenue
recognition and concentration of credit risk. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
We
believe that of the significant accounting policies used in the preparation of
our financial statements (see Note 2 to the Financial Statements), the following
are critical accounting policies, which may involve a higher degree of judgment,
complexity and estimates.
Revenue
Recognition
We
recognize revenues associated with our software products in accordance with the
provisions of the American Institute of Certified Public Accountants’ Statement
of Position 97-2, “Software Revenue Recognition.” We license our software
products under non-exclusive, non-transferable license agreements. Because these
arrangements do not require significant production, modification or
customization, revenue is recognized when the license agreement has been signed,
the software product has been delivered, the related fee is fixed or
determinable and collection of such fee is probable.
In
certain instances, we license our software on a transactional fee basis in lieu
of an up-front licensing fee. In these arrangements, the customer is charged a
fee based upon the number of items processed by the software and we recognize
revenue as these transactions occur. The transaction fee also includes the
provision of standard maintenance and support services as well as product
upgrades should such upgrades become available.
If
professional services are provided in connection with the installation of the
software licensed, revenue is recognized when those services have been
provided.
In
certain instances, the Company will recognize revenue on a percent of completion
basis for the portion of professional services related to customized customer
projects that have been completed but are not yet deliverable to
customer.
For
license agreements that include a separately identifiable fee for contracted
maintenance services, such revenues are recognized on a straight-line basis over
the life of the maintenance agreement noted in the license agreement, but
following any installation period of the software.
Concentrations
of Credit Risk
We extend
credit to our customers and perform ongoing credit evaluations of our customers.
We do not obtain collateral from our customers to secure our accounts
receivables. We evaluate our accounts receivable on a regular basis for the
ability to collect and provide for an allowance for potential credit losses as
deemed necessary.
Three of
our customers, American Express, the Federal Reserve Bank of Cleveland, and
Regulus accounted for 47%, 22%, and 9% respectively, of our net revenue for the
year ended March 31, 2009. Four of our customers, American Express, the Federal
Reserve Bank of Cleveland, Regulus and Citibank accounted for 31% ,24%, 11%, and
10%, respectively, of our net revenue for the year ended March 31,
2008.
At March
31, 2009, amounts due from these three customers accounted for 25%, 19%, and
15%, and one additional customer accounted for 15% of the accounts receivable
then outstanding.
At March
31, 2008, amounts due from these four customers accounted for 45%, 12%, 11% and
4% of the accounts receivable then outstanding.
Results
of Operations
The
results of operations reflected in this discussion include the operations of US
Dataworks for the years ended March 31, 2009 and March 31, 2008.
Revenue
We
generate revenues from (a) licensing software with fees due at the initial term
of the license, (b) licensing and supporting software with fees due on a
transactional basis and (c) providing maintenance, enhancement and support for
previously licensed products, (d) providing professional services.
|
|
For
year
Ended
March
31,
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Change
|
|
|
|
(In 000’s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software
licensing revenues
|
|
$
|
246
|
|
|
$
|
282
|
|
|
|
(12.8
|
)%
|
Software
transactional revenues
|
|
|
2,158
|
|
|
|
1,848
|
|
|
|
16.8
|
%
|
Software
maintenance revenues
|
|
|
892
|
|
|
|
896
|
|
|
|
(0.5
|
)%
|
Professional
service revenues
|
|
|
4,701
|
|
|
|
2,820
|
|
|
|
66.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discounts
on Sales
|
|
|
—
|
|
|
|
(129
|
)
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
|
$
|
7,997
|
|
|
$
|
5,717
|
|
|
|
39.9
|
%
|
Revenues
increased by 39.9% in fiscal 2009, as compared to fiscal
2008. Transactional revenue revenues increased 16.8%, in fiscal 2009,
as compared to fiscal 2008. The increase in transactional revenue was
primarily attributable to new customers added during the year and a steady
growth of transactions processed by our existing customers. Professional service
revenues increased 66.7% in fiscal 2009 as compared to fiscal 2008. The increase
in professional service revenue was primarily attributable to the consulting
agreement that we signed with American Express February 2008 and related
purchase orders.
These
increases were offset by a decrease in our licensing and maintenance revenues of
12.8% and 0.5% respectively in fiscal 2009, as compared to fiscal 2008, with the
decrease in licensing revenues being primarily attributable to the loss of
renewal of third party software licenses we resell to our
customers.
Cost
of Sales
Cost of
sales principally include the costs of our personnel who perform the services
associated with our software maintenance, support, training and installation
activities, and the cost of third party software sold in conjunction with
licenses of our software to convert electronic data into acceptable formats
utilized by the Nation’s banking system. Total cost of sales increased by
$195,024, or 9.9%, from $1,964,555 in fiscal 2008 to $2,159,579 in fiscal 2009.
The increase in cost of sales is due to the increased labor hours needed to
fulfill the requirements of a professional services contract with a major credit
card provider. However, cost of sales as a percentage of combined maintenance
and services revenues declined from 52.8% in fiscal 2008 to 38.6% in fiscal
2009. This decrease is primarily due to the significant increase in professional
service revenue in fiscal 2009 as compared to professional service revenue
recorded in fiscal 2008.
Operating
Expenses
Total
operating expenses decreased by $11,318,381, or 68.9%, from $16,438,670 in
fiscal 2008 to $5,120,289 in fiscal 2009. The decrease in operating
expenses was principally attributable to the goodwill impairment expense of
$10,112,931 that we recorded in fiscal 2008, as compared to no goodwill
impairment charges in fiscal 2009, and to a $1,236,967 decrease in general and
administrative expense in fiscal 2009, as compared to fiscal 2008. The decrease
in general and administrative expense is primarily attributable to a $940,000
decrease in compensation expense, a $160,000 decrease in the use of outside
services and $127,000 decrease in insurance, office, and marketing expenses. We
anticipate that our operating expenses will increase slightly over the coming
year as we continue to maintain and expand our customer base.
Other
Income (Expense)
Total
other income (expense), including interest expense and financing costs,
decreased $3,712,173, from income of $1,010,741 in fiscal 2008 to an expense of
$(2,701,432) in fiscal 2009. The decrease is principally due to the $2,539,827
in interest expense charge incurred when $4,000,000 in convertible notes were
refinanced in August 2008 (due to the acceleration of the unamortized balance of
the original issue discount on such notes and the acceleration of the
unamortized portion of the financing costs for such notes); and a reduction in
the gain on derivatives associated with the debt feature of such convertible
notes of $1,072,956 recorded in fiscal 2009 as compared to fiscal 2008
.
Net
Loss
Net loss
decreased by $9,690,578, or 83.0%, from a net loss of $11,674,891 in fiscal 2008
to a net loss of $1,984,313 in fiscal 2009.
Liquidity
and Capital Resources
Because
of our ability to increase revenue while at the same time reducing general and
administrative expenses, we experienced positive operating cash flow from
operations in fiscal 2009 and expect to continue to achieve enough positive
operating cash flow from operations in the future to operate and grow our
business. However, due to our history of experiencing negative cash
flow from operations and the debt financing that we were forced to put in place
to cover this historical negative cash flow, we find ourselves in the position
of having approximately $4.2 million of debt coming due on July 1, 2010 that
we may not be able to repay from our operating cash flow. While
we currently expect to be able to refinance this debt or reach an agreement to
extend the maturity date of this debt, there can be no assurances that this will
in fact occur. Failure to refinance or extend the maturity date of
this debt will have a material adverse effect on our financial condition and our
ability to continue as a going concern (see “Item 1A. Risk
Factors”).
In
addition, while we expect to be able to fund our operations from cash flow, if
that is not the case, our long term viability will again depend on our ability
to obtain adequate sources of debt or equity funding to fund the continuation of
our business operations and to ultimately achieve adequate profitability and
cash flows to sustain our operations. We will need to increase revenues from
software licenses, transaction-based software license contracts and professional
services agreements to become profitable.
Cash and
cash equivalents decreased by $499,530 from $903,393 at March 31, 2008 to
$403,863 at March 31, 2009. Cash provided by/(used in) operating
activities was $279,445 in fiscal 2009 as compared to
$(2,741,323). The increase in cash flow was attributable to the
combination of a significant increase in revenue and a significant decrease in
general and administrative expense.
Cash used
for investing activities for fiscal 2008 and 2009 consisted of the purchase and
sale of property and equipment totaling $117,850 and $14,538,
respectively.
Financing
activities used cash of $764,438 in fiscal 2009, and included $3,703,500 in
proceeds from a related party loan, offset by $4,000,000 repayment of
convertible promissory notes, $432,659 in deferred financing costs and $35,279
in notes payable to a vendor.
Financing
activities provided cash of $3,622,290 in fiscal 2008, which included $4,000,000
in proceeds from the issuance of senior secured convertible notes, $305,000 in
proceeds from stock sales, that was partially offset by $256,066 repayment of
convertible promissory notes, $56,640 in repayment of notes payable and $370,004
in deferred financing cost associated with such senior secured convertible
notes.
Assuming
that we are able to refinance or extend the maturity date of our debt as
discussed above, as a result of our increased level of transactional revenues
achieved in fiscal 2009, and the expected increase in revenues to be received
from recently received contracts, we believe we currently have adequate capital
resources to fund our anticipated cash needs through March 31, 2010 and beyond.
However, an adverse business or legal development could require us to raise
additional financing sooner than anticipated. We recognize that we may be
required to raise such additional capital, at times and in amounts, which are
uncertain, especially under the current capital market conditions. If we are
unable to acquire additional capital or are required to raise it on terms that
are less satisfactory than we desire, it may have a material adverse effect on
our financial condition. In the event we raise additional equity, these
financings may result in dilution to existing shareholders.
Recently Issued Accounting
Pronouncements
Financial Accounting Standards Board
(“FASB”) Staff Position (“FSP”) No. 157-2
.
FSP 157-2 delays the effective date of
Statement of Financial Accounting Standards (“SFAS 157”),
Fair Value
Measurements,
for
nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). The delay is intended to allow the FASB
and constituents additional time to consider the effect of various
implementation issues that have arisen, or that may arise, from the application
of SFAS 157. This FSP defers the effective date of SFAS 157 to fiscal
years beginning after
November 15, 2008
. The Company does not expect
FSP 157-2 to have a material impact on its financial
statements.
FASB Staff Position
No. 157-3
.
On
October 10, 2008
, the FASB issued FASB Staff Position
157- 3 (“FSP 157-3”)
Determining the Fair Value of a Financial Asset When
the Market for That Asset Is Not Active
.
FSP 157-3 applies to financial assets
within the scope of SFAS 157. FSP 157-3 clarifies the application of SFAS 157 in
a market that is not active and provides an example to illustrate key
considerations in determining the fair value of a financial asset when the
market for that financial asset is not active. In situations in which there is
little, if any, market activity for an asset at the measurement date, the fair
value measurement objective remains the same, that is, the price that would be
received by the holder of the financial asset in an orderly transaction (an exit
price notion) that is not a forced liquidation or distressed sale at the
measurement date. Additionally, in determining fair value for a financial asset,
the use of a reporting entity’s own assumptions about future cash flows and
appropriately risk-adjusted discount rates is acceptable when relevant
observable inputs are not available. Broker (or pricing service) quotes may be
an appropriate input when measuring fair value, but they are not necessarily
determinative if an active market does not exist for the financial
asset. The Company does not expect FSP 157-3 to have a material
impact on its financial statements.
In December 2007, the FASB issued a
revision and replacement of SFAS 141(“SFAS 141R”), “
Business Combinations,”
to increase the
relevance, representational faithfulness, and comparability of the information a
reporting entity provides in its
financial reports
about a business combination and its
effects. SFAS 141R replaces SFAS 141, “
Business
Combinations
” but, retains
the fundamental requirements of SFAS 141 that the acquisition method of
accounting be used and an acquirer be identified for all business combinations.
SFAS 141R expands the definition of a business and of a business
combination and establishes how the acquirer is to: (1) recognize and
measure in its financial statements the identifiable assets acquired, the
liabilities assumed, and any non-controlling interest in the acquired company;
(2) recognize and measure the goodwill acquired in the business combination
or a gain from a bargain purchase; and (3) determine what information to
disclose to enable users of the financial statements to evaluate the nature and
financial effects of the business combination. SFAS 141R is applicable to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after
December 15, 2008, and is to be applied prospectively. Early adoption is
prohibited. SFAS 141R will impact the Company only if it elects to enter
into a business combination subsequent to
March 31, 2009
.
In December 2007, the FASB issued
“SFAS 160,”
“Noncontrolling Interests in
Consolidated Financial Statements — an amendment
of Accounting Research Bulletin No.
51
(“ARB 51”)
to improve
the relevance, comparability, and transparency of the financial information a
reporting entity provides in its consolidated financial statements.
SFAS 160 amends ARB 51 to establish accounting and reporting standards for
noncontrolling interests in subsidiaries and to make certain consolidation
procedures consistent with the requirements of SFAS 141R. It defines a
noncontrolling interest in a subsidiary as an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements. SFAS 160 changes the way the consolidated income
statement is presented by requiring consolidated net income to include amounts
attributable to the parent and the noncontrolling interest. SFAS 160
establishes a single method of accounting for changes in a parent’s ownership
interest in a subsidiary which does not result in deconsolidation. SFAS 160
also requires expanded disclosures that clearly identify and distinguish between
the interests of the parent and the interests of the noncontrolling owners of a
subsidiary. SFAS 160 is effective for financial statements issued for
fiscal years beginning on or after
December 15, 2008
, and interim periods within those
fiscal years. Early adoption is prohibited. SFAS 160 shall be applied
prospectively, with the exception of the presentation and disclosure
requirements which shall be applied retrospectively for all periods presented.
The Company does not believe that the adoption of SFAS 160 would have a
material effect on its financial position, results of operations or cash
flows.
In
April 2008, the FASB issued FSP SFAS 142-3, “
Determination of the Useful Life of
Intangible Assets”
(“SFAS 142-3”). This statement revises the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under FASB
Statement No. 142,
Goodwill and Other
Intangible Assets
. The goal of SFAS 142-3 is to improve the consistency
between the useful life of a recognized intangible asset under Statement 142 and
the period of expected cash flows used to measure the fair value of the asset
under SFAS 141R,
Business
Combinations,
and other U.S. GAAP. FSP SFAS 142-3 is effective
for fiscal years beginning after December 15, 2008. The Company does not
expect SFAS 142-3 to have a material impact on its financial
statements.
In July
2008, the FASB issued SFAS No. 162,
“The Hierarchy of Generally
Accepted Accounting Principles”
(“SFAS 162”). This statement identifies
the sources of accounting principles and the framework for selecting the
principles used in the preparation of financial statements of nongovernmental
entities that are presented in conformity with U.S. GAAP. The
levels of authority of the accounting principles available for the preparation
of financial statements were previously issued by the American Institute of
Certified Public Accountants. The FASB decided that accounting principles
applicable to GAAP should be adopted as a FASB Statement. SFAS 162
does not set an effective date. It will become effective 60 days following
approval by the Securities and Exchange Commission of amendments made by the
Public Accounting Oversight Board to
AU Section 411,
“The Meaning of Present
Fairly in Conformity with Generally Accepted Accounting Principles.”
Effects of applying the provisions of SFAS 162 must be reported as changes in
accounting principle in accordance with SFAS No. 154,
“Accounting Changes and
Error Corrections”
(“SFAS 154”). A company must
follow the disclosure requirements of SFAS 154 and additionally disclose the
accounting principles that were used before and after the application of the
provisions of SFAS 162 and the reasons why applying this Statement resulted in a
change in accounting principle. The Company does not expect SFAS 162
to have a material impact on its financial statements.
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
US
DATAWORKS, INC.
TABLE
OF CONTENTS
|
Page
|
Report
of Independent Registered Public Accounting Firm
|
16
|
Financial
Statements:
|
|
Balance
Sheets as of March 31, 2009 and 2008
|
17
|
Statements
of Operations for the years ended March 31, 2009 and 2008
|
18
|
Statements
of Stockholders’ Equity for the years ended March 31, 2009 and
2008
|
19
|
Statements
of Cash Flows for the years ended March 31, 2009 and 2008
|
21
|
Notes
to Financial Statements
|
22
|
Report
of Independent Registered Public Accounting Firm
Board
of Directors and Stockholders
US
Dataworks, Inc.
We have
audited the accompanying balance sheets of US Dataworks, Inc. as of March 31,
2009 and 2008, and the related statements of operations, stockholders’ equity,
and cash flows for each of the two years in the period ended March 31, 2009.
These financial statements are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these 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 audit 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 financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of US Dataworks, Inc. as of March 31,
2009 and 2008, and the results of its operations and its cash flows for each of
the two years in the period ended March 31, 2009 in conformity with U.S.
generally accepted accounting principles.
/s/ Ham,
Langston & Brezina, LLP
Houston,
Texas
June 29,
2009
US
DATAWORKS, INC.
BALANCE
SHEETS
|
|
March 31, 2009
|
|
|
March 31,
2008
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
403,863
|
|
|
$
|
903,393
|
|
Accounts
receivable, trade
|
|
|
845,747
|
|
|
|
856,261
|
|
Prepaid
expenses and other current assets
|
|
|
186,578
|
|
|
|
145,915
|
|
Total
current assets
|
|
|
1,436,188
|
|
|
|
1,905,569
|
|
Property
and equipment, net
|
|
|
305,783
|
|
|
|
478,687
|
|
Goodwill,
net
|
|
|
4,020,698
|
|
|
|
4,020,698
|
|
Other
assets
|
|
|
194,359
|
|
|
|
357,124
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
5,957,028
|
|
|
$
|
6,762,078
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Current
Portion of Note Payable – Equipment
|
|
$
|
35,279
|
|
|
$
|
35,279
|
|
Deferred
revenue
|
|
|
223,688
|
|
|
|
200,833
|
|
Accounts
payable
|
|
|
247,132
|
|
|
|
271,677
|
|
Accrued
expenses
|
|
|
199,940
|
|
|
|
366,538
|
|
Interest
payable – related parties
|
|
|
38,336
|
|
|
|
18,188
|
|
Notes
payable – related parties
|
|
|
4,203,500
|
|
|
|
—
|
|
Derivative
– Compounded Embedded
|
|
|
—
|
|
|
|
353,749
|
|
Derivative
– Warrants
|
|
|
—
|
|
|
|
267,532
|
|
Total
current liabilities
|
|
|
4,947,875
|
|
|
|
1,513,796
|
|
Long-term
Note Payable – Equipment
|
|
|
17,639
|
|
|
|
52,918
|
|
Long-term
Note Payable – Related Party
|
|
|
—
|
|
|
|
500,000
|
|
Long-term
convertible promissory note, net unamortized discount of
$1,995,636
|
|
|
—
|
|
|
|
2,004,364
|
|
Total
long term liabilities
|
|
|
17,639
|
|
|
|
2,557,282
|
|
Total
liabilities
|
|
|
4,965,514
|
|
|
|
4,071,078
|
|
Commitments
and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
Series B preferred stock, $0.0001 par value; 700,000 shares authorized;
549,667 shares issued and outstanding; $0.75 liquidation preference,
dividends of $334,841 and $293,596 in arrears as of March 31, 2009 and
2008, respectively
|
|
|
55
|
|
|
|
55
|
|
Common
stock, $0.0001 par value; 90,000,000 shares authorized; 32,730,870 and
32,062,962 shares issued and outstanding as of March 31, 2009 and 2008 ,
respectively
|
|
|
3,273
|
|
|
|
3,206
|
|
Additional
paid-in capital
|
|
|
65,063,737
|
|
|
|
64,778,977
|
|
Accumulated
deficit
|
|
|
(64,075,551
|
)
|
|
|
(62,091,238
|
)
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
|
991,514
|
|
|
|
2,691,000
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
5,957,028
|
|
|
$
|
6,762,078
|
|
The
accompanying notes are an integral part of these financial
statements.
US
DATAWORKS, INC.
STATEMENTS
OF OPERATIONS
for
the years ended March 31, 2009 and 2008
_____
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
Software
licensing revenues
|
|
$
|
245,931
|
|
|
$
|
282,045
|
|
Software
transactional revenues
|
|
|
2,158,409
|
|
|
|
1,848,130
|
|
Software
maintenance revenues
|
|
|
892,171
|
|
|
|
896,358
|
|
Professional
services revenues
|
|
|
4,700,476
|
|
|
|
2,820,332
|
|
|
|
|
|
|
|
|
|
|
Total
revenues, net sales discounts in 2009 and 2008 of $0 and
$129,272, respectively
|
|
|
7,996,987
|
|
|
|
5,717,593
|
|
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
|
2,159,579
|
|
|
|
1,964,555
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
5,837,408
|
|
|
|
3,753,038
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
4,932,846
|
|
|
|
6,144,484
|
|
Depreciation
and amortization
|
|
|
187,443
|
|
|
|
181,255
|
|
Goodwill
impairment
|
|
|
—
|
|
|
|
10,112,931
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
5,120,289
|
|
|
|
16,438,670
|
|
|
|
|
|
|
|
|
|
|
Income/(loss)
from operations
|
|
|
717,119
|
|
|
|
(12,685,632
|
)
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
Financing
costs
|
|
|
(348,210
|
)
|
|
|
(152,680
|
)
|
Interest
expense
|
|
|
(2,712,621
|
)
|
|
|
(458,675
|
)
|
Interest
expense – related parties
|
|
|
(333,137
|
)
|
|
|
(47,256
|
)
|
Loss
on disposition of assets
|
|
|
-
|
|
|
|
(44,231
|
)
|
Other
income (expense)
|
|
|
71,255
|
|
|
|
19,346
|
|
Gain
on derivative liabilities
|
|
|
621,281
|
|
|
|
1,694,237
|
|
|
|
|
|
|
|
|
|
|
Total
other income (expense)
|
|
|
(2,701,432
|
)
|
|
|
1,010,741
|
|
|
|
|
|
|
|
|
|
|
Loss
before provision for income taxes
|
|
|
(1,984,313
|
)
|
|
|
(11,674,891
|
)
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,984,313
|
)
|
|
$
|
(11,674,891
|
)
|
|
|
|
|
|
|
|
|
|
Basic
and diluted loss per share
|
|
$
|
(0.06
|
)
|
|
$
|
(0.37
|
)
|
|
|
|
|
|
|
|
|
|
Basic
and diluted weighted-average shares outstanding
|
|
|
32,444,764
|
|
|
|
31,744,212
|
|
The
accompanying notes are an integral part of these financial
statements.
US
DATAWORKS, INC.
STATEMENTS
OF STOCKHOLDERS’ EQUITY
for
the years ended March 31, 2009 and 2008
|
|
Preferred Stock Convertible Series
B
|
|
|
Common Stock
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2007
|
|
|
549,667
|
|
|
$
|
55
|
|
|
|
37,400,462
|
|
|
$
|
3,740
|
|
Warrants
issued in exchange for note extension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
issued in exchange for services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for cash
|
|
|
|
|
|
|
|
|
|
|
762,500
|
|
|
|
76
|
|
Common
stock returned from escrow
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,100,000
|
)
|
|
|
(610
|
)
|
Stock
based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net
(loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Balance
at March 31, 2008
|
|
|
549,667
|
|
|
$
|
55
|
|
|
|
32,062,962
|
|
|
$
|
3,206
|
|
[additional
columns below]
[continued
from above table, first column(s) repeated]
|
|
Additional
Paid-In
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2007
|
|
$
|
64,056,135
|
|
|
$
|
(50,416,347
|
)
|
|
$
|
13,643,583
|
|
Warrants
issued in exchange for note extension
|
|
|
41,588
|
|
|
|
|
|
|
|
41,588
|
|
Warrants
issued in exchange for services
|
|
|
38,000
|
|
|
|
|
|
|
|
38,000
|
|
Common
stock issued for cash
|
|
|
304,924
|
|
|
|
|
|
|
|
305,000
|
|
Common
stock returned from escrow
|
|
|
610
|
|
|
|
—
|
|
|
|
—
|
|
Stock
based compensation
|
|
|
337,720
|
|
|
|
—
|
|
|
|
337,720
|
|
Net
(loss)
|
|
|
—
|
|
|
|
(11,674,891
|
)
|
|
|
(11,674,891
|
)
|
Balance
at March 31, 2008
|
|
$
|
64,778,977
|
|
|
$
|
(62,091,238
|
)
|
|
$
|
2,691,000
|
|
US
DATAWORKS, INC.
STATEMENTS
OF STOCKHOLDERS’ EQUITY
for
the years ended March 31, 2009 and 2008
|
|
Preferred Stock Convertible Series
B
|
|
|
Common Stock
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2008
|
|
|
549,667
|
|
|
$
|
55
|
|
|
|
32,062,962
|
|
|
$
|
3,206
|
|
Stock
based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
667,908
|
|
|
|
67
|
|
Net
(loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Balance
at March 31, 2009
|
|
|
549,667
|
|
|
$
|
55
|
|
|
|
32,730,870
|
|
|
$
|
3,273
|
|
[additional
columns below]
[continued
from above table, first column(s) repeated]
|
|
Additional
Paid-In
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March 31, 2008
|
|
$
|
64,778,977
|
|
|
$
|
(62,091,238
|
)
|
|
$
|
2,691,000
|
|
Stock
based compensation
|
|
|
284,760
|
|
|
|
—
|
|
|
|
284,827
|
|
Net
(loss)
|
|
|
—
|
|
|
|
(1,984,313
|
)
|
|
|
(1,984,313
|
)
|
Balance
at March 31, 2009
|
|
$
|
65,063,737
|
|
|
$
|
(64,075,551
|
)
|
|
$
|
991,514
|
|
The
accompanying notes are an integral part of these financial
statements.
US
DATAWORKS, INC.
STATEMENTS
OF CASH FLOWS
for
the years ended March 31, 2009 and 2008
|
|
2009
|
|
|
2008
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
loss from continuing operations
|
|
$
|
(1,984,313
|
)
|
|
$
|
(11,674,891
|
)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization of property and equipment
|
|
|
187,445
|
|
|
|
181,255
|
|
Amortization
of deferred financing costs
|
|
|
595,425
|
|
|
|
44,987
|
|
Compensatory
element of warrants associated with financing
costs
|
|
|
—
|
|
|
|
79,588
|
|
Gain
on disposition of assets
|
|
|
—
|
|
|
|
44,231
|
|
Amortization
of note discount on convertible promissory note
|
|
|
1,995,636
|
|
|
|
244,627
|
|
Goodwill
impairment
|
|
|
—
|
|
|
|
10,112,931
|
|
Stock
based compensation
|
|
|
284,827
|
|
|
|
337,720
|
|
Gain
on derivatives
|
|
|
(621,281
|
)
|
|
|
(1,694,237
|
)
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
10,514
|
|
|
|
1,323,768
|
|
Prepaid
expenses and other current assets
|
|
|
(40,667
|
)
|
|
|
(14,003
|
)
|
Other
assets
|
|
|
—
|
|
|
|
(1,777
|
)
|
Deferred
revenue
|
|
|
22,855
|
|
|
|
(443,062
|
)
|
Accounts
payable
|
|
|
(24,545
|
)
|
|
|
(648,433
|
)
|
Accrued
expenses
|
|
|
(166,598
|
)
|
|
|
(633,357
|
)
|
Interest
payable
|
|
|
20,148
|
|
|
|
(670
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used) in operating activities
|
|
|
279,446
|
|
|
|
(2,741,323
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(14,538
|
)
|
|
|
(128,700
|
)
|
Sales
of fixed assets
|
|
|
—
|
|
|
|
10,850
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
(14,538
|
)
|
|
|
(117,850
|
)
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
Proceeds
from related party note
|
|
|
3,703,500
|
|
|
|
—
|
|
Proceeds
from convertible promissory notes
|
|
|
—
|
|
|
|
4,000,000
|
|
Repayment
of note payable — related party
|
|
|
—
|
|
|
|
(39,000
|
)
|
Repayment
of convertible promissory note
|
|
|
(4,000,000
|
)
|
|
|
(256,066
|
)
|
Proceeds
from stock sale
|
|
|
—
|
|
|
|
305,000
|
|
Deferred
financing costs
|
|
|
(432,659
|
)
|
|
|
(370,004
|
)
|
Payments
on equipment note payable
|
|
|
(35,279
|
)
|
|
|
(17,640
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash (used) / provided by financing activities
|
|
|
(764,438
|
)
|
|
|
3,622,290
|
|
|
|
|
|
|
|
|
|
|
Net
(decrease) increase in cash and cash equivalents
|
|
|
(499,530
|
)
|
|
|
763,117
|
|
Cash
and cash equivalents, beginning of year
|
|
|
903,393
|
|
|
|
140,276
|
|
Cash
and cash equivalents, end of year
|
|
$
|
403,863
|
|
|
$
|
903,393
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
517,049
|
|
|
$
|
118,183
|
|
Taxes
paid
|
|
$
|
—
|
|
|
$
|
—
|
|
The
accompanying notes are an integral part of these financial
statements.
US
DATAWORKS INC.
NOTES
TO FINANCIAL STATEMENTS
____
|
1.
|
Organization and
Business
|
General
US
Dataworks, Inc. (the “Company”), a Nevada corporation, develops, markets, and
supports payment processing software for the financial services industry. Its
customer base includes many of the largest financial institutions as well as
credit card companies, government institutions, and high-volume merchants in the
United States. The Company was formerly known as Sonicport, Inc.
|
2.
|
Summary of Significant
Accounting Policies
|
Revenue
Recognition
The
Company recognizes revenues associated with our software services in accordance
with the provisions of the American Institute of Certified Public Accountants’
Statement of Position 97-2, “Software Revenue Recognition” (“SOP 97-2”). The
Company licenses its software products under nonexclusive, nontransferable
license agreements. These arrangements do not require significant production,
modification, or customization. Therefore, revenue is recognized when such a
license agreement has been signed, delivery of the software product has
occurred, the related fee is fixed or determinable, and collectibility is
probable.
The
Company licenses its software on a transactional fee basis in lieu of an
up-front licensing fee. In these arrangements, the customer is charged a fee
based upon the number of items processed by the software and the Company
recognizes revenue as these transactions occur. The transaction fee also
includes the provision of standard maintenance and support services as well as
product upgrades should such upgrades become available.
If
professional services were provided in conjunction with the installation of the
software licensed, revenue is recognized when these services have been
provided.
In
certain instances, the Company will recognize revenue on a percent of completion
basis for the portion of professional services related to customized customer
projects that have been completed but are not yet deliverable to
customer.
For
license agreements that include a separately identifiable fee for contracted
maintenance services, such maintenance revenues are recognized on a
straight-line basis over the life of the maintenance agreement noted in the
agreement, but following any installation period of the software.
Cash and
Cash Equivalents
For the
purpose of the statements of cash flows, the Company considers all highly liquid
investments purchased with original maturities of three months or less to be
cash equivalents.
The Company maintains cash deposits with a major bank that, from
time-to-time, may exceed federally insured limits; however the Company has not
experienced any losses on deposits
.
US
DATAWORKS INC.
NOTES
TO FINANCIAL STATEMENTS
____
Property
and Equipment
Property
and equipment are recorded at cost, less accumulated depreciation and
amortization. Depreciation and amortization are provided using the straight-line
method over estimated useful lives as follows:
Furniture
and fixtures
|
5
years
|
Telephone
equipment
|
5
to 10 years
|
Computer
equipment
|
5
years
|
Computer
software
|
5
years
|
Leasehold
improvements
|
Shorter
of initial lease period or
|
|
useful
life of asset
|
Maintenance
and minor replacements are charged to expense as incurred. Gains and losses on
disposals are included in the results of operations.
Impairment
of Long-Lived Assets
The
Company reviews its long-lived assets for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the assets to future net cash flows
expected to be generated by the assets. If the assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount exceeds the fair value of the assets.
Goodwill
Effective
January 1, 2002, the Company adopted SFAS No. 142 “Goodwill and
Other Intangible Assets,” (“SFAS 142”) which establishes new accounting and
reporting requirements for goodwill and other intangible assets. Under
SFAS No. 142, all goodwill amortization ceased effective
January 1, 2002.
The
goodwill recorded on the Company’s books is from the acquisition of US
Dataworks, Inc. in fiscal year 2001 which remains the Company’s single reporting
unit. SFAS 142 requires goodwill for each reporting unit of an entity be tested
for impairment by comparing the fair value of each reporting unit with its
carrying value. Fair value is determined using a combination of the discounted
cash flow, market multiple and market capitalization valuation approaches.
Significant estimates used in the methodologies include estimates of future cash
flows, future short-term and long-term growth rates, weighted average cost of
capital and estimates of market multiples for each reportable unit. On an
ongoing basis, absent any impairment indicators, the Company performs impairment
tests annually during the fourth quarter.
SFAS 142
requires goodwill to be tested annually and between annual tests if events occur
or circumstances change that would more likely than not reduce the fair value of
the reportable unit below its carrying amount. The Company did not have an
impairment of goodwill to record for the year ended March 31, 2009 and did
record an impairment of goodwill for the year ended March 31, 2008. See the
discussion of the impairment in note 4 to these financial
statements.
Fair
Value of Financial Instruments
The
Company includes fair value information in the notes to financial statements
when the fair value of its financial instruments is different from book value.
When the book value approximates fair value, no additional disclosure is made.
Fair value estimates of financial instruments are based on relevant market
information and may be subjective in nature and involve uncertainties and
matters of significant judgment. The Company believes that the carrying value of
its assets and liabilities approximate fair value of such items. The Company
does not hold or issue financial instruments for trading purposes.
US
DATAWORKS INC.
NOTES
TO FINANCIAL STATEMENTS
____
The
Company adopted Statement of Financial Accounting Standards No. 157 “Fair
Value Measurements” (“SFAS 157”) on April 1, 2008. SFAS 157, among
other things, defines fair value, establishes a consistent framework for
measuring fair value and expands disclosure for each major asset and liability
category measured at fair value on either a recurring or nonrecurring
basis. SFAS 157 clarifies that fair value is an exit price,
representing the amount that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants. As such, fair value is a market-based measurement that
should be determined based on assumptions that market participants would use in
pricing an asset or liability. As a basis for considering such
assumptions, SFAS 157 establishes a three-tier fair value hierarchy, which
prioritizes the inputs used in measuring fair value as follows:
Level
1.
|
|
Observable
inputs such as quoted prices in active markets for identical assets or
liabilities;
|
|
|
|
Level
2.
|
|
Inputs,
other than quoted prices included within Level 1, that are observable
either directly or indirectly; and
|
|
|
|
Level
3.
|
|
Unobservable
inputs in which there is little or no market data, which require the
reporting entity to develop its own
assumptions.
|
As of
March 31, 2009 the Company had no assets or liabilities that were marked to fair
value under SFAS 157.
Convertible Debt Financing –
Derivative Liabilities
The
Company reviews the terms of convertible debt and equity instruments issued to
determine whether there are embedded derivative instruments, including embedded
conversion options, that are required to be bifurcated and accounted for
separately as a derivative financial instrument. In circumstances
where the convertible instrument contains more than one embedded derivative
instrument, including the conversion option, that is required to be bifurcated ,
the bifurcated derivative instruments are accounted for as a single, compound
derivative instrument. Also, in connection with the sale of
convertible debt and equity instruments, the Company may issue freestanding
options or warrants that may, depending on their terms, be accounted for as
derivative instrument liabilities, rather than as equity.
In
accordance with SFAS No. 133, “
Accounting for
Derivative Instruments and Hedging Activities
”, as amended, the
convertible debt holder’s conversion right provision, interest rate adjustment
provision, liquidated damages clause, cash premium option, and the redemption
option (collectively, the debt features) contained in the terms governing the
convertible notes are not clearly and closely related to the characteristics of
the notes. Accordingly, the features qualify as embedded derivative
instruments at issuance and, because they do not qualify for any scope exception
within SFAS 133, they are required by SFAS 133 to be accounted for separately
from the debt instrument and recorded as derivative instrument
liabilities.
Stock
Options
Effective
April 1, 2006, the Company adopted the SFAS No. 123 (revised 2004),
Share-Based Payment
(“SFAS 123R”), which
require the measurement and recognition of compensation expense for all
share-based payment awards made to employees and directors, including employee
stock options, based on estimated fair values. The Company adopted SFAS 123R
using the modified prospective transition method, which requires the application
of the accounting standard as of April 1, 2006, the first day of the Company’s
fiscal year 2007. The Company’s financial statements as of and for the year
ended March 31, 2007 reflect the impact of SFAS 123R. In accordance with the
modified prospective transition method, the Company’s financial statements for
prior periods have not been restated to reflect, and do not include, the impact
of SFAS 123R. Stock-based compensation expense recognized under SFAS 123R for
the years ended March 31, 2009 and March 31, 2008 was $284,827, and $337,720
respectively, which consists of stock-based compensation expense related to
employee and director stock options and restricted stock issuances.
SFAS 123R
requires companies to estimate the fair value of share-based payment awards on
the date of grant using an option-pricing model. The value of the portion of the
award that is ultimately expected to vest is recognized as expense over the
requisite service periods in the Company’s statement of operations. Prior to the
adoption of SFAS 123R, the Company accounted for stock-based awards to employees
and directors using the intrinsic value method in accordance with Accounting
Principles Bulletin Opinion No. 25, “Accounting for Stock Issued to
Employees,” as allowed under SFAS No. 123, Accounting for Stock-Based
Compensation,. Under the intrinsic value method, no share-based compensation
expense had been recognized in the Company’s Statement of Operations prior to
April 1, 2006 because the exercise price of the Company’s stock options granted
to employees and directors was equal to or greater than the fair market value of
the underlying stock at the date of grant.
US
DATAWORKS INC.
NOTES
TO FINANCIAL STATEMENTS
____
Stock-based
compensation expense recognized during the period is based on the value of the
portion of share-based payment awards that is ultimately expected to vest
during the period. Compensation expense recognized for all employee stock
options awards granted is recognized over their respective vesting periods
unless the vesting period is graded. As stock-based compensation expense
recognized in the Statement of Operations for the years ended March 31, 2009 and
March 31, 2008 is based on awards ultimately expected to vest, it has been
reduced for estimated forfeitures.
Upon
adoption of SFAS 123R the Company continued to use the Black-Scholes option
valuation model, which requires management to make certain assumptions for
estimating the fair value of employee stock options granted at the date of the
grant. In determining the compensation cost of the options granted during the
years ended March 31, 2009 and March 31, 2008, as specified by SFAS
123R, the fair value of each option grant has been estimated on the date of
grant using the Black-Scholes pricing model and the weighted average assumptions
used in these calculations are summarized as follows:
|
For
the Year Ending
|
|
March
31,
|
|
2009
|
2008
|
Risk-free
Interest Rate
|
2.46%
|
3.71%
|
Expected
Life of Options Granted
|
3
years
|
3
years
|
Expected
Volatility
|
189%
|
80%
|
Expected
Dividend Yield
|
0
|
0
|
Expected
Forfeiture Rate
|
30%
|
30%
|
As of
March 31, 2009, there was approximately $80,573 of total unrecognized
compensation cost related to nonvested share-based compensation arrangements,
which is expected to be recognized over a period of 3 years
.
Advertising
Expense
Advertising
costs are charged to expense as incurred. For the years ended March 31, 2009 and
2008, the Company recorded advertising expense of $124,314 and $40,401
respectively.
Income
Taxes
The
Company accounts for income taxes under the asset and liability method, which
requires the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred income taxes are
recognized for the tax consequences in future years of differences between the
tax bases of assets and liabilities and their financial reporting amounts at
each period-end based on enacted tax laws and statutory tax rates applicable to
the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized. The provision for income taxes, if
applicable, represents the tax payable for the period and the change during the
period in deferred tax assets and liabilities.
In June
2006, FASB issued FIN 48, “
Accounting for Uncertainty in Income
Taxes an interpretation of FASB Statement No. 109”,
which clarifies the
accounting for uncertainty in income taxes recognized in financial statements in
accordance with FASB 109,
“Accounting for Income
Taxes”.
FIN 48 prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. The
provisions of FIN 48 are effective for fiscal years beginning after December 15,
2006, with the cumulative effect of the change in accounting principle recorded
as an adjustment to opening retained earnings. The adoptions of this
pronouncement did not have a material effect on the financial position or
results of operations of the Company.
US
DATAWORKS INC.
NOTES
TO FINANCIAL STATEMENTS
____
Loss per
Share
The
Company calculates loss per share in accordance with SFAS No. 128, “Earnings per
Share.” Basic loss per share is computed by dividing the net loss by the
weighted-average number of common shares outstanding. Diluted loss per share is
computed similar to basic loss per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential common stock equivalents had been issued and if the
additional common shares were dilutive.
The
following potential common stock equivalents have been excluded from the
computation of diluted net loss per share for the periods presented because the
effect would have been anti-dilutive (Options and Warrants typically convert on
a one for one basis, see conversion details of the preferred stock stated below
for the common stock shares issuable upon conversion):
|
|
Year Ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Options
outstanding under the Company’s stock option plans
|
|
|
6,964,220
|
|
|
|
7,521,349
|
|
Options
granted outside the Company’s stock option plans
|
|
|
1,160,000
|
|
|
|
1,160,000
|
|
Warrants
issued in conjunction with private placements
|
|
|
3,538,201
|
|
|
|
9,939,846
|
|
Warrants
issued as a financing cost for notes payable and convertible notes
payable
|
|
|
4,851,163
|
|
|
|
1,891,250
|
|
Warrants
issued for services rendered and litigation settlement
|
|
|
200,000
|
|
|
|
380,769
|
|
Convertible
Series B preferred stock (a)
|
|
|
109,933
|
|
|
|
109,933
|
|
(a)
The Series B preferred stock is convertible into shares of common stock at a
conversion price of $3.75 per share.
Estimates
The
preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Concentrations
of Credit Risk
The
Company sells its products throughout the United States and extends credit to
its customers. It also performs ongoing credit evaluations of such customers.
The Company does not obtain collateral to secure its accounts receivable. The
Company evaluates its accounts receivable on a regular basis for collectibility
and provides for an allowance for potential credit losses as deemed
necessary.
Three of
our customers, American Express, the Federal Reserve Bank, and Regulus accounted
for 47%, 22%, and 9% respectively, of our net revenue for the year ended March
31, 2009. Four of our customers, American Express Federal Reserve Bank, Regulus
and Citibank accounted for 31% ,24%, 11%, and 10%, respectively, of our net
revenue for the year ended March 31, 2008.
At March
31, 2009, amounts due from these three customers accounted for 25%, 19% and 15%,
and one additional customer accounted for 15% of the accounts receivable then
outstanding.
At March
31, 2008, amounts due from these four customers accounted for 45%, 12%, 11% and
6% of the accounts receivable then outstanding.
US
DATAWORKS INC.
NOTES
TO FINANCIAL STATEMENTS
____
Recently Issued Accounting
Pronouncements
Financial Accounting Standards Board
(“FASB”) Staff Position (
“
FSP”) No.
157-2
.
FSP 157-2 delays the effective date of
Statement of Financial Accounting Standards (“SFAS 157”),
Fair Value
Measurements,
for
nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). The delay is intended to allow the FASB
and constituents additional time to consider the effect of various
implementation issues that have arisen, or that may arise, from the application
of SFAS 157. This FSP defers the effective date of SFAS 157 to fiscal
years beginning after
November 15, 2008
. The Company does not expect
FSP 157-2 to have a material impact on its financial
statements.
FASB Staff Position
No. 157-3
.
On
October 10, 2008
, the FASB issued FASB Staff Position
157- 3 (“FSP 157-3”)
Determining the Fair Value of a Financial Asset When
the Market for That Asset Is Not Active
.
FSP 157-3 applies to financial assets
within the scope of SFAS 157. FSP 157-3 clarifies the application of SFAS 157 in
a market that is not active and provides an example to illustrate key
considerations in determining the fair value of a financial asset when the
market for that financial asset is not active. In situations in which there is
little, if any, market activity for an asset at the measurement date, the fair
value measurement objective remains the same, that is, the price that would be
received by the holder of the financial asset in an orderly transaction (an exit
price notion) that is not a forced liquidation or distressed sale at the
measurement date. Additionally, in determining fair value for a financial asset,
the use of a reporting entity’s own assumptions about future cash flows and
appropriately risk-adjusted discount rates is acceptable when relevant
observable inputs are not available. Broker (or pricing service) quotes may be
an appropriate input when measuring fair value, but they are not necessarily
determinative if an active market does not exist for the financial
asset. The Company does not expect FSP 157-3 to have a material
impact on its financial statements.
In December 2007, the FASB issued a
revision and replacement of SFAS 141(“SFAS 141R”),
“
Business
Combinations
,
”
to increase the
relevance, representational faithfulness, and comparability of the information a
reporting entity provides in its
financial reports
about a business combination and its
effects. SFAS 141R replaces SFAS 141, “
Business
Combinations
” but, retains
the fundamental requirements of SFAS 141 that the acquisition method of
accounting be used and an acquirer be identified for all business combinations.
SFAS 141R expands the definition of a business and of a business
combination and establishes how the acquirer is to: (1) recognize and
measure in its financial statements the identifiable assets acquired, the
liabilities assumed, and any non-controlling interest in the acquired company;
(2) recognize and measure the goodwill acquired in the business combination
or a gain from a bargain purchase; and (3) determine what information to
disclose to enable users of the financial statements to evaluate the nature and
financial effects of the business combination. SFAS 141R is applicable to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after
December 15, 2008, and is to be applied prospectively. Early adoption is
prohibited. SFAS 141R will impact the Company only if it elects to enter
into a business combination subsequent to
March 31, 2009
.
In December 2007, the FASB issued
SFAS 160,
“Noncontrolling Interests
in Consolidated Financial Statements — an amendment of Accounting
Research Bulletin No. 51
(“ARB 51”)
to improve the
relevance, comparability, and transparency of the financial information a
reporting entity provides in its consolidated financial statements.
SFAS 160 amends ARB 51 to establish accounting and reporting standards for
noncontrolling interests in subsidiaries and to make certain consolidation
procedures consistent with the requirements of SFAS 141R. It defines a
noncontrolling interest in a subsidiary as an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements. SFAS 160 changes the way the consolidated income
statement is presented by requiring consolidated net income to include amounts
attributable to the parent and the noncontrolling interest. SFAS 160
establishes a single method of accounting for changes in a parent’s ownership
interest in a subsidiary which does not result in deconsolidation. SFAS 160
also requires expanded disclosures that clearly identify and distinguish between
the interests of the parent and the interests of the noncontrolling owners of a
subsidiary. SFAS 160 is effective for financial statements issued for
fiscal years beginning on or after
December 15, 2008
, and interim periods within those
fiscal years. Early adoption is prohibited. SFAS 160 shall be applied
prospectively, with the exception of the presentation and disclosure
requirements which shall be applied retrospectively for all periods presented.
The Company does not believe that the adoption of SFAS 160 would have a
material effect on its financial position, results of operations or cash
flows.
In
April 2008, the FASB issued FSP SFAS 142-3, “
Determination of the Useful Life of
Intangible Assets”
(“SFAS 142-3”). This statement revises the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under FASB
Statement No. 142,
Goodwill and Other
Intangible Assets
. The goal of SFAS 142-3 is to improve the consistency
between the useful life of a recognized intangible asset under Statement 142 and
the period of expected cash flows used to measure the fair value of the asset
under SFAS 141R,
Business
Combinations,
and other U.S. GAAP. FSP SFAS 142-3 is effective
for fiscal years beginning after December 15, 2008. The Company does not
expect SFAS 142-3 to have a material impact on its financial
statements.
In July
2008, the FASB issued SFAS No. 162,
“The Hierarchy of Generally
Accepted Accounting Principles”
(“SFAS 162”). This statement identifies
the sources of accounting principles and the framework for selecting the
principles used in the preparation of financial statements of nongovernmental
entities that are presented in conformity with U.S. GAAP. The
levels of authority of the accounting principles available for the preparation
of financial statements were previously issued by the American Institute of
Certified Public Accountants. The FASB decided that accounting principles
applicable to GAAP should be adopted as a FASB Statement. SFAS 162
does not set an effective date. It will become effective 60 days following
approval by the Securities and Exchange Commission of amendments made by the
Public Accounting Oversight Board to AU Section 411,
“The Meaning of Present
Fairly in Conformity with Generally Accepted Accounting Principles.”
Effects of applying the provisions of SFAS 162 must be reported as changes in
accounting principle in accordance with SFAS No. 154,
“Accounting Changes and
Error Corrections”
(“SFAS 154”). A company must
follow the disclosure requirements of SFAS 154 and additionally disclose the
accounting principles that were used before and after the application of the
provisions of SFAS 162 and the reasons why applying this Statement resulted in a
change in accounting principle. The Company does not expect SFAS 162
to have a material impact on its financial statements.
Reclassifications
Certain
items in the 2008 financial statements have been reclassified to conform to the
2009 financial statement presentation.
US
DATAWORKS INC.
NOTES
TO FINANCIAL STATEMENTS
____
|
3.
|
Property and
Equipment
|
Property
and equipment at March 31, 2009 and 2008 consisted of the
following:
|
|
2009
|
|
|
2008
|
|
Furniture
and fixtures
|
|
$
|
99,535
|
|
|
$
|
99,535
|
|
Telephone
and office equipment
|
|
|
182,275
|
|
|
|
182,275
|
|
Computer
equipment
|
|
|
734,546
|
|
|
|
720,005
|
|
Computer
Software
|
|
|
1,271,098
|
|
|
|
1,271,098
|
|
Leasehold
improvements
|
|
|
64,733
|
|
|
|
64,733
|
|
|
|
|
2,352,187
|
|
|
|
2,337,646
|
|
Less
accumulated depreciation and amortization
|
|
|
(2,046,404
|
)
|
|
|
(1,858,959
|
)
|
Total
|
|
$
|
305,783
|
|
|
$
|
478,687
|
|
Depreciation
and amortization expense for the years ended March 31, 2009 and 2008 was
$187,445 and $181,255, respectively.
Under
SFAS No. 142 the Company should review the fair value of a reportable unit if a
significant event or if circumstances change that would more likely than not
reduce the fair value of the reportable unit below its carrying amount. Fair
value is determined using a combination of the discounted cash flow, market
multiple and market capitalization valuation approaches. The Company has
determined that it did not have an impairment of goodwill to record in the year
ended March 31, 2009.
The
Company did determine that two significant events occurred in the year ended
March 31, 2008 that, when taken together, placed enough downward pressure on the
market value of the Company’s common stock to require a review of the fair value
of the reportable unit in the quarter ending December 31, 2007. First, in
November 2007, the Company issued senior secured convertible notes in the amount
of $4,000,000, which increased the Company’s debt significantly and the market
price of the Company’s common stock began to fall. Secondly, in December 2007,
the Company announced the termination of its Resale Agreement with Hyundai and
entered into a Settlement and Release Agreement terminating the Purchase
Agreement. This announcement continued the downward pressure on the market value
of the Company’s common stock.
In the
quarter ending March 31, 2008, the Company performed its annual impairment
testing and used a memo purchase price allocation to determine the carrying
value of the reportable unit. All assets including certain identified intangible
assets were used in the valuation. The carrying value was then compared to the
Company’s market value as of March 31, 2008 based on the market capitalization
of its common stock. This analysis determined that a total impairment of
$10,112,931 occurred during the year and the goodwill was written down as of
March 31, 2008 accordingly.
The
Company will continue to perform impairment testing annually during the fourth
quarter unless any events indicating the presence of impairment factors
arise
|
5.
|
Notes Payable
- Related
Parties
|
In
connection with the redemption of the Senior Secured Convertible Promissory
Notes due November 13, 2010 discussed below, the Company entered into
a Note Purchase Agreement and issued an aggregate of $3,703,500 Senior Secured
Notes due August 13, 2009 (“Refinance Notes”). The Refinance Notes were
purchased by the Company’s Chief Executive Officer and a member of its Board of
Directors (“Holders”). As originally issued, the Refinance Notes bear interest
at a rate of 12% per annum with interest payments due in arrears
monthly.
Pursuant
to the Refinance Notes as originally issued, if the Company fails to pay any
amount of principal, interest, or other amounts when and as due, then the
Refinance Notes will bear an interest rate of 18% until such time as the Company
cures this default. In addition, if the Company is subject to certain events of
bankruptcy or insolvency, the Refinance Notes provide that the Holders may
redeem all or a portion of the Refinance Notes.
US
DATAWORKS INC.
NOTES
TO FINANCIAL STATEMENTS
____
The
Refinance Notes are secured by a Security Agreement, dated August 13, 2008, by
and between the Company and the Holders, pursuant to which the Company granted
the Holders a security interest in all its personal property, whether now owned
or hereafter acquired, including but not limited to, all accounts receivable,
accounts, copyrights, trademarks, licenses, equipment and all proceeds as from
such collateral.
On
February 19, 2009, US Dataworks, Inc. (the "Company") entered into Note
Modification Agreements with the holders of the Refinance Notes due
August 13, 2009. Effective as of February 19, 2009, the Note Modification
Agreements amended the Refinance Notes as follows: (1) the maturity date of the
Refinance Notes was extended from August 13, 2009 to December 31, 2009; (2) the
annual interest rate on the Refinance Notes increased from 12% to 13%; and (3)
the interest rate escalation clause related to an event of default was deleted.
The Note Modification Agreements also added a mandatory principal payment
provision that required the Company to reduce the principal balance of the
Refinance Notes by 3% of the original principal amount of the Refinance Notes
after the end of each calendar quarter starting with March 31, 2009 as long as
such payment would not reduce the Company's cash balance below $500,000 as of
the last day of such quarter. If making such principal payment would reduce the
Company's cash balance below $500,000 as of such date, the amount of the
principal payment will be reduced to the amount, if any, by which the Company's
cash balance as of such date exceeds $500,000. The amount to be paid is to be
determined each quarter and is not cumulative from quarter to quarter. These
principal payments are to be made within 10 business days after the end of each
quarter. An amendment fee of 1% of the outstanding principal balances of the
Refinance Notes will be paid to the holders thereof as follows: 50% upon
execution of the Note Modification Agreement and 50% on the 90th day following
the execution of the Note Modification Agreement. On May 20, 2009, the Company
again entered into Note Modification Agreements with the holders of the
Refinance Notes that amended the Refinance Notes as follows: (1) the
Other Note (defined below) was included in the definition of “Permitted
Indebtedness” and (2) the Company was allowed to make voluntary interest
payments on the Other Note notwithstanding the fact that the Refinance Notes are
otherwise senior to the Other Note.
On June
26, 2009, the Company again entered into Note Modification Agreements with the
holders of the Refinance Notes that amended the Refinance Notes as follows:
(1) the maturity date of the Refinance Notes was extended from December
31, 2009 to July 1, 2009; and (2) the mandatory principal payment provision was
revised to provide that to the extent the Company’s cash balance at the end of
each calendar quarter exceeds $611,105, one-fourth of such excess amount must be
used by the Company to pay down the principal balance of the Refinance Notes and
the Company has the discretion to use an additional one-fourth of such excess
amount to further pay down the principal balance of the Refinance Notes.
Other than this additional principal payment requirement, the principal payment
provision remained unchanged. In consideration of these amendments, the
Company will (i) pay to the holders of the Refinance Notes a fee of $50,000 in
cash on July 1, 2009 and (ii) will issue to the holders of the Refinance Notes
warrants to purchase 1,854,141 shares of the Company’s common stock at an
exercise price of $0.43 per share, these warrants will be subject to the
additional terms specified in the Note Modification Agreements, copies of which
are filed herewith as exhibits to this Report.
On
September 26, 2006, the Company entered into a note payable with its Chief
Executive Officer for $500,000 (“Other Note”). The note bears an 8.75% per annum
interest rate, is unsecured and was due September 25, 2007. On September 25,
2007, the Company entered into a new note payable agreement that supersedes and
supplants the September 2006 note. As of March 31, 2009 the outstanding balance
on this note payable was $500,000. As originally issued, the principal, together
with any unpaid accrued interest on the new note payable, shall be due and
payable in full on demand on the earlier of: (i) the full and complete
satisfaction of certain senior secured convertible notes (the “November Notes”)
issued by the Company to certain investors on November 13, 2007 and (ii)
ninety-one (91) days following the expiration of the term of the November Notes
(such date described in (i) and (ii) hereinafter the “Demand Date”), unless such
date is extended by the mutual agreement of the parties.
On
May
20, 2009, the Company entered into a Note Modification Agreement with the holder
of the Other Note. Effective as of May 20, 2009, the Note Modification Agreement
amended the Note as follows: (1) it was clarified that the Note was a demand
note for which full payment can be required at any time on or after the maturity
date; (2) the maturity date of the Note was extended to December 31, 2009; and
(3) the Company was allowed to make voluntary prepayments under the Note without
penalty.
On June
26, 2009, the Company again entered into a Note Modification Agreement (a copy
of which is filed herewith as an exhibit to this Report) with the holder of the
Other Note that extended the maturity date of the Other Note from December 31,
2009 to July 1, 2010. In consideration of this amendment, the Company will
pay to the holder of the Other Note a fee of $6,666.67 in cash on July 1,
2009.
Notes
Payable
In August
2007, the Company entered into a note payable with an equipment vendor to
purchase new telephone equipment for $105,835. The
note bears a 10.68% per annum interest rate, is secured by the equipment and is
due in 36 equal monthly installments of $3,418. As of March 31, 2009 and 2008,
the outstanding balance on this Note Payable was $52,918 and $88,197
respectively.
|
6.
|
Convertible Promissory
Notes
|
Senior Secured Convertible
promissory notes due November 13, 2010
On
November 13, 2007, the Company secured certain financing from certain
institutional investors (collectively, the “Investors”) in the form of senior
secured convertible notes (the “Notes”) for an aggregate of $4,000,000. The
interest payable on the Notes is equal to the 6-month LIBOR rate plus five
hundred basis points (or 9.7375% at the time of subscription) and is
recalculated as of the first day of each calendar quarter. The Notes may be
converted at any time into shares of the Company’s common stock (“Common Stock”)
at the conversion price of $0.43 per share, which is equal to 110% of the dollar
volume-weighted average price for the Common Stock on November 12, 2007, subject
to anti-dilution provisions; provided, however, the Investor may not
beneficially own more than 4.99% (the “Maximum Percentage”) of outstanding
shares of Common Stock following such conversion. At any time, the Investor may
decrease or increase this Maximum Percentage to any percentage not to exceed
9.99%. In the event of a Fundamental Transaction (as described in the Notes)
where greater than 50% of the Company’s assets or equity is transferred, the
Investors may redeem the note for either 125% of its principal balance or the
value of the Common Stock as converted (such Common Stock as converted under the
Notes, “Conversion Shares”).
US
DATAWORKS INC.
NOTES
TO FINANCIAL STATEMENTS
____
In
addition, on each of the 9 month and 18 month anniversary of the closing, the
Investors may request that the Company redeem a portion of the Notes. The Notes
have a maturity date of November 13, 2010. The Notes are secured by the Security
Agreement, dated November 13, 2007, by and between the Company and the Investors
(the “Security Agreement”), pursuant to which the Company granted the Investors
a security interest in all its personal property, whether now owned or hereafter
acquired, including but not limited to, all accounts, copyrights, trademarks,
licenses, equipment and all proceeds as from such collateral.
The
Investors also entered into a Put Agreement (the “Put Agreement”) with the
Company’s Chief Executive Officer, and a member of the Company’s Board of
Directors (collectively, the “Put Grantors”). Pursuant to the Put Agreement,
following August 13, 2008, under certain circumstances the Investors may require
one or more of the Put Grantors to purchase all or a portion of the Note,
including any accrued interest or late charges.
In
consideration for entering into the Put Agreement, the Company paid to the Put
Grantors a fee (the “Put Grantor Fee”) equal to an initial installment of two
percent (2%) of the outstanding Note principal for the initial six months of the
Note’s term and an additional fee equal to .50% of the outstanding Note
principal for the next three months, after which time the Put Agreement
terminated. The Put Grantor Fee was shared equally by the Put Grantors
and accrued immediately upon the start of each of the time periods
described above.
In
connection with the issuance of the Notes, the Company has also issued to the
Investors warrants (the “Warrants”) to purchase an aggregate of 4,651,162 shares
of Common Stock (such Common Stock exercisable from the Warrants, “Warrant
Shares”) at the exercise price of $0.43 per share, which is equal to 110% of the
dollar volume-weighted average price for the Common Stock on November 12, 2007,
subject to anti-dilution provisions; provided, however, the Investor may not
beneficially own more than the Maximum Percentage following such exercise. The
Warrants may be exercised at any time until 11:59 p.m., New York time on
November 13, 2012.
The
Company was obligated to reserve for issuance upon conversion of the Notes and
is obligated to reserve for issuance upon exercise of the Warrants shares of
Common Stock equal to at least 130% of the Conversion Shares and Warrant
Shares.
In accordance with SFAS No. 133 “Accounting for Derivative
Instruments and Hedging Activities,” the debt features contained in the terms
governing the notes are not clearly and closely related to the characteristics
of the notes. Accordingly, the debt features qualify as embedded derivative
instruments at issuance and, because they did not qualify for any scope
exception within SFAS 133, they were required to be accounted for separately
from the debt instrument and recorded as derivative financial
instruments.
At the
date of issuance, the embedded debt feature had an estimated initial fair value
of $960,714, which was recorded as a discount to the convertible notes and
derivative liability on our balance sheet. In subsequent periods, if the price
of the security changes, the embedded derivative financial instrument related to
the debt features will be adjusted to the fair value with the corresponding
charge or credit to other income/(expense). The estimated fair value of the debt
features was determined using the probability weighted averaged discounted cash
flows / Lattice Model with a closing price of $0.43, a conversion price as
defined in the respective note agreement and a period of three years. Concerning
the debt features, the model uses several assumptions including: projected stock
price volatility, annual stock price growth rate, interest rate projections, no
registration default, alternative financing availability, default status, holder
redeeming under default, ownership limitation, warrant exercise reset, fixed
conversion reset and trading volume to determine the estimated fair value of the
derivative liability. Due to the retirement of the debt on August 13, 2008, the
embedded derivative liability was terminated resulting in an other income item
of $359,527.
US
DATAWORKS INC.
NOTES
TO FINANCIAL STATEMENTS
____
The
warrants included with this note for purchase of the Company’s common stock had
an initial value of $1,279,549. This amount has been classified as a derivative
financial instrument and recorded as discount to the convertible notes and
derivative liability on our balance sheet in accordance with SFAS No. 133. The
estimated fair value of the warrants at the date of issuance was determined
using the Black-Scholes option-pricing model with a closing price of $0.43, the
respective exercise price of the warrants, a 5 year term, and an 80% volatility
factor relative to the date of issuance. The model uses several assumptions
including: historical stock price volatility, approximate risk-free interest
rate (3.84%), remaining term to maturity, and the closing price of the company’s
common stock to determine the estimated fair value of the derivative liability.
In accordance with the provisions of SFAS No. 133, the Company is required to
adjust the carrying value of the instrument to its fair value at each balance
sheet date and recognize any change since the prior balance sheet date as a
component of other income (expense) on its statement of operations. Due to the
retirement of the debt on August 13, 2008, the embedded derivative liability
associated with the warrants was terminated resulting in an other income item of
$220,674.
The
recorded value of the warrants can fluctuate significantly based on fluctuations
in the market value of the underlying securities of the issuer of the warrants,
as well as in the volatility of the stock price during the term used for
observation and the term remaining for the warrants.
On July
15, 2008, the Company gave notice to the Investors of their respective rights of
optional redemption of the Notes on August 13, 2008. In respect thereto,
the Company received optional redemption notices from each of the Investors. On
August 13, 2008, using the proceeds from the issuance of the Refinance Notes
(discussed in Note 5), the Company repaid principal of $4,000,000
and $38,808 of interest accrued on the principal from and including
July 1, 2008 through August 12, 2008 and the notes were thereby
retired.
|
7.
|
Commitments and
Contingencies
|
Leases
The
Company leases an office in Sugar Land, Texas under an operating lease agreement
that expires in July 2012. Rent expense was $388,226 and $380,118 for the years
ended March 31, 2009 and 2008, respectively.
Future
minimum lease payments under operating leases at March 31, 2009 were as
follows:
Year
Ended
March 31,
|
|
Operating
Lease
|
|
|
|
|
|
2010
|
|
$
|
347,615
|
|
2011
|
|
|
350,747
|
|
2012
|
|
|
355,444
|
|
2013
|
|
|
119,003
|
|
|
|
|
|
|
|
|
$
|
1,172,809
|
|
Employment
Agreements
On May 1
and May 15, 2008, the Company accepted the resignation of Messrs. John Figone
and Terry Stepanik, respectively, and as part of the Company’s restructuring, on
June 12, 2008, it entered into a new Employment Agreement (the ‘Agreement”) with
Mr. Mario Villarreal in connection with his promotion to President and Chief
Operating Officer. Under the Agreement Mr. Villarreal will receive an annual
base salary of $185,000 for a term of one year. If Mr. Villarreal is terminated,
other than for cause, death or disability, or resigns within 60 days following a
material reduction in duties or a material reduction in compensation within six
months following a change of control, Mr. Villarreal is entitled to receive a
lump sum payment equal to one-half (0.5) times his annual base salary and any
unpaid base salary and bonus, subject to compliance with certain ongoing
obligations and the delivery of a release to us.
US
DATAWORKS INC.
NOTES
TO FINANCIAL STATEMENTS
____
The tax
effects of temporary differences that give rise to deferred taxes at March 31,
2009 and 2008 were as follows:
|
|
2009
|
|
|
2008
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
United
States federal net operating loss carryforwards
|
|
$
|
10,297,779
|
|
|
$
|
10,267,648
|
|
Effect
of state net operating loss carryforwards
|
|
|
41,014
|
|
|
|
41,014
|
|
Accrued
liabilities
|
|
|
26,660
|
|
|
|
56,605
|
|
Basis
of Property & Equipment
|
|
|
29,772
|
|
|
|
7,088
|
|
Deferred
Revenue
|
|
|
76,054
|
|
|
|
—
|
|
Total
deferred tax assets
|
|
|
10,471,279
|
|
|
|
10,372,355
|
|
Valuation
allowance
|
|
|
(10,471,279
|
)
|
|
|
(10,372,355
|
)
|
Net
deferred tax assets
|
|
$
|
—
|
|
|
$
|
—
|
|
The
valuation allowance increased by $98,924 during the year ended March 31, 2009
and increased by $86,791 during the year ended March 31, 2008. At March 31,
2009, the Company had approximately $30,288,000 of federal net operating loss
carryforwards attributable to losses incurred since the Company’s inception that
may be offset against future taxable income from 2021 through 2028. Because
United States tax laws and the tax laws of most states limit the time during
which NOL carryforwards may be applied against future taxable income, the
Company may be unable to take full advantage of its NOL for federal income tax
purposes should the Company generate taxable income. Based on such limitations,
the Company has significant NOL carryforwards for which realization of tax
benefits is uncertain. Further, the benefit from utilization of NOL
carryforwards could be subject to limitations if material ownership changes
occur in the Company. For the years ended March 31, 2009 and 2008, the Company
recognized revisions to deferred tax assets with offsetting revisions to the
valuation allowance that resulted in an insignificant net change in the
aggregate of total deferred tax assets less the valuation
allowance.
Income
tax expense differs from the amounts computed by applying the United States
federal income tax rate of 34% to loss before income taxes as
follows:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Income
tax benefit at federal statutory rate
|
|
|
34.0
|
%
|
|
|
34.0
|
%
|
Non-deductible
interest expense from beneficial conversion feature and issuance of common
stock and stock warrants
|
|
|
(34.2
|
)
|
|
|
(0.8
|
)
|
Non-deductible
compensation and other expense arising from issuance of common stock and
stock warrants
|
|
|
(4.9
|
)
|
|
|
(1.1
|
)
|
Non-deductible
goodwill impairment
|
|
|
—
|
|
|
|
(32.0
|
)
|
Non-Taxable
gain on derivative liabilities
|
|
|
10.6
|
|
|
|
5.4
|
|
Revision
to net operating loss carryforward
|
|
|
(3.5
|
)
|
|
|
—
|
|
Change
in the beginning-of-the-year balance of the valuation allowance for
deferred tax assets allocated to income tax expense
|
|
|
1.7
|
|
|
|
(7.9
|
)
|
Other
|
|
|
(3.7
|
)
|
|
|
2.4
|
|
Total
|
|
|
—
|
%
|
|
|
—
|
%
|
US
DATAWORKS INC.
NOTES
TO FINANCIAL STATEMENTS
____
Preferred
Stock
The
Company has 10,000,000 authorized shares of $0.0001 par value preferred stock.
The preferred stock may be issued in series, from time to time, with such
designations, rights, preferences, and limitations as the Board of Directors may
determine by resolution.
Convertible
Series B Preferred Stock
The
Company has 700,000 shares authorized, 109,933 shares issued and outstanding of
$0.0001 par value convertible Series B preferred stock. The Series B has a
liquidation preference of $3.75 per share and carries a 10% cumulative dividend
payable each March 1 and September 1. The Series B is convertible upon issuance
into common stock at $3.75 per share. The Company has the right to redeem the
Series B at any time after issuance at a redemption price of $4.15 per share,
plus any accrued but unpaid dividends.
At March
31, 2009 and 2008, there were accumulated, undeclared dividends in arrears of
$334,841 and $295,596, or $3.05 per share and $2.67 per share,
respectively.
Common Stock and
Warrants
During
the year ended March 31, 2009, the Company completed the following:
The
Company granted 50,000 shares of restricted common stock at $0.12 per
share, 50,000 shares of restricted common stock at $0.22, and 50,000
shares of restricted common stock at $0.15 based on the closing price of the
common stock on the respective grant dates, to the President and Chief Operating
Officer pursuant to his employment agreement, and 55,555 shares valued at $0.12
per share, 80,000 shares valued at $0.22, and 82,353 shares at $0.15 based on
the closing price of the common stock on the respective grant dates, to an
independent member of the Board of Directors associated with his service as a
member of the Company’s Executive Committee.
During
the year ended March 31, 2008, the Company completed the following:
On August
31, 2007, the Company entered into a stock purchase agreement ( the “Purchase
Agreement”), with certain employees and directors of the Company, pursuant to
which the Company agreed to issue to those certain employees and directors an
aggregate of 762,500 shares of the Company’s common stock, $0.0001 par value
(the “Common Stock”), for an aggregate purchase price of $305,000.
On
September 14, 2007, the Company reached an agreement with a current note holder
to extend the terms of the convertible promissory note dated September 15, 2005
for an additional 90 days in exchange for the granting of up to 200,000 warrants
dependent upon when the note is paid. Warrants valued at $41,588; utilizing the
Black-Scholes valuation method, to purchase all 200,000 shares were issued
during the year ended March 31, 2008.
On
November 13, 2007, in connection with the $4,000,000 senior secured convertible
notes issued to a group of institutional investors, the Company issued warrant
to purchase an aggregate of 4,651,162 shares.
Non-Cash Financing and
Investing Activities
In August
2007, the Company entered into a note payable with an equipment vendor to
purchase new telephone equipment for $105,835.
US
DATAWORKS INC.
NOTES
TO FINANCIAL STATEMENTS
____
Stock Options
In August
1999, the Company implemented its 1999 Stock Option Plan (the “1999 Plan”). In
August 2000, the Company’s Board of Directors approved the 2000 Stock Option
Plan (the “2000 Plan”), which amends and restates the 1999 Plan. In September
2006, shareholders approved an amendment to the 2000 Plan to increase the
maximum aggregate number of shares available for issuance thereunder from
6,000,000 to 7,500,000. Under the 2000 Plan, the exercise price must not be less
than the fair market value on the date of grant of the option. The options vest
in varying increments over varying periods and expire 10 years from the date of
vesting. In the case of incentive stock options granted to any 10% owners of the
Company, the exercise price must not be less than 100% of the fair market value
on the date of grant. Such incentive stock options vest in varying increments
and expire five years from the date of vesting.
During
the years ended March 31, 2009 and 2008, the Company granted 483,335 and
1,060,500 stock options, respectively, to certain employees that may be
exercised at prices ranging between $0.26 and $0.26, and between $0.61 and
$0.15, respectively.
The
following table summarizes certain information relative to stock
options:
|
|
2000 Stock Option Plan
|
|
|
Outside of Plan
|
|
|
|
Shares
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Shares
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
March 31, 2007
|
|
|
6,565,349
|
|
|
$
|
0.74
|
|
|
|
1,160,000
|
|
|
$
|
1.02
|
|
Granted
|
|
|
1,060,500
|
|
|
$
|
0.45
|
|
|
|
—
|
|
|
$
|
—
|
|
Forfeited/cancelled
|
|
|
(104,500
|
)
|
|
$
|
0.81
|
|
|
|
—
|
|
|
$
|
—
|
|
Outstanding,
March 31, 2008
|
|
|
7,521,349
|
|
|
$
|
0.70
|
|
|
|
1,160,000
|
|
|
$
|
1.02
|
|
Granted
|
|
|
483,335
|
|
|
$
|
0.26
|
|
|
|
—
|
|
|
$
|
—
|
|
Forfeited/cancelled
|
|
|
(1,040,464
|
)
|
|
$
|
0.58
|
|
|
|
—
|
|
|
$
|
—
|
|
Outstanding,
March 31, 2009
|
|
|
6,964,220
|
|
|
$
|
0.68
|
|
|
|
1,160,000
|
|
|
$
|
1.02
|
|
Exercisable,
March 31, 2009
|
|
|
6,331,059
|
|
|
$
|
0.72
|
|
|
|
1,160,000
|
|
|
$
|
1.02
|
|
The
weighted-average remaining life and the weighted-average exercise price of all
of the options outstanding at March 31, 2009 were 6.35 years and $0.73,
respectively. The exercise prices for the options outstanding at March 31, 2009
ranged from $0.15 to $6.25, and information relating to these options is as
follows:
Range
of
Exercise
Prices
|
|
|
Stock
Options
Outstanding
|
|
|
Stock
Options
Exercisable
|
|
Weighted-
Average
Remaining
Contractual
Life
|
|
Weighted
-Average
Exercise
Price
|
|
|
Weighted-
Average
Exercise
Price
of
Options
Exercisable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.15
- 0.80
|
|
|
|
5,678,884
|
|
|
|
5,045,723
|
|
6.83
years
|
|
$
|
0.53
|
|
|
$
|
0.55
|
|
$
|
0.81
- 1.35
|
|
|
|
1,734,836
|
|
|
|
1,734,836
|
|
5.37
years
|
|
$
|
0.93
|
|
|
$
|
0.93
|
|
$
|
1.36
- 6.25
|
|
|
|
710,500
|
|
|
|
710,500
|
|
4.89
years
|
|
$
|
1.88
|
|
|
$
|
1.88
|
|
|
|
|
|
|
8,124,220
|
|
|
|
7,491,059
|
|
|
|
|
|
|
|
|
|
|
US
DATAWORKS INC.
NOTES
TO FINANCIAL STATEMENTS
____
Because
of our ability to increase revenue while at the same time reducing general and
administrative expenses, we experienced positive cash flow from operations in
fiscal 2009. However, due to our history of experiencing negative cash flow from
operations and the debt financing that we were forced to put in place to cover
this historical negative cash flow, we find ourselves in the position of having
approximately $4.2 million of debt coming due on July 1, 2010, (See Note
11 herein) that we may not be able to repay from our operating
cash flow. While we currently expect to be able to refinance this
debt or reach an agreement to extend the maturity date of this debt, there can
be no assurances that this will in fact occur. Failure to refinance
or extend the maturity date of this debt may have a material adverse effect on
our financial condition and our ability to continue as a going concern (see
“Item 1A. Risk Factors”).
In
addition, while we expect to be able to fund our operations from cash flow, if
that is not the case, our long term viability will again depend on our ability
to obtain adequate sources of debt or equity funding to fund the continuation of
our business operations and to ultimately achieve adequate profitability and
cash flows to sustain our operations. We will need to increase revenues from
software licenses, transaction-based software license contracts and professional
services agreements to become profitable.
Subsequent
to March 31, 2009, the Company entered into certain amendments with the holders
of an aggregate of $4,203,500 principal amount of debt that was scheduled to
mature on December 31, 2009 to, among other things, extend the maturity date of
such debt to July 1, 2009 (see Note 5 herein). These amendments will have
the effect of requiring the Company to reclassify this debt as a long term
liability (from a current liability) as of June 26, 2009. Assuming this
transaction had taken place prior to March 31, 2009, the below Proforma Balance
Sheet shows the impact this transaction would have had.
PROFORMA
AND AS REPORTED BALANCE SHEETS
For
the year ended March 31, 2009
|
|
|
|
|
|
|
|
|
As
Reported
|
|
Proforma
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
5,957,028
|
|
$
|
5,957,028
|
|
Total
Current Liabilities including current portion of Long Term Notes
Payable
|
|
|
4,947,875
|
|
|
1,279,006
|
|
Total
Long Term Liabilities
|
|
|
17,639
|
|
|
3,686,508
|
|
Total
liabilities
|
|
|
4,965,514
|
|
|
4,965,514
|
|
Stockholders
Equity
|
|
|
991,514
|
|
|
991,514
|
|
In
connection with the loan amendments discussed above, the Company agreed to issue
to the note holders warrants to acquire 1,854,141 shares of the Company’s common
stock at an exercise price of $0.43 per share (see Note 5 herein) and
pay cash extension fees of approximately $57,000 payable on July 1,
2009. Based on a valuation performed as of June 26, 2009 the Company
currently estimates that it will record a non-cash charge of $320,157 in
connection with the issuance of the warrants, which will be amortized over the
period beginning on June 26, 2009 and ending on July 1, 2010. The cash extension
fee will be expensed at the time of payment.
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLSOSURE
|
None.
ITEM
9A(T). CONTROLS AND PROCEDURES
Disclosure
controls and procedures
. We maintain “disclosure controls and
procedures,” as such term is defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934, or the Exchange Act, that are designed to ensure that
information required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized, and reported within
the time periods specified in Securities and Exchange Commission rules and
forms, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer,
or persons performing similar functions, as appropriate, to allow timely
decisions regarding required disclosure. In designing and evaluating our
disclosure controls and procedures, management recognized that disclosure
controls and procedures, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the disclosure
controls and procedures are met. Our disclosure controls and procedures have
been designed to meet reasonable assurance standards. Additionally, in designing
disclosure controls and procedures, our management necessarily was required to
apply its judgment in evaluating the cost-benefit relationship of possible
disclosure controls and procedures. The design of any disclosure controls and
procedures also is based in part upon certain assumptions about the likelihood
of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions.
Based on
their evaluation as of the end of the period covered by this Annual Report on
Form 10-K, our Chief Executive Officer and Chief Financial Officer, or persons
performing similar functions, have concluded that, as of that date,
our disclosure controls and procedures were effective at the reasonable
assurance level.
Management’s
Report on Internal Control over Financial Reporting.
Our
management is responsible for establishing and maintaining internal control over
our financial reporting. Because of its inherent limitations, internal control
over financial reporting may not prevent or detect misstatements. Projections of
any evaluation of the effectiveness of internal control 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 policies or procedures may
deteriorate. Our management, with the participation of our Chief Executive
Officer and Chief Financial Officer, or persons performing similar functions,
assessed the effectiveness of our internal control over financial reporting as
of March 31, 2009. In making this assessment, management used the criteria set
forth by the [Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control-Integrated Framework]. Based on the assessment using
those criteria, management concluded that, as of March 31, 2009, our internal
control over financial reporting was effective.
This
Annual Report on Form 10-K does not include an attestation report of our
independent registered public accounting firm regarding our internal control
over financial reporting. Management's report was not subject to attestation by
our independent registered public accounting firm pursuant to temporary rules of
the Securities and Exchange Commission that permit us to provide only
management's report in this Annual Report on Form 10-K.
Changes in
Internal Control over Financial Reporting
. There was no change in our
internal control over financial reporting (as defined in Rule 13a-15(f) under
the Exchange Act) identified in connection with management’s evaluation during
our last fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
ITEM
9B. OTHER INFORMATION
None.
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
Item 10
is incorporated by reference pursuant to Regulation 14A under Securities
Exchange Act of 1934, as amended (the “Exchange Act”). We expect to
file a definitive proxy statement with the Securities and Exchange Commission
(the “SEC”) within 120 days after the close of our fiscal year ended March 31,
2009.
ITEM
11. EXECUTIVE COMPENSATION
Item 11
is incorporated by reference pursuant to Regulation 14A under the Exchange
Act. We expect to file a definitive proxy statement with the SEC
within 120 days after the close of our fiscal year ended March 31,
2009.
ITEM
12.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
Item 12
is incorporated by reference pursuant to Regulation 14A under the Exchange
Act. We expect to file a definitive proxy statement with the SEC
within 120 days after the close of our fiscal year ended March 31,
2009.
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Item 13
is incorporated by reference pursuant to Regulation 14A under the Exchange
Act. We expect to file a definitive proxy statement with the SEC
within 120 days after the close of our fiscal year ended March 31,
2009.
ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14
is incorporated by reference pursuant to Regulation 14A under the Exchange
Act. We expect to file a definitive proxy statement with the SEC
within 120 days after the close of our fiscal year ended March 31,
2009.
PART
IV
ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The
exhibits listed below are required by Item 601 of Regulation S-B. Each
management contract or compensatory plan or arrangement required to be filed as
an exhibit to this Form 10-KSB has been identified.
Exhibit
Number
|
|
Description of Document
|
3(i).1
|
|
Articles
of Incorporation of Sonicport.com, Inc. (incorporated by reference to
Exhibit 3(i).1 to the Registrant’s Annual Report on Form 10— KSB for the
year ended March 31, 2002).
|
|
|
|
3(i).2
|
|
Certificate
of Designation of Series A Convertible Preferred Stock of Sonicport.com,
Inc. (incorporated by reference to Exhibit 3.1(g) to the Registrant’s
Annual Report on Form 10— KSB for the year ended March 31,
2000).
|
|
|
|
3(i).3
|
|
Certificate
of Designation of Series B Convertible Preferred Stock of Sonicport.com,
Inc. (incorporated by reference to Exhibit 3(1).3 to the Registrant’s
Annual Report on Form 10— KSB for the year ended March 31,
2002).
|
|
|
|
3(i).4
|
|
Certificate
of Amendment to Articles of Incorporation of Sonicport.com, Inc.
(incorporated by reference to Exhibit 3.1(h) to the Registrant’s Annual
Report on Form 10— KSB for the year ended March 31,
2001).
|
|
|
|
3(i).5
|
|
Certificate
of Amendment to Articles of Incorporation of Sonicport, Inc. (incorporated
by reference to Exhibit 3.1 to the Registrant’s registration statement on
Form S— 3 filed May 14, 2002).
|
|
|
|
3(ii)**
|
|
Amended
and Restated Bylaws (reflecting an amendment to the Bylaws adopted on
February 19, 2009 as reported in the Registrant’s Current Report on Form
8-K filed with the SEC on February 25, 2009).
|
|
|
|
4.1
|
|
Specimen
common stock certificate. (incorporated by reference to Exhibit 4.1 to the
Registrant’s Annual Report on Form 10— KSB for the year ended March 31,
2002).
|
4.2
|
|
Registration
Rights Agreement, dated as of April 16, 2004, by and among the Registrant
and the signatories thereto (incorporated by reference to Exhibit 4.1 to
the Registrant’s Current Report on Form 8-K, filed with the SEC on May 20,
2004).
|
|
|
|
4.3
|
|
Registration
Rights Agreement, dated as of November 13, 2007, by and between the
Registrant and the signatories thereto (incorporated by reference to
Exhibit 4.4 to the Registrant’s Quarter Report on Form 10-QSB for the
quarter ended December 31, 2007).
|
|
|
|
4.4
|
|
Form
of Common Stock Purchase Warrant (incorporated by reference to Exhibit
99.3 to the Registrant’s Registration Statement on Form S-3 (File No.
333-148039) filed with the SEC on December 13,
2007).
|
Exhibit
Number
|
|
Description of
Document
|
4.5
|
|
Rights
Agreement, dated July 24, 2003, by and between the Registrant and
Corporate Stock Transfer (incorporated by reference to Exhibit 4.1 to the
Registrant’s Current Report on Form 8-K, filed with the SEC on July 25,
2003).
|
|
|
|
4.6
|
|
Amendment
No. 2 to Rights Agreement, dated November 13, 2007, by and between the
Registrant and American Stock Transfer & Trust (incorporated by
reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K,
filed with the SEC on November 14, 2007).
|
|
|
|
10.1†
|
|
Amended
and Restated 2000 Stock Option Plan (incorporated by reference to Exhibit
10.1 to the Registrants' Quarterly Report on Form 10-Q for the quarter
ended September 30, 2008.
|
|
|
|
10.2†
|
|
Form
of Incentive Stock Option Agreement (incorporated by reference to Exhibit
10.2 to the Registrant’s Annual Report on Form 10— KSB for the year ended
March 31, 2003).
|
|
|
|
10.3†
|
|
Form
of Stock Option Agreement (incorporated by reference to Exhibit 99.1 to
the Registrant’s Registration Statement on Form S— 8 (File No. 333—
102842)).
|
|
|
|
10.4†
|
|
Form
of Director Stock Option Agreement (incorporated by reference to Exhibit
10.13 to the Registrant’s Annual Report on Form 10— KSB for the year ended
March 31, 2003).
|
|
|
|
10.5†
|
|
Form
of Nonstatutory Stock Option Agreement (incorporated by reference to
Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10— QSB for the
quarter ended September 30, 2003).
|
|
|
|
10.6†
|
|
Nonstatutory
Stock Option Agreement dated May 21, 2003 between the Registrant and Mario
Villarreal. (incorporated by reference to Exhibit 10.18 to the
Registrant’s Quarterly Report on Form 10— QSB for the quarter ended June
30, 2003).
|
|
|
|
10.7†
|
|
Nonstatutory
Stock Option Agreement dated May 21, 2003 between the Registrant and Terry
E. Stepanik. (incorporated by reference to Exhibit 10.19 to the
Registrant’s Quarterly Report on Form 10— QSB for the quarter ended June
30, 2003).
|
10.8†
|
|
Employment
Agreement dated June 12, 2008 between the Registrant and Mario Villarreal
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current
Report on Form 8— K filed June 18, 2008).
|
|
|
|
10.9
|
|
Lease
Agreement dated as of June 22, 2007, by and between Registrant and Parkway
Properties LP.
|
Exhibit
Number
|
|
Description of
Document
|
10.10
|
|
Master
License Agreement, effective as of October 15, 1999, by and between the
Registrant and American Express Travel Related Services Company
(incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly
Report on Form 10-QSB for the quarter ended September 30,
2007).
|
|
|
|
10.11
|
|
Schedule
Number 1 to Master License Agreement, dated July 22, 2005, by and between
the Registrant and American Express Travel Related Services Company
(incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly
Report on Form 10-QSB for the quarter ended September 30,
2007).
|
|
|
|
10.12*
|
|
Formal
Purchase Order from American Express Travel Related Services Company, Inc.
pursuant to the Master Agreement for Consulting Services dated June 16,
2005, as amended
|
|
|
|
10.13
|
|
Note
Purchase Agreement dated August 13, 2008, by and between the Company and
signatories thereto (incorporated by reference to Exhibit 10.2 to the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended September
30, 2008).
|
|
|
|
10.14
|
|
Security
Agreement dated August 13, 2008 made by the Company in favor of Charles E.
Ramey, as collateral agent (incorporated by reference to Exhibit 10.4 to
the Registrant’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2008).
|
|
|
|
10.15
|
|
Form
of US Dataworks, Inc. Refinancing Secured Note dated August 13, 2008
(incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly
Report on Form 10-Q for the quarter ended September 30,
2008).
|
|
|
|
10.16
|
|
Note
Modification Agreement by and between US Dataworks, Inc. and Charles E.
Ramey dated February 19, 2009 (incorporated by reference to Exhibit 10.2
to the Registrant’s Current Report on Form 8-K filed with the SEC on
February 25, 2009).
|
|
|
|
10.17
|
|
Note
Modification Agreement by and between US Dataworks, Inc. and John L.
Nicholson, M.D. dated February 19, 2009 (incorporated by reference to
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the
SEC on February 25, 2009).
|
|
|
|
10.18†
|
|
Outside
Director Compensation Plan dated April 20, 2009 but effective as of April
1, 2009 (incorporated by reference to Item 1.01 of the Registrant’s
Current Report on Form 8-K filed with the SEC on April 23,
2009).
|
|
|
|
10.19
|
|
Note
Modification Agreement by and between US Dataworks, Inc. and Charles E.
Ramey dated May 20, 2009 (Refinance Note) (incorporated by reference to
Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the
SEC on May 27, 2009).
|
|
|
|
10.20
|
|
Note
Modification Agreement by and between US Dataworks, Inc. and John L.
Nicholson, M.D. dated May 20, 2009 (Refinance Note) (incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
filed with the SEC on May 27, 2009).
|
|
|
|
10.21
|
|
Note
Modification Agreement by and between US Dataworks, Inc. and Charles E.
Ramey dated May 20, 2009 (Other Note) (incorporated by reference to
Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the
SEC on May 27, 2009).
|
|
|
|
10.22**
|
|
Note
Modification Agreement by and between US Dataworks, Inc. and Charles E.
Ramey dated June 26, 2009 (Refinance Note).
|
|
|
|
10.23**
|
|
Note
Modification Agreement by and between US Dataworks, Inc. and John L.
Nicholson, M.D. dated June 26, 2009 (Refinance Note).
|
|
|
|
10.24**
|
|
Note
Modification Agreement by and between US Dataworks, Inc. and Charles E.
Ramey dated June 26, 2009 (Other Note).
|
|
|
|
23**
|
|
Consent
of Independent Registered Public Accounting
Firm
|
24.1**
|
|
Power
of Attorney (included on signature page).
|
|
|
|
31.1**
|
|
Section
302 Certification of Chief Executive Officer.
|
|
|
|
31.2**
|
|
Section
302 Certification of Chief Financial Officer or person performing similar
functions.
|
|
|
|
32.1**
|
|
Section
906 Certification of Chief Executive Officer.
|
|
|
|
32.2**
|
|
Section
906 Certification of Chief Financial Officer or person performing similar
functions.
|
† Indicates
management contract or compensatory plan or arrangement.
* Confidential
treatment requested.
** Filed herewith
SIGNATURES
In
accordance with Section 13 or 15 (d) of the Exchange Act, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
US DATAWORKS,
INC.
|
|
|
|
|
|
|
By:
|
/s/ Charles
E. Ramey
|
|
|
|
Charles
E. Ramey
|
|
|
|
Chief
Executive Officer
|
|
|
|
|
|
|
Date: June
29, 2009
|
|
KNOW ALL
MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Charles E. Ramey and John McLaughlin, and each of them,
his true and lawful attorneys-in-fact, each with full power of substitution, for
him or her in any and all capacities, to sign any amendments to this report on
Form 10- K and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact or their
substitute or substitutes may do or cause to be done by virtue
hereof.
In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Charles E. Ramey
|
|
Chief
Executive Officer
|
|
June
29, 2009
|
Charles
E. Ramey
|
|
(Principal
Executive Officer)
|
|
|
|
|
and
Director
|
|
|
|
|
|
|
|
|
|
Chief
Accounting Officer
|
|
|
/s/ John T. McLaughlin
|
|
(Principal
Accounting Officer and Principal
|
|
June
29, 2009
|
John
T. McLaughlin
|
|
Financial
Officer)
|
|
|
|
|
|
|
|
/s/ Joe Abrell
|
|
Director
|
|
June
29, 2009
|
Joe
Abrell
|
|
|
|
|
|
|
|
|
|
/s/ Anna C. Catalano
|
|
Director
|
|
June
29, 2009
|
Anna
C. Catalano
|
|
|
|
|
|
|
|
|
|
/s/ G. Richard Hicks
|
|
Director
|
|
June
29, 2009
|
G.
Richard Hicks
|
|
|
|
|
|
|
|
|
|
/s/ J. Patrick Millinor
|
|
Director
|
|
June
29, 2009
|
J.
Patrick Millinor
|
|
|
|
|
|
|
|
|
|
/s/ John L. Nicholson,
M.D.
|
|
Director
|
|
June
29, 2009
|
John
L. Nicholson, M.D.
|
|
|
|
|
|
|
|
|
|
/s/ Mario Villarreal
|
|
Director
|
|
June
29, 2009
|
Mario
Villarreal
|
|
|
|
|
|
|
|
|
|
/s/ Hayden D. Watson
|
|
Director
|
|
June
29, 2009
|
Hayden
D. Watson
|
|
|
|
|
|
|
|
|
|
/s/ Thomas L. West, Jr.
|
|
Director
|
|
June
29, 2009
|
Thomas
L. West, Jr.
|
|
|
|
|
EXHIBIT
INDEX
Exhibit
Number
|
|
Description of Document
|
3(i).1
|
|
Articles
of Incorporation of Sonicport.com, Inc. (incorporated by reference to
Exhibit 3(i).1 to the Registrant’s Annual Report on Form 10— KSB for the
year ended March 31, 2002).
|
|
|
|
3(i).2
|
|
Certificate
of Designation of Series A Convertible Preferred Stock of Sonicport.com,
Inc. (incorporated by reference to Exhibit 3.1(g) to the Registrant’s
Annual Report on Form 10— KSB for the year ended March 31,
2000).
|
|
|
|
3(i).3
|
|
Certificate
of Designation of Series B Convertible Preferred Stock of Sonicport.com,
Inc. (incorporated by reference to Exhibit 3(1).3 to the Registrant’s
Annual Report on Form 10— KSB for the year ended March 31,
2002).
|
|
|
|
3(i).4
|
|
Certificate
of Amendment to Articles of Incorporation of Sonicport.com, Inc.
(incorporated by reference to Exhibit 3.1(h) to the Registrant’s Annual
Report on Form 10— KSB for the year ended March 31,
2001).
|
|
|
|
3(i).5
|
|
Certificate
of Amendment to Articles of Incorporation of Sonicport, Inc. (incorporated
by reference to Exhibit 3.1 to the Registrant’s registration statement on
Form S— 3 filed May 14, 2002).
|
|
|
|
3(ii)**
|
|
Amended
and Restated Bylaws (reflecting an amendment to the Bylaws adopted on
February 19, 2009 as reported in the Registrant’s Current Report on Form
8-K filed with SEC on February 25, 2009).
|
|
|
|
4.1
|
|
Specimen
common stock certificate. (incorporated by reference to Exhibit 4.1 to the
Registrant’s Annual Report on Form 10— KSB for the year ended March 31,
2002).
|
4.2
|
|
Registration
Rights Agreement, dated as of April 16, 2004, by and among the Registrant
and the signatories thereto (incorporated by reference to Exhibit 4.1 to
the Registrant’s Current Report on Form 8-K, filed with the SEC on May 20,
2004).
|
|
|
|
4.3
|
|
Registration
Rights Agreement, dated as of November 13, 2007, by and between the
Registrant and the signatories thereto (incorporated by reference to
Exhibit 4.4 to the Registrant’s Quarter Report on Form 10-QSB for the
quarter ended December 31, 2007).
|
Exhibit
Number
|
|
Description of
Document
|
4.4
|
|
Form
of Common Stock Purchase Warrant (incorporated by reference to Exhibit
99.3 to the Registrant’s Registration Statement on Form S-3 (File No.
333-148039) filed with the SEC on December 13,
2007).
|
4.5
|
|
Rights
Agreement, dated July 24, 2003, by and between the Registrant and
Corporate Stock Transfer (incorporated by reference to Exhibit 4.1 to the
Registrant’s Current Report on Form 8-K, filed with the SEC on July 25,
2003).
|
|
|
|
4.6
|
|
Amendment
No. 2 to Rights Agreement, dated November 13, 2007, by and between the
Registrant and American Stock Transfer & Trust (incorporated by
reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K,
filed with the SEC on November 14, 2007).
|
|
|
|
10.1†
|
|
Amended
and Restated 2000 Stock Option Plan (incorporated by reference to Exhibit
10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2008.
|
|
|
|
10.2†
|
|
Form
of Incentive Stock Option Agreement (incorporated by reference to Exhibit
10.2 to the Registrant’s Annual Report on Form 10— KSB for the year ended
March 31, 2003).
|
|
|
|
10.3†
|
|
Form
of Stock Option Agreement (incorporated by reference to Exhibit 99.1 to
the Registrant’s Registration Statement on Form S— 8 (File No. 333—
102842)).
|
|
|
|
10.4†
|
|
Form
of Director Stock Option Agreement (incorporated by reference to Exhibit
10.13 to the Registrant’s Annual Report on Form 10— KSB for the year ended
March 31, 2003).
|
|
|
|
10.5†
|
|
Form
of Nonstatutory Stock Option Agreement (incorporated by reference to
Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10— QSB for the
quarter ended September 30, 2003).
|
|
|
|
10.6†
|
|
Nonstatutory
Stock Option Agreement dated May 21, 2003 between the Registrant and Mario
Villarreal. (incorporated by reference to Exhibit 10.18 to the
Registrant’s Quarterly Report on Form 10— QSB for the quarter ended June
30, 2003).
|
|
|
|
10.7†
|
|
Nonstatutory
Stock Option Agreement dated May 21, 2003 between the Registrant and Terry
E. Stepanik. (incorporated by reference to Exhibit 10.19 to the
Registrant’s Quarterly Report on Form 10— QSB for the quarter ended June
30, 2003).
|
Exhibit
Number
|
|
Description of
Document
|
10.8†
|
|
Employment
Agreement dated June 12, 2008 between the Registrant and Mario Villarreal
(incorporated by reference to Exhibit 10.1 to the Registrant’s Current
Report on Form 8— K filed June 18, 2008).
|
|
|
|
10.9
|
|
Lease
Agreement dated as of June 22, 2007, by and between Registrant and Parkway
Properties LP.
|
10.10
|
|
Master
License Agreement, effective as of October 15, 1999, by and between the
Registrant and American Express Travel Related Services Company
(incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly
Report on Form 10-QSB for the quarter ended September 30,
2007).
|
|
|
|
10.11
|
|
Schedule
Number 1 to Master License Agreement, dated July 22, 2005, by and between
the Registrant and American Express Travel Related Services Company
(incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly
Report on Form 10-QSB for the quarter ended September 30,
2007).
|
|
|
|
10.12*
|
|
Formal
Purchase Order from American Express Travel Related Services Company, Inc.
pursuant to the Master Agreement for Consulting Services dated June 16,
2005, as amended
|
|
|
|
10.13
|
|
Note
Purchase Agreement dated August 13, 2008, by and between the Company and
signatories thereto (incorporated by reference to Exhibit 10.2 to the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended September
30, 2008).
|
|
|
|
10.14
|
|
Security
Agreement dated August 13, 2008 made by the Company in favor of Charles E.
Ramey, as collateral agent (incorporated by reference to Exhibit 10.4 to
the Registrant’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2008).
|
|
|
|
10.15
|
|
Form
of US Dataworks, Inc. Refinancing Secured Note dated August 13, 2008
(incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly
Report on Form 10-Q for the quarter ended September 30,
2008).
|
|
|
|
10.16
|
|
Note
Modification Agreement by and between US Dataworks, Inc. and Charles E.
Ramey dated February 19, 2009 (incorporated by reference to Exhibit 10.2
to the Registrant’s Current Report on Form 8-K filed with the SEC on
February 25, 2009).
|
|
|
|
10.17
|
|
Note
Modification Agreement by and between US Dataworks, Inc. and John L.
Nicholson, M.D. dated February 19, 2009 (incorporated by reference to
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the
SEC on February 25, 2009).
|
|
|
|
10.18†
|
|
Outside
Director Compensation Plan dated April 20, 2009 but effective as of April
1, 2009 (incorporated by reference to Item 1.01 of the Registrant’s
Current Report on Form 8-K filed with the SEC on April 23,
2009).
|
|
|
|
10.19
|
|
Note
Modification Agreement by and between US Dataworks, Inc. and Charles E.
Ramey dated May 20, 2009 (Refinance Note) (incorporated by reference to
Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the
SEC on May 27, 2009).
|
|
|
|
10.20
|
|
Note
Modification Agreement by and between US Dataworks, Inc. and John L.
Nicholson, M.D. dated May 20, 2009 (Refinance Note) (incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K
filed with the SEC on May 27, 2009).
|
|
|
|
10.21
|
|
Note
Modification Agreement by and between US Dataworks, Inc. and Charles E.
Ramey dated May 20, 2009 (Other Note) (incorporated by reference to
Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the
SEC on May 27, 2009).
|
|
|
|
10.22**
|
|
Note
Modification Agreement by and between US Dataworks, Inc. and Charles E.
Ramey dated June 26, 2009 (Refinance Note).
|
|
|
|
10.23**
|
|
Note
Modification Agreement by and between US Dataworks, Inc. and John L.
Nicholson, M.D. dated June 26, 2009 (Refinance Note).
|
|
|
|
10.24**
|
|
Note
Modification Agreement by and between US Dataworks, Inc. and Charles E.
Ramey dated June 26, 2009 (Other Note).
|
|
|
|
23**
|
|
Consent
of Independent Registered Public Accounting
Firm
|
24.1**
|
|
Power
of Attorney (included on signature page).
|
|
|
|
31.1**
|
|
Section
302 Certification of Chief Executive Officer.
|
|
|
|
31.2**
|
|
Section
302 Certification of Chief Financial Officer or person performing similar
functions.
|
|
|
|
32.1**
|
|
Section
906 Certification of Chief Executive Officer.
|
|
|
|
32.2**
|
|
Section
906 Certification of Chief Financial Officer or person performing similar
functions.
|
† Indicates
management contract or compensatory plan or arrangement.
* Confidential
treatment requested.
** Filed herewith.
US Dataworks (AMEX:UDW)
Gráfica de Acción Histórica
De May 2024 a Jun 2024
US Dataworks (AMEX:UDW)
Gráfica de Acción Histórica
De Jun 2023 a Jun 2024