UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
|
x
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the
quarterly period ended
March 31, 2008
|
o
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
1934
|
For
the
transition period from __________ to
__________.
Commission
File No.
000-26913
NW
TECH CAPITAL, INC.
(
(Exact
Name of Registrant as Specified in its Charter)
|
NEVADA
|
|
86-0862532
|
|
(State
or Other Jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
|
|
|
|
|
4603
NE St. Johns Road, Ste. B
Vancouver,
Washington
|
|
98661
|
|
(Address
of Principal Executive Offices)
|
|
(Zip
Code)
|
Issuer's
Telephone Number:
(360)-635-6521
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
x
No
o
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.
|
Large
accelerated filer
o
|
|
Accelerated
filer
o
|
|
|
|
|
|
Non-accelerated
filer
o
|
|
Smaller
reporting company
x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
o
No
x
APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING
THE PRECEDING FIVE YEARS
Indicate
by check mark whether the registrant filed all documents and reports required
to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court.
Yes
o
No
o
APPLICABLE
ONLY TO CORPORATE ISSUERS
State
the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date: As of May 14, 2008, there were 65,940,154
outstanding shares of the Registrant's Common Stock, $.00001 par
value.
TABLE
OF CONTENTS
|
|
|
Page
|
|
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PART
I - FINANCIAL INFORMATION
|
|
|
|
|
|
|
Item
1.
|
Condensed
Consolidated Financial Statements
|
3
|
|
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis or Plan of Operation
|
12
|
|
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
14
|
|
|
|
|
|
Item
4.
|
Controls
and Procedures
|
14
|
|
|
|
|
|
|
|
|
|
|
PART
II - OTHER INFORMATION
|
|
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
15
|
|
|
|
|
|
Item
1A.
|
Risk
Factors
|
15
|
|
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
15
|
|
|
|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
16
|
|
|
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
16
|
|
|
|
|
|
Item
5.
|
Other
Information
|
16
|
|
|
|
|
|
Item
6.
|
Exhibits
|
16
|
PART
I - FINANCIAL INFORMATION
Item
1. Condensed Consolidated Financial Statements.
|
NW
TECH CAPITAL, INC.
|
|
(FORMERLY
CYBERTEL CAPITAL CORPORATION)
|
|
CONDENSED
CONSOLIDATED BALANCE
SHEETS
|
|
|
|
March
31, 2008
|
|
December
31, 2007
|
|
|
ASSETS
|
|
(UNAUDITED)
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
9,525
|
|
$
|
16,675
|
|
|
Other
current assets
|
|
|
41,000
|
|
|
40,000
|
|
|
Total
current assets
|
|
|
50,525
|
|
|
56,675
|
|
|
TOTAL
ASSETS
|
|
$
|
50,525
|
|
$
|
56,675
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
222,051
|
|
$
|
228,082
|
|
|
Accrued
expenses
|
|
|
36,993
|
|
|
67,806
|
|
|
Notes
payable to shareholders, net
|
|
|
272,539
|
|
|
293,064
|
|
|
Derivative
liability
|
|
|
211,662
|
|
|
140,187
|
|
|
Total
current liabilities
|
|
|
743,245
|
|
|
729,139
|
|
|
TOTAL
LIABILITIES
|
|
|
743,245
|
|
|
729,139
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIT
|
|
|
|
|
|
|
|
|
Series
A convertible preferred stock, $.001 per share, 5,000 shares authorized;
84 and 164 shares issued and outstanding
|
|
|
-
|
|
|
-
|
|
Series
B super voting preferred stock, par value $.00001 per share; 100,000,000
shares authorized; 49,200,000 and 50,000,000 shares issued and
outstanding
|
|
|
492
|
|
|
500
|
|
|
Common
stock; $.00001 par value; 2,500,000,000 shares authorized; 38,054,389
and
550,363 issued and outstanding
|
|
|
381
|
|
|
6
|
|
|
Additional
paid-in-capital
|
|
|
23,985,975
|
|
|
23,656,194
|
|
|
Accumulated
deficit
|
|
|
(24,679,568
|
)
|
|
(24,329,164
|
)
|
|
TOTAL
STOCKHOLDERS’ DEFICIT
|
|
|
(692,720
|
)
|
|
(672,464
|
)
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
50,525
|
|
$
|
56,675
|
|
See
accompanying notes to condensed consolidated financial statements.
|
NW
TECH CAPITAL, INC.
|
|
CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
|
|
(UNAUDITED)
|
|
|
|
For
the three months ended March 31,
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$
|
-
|
|
$
|
-
|
|
|
Cost
of goods sold
|
|
|
-
|
|
|
-
|
|
|
Gross
profit
|
|
|
-
|
|
|
-
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
217,644
|
|
|
137,168
|
|
|
Bad
debt recovery
|
|
|
(12,221
|
)
|
|
-
|
|
|
TOTAL
OPERATING EXPENSES
|
|
|
205,423
|
|
|
137,168
|
|
|
OPERATING
LOSS
|
|
|
(205,423
|
)
|
|
(137,168
|
)
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(72,147
|
)
|
|
(1,054
|
)
|
|
Change
in fair value of derivative liability
|
|
|
(71,475
|
)
|
|
(6,425
|
)
|
|
TOTAL
OTHER INCOME/(EXPENSE)
|
|
|
(143,622
|
)
|
|
(7,479
|
)
|
|
LOSS
FROM CONTINUING OPERATIONS
|
|
|
(349,045
|
)
|
|
(144,647
|
)
|
|
|
|
|
|
|
|
|
|
|
DISCONTINUED
OPERATIONS
|
|
|
|
|
|
|
|
|
Loss
from operations of discontinued business
|
|
|
-
|
|
|
(7,511
|
)
|
|
LOSS
FROM DISCONTINUED OPERATIONS
|
|
|
-
|
|
|
(7,511
|
)
|
|
NET
LOSS
|
|
|
(349,045
|
)
|
|
(152,158
|
)
|
|
Preferred
dividend
|
|
|
(1,359
|
)
|
|
(1,938
|
)
|
|
NET
LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS
|
|
$
|
(350,404
|
)
|
$
|
(154,096
|
)
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS PER COMMON SHARE - BASIC AND DILUTED
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
(0.02
|
)
|
$
|
(75.77
|
)
|
|
Discontinued
operations
|
|
$
|
0.00
|
|
$
|
(3.93
|
)
|
|
Net
loss per common share
|
|
$
|
(0.02
|
)
|
$
|
(80.72
|
)
|
|
Weighted
average number of shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
18,793,889
|
|
|
1,909
|
|
See
accompanying notes to condensed consolidated financial statements.
|
NW
TECH CAPITAL, INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(UNAUDITED)
|
|
|
|
For
the three months
ended
March 31,
|
|
|
|
|
2008
|
|
2007
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net
loss from continuing operations
|
|
$
|
(349,045
|
)
|
$
|
(144,647
|
)
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities
|
|
|
|
|
|
|
|
|
Notes
issued for expenses
|
|
|
(6,360
|
)
|
|
-
|
|
|
Interest
expense associated with beneficial conversion feature
|
|
|
60,150
|
|
|
-
|
|
|
Change
in fair value of derivative liability
|
|
|
71,475
|
|
|
6,425
|
|
|
Common
stock issued to third parties for services
|
|
|
112,430
|
|
|
160,220
|
|
|
Common
stock issued for interest payment on debt
|
|
|
5,350
|
|
|
-
|
|
|
Changes
in assets and liabilities
|
|
|
|
|
|
|
|
|
Prepaid
expenses
|
|
|
(1,000
|
)
|
|
-
|
|
|
Accounts
payable and accrued expenses
|
|
|
79,850
|
|
|
24,956
|
|
|
Net
cash used in continuing operations
|
|
|
(27,150
|
)
|
|
46,954
|
|
|
Net
income (loss) from continuing operations
|
|
|
-
|
|
|
(7,511
|
)
|
|
Net
cash provided by (used in) discontinued operations
|
|
|
-
|
|
|
-
(88,563
|
)
|
|
Net
cash used in operating activities
|
|
|
(27,150
|
)
|
|
(49,120
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOW FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net
cash provided by investing activities
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOW FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Proceeds
from related party notes payable
|
|
|
20,000
|
|
|
-
|
|
|
Proceeds
from notes payable
|
|
|
-
|
|
|
50,000
|
|
|
Proceeds
from exercise of ESOP
|
|
|
-
|
|
|
75,804
|
|
|
Net
cash provided by financing activities
|
|
|
20,000
|
|
|
125,804
|
|
|
Net
cash provided by discontinued operations
|
|
|
-
|
|
|
(55,671
|
)
|
|
Net
cash provided by financing activities
|
|
|
20,000
|
|
|
70,133
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents:
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash
|
|
|
(7,150
|
)
|
|
21,013
|
|
|
Cash,
beginning of period
|
|
|
16,675
|
|
|
1,718
|
|
|
Cash
of discontinued operations, beginning of period
|
|
|
-
|
|
|
19,736
|
|
|
Less
cash of discontinued operations, end of period
|
|
|
-
|
|
|
(34,948
|
)
|
|
Cash,
end of period
|
|
$
|
9,525
|
|
$
|
7,519
|
|
See
accompanying notes to condensed consolidated financial statements.
|
NW
TECH CAPITAL, INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
|
|
(UNAUDITED)
|
|
|
|
For
the three months
ended
March 31,
|
|
|
|
|
2008
|
|
2007
|
|
|
SUPLLEMENTAL
DISCLOSURES
|
|
|
|
|
|
|
|
|
Cash
paid for interest & taxes
|
|
$
|
-
|
|
$
|
2,317
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
financing and investing activities
|
|
|
|
|
|
|
|
|
Issuance
of Note for accrued expense
|
|
$
|
51,874
|
|
$
|
-
|
|
|
Common
stock issued to third parties for services
|
|
$
|
112,430
|
|
$
|
-
|
|
|
Issuance
of common stock for payment of debt
|
|
$
|
66,470
|
|
$
|
-
|
|
|
Conversion
of preferred stock to common stock
|
|
$
|
-
|
|
$
|
-
|
|
|
Conversion
of accrued dividend to common stock
|
|
$
|
59,819
|
|
$
|
-
|
|
|
Accrued
preferred stock dividends
|
|
$
|
1,359
|
|
$
|
-
|
|
See
accompanying notes to condensed consolidated financial statements.
NW
TECH
CAPITAL, INC.
(FORMERLY
CYBERTEL CAPITAL CORPORATION)
Notes
to
the Condensed Consolidated Financial Statements
March
31,
2008 and December 31, 2007
NOTE
1 -
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited interim financial statements of NW Tech Capital ("NWTT"
or the “Company”) have been prepared in accordance with accounting principles
generally accepted in the United States of America and the rules of the
Securities and Exchange Commission ("SEC"), and should be read in conjunction
with the audited consolidated financial statements and notes thereto contained
in the Company's Annual Report on Form 10-KSB for the fiscal year ended December
31, 2007 filed with the SEC on March 31, 2008 (the “2007 Form 10K-SB”). In the
opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of financial position and the
results of operations for the interim periods presented have been reflected
herein. The results of operations for the interim period are not necessarily
indicative of the results to be expected for the full fiscal year. Notes to
the
financial statements which would substantially duplicate the disclosure
contained in the audited financial statements for 2007 as reported in the 2007
Form 10K-SB have been omitted.
Basic
and Diluted Net Loss per Share
The
basic
net loss per common share is computed by dividing the net loss by the weighted
average number of common shares outstanding. Diluted net loss per common share
is computed by dividing the net loss adjusted on an “as if converted” basis, by
the weighted average number of common shares outstanding plus potential dilutive
securities. For the quarters ended March 31, 2008 and 2007, potential dilutive
securities had an anti-dilutive effect and were not included in the calculation
of diluted net loss per common share. In January 2008, the Company affected
a
1:1000 reverse split, as well as doing the same thing on February 7, 2007 and
a
change in par value from $.001 per share to $.00001 per share. All shares and
per share amounts for the quarters ended March 31, 2008 and 2007, have been
restated to reflect the splits as if they had occurred on the first day of
the
first period presented.
NOTE
2 - MATERIAL EVENTS
Acquisitions
On
January 29, 2008, the Company signed an acquisition agreement to purchase a
Portland, Oregon-based company named Teledigit Inc. The acquisition agreement
is
to purchase 100% of Teledigit Inc. in exchange for 800,000 shares of the
Company’s series “E” Preferred Stock valued at $1.00 per share. The acquisition
is scheduled to close by July 31, 2008, pending the completion of an
audit.
Reverse
Split
On
January 21, 2008, the Company effected another 1000-to-1 reverse split. All
shareholder equity accounts have been stated to reflect such stock split as
of
the earliest date presented in the financial statements.
Name
Change
On
January 18, 2008, the Company filed a Certificate of Amendment with the State
of
Nevada changing its corporate name to NW Tech Capital, Inc.
Discontinued
Operations
On
December 31, 2007, a separation agreement was reached between the Company and
AireWire releasing AireWire back to its original state (before the acquisition)
and returning $1,000,000 dollars worth of Series “C” stock back to the
Company.
NW
TECH
CAPITAL, INC.
(FORMERLY
CYBERTEL CAPITAL CORPORATION)
Notes
to
the Condensed Consolidated Financial Statements
March
31,
2008 and December 31, 2007
NOTE
3 - GOING CONCERN
As
shown
in the accompanying financial statements, for the three months ended March
31,
2008, NWTT incurred recurring net losses from continuing operations in the
amount of $349,045 and has an accumulated deficit of $24,679,568 and a working
capital deficit of $692,720 as of March 31, 2008. These conditions raise
substantial doubt as to NWTT’s ability to continue as a going concern. The
continued support of NWTT creditors, lenders and shareholders is required in
order for NWTT to continue as a going concern. Management’s plans to support
NWTT’s operations include cutting overhead costs, borrowing additional funds and
raising additional capital. NWTT’s inability to obtain additional capital or
obtain such capital on favorable terms could have a material adverse effect
on
its consolidated financial position, results of operations and its ability
to
continue operations. The financial statements do not include any adjustments
that might be necessary if NWTT is unable to continue as a going
concern.
NOTE
4 - NOTES PAYABLE
All
of
the Company’s Notes Payables are short term convertible notes to shareholders
with interest rates ranging from 8% to 12%.
As
of the
quarter ended March 31, 2008, the Company has four notes which may be converted
into shares of the Company’s common stock based on 70% of the average of the
lowest three closing bid prices in the past 20 trading days immediately
preceding the conversion as long as such conversions do not exceed 4.99% of
the
then-outstanding common stock of the Company. As of March 31, 2008, three of
these notes are not convertible until a later date. In relation to the
convertible feature of these notes, a debt discount totaling $21,429 was
calculated in accordance with EITF 00-27 and is being amortized over the life
of
the debenture. The amortization is being recorded as interest expense and
totaled $21,429 for the quarter ended March 31, 2008 and for the period from
inception to March 31, 2008. The embedded conversion option is also accounted
for under EITF 00-19 and we have accounted for the embedded conversion option
as
a derivative liability. Accordingly, the embedded conversion option is marked
to
market through earnings at the end of each reporting period. The conversion
option is valued using the Black-Scholes valuation model and totaled $48,914
for
the quarter.
During
the quarter, the noteholders converted a total of $27,624 of principal and
interest payments.
As
of
March 31, 2008, the balances of the four notes were $102,908.
As
of the
quarter ended March 31, 2008, the Company has two notes which may be converted
into shares of the Company’s common stock based on 50% of the average of the
lowest three closing bid prices in the past 20 trading days immediately
preceding the conversion as long as such conversions do not exceed 4.99% of
the
then-outstanding common stock of the Company. In relation to the convertible
feature of these notes, a debt discount totaling $25,000 was calculated in
accordance with EITF 00-27 and is being amortized over the life of the
debenture. The amortization is being recorded as interest expense and totaled
$10,000 for the quarter ended March 31, 2008 and $25,000 for the period from
inception to March 31, 2008. The embedded conversion option is also accounted
for under EITF 00-19 and we have accounted for the embedded conversion option
as
a derivative liability. Accordingly, the embedded conversion option is marked
to
market through earnings at the end of each reporting period. The conversion
option is valued using the Black-Scholes valuation model and totaled $109,297
for the quarter.
During
the quarter, the note Holders converted a total of $27,548 of principal and
interest payments.
As
of
March 31, 2008, the balances of the two notes were $42,546.
As
of the
quarter ended March 31, 2008, the Company has one note which may be converted
into shares of the Company’s common stock based on 75% of the average of the
lowest three closing bid prices in the past 20 trading days immediately
preceding the conversion as long as such conversions do not exceed 4.99% of
the
then outstanding common stock of the Company. In relation to the convertible
feature of this note, a debt discount totaling $45,000 was calculated in
accordance with EITF 00-27 and is being amortized over the life of the
debenture. The amortization is being recorded as interest expense and totaled
$13,722 for the quarter ended March 31, 2008 and for the period from inception
to March 31, 2008. The embedded conversion option is also accounted for under
EITF 00-19 and we have accounted for the embedded conversion option as a
derivative liability. Accordingly, the embedded conversion option is marked
to
market through earnings at the end of each reporting period. The conversion
option is valued using the Black-Scholes valuation model and totaled $53,452
for
the quarter.
During
the quarter, the note Holders converted a total of $11,309 of principal and
interest payments.
As
of
March 31, 2008, the balance of the note was $37,708.
As
of the
quarter ended March 31, 2008, the Company owes a related party $116,475, without
interest.
NW
TECH
CAPITAL, INC.
(FORMERLY
CYBERTEL CAPITAL CORPORATION)
Notes
to
the Condensed Consolidated Financial Statements
March
31,
2008 and December 31, 2007
The
unaudited Chart below summarizes the Notes Payable mentioned in Note
4:
|
Terms
|
|
Amount
Unaudited
|
|
|
Short
Term Notes Payable to Shareholders:
|
|
|
|
|
|
-
10%
interest; principal of $20,000; convertible to common stock based
on 70%
of average price commencing August 28, 2008; due on February 28,
2009
|
|
$
|
20,000
|
|
|
-
10%
interest; principal of $30,000; convertible to common stock based
on 70%
of average price commencing April 1, 2008; due on October 1,
2008
|
|
|
30,000
|
|
|
-
8%
interest; principal of $27,087; convertible to common stock based
on 70%
of average price; due on December 31, 2008
|
|
|
27,087
|
|
|
-
10%
interest; principal of $30,000; convertible to common stock based
on 70%
of average price commencing June 20, 2008; due on December 20,
2008
|
|
|
30,000
|
|
|
-
12%
interest; principal of $1,054; convertible to common stock based
on 50% of
average price; due on demand
|
|
|
1,054
|
|
|
-
8%
interest; principal of $41,493; convertible to common stock based
on 50%
of average price; due on demand
|
|
|
41,493
|
|
|
-
12%
interest; principal of $37,708; convertible to common stock based
on 75%
of average price; due on February 28, 2009; net of unamortized discount
related to debt discount of $31,278
|
|
|
6,430
|
|
|
-
No
interest; principal of $116,475
|
|
|
116,475
|
|
|
Total
Short Term Notes Payable to Shareholders
|
|
$
|
272,539
|
|
NOTE
5 - STOCK HOLDER’S EQUITY
Common
Stock
During
the quarter ended March 31, 2008:
The
Company issued a total of 6,550,000 shares of common stock for services valued
at $112,430.
The
Company issued a total of 8,926,899 shares of common stock for repayment of
debt
valued at $66,471.
Preferred
Stock
During
the quarter ended March 31, 2008:
Holders
of the Company’s Series A preferred stock converted 80.47 shares of the Series A
preferred stock and $59,819 of Series A dividends into 2,027,068 shares of
the
Company’s common stock.
The
Company amended the Series B Preferred Stock by increasing the authorized shares
from 50,000,000 shares to 100,000,000 shares with a par value of $0.00001 per
share. The Company also added a conversion feature which allows shareholders
of
the Series B Preferred Stock to convert one share of Series B Preferred Stock
into 25 shares of Common Stock upon request of the shareholder.
The
President and CEO of the Company converted 800,000 shares of his Series B
preferred stock into 20,000,000 shares of the Company’s common
stock.
The
Company designated a new series of preferred stock named the Series E Preferred
Stock with 10,000,000 authorized shares and a par value of $0.00001. Each share
of the Series E Preferred Stock is convertible to $1.00 of the Company’s common
stock six months after issuance.
NW
TECH
CAPITAL, INC.
(FORMERLY
CYBERTEL CAPITAL CORPORATION)
Notes
to
the Condensed Consolidated Financial Statements
March
31,
2008 and December 31, 2007
NOTE
6 - DISCONTINUED OPERATIONS
On
December 15, 2007, the Company entered into a Mutual Separation Agreement (“the
Separation Agreement”) with AireWire, Inc. (“AireWire”), effective December 31,
2007. The Company and AireWire were parties to an acquisition agreement dated
March 31, 2006 (the “Acquisition Agreement”). Both parties deemed it in their
best interests to unwind the Acquisition Agreement. The Separation Agreement
provided that the Company would return the 1,000,000 shares of AireWire’s common
stock owned by the Company and that AireWire would return the 500,000 shares
of
the Company’s common stock owned by AireWire. On the effective date of the
Separation Agreement, neither party had any obligation to the
other.
In
December 31, 2007, the Company recorded a loss from discontinued operations
and
recorded a gain on the disposition of this subsidiary.
Prior
year financial statements for 2007 have been reclassified to present the
operations of AireWire as discontinued operations. There is no activity in
the
current year related to AireWire.
The
following amounts, related to our AireWire business, have been segregated from
Continuing Operations and included in Discontinued Operations
in
the
Consolidated Statements of Operations:
|
|
|
|
|
|
|
|
March
31,
|
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
$
|
174,147
|
|
|
Cost
of goods sold
|
|
|
-
|
|
|
5,432
|
|
|
Gross
profit
|
|
|
-
|
|
|
168,715
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
-
|
|
|
174,963
|
|
|
Total
operating expenses
|
|
|
|
|
|
(174,963
|
)
|
|
Other
Income (expense):
|
|
|
|
|
|
|
|
|
Interest
Expense
|
|
|
-
|
|
|
(1,263
|
)
|
|
Total
other income
|
|
|
-
|
|
|
(1,263
|
)
|
|
Loss
from discontinuing operations
|
|
$
|
-
|
|
$
|
(7,511
|
)
|
NOTE
7 - ACQUISITIONS AND INVESTMENTS
On
January 29, 2008 the Company signed an acquisition agreement to purchase a
Portland, Oregon-based company named Teledigit Inc. (“Teledigit”). The
acquisition agreement is to purchase 100% of Teledigit in exchange for 800,000
shares of the Company’s Series “E” Preferred Stock valued at $1.00 per share.
Teledigit
is a locally owned and operated telecommunications company in the Pacific
Northwest. Established in 1995, Teledigit bases its operations out of Portland,
Oregon serving customers in the greater Portland Metropolitan/Vancouver, WA
areas. It provides installation and service for business voice needs,
including key systems, PBX’s, voicemail, and cabling. Revenues for fiscal year
2007, exceeded $1.7 million dollars. Currently, the Company is in the process
of
auditing the Teledigit books so that the acquisition agreement can be completed.
The acquisition is still on schedule to be completed by July 31,
2008.
NOTE
8 - RELATED PARTY TRANSACTIONS
During
the quarter ending March 31, 2008, the President and CEO of the Company
converted 800,000 shares of his Series B preferred stock into 20,000,000 shares
of the Company’s common stock.
NW
TECH
CAPITAL, INC.
(FORMERLY
CYBERTEL CAPITAL CORPORATION)
Notes
to
the Condensed Consolidated Financial Statements
March
31,
2008 and December 31, 2007
NOTE
9 - SUBSEQUENT EVENTS
The
Company issued a total of 3,500,000 shares of common stock for services valued
at $11,950.
The
Company issued a total of 6,406,110 shares of common stock for repayment of
debt
valued at $8,836.
Holders
of the Company’s Series A preferred stock converted 11.29 shares of the Series A
preferred stock into 6,988,000 shares of the Company’s common
stock.
On
April
1, 2008, the Company signed a convertible promissory note for $25,000 with
a 10%
interest rate due March 31, 2009.
Effective
April 17, 2008, the Company incorporated a new Hong Kong/China company named
“NW
Tech Capital Group Limited” to engage in completing merger and acquisitions
opportunities with private China companies.
Effective
April 18, 2008, the Company designated a new series of preferred stock named
the
“Series F Preferred Convertible Stock” to consist of 10,000,000 shares to be
issued at $1.00 per share. The holders of the Series F Preferred Convertible
Stock shall be entitled to receive annual dividends of 8% when and if declared
by the Board of Directors and is convertible into shares of the Company’s Common
Stock at any time after 6 months from date of issuance.
Item
2. Management’s Discussion and Analysis or Plan of
Operation
.
Overview
The
following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements in the Form 10-KSB for the year ended December
31, 2007 and the other financial data appearing elsewhere in this Form
10-Q.
The
information set forth in this Management's Discussion and Analysis of Financial
Condition and Results of Operations ("MD&A") contains certain
"forward-looking statements," including, among others (i) expected changes
in
the Company's revenues and profitability, (ii) prospective business
opportunities and (iii) the Company's strategy for financing its business.
Forward-looking statements are statements other than historical information
or
statements of current condition. Some forward-looking statements may be
identified by use of terms such as "believes," "anticipates," "intends" or
"expects." These forward-looking statements relate to the plans, objectives
and
expectations of the Company for future operations. Although the Company believes
that its expectations with respect to the forward-looking statements are based
upon reasonable assumptions within the bounds of its knowledge of its business
and operations, in light of the risks and uncertainties inherent in all future
projections, the inclusion of forward-looking statements in this report should
not be regarded as a representation by the Company or any other person that
the
objectives or plans of the Company will be achieved.
In
light
of these risks and uncertainties, there can be no assurance that actual results,
performance or achievements of the Company will not differ materially from
any
future results, performance or achievements expressed or implied by such
forward-looking statements. The foregoing review of important factors should
not
be construed as exhaustive. The Company undertakes no obligation to release
publicly the results of any future revisions it may make to forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
Executive
Overview
NW
Tech
Capital, Inc. (the “Company,” “we,” “us,” or “our”), formerly Cybertel Capital
Corporation, was originally organized for the primary purpose of engaging in
all
facets of the business comprising the telecommunications industry and was a
provider of long-distance voice and data telecommunications.
On
January 29, 2008, we signed an acquisition agreement to purchase a
telecommunications company named Teledigit Inc. (“Teledigit”). Established in
1995, Teledigit bases its operations out of Portland, Oregon, serving customers
in the greater Portland Metropolitan/Vancouver, WA areas. Teledigit has had
a
progressive growth rate over the last several years. Its revenues for its last
year exceeded $1.7 million. Teledigit provides installation and service for
business voice needs, including key systems, PBX’s, voicemail, and cabling. The
acquisition agreement is to purchase 100% of Teledigit in exchange for 800,000
shares of our Series “E” stock worth $1.00 per share. Currently we are in the
process of auditing the Teledigit books so that the acquisition agreement can
be
completed. The acquisition is still on schedule to be completed by July 31,
2008.
We
also
are actively involved in identifying other companies in the telecommunications
industry for acquisition or strategic partnerships. These companies may be
providers of long distance service, Voice over Internet Protocol providers,
consulting companies, prepaid service companies, network management operations,
or other companies in the telecommunication arena.
We
also
are looking into acquisition possibilities and funding from China. Subsequent
to
the quarter ending March 31, 2008, we
incorporated
a new Hong Kong/China company named “NW Tech Capital Group Limited” to engage in
completing merger and acquisitions opportunities with private China
companies.
We
currently have insufficient funds to operate our business according to our
proposed business plan. In addition, if unanticipated expenses, problems, and
difficulties occur which result in material delays in the development of our
products, we will not be able to operate within our budget. If we do not operate
within our budget, we will require additional funds to continue our business.
We
may not be able to obtain additional financing as needed, on acceptable terms,
or at all, which would force us to delay our plans for growth and implementation
of our strategy, which could seriously harm our business, financial condition,
and results of operations. If we need additional funds, we may seek to obtain
them primarily through stock or debt financings. Those additional financings
could result in dilution to our stockholders.
Recent
Developments
On
January 21, 2008, we effected a 1000-to-1 reverse split of our common stock.
All
shareholder equity accounts have been stated to reflect the stock splits and
change in par value as of the earliest date presented in the financial
statements.
On
January 18, 2008, we filed a Certificate of Amendment with the State of Nevada
changing our corporate name to “NW Tech Capital Inc.”
In
January 2008, we entered into a purchase agreement with Teledigit Inc.
(“Teledigit”) a Portland, Oregon-based telecommunications sales and service
company. Teledigit has been in business since 1996 and has shown progressive
growth each year for the past 10 years. Teledigit does a wide range of business
for a national dental company which has locations all across the United States,
supplying everything from new phone systems to servicing old systems and
engineering wiring for new offices.
On
December 31, 2007, a separation agreement was reached between the Company and
AireWire Inc., releasing AireWire back to its original state (before the
acquisition) and returning $1,000,000 dollars worth of Series “C” stock back to
us.
Critical
Accounting Policies
Accounting
for Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios.
We
carry
notes with a convertible feature embedded and accounted for them under the
Financial Accounting Standards Board’s Emerging Issues Task Force (“EITF”) 00-27
and 00-19.
EITF
00-27 requires us to calculate the fair value of stock-based embedded
convertible
feature in notes as a debt discount, also known as a beneficial conversion
feature, or “BCF.” The convertible notes allow the note holder to convert the
note into common shares of us at a specified discounted rate.
The
value
of the debt discount is calculated on the date of the note issuance using the
intrinsic value method. Essentially, the debt discount equates to the difference
between the note and the fair market value of the stocks if the entire note
were
to be converted. The debt discount is expensed as interest ratably on a
straight-line basis over the requisite service period.
EITF
00-19 requires the
use
of a
valuation model to calculate the fair value of the embedded convertible feature
in the notes. The Company uses the Black-Scholes model, or “BSM,” to calculate
the fair value of the embedded convertible feature. The BSM incorporates various
assumptions including expected volatility, expected life, and interest
rates. The expected volatility is based on the historical volatility of our
common stock. We base our expected life assumption on its historical experience
and on the terms and conditions of the notes.
Accordingly,
the embedded conversion feature is marked to market through earnings at the
end
of each reporting period and reported as a derivative liability.
Results
of Operations for the Three Months Ended March 31, 2008
We
generated a net loss of $349,045 for the quarter ended March 31, 2008, compared
to $152,158 for the same quarter in 2007. The increase in net loss was primarily
due to an increase in interest expense, change in the value of the derivative
liability in accordance with EITF 00-19, and an increase in selling and
administrative expenses. The increase in interest expense consists largely
of
the amortization of the beneficial conversion feature, or BCF, as calculated
in
accordance with EITF 00-27. The amortization of the BCF and the change in value
of the derivative liability are non
-cash
expenses that make up a large sum of our expenses.
We
did
not generate any revenues from Continuing Operations for the quarter ending
March 31, 2008 nor did we generate any revenues from Continuing Operations
for
the corresponding period in 2007. During the same period in 2007, we had a
$7,500 loss from Discontinued Operations.
Selling,
general, and administrative costs were $217,644 during the three months ended
March 31, 2008, as compared to $137,168 for the corresponding period in 2007.
This increase was primarily due to stock for services expense.
Liquidity
and Capital Resources
During
the three-month period ended March 31, 2008, cash used by operations was
$27,150. We intend to continue to search for ways to expand our business through
new service contracts and by continuing to search for new acquisitions. We
anticipate that we will incur smaller losses in the future if we are able to
expand our business and the marketing of our products and services now offered.
The losses will continue until the excess of operation and marketing expenses
is
overcome by the increase in revenue from operations.
During
the three months ended March 31, 2008, we incurred a net loss of $349,045,
had
cash used for operations of $27,150, and cash provided by financing activities
was $20,000. All of these proceeds were used to fund operations. We continue
to
seek short-term financing through debt and equity financing and are also seeking
long-term financing through debt and/or equity financing through a private
placement or a retail offering of our common stock.
In
order
to execute our business plan, we will need to acquire additional capital from
debt or equity financing. Our independent certified public accountants have
stated in their report for the year-end that there is a substantial doubt about
our ability to continue as a going concern. In the absence of significant
revenue and profits, we will be completely dependent on additional debt and
equity financing arrangements. There is no assurance that any financing will
be
sufficient to fund our capital expenditures, working capital and other cash
requirements for the fiscal year ending December 31, 2008. We cannot assure
you
that any such additional funding will be available or that, if available, can
be
obtained on terms favorable to us. If we are unable to raise needed funds on
acceptable terms, we will not be able to execute our business plan, develop
or
enhance existing services, take advantage of future opportunities or respond
to
competitive pressures or unanticipated requirements. A material shortage of
capital will require us to take drastic steps such as further reducing our
level
of operations, disposing of selected assets or seeking an acquisition partner.
If cash is insufficient, we will not be able to continue operations.
Off-Balance
Sheet Transactions
There
are
no off-balance sheet transactions.
Material
Commitments
As
of the
date of this Quarterly Report, we do not have any material commitments that
are
not reflected as liabilities on our consolidated balance sheet included
elsewhere in this report, nor does management anticipate any further material
commitments within the next twelve months.
Item
3. Quantitative and Qualitative Disclosures about Market
Risk.
Not
Applicable.
Item
4. Controls and Procedures.
As
of the
end of the period covered by this Quarterly Report, we carried out an
evaluation, under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer of the effectiveness of our
disclosure controls and procedures. Based on this evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that, as of the end
of
such period, our disclosure controls and procedures are effective to provide
reasonable assurance that the information required to be disclosed by the
Company in the reports that it files or submits under the Securities and
Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed,
summarized and reported, within the time periods specified in the SEC’s rules
and forms. It should be noted that the design of any system of controls 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, regardless of how remote.
In
addition, we reviewed our internal controls over financial reporting, and there
have been no changes in our internal controls over financial reporting in the
last fiscal quarter that has materially affected or is reasonably likely to
materially affect our internal control over financial
reporting.
PART
II - OTHER INFORMATION
Item
1. Legal Proceedings.
Except
as
indicated below, the Company is not a party to any pending legal proceeding.
To
the knowledge of management, no federal, state or local governmental agency
is
presently contemplating any proceeding against the Company. No director,
executive officer or other person who may be deemed to be an “affiliate” of the
Company or owner of record or beneficially of more than five percent of its
common stock is a party adverse to the Company or has a material interest
adverse to the Company in any proceeding.
(1)
On or about January 25, 2002, Prudential Home Building Investors, Inc., a
New Jersey corporation (“Prudential”), filed a complaint against the Company in
the Superior Court of California, County of San Diego, and Central Division.
The
case was designated Case No. GIC 782069, and sought damages in the amount of
$32,000 for unpaid rent due on the Company’s former La Jolla, California
facility for the period of September, 2001, through December, 2001, when the
lease terminated. The Company has accrued this expense and expects no additional
cost or expense upon settlement of this case.
(2)
On March 2, 2006, Epstein, Fitzsimmons, Brown, Gioia, Jacobs &
Sprouls, P.C., obtained a $15,000 default judgment against the Company in the
Superior Court of New Jersey for Morris County. The Company expects no
additional cost or expense upon settlement of this case.
Item
1A. Risk Factors
There
have been no material changes from the Risk Factors described in our Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2007.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds.
The
following table indicates all sales of unregistered securities by NWTT during
the quarterly period ended March 31, 2008:
|
Name
of Purchaser
|
|
Date
|
|
No.
of Shares of
Common
Stock
|
|
Type
|
|
Edify
Capital Corp
|
|
01/03/08
|
|
27,068
|
|
Conversion
of Series A Preferred Stock
|
|
Majestic
Safe-T Products
|
|
01/25/08
|
|
1,028,800
|
|
Conversion
of Debt
|
|
James
Wheeler
|
|
01/25/08
|
|
20,000,000
|
|
Conversion
of Series B Preferred Stock
|
|
Roger
Ettore
|
|
01/29/08
|
|
280,375
|
|
Conversion
of Debt
|
|
Bellacloud
|
|
01/31/08
|
|
205,780
|
|
Conversion
of Debt
|
|
Bellacloud
|
|
02/18/08
|
|
714,286
|
|
Conversion
of Debt
|
|
Executive
Management Services
|
|
03/03/08
|
|
1,170,515
|
|
Conversion
of Debt
|
|
Bellacloud
|
|
03/06/08
|
|
857,143
|
|
Conversion
of Debt
|
|
Roger
Ettore
|
|
03/06/08
|
|
500,000
|
|
Conversion
of Debt
|
|
Majestic
Safe-T Products
|
|
03/14/08
|
|
1,000,000
|
|
Conversion
of Preferred A Dividends
|
|
Edify
Capital Group
|
|
03/14/08
|
|
1,000,000
|
|
Conversion
of Series A Preferred Stock
|
|
Bellacloud
|
|
03/25/08
|
|
1,000,000
|
|
Conversion
of Debt
|
|
Roger
Ettore
|
|
03/26/08
|
|
1,570,000
|
|
Conversion
of Debt
|
|
Executive
Management Services
|
|
03/31/08
|
|
1,600,000
|
|
Conversion
of Debt
|
Management
believes each of the foregoing persons or entities was either an "accredited
investor," or "sophisticated investor" as defined in Rule 501 of Regulation
D
promulgated under the Securities Act of 1933, as amended (the “Act”). Each such
person or entity had access to all material information about NWTT prior to
the
offer, sale or issuance of these "restricted securities." Management believes
that these shares were exempt from the registration requirements of the Act,
pursuant to Section 4(2) thereof.
Item
3. Defaults upon Senior Securities.
None
.
Item
4. Submission of Matters to a Vote of Security Holders.
None.
Item
5. Other Information.
None.
Item
6. Exhibits.
|
4.1
|
Amendment
of Designation After Issuance of Class of Series B Preferred Super
Voting
Convertible Preferred Stock, filed with the Secretary of State of
the
State of Nevada on January 24,
2008.
|
|
4.2
|
Certificate
of Designation for Series E Convertible Preferred Stock, filed with
the
Secretary of State of the State of Nevada on January 24,
2008.
|
|
4.3
|
Certificate
of Designation for Series F Convertible Preferred Stock, filed with
the
Secretary of State of the State of Nevada on April 21,
2008.
|
|
31.1
|
Certification
of Chief Executive Officer and Chief Financial Officer, James A.
Wheeler,
pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange
Act.
|
|
32.1
|
Certification
of Chief Executive Officer and Chief Financial Officer, James A.
Wheeler,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002.
|
In
accordance with the requirements of the Exchange Act, the registrant caused
this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
|
|
|
|
NW
TECH CAPITAL, INC.
|
|
|
|
|
Dated:
May 14, 2008
|
By:
|
/s/ James
A.
Wheeler
|
|
|
James
A. Wheeler
CEO,
CFO, President and Director
|
|
|
|
|
4.1
|
Amendment
of Designation After Issuance of Class of Series B Preferred Super
Voting
Convertible Preferred Stock, filed with the Secretary of State of
the
State of Nevada on January 24,
2008.
|
|
4.2
|
Certificate
of Designation for Series E Convertible Preferred Stock, filed with
the
Secretary of State of the State of Nevada on January 24,
2008.
|
|
4.3
|
Certificate
of Designation for Series F Convertible Preferred Stock, filed with
the
Secretary of State of the State of Nevada on April 21,
2008.
|
|
31.1
|
Certification
of Chief Executive Officer and Chief Financial Officer, James A.
Wheeler,
pursuant to Rules 13a-14(a) and 15d-14(a) of the Exchange
Act.
|
|
32.1
|
Certification
of Chief Executive Officer and Chief Financial Officer, James A.
Wheeler,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002.
|
NW Tech Capital (PK) (USOTC:NWTT)
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