UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
AMENDED
FORM 10-Q
AMENDMENT
2
(Mark
One)
[x]
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended December 31st, 2009
OR
[_]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
transition period from __________________ to __________________
Commission
File Number 0-17304
Cistera Networks,
Inc.
(Exact
name of registrant as specified in its charter)
Nevada
(State
or other jurisdiction of incorporation or organization)
|
91-1944887
(I.R.S.
Employer Identification No.)
|
6509 Windcrest Drive, Suite
160, Plano,
Texas 75024
(Address
of principal executive
offices) (Zip
Code)
972-381-4699
(Registrant's
telephone number, including area code)
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
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
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
definition of “large accelerated filer,” “accelerated filer” “non-accelerated
filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
Large
accelerated filer
£
|
|
Accelerated
filer
£
|
|
Non-accelerated
filer
£
|
|
Smaller
reporting company
ý
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes No X
As of
Feburary 15th, 2009, 17,423,410 shares of the registrant’s stock, $0.001 par
value per share, were outstanding.
CISTERA
NETWORKS, INC & SUBSIDIARY
TABLE
OF CONTENTS
PART
I: FINANCIAL INFORMATION
|
|
|
|
|
Item
1.
|
Financial
Statements:
|
|
|
|
|
|
Consolidated
Balance Sheets – December 31, 2009 (unaudited) and March 31, 2009
(audited)
|
4
|
|
Consolidated
Statements of Operations – For the three months ended December 31, 2009
and
2008
(unaudited)
|
5
|
|
Consolidated
Statements of Operations – For the nine months ended December 31, 2009
and
2008
(unaudited)
|
6
|
|
Consolidated
Statements of Stockholders’ Deficit – December 31, 2009 (unaudited)
and
March
31, 2009 (audited)
|
7
|
|
Consolidated
Statements of Cash Flows – For the nine months ended December 31, 2009
and
2008
(unaudited)
|
8
|
|
Notes
to Consolidated Financial Statements (unaudited)
|
10
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
18
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
26
|
|
|
|
Item
4T.
|
Controls
and Procedures
|
26
|
|
|
|
PART
II: OTHER INFORMATION
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
27
|
|
|
|
Item
1A.
|
Risk
Factors
|
27
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
27
|
|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
28
|
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
28
|
|
|
|
Item
5.
|
Other
Information
|
28
|
|
|
|
Item
6.
|
Exhibits
|
28
|
|
|
|
SIGNATURES
|
29
|
EXPLANATORY
NOTES
Amendment
No. 2 to the Quarterly Report on Form 10-Q (the “Report”) for the fiscal quarter
ended September 30, 2009 is filed for the purpose of amending the report as
“reviewed” by Robison, Hill and Company.
Amendment
No. 1 to the Quarterly Report on Form 10-Q (the “Report”) for the fiscal
quarter ended December 31, 2009 is filed for the purpose of amending the
report as “not-reviewed”. On April 7th the SEC provided a letter of comment
stating that the existing Independent Certified Accountant used to review the
report is not a member of the PCOAB. Subsequently the Company appointed Robison,
Hill & Company as the company’s independent accountants to review this
report.
Part
I. FINANCIAL INFORMATION
Item
1. Financial Statements
CISTERA
NETWORKS, INC. & SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
|
|
December
31, 2009 (Unaudited)
|
|
|
March
31st, 2009 (Audited)
|
|
Current
assets
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
15,124
|
|
|
$
|
1,493
|
|
Accounts
receivable, net of allowance for doubtful accounts of $-0-
|
|
|
268,413
|
|
|
|
151,322
|
|
Inventory
|
|
|
71,376
|
|
|
|
124,656
|
|
Prepaid
expenses
|
|
|
29,291
|
|
|
|
37,341
|
|
Total
current assets
|
|
|
384,204
|
|
|
|
314,812
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
228,418
|
|
|
|
324,217
|
|
Intangible
assets, net
|
|
|
1,547,611
|
|
|
|
1,751,442
|
|
Total
long-term assets
|
|
|
1,776,029
|
|
|
|
2,075,659
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
2,160,233
|
|
|
$
|
2,390,471
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
443,035
|
|
|
|
517,052
|
|
Accrued
liquidated damages – outside investors
|
|
|
|
|
|
|
177,402
|
|
Accrued
liabilities
|
|
|
503,417
|
|
|
|
1,527,811
|
|
Deferred
revenue
|
|
|
947,862
|
|
|
|
865,271
|
|
Convertible
promissory notes and other notes payable, net of discount
|
|
|
976,427
|
|
|
|
976,427
|
|
Note
payable
|
|
|
-
|
|
|
|
7,781
|
|
Total
current liabilities
|
|
|
2,870,741
|
|
|
|
4,071,743
|
|
|
|
|
|
|
|
|
|
|
Accrued
liquidated damages – outside investors
|
|
|
177,402
|
|
|
|
-
|
|
Litigation
Reserve
|
|
|
650,000
|
|
|
|
-
|
|
Convertible
promissory notes and other notes payable, net of discount
|
|
|
|
|
|
|
-
|
|
Deferred
Revenue
|
|
|
-
|
|
|
|
174,554
|
|
Other
long-term liabilities
|
|
|
423,175
|
|
|
|
58,031
|
|
Total
long-term liabilities
|
|
|
1,250,577
|
|
|
|
409,987
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
4,121,318
|
|
|
|
4,304,328
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
deficit:
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.01 par value; 1,000,000 shares authorized;
-0-
shares issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common
stock, $0.001 par value; 50,000,000 shares authorized;
17,423,410 shares
issued and outstanding,
Respectively
|
|
|
17,423
|
|
|
|
17,423
|
|
Additional
paid-in capital
|
|
|
19,291,219
|
|
|
|
19,291,219
|
|
Accumulated
deficit
|
|
|
(21,269,727
|
)
|
|
|
(21,222,499
|
)
|
Total
stockholders' deficit
|
|
|
(1,961,085
|
)
|
|
|
(1,913,857
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
$
|
2,160,233
|
|
|
$
|
2,390,471
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
CISTERA
NETWORKS, INC. & SUBSIDIARY
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three
months ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
Convergence
solutions
|
|
$
|
229,725
|
|
|
$
|
712,340
|
|
Professional
services
|
|
|
31,932
|
|
|
|
98,514
|
|
Support
and maintenance
|
|
|
311,787
|
|
|
|
261,633
|
|
Total
revenues
|
|
|
573,444
|
|
|
|
1,072,487
|
|
|
|
|
|
|
|
|
|
|
Cost
of revenues
|
|
|
|
|
|
|
|
|
Convergence
solutions
|
|
|
50,608
|
|
|
|
254,675
|
|
Professional
services
|
|
|
7,035
|
|
|
|
55,680
|
|
Support
and maintenance
|
|
|
68,685
|
|
|
|
24,250
|
|
Total
cost of revenues
|
|
|
126,328
|
|
|
|
344,605
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
447,116
|
|
|
|
737,882
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
|
5
|
|
|
|
319,758
|
|
Software
development
|
|
|
88,736
|
|
|
|
188,956
|
|
Engineering
and support
|
|
|
104,600
|
|
|
|
172,923
|
|
General
and administrative
|
|
|
144,981
|
|
|
|
338,210
|
|
Depreciation
and amortization
|
|
|
24,128
|
|
|
|
103,538
|
|
Total
operating expenses
|
|
|
362,450
|
|
|
|
1,123,385
|
|
|
|
|
|
|
|
|
|
|
Income
/ (Loss) from operations
|
|
|
84,665
|
|
|
|
(385,503
|
)
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
-
|
|
|
|
158
|
|
Other
income
|
|
|
7
|
|
|
|
-
|
|
Interest
expense
|
|
|
(46,541
|
)
|
|
|
(43,124
|
)
|
Abandonment
loss
|
|
|
|
|
|
|
-
|
|
Charge
for inducements related to stock issued to convertible note
holders
|
|
|
-
|
|
|
|
-
|
|
Amortization
of discount on convertible notes – outside investors
|
|
|
-
|
|
|
|
(108,918
|
)
|
Amortization
of discount on convertible notes – related parties
|
|
|
-
|
|
|
|
-
|
|
Credit
(charge) for estimated liquidated damages
|
|
|
-
|
|
|
|
-
|
|
Total
other income (expense)
|
|
|
(46,534
|
)
|
|
|
(151,884
|
)
|
|
|
|
|
|
|
|
|
|
Net
Income / (Loss)
|
|
$
|
38,131
|
|
|
$
|
(537,387
|
)
|
|
|
|
|
|
|
|
|
|
Basic
& diluted net income / (loss) per share
|
|
$
|
0.00
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding – basic and diluted
|
|
|
17,423,410
|
|
|
|
17,423,410
|
|
CISTERA
NETWORKS, INC. & SUBSIDIARY
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Nine
months ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
Convergence
solutions
|
|
$
|
798,206
|
|
|
$
|
2,247,809
|
|
Professional
services
|
|
|
166,518
|
|
|
|
204,347
|
|
Support
and maintenance
|
|
|
817,595
|
|
|
|
709,394
|
|
Total
revenues
|
|
|
1,782,319
|
|
|
|
3,161,550
|
|
|
|
|
|
|
|
|
|
|
Cost
of revenues
|
|
|
|
|
|
|
|
|
Convergence
solutions
|
|
|
276,987
|
|
|
|
664,417
|
|
Professional
services
|
|
|
111,380
|
|
|
|
148,680
|
|
Support
and maintenance
|
|
|
108,931
|
|
|
|
71,684
|
|
Total
cost of revenues
|
|
|
497,298
|
|
|
|
884,781
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
1,285,021
|
|
|
|
2,276,769
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Sales
and marketing
|
|
|
113,226
|
|
|
|
900,230
|
|
Software
development
|
|
|
224,971
|
|
|
|
612,289
|
|
Engineering
and support
|
|
|
245,505
|
|
|
|
579,323
|
|
General
and administrative
|
|
|
489,229
|
|
|
|
1,098,827
|
|
Depreciation
and amortization
|
|
|
77,541
|
|
|
|
302,368
|
|
Total
operating expenses
|
|
|
1,150,472
|
|
|
|
3,493,037
|
|
|
|
|
|
|
|
|
|
|
Income
/ (loss) from operations
|
|
|
134,549
|
|
|
|
(1,216,268
|
)
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
-
|
|
|
|
326
|
|
Other
income
|
|
|
70
|
|
|
|
|
|
Interest
expense
|
|
|
(171,170
|
)
|
|
|
(190,933
|
)
|
Abandonment
loss
|
|
|
(15,815
|
)
|
|
|
-
|
|
Charge
for inducements related to stock issued to convertible note
holders
|
|
|
-
|
|
|
|
(1,324,444
|
)
|
Amortization
of discount on convertible notes – outside investors
|
|
|
-
|
|
|
|
(1,297,773
|
)
|
Amortization
of discount on convertible notes – related parties
|
|
|
-
|
|
|
|
(41,060
|
)
|
Credit
(charge) for estimated liquidated damages
|
|
|
-
|
|
|
|
11,299
|
|
Total
other income (expense)
|
|
|
(186,915
|
)
|
|
|
(2,842,585
|
)
|
|
|
|
|
|
|
|
|
|
Net
Income (loss)
|
|
$
|
(52,366
|
)
|
|
|
(4,058,853
|
)
|
|
|
|
|
|
|
|
|
|
Basic
& diluted net loss per share
|
|
$
|
0.00
|
|
|
$
|
(0.28
|
)
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding – basic and diluted
|
|
|
17,423,410
|
|
|
|
14,725,627
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
CISTERA
NETWORKS, INC. & SUBSIDIARY
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Additional
paid-in capital
|
|
|
Accumulated
deficit
|
|
|
Total
stockholders’ equity (deficit)
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
at September 30, 2009 (unaudited)
|
|
|
-
|
|
|
|
-
|
|
|
|
17,423,410
|
|
|
$
|
17,423
|
|
|
$
|
19,291,219
|
|
|
$
|
(21,307,784
|
)
|
|
$
|
(1,999.142
|
)
|
Net
income / (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,130
|
|
|
|
38,130
|
|
Balance
Adjustment from
September
30,2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(73
|
)
|
|
|
(73
|
)
|
Balances
at December 31, 2009 (unaudited)
|
|
|
-
|
|
|
$
|
-
|
|
|
|
17,423,410
|
|
|
$
|
17,423
|
|
|
$
|
19,291,219
|
|
|
$
|
(21,269,727
|
)
|
|
$
|
(1,961,085
|
)
|
The
accompanying notes are an integral part of these consolidated financial
statements.
CISTERA
NETWORKS, INC. & SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Nine
months ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net
Income (loss)
|
|
$
|
(52,366
|
)
|
|
$
|
(4,058,853
|
)
|
Adjustments
used to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Charge
for inducement to convert debt to convertible promissory
notes
|
|
|
-
|
|
|
|
1,324,444
|
|
Charge
(credit) for liquidated damages
|
|
|
-
|
|
|
|
(11,299
|
)
|
Charge
for stock issued for waiver of registration rights
payments
|
|
|
-
|
|
|
|
1,297,773
|
|
Amortization
of discount on convertible promissory notes – Outside
Parties
|
|
|
-
|
|
|
|
41,060
|
|
Amortization
of discount on convertible promissory notes – Related
Parties
|
|
|
-
|
|
|
|
26,829
|
|
Abandonment
loss
|
|
|
15,815
|
|
|
|
-
|
|
Gain
on disposition of assets
|
|
|
1,717
|
|
|
|
-
|
|
Depreciation
and amortization
|
|
|
77,541
|
|
|
|
302,368
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
117,091
|
|
|
|
181,775
|
|
Inventory
|
|
|
53,280
|
|
|
|
66,829
|
|
Prepaid
expenses
|
|
|
(8,050
|
)
|
|
|
11,209
|
|
Accounts
payable
|
|
|
(74,017
|
)
|
|
|
(34,160
|
)
|
Note Payable
|
|
|
(7,781
|
)
|
|
|
-
|
|
Accrued
liabilities
|
|
|
(374,394
|
)
|
|
|
172,716
|
|
Deferred
revenue
|
|
|
(91,963
|
)
|
|
|
(207,317
|
)
|
Other
long-term liabilities
|
|
|
365,144
|
|
|
|
51,066
|
|
Net
cash provided by (used) in operating activities
|
|
|
22,017
|
|
|
|
(835,479
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment, net
|
|
|
-
|
|
|
|
(61,422
|
)
|
Net
cash used in investing activities
|
|
|
-
|
|
|
|
(61,422
|
)
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Decrease
in restricted cash
|
|
|
|
|
|
|
50,000
|
|
Net
borrowings (payments) on line of credit
|
|
|
|
|
|
|
(17,503
|
)
|
Net
proceeds from short-term advances
|
|
|
-
|
|
|
|
25,630
|
|
Net
proceeds from exercise of warrants
|
|
|
-
|
|
|
|
843,604
|
|
Payments
on convertible promissory notes and other loans
|
|
|
-
|
|
|
|
(19,153
|
)
|
Payments
on other notes payable and capital lease
|
|
|
(8,386
|
)
|
|
|
-
|
|
Net
cash provided by (used) financing activities
|
|
|
(8,386
|
)
|
|
|
882,578
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
|
13,631
|
|
|
|
(14,323
|
)
|
Cash
and cash equivalents at beginning of period
|
|
|
1,493
|
|
|
|
125,007
|
|
Cash
and cash equivalents at end of period
|
|
$
|
15,124
|
|
|
$
|
110,684
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
CISTERA
NETWORKS, INC. & SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(continued)
(Unaudited)
|
|
Nine
months ended December 31
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the year for:
|
|
|
|
|
|
|
Interest
|
|
$
|
14,853
|
|
|
$
|
53,740
|
|
Income
taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of convertible promissory notes and related accrued interest
and
accrued
liquidated damages to common stock
|
|
$
|
-
|
|
|
$
|
3,287,116
|
|
Conversion
of accounts payable and other accrued liabilities to
convertible
promissory
notes
|
|
|
|
|
|
|
|
|
Conversion
of accrued liabilities to common stock
|
|
|
-
|
|
|
|
53,312
|
|
Transfer
of inventory to equipment
|
|
|
-
|
|
|
|
46,989
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
CISTERA
NETWORKS, INC. & SUBSIDIARY
Notes
to Consolidated Financial Statements
(Unaudited)
NOTE
1 – BASIS OF PRESENTATION
The
accompanying unaudited consolidated financial statements of Cistera Networks,
Inc. (“Cistera” the “Company” or “we”) and its wholly-owned subsidiary have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission (“SEC”). All significant intercompany transactions and balances have
been eliminated in consolidation. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America (“US GAAP”) have
been condensed or omitted pursuant to such rules and regulations. In the opinion
of management, the unaudited consolidated financial statements have been
prepared on the same basis as the annual audited consolidated financial
statements, and reflect all adjustments, consisting only of normal, recurring
adjustments necessary for a fair presentation in accordance with US GAAP. The
results of operations for interim period presented are not necessarily
indicative of the operating results for the full year. These unaudited
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company’s
Annual Report on Form 10-K for the fiscal year ended March 31, 2009 (the “2009
10-K”).
Significant
Accounting Policies
The
Company prepares its financial statements in accordance with US GAAP. The
accounting policies most fundamental to understanding our financial statements
are those relating to recognition of revenue, our use of estimates and the
accounting for convertible debt and warrants. For a detailed discussion on the
application of these accounting policies, see Note 2 to our audited consolidated
financial statements contained in our 2009 10-K.
Recently
Issued Accounting Pronouncements
In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities—Including an Amendment of FASB
Statement No. 115"(“SFAS 159”). SFAS 159 permits companies
to measure many financial instruments and certain other items at fair value at
specified election dates. Unrealized gains and losses on these items will be
reported in earnings at each subsequent reporting date. The fair value option
may be applied instrument by instrument (with a few exceptions), is irrevocable
and is applied only to entire instruments and not to portions of instruments.
SFAS 159 is effective for fiscal years beginning after November 15,
2007. We do not believe it will have a material impact.
In December 2007, the FASB issued
SFAS No. 160, “Non-Controlling Interests in Consolidated Financial
Statements” (“SFAS 160”), which requires all entities to report non-controlling
(minority interests) in subsidiaries with equity in the consolidated financial
statements, but separate from the parent stockholders' equity. We do not believe
it will have a material impact.
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business
Combinations" ("SFAS 141R"), which replaces FASB Statement No. 141.
SFAS 141R establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any non-controlling interest in the acquiree
and the goodwill acquired. The Statement also establishes disclosure
requirements that will enable users to evaluate the nature and financial effects
of the business combination. We do not believe it will have a material
impact.
Research
and development expenditures are generally expensed as incurred. SFAS No. 86,
“Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed”, requires capitalization of certain software development costs
subsequent to the establishment of technological feasibility. Based on the
Company’s product development process, technological feasibility is established
upon completion of a working model. Costs incurred by the Company between
completion of the working model and the point at which the product is ready for
general release have been insignificant. Thereafter, all software production
costs shall be capitalized and subsequently reported at the lower of unamortized
cost or net realizable value. Capitalized costs are amortized based on current
and future revenue for each product with an annual minimum equal to the
straight-line amortization over the remaining estimated economic life of the
product.
CISTERA
NETWORKS, INC. & SUBSIDIARY
Notes
to Consolidated Financial Statements
(Unaudited)
Balance
Sheet Accounts
Accounts
receivable are comprised of the following:
|
|
December
31, 2009
|
|
|
March
31, 2009
|
|
|
|
|
|
|
|
|
Receivables
assigned to factor
|
|
$
|
0
|
|
|
$
|
125,402
|
|
Advances
to (from) factor
|
|
|
(0
|
)
|
|
|
(70,570
|
)
|
Fees,
expenses and charges to reserve
|
|
|
(0
|
)
|
|
|
(792
|
)
|
Amounts
due from reserve account
|
|
|
0
|
|
|
|
-
|
|
Amounts
due from factor
|
|
|
0
|
|
|
|
54,040
|
|
|
|
|
|
|
|
|
|
|
Non-factored
Accounts Receivable
|
|
|
268,413
|
|
|
|
97,282
|
|
Total
accounts receivable
|
|
$
|
268,413
|
|
|
$
|
151,322
|
|
Accrued
liabilities are comprised of the following:
|
|
December
31, 2009
|
|
|
March
31, 2009
|
|
|
|
|
|
|
|
|
Accrued
expenses
|
|
$
|
75,951
|
|
|
$
|
82,924
|
|
Reserve
for litigation contingency
|
|
|
-
|
|
|
|
650,000
|
|
Accrued
compensation and payroll taxes
|
|
|
247,863
|
|
|
|
545,626
|
|
Accrued
Interest
|
|
|
-
|
|
|
|
225,330
|
|
Customer
Deposits
|
|
|
126,672
|
|
|
|
-
|
|
Other
|
|
|
52,931
|
|
|
|
23,931
|
|
|
|
|
|
|
|
|
|
|
Total
Accrued liabilities
|
|
$
|
503,417
|
|
|
$
|
1,527,811
|
|
Other
long-term liabilities are comprised of the following:
|
|
December
31, 2009
|
|
|
March
31, 2009
|
|
|
|
|
|
|
|
|
Deferred
rent
|
|
$
|
45,722
|
|
|
$
|
58.031
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
45,722
|
|
|
$
|
58,031
|
|
Earnings
per Share
Basic
earnings (loss) per share is based on the weighted average number of common
shares outstanding.
Diluted
earnings (loss) per share is computed using the weighted average number of
common shares outstanding plus the number of common shares that would be issued
assuming exercise or conversion of all potentially dilutive common stock
equivalents. The Company had approximately 6.6 million and 6.5
million potentially dilutive common stock equivalents (in the form of stock
options and stock purchase warrants) outstanding as of December 31, 2009 and
2008, respectively. These potentially dilutive common stock equivalents have
been excluded from the diluted share calculations for the three months ended
December 31, 2009 and 2008, respectively, as they were anti-dilutive as a result
of the net losses incurred for those periods. Accordingly, basic shares equal
diluted shares for all periods presented.
CISTERA
NETWORKS, INC. & SUBSIDIARY
Notes
to Consolidated Financial Statements
(Unaudited)
Accounts
receivable and concentration of credit risk
The
Company has no significant off-balance sheet concentrations of credit risk such
as foreign exchange contracts, options contracts or other foreign hedging
arrangements.
The
Company is subject to credit risk from accounts receivable with its customers.
The Company’s accounts receivable are due from both governmental and commercial
entities. Credit is extended based on evaluation of the customers’ financial
condition and, generally, collateral is not required. Accounts receivable are
generally due within 30 to 60 days and are stated at amounts due from customers
net of an allowance for doubtful accounts. Accounts outstanding longer than the
contractual payment terms are considered past due.
The
Company assesses potential reserves against its accounts receivable by
considering a number of factors, including the length of time trade accounts
receivable are past due, the Company’s previous loss history, the customers’
current ability to pay their obligations to the Company and economic and
industry conditions. Based on these factors, the Company has
concluded that an allowance for doubtful accounts as of December 31, 2009 and
March 31, 2009 is not required.
As of
December 31, 2009, the Company receives approximately 39% of its gross revenues
from its top three re-sellers. This represents an increase in
concentration of business from the 34% reported for the year ended March 31,
2009.
Reclassifications
Certain
reclassifications have been made in the fiscal year 2009 financial statements to
conform to the fiscal year 2010 presentation.
NOTE
2 - FINANCIAL CONDITION
The
accompanying consolidated financial statements have been prepared in conformity
with US GAAP (except with regard to omission of certain disclosures within
interim financial statements, as permitted by the SEC), which contemplate our
continuation as a going concern and do not include any adjustments relating to
the recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary if we were unable to
continue as a going concern. However, the report of our independent registered
public accounting firm on our consolidated financial statements, as of and for
the year ended March 31, 2009, contains an explanatory paragraph expressing
substantial doubt as to our ability to continue as a going concern. The “going
concern” explanatory paragraph resulted from, among other things, the
substantial losses from operations we have incurred since inception, our
liquidity position and the net loss of $4.6 million for the year ended March 31,
2009, which included non-cash charges of $1.4 million related to amortization of
discounts associated with our sale and issuance of Senior Unsecured Convertible
Promissory Notes in the fiscal years 2007 and 2008 (the “PP2 Notes”) and
negative working capital (current liabilities in excess of current assets) of
$2.48 million as of December 31, 2009. In addition, we had a net loss
of $52,366 for the nine months ended December 31, 2009.
Accordingly,
as of December 31, 2009, the recoverability of a major portion of the recorded
asset amounts is dependent on our continuing operations, which in turn is
dependent on our ability to maintain our current financing arrangements and our
ability to become profitable in our future operations through generating higher
revenues or lowering operating costs, or a combination of the two. These factors
raise substantial doubt about our ability to continue as a going concern. These
consolidated financial statements do not reflect adjustments that would be
necessary if we were unable to continue as a going concern.
CISTERA
NETWORKS, INC. & SUBSIDIARY
Notes
to Consolidated Financial Statements
(Unaudited)
The
Company maintained a factoring facility with Allied Capital Partners, L.P.
(“Allied”) for up to $1,500,000 of the Company’s customer accounts
receivable. The facility allows for an advance rate up to 85.88% and
initial factoring charges are 1.75% of the total accounts receivable
balance. An additional funding agreement became effective in November
of 2008 allowing for the factoring of support renewals at an advance rate of
50.88% and initial factoring charges of 1.75% of the total accounts receivable
balance. Advances made by Allied are collateralized by the Company’s
accounts receivable, chattel paper, general intangibles, supporting obligations,
inventory and proceeds thereof. The term of the current agreement is
for a period of two years with an automatic one-year renewal
thereafter. Advances under the factoring facility at December 31,
2009 were $0 and are netted against total accounts receivable on the
Consolidated Balance Sheet.
On
December 10th 2009, the factoring facility was terminated by mutual agreement.
We believe that the cost of this facility outweighed the benefits to the
Company. In addition, by terminating this facility, we expect to save over
$135,000 annually.
As of
December 30, 2008, we were in default on approximately $148,000 of principal and
accrued interest on certain PP2 Notes (the “December PP2 Notes”). As
of that date, we began to accrue interest on the December PP2 Notes at a default
rate of 18% per annum, which is the maximum allowable rate as stipulated under
the PP2 Note purchase agreement. As of April 5, 2009, we were in
default on approximately $1,100,000 of principal and accrued interest on certain
PP2 Notes (the “April PP2 Notes”). As of that date, we began to
accrue interest on the April PP2 Notes at a default rate of 18% per annum, which
is the maximum allowable rate as stipulated under the PP2 Note purchase
agreement. We will need to renegotiate the payment or conversion of
the principal and interest due on all of the PP2 Notes, or raise additional
capital, or a combination of the two. If we need to raise additional capital it
could be in the form of equity or debt, or a combination of the two. The Company
is currently negotiation restructuring of this debt.
NOTE
3 – DEBT
PP1
Notes and Warrants
The
outstanding principal and accrued interest are convertible into shares of common
stock at a conversion rate equal to the lesser of (a) $1.30 per share, or (b) a
25% discount to the average closing bid price of the Company’s common stock for
the five days including and immediately preceding the interest compounding date,
provided that in no event shall the conversion price per share be less than
$1.00 per share. The PP1 Notes may be converted, in whole or in part,
at the option of the PP1 Note holder on any interest compounding
date. The PP1 Notes converted in December 2005 were converted at
$1.00 per share.
The PP1
Warrants have a term of five years and are exercisable at an exercise price of
$1.30 per share. Subject to an effective registration statement
covering the resale of the shares of common stock issuable upon exercise of the
PP1 Warrants, the Company may, upon thirty days prior written notice, redeem the
PP1 Warrants for $0.10 per share, in whole or in part, if our common stock
closes with a bid price of at least $3.50 for any ten (10) out of fifteen (15)
consecutive trading days.
PP2
Notes and Warrants
The
outstanding principal and accrued interest are convertible into shares of common
stock at a fixed rate of $0.75 per share. The PP2 Notes may be
converted, in whole or in part, at the option of the PP2 Note holder on any
interest compounding date. The Company may prepay the PP2 Notes in
whole or in part, upon thirty days prior written notice to note holders;
provided that partial prepayments may be made only in increments of $10,000 and,
provided further, that the PP2 Note holders may convert the amount of the
proposed prepayment into shares of our common stock at any time.
CISTERA
NETWORKS, INC. & SUBSIDIARY
Notes
to Consolidated Financial Statements
(Unaudited)
The PP2
Warrants have a term of five years and are exercisable at an exercise price of
$1.00 per share. Subject to an effective registration statement
covering the resale of the shares of common stock issuable upon exercise of the
PP2 Warrants, the Company may, upon thirty days prior written notice, redeem the
PP2 Warrants for $0.10 per share, in whole or in part, if our common stock
closes with a bid price of at least $3.50 for any ten (10) out of fifteen (15)
consecutive trading days.
For the
three months ended June 30, 2008, the Company recorded $1,120,997 of
amortization of debt discounts associated with the PP2 Notes.
As of
December 31, 2009, the Company had $976,426 of principal, accrued interest of
$377,437 and accrued liquidated damages of $177,402 outstanding on its PP1 Notes
and PP2 Notes. The PP1 Notes and the PP2 Notes were due in December
2008 and April 2009 (the “April PP2 Notes”), respectively, and are in
default. The Notes bear interest at an annual rate of 18%, compounded
quarterly.
STIIP
Under the
STIIP, which commenced on June 9, 2008, the Company temporarily modified the
terms of its outstanding PP1 Notes, PP2 Notes, PP1 Warrants and PP2 Warrants.
During the period beginning June 9, 2008 through June 24, 2008 (the “Conversion
Period”), the conversion prices of the PP1 Notes and PP2 Notes, which were $1.00
and $0.75 per share, respectively, were reduced to $0.53 per
share. In addition, the exercise prices for the PP1 Warrants and the
PP2 Warrants, which were $1.30 and $1.00 per share, respectively, were reduced
to $0.40 per share. Under the STIIP, certain PP2 Note holders
converted $3,240,290, comprised of $2,470,156 in principal and $770,134 in
accrued interest and liquidated damages into approximately 6.2 million shares of
the Company’s common stock at the reduced conversion price.
Also
under the STIIP, certain PP1 and PP2 Warrant holders exercised approximately 2.3
million PP1 and PP2 Warrants at an exercise price of $0.40 per
share. All PP1 and PP2 Warrant holders who exercised their warrants
also received three additional warrants (the “Bonus Warrants”) for every ten
warrants exercised. The Bonus Warrants were exercisable during the
Conversion Period at an exercise price of $0.30 per share, and if not exercised
on or before such date, the exercise price for such Bonus Warrants was increased
to $0.60 per share. A total of 507,675 Bonus Warrants were exercised at
$0.30 per share. The bonus warrants were valued using the Black-Scholes
option pricing model (“Black-Scholes model”) and a charge and a corresponding
credit to additional paid-in capital were recorded for the June 30, 2008 and
September 30, 2008 quarters in the amounts of $36,125 and $131,631,
respectively. The bonus warrants expire on April 6,
2012. The total cash proceeds received from the exercises of the PP1,
PP2 and Bonus Warrants was approximately $844,000.
The
Company accounted for the reduction in the conversion prices of the PP2 Notes
under the STIIP in accordance with FASB Statement No. 84, “Induced Conversions
of Convertible Debt an amendment of APB Opinion No. 26” (“SFAS
84”). Accordingly, the Company calculated and recorded an inducement
charge and a corresponding credit to additional paid-in capital in the June 30,
2008 quarter in the amount of $931,893 for the fair value of common stock issued
based on the reduced price in excess of the fair value of the common stock
issuable pursuant to the original conversion price.
The
Company accounted for the reduction in the exercise price of the PP1 and PP2
Warrants exercised under the STIIP in accordance with the guidance in SFAS
123(R), “Share-based payment” (“SFAS 123R”) and FASB Staff Position No. FSP FAS
123(R)-6, “Technical Corrections of FASB Statement No. 123(R)” for a
modification due to a short-term inducement. Accordingly, the Company
recorded a charge and a corresponding credit to additional paid-in capital in
the June 30, 2008 quarter in the amount of $202,743 for the difference between
the fair value of the PP1 and PP2 Warrants immediately before and after the
modification multiplied by the number of PP1 and PP2 Warrants that were
exercised during the Conversion Period of the STIIP. The fair value
of the PP1 and PP2 Warrants were calculated using the Black-Scholes model. The
total non-cash charge recorded for the inducement on the PP2 Notes and the
reduction in exercise price on the PP1 and PP2 Warrants was
$1,134,216.
CISTERA
NETWORKS, INC. & SUBSIDIARY
Notes
to Consolidated Financial Statements
(Unaudited)
The
Company’s total debt as of December 31, 2009, all of which is current, is as
follows:
|
|
|
|
PP1
and PP2 Notes:
|
|
|
|
Principal
|
|
$
|
976,426
|
|
Accrued
interest
|
|
|
377,437
|
|
Accrued
estimated liquidated damages
|
|
|
177,402
|
|
Total
|
|
$
|
1,531,265
|
|
Registration
Payment Arrangements
Effective
April 1, 2007, the Company adopted FASB Staff Position No. EITF 00-19-2
“Accounting for Registration Payment Arrangements” (“FSP EITF 00-19-2”), which
was applicable to the accounting for the liquidated damages on the PP2
Notes. Upon adoption, the Company recorded a cumulative effect of an
accounting change entry (i.e., a charge to the beginning balance of the
accumulated deficit) as of April 1, 2007 for the combination of: 1)
the reclassification of the Warrants from derivative liabilities to equity
securities (based on the criteria as outlined under EITF 00-19 “Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company’s Own Stock” (“EITF 00-19”)), and 2) a contingent liability for probable
future payment of liquidated damages (based on the Company’s best estimate as of
the date of adoption, which was through March 31, 2008). The amount
of the contingent liability recorded was approximately $289,000. The
difference between the Warrants as measured on the date of adoption of FSP EITF
00-19 and their original recorded value was approximately $466,000, and, as
stated above, was included in the charge to the beginning balance of the
accumulated deficit. The total cumulative effect of this accounting
change was $755,000.
On April
5, 2007, the Company closed the balance of its PP2 offering and, in accordance
with FSP EITF 00-19-2, recorded a contingent liability and related charge to the
consolidated Statement of Operations for estimated liquidated damages related to
this funding through March 31, 2008. The amount recorded was
$251,176.
As of
March 31, 2008, the Company estimated and accrued $671,342 related to liquidated
damages related to the PP2 Notes and concluded that this amount was the maximum
pay-out required. Under the STIIP, certain PP2 Note holders,
comprising approximately 70% of the original principal of PP2 Notes, converted
their outstanding PP2 Notes at a reduced price of $0.53. On June 30,
2008, the Company executed an agreement with the institutional investor in the
PP2 offering that had the contractual right to liquidated damages. In
exchange for the waiver from the investor, the Company issued to the investor
58,777 shares of its common stock. The agreement terminated any assessment of
liquidated damages beyond June 24, 2008. For the three months ended June 30,
2008, the Company recorded a charge and credit to additional paid-in capital for
the fair value of these shares issued in the amount of $22,041.
The table
below summarizes the cumulative effect entry recorded as of April 1, 2007 for
the adoption of FSP EITF 00-19-2:
Accumulated
deficit, April 1, 2007
|
|
$
|
(10,586,847
|
)
|
|
|
|
|
|
Adjustments
for the cumulative effect of the change in accounting
principle:
|
|
|
|
|
Contingent
liability recorded for estimated liquidated damages
|
|
|
(289,518
|
)
|
Reclassification
of Warrants from derivative liabilities to equity
securities
|
|
|
(465,597
|
)
|
Total
adjustments
|
|
|
(755,115
|
)
|
|
|
|
|
|
Accumulated
deficit, April 1, 2007, as adjusted
|
|
$
|
(11,341,962
|
)
|
CISTERA
NETWORKS, INC. & SUBSIDIARY
Notes
to Consolidated Financial Statements
(Unaudited)
NOTE
4 – COMMITMENTS AND CONTINGENCIES
The
Company and certain of its current and former officers and directors are
defendants in litigation pending in Dallas, Texas, styled KINGDON R. HUGHES VS.
GREGORY T. ROYAL, CYNTHIA A. GARR, JAMES T. MILLER, JR., CHARLES STIDHAM, CNH
HOLDINGS COMPANY D/B/A CISTERA NETWORKS AND XBRIDGE SOFTWARE, INC.; Cause No.
DV05-0600-G; G-134th District Court, Dallas County, Texas. The
plaintiff has alleged a number of complaints against the defendants, including
breach of fiduciary duty, misappropriation of corporate opportunities, fraud,
fraudulent inducement, breach of contract, tortuous interference with contract,
fraudulent transfer, and shareholder oppression arising in connection with the
license agreement between the Company and XBridge in May 2003 and the
acquisition of XBridge by the Company in May 2005. The parties held a
mediation conference in April 2006 and have come to an understanding with
respect to the principal elements of a potential settlement. The Company is
currently in the process of negotiating definitive settlement agreements. In
accordance with SFAS No. 5, “Accounting for Contingencies” (“SFAS 5”), we
recorded a contingent liability in the amount of $650,000 as of March 31, 2008
related to the outstanding litigation. As of December 31, 2008, the
Company believes that this amount represents the best estimate of a potential
settlement.
NOTE
5 - RELATED PARTY TRANSACTIONS
On
December 4, 2008, an employee advanced the Company $25,000 for the period
through December 31, 2008. In consideration for this advance, the
Company issued to the employee 25,000 common stock purchase warrants that were
immediately exercisable at $0.40 per share and have a five-year
life. The Company calculated the fair value of the warrants using the
Black-Scholes model and recorded a charge in the amount $4,100 for the December
2008 quarter. As of June 30, 2009, the entire obligation has been
repaid.
On the
1
st
December 2009, the Company entered into a professional services agreement with
Blue Kiwi Group Ltd. This agreement provides for the services of Mr Royal to act
as Company Board Member and CEO of the Company. The consideration is $150,000
per annum for a period of two years. The agreement is attached as exhibit
33.1.
CISTERA
NETWORKS, INC. & SUBSIDIARY
Notes
to Consolidated Financial Statements
(Unaudited)
NOTE
6 – SUBSEQUENT EVENTS
Reverse/Forward
Split
On the
25
th
June
2009, the Company filed a an Information Statement to inform the stockholders of
(i) the approval on June 9, 2009 of resolutions by the Board of Directors
proposing amendments to the Articles of Incorporation to effect a 3 for 1
reverse stock split of our common stock followed immediately by a 3 for 1
forward stock split of the common stock (the "Reverse/Forward Stock Split"), and
(ii) receipt of written consents dated June 9, 2009, approving such amendment by
stockholders holding 65.6% of the voting power of all of our stockholders
entitled to vote on the matter as of June 9, 2009. As a result of the
Reverse/Forward Stock Split, stockholders owning fewer than 3 shares of our
common stock will be cashed out at a price of $.14 per share, and the holdings
of all other stockholders will remain unchanged.
When the
Reverse/Forward Stock Split becomes effective, the Company will have fewer than
300 stockholders of record, and will be eligible to cease filing periodic
reports with the Commission, and the Company intends to cease public
registration and terminate the listing of our Common Stock on the OTC Bulletin
Board. Once the Company ceases public registration and terminates the listing of
our Common Stock, the Company will not be required to provide our Stockholders
with periodic or other reports regarding the Company, although they intend to
continue to provide similar information through the Pink Sheets News
Service.
The
Company estimates the cost of the Reverse/Forward Stock Split, to be
approximately $25,800. However, if on the date immediately preceding
the effective date of the Reverse/Forward Stock Split, they believe that the
cash required to pay for the Reverse/Forward Stock Split exceeds the reasonable
estimate of the amount of cash necessary to consummate the Reverse/Forward
Split, they reserve the right not to effect the Reverse/Forward Stock
Split.
The
Reverse/Forward Stock Split has been submitted to the Securities and Exchange
Commission for proposal and comment. If the Reverse/Forward Stock
Split is approved by the SEC, the transaction will become complete 20 days after
the shareholders have been notified by letter. Currently, Cistera
Networks, Inc. has 17,423,410 shares outstanding. If the transaction
is approved and completed, 477 shares will be repurchased at $0.14 per share or
$66.78, leaving 17,422,933 shares outstanding.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations
FORWARD-LOOKING
STATEMENTS
This
report contains “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. In many but not all cases you can
identify forward-looking statements by words such as “anticipate,”
“believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,”
“should,” “will” and “would” or the negative of these terms or other similar
expressions. These forward-looking statements include statements regarding
our expectations, beliefs, or intentions about the future, and are based on
information available to us at this time. We assume no obligation to update any
of these statements and specifically decline any obligation to update or correct
any forward-looking statements to reflect events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or unanticipated
events. Actual events and results could differ materially from our expectations
as a result of many factors, including those identified in this report. We urge
you to review and consider those factors, and those identified from time to time
in our reports and filings with the SEC, for information about risks and
uncertainties that may affect our future results. All forward-looking statements
we make after the date of this filing are also qualified by this cautionary
statement and identified risks. Additional risk factors are discussed in our
Annual Report on Form 10-K for the fiscal year ended March 31, 2009 and our
other reports filed with the SEC, to which reference should be
made.
EXECUTIVE SUMMARY AND RECENT
BUSINESS DEVELOPMENTS
For the
third quarter ending 31st December 2009, we saw a 46.5% decrease in revenues as
compared to the same quarter in the prior year. We experienced a drop
in revenue on a sequential quarter basis as a result of the deteriorating global
economic situation. High margin recurring revenue from support and
maintenance continues to become a more significant piece of our revenues as our
installed base grows. Despite the economic slowdown, our pipeline of
opportunities continues to increase in both number of opportunities and project
size.
Cistera
Networks is approximately half-way through a restructuring plan designed to make
the company sustain-ably profitable and dominate in the strongest key markets we
operate in. We believe that our products are ideally suited to Federal, State
and Local Government applications, Healthcare and Public Safety and continue to
make strong headway in these markets. We believe that this focus will continue
the trending of our product mix toward the higher value in key markets as well
as a strong emphasis on maintenance revenue will allow us to maintain strong
profitability into the future.
In
December 2009 Cistera Networks incorporated a wholly owned subsidiary Cistera
Federal Systems Inc. As has been previously discussed, Cistera is increasing
it’s presence in the federal government market. This market offers significant
opportunities for Cistera products and the company has made significant progress
in developing this market. Cistera Federal Systems Inc was incorporated to
further develop this market as well as hold the necessary procurement contracts
and compliance requirements for the federal government.
Cistera
Networks has also believes that there are significant opportunities in the
public safety market dominated by Federal, State and Local government customers,
particularly Land Mobile Radio P.25 markets. In December 2009 Cistera Networks
Inc incorporated a wholly owned subsidiary Telmarine Communications Inc to
specifically focus on the development the market for Unified Communications for
Land Mobile Radio. Telmarine is currently pursuing technology agreements and
relationships with third parties to grow the product offering for the public
safety markets.
In light
of the significant downturn in the U.S. economy, we are carefully monitoring our
sales pipeline and have refocused our solutions selling efforts onto our top
reseller relationships. Further, beginning January 1, 2009, we
instituted additional operating expense reductions, including salary reductions
for the management team, employee terminations and marketing program
elimination. We are seeing market segments, such as government and healthcare
are more resilient to the current economic conditions, primarily due to
continued demand for event alerting and notification solutions for public safety
infrastructure. With the demographics of an aging population, healthcare is also
an industry that is continuing to grow. Because there are fewer
employees to operate facilities, the efficiencies and increased productivity our
products provide can measurably enhance business operations.
On the
14
th
May
2009, the company announced the release of version 1.9 of the Cistera
Convergence Server. Cistera ConvergenceServer Version1.9 is the result of over
five years of work on enterprise application platforms for Unified
Communications and is the most advanced solution set available
today.
On the
10
th
June
2009, the company announced the the addition of the
Zone
Speak
™ IP Speaker to its
successful Event Alerting and Notification Solution Set.
On the
16
th
September 2009, the company announced the release of the latest
version of its award-winning platform, the Cistera ConvergenceServer (CCS)
Version 1.9 has successfully completed Interoperability Verification Testing
(IVT) for Cisco Unified Communications Manager (CUCM 7.1).
On the
29
th
October 2009, the company announced the release of the newest configuration of
its award-winning platform, the Cistera ConvergenceServer 9500 (CCS 9500)
specifically tailored for large-scale applications.
RESULTS
OF OPERATIONS
Selected
Consolidated Statements of Operations Data
The
following tables present consolidated statements of operations data for the
three and nine months ended December 31, 2009 and 2008 based on the percentage
of revenue for each line item, as well as the dollar and percentage change of
each of the items.
Results
of Operations for the Three Months Ended December 31, 2009
Compared
to the Three Months Ended December 31, 2008
|
For
the three months ended December 31,
|
|
2009
|
%
of revenue
|
2008
|
%
of revenue
|
|
|
|
|
|
Revenues:
|
|
|
|
|
Convergence
solutions
|
$229,725
|
40%
|
$ 712,340
|
67%
|
Professional
services
|
31,932
|
6%
|
98,514
|
9%
|
Support
and maintenance
|
311,787
|
54%
|
261,633
|
24%
|
Total
revenues
|
573,444
|
100%
|
1,072,487
|
100%
|
|
|
|
|
|
Cost
of revenues:
|
|
|
|
|
Convergence
solutions
|
50,608
|
9%
|
254,675
|
24%
|
Professional
services
|
7,035
|
1%
|
55,680
|
5%
|
Support
and maintenance
|
68,685
|
12%
|
24,250
|
2%
|
Total
cost of revenues
|
126,328
|
22%
|
334,605
|
31%
|
|
|
|
|
|
Gross
Profit
|
447,116
|
78%
|
737,882
|
69%
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
Sales
and marketing
|
5
|
0%
|
319,758
|
30%
|
Software
development
|
88,736
|
15%
|
188,956
|
18%
|
Engineering
and support
|
104,600
|
18%
|
172,923
|
16%
|
General
and administrative
|
144,981
|
25%
|
338,210
|
31%
|
Depreciation
and amortization
|
24,128
|
4%
|
103,538
|
10%
|
Total
operating expenses
|
362,450
|
63%
|
1,123,385
|
105%
|
|
|
|
|
|
Loss
from operations
|
84,665
|
15%
|
(385,503)
|
(36%)
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
Interest
income
|
7
|
-%
|
158
|
-
|
Interest
expense
|
(46,541)
|
0%
|
(43,124)
|
(4%)
|
Amortization
of discount on convertible notes
|
|
(8%)
|
(108,918)
|
(10%)
|
Charge
for inducements related to stock
issued
to convertible note holders
|
|
0%
|
-
|
-
|
Total
other income (expense)
|
(46,534)
|
(8%)
|
(151,884)
|
(14%)
|
|
|
|
|
|
Net
loss
|
$38,130
|
(7%)
|
$ (537,387)
|
(50%)
|
|
|
|
|
|
Revenue
Revenue
for the quarter ended December 31, 2009 decreased $499,043 or approximately 46%
from the comparable prior year quarter primarily due to the current U.S Economic
downturn and the lack of capital spending.
Gross Profit and Gross
Margin
Gross
profit for the quarter ended December 31, 2009 decreased $290,766 or
approximately 40% from the comparable prior year quarter primarily due to
decreased revenue. Gross margin did, however, increased in the
December 2009 quarter as compared to the December 2008 quarter to 78% from
69%. This increase was primarily due to increases in the higher
margin revenue categories of convergence solutions and support and maintenance,
offset by lower margins on professional services as a result of the timing of
completion of certain project service engagements.
Operating
Expenses
Operating
expenses, excluding depreciation and amortization decreased from $1,123,385 in
the December 2008 quarter to $362,450 in the December 2009 quarter, a decrease
of $760,935 or approximately 67%. The decrease was a direct
reduction due to the decrease in headcount from the previous year and continued
controls over expenses.
Interest
Expense
Interest
expense for the December 2009 quarter increased $3,417 from the December 2008
quarter primarily due to the increase in accrued interest on the PP2 Notes due
to the decrease in the PP2 Notes as a result of the conversions under the STIIP
in June 2008. Offsetting the overall interest expense decrease was an
increase in interest on our accounts receivable factoring facility as a result
of higher factorings in the December 2009 quarter as compared to the December
2008 quarter.
Results
of Operations for the Nine Months Ended December 31, 2009
Compared
to the Nine Months Ended December 31, 2008
|
For
the nine months ended December 31,
|
|
2009
|
%
of revenue
|
2008
|
%
of revenue
|
|
|
|
|
|
Revenues:
|
|
|
|
|
Convergence
solutions
|
$798,206
|
45%
|
$ 2,247,809
|
71%
|
Professional
services
|
166,518
|
9%
|
204,347
|
7%
|
Support
and maintenance
|
817,595
|
46%
|
709,394
|
22%
|
Total
revenues
|
1,782,319
|
100%
|
3,161,500
|
100%
|
|
|
|
|
|
Cost
of revenues:
|
|
|
|
|
Convergence
solutions
|
276,987
|
16%
|
664,417
|
21%
|
Professional
services
|
111,380
|
6%
|
148,680
|
5%
|
Support
and maintenance
|
108,931
|
6%
|
71,684
|
2%
|
Total
cost of revenues
|
497,298
|
28%
|
884,781
|
28%
|
|
|
|
|
|
Gross
Profit
|
1,285,021
|
72%
|
2,276,769
|
72%
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
Sales
and marketing
|
113,226
|
6%
|
900,230
|
28%
|
Software
development
|
224,971
|
13%
|
612,289
|
19%
|
Engineering
and support
|
245,505
|
14%
|
579,323
|
18%
|
General
and administrative
|
489,229
|
27%
|
1,098,827
|
35%
|
Depreciation
and amortization
|
77,541
|
4%
|
302,368
|
10%
|
Total
operating expenses
|
1,150,472
|
64%
|
3,493,037
|
110%
|
|
|
|
|
|
Gain
(Loss) from operations
|
134,549
|
8%
|
(1,216,268)
|
(38%)
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
Interest
income
|
70
|
|
326
|
-
|
Other
income
|
|
|
-
|
|
Charge
for inducements related to stock Issued to convertible note
holders
|
|
|
(1,324,444)
|
(42%)
|
Amortization
of discount on convertible Notes
|
|
|
(1,338,833)
|
(57%)
|
Abandonment
loss
|
(15,815)
|
|
|
|
Interest
expense
|
(171,170)
|
(10%)
|
(190,933)
|
(6%)
|
Credit
(charge) for estimated liquidated
Damages
|
|
|
11,299
|
-
|
Total
other income (expense)
|
(186,915)
|
0%
|
(2,842,585)
|
(90%)
|
Net
Gain (Loss)
|
(52,366)
|
(3%)
|
(4,058,853)
|
(128%)
|
Revenue
Revenue
for the nine months ended December 31, 2009 decreased $1,379,231 or
approximately 44% from the comparable prior year nine months primarily due to
the deteriorating global economic environment. Revenue from
professional services decreased 18.5% from the prior year quarter primarily due
the reduction in overall revenues.
Gross
Profit and Gross Margin
Gross
profit for the nine months ended December 31, 2009 decreased $991,748 or
approximately 43% from the comparable prior year quarter primarily due to
decreased revenue. Gross margin was stable in the nine months ending
December 2009 as compared to the December 2008 nine months maintaining
72%.
Operating
Expenses
Operating
expenses, excluding depreciation and amortization, decreased from $3,493,037 in
the December 2008 nine months to $1,150,472 in the nine-month
ending December 2009, a decrease of $2,342,565 or approximately
67%. The decrease
was primarily attributable
to: 1) a decrease in overall headcount; 2) an increase in and rent
and facilities expense; 3) a decrease in sales and marketing tradeshow expenses;
4) a decrease in professional fees.
Interest
Expense
Interest
expense for the nine months ending December 2009 quarter decreased $19,763 from
the nine months ended December 2008 quarter primarily due to the decrease in
accrued interest on the PP2 Notes due to the decrease in the PP2 Notes as a
result of the conversions under our “Short Term Investment Incentive Plan” (the
“STIIP”). Offsetting the overall interest expense decrease was an
increase in the interest rate on the PP1 and PP2 Notes due to a default on the
notes.
Amortization
of Debt Discount
The
amortization of debt discount on our PP2 Notes in the six months ending December
2009 quarter decreased $1,338,833 from the December 2008 quarter primarily as a
result of the amortization of the debt discount was completed recorded at March
31, 2009. As required under GAAP, all unamortized debt discount
outstanding at the date of the conversion was expensed. See further
discussion of the STIIP under “Liquidity” under this Item.
Charge
for Inducements Related to Stock Issued to Convertible Note Holders
As part
of the STIIP, we lowered the conversion price of our PP2 Notes and the exercise
price of both our PP1 and PP2 Warrants. As required under US GAAP, we
recorded non-cash charges for the June 2008 quarter in the amounts of $1,192,813
related to these inducements. See further discussion of the STIIP
under “Liquidity and Capital Resources.”
Liquidated
Damages
The
decrease in the charge for liquidated damages from the three months ended
December 2009 was primarily the result of the settlement of future liquidated
damages as of June 24, 2008. As of June 30, 2008, we recorded an
adjustment to the amount of accrued liquidated damages for PP2 Note holders who
did not convert their notes in the STIIP. As part of an agreement
dated June 30, 2008 with the investor in the PP2 offering that had the
contractual right to liquidated damages, we issued to the investor 58,777 shares
of our common stock in exchange for a waiver on future liquidated damages after
June 24, 2008. The agreement terminated any assessment of liquidated damages
beyond June 24, 2008.
Liquidity
and Capital Resources
The
unaudited consolidated financial statements contained in this report have been
prepared in conformity with US GAAP (except with regard to omission of certain
disclosures within interim financial statements, as permitted by the SEC), which
contemplate our continuation as a going concern and do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or amounts and classification of liabilities that might be necessary if
we were unable to continue as a going concern. However, the report of our
independent registered public accounting firm on our consolidated financial
statements, as of and for the year ended March 31, 2009, contains an explanatory
paragraph expressing substantial doubt as to our ability to continue as a going
concern. The “going concern” explanatory paragraph resulted from, among other
things, the substantial losses from operations we have incurred since inception,
our liquidity position and net loss of $4.6 million for the year ended March 31,
2009, which included non-cash charges of $1.4 million related to amortization of
discounts associated with our PP2 Notes and negative working capital (current
liabilities in excess of current assets) of $3.0 million as of March 31,
2009. In addition, we had a net loss of $75,435 for the nine months
ended December 31, 2009. Also, as of December 31, 2009, we have
negative working capital (current liabilities in excess of current assets) of
$2.51 million.
Accordingly,
as of December 31, 2009, the recoverability of a major portion of the recorded
asset amounts is dependent on our continuing operations, which in turn is
dependent on our ability to maintain our current financing arrangements and our
ability to become profitable in our future operations through generating higher
revenues or lowering operating costs, or a combination of the two. These factors
raise substantial doubt about our ability to continue as a going concern. These
consolidated financial statements do not reflect adjustments that would be
necessary if we were unable to continue as a going concern.
Our
primary source of working capital liquidity was a factoring facility we have
with Allied Capital Partners, L.P. (“Allied”), which allows for cash advances of
up to $1,500,000 on our customer accounts receivable, subject to the approval of
Allied of the customer and the type of product or service that is
invoiced. The facility allows for an advance rate up to 85.88% and
initial factoring charges are 1.75% of the total accounts receivable
balance. An additional funding agreement became effective in November
of 2008 allowing for the factoring of support renewals at an advance rate of
50.88% and initial factoring charges of 1.75% of the total accounts receivable
balance. Advances made by Allied are collateralized by our accounts
receivable, chattel paper, general intangibles, supporting obligations,
inventory and proceeds thereof.
On
December 10th 2009, both parties mutually agreed to terminate the factoring
facility. The company believes that the cost of this facility outweighed the
benefits to the company. The company expects to save over $135,000 annually from
the termination of this facility.
As of
December 30, 2008, we were in default on approximately $148,000 of principal and
accrued interest on certain PP2 Notes (the “December PP2 Notes”). As
of that date, we began to accrue interest on the December PP2 Notes at a default
rate of 18% per annum, which is the maximum allowable rate as stipulated under
the PP2 Note purchase agreement. We will need to renegotiate the
payment or conversion of the principal and interest due on all of the PP2 Notes,
of which approximately $1.1 million is due in April 2009, or raise additional
capital, or a combination of the two. If we need to raise additional capital it
could be in the form of equity or debt, or a combination of the two. The capital
markets are extremely challenging at this time and there can be no assurance
that we will be successful in raising additional funds and, if so, on favorable
terms or that the cost savings or required new capital will be
sufficient. We are also actively exploring other strategic
alternatives.
As of
April 5, 2009, we were in default on approximately $1,100,000 of principal and
accrued interest on certain PP2 Notes (the “April PP2 Notes”). As of
that date, we began to accrue interest on the April PP2 Notes at a default rate
of 18% per annum, which is the maximum allowable rate as stipulated under the
PP2 Note purchase agreement. We will need to renegotiate the payment
or conversion of the principal and interest due on all of the PP2 Notes or raise
additional capital, or a combination of the two. If we need to raise additional
capital it could be in the form of equity or debt, or a combination of the two.
The capital markets are extremely challenging at this time and there can be no
assurance that we will be successful in raising additional funds and, if so, on
favorable terms or that the cost savings or required new capital will be
sufficient. We are also actively exploring other strategic
alternatives.
Cash
and Cash Flows
Our cash
and cash equivalents at December 31, 2009 were $15,124. For the nine months
ended December 31, 2009, net cash provided by operations was
$22,017. The primary use of cash was the loss from operations
incurred for the period of $74,435 adjusted for non-cash charges of $96,505 for
depreciation and amortization, abandonment loss and gain from disposition of
assets.
Contractual
Obligations
Our
current material contractual obligations are our current and former corporate
office leases and the principal, accrued interest and accrued liquidated damages
under our PP1 and PP2 Notes. In December 2008, we executed a sublease
for our former corporate office facility at approximately $4,100 per month for
the remaining lease term, which is through November 2009. On May 29,
2009 the property manager informed us that our sub-lessee had vacated the
premises. The Company has successfully negotiated a termination of
the former corporate office lease in Dominion Plaza.
Critical
Accounting Policies
We
prepare our financial statements in accordance with US GAAP. The accounting
policies most fundamental to understanding our financial statements are those
relating to recognition of revenue, our use of estimates and the accounting for
convertible debt and warrants. For a detailed discussion on the application of
these accounting policies, see Note 2 to our audited consolidated financial
statements contained in our 2009 10-K.
Research
and Development – Software Development
Research
and development expenditures are generally expensed as incurred. SFAS No. 86,
“Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed”, requires capitalization of certain software development costs
subsequent to the establishment of technological feasibility. Based on the
Company’s product development process, technological feasibility is established
upon completion of a working model. Costs incurred by the Company between
completion of the working model and the point at which the product is ready for
general release have been insignificant. Thereafter, all software production
costs shall be capitalized and subsequently reported at the lower of unamortized
cost or net realizable value. Capitalized costs are amortized based on current
and future revenue for each product with an annual minimum equal to the
straight-line amortization over the remaining estimated economic life of the
product. Our software development costs capitalized as of the 31
st
of
December are $1,170,144 and for the nine months ending December 31,2009 are
$203,832.
Recently
Issued Accounting Pronouncements
We
discuss the potential impact of recent accounting pronouncements in Note 1 to
the unaudited consolidated financial statements contained in this
report.
Item
3. Quantitative and Qualitative Disclosures About Market Risk
As a
smaller reporting company, we are not required to provide this
information.
Item
4(T). Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
Disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under
the Exchange Act) are designed to ensure that information required to be
disclosed in reports filed or submitted under the Exchange Act is recorded,
processed, summarized, and reported within the time periods specified in SEC
rules and forms and that such information is accumulated and communicated to
management, including our Chief Executive Officer, who is also currently our
interim Chief Financial Officer (the “Certifying Officer”), to allow timely
decisions regarding required disclosures.
As of
December 31, 2009, we carried out an analysis, under the supervision and with
the participation of our management, including our Certifying Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures. As a result of this analysis, our Certifying Officer concluded that
our disclosure controls and procedures and internal controls over financial
reporting continued to be not effective and identified remediation measures to
be implemented.
We
estimate that the Certifying Officer, along with the Company’s other management
personnel, will need to complete remediation measures that may include engaging
an independent consulting firm to further evaluate, remediate, implement,
document and test the internal controls in these key areas:
1.
|
Financial
Reporting, including technical accounting surrounding complex accounting
transactions
|
2.
|
Order
Entry Accounting & Reporting
|
3.
|
Debt/Equity
Accounting & Compliance
|
4.
|
Cash
& Other Working Capital
Management
|
5.
|
Compensation
Accounting & Administration
|
6.
|
Other
Assets & Liability Account
Management
|
We will
also monitor our disclosure controls and procedures on a continuing basis to
ensure that information required to be disclosed in the reports we file or
submit under the Exchange Act is accumulated and communicated to our management,
including its principal executive and principal financial officers, as
appropriate, to allow timely decisions regarding required disclosure. In the
future as such controls change in relation to developments in the our business
and financial reporting requirements, our evaluation and monitoring measures
will also address any additional corrective actions that may be
required.
Inherent
Limitations of Internal Controls
Our
management does not expect that our disclosure control procedures or our
internal controls over financial reporting will prevent all errors and fraud. A
control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, have been detected.
PART
II - OTHER INFORMATION
Item
1. Legal Proceedings
The
Company and certain of its current and former officers and directors are
defendants in litigation pending in Dallas, Texas, styled KINGDON R. HUGHES VS.
GREGORY T. ROYAL, CYNTHIA A. GARR, JAMES T. MILLER, JR., CHARLES STIDHAM, CNH
HOLDINGS COMPANY D/B/A CISTERA NETWORKS AND XBRIDGE SOFTWARE, INC.; Cause No.
DV05-0600-G; G-134th District Court, Dallas County, Texas. The
plaintiff has alleged a number of complaints against the defendants, including
breach of fiduciary duty, misappropriation of corporate opportunities, fraud,
fraudulent inducement, breach of contract, tortuous interference with contract,
fraudulent transfer, and shareholder oppression arising in connection with the
license agreement between the Company and XBridge in May 2003 and the
acquisition of XBridge by the Company in May 2005. The parties held a
mediation conference in April 2006 and have come to an understanding with
respect to the principal elements of a potential settlement. The Company is
currently in the process of negotiating definitive settlement agreements. In
accordance with SFAS No. 5, “Accounting for Contingencies” (“SFAS 5”), we
recorded a contingent liability in the amount of $650,000 as of March 31, 2008
related to the outstanding litigation. As of December 31, 2008, the
Company believes that this amount represents the best estimate of a potential
settlement.
Item
1A. Risk Factors
We may need to raise additional
capital to fund our operation
s
.
Our
ability to continue as a going concern is in doubt and we may not be successful
in generating revenue and gross profit at levels sufficient to cover our
operating costs and cash investment requirements.
We
purchase over half of our products from one supplier—Equus Computer Systems.
(“Equus”). Equus provides us with open trade credit on 30 day terms
based on a pre-established credit limit and, historically, has provided
additional credit to support larger purchase order demands on a “one-off
basis.” We purchase most of our other products from our other
suppliers on open trade credit terms with set dollar limits. If Equus
or our other significant suppliers were to cease to sell to us on trade credit
terms, or were to substantially lower the credit limits they have set, we would
need to accelerate our payments to those vendors, creating additional demands on
our cash resources, or we would need to find other sources for those
goods.
We
will need to renegotiate or extend the currently outstanding PP2 Notes and
related interest.
As of
December 30, 2008, we were in default on approximately $148,000 of principal and
accrued interest on certain PP2 Notes. In addition, as of April 5,
2009, we were in default of approximately $1,100,000 of principal and accrued
interest on certain PP2 Notes. Currently, we are accruing interest on
these PP2 Notes at a default rate of 18% per annum, which is the maximum
allowable rate as stipulated under the PP2 Note purchase
agreement. If we need to raise additional capital it could be in the
form of equity or debt, or a combination of the two. There can be no assurance
that we will be successful in raising additional funds and, if so, on favorable
terms or that the cost savings or required new capital will be
sufficient.
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
None
Item
3. Defaults Upon Senior Securities
As of
December 30, 2008, we were in default on approximately $148,000 of principal and
accrued interest on certain PP2 Notes (the “December PP2 Notes”). As
of this date, we began to accrue interest on the December PP2 Notes at a default
rate of 18% per annum, which is the maximum allowable rate as stipulated under
the PP2 Note purchase agreement. In addition, as of April 5, 2009, we
were in default on approximately $1,100,000 of principal and accrued interest on
certain PP2 Notes. As of this date, we began to accrue interest on
the April PP2 Notes at a default rate of 18% per annum. We will
likely need to renegotiate the payment or conversion of the principal and
interest due on all of the PP2 Notes, or raise additional capital, or a
combination of the two. If we need to raise additional capital it could be in
the form of equity or debt, or a combination of the two. There can be no
assurance that we will be successful in raising additional funds and, if so, on
favorable terms or that the cost savings or required new capital will be
sufficient.
Item
4. Submission of Matters to a Vote of Security Holders
None.
Item
5. Other Information
None.
Item
6. Exhibits
31.1 Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
33.1 Professional
Services Agreement between Cistera Networks Inc and Blue Kiwi Group
Ltd.
99.1 Press
release dated XXXXX
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
CISTERA
NETWORKS, INC.
Date:
July 15, 2010
|
/s/ Gregory T.
Royal
|
|
Gregory
T. Royal
|
|
Chief
Executive Officer and interim
|
|
Chief
Financial Officer
|
|
|
|
(Principal
Executive, Financial and
|
|
Accounting
Officer)
|
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