UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period ended June 30, 2009
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0-25594
California 77-0190772
---------- ----------
(State or other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
|
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 past 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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definitions of "large accelerated filer", "accelerated filer," and "smaller" reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer? [ ] Non-accelerated filer [ ] (Do not check if a smaller reporting company) 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 [ ] No [ X ]
There were 9,927,329 shares of the registrant's common stock, no par value, outstanding as of June 30, 2009.
PROTOSOURCE CORPORATION
INDEX
Part I - Financial Information (unaudited):
Item 1. Condensed consolidated balance sheet as of June 30, 2009 (unaudited) and December 31, 2008 3
Condensed consolidated statement of operations for the six-month and three-month periods ended June 30, 2009 and
2008 (unaudited) 4 Condensed consolidated statement of stockholders' deficiency for the six-month period ended June 30, 2009 (unaudited) 5 Condensed consolidated statement of cash flows for the six-month periods ended June 30, 2009 and 2008 (unaudited) 6 & 7 |
Notes to condensed consolidated financial statements (unaudited) 8 to 14
Item 2. Management's discussion and analysis of
financial condition
and results of operations 15 to 19
Item 3. Quantitative and qualitative disclosures
about market risk 20
Item 4T. Controls and procedures 20
Part II - Other Information
Other Information 21
Signature and certifications 22
When used in this report, the words "estimate," "project," "intend," "believe" and "expect" and similar expressions are intended to identify forward-looking statements. Such statements are subject to risk and uncertainties that could cause actual results to differ materially, including competitive pressures and new product or service introductions by the Company and its competitors. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly release updates or revisions to these statements.
PROTOSOURCE CORPORATION
========================
CONDENSED CONSOLIDATED BALANCE SHEET
-------------------------------------------------------------------------------------------------------------
June 30, 2009 December 31,
(unaudited) 2008
------------ ------------
ASSETS
Current assets:
Cash $ 89,737 $ 12,826
Accounts receivable, net of allowance of $80,000 322,428 380,040
Advances to employees 85 765
Prepaid expenses 3,164 --
Advances to officers, net of obligations to officers 157,036 95,167
------------ ------------
Total current assets 572,450 488,798
------------ ------------
Property and equipment, at cost, net of
accumulated depreciation and amortization of
$681,864 and $655,383, respectively 52,286 78,767
------------ ------------
Other assets:
Goodwill - Acquisition of P2i Newspaper 375,067 375,067
Deposits 19,266 14,074
------------ ------------
Total other assets 394,333 389,141
------------ ------------
Total assets $ 1,019,069 $ 956,706
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Notes payable $ 2,425,000 $ 2,425,000
Current portion of obligations under capital leases 24,719 49,524
Accounts payable 348,916 299,865
Accrued interest 2,140,875 1,918,354
Amounts due to related party - P2i, Inc. 99,932 135,275
Accrued expenses - other 671,592 534,073
Advance from officer 12,000 12,000
------------ ------------
Total current liabilities 5,723,034 5,374,091
------------ ------------
Obligations under capital leases, non-current portion 22,881
19,046
Stock subscriptions payable 661,844 661,844
------------ ------------
Total non-current liabilities 684,725 680,890
------------ ------------
Stockholders' deficiency:
Preferred stock, Series B, no par value; 5,000,000 shares
authorized, 193,836 shares issued and outstanding 416,179 416,179
Common stock, no par value; 500,000,000 shares
authorized, 9,927,329 shares issued and outstanding 26,143,461 26,143,461
Additional paid-in capital 2,291,607 2,291,607
Accumulated other comprehensive income 104,833 110,707
Accumulated deficit (34,344,770) (34,060,229)
------------ ------------
Net stockholders' deficiency (5,388,690) (5,098,275)
------------ ------------
Total liabilities and stockholders' deficiency $ 1,019,069 $ 956,706
============ ============
See accompanying notes.
- 3 -
|
PROTOSOURCE CORPORATION
=======================
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
------------------------------------------------------------------------------------------------------------------------------------
SIX-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30, JUNE 30,
2009 2008 2009 2008
------------ ------------ ------------ ------------
Net revenues $ 1,559,762 $ 1,782,998 $ 741,603 $ 902,452
------------ ------------ ------------ ------------
Operating costs and expenses:
Cost of revenues 1,213,827 1,384,496 586,740 684,812
Selling, general and administrative 366,719 563,721 187,961 262,965
Depreciation and amortization 26,481 36,982 11,624 18,519
------------ ------------ ------------ ------------
Total operating costs and expenses 1,607,027 1,985,199 786,325 966,296
------------ ------------ ------------ ------------
Operating loss (47,265) (202,201) (44,722) (63,844)
------------ ------------ ------------ ------------
Other income (charges):
Interest expense (234,724) (212,505) (118,669) (108,565)
Other income (expense) (2,552) 132 6,267 154
------------ ------------ ------------ ------------
Net other (charges) (237,276) (212,373) (111,104) (108,411)
------------ ------------ ------------ ------------
Net loss ($ 284,541) ($ 414,574) ($ 155,826) ($ 172,255)
============ ============ ============ ============
Net loss per basic and diluted
share of common stock ($ 0.00) ($ 0.01) ($ 0.00) ($ 0.01)
============ ============ ============ ============
Weighted average number of basic and diluted
common shares outstanding 32,874,548 32,874,548 32,874,548 32,874,548
============ ============ ============ ============
See accompanying notes.
- 4 -
|
PROTOSOURCE CORPORATION
=======================
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009
(unaudited)
---------------------------------------------------------------------------------------------------------------
Preferred Stock Common Stock
--------------- ------------
Shares Amount Shares Amount
------------ ------------ ------------ ------------
Balance,
December 31, 2008 193,836 $ 416,179 9,927,329 $ 26,143,461
Net
loss
Other comprehensive
income, net of tax:
Foreign currency
translation
adjustments
------------ ----------- ------------ -------------
Total comprehensive
(loss)
Balance,
June 30, 2009 193,836 $ 416,179 9,927,329 $ 26,143,461
============ ============ ============ ============
|
PROTOSOURCE CORPORATION
=======================
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY (Continued)
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 2009
(unaudited)
------------------------------------------------------------------------------------------------------------------------------------
Accumulated
Additional Other
Paid-in Comprehensive Accumulated Comprehensive
Capital Income Deficit Total (Loss)
------------ ------------ ------------ ------------ ------------
Balance,
December 31, 2008 $ 2,291,607 $ 110,707 ($34,060,229) ($ 5,098,275)
Net
loss
(284,541) (284,541) ($ 284,541)
Other comprehensive
income, net of tax:
Foreign currency
translation
adjustments (5,874) (5,874) (5,874)
------------ ------------ ------------ ------------ ------------
Total comprehensive
(loss) ($ 290,415)
============
Balance,
June 30, 2009 $ 2,291,607 $ 104,833 ($34,344,770) ($ 5,388,690)
============ ============ ============ ============
See accompanying notes.
- 5 -
|
PROTOSOURCE CORPORATION
=======================
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
-------------------------------------------------------------------------------------------------------------
SIX-MONTH PERIOD
ENDED
JUNE 30,
2009 2008
--------- --------
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Net loss ($284,541) ($414,574)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 26,481 36,982
Provision for bad debts -- 5,000
Accrued interest 222,521 200,725
Changes in operating assets and liabilities:
Accounts receivable 57,612 90,564
Prepaid expenses (3,164) --
Accounts payable 49,051 103,026
Due to related party - P2i, Inc. -- (51,100)
Accrued expenses - other 137,519 51,552
--------- ---------
Net cash provided by operating activities 205,479 22,175
--------- ---------
Cash flows from investing activities:
Acquisitions of property and equipment -- (5,181)
(Decrease) in due to related parties (35,343) (1,625)
(Increase) decrease in advances to employees 680 (1,785)
(Increase) decrease in advances to officers, net (61,869) 19,164
(Increase) in deposits (5,192) (5,460)
--------- ---------
Net cash provided by (used in) investing activities (101,724) 5,113
--------- ---------
Cash flows from financing activities:
Payments on obligations under capital leases (20,970) (17,106)
--------- ---------
Net cash (used in) financing activities (20,970) (17,106)
--------- ---------
Net increase in cash before effect of
exchange rate changes on cash 82,785 10,182
Effect of exchange rate changes on cash (5,874) (722)
--------- ---------
Net increase in cash 76,911 9,460
Cash at beginning of period 12,826 72,381
--------- ---------
Cash at end of period $ 89,737 $ 81,841
========= =========
CONTINUED ON NEXT PAGE
See accompanying notes.
- 6 -
|
PROTOSOURCE CORPORATION
=======================
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
(unaudited)
------------------------------------------------------------------------------------------
SIX-MONTH PERIOD
ENDED
JUNE 30,
2009 2008
------- -------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $12,995 $11,780
------- -------
Income taxes $ -- $ --
------- -------
See accompanying notes.
- 7 -
|
PROTOSOURCE CORPORATION
=======================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
--------------------------------------------------------------------------------
1. Nature of Operations and Summary of Significant Accounting Policies
-------------------------------------------------------------------
Nature of operations - ProtoSource Corporation, formerly SHR
Corporation doing business as Software Solutions Company (the Company),
was incorporated on July 1, 1988, under the laws of the state of
California. Until May 1, 2002, the Company was an Internet service
provider (ISP). The Company provided dial-up Internet access, web
hosting services and web development services. On May 1, 2002, the
Company entered into an agreement to sell substantially all of the
assets pertaining to the ISP to Brand X Networks, Inc. On August 16,
2007, the Company exercised its security interests and entered into a
foreclosure acquisition agreement with Brand X Networks, Inc., taking
possession of its business assets as collateral due to its inability to
pay its debt to the Company. These assets were transferred to
ProtoSource Acquisition II, Inc., a Nevada corporation (incorporated
August 15, 2007) and a wholly owned subsidiary of the Company, on
September 1, 2007. Effective September 1, 2007, the Company provides
bilingual technical support services, web-hosting, and Internet
connectivity.
Effective January 1, 2004, the Company acquired P2i Newspaper, LLC. P2i
Newspaper is principally engaged in the conversion of text and graphics
from print to interactive Web content. Its clients include newspaper
groups located in the United States and the United Kingdom. P2i
Newspaper is headquartered in Bethlehem, Pennsylvania and has a data
conversion center located in Kuala Lumpur, Malaysia.
Interim Financial Statements - The accompanying financial statements
for the six-months and three-months ended June 30, 2009 are unaudited,
and have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). Certain information and
note disclosures normally included in annual financial statements
prepared in accordance with generally accepted accounting principles of
the United States of America have been condensed or omitted pursuant to
those rules and regulations. Accordingly, these interim financial
statements should be read in conjunction with the audited financial
statements and notes thereto contained in ProtoSource Corporation (the
"Company") Annual Report on Form 10-K for the year ended December 31,
2008, filed with the SEC on April 15, 2009. The results of operations
for the interim periods shown in this report are not necessarily
indicative of results to be expected for other interim periods or for
the full fiscal year. In the opinion of management, the information
contained herein reflects all adjustments necessary for a fair
statement of the interim results of operations. All such adjustments
are of a normal, recurring nature. Certain reclassifications have been
made to the prior year amounts to conform to the current year
presentation.
The year-end condensed balance sheet data was derived from audited
financial statements in accordance with the rules and regulations of
the SEC, but does not include all disclosures required for financial
statements prepared in accordance with generally accepted accounting
principles of the United States of America.
The accompanying consolidated financial statements include the accounts
of the Company and its subsidiaries. All of the Company's subsidiaries
are wholly owned for the periods presented. All intercompany
transactions have been eliminated.
- 8 -
|
PROTOSOURCE CORPORATION
=======================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
--------------------------------------------------------------------------------
1. Nature of Operations and Summary of Significant Accounting Policies -
Continued
-----------------------------------------------------------------------
Basis of presentation - The accompanying unaudited condensed
consolidated financial statements of the Company are prepared in
conformity with generally accepted accounting principles. The
disclosures presented are sufficient, in management's opinion, to make
the interim information presented not misleading. All adjustments
consisting of normal recurring adjustments, which are necessary so as
to make the interim information not misleading, have been made. Results
of operations for the six months ended June 30, 2009 are not
necessarily indicative of the results expected for the full fiscal year
or for any future period. It is recommended that this financial
information be read with the complete financial statements included in
the Company's Annual Report on Form 10-K for the year ended December
31, 2008 previously filed with the Securities and Exchange Commission.
The accompanying condensed consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of
business. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset
amounts or the amount and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
The Company's continuation as a going concern is dependent upon its
ability to generate sufficient cash flows to meet its obligations on a
timely basis, to obtain additional financing as may be required, and to
generate revenues to a level where the Company becomes profitable.
These measures are essential, as the Company has experienced cash
liquidity shortfalls from operations.
The Company's continued existence is dependent upon its ability to
achieve its operating plan. Management's plans include the following:
o Obtaining additional working capital through the sale of common
stock or debt securities.
o The ability of ProtoSource to successfully implement its
strategic plan as follows:
ProtoSource's primary focus is the delivery of ePublishing Solutions
and related services, to newspapers, retailers, and magazines,
utilizing internally-developed, proprietary applications bridging the
divide between traditional print revenue and the opportunities online
via a coordinated sales and marketing strategy in the United States and
Europe. Secondarily, but of strategic importance, the Company operates
a technical support facility in Fresno, CA. These two distinct suites
of services and solutions are offered by the Company's two principle
operating units: P2i Newspapers and ProtoSource Acquisition II dba
BX-Solutions.:
P2i Newspaper delivers products and services tailored specifically to
create online versions of print content, primarily for the print and
publishing industries.
The Company's proprietary system allows for the normalization of
diverse forms of data, including text and graphics, which can be
integrated by a seamless, dynamic, and highly customizable
front-end interface. This allows customers to have their data
re-purposed for new revenue generation. It also serves to
enhance the customer's own productivity by enabling more
effective information management and exchange between themselves
and their end customers, who both gain greater satisfaction
through the enhanced interactivity.
- 9 -
|
PROTOSOURCE CORPORATION
=======================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
--------------------------------------------------------------------------------
1. Nature of Operations and Summary of Significant Accounting Policies -
Continued
-----------------------------------------------------------------------
Every day of the week, 52 weeks a year, P2i receives electronic
files from customers at its facility in Cyberjaya, just south of
Kuala Lumpur, Malaysia. P2i employs approximately 100 staff in
this 4,000 square foot office. This office was reduced in
physical size from 6,000 to 4,000 sq ft in July 2009. Incoming
data files are processed overnight for delivery the following
morning. Data is delivered not only to P2i's web servers for
seamless integration into our clients' existing, hosted web
sites, but also distributed back to clients and their business
partners in a wide range of formats. The combination of low
labor costs, a well-educated labor pool fluent in English, and
sophisticated technologies makes P2i effective and competitive.
The online presentation and Web enablement of the Company's
clients' content is the key to efficient, effective Web
presence, and the ensuing revenues and profits such a presence
will yield. The Company takes either the same electronic files
that generate print output, or existing online content in the
public domain and uses that content to deliver a vastly
enhanced, user friendly, online presence, adding a myriad of
user-friendly features that are unique to Web-based
presentations. This cost-effective solution perfectly transfers
the client's known brand identity to the Internet, and
integrates into the delivery all the inherent E-commerce,
interactive and database features needed to maximize its impact
and benefits.
Services of P2i Newspaper comprise the following:
Hosted Solutions -- Publishers large and small may use the Company's
array of customizable, turnkey, hosted products for entire
publications, sections and vertical-specific solutions. Utilizing
proprietary technology, the Company converts print content comprising
editorial and media ads into interactive, online content that is
seamlessly incorporated into existing newspaper/publisher web sites. At
the end of every business day, publishing clients transmit to the
Company the same electronic versions of ads and pages that go to press.
These files are received by the Company's production group, processed,
quality checked, and delivered to the hosting servers by the start of
the following business day.
Data Extraction -- Customers utilizing in-house or third party
solutions may rely upon the Company's ability to database incoming
content down to the minutest subset. The Company has solutions that
will convert multiple forms of disparate electronic content and process
them into one constant data flow as one of its specialties. Extracting
relevant data points, merging consistencies and fielding content to
produce a data feed, per the client's or third party's specifications,
is at the core of the Company's technology. The ensuing data enables
tight search functions and powers retail advertising web sites.
Content Review - Because online content needs to reflect the values,
relevance and accuracy that print institutions have embodied for
centuries, the Company's Content Review team functions to examine
thousands of items a day for retailers and newspapers, editing,
proofing and determining relevancy. The staff reviews pricing,
language, brand names, and scores of other specifics, delivering a
critical component in the online publishing of user-generated content.
- 10 -
|
PROTOSOURCE CORPORATION
=======================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
--------------------------------------------------------------------------------
1. Nature of Operations and Summary of Significant Accounting Policies -
Continued
-----------------------------------------------------------------------
Technical Support -- The Company has also launched a poly-lingual
Technical Support team. Unlike a traditional call center that scripts
its responses, this functional group separates itself from the
competition by providing a highly trained, technically skilled support
person that is trained to understand the idiosyncrasies of customers'
products and services to ensure each caller gets the best possible
service.
ProtoSource Acquisition II, Inc. dba BX Solutions delivers technical
support, hosting and Internet access to telephone and Internet
companies.
The Company's second facility in Fresno, CA, operated by, and branded
as, BX-Solutions, is wholly-owned subsidiary and employs approximately
30 staff providing 24/7 English and Spanish technical support via
incoming telephone calls to the customers of technology companies.
These comprise small and mid-size Internet service providers and telcos
in the United States. This facility also houses and manages servers for
its own customers.
Services of ProtoSource Acquisition II, Inc. dba BX Solutions comprise
the following:
Technical Support - Customers of BX offer their subscribers either
Internet access or other related communications services. These include
local and regional Internet access for consumers and businesses using
dial-up, broadband and wireless connectivity. BX provides Bilingual
technical support services on an outsource basis to these subscribers,
24/7/52.
Dial-up Internet Services - BX has a very small local consumer network
to which it provides Internet Services including connectivity, email
and web hosting. Additionally BX provisions the same services under
different brand names for other companies: these would be designated
virtual Internet Service Providers as BX provides the entire
infrastructure.
Hosting - BX provides some hosting for its own customers. P2i's hosting
has been relocated to different facility.
The combination of on-target sales strategies, low labor costs, a
well-educated labor pool fluent in English, and sophisticated
technologies are key to the Company's competitive strategy. If
management cannot sufficiently execute and achieve the above stated
objectives, the Company may find it necessary to dispose of assets, or
undertake other actions as may be appropriate.
Net (loss) per basic and diluted share of common stock - Basic loss per
share is calculated using the weighted average number of common shares
outstanding. Diluted loss per share is computed on the basis of the
weighted average number of common shares outstanding during the period
increased by the dilutive effect of outstanding stock options using the
"treasury stock" method. The weighted average number of basic and
diluted common shares outstanding includes:
Actual shares issued and outstanding at June 30, 2009 9,927,329
Stock subscriptions payable - note holders 2,750,000
Stock subscriptions payable - investment banker 813,688
Series B convertible preferred stock issued to P2i, Inc. 19,383,531
----------
32,874,548
==========
- 11 -
|
PROTOSOURCE CORPORATION
=======================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
--------------------------------------------------------------------------------
1. Nature of Operations and Summary of Significant Accounting Policies -
Continued
-----------------------------------------------------------------------
The basic and diluted loss per share are the same since the Company had
a net loss for 2009 and 2008 and the inclusion of stock options and
other incremental shares would be anti-dilutive. Options and warrants
to purchase 1,070,000 shares of common stock at June 30, 2009 and 2008
were not included in the computation of diluted loss per share.
Reclassifications - Certain reclassifications have been made to the
2008 financial statement presentation for comparability with the 2009
financial statements.
2. Recently Issued Accounting Standards
------------------------------------
In May 2009, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") issued SFAS No.
165, "Subsequent Events". This Statement sets forth: 1) the period
after the balance sheet date during which management of a reporting
entity should evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements; 2) the
circumstances under which an entity should recognize events or
transactions occurring after the balance sheet date in its financial
statements; and 3) the disclosures that an entity should make about
events or transactions that occurred after the balance sheet date. This
Statement is effective for interim and annual periods ending after June
15, 2009. The company adopted this Statement in the quarter ended June
30, 2009. This Statement did not impact the Company's financial
position, results of operations or cash flows.
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally
Accepted Accounting Principles". This Statement identifies the sources
of accounting principles and the framework for selecting the principles
to be used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with
generally accepted accounting principles (GAAP) in the United States
(the GAAP hierarchy). This Statement shall be effective 60 days
following the SEC's approval of the Public Company Accounting Oversight
Board (PCAOB) amendments to AU Section 411, "The Meaning of Present
Fairly in Conformity With Generally Accepted Accounting Principles".
This Statement did not impact the Company's financial position, results
of operations or cash flows.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about
Derivative Instruments and Hedging Activities - an amendment of FASB
Statement No. 133". This Statement requires additional disclosures
about the objectives of the derivative instruments and hedging
activities, the method of accounting for such instruments under SFAS
No. 133 and its related interpretations, and a tabular disclosure of
the effects of such instruments and related hedged items on our
financial position, results of operations and cash flows. SFAS No. 161
is effective for the Company beginning January 1, 2009. This Statement
did not impact the Company's financial position, results of operations
or cash flows.
In December 2007, the FASB issued SFAS No. 141 (Revised 2007),
"Business Combinations" ("SFAS 141R"). SFAS 141R will significantly
change the accounting for business combinations in a number of areas
including the treatment of contingent consideration, contingencies,
acquisition cost, research and development assets and restructuring
costs. In addition, under SFAS 141R, changes in deferred tax asset
valuation allowances and acquired income tax uncertainties in a
business combination after the measurement period will impact income
taxes. SFAS 141R is effective for fiscal years beginning after December
15, 2008. This Statement did not impact the Company's financial
position, results of operations or cash flows.
- 12 -
|
PROTOSOURCE CORPORATION
=======================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
--------------------------------------------------------------------------------
2. Recently Issued Accounting Standards - Continued
-------------------------------------------------
In December 2007, the FASB issued SFAS No. 160, "Noncontrolling
Interests in Consolidated Financial Statements, An Amendment of ARB No.
51." SFAS 160 amends ARB 51 to establish accounting and reporting
standards for the noncontrolling interests in a subsidiary and for the
deconsolidation of a subsidiary. It also amends certain of ARB 51's
consolidation procedures for consistency with the requirements of SFAS
141R. SFAS 160 is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December 15, 2008.
This Statement did not impact the Company's financial position, results
of operations or cash flows.
In September 2006, the FASB issued SFAS No. 157, "Fair Value
Measurements". SFAS No. 157 provides guidance for using fair value to
measure assets and liabilities. It also responds to investors' requests
for expanded information about the extent to which companies measure
assets and liabilities at fair value, the information used to measure
fair value, and the effect of fair value measurements on earnings. SFAS
No. 157 applies whenever other standards require (or permit) assets or
liabilities to be measured at fair value, and does not expand the use
of fair value in any new circumstances. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after November
15, 2007 and was required to be adopted by the Company in the first
quarter of 2008. This Statement did not impact the Company's financial
position, results of operations or cash flows.
3. Series B Convertible Preferred Stock
------------------------------------
Common stock, holders of 193,836 shares of Series B Convertible
Preferred Stock ("Series B Stock") are entitled to convert each share
of Series B Stock into 100 shares of common stock. Series B
stockholders are not entitled to receive dividends. In a liquidation,
Series B Stock holders would be treated as if they were owners of the
number of shares of common stock into which the Series B Stock is
convertible.
4. Business Segment Data
---------------------
The Company has two reportable business segments. The following is a
description of each operating segment:
Media & Data Conversion Technologies - These operations are
principally engaged in the mining and database management of print,
graphic and data content for the publishing industry, and its
distribution via the Internet. Data is deliverable to the Company's web
servers for seamless integration into the clients' hosted web sites,
but also is distributed back to the client, and their business
partners, in a wide range of formats to fit continually evolving,
highly-diversified applications.
Technical Support & Hosting Services - These operations are principally
engaged in providing bilingual technical support services, web-hosting,
and Internet connectivity.
- 13 -
|
PROTOSOURCE CORPORATION
=======================
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
--------------------------------------------------------------------------------
4. Business Segment Data - Continued
---------------------------------
Financial information for the two reporting segments for the six and
three months ended June 30, 2009 and 2008 is shown below:
SIX-MONTH THREE -MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30, JUNE 30,
2009 2008 2009 2008
----------- ----------- ----------- -----------
Net revenues
Media & Data Conversion Technologies $ 949,506 $ 1,092,781 $ 468,090 $ 558,150
Technical Support & Hosting Services 610,256 690,217 273,513 344,302
----------- ----------- ----------- -----------
$ 1,559,762 $ 1,782,998 $ 741,603 $ 902,452
=========== =========== =========== ===========
Cost of revenue
Media & Data Conversion Technologies $ 645,942 $ 805,098 $ 319,750 $ 390,399
Technical Support & HostingServices 567,885 579,398 266,990 294,413
----------- ----------- ----------- -----------
$ 1,213,827 $ 1,384,496 $ 586,740 $ 684,812
=========== =========== =========== ===========
Gross margin
Media & Data Conversion Technologies $ 303,564 $ 287,683 $ 148,340 $ 167,751
Technical Support & Hosting Services 42,371 110,819 6,523 49,889
----------- ----------- ----------- -----------
$ 345,935 $ 398,502 $ 154,863 $ 217,640
=========== =========== =========== ===========
Total operating costs and expenses
Media & Data Conversion Technologies $ 940,770 $ 1,299,825 $ 467,064 $ 609,207
Technical Support & Hosting Services 666,257 685,374 319,261 357,089
----------- ----------- ----------- -----------
$ 1,607,027 $ 1,985,199 $ 786,325 $ 966,296
=========== =========== =========== ===========
Operating income (loss)
Media & Data Conversion Technologies $ 8,737 ($ 207,045) $ 1,016 ($ 51,058)
Technical Support & Hosting Services (56,002) 4,844 (45,738) (12,786)
----------- ----------- ----------- -----------
($ 47,265) ($ 202,201) ($ 44,722) ($ 63,844)
=========== =========== =========== ===========
Interest and other income/(charges), net
Media & Data Conversion Technologies ($ 139,077) ($ 134,748) ($ 67,892) ($ 69,595)
Technical Support & Hosting Services (98,199) (77,625) (43,212) (38,816)
----------- ----------- ----------- -----------
($ 237,276) ($ 212,373) ($ 111,104) ($ 108,411)
=========== =========== =========== ===========
Net income (loss)
Media & Data Conversion Technologies ($ 130,340) ($ 341,793) ($ 66,876) (120,653)
Technical Support & Hosting Services (154,201) (72,781) (88,950) (51,602)
----------- ----------- ----------- -----------
($ 284,541) ($ 414,574) ($ 155,826) ($ 172,255)
=========== =========== ===========
JUNE 30, DECEMBER 31,
2009 2008
----------- ------------
Identifiable assets
Media & Data Conversion Technologies $ 964,410 $ 787,701
Technical Support & Hosting Services 54,658 169,005
----------- -----------
$ 1,019,069 $ 956,706
=========== ===========
5. Subsequent Event
----------------
Management has evaluated subsequent events to determine if events or
transactions occurring through April 14, 2009, require potential
adjustment to or disclosure in the financial statements. As a result of
this review, no subsequent events were deemed to impact the Company's
financial position, results of operations and cash flows.
- 14 -
|
PROTOSOURCE CORPORATION
=======================
MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
(unaudited)
--------------------------------------------------------------------------------
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS.
Certain statements in this section and elsewhere in this quarterly report on
Form 10-Q are forward-looking in nature and relate to the Company's plans,
objectives, estimates and goals. Words such as "expects," "anticipates,"
"intends," "plans," "projects," "forecasts," "believes," and "estimates," and
variations of such words and similar expressions, identify such forward-looking
statements. Such statements are made pursuant to the safe harbor provisions of
the private securities litigation reform act of 1995 and speak only as of the
date of this report. The statements are based on current expectations, are
inherently uncertain, are subject to risks and uncertainties and should be
viewed with caution. Actual results and experience may differ materially from
those expressed or implied by the forward-looking statements as a result of many
factors, including, without limitation, those set forth under "Description of
Business" in the Company's most recent Annual Report on Form 10-K. The Company
makes no commitment to update any forward-looking statement or to disclose any
facts, events, or circumstances after the date hereof that may affect the
accuracy of any forward-looking statement.
Results of Operations - Six Months Ended June 30, 2009 vs.
Six Months Ended June 30, 2008
--------------------------------------------------------------------------------
Net Revenues - For the six months ended June 30, 2009 and 2008, net revenues
were $1,559,762 and $1,782,998, respectively. In the current year, $949,506 of
these revenues are attributed to the operations of P2i Newspaper and $610,256
are attributed to the operations of ProtoSource Acquisition II (d.b.a.
BX-Solutions). This represents a combined decrease of $223,236 in revenues
compared to the previous year.
P2i Newspaper's net revenues are attributable to Media and Data Conversion
Technologies and BX-Solutions' (ProtoSource Acquisition II) net revenues are
attributable to Technical Support and Hosting Services operations.
BX-Solutions contributed $610,256 of revenues for the first six months of 2009
versus $690,217 for 2008. P2i Newspaper recorded $1,092,781 during the same
period in 2008; its current year revenues of $949,506 represent a decrease over
last year of $143,275. This is attributable to multiple factors: the continuing
decline in print advertising resulting in fewer ads to be processed for online
publishing; the deteriorating newspaper industry and in particular the
bankruptcies of Tribune Group and Minneapolis Star Tribune, both of which are
customers of P2i Newspaper. Additionally the state of the economy is driving
down both unit pricing and volume.
Operating Costs and Expenses - For the six months ended June 30, 2009, combined
total operating costs and expenses totaled approximately $1,607,000 versus
$1,985,200 in 2008, a $378,170 reduction from the previous year. Approximately,
$19,100 of reduced costs were directly attributable to the operations of
ProtoSource Acquisition II, Inc. Additionally, there was a $359,055 reduction of
total operating costs and expenses over the prior year for P2i Newspaper.
Total operating costs and expenses in the amount of $940,770 were related to the
operations of P2i Newspaper: For P2i Newspaper, this is a reduction of
approximately $360,000 over the preceding year and breaks down as follows:
Approximately $159,000 less in production expenditures, approximately $45,000
less in selling expenses, and approximately $156,000 less in general and
administrative costs. The decrease in selling and general & administrative costs
is the result of a restructuring of the US management team in the latter part of
2008. This included the elimination of the Group Financial Manager's position,
those responsibilities being assumed in part by the CEO and in part by a
consultant. This has yielded savings in excess of $100,000 and resulted in
greater efficiencies. Additionally, the US-based position of Chief Technology
Officer was eliminated and those duties are now shared between the SVP of
Product Development and the Lead Developer at P2i Newspaper in Malaysia.
Total operating costs and expenses in the amount of $666,250 are related to the
operations of ProtoSource Acquisition II, Inc. (d.b.a. BX-Solutions): These
costs break down as follows: Approximately $568,000 in production expenditures
and approximately $98,000 in sales, general and administrative costs.
- 15 -
|
PROTOSOURCE CORPORATION
=======================
MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS - CONTINUED
(unaudited)
--------------------------------------------------------------------------------
For the six months ended June 30, 2009, combined cost of revenues -- as a
percentage of combined revenues -- were 77.8% versus 77.6% for the same period
in 2008.
P2i Newspaper's cost of revenues as a percentage of revenues were 68.0% and
73.7% in 2009 and 2008, respectively.
BX-Solutions cost of revenues as a percentage of revenues for the six months
ended June 30 were 93.1% for 2009 and 83.9% for 2008. This increase in cost of
revenues is largely attributable to a shift in the mix of products and services
sold: revenues from dial-up Internet services declined and was replaced by the
more labor-intensive Technical Support revenues. BX-Solutions will not see a
decline in the cost of revenues as a percentage of revenues until revenues
increase and the Company can enjoy economies of scale within BX-Solutions.
For the six months ended June 30, 2009, combined selling, general and
administrative expenses posted a decrease of approximately $197,000 over the
previous year due to the following significant components: In respect to
BX-Solutions, a $4,000 increase is attributable to general and administrative
costs (for the facility in Fresno, CA). In respect to P2i Newspaper,
approximately $45,000 less in selling expenses is entirely attributable to
decrease in expense. And for P2i Newspaper, approximately $156,000 less in
general and administrative expenses, largely attributable to reductions in the
Company's liability insurance, salaries and local taxes was realized this year
over last for the six months ended June 30, 2009.
Administrative costs principally consist of the Company's management office and
personnel, professional fees associated with maintenance of the Company, and
officers' and directors' liability insurance costs.
Interest Expense - Interest expense totaled $234,724 for the six-month period
ended June 30, 2009 versus $212,505 in the same period in 2008. The interest
expense is predominantly due to the convertible notes obtained during 2002,
2003, and 2004 to fund the operations of the Company and P2i Newspaper --
pending and post merger -- with approximately $10,500 and $6,000 attributable to
equipment lease financing in 2009 and 2008, respectively.
Results of Operations - Three Months Ended June 30, 2009 vs.
Three Months Ended June 30, 2008
--------------------------------------------------------------------------------
Net Revenues - For the three months ended June 30, 2009 and 2008, net revenues
were $741,603 and $902,452, respectively. In the current year, $468,090 of these
revenues is attributed to the operations of P2i Newspaper and $273,513 are
attributed to the operations of ProtoSource Acquisition II (d.b.a.
"BX-Solutions"). This represents a combined decrease of $160,849 in revenues
over the previous year.
P2i Newspaper's net revenues are attributable to Media and Data Conversion
Technologies and BX-Solutions' (ProtoSource Acquisition II) net revenues are
attributable to Technical Support and Hosting Services operations.
Operating Costs and Expenses - For the three months ended June 30, 2009,
combined total operating costs and expenses totaled $786,325 versus $966,296 in
2008, a $179,971 reduction over the previous year. $37,828 of reduced costs were
directly attributable to the operations of ProtoSource Acquisition II, Inc. and
$142,143 attributable to the operations of P2i Newspaper.
- 16 -
|
PROTOSOURCE CORPORATION
=======================
MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS - CONTINUED
(unaudited)
--------------------------------------------------------------------------------
Results of Operations - Three Months Ended June 30, 2009 vs.
Three Months Ended June 30, 2008 - Continued
--------------------------------------------------------------------------------
For the three months ended June 30, 2009, $467,074 of total operating costs and
expenses are related to the operations of P2i Newspaper: For P2i Newspaper, this
is a reduction of approximately $142,140 over the same quarter in the preceding
year and breaks down as follows: Approximately $70,650 less production
expenditures, approximately $2,400 more in selling expenses, approximately
$72,790 less in general and administrative costs, and approximately $1,000 less
in depreciation expense. The decrease in selling and general & administrative
costs is the result of a restructuring of the US management team in the latter
part of 2008. This included the elimination of the Group Financial Manager's
position, those responsibilities being assumed in part by the CEO and in part by
a consultant. This has yielded savings in excess of $20,000 and resulted in
greater efficiencies. Additionally the US-based position of Chief Technology
Officer was eliminated and those duties are now shared between the SVP of
Product Development and the Lead Developer at P2i in Malaysia.
For the three months ended June 30, 2009, approximately $319,200 of total
operating costs and expenses are related to the operations of ProtoSource
Acquisition II, Inc. These costs break down as follows: Approximately $266,900
in production expenditures and approximately $52,300 in selling, general and
administrative costs
For the three months ended June 30, 2009, combined cost of revenues -- as a
percentage of combined revenues -- were 79.1% versus 75.9% for the same period
in 2008.
For the three months ended June 30, 2008, P2i Newspaper's cost of revenues as a
percentage of revenues were 68.3% and 69.1% in 2009 and 2008, respectively.
BX-Solutions cost of revenues for the three months ended June 30, 2009 were
97.6% vs. 85.5% in 2008.
For the three months ended June 30, 2009, combined selling, general and
administrative expenses posted a net decrease of approximately $75,000 over the
same quarter in the previous year due to the following significant components:
In respect to BX-Solutions, approximately $2,970 is attributable to general and
administrative costs (for the facility in Fresno, CA) and a $3,000 provision for
uncollectible accounts recorded in 2008. In respect to P2i Newspaper,
approximately $2,370 more in selling expenses. For P2i Newspaper, approximately
$72,790 less in general and administrative expenses, largely attributable to a
restructuring of the US management team in the latter part of 2008, was realized
this year over last for the three months ended June 30, 2008.
Administrative costs principally consist of the Company's management office and
personnel, professional fees associated with maintenance of the Company, and
officers' and directors' liability insurance costs.
Interest Expense - Interest expense totaled $118,670 for the three-month period
ended June 30, 2009 versus $108,565 in the same period in 2008. The interest
expense is predominantly due to the convertible notes obtained during 2002,
2003, and 2004 to fund the operations of the Company and P2i Newspaper --
pending and post merger -- with approximately $4,090 attributable to equipment
lease financing recorded in each of the three-month periods.
Liquidity and Capital Resources
-------------------------------
We assess liquidity by our ability to generate cash to fund our operations.
Significant factors that affect the management of our liquidity include: current
balances of cash, expected cash flows provided by operations, current levels of
our accounts receivable and accounts payable balances, access to financing
sources and our expected investment in equipment.
For the six-month period ended June 30, 2009, the Company provided approximately
$77,000 more cash than used.
- 17 -
|
PROTOSOURCE CORPORATION
=======================
MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS - CONTINUED
(unaudited)
-------------------------------------------------------------------------------
Even though the Company's net loss for the six-month period ended June 30, 2009
was approximately $284,500, cash flows provided by operations approximated
$205,000. In part, this was due to non-cash depreciation charges of
approximately $26,500. Additional significant components enhancing working
capital and available cash - because they were accrued but unpaid during the
period -- were as follows: Approximately $222,000 of accrued interest arising
from the Company's convertible debt obligations, approximately $87,000 of
accrued supplier and service provider obligations together with office and
facilities maintenance expenses, approximately $100,000 of accrued payroll
expenses, plus approximately $58,000 in decreased outstanding accounts
receivable levels over that at the beginning of the year.
During the six-month period ended June 30, 2009, the Company had net negative
cash flows from investing activities of approximately $101,700. This was
primarily due to an approximately $62,000 increase in advances to officers,
$35,300 decrease in amount due to related party, and a $5,200 increase in
deposits.
And during the six-month period ended June 30, 2009, the Company used
approximately $21,000 in financing activities for payments on its capital lease
obligations.
As of June 30, 2009, the Company had a $89,737 balance in cash and $482,713 in
accounts receivable and other current assets. Taken together with $5,723,034 of
total current liabilities, this resulted in a negative working capital position
of $5,150,584 at June 30, 2009. $4,565,875 of this amount pertains to the
Company's obligations to its convertible debt holders.
In July 2007, the Company entered into an investment banking agreement with
Colebrooke Capital, Inc. The fees under this arrangement were $7,500 down and
$3,500 for the first 90 days of the agreement. Under this arrangement the
Company will be required to a pay a 7% financing fee on any funds raised by
Colebrooke Capital. Furthermore, in respect to capital transactions introduced
by Colebrooke Capital, there will be a 5% transaction fee requirement, but no
fees on any Company generated deals. On December 10, 2008, the board ratified a
Company proposal to compensate Colebrook Capital in full with 250,000 common
shares. This is in respect of an investment banking relationship entered into by
the Company in 2007. The goal was to raise funds to make an acquisition but the
deterioration of the equities markets has made this untenable and the
relationship has been terminated. The Company anticipates issuing these shares
in Q3 of 2009.
On August 15, 2007, the Company entered into a 24-month term capital lease
agreement with Bankers Capital for the purchase of computer and computer related
items valued at $20,123 with monthly lease payments of $1,163. The lease term
expires July 14, 2009 and the residual maturity date was July 15, 2009 with a $1
purchase option. $2,720 was paid to Bankers Capital at the start of the lease to
cover the first payment, one payment held for a security deposit, and for UCC
filing and documentation fees. Company officers, Peter A. Wardle and Thomas C.
Butera, are personal guarantors of this agreement.
On October 15, 2007, the Company entered into a 24-month term capital lease
agreement with Bankers Capital for the purchase of computer and computer related
items valued at $24,380 with monthly lease payments of $1,408. The lease term
expires September 14, 2009 and the residual maturity date is September 15, 2009
with a $1 purchase option. $3,212 was paid to Bankers Capital at the start of
the lease to cover the first payment, one payment held for a security deposit,
and for UCC filing and documentation fees. Company officers, Peter A. Wardle and
Thomas C. Butera, are personal guarantors of this agreement.
At June 30, 2009, 9,927,329 of common shares were issued and outstanding and the
Company had obligations to issue an additional 22,947,219 shares of common with
a further 33,945,000 shares committed for issuance.
- 18 -
|
PROTOSOURCE CORPORATION
=======================
MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS - CONTINUED
(unaudited)
--------------------------------------------------------------------------------
Liquidity and Capital Resources - Continued
-------------------------------------------
On May 15, 2008, the Company entered into two 24-month term capital lease
agreements with Bankers Capital for the purchase of computer and computer
related items valued at $25,579 and $37,571, respectively, with monthly lease
payments of $1,478 and $2,048, respectively. The lease terms expire April 7,
2010 and the residual maturity date is April 15, 2010 with a $1 purchase option
for each agreement. Amounts of $3,450 and $4,590 were paid to Bankers Capital at
the start of the respective leases to cover the first payment, one payment held
for a security deposit, and for UCC filing and documentation fees. Company
officers, Peter A. Wardle and Thomas C. Butera, are personal guarantors of both
of these agreements.
Critical Accounting Policies and Estimates
------------------------------------------
Management's discussion and analysis of its financial position and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenue and expenses and related disclosure of contingent
assets and liabilities. The significant accounting policies which we believe are
the most critical to aid in fully understanding and evaluating our reported
financial results include the following:
In accordance with SFAS No. 109, "Accounting for Income Taxes", the Company
maintains a valuation allowance of $5,600,000 as of December 31, 2008 on
deferred tax assets relating to its net operating losses which the Company has
not determined to be more likely than not realizable.
In accordance with SFAS No. 165, "Subsequent Events", management has evaluated
subsequent events to determine if events or transactions occurring through
August 14, 2009, require potential adjustment to or disclosure in the financial
statements. No adjustments or disclosures were deemed to be necessary.
The Company considers certain trade accounts receivable to be of doubtful
collection; accordingly, the Company has an $80,000 allowance for doubtful
accounts.
In consideration of SEC Proposed Rule Release 33-8098, the Company does not
maintain estimates for sales returns or credits, cancellations and warranties.
Due to the peculiar nature of the type of services provided and the underlying
processes employed by the Company to create and deliver completed product
(without defect) to its customers, there is no material exposure to what would
be classified as sales returns or credits. Likewise, cancellations and or
warranties are not significantly measurable in respect to the type of electronic
product (Internet Website content) deliverable to the Company's customers; and
historically, there has been no basis or need for such.
- 19 -
|
PROTOSOURCE CORPORATION
=======================
MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS - CONTINUED
(unaudited)
--------------------------------------------------------------------------------
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
N/A
Item 4T. CONTROLS AND PROCEDURES.
Evaluation of disclosure controls and procedures.
As of June 30, 2009, an evaluation was performed under the supervision and with
the participation of our management, including the chief executive officer, or
CEO, who is also the acting chief financial officer, or CFO, of the
effectiveness of the design and operation of our disclosure procedures. Based on
management's evaluation as of the end of the period covered by this Report, our
principal executive officer and chief financial officer has concluded that our
disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") were
effective to ensure that the information required to be disclosed by us in the
reports that we file under the Exchange Act is gathered, analyzed and disclosed
with adequate timeliness, accuracy and completeness.
Changes in internal controls.
There have been no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the date of
the evaluation referred to above, nor were there any significant deficiencies or
material weaknesses in our internal controls. Accordingly, no corrective actions
were required or undertaken except as disclosed.
- 20 -
|
PROTOSOURCE CORPORATION
=======================
OTHER INFORMATION
(unaudited)
--------------------------------------------------------------------------------
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
From time to time the Company is subject to litigation incidental to its
business. The Company is not currently a party to any material legal proceedings
Item 1A. RISK FACTORS.
None.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
Item 5. OTHER INFORMATION.
None.
Item 6. EXHIBITS.
Exhibits.
The following exhibits are filed with this report:
Exhibit 31.1 - Certification of CEO and CFO pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 32.1 - Certification of CEO and CFO pursuant to 18 U.S.C. Section 1350
- 21 -
|
PROTOSOURCE CORPORATION
=======================
SIGNATURE
--------------------------------------------------------------------------------
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
PROTOSOURCE CORPORATION
/s/ Peter Wardle
-------------------------
Peter Wardle,
Chief Executive Officer/
Chief Financial Officer
Date: August 14, 2009
|
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Peter Wardle, Chief Executive Officer and Chief Financial Officer of ProtoSource Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-Q of ProtoSource Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, periods presented in this quarterly report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is likely to materially affect, the small business issuer's internal control over financial reporting; and
d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting: and
5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):
a. all significant deficiencies in the design or operation of internal controls which could adversely affect the small business issuer's ability to record, process, summarize and report financial data and have identified for the small business issuer's auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.
Dated: August 14, 2009 /s/ PETER WARDLE
---------------------------------------
Peter Wardle, Chief Executive
|
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of ProtoSource Corporation (the "Company") on Form 10-Q for the quarterly period ended June 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Peter Wardle, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/Peter Wardle --------------- Peter Wardle Chief Executive Officer and Chief Financial Officer Dated: August 14, 2009 |