Item 1: Business
Background of the Company
We began operations in May 1994 as a traditional 1+ long-distance reseller. Recognizing the declines in telecommunications service prices and the decreasing margins being experienced in long distance sales, we decided to sell our long distance customer base and assets in early 1997. From 1997 until early 2005, we focused on the development of voice activated telecommunications services that would allow any consumer the ability to “dial” their calls using their voice. In the last five years we have focused our efforts on service applications that relate to the delivery of content to end users.
Our initial introduction to mobile entertainment led us to research the viability of personalized entertainment services that could be delivered through our network. On October 22, 2004 we announced the first commercial launch of a ringback service in the United States with the launch of our Rockin’ Ringback service. Our personalized ringback service provided a network-based personalized service that enabled users to choose an audio file that callers will listen to while the phone is ringing. We believed that since we already had a relationship with the carrier and were integrated with these carriers customer service departments and billing departments that we had an opportunity to introduce new products with minimal integration effort. As of August 30, 2010 we had eight carrier customers providing My Phone Services Suite service in their marketplace.
For the past three years a major portion of the Company’s revenue, approximately 65% has been from one customer. In early May this customer gave notice that it would be canceling its contract and did effective August 31, 2010. The Company’s revenues from its remaining customers were insufficient to continue operational requirements.
On September 9, 2010, the Company entered into an Asset Purchase Agreement between the Company, as seller, and ClearSky Mobile Media, Inc., (“CMM”) and ClearSky RBT, LLC, (“CRBT”). Pursuant to the Purchase Agreement, the Company sold all of the rights and assets utilized by the Company in its ringback tone and content delivery business to CMM and CRBT. CRBT is a wholly owned subsidiary of CMM. The Purchase Agreement was effective for accounting purposes as of September 1, 2010.
Under the Purchase Agreement, the Company transferred (i) to CMM, all of the Company’s business contracts executed in connection with the ringback tone and content delivery business, intellectual property rights (including patents and trademarks) relating to the ringback tone and content delivery business, key employee services, equipment, website content and telephone numbers, and (ii) to CRBT, all software, hardware and software development rights used in connection with the ringback tone and content delivery business at a purchase price of $225,000 in cash at the closing.
The Company has retained its digital signage support business and will continue to evaluate the viability of such business going forward. Our digital signage offering provides for a turn-key solution utilizing in-store touch screens and customizable interactive content design to engage customers while they are shopping in a cellular telephone retail store.
Employees
As of June 13, 2011, we had 1 full time employee. Our employee is not represented by a labor organization. We maintain various employee benefit plans.
Patents, Trademarks and Copyright
We have received allowance on our U. S. Patent Applications “Method and Apparatus That Provides a Reusable Voice Path in Addition to Release Link Functionality for Use with a Platform Having a Voice Activated Front End” and “ System Access Modules for Use with a Telecommunications Switch, a Telephony Server System and a Method of Enabling a Communications Session”. The company continues to evaluate the use of these patents in future products and/or the ability to license their use to third parties.
Item 1A:
Item 1A: Risk Factors
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 1B:
Item 1B: Unresolved Staff Comments
None
Item 2:
Item 2: Properties
Our executive offices are located in Dallas, Texas. We lease 1,536 square feet of space in a facility as a tenant. The term of the lease is through December 31, 2012 and the rent is presently $2,112 per month. The Company currently subleases 92% of its office space to a 3rd party under a quarterly sublease that expires on September 30, 2011. The sublease automatically extends until December 31, 2011 unless the sub-lessor provides notice to not renew by July 15, 2011.
Item 3:
Item 3: Legal Proceedings
In February, 2008, we were sued by Ring Plus, Inc. in the United States District Court for the Central District of California alleging infringement of its U.S. Patent No. 7,006,608 (the “608 Patent”) which pertained to ringback tone replacement methods and algorithms. Ring Plus, Inc. was seeking declaratory judgment that we had violated the 608 Patent. On January 13, 2011, Ring Plus, Inc. and the Company reached a settlement in the case brought by Ring Plus in February, 2008, in the United States District Court for the Central District of California alleging infringement of its U.S. Patent No. 7,006,608 (the “608 Patent”) which pertains to ringback tone replacement methods and algorithms. The terms of the settlement are confidential and have no impact on the financial statements.
Item 4:
Item 4: Removed and Reserved
PART II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Common Stock is listed on the OTC Electronic Bulletin Board under the symbol “PRFV”. The following table indicates the quarterly high and low bid price for the Common Stock on the OTC Electronic Bulletin Board for the fiscal years ending March 31, 2011 and March 31, 2010. Such inter-dealer quotations do not necessarily represent actual transactions and do not reflect retail mark-ups, mark-downs or commissions.
OTC ELECTRONIC BULLETIN BOARD BID PRICE
On June 13, 2011, the closing bid price of the Common Stock as reported on the OTC Electronic Bulletin Board was $.045.
The number of holders of record of the Company’s common stock as of June 13, 2011 was 33 as reported by our transfer agent. This number does not include an undetermined number of stockholders whose stock is held in “street” or “nominee” name.
We have not declared or paid any cash or other dividends on the Common Stock to date for the last two (2) fiscal years and have no intention of doing so in the foreseeable future.
We did not repurchase any of our equity securities during the fourth quarter of fiscal 2011.
Recent Sales of Unregistered Securities not previously reported on the Company’s 10-QSB
None
Item 6.
Item 6. Selected Financial Data
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis constitutes forward-looking statements for purposes of the Securities Act and the Exchange Act and as such involves known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. The words “expect”, “estimate”, “anticipate”, “predict”, “believes”, “plan”, “seek”, “objective” and similar expressions are intended to identify forward-looking statements or elsewhere in this report. Important factors that could cause our actual results, performance or achievement to differ materially from our expectations are discussed in detail in Item 1 above. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by such factors. We undertake no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Notwithstanding the foregoing, we are not entitled to rely on the safe harbor for forward looking statements under 27A of the Securities Act or 21E of the Exchange Act as long as our stock is classified as a penny stock within the meaning of Rule 3a51-1 of the Exchange Act. A penny stock is generally defined to be any equity security that has a market price (as defined in Rule 3a51-1) of less than $5.00 per share, subject to certain exceptions.
On November 13, 2006, the Board of Directors approved a 1 for 5 reverse stock split of its common stock. All references in this report to the number of shares of common stock, loss per share, and market price per share have been retroactively restated to reflect the reverse stock split.
The following discussion should be read in conjunction with the Financial Statements, including the notes thereto.
Overview
We began operations in May 1994 as a traditional 1+ long-distance reseller. Recognizing the declines in telecommunications service prices and the decreasing margins being experienced in long distance sales, we decided to sell our long distance customer base and assets in early 1997. From 1997 until early 2005, we focused on the development of voice activated telecommunications services that would allow any consumer the ability to “dial” their calls using their voice. In the last five years we have focused our efforts on service applications that relate to the delivery of content to end users.
Our initial introduction to mobile entertainment led us to research the viability of personalized entertainment services that could be delivered through our network. On October 22, 2004 we announced the first commercial launch of a ringback service in the United States with the launch of our Rockin’ Ringback service. Our personalized ringback service provided a network-based personalized service that enabled users to choose an audio file that callers will listen to while the phone is ringing. We believed that since we already had a relationship with the carrier and were integrated with these carriers customer service departments and billing departments that we had an opportunity to introduce new products with minimal integration effort. As of August 30, 2010 we had eight carrier customers providing My Phone Services Suite service in their marketplace.
For the past three years a major portion of the Company’s revenue, approximately 65% has been from one customer. In early May this customer gave notice that it would be canceling its contract and did effective August 31, 2010. The Company’s revenues from its remaining customers were insufficient to continue operational requirements.
On September 9, 2010, the Company entered into an Asset Purchase Agreement between the Company, as seller, and ClearSky Mobile Media, Inc., (“CMM”) and ClearSky RBT, LLC, (“CRBT”). Pursuant to the Purchase Agreement, the Company sold all of the rights and assets utilized by the Company in its ringback tone and content delivery business to CMM and CRBT. CRBT is a wholly owned subsidiary of CMM. The Purchase Agreement was effective for accounting purposes as of September 1, 2010.
Under the Purchase Agreement, the Company transferred (i) to CMM, all of the Company’s business contracts executed in connection with the ringback tone and content delivery business, intellectual property rights (including patents and trademarks) relating to the ringback tone and content delivery business, key employee services, equipment, website content and telephone numbers, and (ii) to CRBT, all software, hardware and software development rights used in connection with the ringback tone and content delivery business at a purchase price of $225,000 in cash at the closing.
The Company has retained its digital signage support business and will continue to evaluate the viability of such business going forward.
Results of Operations
The operations of the Company’s ringback tone and content delivery business have been classified as discontinued in the Statements of Operations contained in the Company’s Financial Statements. Information provided below for results of operations include only the Company’s digital signage results and general overhead allocated to the continuing business enterprise.
We recorded net loss of $341,779, or $.06 per share, for the fiscal year ended March 31, 2011, compared to a net loss of $248,898, or $.04 per share, for the fiscal year ended March 31, 2010.
Total Revenue
Total revenue from continuing operations for the fiscal year ended March 31, 2011 was $24,658 compared to $59,680 for the fiscal year ended March 31, 2010. The decrease of revenue reflects decline in our digital sign business and will continue as we phase out of the business completely.
Cost of Sales
Cost of sales for the fiscal year ended March 31, 2011 was $4,539 compared to $9,333 for the fiscal year ended March 31, 2010.
Selling, General and Administrative
Selling, general and administrative expenses for the fiscal year ended March 31, 2011 were $343,375 compared to $299,245 for the fiscal year ended March 31, 2010.
General and administrative expenses will decline as the overall overhead of the Company is reduced and continuing operations are phased out.
Other Income and Expense
We have recognized income from the sale of excess equipment of $11,763, for the fiscal year ended March 31, 2011 compared to $-0- for the fiscal year ended March 31, 2010. We also recognized an impairment expense of $30,286, $10,464 on digital sign equipment and $19,822 on patents for the fiscal year ended March 31, 2011 compared to $-0- for the fiscal year ended March 31, 2010.
Income Taxes
As of March 31, 2011, we had cumulative federal net operating losses of approximately $17.3 million, which can be used to offset future income subject to federal income tax through the fiscal year 2031. Net operating loss limitations may be imposed if changes in stock ownership of the company create a change of control as provided in Section 382 of the Internal Revenue Code of 1986.
Discontinued Operations
As discussed above, the Company’s discontinued operations included the operations of the Company’s ringback tone and content delivery business in all periods presented. The Company had a gain on the sale of its ringback tone and content delivery business of $97,329, as follows:
The income from discontinued operations for the fiscal year ended March 31, 2011 compared to March 31, 2010 was composed of the following:
Liquidity and Capital Resources
Our cash and cash equivalents at March 31, 2011 were $489,031, a decrease of $111,616 from $600,647 at March 31, 2010.
Net cash used for continuing operating activities was $307,327 for the year ended March 31, 2011 compared to net cash used for operating activities of $178,396 for the year ended March 31, 2010. Net cash provided from investing activities was $14,395 for the year ended March 31, 2011 compared to $-0- for the year ended March 31, 2010. Net cash used for financing activities was $-0- for both periods.
On September 29, 2006, pursuant to Section 4(2) of the Securities Act and Regulation D thereunder, we completed the sale of 117 units (“Units”) with each Unit consisting of a 3-year, 6% Convertible Debenture in the principal amount of $10,000, and 14,286 5-year warrants to purchase a share of Common Stock, $.001 par value per share, of the Company at an exercise price of $.50 for an aggregate of $1,170,000. The debentures were paid in full on September 30, 2010.
On March 31, 2005, pursuant to Section 4(2) of the Securities Act and Regulation D thereunder, we completed the sale of 97.5 units (“Units”) with each Unit consisting of a 3-year, 6% Convertible Debenture in the principal amount of $10,000, and 10,000 5-year warrants to purchase a share of Common Stock, $.001 par value per share, of the Company at an exercise price of $.60 for an aggregate of $975,000. The debentures were paid in full on January 31, 2010.
On May 18, 2004, pursuant to Section 4(2) of the Securities Act and Regulation D thereunder, we closed an offering of 220 units consisting of Ten Thousand (10,000) shares of the common stock of the Company and a warrant to purchase Five Thousand shares of common stock at a purchase price of $5,000 per unit for an aggregate of $1,100,000.
The Company will explore strategic alternatives including merger with another entity. Currently, we do not have any agreement or understanding with any entity and there is no assurance that such a transaction will ever be consummated. The Company currently has sufficient capital resources to continue its diminished operations and continue to evaluate viable opportunities.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Future Obligations
Management projects working capital needs to be approximately $80,000 over the next twelve months for corporate overhead to continue to maintain its current level of operation and continue as a reporting company. Management believes that current cash and cash equivalents are sufficient to meet this requirement.
Critical Accounting Policies
Our accounting policies are fully described in Note B to our financial statements. The following describes the general application of accounting principles that impact our consolidated financial statements.
Our results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debt, inventories, investments, intangible assets, income taxes, financing operations, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 8.
Item 8. Financial Statements and Supplementary Data
PREFERRED VOICE, INC.
FINANCIAL STATEMENTS
MARCH 31, 2011 and 2010
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors
and Shareholders
Preferred Voice, Inc.
We have audited the accompanying balance sheets of Preferred Voice, Inc. as of March 31, 2011 and 2010, and the related statements of operations, stockholders' equity (deficit) and cash flows for the years ended March 31, 2011 and 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial report as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Preferred Voice, Inc. as of March 31, 2011 and 2010, and the results of its operations and its cash flows for the years ended March 31, 2011 and 2010, in conformity with accounting principles generally accepted in the United States of America.
Dallas, Texas
June 24, 2011
PREFERRED VOICE, INC.
BALANCE SHEETS
MARCH 31, 2011 AND 2010
The accompanying notes are an integral part of these statements.
PREFERRED VOICE, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 2011 AND 2010
The accompanying notes are an integral part of these statements.
PREFERRED VOICE, INC.
STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE YEARS ENDED MARCH 31, 2011 AND 2010
The accompanying notes are an integral part of these statements.
PREFERRED VOICE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2011 AND 2010
The accompanying notes are an integral part of these statements.
PREFERRED VOICE, INC.
NOTES TO FINANCIAL STATEMENTS
Note A - General organization:
Preferred Voice, Inc. (the "Company") is a Delaware corporation incorporated in 1992. On February 25, 1997, the Company’s stockholders approved changing the name of the Company to better reflect the nature of the Company’s business. The Company commenced business on May 13, 1994, and was in the development stage until August 1, 1995. The Company provides enhanced services to the telecommunications industry throughout the United States and maintains its principal offices in Dallas, Texas.
On September 9, 2010, the Company entered into an Asset Purchase Agreement between the Company, as seller, and ClearSky Mobile Media, Inc., a Delaware corporation (“CMM”) and ClearSky RBT, LLC, a Florida limited liability company (“CRBT”), a wholly-owned subsidiary of CMM, as purchasers. Pursuant to the Purchase Agreement, the Company sold all of the rights and assets utilized by the Company in its ringback tone and content delivery products business (including the product line/application known as “Rockin’ Ringback) to CMM and CRBT for $225,000 in cash.
The operations of the Company’s ringback tone and content delivery products are reflected in the financial statements as discontinued operations. The 2010 financial statements have been retrospectively adjusted to reflect the operations of the ringback tone and content delivery products as discontinued operations.
After the sale, the Company has only its digital signage operations remaining which have been in decline since January of 2009. However, the Company has repaid all of its outstanding debt. The Company intends to explore strategic alternatives including merger with another entity. Currently, the Company does not have any agreement or understanding with any entity, and there is no assurance that such a transaction will ever be consummated. The Company believes that it will be able to meet its cash requirements throughout fiscal 2012 and continue its business development efforts.
Note B - Summary of significant accounting policies:
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.
Cash and cash equivalents
For purposes of reporting cash flows, cash and cash equivalents include all amounts due from banks with original maturities of three months or less.
The Company maintains cash balances at a financial institution located in Dallas, Texas, which at times may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.
Receivables and credit policies
Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Unpaid accounts receivable with invoice dates over 30 days old bear no interest. Accounts receivable are stated at the amount billed to the customer. Customer account balances with invoices dated over 90 days are considered delinquent. Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoice. The Company estimates the allowance for doubtful accounts based on an analysis of specific customers, taking into consideration the age of past due accounts and an assessment of the customer’s ability to pay.
Inventory
Inventory, consisting of digital signage equipment and related components was $-0- and $12,393 for the years ended March 31, 2011 and 2010, respectively. Inventory is stated at the lower of cost or market. Cost is determined using the first-in, first-out method.
PREFERRED VOICE, INC.
NOTES TO FINANCIAL STATEMENTS
Note B - Summary of significant accounting policies (continued):
Property and equipment
The cost of property and equipment is depreciated over the estimated useful lives of the related assets. Depreciation is computed on the straight-line method for financial reporting purposes and the double declining method for income tax purposes. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized.
The useful lives of property and equipment for purposes of computing depreciation is 5 years for computer equipment, furniture and fixtures, and office equipment.
Depreciation expense for the years ended March 31, 2011 and 2010 was $8,397 and $13,696, respectively.
Capitalized software development
The Company has adopted the provisions of the Software Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) to account for its internally developed software costs since the Company is dependent on the software to provide the enhanced services. Under the provisions of the Software Topic, costs incurred prior to the product’s technological feasibility are expensed as incurred. The capitalization of software development costs begins when a product’s technological feasibility has been established and ends when the product is available for use and released to customers. Capitalized software development costs include direct costs incurred subsequent to establishment of technological feasibility for significant product enhancements. Amortization is computed on an individual product basis using the straight-line method over the estimated economic life of the product, generally three years.
During the years ended March 31, 2011 and 2010, there were no software development costs capitalized for continuing operations. The amortization of capitalized software development costs for the years ended March 31, 2011 and 2010 was $688 and $750, respectively. The Company’s software development costs have been fully amortized.
Patents
Patents are recorded at cost. Amortization is computed on the straight-line method over the identifiable lives of the patents. The Company has adopted the provisions of the Intangibles - Goodwill and Other Topic of the FASB, which addresses financial accounting and reporting for acquired goodwill and other intangible assets. Specifically, the statement addresses how intangible assets that are acquired should be accounted for in financial statements upon their acquisition, as well as how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. The statement requires intangible assets to be reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable and that a loss shall be recognized if the carrying amount of an intangible exceeds its fair value. The Company tested its intangible assets for impairment as of March 31, 2011 and determined that full impairment of their patents was appropriate.
The amortization of patents for the years ended March 31, 2011 and 2010 was $5,752 for both periods.
Advertising expense
The Company expenses advertising costs when the advertisement occurs. Total advertising expense amounted to $-0- for the years ended March 31, 2011 and 2010.
Fair value of financial instruments
The Company defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. Financial instruments included in the Company’s financial statements include cash and cash equivalents, trade accounts receivable, other receivables, other assets, notes payable and long-term debt. Unless otherwise disclosed in the notes to the financial statements, the carrying value of financial instruments is considered to approximate fair value due to the short maturity and characteristics of those instruments. The carrying value of long-term debt approximates fair value as terms approximate those currently available for similar debt instruments.
PREFERRED VOICE, INC.
NOTES TO FINANCIAL STATEMENTS
Note B - Summary of significant accounting policies (continued):
Concentration of business, market and credit risks
In the normal course of business, the Company extends unsecured credit to its customers with payment terms generally 30 days. Because of the credit risk involved, management provides an allowance for doubtful accounts that reflects its opinion of amounts that will eventually become uncollectible. In the event of complete nonperformance by the Company’s customers, the maximum exposure to the Company is the outstanding accounts receivable balance at the date of nonperformance.
Revenue recognition
For recognizing revenue, the Company applies the provisions of the Revenue Recognition Topic of the FASB ASC. In most cases, the services being performed do not require significant production, modification or customization of the Company’s software or services; therefore, revenues are recognized when evidence of a completed transaction exists, generally when services have been rendered. In situations where the Company receives an initial payment for future services, the Company defers recognition of revenue, and recognizes the revenue over the life of the respective contract.
During the years ended March 31, 2011 and 2010, the majority of the Company’s revenue consisted of services that have been discontinued.
The amount of sales by product segment for the years ended March 31, 2011 and 2010 was as follows:
Income taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates that will apply in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The current and deferred tax provision in the financial statements includes consideration of uncertain tax positions in accordance with the Income Taxes Topic of the FASB ASC. Management believes there are no significant uncertain tax positions, so no adjustments have been reported from the adoption of the Income Taxes Topic of the FASB ASC. The Company is no longer subject to income tax examinations by the Internal Revenue Service for years prior to 2008.
Stock based compensation
The Company recognizes compensation costs related to stock-based payment transactions (i.e. granting of stock options and warrants) in the financial statements in accordance with the Stock Compensation Topic of the FASB ASC. With limited exceptions, the amount of compensation cost is measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be remeasured each reporting period. Compensation cost will be recognized over the period that an employee provides services in exchange for the award. Stock-based compensation expense recognized for the years ended March 31, 2011 and 2010 was $-0- for both periods. As of March 31, 2011, there were no unrecognized compensation costs related to non-vested share-based compensation arrangements. Disclosures required by this statement are in Notes F and G.
PREFERRED VOICE, INC.
NOTES TO FINANCIAL STATEMENTS
Note B - Summary of significant accounting policies (continued):
Income or loss per share
The Company adopted the provisions of the Earnings Per Share Topic of the FASB Accounting Standards Codification. This standard replaces primary and fully-diluted earnings per share (EPS) with basic and diluted EPS. Basic EPS is calculated by dividing net income or loss (available to common stockholders) by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For 2011 and 2010, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.
Loss per share is based on the weighted average number of shares outstanding of 6,130,184, for each of the years ended March 31, 2011 and 2010.
Subsequent events
In May 2009, the FASB issued new accounting guidance on subsequent events that establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The Subsequent Events Topic, 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. The pronouncement was effective for interim or annual financial periods ending after June 15, 2009. The adoption of this statement did not have a material effect on the Company’s financial statements.
In February 2010, the FASB amended its guidance on subsequent events to remove the requirement for SEC filers to disclose the date through which an entity has evaluated subsequent events, for both issued and revised financial statements. This amendment alleviates potential conflicts between the FASB’s guidance and the reporting rules of the SEC. Our adoption of this amended guidance, which was effective upon issuance, had no effect on our financial condition, results of operations, or cash flows. There were no subsequent events that would require adjustment to or disclosure in the financial statements.
Note C - Discontinued operations:
On August 5, 2010, the Board of Directors of the Company approved the sale of substantially all of the assets of the Company’s ringback tone and content delivery products business other than specified assets including cash and accounts receivables to ClearSky Mobile Media, Inc. and ClearSky RBT, LLC (collectively “Clearsky”).
On September 9, 2010, subsequent to the receipt of shareholder approval of the Asset Purchase Agreement, the Company completed the sale of the Company’s ringback tone and content delivery products business to Clearsky for $225,000 in cash.
In accordance with FASB Accounting Standards Codification, Presentation of Financial Statements - Discontinued Operations - Other Presentation Matters Topic, the Company has presented the results of the Company’s ringback tone and content delivery product business as discontinued operations in the accompanying balance sheets, statement of operations and statement of cash flows.
PREFERRED VOICE, INC.
NOTES TO FINANCIAL STATEMENTS
Note C - Discontinued operations (continued):
The carrying amounts of the assets and liabilities aggregated in discontinued operations in the consolidated balance sheet at March 31, 2011 and March 31, 2010, were as follows:
Income from discontinued operations in the periods presented were as follows:
Note D - Convertible debt and warrants:
On September 29, 2006, the Company closed a Securities Purchase Agreement and issued $1,170,000 in principal amount of 6% Convertible Debentures due September 29, 2009 and subsequently extended to September 29, 2010 (the "Debentures"), to a group of institutional and high net worth investors. As of March 31, 2010, there was an outstanding balance due of $1,111,500. The Debentures pay an interest rate of 6% on an annual basis and are convertible into 3,175,714 shares of the Company’s common stock at a price of $0.35 per share. The investors also received warrants to purchase an additional 1,671,429 shares of common stock with an exercise price of $0.50 per share exercisable through September 29, 2011.
The Company has allocated the proceeds from the issuance of the Debentures to the warrants and the Debentures based on their relative fair market values at the date of issuance. The value assigned to the warrants of $281,977 has been recorded as an increase in additional paid-in capital. The assignment of a value to the warrants results in a loan discount being recorded for the same amount. The discount was amortized over the original three-year term of the Debentures as additional interest expense. Amortization for the years ended March 31, 2011 and 2010 was $-0- and $46,996, respectively.
PREFERRED VOICE, INC.
NOTES TO FINANCIAL STATEMENTS
Note D - Convertible debt and warrants (continued):
167,143 warrants were issued in exchange for consulting services provided for in the issuance of the Securities Purchase Agreement. These warrants are exercisable at price of $0.50 per share and were valued using the relative fair market value at the date of issuance. The value assigned to the warrants of $25,285 has been recorded as deferred loan cost and was amortized over the original three-year term of the debentures as financing cost. Amortization for the years ended March 31, 2011 and 2010 was $-0- and $4,214, respectively.
Note E - Common stock:
Stock purchase warrants
At March 31, 2011 the Company had outstanding warrants to purchase 2,807,572 shares of the Company's common stock at prices that ranged from $0.50 per share to $0.75 per share. The warrants are exercisable at any time and expire through September 29, 2011. At March 31, 2011, 2,807,572 shares of common stock were reserved for that purpose.
Common stock reserved
At March 31, 2011, shares of common stock were reserved for the following purposes:
Note F - Employee stock option plans:
2000 Plan
On September 29, 2000, the Company adopted an incentive stock option and other equity participation plan (“2000 Plan”) which permits the issuance of stock purchase agreements, stock awards, incentive stock options, non-qualified stock options and stock appreciation rights to selected employees and independent contractors of the Company. The 2000 Plan reserved 400,000 shares of common stock for grant and provides that the term of each award be determined by the committee of the Board of Directors (Committee) charged with administering the Plan. In February 2006, the Committee revised the plan to reserve 1,000,000 shares of common stock for grant. These stock options vest over a period of one to two years and expire five years from the grant date.
Under the terms of the 2000 Plan, options granted may be either nonqualified or incentive stock options, and the exercise price, determined by the Committee, may not be less than the fair market value of a share on the date of the grant. Stock appreciation rights granted in tandem with an option shall be exercisable only to the extent the underlying option is exercisable and the grant price shall be equal to the exercise price of the underlying option. At March 31, 2011, options to purchase 179,133 shares at an exercise price of $0.60 per share were outstanding. No stock appreciation rights had been granted at March 31, 2011.
As of March 31, 2011, 41,667 options have been exercised, 1,061,995 have been forfeited, 109,550 expired, 179,133 remain outstanding, and 179,133 were vested and exercisable. On various dates during the year, 129,133 options due to expire were extended for an additional year. At March 31, 2011, the remaining weighted average contractual life was .7 years.
Employee warrants
As of March 31, 2011, none of the employee warrants have been exercised or forfeited, 992,000 expired, 151,000 remain outstanding, and 151,000 were vested and exercisable. On May 18, 2010, 95,000 warrants that were to expire were extended for an additional year. At March 31, 2011, the remaining weighted average contractual life was approximately .2 years.
PREFERRED VOICE, INC.
NOTES TO FINANCIAL STATEMENTS
Note G - Information related to employee stock options and warrants:
The Company used the Black-Scholes option-pricing model (“Black-Scholes”) as its method of valuation. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The fair value of share-based payment awards on the date of grant as determined by the Black-Scholes model is affected by our stock price as well as other assumptions.
Following is a summary of the stock award and incentive plans:
Following is a summary of warrants issued to employees:
Note H - Stock warrants:
During the years ended March 31, 2011 and 2010, the Company issued -0- warrants to service provider; therefore, no expense was recognized by the Company during the years ended March 31, 2011 and 2010. The Company accounts for warrants issued to non-employees at fair value of the warrants at the grant date.
As of March 31, 2011, none of the total warrants issued to non-employees for goods and services have been exercised; none have been forfeited; 363,607 have expired; and 967,143 remain outstanding, of which 967,143 were vested and exercisable. At March 31, 2011, the remaining weighted average contractual life was approximately .3 years.
PREFERRED VOICE, INC.
NOTES TO FINANCIAL STATEMENTS
Note H - Stock warrants (continued):
For the years ended March 31, 2011 and 2010, the Company issued -0- warrants in connection with stock offerings; therefore, no expense was recognized by the Company during the years ended March 31, 2011 and 2010.
As of March 31, 2011, 204,499 of the total warrants issued for stock offerings have been exercised; none have been forfeited; 2,713,993 have expired; and 1,689,428 remain outstanding, of which 1,689,428 were vested and exercisable. At March 31, 2011, the remaining weighted average contractual life was approximately 0.5 years.
The per share weighted-average fair value of warrants granted to non-employees in exchange for goods and services was determined using the Black Scholes Option-Pricing Model.
Following is a summary of warrants issued to non-employees in exchange for goods and services:
The following is a summary of warrants issued in connection with stock and debenture offerings:
PREFERRED VOICE, INC.
NOTES TO FINANCIAL STATEMENTS
Note H - Stock warrants (continued):
Following is an overall summary of the stock warrants activity, including warrants issued to employees (see Note G):
Note I - Income taxes:
The Company uses the liability method of accounting for income taxes. Under the liability method, a provision for income taxes is recorded based on taxes currently payable on income as reported for federal income tax purposes, plus an amount which represents the change in deferred income taxes for the year.
Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax-reporting basis of the Company's assets and liabilities. The major areas in which temporary differences give rise to deferred taxes are accounts receivable, accrued liabilities, start-up expenditures, accumulated depreciation, and net operating loss carry-forwards. Deferred income taxes are classified as current or non-current depending on the classification of the assets and liabilities to which they relate. Deferred income taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the years in which the temporary differences are expected to reverse.
The provision for income taxes as of March 31 consists of:
PREFERRED VOICE, INC.
NOTES TO FINANCIAL STATEMENTS
Note I - Income taxes (continued):
The provision for income taxes for the years ended March 31, 2011 and 2010, differs from the “expected” tax benefit (computed using the 34% U.S. federal corporate rate to income before income taxes) as follows:
Deferred tax (liabilities) assets as of March 31 consist of the following:
The Company has recorded a valuation allowance amounting to the entire deferred tax asset balance because of the Company's uncertainty as to whether the deferred tax asset is realizable. However, if the Company is able to utilize the deferred tax asset in the future, the valuation allowance will be reduced through a credit to income.
The Company has available at March 31, 2011, a net operating loss carry-forward of approximately $17,287,000, which can be used to offset future taxable income through the year 2031. Utilization of net operating loss carry-forwards in the future may be limited if changes in the Company’s stock ownership create a change of control as provided in Section 382 of the Internal Revenue Code.
PREFERRED VOICE, INC.
NOTES TO FINANCIAL STATEMENTS
Note J - Commitments:
The Company leases its office facilities and some office equipment under operating leases expiring through December 2012. Following is a schedule of future minimum lease payments required under the above operating leases as of March 31, 2011:
Total rent expense charged to operations was $17,679 and $45,890, for the years ended March 31, 2011 and 2010, respectively.
The Company subleases 92% of its office space to a 3rd party under a quarterly sublease that expires on September 30, 2011. The sublease automatically extends until December 31, 2011 unless the sub-lessor provides notice to not renew by July 15, 2011. Payments received from sub-lessor reduce rent expense.
Note K - Legal proceedings:
In February, 2008, we were sued by Ring Plus, Inc. in the United States District Court for the Central District of California alleging infringement of its U.S. Patent No. 7,006,608 (the “608 Patent”) which pertained to ringback tone replacement methods and algorithms. Ring Plus, Inc. was seeking declaratory judgment that we had violated the 608 Patent. On January 13, 2011, Ring Plus, Inc. and the Company reached a settlement in the case brought by Ring Plus in February, 2008, in the United States District Court for the Central District of California alleging infringement of its U.S. Patent No. 7,006,608 (the “608 Patent”) which pertains to ringback tone replacement methods and algorithms. The terms of the settlement are confidential and have no impact on the financial statements.
Note L - Going concern:
Management projects working capital needs to be approximately $80,000 over the next twelve months for corporate overhead to continue to maintain its current level of operation and continue as a reporting company. Management believes that current cash and cash equivalents are sufficient to meet this requirement.
Item 9.
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
There have been no changes in or disagreements with our accountants on accounting and financial disclosures.
Item 9A(T).
Item 9A(T). Controls and Procedures
Evaluation of disclosure controls and procedures. We carried out an evaluation required by the Securities Exchange Act of 1934, as amended (the "1934 Act"), under the supervision and with the participation of our Chief Executive Officer, who is also our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the 1934 Act. Based on this evaluation, the Chief Executive Officer concluded that as of March 31, 2011, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the 1934 Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate to allow timely decisions regarding required disclosures.
Management’s Annual Report on Internal Control over Financial Reporting. The Company's management is responsible for establishing and maintaining an adequate system of internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
All internal control systems, no matter how well designed, have inherent limitations. A system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Further, because of changes in conditions, effectiveness of internal control over financial reporting may vary over time.
An internal control material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit the attention of those responsible for oversight of the company's financial reporting.
Management of the Company conducted an evaluation of the effectiveness of the Company's internal control over financial reporting based on the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, the Company's management concluded that its internal control over financial reporting was effective as of March 31, 2011.
This annual report does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.
Changes in Internal Control Over Financial Reporting. The Company has made no changes in its internal control over financial reporting in connection with its fourth quarter 2011 evaluation that would materially affect, or are reasonably likely to materially affect, its internal control over financial reporting.
Item 9B.
Item 9B. Other Information
None
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance
Directors and Executive Officers
The Board of Directors currently consists of two (2) people. Directors serve until the next annual meeting and until their successors are elected and qualified. The following table sets forth information about all of our Directors and executive officers and all persons nominated or chosen to become such:
Ms. Merritt is a founder of Preferred Voice and has been a director since May 1994. She has served as Chief Executive Officer since February 2005, Chief Operating Officer from May 2004, and has served as Executive Vice President - Finance and Secretary/Treasurer since inception. She served as President of Star of Texas, Inc., from 1989 to May 1994. She also served as Controller of United Medicorp for several months during 1992. Ms. Merritt is a certified public accountant and was employed by Ernst & Whinney from 1981 to 1989.
Mr. Ogilvie was elected as a director of Preferred Voice in February 20, 2000. Mr. Ogilvie is a Managing Director with Capital Investment Company and has been so since September of 2000. From January 1998 to 2000, Mr. Ogilvie was employed by Classic Residence by Hyatt as Managing Director of Development-Western Division. From 1993 through 1998, Mr. Ogilvie was a partner in the John Buck Company, a full service real estate brokerage, development and property management company. Mr. Ogilvie is the sole member of our Audit Committee.
We are not aware of any “family relationships” (as defined in Item 401(c) of Regulation S-­B promulgated by the SEC) among directors, executive officers, or persons nominated or chosen by us to become directors or executive officers.
Except as set forth above, we are not aware of any event (as listed in Item 401(d) of Regulation S-B promulgated by the SEC) that occurred during the past five years that are material to an evaluation of the ability or integrity of any director, person nominated to become a director, executive officer, promoter or control person of the company.
The Board of Directors has determined that Mr. Ogilvie is “independent” as such term is defined by the listing standards of Nasdaq and the rules of the SEC. Ms. Merritt is not “independent” since she is an employee of the Company.
Compliance with Section 16(a) of the Exchange Act
Due to our status as a Section 15(d) reporting company, our executive officers, directors, and persons who beneficially own more than 10% of a registered class of our equity securities are not required to file with the SEC reports of ownership and changes in ownership of Preferred Voice's equity securities pursuant to Section 16(a) of the Securities Exchange Act of 1934.
Code of Ethics
The Board of Directors has adopted a code of business ethics that applies to its directors, officers and management employees generally. A copy of this code of business ethics may be obtained, at no cost, by writing or telephoning the Company at Preferred Voice, Inc., 6500 Greenville Avenue, Suite 330, Dallas, Texas 75206, 214-368-1913, Attn: Secretary.
Audit, Nominating and Compensation Committees
Mr. Ogilvie is currently the only member of the Audit Committee. The Board of Directors has determined that Mr. Ogilvie is qualified as a “financial expert” under the provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations of the SEC. The Company does not currently have either a Nominating or Compensation Committee.
Item 11.
Item 11. Executive Compensation
The following tables set forth the compensation paid by the Company to our executive officers during the fiscal years ended March 31, 2011 and 2010.
Annual Compensation
(1) Ms. Merritt has served as Chief Executive Officer since February, 2005.
Outstanding Equity Awards at Fiscal Year-End Table
We have not granted any stock awards other than as stock options. The following table reflects all option awards outstanding at March 31, 2011 to our executive officers:
Equity Compensation Plan
Compensation of Directors
We paid our non executive director a directors’ fee of $45,000 for past services in the fiscal year end March 31, 2011. We also pay directors' expenses to attend board meetings. During the year ended March 31, 2011, no director expenses were reimbursed.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth as of June 13, 2011, the name and number of shares of the Company’s common stock, par value $0.001 per share, held of record by (i) each of the directors and named executive officers of the Company, (ii) beneficial owners of 5% or more of our common stock; and (iii) all the officers and directors as a group. Pursuant to the rules and regulations of the Securities and Exchange Commission, shares of common stock that an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purposes of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purposes of computing the percentage ownership of any other person shown in the table.
Beneficial Ownership (1), (2)
*
Less than one percent (1%).
1)
SEC rules provide that, for purposes hereof, a person is considered the “beneficial owner” of shares with respect to which the person, direxctly or indirectly, has or shares the voting or investment power, irrespective of his/her/its economic interest in the shares. Unless otherwise noted, each person identified possesses sole voting and investment power over the shares listed, subject to community property laws.
2)
Based on 6,130,184 shares outstanding on June 13, 2011. Shares of common stock subject to options that are exercisable within 60 days of June 13, 2011, are deemed beneficially owned by the person holding such options for the purposes of calculating the percentage of ownership of such person but are not treated as outstanding for the purpose of computing the percentage of any other person.
3)
Includes 93,857 shares issuable upon exercise of warrants, 179,133 issuable upon exercise of employee stock options, and 6,000 shares held by minor children.
4)
Includes 58,000 shares issuable upon exercise of warrants.
5)
Includes 800,000 shares issuable upon exercise of warrants held by Hidden River, LLC for which Mr. Parker has voting power over the shares.
6)
Includes 142,857 shares issuable upon exercise of warrants. JMG Capital Partners’ address is 11601 Wilshire Blvd, Suite 2180, Los Angeles, California 90025. JMG Capital Partners has advised us that Jonathan M. Glaser is the member-manager of JMG Capital Management, LLC, which is the general partner of JMG Capital Partners, and is the natural person with sole voting power over the shares held by JMG Capital Partners.
7)
Includes 142,857 shares issuable upon exercise of warrants. JMG Triton Offshore Fund Ltd.’s address is Citco Building, Wickhams Cay, Road Town, Tortola, British Virgin Islands. We have been informed by JMG Triton Offshore Fund Ltd. that Jonathan M. Glaser is the member-manager of Pacific Assets Management, LLC, which is the general partner of JMG Triton Offshore Fund Ltd., and he is the natural person who has sole voting power over the shares held by JMG Triton Offshore Fund Ltd.
8)
Includes 100,000 shares issuable upon exercise of warrants, 727,057 shares held in Mr. Emerson’s retirement accounts, 2,000 shares held by Emerson Partners, 100,000 shares issuable upon exercise of warrants held by Emerson Partners, for which Mr. Emerson has voting power over the shares held by Emerson Partners, 100,000 shares issuable upon exercise of warrants held by Emerson Family Foundation, for which Mr. Emerson has voting power over the shares held by Emerson Family Foundation.
9)
Includes 214,286 shares issuable upon exercise of warrants. Bristol Investment Fund, Ltd’s address is Caledonian House, Jennett Street, Georgetown, Grand Cayman, Cayman Islands. Bristol Capital Advisors, LLC ("BCA") is the investment advisor to Bristol Investment Fund, Ltd. ("Bristol"). As manager of BCA and a director of Bristol, Paul Kessler has voting and investment power over the shares held by Bristol. Mr. Kessler disclaims beneficial ownership of such shares.
10)
Includes 117,000 shares issuable upon exercise of warrants, 130,000 shares held by The Runnels Family Trust, 185,714 shares issuable upon exercise of warrants held by The Runnels Family Trust, 327,259 shares held by High Tide, LLC, 100,000 shares issuable upon exercise of warrants held by High Tide, LLC for which Mr. Runnels has sole voting power over the shares held by High Tide, LLC and 272,456 held by T.R. Winston & Company Incorporated and 50,143 issuable upon exercise of warrants held by T.R. Winston & Company Incorporated for which Mr. Runnels has voting power over the shares held by T.R. Winston & Company Incorporated .
11)
Includes the shares described in footnotes 3 and 4.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence
None
See Item 9 above for information concerning director independence.
Item 14.
Item 14. Principal Accountant Fees and Services
Our independent auditors, Philip Vogel & Co., P.C., have no direct or indirect interest in the Company and have been the Company’s Independent Registered Public Accounting Firm since 1995. The following table sets forth the fees billed and estimated fees for professional audit services provided by such firm for the fiscal years ended March 31, 2011 and 2010:
(a)
Includes fees for services related to the audits of our annual financial statements and the reviews of our interim financial statements and assistance with SEC filings.
(b)
Includes fees for services related to transaction due diligence and consultations with respect to compliance with Section 404 of the Sarbanes-Oxley Act.
(c)
Includes fees for services related to tax compliance, preparation and planning services (including U.S. federal, state and local returns) and tax examination assistance.
Our Audit Committee established a policy whereby the outside auditors are required to seek pre-approval on an annual basis of all audit, audit-related, tax and other services by providing a prior description of the services to be performed. For the year ended March 31, 2011, 100% of all audit-related services were pre-approved by the Audit Committee, which concluded that the provision of such services by Philip Vogel & Co., P.C. was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.
Item 15.
Item 15. Exhibits
(a)
Exhibits
_____________
*Filed herewith.
(1)
Incorporated by reference to the exhibit shown in parenthesis to our Registration Statement on Form S-1, filed with the Securities and Exchange Commission on June 15, 1995.
(2)
Incorporated by reference to the exhibit shown in parenthesis to Amendment No. 1 to our Registration Statement, filed with the Securities and Exchange Commission on August 7, 1995.
(3)
Incorporated by reference to the exhibit shown in parenthesis to our Annual Report on Form 10-KSB for the period ended March 31, 1999, filed by us with the Securities and Exchange Commission.
(4)
Incorporated by reference to the exhibit shown in parenthesis to our Registration Statement on Form SB-2, filed with the Securities Exchange Commission on March 8, 2001
(5)
Incorporated by reference to the exhibit shown in parenthesis to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 15, 2000.
(6)
Incorporated by reference to the exhibit shown in parenthesis to our Quarterly Report on Form 10-QSB for the quarter ended December 31, 2000, filed by us with the Securities and Exchange Commission.
(7)
Incorporated by reference to the exhibit shown in parenthesis to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 7, 2001.
(8)
Incorporated by reference to the exhibit shown in parenthesis to our Quarterly Report on Form 10-QSB for the quarter ended September 30, 2001, filed by us with the Securities and Exchange Commission.
(9)
Incorporated by reference to the exhibit shown in parenthesis to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on November 21, 2001.
(10)
Incorporated by reference to the exhibit shown in parenthesis to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 18, 2004.
(11)
Incorporated by reference to the exhibit shown in parenthesis to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 24, 2005.
(12)
Incorporated by reference to the exhibit shown in parenthesis to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 5, 2005.
(13)
Incorporated by reference to the exhibit shown in parenthesis to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on November 1, 2005.
(14)
Incorporated by reference to the exhibit shown in parenthesis to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 25, 2006.
(15)
Incorporated by reference to the exhibit shown in parenthesis to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 3, 2006.
(16)
Incorporated by reference to the exhibit shown in parenthesis to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on November 15, 2006.
(17)
Incorporated by reference to the exhibit shown in parenthesis to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on February 23, 2009.
(18)
Incorporated by reference to the exhibit shown in parenthesis to our Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 9, 2010.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this annual report on Form 10-KSB to be signed on its behalf by the undersigned thereto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report on Form 10-KSB has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE
TITLE
DATE
/s/ Mary G. Merritt
Chairman and Chief Executive Officer
June 24, 2011
Mary G. Merritt
(Principal Executive Officer) Secretary, Treasurer, Executive Vice President of Finance and Director (Principal Financial and Accounting Officer)
/s/ Scott Ogilvie
Director
June 24, 2011
Scott Ogilvie