|
x
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF
1934
|
|
¨
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
|
Utah
|
73-0981865
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.)
|
PART
I. FINANCIAL INFORMATION
|
||
ITEM 1.
|
||
4
|
||
|
||
5
|
||
|
||
6
|
||
|
||
7
|
||
ITEM 2.
|
16
|
|
ITEM 3.
|
21
|
|
PART
II. OTHER INFORMATION
|
||
ITEM 1.
|
22
|
|
ITEM 2.
|
22
|
|
|
||
ITEM 3.
|
22
|
|
ITEM 4.
|
22
|
|
ITEM 5.
|
22
|
|
|
||
ITEM 6.
|
22
|
|
||||
|
||||
Unaudited
|
|
|||
|
|
|
|
|
|
|
September
30, 2007
|
|
|
ASSETS
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
351,426
|
|
Accounts
receivable, net of allowance for doubtful accounts of
$483,344
|
|
|
2,660,799
|
|
Inventory,
net
|
|
|
773,451
|
|
Prepaid
expenses and other current assets
|
|
|
674,262
|
|
Total
current assets
|
|
|
4,459,938
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
5,292,250
|
|
Loan
origination costs
|
|
|
827,614
|
|
Other
assets
|
|
|
70,590
|
|
Total
assets
|
|
$
|
10,650,392
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
Current
liabilities
|
|
|
|
|
Line
of credit
|
|
$
|
942,290
|
|
Notes
payable, net of unamortized discount of $288,889
|
|
|
809,404
|
|
Notes
payable - related parties, net of unamortized discount of
$255,036
|
|
|
723,981
|
|
Accounts
payable
|
|
|
3,940,184
|
|
Accrued
expenses
|
|
|
6,999,052
|
|
Interest
payable including amount due to related parties of
$1,178,185
|
|
|
1,473,555
|
|
Deferred
revenue
|
|
|
4,600,562
|
|
Current
portion of obligations under capital leases
|
|
|
1,312,698
|
|
Total
current liabilities
|
|
|
20,801,726
|
|
Long-term
liabilities
|
|
|
|
|
Obligations
under capital leases - less current portion
|
|
|
10,417,313
|
|
Notes
payable - less current portion, net of unamortized discount of
$264,815
|
|
|
1,162,682
|
|
Notes
payable - related parties, less current portion, net of unamortized
discount of $637,355
|
|
|
4,284,520
|
|
Other
long-term liabilities
|
|
|
62,750
|
|
Total
long-term liabilities
|
|
|
15,927,265
|
|
Total
liabilities
|
|
|
36,728,991
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
Stockholders'
deficit
|
|
|
|
|
Preferred
stock:
|
|
|
|
|
Series
A, 10,000,000 shares authorized, no par value; 1,500,000 shares
issued and
outstanding; liquidated preference of $1.00 per share, plus accrued
unpaid
dividends
|
|
|
1,875,000
|
|
Series
B, 2,800,000 shares to be issued and outstanding; liquidated
preference of
$1.00 per share, plus accrued unpaid dividends
|
|
|
6,533,333
|
|
Common
stock, 750,000,000 shares authorized; 188,878,008 shares issued
and
outstanding
|
|
|
48,242,698
|
|
Accumulated
deficit
|
|
|
(82,708,396
|
)
|
Other
comprehensive loss
|
|
|
(21,234
|
)
|
Total
stockholders' deficit
|
|
|
(26,078,599
|
)
|
|
|
|
|
|
Total
liabilities and stockholders' deficit
|
|
$
|
10,650,392
|
|
The
accompanying notes are an integral part of this consolidated financial
statement
|
TWL
Corporation and Subsidiaries
|
|
|||||||
|
||||||||
Unaudited
|
|
|||||||
|
|
|
|
|
|
|
||
|
|
Three
Months ended
|
|
|||||
|
|
September
30,
|
|
|||||
|
|
2007
|
|
|
2006
|
|
||
Revenues,
net:
|
|
|
|
|
|
|
||
Subscription
|
|
$
|
2,614,908
|
|
|
$
|
2,951,466
|
|
Single
event
|
|
|
1,636,715
|
|
|
|
2,988,691
|
|
Production
|
|
|
427,627
|
|
|
|
333,964
|
|
Other
|
|
|
575,258
|
|
|
|
504,569
|
|
Total
revenues, net
|
|
|
5,254,508
|
|
|
|
6,778,690
|
|
|
|
|
|
|
|
|
|
|
Cost
and Expenses:
|
|
|
|
|
|
|
|
|
Royalty,
printing, delivery and communications costs
|
|
|
1,167,646
|
|
|
|
1,125,183
|
|
Salaries
and benefits
|
|
|
4,965,310
|
|
|
|
4,270,878
|
|
Selling,
general & administrative excluding salaries and
benefits
|
|
|
1,366,067
|
|
|
|
1,549,695
|
|
Amortization
of program inventory
|
|
|
-
|
|
|
|
2,142,145
|
|
Depreciation
& amortization
|
|
|
251,417
|
|
|
|
249,871
|
|
Total
costs and expenses
|
|
|
7,750,440
|
|
|
|
9,337,772
|
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(2,495,932
|
)
|
|
|
(2,559,082
|
)
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
Interest,
net
|
|
|
(464,731
|
)
|
|
|
(4,200,499
|
)
|
Interest,
net - related party
|
|
|
(281,180
|
)
|
|
|
-
|
|
Loss
in non-consolidated affiliate
|
|
|
(34,686
|
)
|
|
|
-
|
|
Loss
on refinancing of debt
|
|
|
-
|
|
|
|
(1,633,840
|
)
|
Other
income
|
|
|
55,836
|
|
|
|
56,885
|
|
Total
other expense
|
|
|
(724,761
|
)
|
|
|
(5,777,454
|
)
|
|
|
|
|
|
|
|
|
|
Loss
from operations
|
|
|
(3,220,693
|
)
|
|
|
(8,336,536
|
)
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
-
|
|
|
|
-
|
|
Net
loss attributable to common stockholders
|
|
$
|
(3,220,693
|
)
|
|
$
|
(8,336,536
|
)
|
|
|
|
|
|
|
|
|
|
Net
loss per common share - basic and dilutive
|
|
$
|
(0.02
|
)
|
|
$
|
(0.19
|
)
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
180,530,179
|
|
|
|
42,965,513
|
|
Components
of other comprehensive loss for the three months ended September
30, 2007
and 2006:
|
|
|||||||
|
|
Three
Months ended
|
|
|||||
|
|
September
30,
|
|
|||||
|
|
2007
|
|
|
2006
|
|
||
Net
loss attributable to common stockholders
|
|
$
|
(3,220,693
|
)
|
|
$
|
(8,336,536
|
)
|
Foreign
currency translation loss
|
|
|
(6,379
|
)
|
|
|
(2,276
|
)
|
Comprehensive
loss
|
|
$
|
(3,227,072
|
)
|
|
$
|
(8,338,812
|
)
|
The
accompanying notes are an integral part of this consolidated financial
statement
|
TWL
Corporation and Subsidiaries
|
|
|||||||
|
||||||||
Unaudited
|
|
|||||||
|
|
|
|
|
|
|
||
|
|
Three
Months ended
|
|
|||||
|
|
September
30,
|
|
|||||
|
|
2007
|
|
|
2006
|
|
||
Cash
flows from operating activities:
|
|
|
|
|
|
|
||
Net
loss
|
|
$
|
(3,220,693
|
)
|
|
$
|
(8,336,536
|
)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
on property and equipment
|
|
|
251,417
|
|
|
|
249,897
|
|
Foreign
currency translation adjustments
|
|
|
(6,379
|
)
|
|
|
(2,276
|
)
|
Amortization
of program inventory
|
|
|
-
|
|
|
|
2,142,145
|
|
Common
stock issued for services
|
|
|
-
|
|
|
|
126,000
|
|
Employee
stock based compensation
|
|
|
442,102
|
|
|
|
206,813
|
|
Amortization
of debt origination costs
|
|
|
107,945
|
|
|
|
32,231
|
|
Amortization
of debt discount
|
|
|
136,215
|
|
|
|
5,370,580
|
|
Gain
on settlement of accounts payable
|
|
|
(55,337
|
)
|
|
|
(56,885
|
)
|
Changes
in current assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(22,068
|
)
|
|
|
(2,566,963
|
)
|
Prepaid
expenses and other current assets
|
|
|
(108,477
|
)
|
|
|
(67,012
|
)
|
Other
assets
|
|
|
-
|
|
|
|
(327,000
|
)
|
Accounts
payable and accrued expenses
|
|
|
(195,615
|
)
|
|
|
483,651
|
|
Inventory
|
|
|
11,696
|
|
|
|
86,305
|
|
Deferred
revenue
|
|
|
710,380
|
|
|
|
656,098
|
|
Interest
payable
|
|
|
283,489
|
|
|
|
234,198
|
|
Net
cash used in operating activities
|
|
|
(1,665,325
|
)
|
|
|
(1,768,754
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases
of property and equipment
|
|
|
(61,516
|
)
|
|
|
-
|
|
Net
cash used in investing activities
|
|
|
(61,516
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Capital
lease payments
|
|
|
(313,615
|
)
|
|
|
(291,746
|
)
|
Net
payments on line of credit
|
|
|
(117,825
|
)
|
|
|
521,683.00
|
|
Borrowings
under notes
|
|
|
-
|
|
|
|
2,500,000
|
|
Payments
on notes payable
|
|
|
(128,690
|
)
|
|
|
(25,785
|
)
|
Sale
of common stock
|
|
|
1,290,000
|
|
|
|
-
|
|
Net
cash provided by financing activities
|
|
|
729,870
|
|
|
|
2,704,152
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash
|
|
|
(996,971
|
)
|
|
|
935,398
|
|
Cash
at beginning of period
|
|
|
1,348,397
|
|
|
|
181,339
|
|
Cash
at end of period
|
|
$
|
351,426
|
|
|
$
|
1,116,737
|
|
|
|
|
|
|
|
|
|
|
Supplemental
information:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
305,894
|
|
|
$
|
239,754
|
|
Common
stock issued for conversion of notes payable
|
|
|
280,000
|
|
|
|
-
|
|
Beneficial conversion on convertible debentures | - | 3,725,166 | ||||||
Preferred stock issued for debt origination costs | - | 833,333 | ||||||
Deemed dividend on preferred stock | - | 250,000 | ||||||
Series A preferred stock issued in connection with debt transactions | - | 3,210,000 | ||||||
Warrants surrendered in debt transaction | - | (326,160 | ) |
As
of September 30, 2007, convertible debt and notes payable consists
of the
following:
|
||||
September
30, 2007
|
||||
Bank
notes payable; secured by Company vehicle, interest at 9.5% per
anum,
monthly payment of $574, matures October 2006
|
$ |
8,290
|
||
Junior
secured convertible note payable to a related party, due March
31, 2010,
interest at 15% per annum, convertible at $0.03 per share
|
4,500,000
|
|||
Junior
secured convertible note payable to a related party, due March
31, 2011,
interest at 15% per annum, convertible at $0.03 per share, four
year
warrants to purchase 15,000,000 shares of common stock at $0.03
per
share
|
1,125,000
|
|||
Senior
secured term note payable, due August 31, 2009, interest at prime
+ 3%;
Rate as of June 30, 2007 is 11.25%
|
2,117,500
|
|||
Convertible
notes payable to third parties, interest at 9% per annum, principal
and
interest due January 7, 2006, past due, convertible at $0.45 per
share,
warrants are for three years to purchase 1,476,027 shares of common
stock
at $0.25 per share
|
400,000
|
|||
Note
payable to related party, due December 31, 2004, past due, unsecured,
interest at 6% per annum
|
24,444
|
|||
Notes
payable to a related party; unsecured, interest at 8% per annum
on
$94,777; non-interest bearing on $76,447, payable on
demand
|
186,448
|
|||
Note
payable to a related party, unsecured, non-interest bearing, due
December
31,2006, past due
|
25,000
|
|||
Convertible
note payable to a related party for IRCA purchase; due December
31, 2005,
past due, unsecured, non-interest bearing convertible at $0.01
per
share
|
20,000
|
|||
Convertible
note payable to a related party for Riverbend purchase, due December
31,
2006, past due, unsecured, non-interest bearing convertible at
$0.01 per
share
|
20,000
|
|||
Total
notes payable
|
8,426,682
|
|||
Less:
current maturities
|
2,077,310
|
|||
Long-term
notes payable
|
$ |
6,349,372
|
Maturity
schedule for notes payable:
|
||||
Fiscal
Year
|
||||
2008
|
$ |
2,077,310
|
||
2009
|
3,375,000
|
|||
2010
|
2,974,372
|
|||
Total
|
$ |
8,426,682
|
Weighted
|
||||||||
Average
|
||||||||
Exercise
|
||||||||
Shares
|
Price
|
|||||||
Outstanding
at June 30, 2007
|
70,930,148
|
$ |
0.09
|
|||||
Granted
|
14,779,409
|
0.06
|
||||||
Exercised
|
-
|
-
|
||||||
Canceled
|
(1,869,388 | ) |
0.10
|
|||||
Outstanding
at September 30, 2007
|
83,840,169
|
$ |
0.08
|
|||||
Exercisable
at September 30, 2007
|
20,049,100
|
$ |
0.14
|
Options
Outstanding
|
Options
Exercisable
|
|||||||||||||||||||||
Range
of Exercise Price
|
Number
of Options Outstanding
|
Weighted
Average Exercise Price
|
Average
Remaining Contractual Life (Yrs)
|
Number
of Options
|
Weighted
Average Exercise Price
|
|||||||||||||||||
$ |
0.05
- 0.09
|
77,851,180
|
$ |
0.07
|
7
|
14,823,705
|
$ |
0.06
|
||||||||||||||
$ |
0.16
- 0.27
|
3,719,989
|
0.21
|
3
|
3,008,627
|
0.21
|
||||||||||||||||
$ |
0.50
|
2,169,000
|
0.50
|
2
|
2,116,768
|
0.50
|
||||||||||||||||
$ |
0.85
|
100,000
|
0.85
|
2
|
100,000
|
0.85
|
||||||||||||||||
83,840,169
|
$ |
0.08
|
20,049,100
|
$ |
0.14
|
Three
months ended September 30,
|
||||||
2007
|
2006
|
|||||
Risk-free
interest rate
|
4.05-4.68%
|
3.61%
|
||||
Dividend
yield
|
Nil
|
Nil
|
||||
Volatility
|
186-193%
|
120%
|
||||
Expected
life
|
2
-
7 years
|
4
years
|
Weighted
|
||||||||
Average
|
||||||||
Exercise
|
||||||||
Shares
|
Price
|
|||||||
Outstanding
at June 30, 2007
|
45,017,684
|
$ |
0.29
|
|||||
Granted
|
-
|
|||||||
Exercised
|
-
|
|||||||
Canceled
|
(16,271,333 | ) |
0.07
|
|||||
Outstanding
at September 30, 2007
|
28,746,351
|
$ |
0.42
|
Range
of Exercise Price
|
Number
of Warrants Outstanding
|
Average
Exercise Price
|
Exercisable
Through
|
||||||||
$ |
0.03
- 0.14
|
1,666,667
|
$ |
0.03
|
October
2007
|
||||||
$ |
0.15
- 0.19
|
250,000
|
$ |
0.15
|
March
2008
|
||||||
$ |
0.20
- 0.24
|
937,500
|
$ |
0.20
|
March
2008 - March 2010
|
||||||
$ |
0.25
- 0.29
|
17,817,066
|
$ |
0.26
|
October
2007 - July 2010
|
||||||
$ |
0.30
- 0.34
|
601,818
|
$ |
0.31
|
March
2008 - July 2010
|
||||||
$ |
0.80
- 1.00
|
7,473,300
|
$ |
0.96
|
November
2007 - October 2010
|
||||||
28,746,351
|
$ |
0.42
|
1.
|
Amend
the Certificate of Incorporation to effect a 1-for-20 reverse stock
split
of TWL Corporation’s outstanding common
stock
|
2.
|
Change
the Company’s domicile from Utah to
Nevada.
|
Statement
of Operations for
|
||||||||||||||||
Three
Months Ending September 30
|
2007
|
2006
|
Change
|
%
|
||||||||||||
Revenues,
net
|
$ |
5,254,508
|
$ |
6,778,690
|
$ | (1,524,182 | ) | 22 | % | |||||||
|
||||||||||||||||
Cost
and expenses:
|
||||||||||||||||
Royalty,
printing, delivery and communication costs
|
1,167,646
|
1,125,183
|
42,463
|
4 | % | |||||||||||
Salaries
and benefits
|
4,965,310
|
4,270,878
|
694,432
|
16 | % | |||||||||||
Selling,
general & administrative excluding salaries and
benefits
|
1,366,067
|
1,549,695
|
(183,628 | ) | 12 | % | ||||||||||
Amortization
of program inventory
|
-
|
2,142,145
|
(2,142,145 | ) |
-
|
|||||||||||
Depreciation
and amortization
|
251,417
|
249,871
|
1,546
|
1 | % | |||||||||||
Total
expenses
|
$ |
7,750,440
|
$ |
9,337,772
|
$ | (1,587,332 | ) | 17 | % | |||||||
Loss
from operations
|
$ | (2,495,932 | ) | $ | (2,559,082 | ) | $ |
63,150
|
2 | % | ||||||
Other
income (expense):
|
||||||||||||||||
Interest,
net
|
(464,731 | ) | (4,200,499 | ) |
3,735,768
|
89 | % | |||||||||
Interest,
net - related party
|
(281,180 | ) |
-
|
(281,180 | ) |
-
|
||||||||||
Loss
on non-consolidated affiliate
|
(34,686 | ) |
-
|
(34,686 | ) |
-
|
||||||||||
Loss
on refinance of debt
|
-
|
(1,633,840 | ) |
1,633,840
|
-
|
|||||||||||
Other
income
|
55,836
|
56,885
|
(1,049 | ) | 2 | % | ||||||||||
Total
other income (expense)
|
$ | (724,761 | ) | $ | (5,777,454 | ) | $ |
5,052,693
|
87 | % | ||||||
Net
loss
|
$ | (3,220,693 | ) | $ | (8,336,536 | ) | $ |
5,115,843
|
61 | % |
Working
Capital at September 30
|
2007
|
|||
Current
assets
|
$ |
4,459,938
|
||
Current
liabilities
|
20,801,726
|
|||
Working
Capital
|
(16,341,788 | ) |
Cash
Flows for the Three Months
|
||||||||||||||||
Ending
September 30
|
2007
|
2006
|
Change
|
%
|
||||||||||||
Cash
flows used in operating activities
|
$ | (1,665,325 | ) | $ | (1,768,754 | ) | $ |
103,429
|
6 | % | ||||||
Cash
flows used in investing activities
|
(61,516 | ) |
-
|
(61,516 | ) |
-
|
||||||||||
Cash
flows provided by financing activities
|
729,870
|
2,704,152
|
(1,974,282 | ) | 73 | % |
TWL
CORPORATION
|
||
November
14, 2007
|
By:
|
/s/
Dennis J. Cagan
|
Dennis J. Cagan | ||
Chief Executive Officer | ||
November
14, 2007
|
By:
|
/s/
Patrick R. Quinn
|
Patrick R. Quinn | ||
Chief Financial Officer |