-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Nt7bRKZNBfyy452yNc4Is0CifDKdv+ivgzaPgV/w4dVQcGd/oynLcRKjScbXN0S0 Uvr3oBt9WdlgxcnqvRwziA== 0001065949-08-000227.txt : 20081113 0001065949-08-000227.hdr.sgml : 20081113 20081113153702 ACCESSION NUMBER: 0001065949-08-000227 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20080930 FILED AS OF DATE: 20081113 DATE AS OF CHANGE: 20081113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MACHINETALKER INC CENTRAL INDEX KEY: 0001172631 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 010592299 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-49805 FILM NUMBER: 081184860 BUSINESS ADDRESS: STREET 1: 513 DE LA VINA STREET CITY: SANTA BARBARA STATE: CA ZIP: 93101 BUSINESS PHONE: 805-957-1680 MAIL ADDRESS: STREET 1: 513 DE LA VINA STREET CITY: SANTA BARBARA STATE: CA ZIP: 93101 FORMER COMPANY: FORMER CONFORMED NAME: MACHINE TALKER INC DATE OF NAME CHANGE: 20020506 10-Q 1 mti10qsept08vfinal.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarterly Period Ended September 30, 2008 or [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition period from _______________ to ______________ Commission File Number: 000-49805 MACHINETALKER, INC. ---------------------------- (Name of registrant in its charter) DELAWARE 01-05922991 -------- ----------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 513 DE LA VINA STREET, SANTA BARBARA, CALIFORNIA 93101 ---------------------------------------------------- (Address of principal executive offices) (Zip Code) Issuer's telephone Number: (805) 957-1680 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 proceeding 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 smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer [___] Accelerated filer [___] Non-accelerated filer [___] Smaller reporting company [_X_] (Do not check if a smaller reporting company) Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [___] No[_X_] Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. The number of shares of registrant's common stock outstanding, as of October 31, 2008 was 220,933,497. TABLE OF CONTENTS PART I - FINANCIAL INFORMATION 2 ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 2 Consolidated Balance Sheets September 30, 2008 (unaudited) 2 Consolidated Statements of Operations for the Nine Months Ended September 30, 2008 and September 30, 2007 (unaudited) 3 Consolidated Statement of Shareholders' Equity (Deficit) for the Nine Months Ended September 30, 2008 (unaudited) 4 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2008 and September 30, 2007 (unaudited) 5 Notes to the Consolidated Financial Statements 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 13 ITEM 4T. CONTROLS AND PROCEDURES 13 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 14 ITEM 1A. RISK FACTORS 14 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 14 ITEM 3. DEFAULTS UPON SENIOR SECURITIES 14 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 14 ITEM 5. OTHER INFORMATION 14 ITEM 6. EXHIBITS 14 SIGNATURES 15 -1- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS.
MACHINETALKER, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, 2008 December 31, 2007 --------------------- ---------------------- ASSETS CURRENT ASSETS Cash $ 10,355 $ 3,258 Other receivable - 300,000 Inventory 71,428 39,103 Prepaid expenses 1,617 5,164 --------------------- ---------------------- TOTAL CURRENT ASSETS 83,400 347,525 --------------------- ---------------------- PROPERTY & EQUIPMENT, at cost Machinery & equipment 13,080 13,080 Computer equipment 50,351 50,351 Furniture & fixture 4,670 4,670 --------------------- ---------------------- 68,101 68,101 Less accumulated depreciation (56,227) (49,186) --------------------- ---------------------- NET PROPERTY AND EQUIPMENT 11,874 18,915 --------------------- ---------------------- OTHER ASSETS Purchase option, Regents 5,000 5,000 License fees, net of amortization of $40,000 and $2,310 respectively 42,690 66,627 Goodwill, WDTI - 1,715,000 Patents 656 - Security Deposit 2,975 2,975 --------------------- ---------------------- TOTAL OTHER ASSETS 51,321 1,789,602 --------------------- ---------------------- TOTAL ASSETS $ 146,595 $ 2,156,042 ===================== ====================== LIABILITIES AND SHAREHOLDERS' (DEFICIT) CURRENT LIABILITIES Accounts payable $ 60,821 $ 42,507 Accrued expenses 381,817 244,662 Unearned revenues 40,000 30,000 Customer deposit 12,000 - Note payable, investors 80,000 65,000 Notes payable, shareholder 398,342 384,342 --------------------- ---------------------- TOTAL CURRENT LIABILITIES 972,980 766,511 --------------------- ---------------------- LONG TERM LIABILITIES Unearned revenues 8,817 48,817 Notes payable, shareholder 436,000 436,000 --------------------- ---------------------- TOTAL LONG TERM LIABILITIES 444,817 484,817 --------------------- ---------------------- TOTAL LIABILITIES 1,417,797 1,251,328 --------------------- ---------------------- SHAREHOLDERS' EQUITY/(DEFICIT) Common stock, $.001 par value; 500,000,000 authorized shares; 220,583,497 and 218,650,602 shares issued and outstanding, respectively 220,583 218,650 Additional paid in capital 5,253,574 5,212,163 Deficit accumulated during the development stage (6,745,359) (4,526,099) --------------------- ---------------------- TOTAL SHAREHOLDERS' EQUITY/(DEFICIT) (1,271,202) 904,714 --------------------- ---------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT) $ 146,595 $ 2,156,042 ===================== ====================== The accompanying notes are an integral part of these consolidated financial statements.
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MACHINETALKER, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Nine Months Ended From Inception -------------------------- --------------------------- January 30, 2002 through 9/30/2008 9/30/2007 9/30/2008 9/30/2007 September 30, 2008 ------------- ------------ ------------- ------------- ------------------ REVENUE $ 10,000 $ 10,000 $ 30,000 $ 31,730 $ 1,054,579 COST OF SERVICES 65 883 86 31,812 453,160 ------------- ------------ ------------- ------------- ------------------ GROSS PROFIT (DEFICIT) 9,935 9,117 29,914 (82) 601,419 OPERATING EXPENSES Selling and marketing expenses 19,491 68,571 110,302 233,582 1,262,805 General and administrative expenses 67,433 68,356 246,219 242,965 2,489,415 Research and development 24,338 94,097 90,904 262,331 1,410,097 Depreciation and amortization expense 4,774 11,337 30,978 17,279 99,264 ------------- ------------ ------------- ------------- ------------------ TOTAL OPERATING EXPENSES 116,036 242,361 478,403 756,157 5,261,581 ------------- ------------ ------------- ------------- ------------------ LOSS FROM OPERATIONS (106,101) (233,244) (448,489) (756,239) (4,660,162) OTHER INCOME/(EXPENSE) BEFORE PROVISION FOR INCOME TAXES Interest Income 3 3 9 9 10,247 Discounts earned - - - 2 2 Interest Expense (14,585) (11,461) (41,987) (34,742) (230,238) Stock compensation expense (4,352) (4,308) (12,875) (12,784) (69,822) Impairment loss - - (1,715,000) - (1,715,000) Loss on Investment - - - - (74,468) Gain/(Loss) on Sale of Asset - 1,237 - 1,237 (963) ------------- ------------ ------------- ------------- ------------------ TOTAL OTHER INCOME/(EXPENSES) (18,934) (14,529) (1,769,853) (46,278) (2,080,242) ------------- ------------ ------------- ------------- ------------------ PROVISION FOR INCOME TAXES (118) - (918) (800) (4,955) ------------- ------------ ------------- ------------- ------------------ NET (LOSS) $ (125,153) $ (247,773) $(2,219,260) $ (803,317) $ (6,745,359) ============= ============ ============= ============= ================== BASIC AND DILUTED LOSS PER SHARE $ (0.00) $ (0.00) $ (0.01) $ (0.00) ============= ============ ============= ============= WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED 219,174,439 169,838,898 218,864,438 164,695,814 ============= ============ ============= ============= The accompanying notes are an integral part of these consolidated financial statements.
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MACHINETALKER, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) NINE MONTHS ENDED SEPTEMBER 30, 2008 (Unaudited) Accumulated Deficit During Common stock Additional the ------------------------ Paid-in Development Shares Amount Capital Stage Total ----------- ------------ ------------ ------------ ------------ Balance at December 31, 2007 218,650,602 $ 218,650 $ 5,212,163 $(4,526,099) $ 904,714 Issuance of common stock in March 2008 (66,229 shares at $0.07 per share for services) (unaudited) 66,229 66 4,570 - 4,636 Issuance of common stock in July 2008 (366,666 shares at $0.05 per share for services) (unaudited) 366,666 367 17,966 - 18,333 Issuance of common stock in September 2008 (1,500,000 shares at $0.005 per share for services) (unaudited) 1,500,000 1,500 6,000 - 7,500 Stock compensation cost (unaudited) - - 12,875 - 12,875 Net Loss for the nine months ended September 30, 2008 (unaudited) - - - (2,219,260) (2,219,260) ----------- ------------ ------------ ------------ ------------ Balance at September 30, 2008 (unaudited) 220,583,497 $ 220,583 $ 5,253,574 $(6,745,359) $(1,271,202) =========== ============ ============ ============ ============ The accompanying notes are an integral part of these consolidated financial statements.
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MACHINETALKER, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended From Inception --------------------------------- January 30, 2002 through 9/30/2008 9/30/2007 September 30, 2008 ---------------- ---------------- ------------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (2,219,260) $ (803,317) $ (6,745,359) Adjustment to reconcile net loss to net cash used in operating activities Depreciation and amortization expense 30,978 17,279 99,264 Issuance of common shares and warrants for services 30,469 65,658 565,392 Issuance of common shares in conversion of debt - - 400,000 Write off of investment value - - 74,468 Stock compensation cost 12,875 12,784 69,822 Gain/(loss) on sale of asset - (1,237) (1,237) Impairment loss 1,715,000 - 1,715,000 Disposal of asset - - 4,200 (Increase) Decrease in: Inventory (32,325) (7,489) (71,428) Employee advance - 227 - Prepaid expenses 3,547 4,136 (1,617) Deposits - - (2,975) Other assets (656) - (656) Increase (Decrease) in: Accounts payable 18,314 (2,080) 60,821 Accrued expenses 137,155 131,824 381,817 Customer deposit 12,000 - 12,000 Unearned revenue (30,000) (30,000) 48,817 ---------------- --------------- ------------------ NET CASH USED IN OPERATING ACTIVITIES (321,903) (612,215) (3,391,671) ---------------- --------------- ------------------ NET CASH FLOWS USED IN INVESTING ACTIVITIES: Purchase of property and equipment - (1,055) (68,654) Sale of asset - 1,963 1,963 Investment in companies - (7,468) (7,468) ----------------- --------------- ------------------ NET CASH USED IN INVESTING ACTIVITIES - (6,560) (74,159) ---------------- --------------- ------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Loans from officers 59,000 309,342 1,079,342 Payments on loans from officers (45,000) - (45,000) Proceeds from subsidairy 300,000 - 300,000 Proceeds from investor 15,000 - 125,000 Payments on notes payable - - (45,000) Proceeds from issuance of common stock - 264,068 2,054,193 ---------------- --------------- ------------------ NET CASH PROVIDED BY FINANCING ACTIVITIES 329,000 573,410 3,468,535 ---------------- --------------- ------------------ NET INCREASE/(DECREASE) IN CASH 7,097 (45,365) 2,705 CASH, BEGINNING OF PERIOD 3,258 50,546 7,650 ---------------- --------------- ------------------ CASH, END OF PERIOD $ 10,355 $ 5,181 $ 10,355 ================ =============== ================== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid $ - $ - $ 133,948 ================ =============== ================== Income taxes $ 918 $ 800 $ 4,955 ================ =============== ================== SUPPLEMENTAL SCHEDULE OF NON-CASH TRANSACTIONS During the nine months ended September 30, 2008, the Company expensed compensation cost of $12,875 related to the vesting of employee stock options; issued 1,932,895 shares of common stock for services at a fair value of $30,469; Loss on impairment of goodwill in the amount of $1,715,000. During the nine months ended September 30, 2007, the Company expensed compensation cost of $12,874 related to the vesting of employee stock options; 845,593 issued for services for a fair value of $65,658; 3,000,000 shares of common stock issued to acquire 100% of the total issued and outstanding stock of WDT from UTEK for a value of $240,000; the Company issued 2,857,143 shares of common stock in conversion of debt valued at $200,000. The accompanying notes are an integral part of these consolidated financial statements.
-5- MACHINETALKER, INC. AND SUBSIDIARY (A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED SEPTEMBER 30, 2008 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008 For further information refer to the consolidated financial statements and footnotes thereto included in the Company's Form 10-KSB for the year ended December 31, 2007. GOING CONCERN The accompanying consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities and commitments in the normal course of business. The accompanying consolidated financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company does not generate significant revenue, and has negative cash flows from operations, which raise substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern and appropriateness of using the going concern basis is dependent upon, among other things, an additional cash infusion. The Company has obtained funds from its shareholders since its inception through September 30, 2008. It is Management's plan to generate additional working capital from investors, and then continue to pursue its business plan and purposes. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies of MachineTalker, Inc. is presented to assist in understanding the Company's consolidated financial statements. The consolidated financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the consolidated financial statements. DEVELOPMENT STAGE ACTIVITIES AND OPERATIONS The Company has been in its initial stages of formation and for the nine months ended September 30, 2008, had insignificant revenues. FASB #7 defines a development stage activity as one in which all efforts are devoted substantially to establishing a new business and even if planned principal operations have commenced, revenues are insignificant. REVENUE RECOGNITION The Company recognizes revenue when services are performed, and at the time of shipment of products, provided that evidence of an arrangement exists, title and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured. The Company also granted an exclusive license limited to a specific application for the use of the technology required to operate the Company's product. The revenue related to this transaction is recognized over the contract period, and the related deferred revenue amounted to $48,817 at September 30, 2008. To date the Company has had minimal revenue and is still in the development stage. -6- MACHINETALKER, INC. AND SUBSIDIARY (A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED SEPTEMBER 30, 2008 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) STOCK-BASED COMPENSATION On January 1, 2006, the Company adopted Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment" (FAS) No. 123R, that addresses the accounting for share-based payment transactions in which an enterprise receives employee services in exchange for either equity instruments of the enterprise or liabilities that are based on the fair value of the enterprise's equity instruments or that may be settled by the issuance of such equity instruments. The statement eliminates the ability to account for share-based compensation transactions, as we formerly did, using the intrinsic value method as prescribed by Accounting Principles Board, or APB, Opinion No. 25, "Accounting for Stock Issued to Employees," and generally requires that such transactions be accounted for using a fair-value-based method and recognized as expenses in our statement of income. The adoption of (FAS) No. 123R by the Company had no material impact on the statement of income. The Company adopted FAS 123R using the modified prospective method which requires the application of the accounting standard as of January 1, 2006. Our financial statements as of and for the nine months ended September 30, 2008 reflect the impact of adopting FAS 123R. In accordance with the modified prospective method, the financial statements for prior periods have not been restated to reflect, and do not include, the impact of FAS 123R. Stock-based compensation expense recognized during the period is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. Stock-based compensation expense recognized in the consolidated statements of operations during the nine months ended September 30, 2008, included compensation expense for the stock-based payment awards granted prior to, but not yet vested, as of September 30, 2008 based on the grant date fair value estimated in accordance with the pro forma provisions of FAS 148, and compensation expense for the stock-based payment awards granted subsequent to September 30, 2008, based on the grant date fair value estimated in accordance with FAS 123R. As stock-based compensation expense recognized in the statement of income for the nine months ended September 30, 2008 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures, FAS 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. In the pro forma information required under FAS 148 for the periods prior to the year ended December 31, 2007, we accounted for forfeitures as they occurred. The stock-based compensation expense recognized in the consolidated statement of operations during the nine months ended September 30, 2008 is $12,875. LOSS PER SHARE CALCULATIONS The Company adopted Statement of Financial Standards ("SFAS") No. 128 for the calculation of "Loss per Share". SFAS No. 128 dictates the calculation of basic earnings per share and diluted earnings per share. Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company's diluted loss per share is the same as the basic loss per share for the nine months ended September 30, 2008 as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss. The weighted average number of shares used for the calculation of the loss per share considers the stock split as if it had occurred on January 1, 2003. RECLASSIFICATION The expenses for the nine months ended September 30, 2007 were reclassified to conform with the expenses for the nine months ended September 30, 2008. -7- MACHINETALKER, INC. AND SUBSIDIARY (A Development Stage Company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED SEPTEMBER 30, 2008 3. CAPITAL STOCK AND WARRANTS During the nine months ended September 30, 2008, the Company issued 1,932,895 shares of common stock for a fair value of $30,469 for services. During the nine months ended September 30, 2007, the Company issued 2,520,000 shares of common stock for cash of $126,000 at a price of $0.05 per share through a private placement; 3,000,000 shares of common stock in order to purchase stock in another company at a price of $0.08 per share valued at $240,000; 1,828,571 shares of common stock for cash of $128,000 at a price of $0.07 per share through a private placement; 31,818 shares of common stock for cash of $3,818 for warrants exercised at a price of $0.12 per share; 2,857,143 shares of common stock for the conversion of a note with a principal amount of $200,000 at a price of $0.07 per share; 250,000 shares of common stock for cash of $6,250 for employee stock options exercised at a price of $0.025 per share; and 38,260 shares of common stock for services at a fair value of $3,826 at a price of $0.10 per share. WARRANTS During the nine months ended September 30, 2007, the Company issued 600,000 warrants for services with a fair value of $49,487 determined using the Black Scholes pricing model; 31,818 of these warrants were exercised at a price of $0.12. At September 30, 2008, the Company had a total of 5,108,515 warrants to purchase 5,108,515 shares of common stock outstanding. 4. INCOME TAXES The Company files income tax returns in the U.S. Federal jurisdiction, and the state of California. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2004. The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. Deferred income taxes have been provided by temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. To the extent allowed by GAAP, we provide valuation allowances against the deferred tax assets for amounts when the realization is uncertain. Included in the balance at September 30, 2008, are no tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The Company's policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. 5. SUBSEQENT EVENTS On or about October 8, 2008, the Company appointed Mark Richardson as a director of the Company. Also, the Company issued to Mark Richardson 350,000 shares of common stock at a fair value of $1,750 for services as a director of the Company. -8- ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. CAUTIONARY STATEMENTS This Form 10-Q contains financial projections and other "forward-looking statements," as that term is used in federal securities laws, about MachineTalker, Inc.'s ("we," "us," or the "Company") financial condition, results of operations and business. These statements include, among others: statements concerning the potential for revenues and expenses and other matters that are not historical facts. These statements may be made expressly in this Form 10-Q. You can find many of these statements by looking for words such as "believes," "expects," "anticipates," "estimates," or similar expressions used in this Form 10-Q. These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause the Company's actual results to be materially different from any future results expressed or implied by the Company in those statements. The most important facts that could prevent the Company from achieving its stated goals include, but are not limited to, the following: (a) volatility or decline of the Company's stock price; (b) potential fluctuation in quarterly results; (c) failure of the Company to earn revenues or profits; (d) inadequate capital and barriers to raising the additional capital or to obtaining the financing needed to implement its business plans; (e) inadequate capital to continue business; (f) changes in demand for the Company's products and services; (g) rapid and significant changes in markets; (h) litigation with or legal claims and allegations by outside parties; and (i) insufficient revenues to cover operating costs. Because the statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. The Company cautions you not to place undue reliance on the statements, which speak only as of the date of this Form 10-Q. The cautionary statements contained or referred to in this section should be considered in connection with any subsequent written or oral forward-looking statements that the Company or persons acting on its behalf may issue. The Company does not undertake any obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events. The following discussion should be read in conjunction with our condensed financial statements and notes to those statements. In addition to historical information, the following discussion and other parts of this quarterly report contain forward-looking information that involves risks and uncertainties. OVERVIEW In February 2008, we completed development and began to conduct demonstrations of Talker(R) products for wireless Condition-Based Maintenance ("CBM") applications. These Talkers(R) are equipped with vibration sensors to monitor changes in the characteristics of motors and bearing supports located throughout large industrial facilities where the typical wired systems are difficult to install. A change in the vibration pattern of a rotating device indicates that the device requires immediate maintenance. We believe that our products for the CBM market will enable us to field complete systems that gather data automatically and transmit that data over a wireless connection to a center where the CBM analysis can be made. We believe that CBM eliminates the expense of unnecessary periodic repairs and also eliminates labor costs associated with having to manually test these rotating devices in order to determine potential failure. Our second area of focus is developing a more capable sensor using variations of Ultra-Wide Band ("UWB") to maintain the security of cargo in shipping containers. Our UWB technology is now able to detect any minimal -9- movement which means that if anything moves inside a container, or opens a hole or intrudes in any way, the change can be detected and the Talker(R) can send an alert. Our acquisition of 100% of Wideband Detection Technologies, Inc. ("WDT") and its license from Lawrence Livermore National Laboratory that covers this UWB intrusion detector (and other UWB technology) permits us to place this new product into service for the security application. We currently have four full time employees as compared to six employees during 2007. This change reflects reduction of administration and reliance upon OEMs and Systems Integrators as marketing representatives and technical consultants, all of whom are consultants and not employees. APPLICATION OF CRITICAL ACCOUNTING POLICIES Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. 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 disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to impairment of property, plant and equipment, intangible assets, deferred tax assets and fair value computation using the Black Scholes option pricing model. We base our estimates on historical experience and on various other assumptions, such as the trading value of our common stock and estimated future undiscounted cash flows, that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions; however, we believe that our estimates, including those for the above-described items, are reasonable. USE OF ESTIMATES In accordance with accounting principles generally accepted in the United States, management utilizes estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These estimates and assumptions relate to recording net revenue, collectibility of accounts receivable, useful lives and impairment of tangible and intangible assets, accruals, income taxes, inventory realization, stock-based compensation expense and other factors. Management believes it has exercised reasonable judgment in deriving these estimates. Consequently, a change in conditions could affect these estimates. FAIR VALUE OF FINANCIAL INSTRUMENTS Our cash, cash equivalents, investments, accounts receivable and accounts payable are stated at cost which approximates fair value due to the short-term nature of these instruments. In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123R, Share-based Payment. SFAS 123R revises SFAS 123 and supersedes APB 25. SFAS 123R will be effective for the year ending December 31, 2006, and applies to transactions in which an entity exchanges its equity instruments for goods or services and also applies to liabilities an entity may incur for goods or services that are to follow a fair value of those equity instruments. Under SFAS 123R, we will be required to follow a fair value approach using an option-pricing model, such as the Black Scholes option valuation model, at the date of a stock option grant. The deferred compensation calculated under the fair value method would then be amortized over the respective vesting period of the stock option. The adoption of SFAS 123R will not have a material impact on our results of operations. REVENUE RECOGNITION We recognize revenue in accordance with the Securities and Exchange Commission ("SEC") Staff Accounting Bulletin No. 104, "Revenue Recognition in Financial Statements" ("SAB 104"). We recognize revenue upon delivery, provided that evidence of an arrangement exists, title, and risk of loss have passed to the customer, fees are fixed or determinable, and collection of the related receivable is reasonably assured. We record revenue net of estimated product returns, which is based upon our return policy, sales agreements, management estimates of potential future product returns related to current period revenue, current economic trends, changes in customer composition and historical experience. We accrue for warranty costs, sales returns, and other allowances -10- based on our experience which tells us we have less than $25,000 per year in warranty returns and allowances. Generally, we extend credit to our customers and do not require collateral. We perform ongoing credit evaluations of our customers and historic credit losses have been within our expectations. We do not ship a product until we have either a purchase agreement or rental agreement signed by the customer with a payment arrangement. This is a critical policy, because we want our accounting to show only sales which are "final" with a payment arrangement. We do not make consignment sales, nor inventory sales subject to a "buy back" or return arrangement from customers. Accordingly, original equipment manufacturers do not presently have a right to return unsold products to the Company. We also grant exclusive licenses for the use of the technology required to operate our products. We recognize revenue from software licensing arrangements under SOP 97-2 "Software Revenue Recognition," as amended by SOP-98-9, Modification of SOP 97-2, "Software Revenue Recognition with Respect to Certain Transactions." For those contracts that either do not contain a services component or that have services which are not essential to the functionality of any other element of the contract, software license revenue is recognized over the contract period. PROVISION FOR SALES RETURNS, ALLOWANCES AND BAD DEBTS We maintain a provision for sales allowances, returns and bad debts. Sales returns and allowances result from equipment damaged in delivery or customer dissatisfaction, as provided by agreement. The provision is provided for by reducing gross revenue by a portion of the amount invoiced during the relevant period. The amount of the reduction is estimated based on historical experience. RESERVE FOR OBSOLETE/EXCESS INVENTORY Inventories are stated at the lower of cost or market. We regularly review our inventories and, when required, will record a provision for excess and obsolete inventory based on factors that may impact the realizable value of our inventory including, but not limited to, technological changes, market demand, regulatory requirements and significant changes in our cost structure. If ultimate usage varies significantly from expected usage, or other factors arise that are significantly different than those anticipated by management, inventory write-downs or increases in reserves may be required. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In December 2004, the Financial Accounting Standards Board issued two FASB Staff Positions - FSP FAS 109-1, Application of FASB Statement 109 "Accounting for Income Taxes" to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004, and FSP FAS 109-2 Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004. Neither of these affected us as it does not participate in the related activities. In May 2005, the FASB issued FASB Statement No. 154, "Accounting Changes and Error Corrections." This new standard replaces APB Opinion No. 20, "Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements," and represents another step in the FASB's goal to converge its standards with those issued by the IASB. Among other changes, Statement 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so. Statement 154 also provides that (1) a change in method of depreciating or amortizing a long-lived non-financial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a "restatement." The new standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. Early adoption of this standard is permitted for accounting changes and correction of errors made in fiscal years beginning after June 1, 2005. We have evaluated the impact of the adoption of Statement 154 and do not believe the impact will be significant to our overall results of operations or financial position. -11- RESULTS OF OPERATIONS FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2008 COMPARED TO THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2007 REVENUE Total revenue for the three months ended September 30, 2008 was $10,000 as compared to $10,000 for the three months ended September 30, 2007. Total revenue decreased by $1,730 or 5.45% to $30,000 for the nine months ended September 30, 2008 compared to $31,730 for the nine months ended September 30, 2007. This decrease in revenue was a result of focusing on research and development. COST OF SALES Cost of Sales ("COS") decreased by $(818) or (92.64)% to $65 for the three months ended September 30, 2008 compared to the prior period. COS decreased by $(31,726) or (99.73)% to $86 for the nine months ended September 30, 2008 compared to the prior period. This decrease in COS was a result of a decrease in raw materials and labor. SELLING AND MARKETING EXPENSES Selling and marketing ("S&M") expenses decreased by $(49,080) or (71.58)%, to $19,491 for the three months ended September 30, 2008 compared to the prior period. S&M expenses decreased by $(123,280) or (52.78)%, to $110,302 for the nine months ended September 30, 2008 compared to the prior period. This decrease in S&M expenses was the result of a decrease in salaries and marketing services. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative ("G&A") expenses decreased by $(923) or (1.35)%, to $67,433 for the three months ended September 30, 2008 compared to the prior period. G&A expenses increased by $3,254 or 1.34%, to $246,219 for the nine months ended September 30, 2008 compared to the prior period. This increase in G&A expenses for the nine months ended September 30, 2008 was the result of an increase in professional fees and salaries paid by the Company. RESEARCH AND DEVELOPMENT Research and Development ("R&D") costs decreased by $(69,759) or (74.14)%, to $24,338 for the three months ended September 30, 2008 compared to the prior period. R&D costs decreased by $(171,427) or (65.35)%, to $90,904 for the nine months ended September 30, 2008 compared to the prior period. This decrease in R&D costs was the result of purchasing wireless technology through equity financing. NET LOSS Net Loss decreased by $122,620 or 49.49% to $(125,153) for the three months ended September 30, 2008, compared to the prior period. Net Loss increased by $(1,415,943) or (176.26)% to $(2,219,260) for the nine months ended September 30, 2008, compared to the prior period. This increase in Net Loss for the nine months ended September 30, 2008 resulted mainly from the loss impairment of goodwill, and also from operational costs. Currently operating costs exceed revenue because sales are not yet significant. We cannot assure when or if revenue will exceed operating costs. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 2008, we had a working capital deficit of $889,580 as compared to a working capital deficit of $418,986 as of December 31, 2007. This increase of $470,594 was due primarily to use of funds for operational costs. Cash flow used in operating activities was $321,903 for the nine months ended September 30, 2008, as compared to cash used of $612,215 for the prior period. This decrease of $290,312 was primarily attributable to a decrease in research and development and general and administrative expenses. -12- Cash used by investing activities was $0 for the nine months ended September 30, 2008, as compared to cash used of $6,560 for the prior period. The cash used in investing activities in the prior period was primarily due to an investment in subsidiary. Cash provided from financing activities during the nine months ended September 30, 2008 was $329,000 as compared to cash provided of $573,410 for the prior period. The decrease of $244,410 was due to a decrease in loans received from an officer of the Company and equity financing. PLAN OF OPERATION AND FINANCING NEEDS We have completed the development of Talker(R) units that track and report over the Internet the position of any moving cargo along with information from sensors that accompany the Talkers while en-route. Reports are now issued over cellular connection. These remote tracking units are being demonstrated in refrigeration trailers to assure that produce and other perishable contents are handled in a timely manner. Management estimates that we will require additional cash resources during the remainder of 2008 and into the first quarter of 2009 in order to increase our marketing and sales activity so that introduction of our completed products to customers will result in sales. If we are unable to obtain sufficient funds during the next six months, we may be forced to reduce the size of our organization, which could have a material adverse impact on, or cause us to curtail and/or cease, the development and marketing of our products. OFF-BALANCE SHEET ARRANGEMENTS We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not Applicable. ITEM 4T. CONTROLS AND PROCEDURES. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by the Company is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Our management, under the direction of our Chief Executive Officer and Principal Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such terms are defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2008. As part of such evaluation, management considered the matters discussed below relating to internal control over financial reporting. Based on this evaluation our management, including the Company's Chief Executive Officer and Principal Financial Officer, has concluded that the Company's disclosure controls and procedures were effective as of September 30, 2008. INTERNAL CONTROL OVER FINANCIAL REPORTING The Company's Chief Executive Officer and Principal Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our 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 of accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. -13- CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING There were no changes in the Company's internal control over financial reporting identified in connection with the evaluation of it that occurred during the quarter ended September 30, 2008 that materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. None. ITEM 1A. RISK FACTORS. Not Applicable. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. In July 2008, the Company issued a total of 366,666 shares of common stock to two employees for services rendered to the Company. In September 2008, the Company issued a total of 1,500,000 shares of common stock to two employees for services rendered to the Company. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS. EXHIBIT DESCRIPTION ------- ----------------------------------------------------- 31.1 Section 302 Certification of Chief Executive Officer 31.2 Section 302 Certification of Chief Financial Officer 32.1 Section 906 Certification of Chief Executive Officer 32.2 Section 906 Certification of Chief Financial Officer -14- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MACHINETALER, INC. Dated: November 13, 2008 By: /s/Roland F. Bryan ----------------------------------------- Roland F. Bryan, Chairman of the Board and Chief Executive Officer (Principal Executive Officer) Dated: November 13, 2008 By: /s/Roland F. Bryan ----------------------------------------- Roland F. Bryan, Chief Financial Officer (Principal Financial Officer) -15- EX-31.2 2 ex311.txt EXHIBIT 31.1 SECTION 302 CERTIFICATION EXHIBIT 31.1 CERTIFICATION I, Roland F. Bryan, certify that: 1. I have reviewed this report on Form 10-Q of MachineTalker, Inc.; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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 registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; c. Evaluated the effectiveness of the registrant'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 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 (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant'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 registrant's board of directors (of persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; 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. Date: November 13, 2008 /s/ Roland F. Bryan ------------------------------------------------------ Roland F. Bryan, Chief Executive Officer and President (Principal Executive Officer) EX-31.2 3 ex312.txt EXHIBIT 31.2 SECTION 302 CERTIFICATION EXHIBIT 31.2 CERTIFICATION I, Roland F. Bryan, certify that: 1. I have reviewed this report on Form 10-Q of MachineTalker, Inc.; 2. Based on my knowledge, this 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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 registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; c. Evaluated the effectiveness of the registrant'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 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 (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant'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 registrant's board of directors (of persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; 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. Date: November 13, 2008 /s/ Roland F. Bryan ----------------------------------------------------- Roland F. Bryan, Chief Financial Officer (Principal Financial Officer) EX-32.1 4 ex321.txt EXHIBIT 32.1 SECTION 906 CERTIFICATION 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 MachineTalker, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2008 (the "Report") I, Roland F. Bryan, Chief Executive Officer and President of the Company, certify, pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief: (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. Dated: November 13, 2008 /s/ Roland F. Bryan - ------------------------------------------------------ Roland F. Bryan, Chief Executive Officer and President This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. EX-32.2 5 ex322.txt EXHIBIT 32.2 SECTION 906 CERTIFICATION Exhibit 32.2 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 MachineTalker, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2008 (the "Report") I, Roland F. Bryan, Chief Financial Officer of the Company, certify, pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief: (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. Dated: November 13, 2008 /s/ Roland F. Bryan - ---------------------------------------- Roland F. Bryan, Chief Financial Officer This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----