-----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, OW1dfvD/v6JinFSXbCB7xe4maGQywAn+K+EvDWJRfo6vHcHR50bUtozRPKhSZnnG Q6spkjlHiINAeya48P9BCA== 0000891020-06-000139.txt : 20071212 0000891020-06-000139.hdr.sgml : 20071212 20060531214442 ACCESSION NUMBER: 0000891020-06-000139 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20051231 FILED AS OF DATE: 20060601 DATE AS OF CHANGE: 20061114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROFIELD GROUP INC CENTRAL INDEX KEY: 0000944947 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL WORK [1731] IRS NUMBER: 930935149 STATE OF INCORPORATION: OR FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-26226 FILM NUMBER: 06878391 BUSINESS ADDRESS: STREET 1: 1631 NW THURMAN, SUITE 310 CITY: PORTLAND STATE: OR ZIP: 97209 BUSINESS PHONE: 5034193580 MAIL ADDRESS: STREET 1: 1631 NW THURMAN, SUITE 310 CITY: PORTLAND STATE: OR ZIP: 97209 FORMER COMPANY: FORMER CONFORMED NAME: MICROFIELD GRAPHICS INC /OR DATE OF NAME CHANGE: 19950504 10KSB/A 1 v20822a1e10ksbza.htm FORM 10-KSB/A e10ksbza
 

 
 
U.S. Securities and Exchange Commission
Washington, D. C. 20549
Form 10-KSB/A
     
þ   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005
     
o   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number : 0-26226
MICROFIELD GROUP, INC.
(Name of small business issuer in its charter)
     
Oregon   93-0935149
(State or other jurisdiction   (I. R. S. Employer
of incorporation or organization)   Identification No.)
1631 NW Thurman St., Suite 200
Portland, Oregon 97209
(Address of principal executive offices and zip code)

(503) 419-3580
(Issuer’s telephone number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock
Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  o
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes þ No o
Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-KSB or any amendment to this Form 10-KSB. þ
Issuer’s revenues for its most recent fiscal year were $57,935,000.
Indicate by check mark whether Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o
The aggregate market value of voting stock held by non-affiliates of the registrant at March 1, 2006 was $161,282,000 computed by reference to the average bid and asked prices as reported on the Nasdaq Bulletin Board Market.
The number of shares outstanding of the Registrant’s Common Stock as of March 31, 2006 was 62,702,303 shares.
 
 

 

 

Item 8A. Controls and Procedures
     Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
     As of the end of the period covered by this Annual Report, we conducted evaluations, under the supervision and with the participation of our President and Chief Financial Officer (CFO), of our disclosure controls and procedures (as defined in Rules 13a-15(e) of the Exchange). Based on their evaluations, our President and CFO concluded that our disclosure controls and procedures need additional improvement. As of December 31, 2005 our President and CFO concluded that our disclosure controls and procedures were not effective to ensure timely reporting with the Securities and Exchange Commission. In order to remediate these weaknesses, we, under the direction of our CFO, performed additional procedures that compensate for the lack of effective controls. These additional procedures which are described in greater detail below, include but are not limited to, the implementation of (i) an enhanced quarterly and annual financial statement close and (ii) review and reporting processes to include additional levels of analysis and review. Additionally, our management has undergone a limited process of identifying deficiencies with respect to our disclosure controls and procedures and implementing corrective measures, which includes the establishment of new internal policies related to financial reporting. We hired a new CFO in September 2005, and a new Corporate Controller in February 2006. The hiring of the Corporate Controller added expertise in the area of internal controls and procedures that did not previously exist within our management. A significant component of the duties to be performed in that position will be to improve the internal controls and procedures. We have the objective of being in compliance with all Sarbanes-Oxley mandates as required. This objective includes a complete review and documentation of the internal controls and procedures in place, with changes to those controls and procedures as deemed necessary to comply with Sarbanes-Oxley.
Changes in Internal Control over Financial Reporting
     As required by Rule 13a-15(d), our management, including the President, also conducted an evaluation of our internal controls over financial reporting to determine whether any changes occurred during the fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. During the preparation of our financial statements as of and for the year ended December 31, 2005, our President and CFO concluded that our current system of disclosure controls and procedures was not effective because of the internal control weaknesses identified below. As a result of this conclusion, we have initiated the changes in internal control also described below.
     Deficiencies and Corrective Actions Relating to the Company’s Internal Controls over Financial Reporting
     During the course of the audit of our December 31, 2005 financial statements, our registered independent public accounting firm identified certain material weaknesses relating to our internal controls and procedures within the areas of revenue recognition, accounts payable, cash disbursements, inventory accounting and document retention. Certain of these internal control deficiencies may also constitute deficiencies in our disclosure controls.

 

We made three separate acquisitions during the past three years:
CVI in September 2003
CEI in July 2005 and
ECI in October 2005
     Both CVI and CEI, where internal control weaknesses existed, were privately held before the acquisitions, and did not have formally established controls and procedures in place. The main internal control weaknesses that existed and the areas of the business involved are described below.
Revenue recognition
•   Incomplete or missing customer contract files
•   Incomplete or missing proof of sale or agreement
•   Non-existent or limited review procedures
•   Inconsistent application of percentage of completion estimation
Cash disbursements and liability recognition
•   No standardized purchasing procedures
•   Inadequate approval procedures
•   Limited separation of duties
•   Inadequate document control system
•   Inconsistently applied period cutoff procedures
•   Cash account reconciliations not performed timely
Other
•   Accounts not reconciled for long periods of time
•   Monthly books and records not closed timely
•   Limited review of accounting reconciliations
•   Lack of properly trained personnel to perform duties
•   Inadequate inventory tracking procedures
•   Inadequate fixed asset tracking procedures
•   Lack of accounts receivable aging monitoring procedures
     In order to review the financial condition and prepare the financial disclosures in this document, our officers have been responding to recommendations from our registered independent public accounting firm to properly and accurately account for the financial information contained in this Form 10-KSB. To begin correcting these material weaknesses, we have undertaken the following:
•   Qualified personnel have been hired to perform additional procedures in an effort to support and substantiate account balances at period end.
•   Detailed validation work was done by internal personnel with respect to all consolidated balance sheet account balances to substantiate the financial information that is contained in this Form 10-KSB.
•   Additional analysis was performed on consolidated income statement amounts and compared to prior period (both year over year and consecutive period) amounts for reasonableness. This additional analysis is supplemental to the audit procedures normally required for our registered independent public accounting firm to provide an opinion on the financial statements.

 

     At December 31, 2005, certain internal control weaknesses remained. These weaknesses will be addressed in prospective quarters through management’s continuing implementation of a more effective system of controls, procedures and other changes in the areas of revenue recognition, cash disbursements, account reconciliation and document control to insure that information required to be disclosed in this annual report on Form 10-KSB has been recorded, processed, summarized and reported accurately. Our management acknowledges the existence of this problem, and has developed procedures to address them to the extent possible given limitations in financial and manpower resources. Among the changes that have been implemented, or that are in the process of being implemented are:
Revenue recognition
•   Criteria and procedures established defining approved customer contracts
•   Control function established to review and monitor compliance to new procedures
•   Improved document control and file check out procedures
•   Procedure established defining consistent percentage completion Gross Margin estimation process
Cash disbursements and liability recognition
•   Document control system established and monitored for compliance
•   Cut off procedures formalized and consistently applied
•   Centralized departmental budgets and accountability established
•   Purchasing procedures have been formalized and implementation has begun
•   Procedures instituted to provide for appropriate separation of duties
Other
•   Procedures established and personnel assigned to reconcile key accounts on a timely basis
•   Control function added to review reconciliations
•   Timely closing and review of books and records
•   Deadlines imposed for period end closings
     To correct the material weakness, checklists will be developed delineating tasks, preparation responsibilities, and review responsibilities targeting specific completion dates. The checklist will provide evidentiary support of work performed and review. Specific checklists will be developed for non-quarter end months, quarter end months and the annual close. These checklists have been developed and will be implemented in the second quarter 2006 close process and utilized in the preparation of the second quarter 2006 Form 10-Q and subsequent period ends.
     Our officers have been working with the Board of Directors to address recommendations from our registered independent public accounting firm regarding deficiencies in the disclosure controls and procedures. We are currently engaged in the implementation of a new internal software system and associated new internal control procedures. Management expects that this system along with new associated procedures, once implemented, will correct the deficiencies and will result in disclosure controls and procedures pursuant to Rule 13a-14 of the Exchange Act, that will timely alert the President to material information relating to us required to be included in our Exchange Act filings.

 

SIGNATURES
     In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
             
Dated: June 1, 2006
            
 
            
    MICROFIELD GROUP, INC.
 
            
 
  By:   /s/ Rodney M. Boucher
 
    
    Rodney M. Boucher
    Chief Executive Officer
     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
     
Signature   Title
 
/s/ Rodney M. Boucher
  Chief Executive Officer and Director
     
Rodney M. Boucher
  Date:  June 1, 2006
 
    
/s/ A. Mark Walter
  President and Director
     
A. Mark Walter
  Date:  June 1, 2006
 
    
/s/ Randall R. Reed
  Chief Financial Officer (Principal Financial and Accounting Officer)
     
Randall R. Reed
   Date:  June 1, 2006
 
    
/s/ Michael W. Stansell
  Director
     
Michael W. Stansell
  Date:  June 1, 2006
 
    
/s/ Gene Ameduri
  Director
     
Gene Ameduri
  Date:  June 1, 2006
 
    
/s/ William C. McCormick
  Director
     
William C. McCormick
  Date:  June 1, 2006
 
    
/s/ Gary D. Conley
  Director
     
Gary D. Conley
  Date:  June 1, 2006
EX-31.1 2 v20822a1exv31w1.txt EXHIBIT 31.1 CERTIFICATIONS EXHIBIT 31.1 I, Rodney Boucher, certify that: 1. I have reviewed this annual report on Form 10-KSB/A of Microfield Group, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures 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 annual report is being prepared; b) 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 period covered by this report based on such evaluation; and c) 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 registrant'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 officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 1, 2006 /s/ RODNEY M. BOUCHER --------------------------- Rodney M. Boucher Chief Executive Officer EX-31.2 3 v20822a1exv31w2.txt EXHIBIT 31.2 CERTIFICATIONS EXHIBIT 31.2 I, Randall R. Reed, certify that: 1. I have reviewed this annual report on Form 10-KSB/A of Microfield Group, Inc.; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures 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 annual report is being prepared; b) 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 period covered by this report based on such evaluation; and c) 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 registrant'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 officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 1, 2006 /s/ RANDALL R. REED --------------------------- Randall R. Reed Chief Financial Officer CORRESP 4 filename4.txt [SICHENZIA ROSS FRIEDMAN FERENCE LLP LETTERHEAD] June 1, 2006 Securities and Exchange Commission Division of Corporation Finance 100 F Street, NE Washington, D.C. 20549 Attention: Pamela A. Long, Esq. Re: Microfield Group, Inc. Form 10-KSB filed April 6, 2006 File No. 0-26226 Dear Ms. Long: This letter sets forth the responses of Microfield Group, Inc., an Oregon corporation (the "Company" or "we"), to the comments received from the Staff (the "Staff") of the Securities and Exchange Commission (the "Commission") by the letters dated May 16, 2006 and May 24, 2006 concerning the Company's Form 10-KSB filed with the Commission on April 6, 2006 (the "Form 10-KSB"). We are authorized by the Company to provide the responses contained in this letter on behalf of the Company. The numbers of the responses in this letter correspond to the numbers of the Staff's comments as set forth in its letter to the Company dated May 16, 2006 and its letter to the Company dated May 24, 2006. References in the text of the responses herein to captions and page numbers are to Form 10-KSB/A which is being filed herewith. For your convenience, we set forth each comment from your comment letter in bold typeface and include the Company's response below it. Letter Dated May 16, 2006 - ------------------------- ITEM 8A. CONTROLS AND PROCEDURES, PAGE 73 - ----------------------------------------- EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES - ------------------------------------------------ 1. WE NOTE YOUR STATEMENT THAT THE PRESIDENT AND CHIEF FINANCIAL OFFICER HAVE CONCLUDED THAT THE COMPANY'S DISCLOSURE CONTROLS AND PROCEDURES WERE "ADEQUATELY EFFECTIVE," AND THAT THEY "NEEDED ADDITIONAL IMPROVEMENT." AS A RESULT IT REMAINS UNCLEAR WHETHER YOUR PRESIDENT AND CHIEF FINANCIAL OFFICER HAVE CONCLUDED THAT YOUR DISCLOSURE CONTROLS AND PROCEDURES ARE EFFECTIVE. PLEASE REVISE YOUR DISCLOSURE TO STATE, IN CLEAR AND UNQUALIFIED LANGUAGE, THE CONCLUSIONS REACHED BY YOUR PRESIDENT AND CHIEF FINANCIAL OFFICER ON THE EFFECTIVENESS OF YOUR DISCLOSURE CONTROLS AND PROCEDURES. WE NOTE YOUR STATEMENT IN THE SUBSEQUENT PARAGRAPH THAT THE COMPANY CONCLUDED THAT THE DISCLOSURE CONTROLS AND PROCEDURES WERE NOT EFFECTIVE. In Item 8A of Form 10-KSB/A we have modified the disclosure to state that as of December 31, 2005, our President and Chief Financial Officer concluded that our disclosure controls and procedures were not effective. 2. WE NOTE YOUR STATEMENT THAT THE MATERIAL WEAKNESSES IN THE COMPANY'S INTERNAL CONTROLS MAY ALSO CONSTITUTE DEFICIENCIES IN THE COMPANY'S DISCLOSURE CONTROLS. IF MANAGEMENT DETERMINES THAT YOUR DISCLOSURE CONTROLS AND PROCEDURES WERE EFFECTIVE AT DECEMBER 31, 2005, PLEASE EXPLAIN IN REASONABLE DETAIL HOW THEY REACHED THAT CONCLUSION, GIVEN THE INTERNAL CONTROL DEFICIENCIES. As previously stated, we have modified the disclosure in Form 10-KSB/A to state that as of December 31, 2005, our President and Chief Financial Officer concluded that our disclosure controls and procedures were not effective. CHANGES IN CONTROL AND PROCEDURES - --------------------------------- 3. DISCLOSE IN GREATER DETAIL THE NATURE OF THE MATERIAL WEAKNESSES IN INTERNAL CONTROLS IDENTIFIED IN YOUR DISCLOSURE. DISCLOSE WHEN THE MATERIAL WEAKNESSES FIRST BEGAN AND DISCLOSE THE SPECIFIC STEPS THAT THE COMPANY HAS TAKEN IF ANY, TO REMEDIATE THE MATERIAL WEAKNESS AND DISCLOSE WHETHER THE COMPANY BELIEVES THAT THE MATERIAL WEAKNESS EXISTS AT THE END OF THE PERIOD COVERED BY THE REPORT. In Item 8A of Form 10-KSB/A we have disclosed in greater detail the nature of the material weaknesses in internal controls identified in Form 10-KSB/A. In addition, we have disclosed when the material weaknesses first began and the specific steps that we have taken to remediate the material weaknesses. We have also disclosed whether we believe the material weakness exists at the end of December 31, 2005. 4. WE NOTE YOUR STATEMENT THAT A "CONTROL SYSTEM, NO MATTER HOW WELL CONCEIVED AND OPERATED, CAN PROVIDE ONLY REASONABLE, NOT ABSOLUTE, ASSURANCE THAT THE OBJECTIVES OF THE INTERNAL CONTROL SYSTEM ARE MET". PLEASE REVISE TO STATE CLEARLY, IF TRUE, THAT YOUR DISCLOSURE CONTROLS AND PROCEDURES ARE DESIGNED TO PROVIDE REASONABLE ASSURANCE OF ACHIEVING THEIR OBJECTIVES AND THE CONCLUSIONS OF YOUR PRESIDENT AND CHIEF FINANCIAL OFFICER REGARDING THE EFFECTIVENESS OF YOUR DISCLOSURE CONTROLS AND PROCEDURES AT THAT REASONABLE ASSURANCE LEVEL. IN THE ALTERNATIVE, REMOVE THE REFERENCE TO THE LEVEL OF ASSURANCE OF YOUR DISCLOSURE CONTROLS AND PROCEDURES. PLEASE REFER TO SECTION II.F.4 OF MANAGEMENT'S REPORTS ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND CERTIFICATION OF DISCLOSURE IN EXCHANGE ACT PERIODIC REPORTS, SEC RELEASE NO. 33-8238, AVAILABLE ON OUR WEBSITE AT HTTP://WWW.SEC.GOV/RULES/FINAL/33-8238.HTM. In Item 8A of Form 10-KSB/A we have deleted the statement that a "control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met." Letter Dated May 24, 2006 ------------------------- Evaluation of Disclosure Controls and Procedures ------------------------------------------------ 1. In the third paragraph, please revise to state that your certifying officers concluded your disclosure controls and procedures were not effective. In Item 8A of Form 10-KSB/A we have modified the language to state that our certifying officers concluded that our disclosure controls and procedures were not effective. 2. The phrase "but needed additional improvement in general" at the end of this revised sentence is confusing. Please either revise to state "and needed additional improvement" or delete the sentence since it appears you no longer need it. In Item 8A of Form 10-KSB/A, we have deleted the sentence. 3. Please delete the word "absolutely" in the fourth sentence since the difference between not being effective and not being absolutely effective is not clear or easily ascertainable. Please describe the additional procedures that you performed to compensate for the lack of additional controls. Please define what you mean by "established" controls. In Item 8A of Form 10-KSB/A we deleted the word "absolutely" in the fourth sentence. We have also deleted the term "established controls." In addition we have described a number of the additional procedures that we performed to compensate for the lack of additional controls. Please note that a list of additional procedures is included in Item 8A directly after the list of internal control weaknesses below. Very truly yours, /s/ Jeffrey J. Fessler ---------------------- Jeffrey J. Fessler [SRFF Logo} -----END PRIVACY-ENHANCED MESSAGE-----