e10vq
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Quarterly Period Ended September 30, 2007
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For
the Transition Period From TO
Commission file number: 0-50090
AMERICAN POST TENSION, INC.
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of incorporation or organization)
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13-3926203
(IRS Employer Identification No.) |
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1179 Center Point Drive, Henderson, NV
(Address of principal executive offices)
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89074
(Zip Code) |
(702) 565-7866
(Registrants Telephone Number, Including Area Code)
MAGIC COMMUNICATIONS, INC.
(Former name, former address and former fiscal year, if
changed since last report)
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 preceding 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 o No þ
Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, or a
non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act.)
Large accelerated filer o Accelerated filer o Non-accelerated filer þ
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o Yes þ No
As of November 13, 2007, the registrant had 34,291,600 shares of Common Stock ($0.0001 par value)
outstanding.
TABLE OF CONTENTS
FORWARD-LOOKING INFORMATION
To the extent that the information presented in this Quarterly Report on Form 10-Q for the
quarter and the nine months ended September 30, 2007 discusses financial projections, information
or expectations about our products or markets, or otherwise makes statements about future events or
statements regarding the intent, belief or current expectations of American Post Tension, Inc. and
its subsidiary (collectively the Company), its directors or its officers with respect to, among
other things, future events and financial trends affecting the Company, such statements are
forward-looking. We are making these forward-looking statements in reliance on the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Although we believe that the
expectations reflected in these forward-looking statements are based on reasonable assumptions,
there are a number of risks and uncertainties that could cause actual results to differ materially
from such forward-looking statements. Forward-looking statements are typically identified by the
words believes, expects, anticipates, and similar expressions. In addition, any statements
that refer to expectations or other characterizations of future events or circumstances are
forward-looking statements. Readers are cautioned that any such forward-looking statements are not
guarantees of future performance and that matters referred to in such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause actual results,
performance or achievements of the Company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking statements. Such factors
include, among other things, the pace of residential construction in our geographic markets,
changes in mortgage interest rates, prices and availability of raw materials and supplies, our
ability to locate, acquire, pay for, and integrate other businesses that complement ours, our
ability to expand our business into the commercial construction field, our ability to attract and
retain qualified personnel if and as our business grows, and risks associated with our stock being
classified as a penny stock. We undertake no obligation to publicly update or revise these
forward-looking statements because of new information, future events or otherwise, except as
required by law.
1
PART I FINANCIAL INFORMATION
ITEM 1.
UNAUDITED CONDENSED FINANCIAL STATEMENTS
AMERICAN POST TENSION, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 2007
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September 30, |
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December 31, |
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2007 |
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2006 |
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ASSETS |
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Current assets: |
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|
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Cash and cash equivalents |
|
$ |
2,076,606 |
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|
$ |
2,937,178 |
|
Accounts receivable, net of allowance for doubtful accounts
of $240,275 at September 30, 2007 and $191,100 at December 31, 2006 |
|
|
2,258,228 |
|
|
|
1,885,808 |
|
Inventory |
|
|
1,267,398 |
|
|
|
2,752,337 |
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Prepaid expenses |
|
|
17,218 |
|
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|
116,697 |
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|
|
|
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Total current assets |
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5,619,450 |
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|
7,692,020 |
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Property and equipment, net of accumulated depreciation
of $1,198,548 at September 30, 2007 and $1,107,309 at December 31, 2006 |
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1,034,546 |
|
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|
1,065,148 |
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Total assets |
|
$ |
6,653,996 |
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$ |
8,757,168 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable and accrued expenses |
|
$ |
723,031 |
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$ |
498,939 |
|
Accrued interest |
|
|
9,700 |
|
|
|
9,700 |
|
Income taxes payable |
|
|
146,553 |
|
|
|
|
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Current portion of long-term debt |
|
|
1,311 |
|
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|
9,577 |
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Shareholder loans current portion |
|
|
321,100 |
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|
530,106 |
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Total current liabilities |
|
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1,201,695 |
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|
1,048,322 |
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Long-term liabilities: |
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Shareholder loans |
|
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|
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203,684 |
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|
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Total liabilities |
|
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1,201,695 |
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|
|
1,252,006 |
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|
|
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Shareholders equity: |
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Preferred stock, $.0001 par value authorized,
1,000,000 shares at September 30, 2007 and December
31, 2006; no shares issued or outstanding at
September 30, 2007 and December 31, 2006 |
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Common stock, $.0001 par value authorized,
50,000,000 shares at September 30, 2007 and December
31, 2006; issued, 34,291,600 and 25,400,160 shares
at September 30, 2007 and December 31, 2006,
respectively |
|
|
3,429 |
|
|
|
2,540 |
|
Additional paid-in capital |
|
|
5,163,799 |
|
|
|
7,574 |
|
Retained Earnings |
|
|
285,072 |
|
|
|
7,495,048 |
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|
|
|
|
|
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Total shareholders equity |
|
|
5,452,301 |
|
|
|
7,505,162 |
|
Total liabilities and shareholders equity |
|
$ |
6,653,996 |
|
|
$ |
8,757,168 |
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|
|
|
|
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The accompanying notes are an integral part of the unaudited condensed financial statements.
2
AMERICAN POST TENSION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2007
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2007 |
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2006 |
|
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2007 |
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2006 |
|
Sales |
|
$ |
4,166,195 |
|
|
$ |
6,351,282 |
|
|
$ |
12,777,236 |
|
|
$ |
26,350,852 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
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Cost of sales |
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2,980,306 |
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4,135,396 |
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9,235,323 |
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17,752,520 |
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Gross margin |
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1,185,889 |
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2,215,886 |
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3,541,913 |
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8,598,332 |
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Other costs and expenses |
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Selling, general and administrative |
|
|
1,282,564 |
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|
947,401 |
|
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3,261,616 |
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2,987,761 |
|
|
|
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|
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|
|
|
|
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Income (loss) from operations |
|
|
(96,675 |
) |
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|
1,268,485 |
|
|
|
280,297 |
|
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|
5,610,571 |
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Other income and (expense) |
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Merger related expenses and costs
|
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|
|
|
|
|
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(929,289 |
) |
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Other income (expense), net |
|
|
56,853 |
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|
|
(33 |
) |
|
|
793,219 |
|
|
|
22,210 |
|
Interest income, net |
|
|
15,429 |
|
|
|
42,046 |
|
|
|
63,973 |
|
|
|
105,695 |
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
72,282 |
|
|
|
42,013 |
|
|
|
(72,097 |
) |
|
|
127,905 |
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Net income before income tax |
|
$ |
(24,393 |
) |
|
$ |
1,310,498 |
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|
$ |
208,200 |
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|
$ |
5,738,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Provision for income taxes |
|
|
(8,527 |
) |
|
|
|
|
|
|
169,090 |
|
|
|
29,426 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
Net income |
|
|
(15,866 |
) |
|
|
1,310,498 |
|
|
|
39,110 |
|
|
|
5,709,050 |
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|
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Net income per share basic |
|
$ |
(0.00 |
) |
|
$ |
0.05 |
|
|
$ |
0.00 |
|
|
$ |
0.22 |
|
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Net income per share diluted |
|
$ |
(0.00 |
) |
|
$ |
0.05 |
|
|
$ |
0.00 |
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|
$ |
0.22 |
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Distributions per share |
|
$ |
0.00 |
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|
$ |
0.04 |
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|
$ |
0.10 |
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|
$ |
0.22 |
|
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Weighted average common shares outstanding: |
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Basic |
|
|
34,275,296 |
|
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25,400,160 |
|
|
|
30,981,946 |
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|
25,400,160 |
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Diluted |
|
|
34,275,296 |
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|
25,400,160 |
|
|
|
30,981,946 |
|
|
|
25,400,160 |
|
|
|
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|
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The accompanying notes are an integral part of the unaudited condensed financial statements.
3
AMERICAN POST TENSION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three and Nine Months Ended September 30, 2007
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Three Months Ended |
|
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Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
Net Income |
|
$ |
(15,866 |
) |
|
$ |
1,310,498 |
|
|
$ |
39,110 |
|
|
$ |
5,709,050 |
|
|
Adjustment to reconcile net income to net cash provided
(used in) by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
93,719 |
|
|
|
29,144 |
|
|
|
139,132 |
|
|
|
87,433 |
|
Shares issued as part of merger in lieu of cash |
|
|
|
|
|
|
|
|
|
|
852,134 |
|
|
|
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Shares issued to employees and BOD members |
|
|
30,000 |
|
|
|
|
|
|
|
46,256 |
|
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|
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Changes in assets and liabilities: |
|
|
|
|
|
|
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|
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|
|
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(Increase) decrease in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Accounts receivable |
|
|
244,531 |
|
|
|
936,341 |
|
|
|
(372,420 |
) |
|
|
2,032,363 |
|
Inventory |
|
|
(154,603 |
) |
|
|
(675,983 |
) |
|
|
1,484,939 |
|
|
|
(839,136 |
) |
Prepaid expenses and other assets |
|
|
25,826 |
|
|
|
15,650 |
|
|
|
99,479 |
|
|
|
53,719 |
|
Increase (decrease) in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
|
239,971 |
|
|
|
69,416 |
|
|
|
224,092 |
|
|
|
382,048 |
|
Accrued income taxes payable |
|
|
(8,527 |
) |
|
|
|
|
|
|
146,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments |
|
|
470,917 |
|
|
|
374,566 |
|
|
|
2,620,165 |
|
|
|
1,716,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used in) operating activities |
|
|
455,051 |
|
|
|
1,685,066 |
|
|
|
2,659,275 |
|
|
|
7,425,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution of property and equipment to
shareholders in lieu of cash compensation |
|
|
21,882 |
|
|
|
|
|
|
|
21,882 |
|
|
|
|
|
Net proceeds from the sale/retirement of property and equipment |
|
|
(1,601 |
) |
|
|
|
|
|
|
(16,220 |
) |
|
|
(33,546 |
) |
Acquisition (sale) of property and equipment |
|
|
(84,366 |
) |
|
|
(9,220 |
) |
|
|
(130,723 |
) |
|
|
(15,212 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided (used) in investing activities |
|
|
(64,084 |
) |
|
|
(9,220 |
) |
|
|
(125,060 |
) |
|
|
(48,758 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholder distributions |
|
|
|
|
|
|
(1,103,999 |
) |
|
|
(2,994,769 |
) |
|
|
(5,680,796 |
) |
Issuance of shares for public shell net assets |
|
|
|
|
|
|
|
|
|
|
4,407 |
|
|
|
|
|
Decrease in line of credit |
|
|
|
|
|
|
(989,925 |
) |
|
|
|
|
|
|
1,359,400 |
) |
Increase (repayment) of loans payable |
|
|
(3,573 |
) |
|
|
(17,005 |
) |
|
|
8,266 |
|
|
|
(28,125 |
) |
Proceeds from shareholder loans |
|
|
|
|
|
|
904,166 |
|
|
|
|
|
|
|
904,166 |
|
Repayment of shareholder loans |
|
|
(133,662 |
) |
|
|
|
|
|
|
(412,690 |
) |
|
|
|
|
Net cash provided by financing activities |
|
|
(137,235 |
) |
|
|
(1,206,763 |
) |
|
|
(3,394,786 |
) |
|
|
(6,164,155 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
253,732 |
|
|
|
469,083 |
|
|
|
(860,571 |
) |
|
|
1,212,564 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period |
|
|
1,822,874 |
|
|
|
2,999,380 |
|
|
|
2,937,178 |
|
|
|
2,255,899 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
2,076,606 |
|
|
$ |
3,468,463 |
|
|
$ |
2,076,606 |
|
|
$ |
3,468,463 |
|
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
AMERICAN POST TENSION, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
For the Nine Months Ended September 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
Additional |
|
|
|
|
|
|
Total |
|
|
|
Common |
|
|
|
|
|
|
Paid-in |
|
|
Retained |
|
|
Shareholders |
|
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Earnings |
|
|
Equity |
|
Balances at December 31, 2006 |
|
|
25,400,160 |
|
|
$ |
2,540 |
|
|
$ |
7,574 |
|
|
$ |
7,495,048 |
|
|
$ |
7,505,162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
622,428 |
|
|
|
622,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(438,050 |
) |
|
|
(438,050 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at March 31, 2007 |
|
|
25,400,160 |
|
|
$ |
2,540 |
|
|
$ |
7,574 |
|
|
$ |
7,679,426 |
|
|
$ |
7,689,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(567,452 |
) |
|
|
(567,452 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,556,718 |
) |
|
|
(2,556,718 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of restricted
shares for consulting
services |
|
|
5,325,840 |
|
|
|
533 |
|
|
|
851,601 |
|
|
|
|
|
|
|
852,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of restricted
shares to employees of PTNV |
|
|
101,600 |
|
|
|
10 |
|
|
|
16,246 |
|
|
|
|
|
|
|
16,256 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
American Post Tension, Inc.
reclassification upon merger
on April 12, 2007 |
|
|
3,414,600 |
|
|
|
341 |
|
|
|
4,066 |
|
|
|
|
|
|
|
4,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of PTNV
retained earnings at the
time of S Corporation
revocation in April 2007 |
|
|
|
|
|
|
|
|
|
|
4,254,317 |
|
|
|
(4,254,317 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at June 30, 2007 |
|
|
34,241,600 |
|
|
$ |
3,424 |
|
|
$ |
5,133,804 |
|
|
$ |
300,938 |
|
|
$ |
5,438,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,866 |
) |
|
|
(15,866 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of restricted
shares to BOD members |
|
|
50,000 |
|
|
|
5 |
|
|
|
29,995 |
|
|
|
|
|
|
|
30,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at June 30, 2007 |
|
|
34,291,600 |
|
|
$ |
3,429 |
|
|
$ |
5,163,799 |
|
|
$ |
285,072 |
|
|
$ |
5,452,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the unaudited condensed financial statements.
5
AMERICAN POST TENSION, INC.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007
NOTE 1: ORGANIZATION AND NATURE OF BUSINESS
Company Overview
Magic Communications, Inc. (Magic) was originally formed as a New York corporation on
January 16, 1997 and reincorporated as a Delaware corporation in November 2002 for the purpose of
offering Internet kiosks where the public could access the Internet for a fee. Magic did not
develop that business, and, from June 1997 until April 2007 Magic engaged in the business of
contracting with various locations such as malls, gas stations, stores and office buildings to
install pay phones that were an alternative to those provided by the primary local service provider
(Verizon). As discussed below, immediately following the completion of the Merger (as defined
below), Magic sold substantially all of its assets relating to this business to Illusions, LLC, a
Florida limited liability company controlled by Stephen Rogers, Magics President and Chief
Executive Officer immediately prior to the consummation of the Merger and a director prior to the
Merger. Illusions also assumed most of Magics liabilities in connection with the sale of those
assets. Magic is no longer engaged in the business of installing or operating pay telephones. Magic
Communications, Inc., subsequent to the Merger, changed its name to American Post Tension, Inc.
(APTI) on September 24, 2007.
Merger Agreement with Post Tension of Nevada
On July 15, 2005, the Securities and Exchange Commission adopted final rules amending the use
of Form S-8 and Form 8-K for shell companies. The amendments expand the definition of a shell
company to mean a company, other than an asset-backed issuer, with no or nominal operations/assets
or assets consisting of cash and cash equivalents and no or nominal other assets, the amendments
prohibit the use of a Form S-8 (a form used by a corporation to register securities issued to an
employee, director, officer, consultant or advisor, under certain circumstances), and revise the
Form 8-K to require a shell company to include current Form 10 or Form 10-SB information, including
audited financial statements, in the filing on Form 8-K that the shell company files to report the
acquisition of the business opportunity. The rules are designed to assure that investors in shell
companies that acquire operations or assets have access on a timely basis to the same kind of
information as is available to investors in public companies with continuing operations.
On December 28, 2006, Magic entered into a Memorandum of Understanding with Post Tension of
Nevada, a Nevada corporation (PTNV), which became firm, and was announced in a Current Report on
Form 8-K, filed with the SEC on February 20, 2007. On April 12, 2007, a Current Report on Form 8-K
filed with the SEC reported the completion of the definitive Agreement and Plan of Merger (the
Merger Agreement) with PTNV and PTNV Acquisition Corp, a Florida corporation and a wholly-owned
subsidiary of Magic (Acquisition Corp.). The Merger Agreement provided that, upon the terms and
subject to the conditions set forth in the Merger Agreement, Acquisition Corp. would merge with and
into PTNV (the Merger). As a result of the Merger, PTNV became a wholly-owned subsidiary of
Magic. Each outstanding share of PTNV common stock was converted into the right to receive
10,160.064 shares of the Companys common stock as set forth in the Merger Agreement. Under the
terms of the Merger Agreement at closing, the Company issued, and the PTNV stockholders received,
in a tax-free exchange, shares of Company common stock such that PTNV stockholders now own
approximately 90% of the issued and outstanding shares of the Company. Magic Communications, Inc.,
subsequent to the Merger, changed its name to American Post Tension, Inc. (APTI) on September 24,
2007.
As a result of the Merger, as the acquired entitys shareholders exercise control over APTI,
the transaction is deemed to be a capital transaction whereby APTI is treated as a non-business
entity. Therefore, the accounting for the business combination is identical to that resulting from
a reverse merger, except no goodwill or other intangible assets will be recorded as a result of the
Merger. Accordingly, the Company did not recognize goodwill or any other intangible assets in
connection with the transaction.
6
PTNV is treated as the acquirer for accounting purposes. Therefore, the historic financial
statements prior to merger are those of PTNV and post merger, the financial statements represent
the consolidated financial position and operating results of American Post Tension, Inc. and its
wholly-owned subsidiary, Post Tension of Nevada. All references to shares and per share amounts in
the accompanying financial statements have been restated to reflect the aforementioned share
exchange.
In July 2001, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards SFAS No. 141, Business Combinations and SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS No. 141 requires business combinations initiated after September 30, 2001
to be accounted for using the purchase method of accounting, and broadens the criteria for
recording intangible assets separate from goodwill. Recorded goodwill and intangibles will be
evaluated against these new criteria and may result in certain intangibles being subsumed into
goodwill, or alternatively, amounts initially recorded as goodwill may be separately identified and
recognized apart from goodwill. SFAS No. 142 requires the use of a non-amortization approach to
account for purchased goodwill and certain intangibles. Under a non-amortization approach, goodwill
and certain intangibles is more than its fair value. Goodwill is the excess of the acquisition
costs of the acquired entity over the fair value of the identifiable net assets acquired. The
Company is required to test goodwill and intangible assets that are determined to have an
indefinite life for impairments at least annually. The provisions of SFAS No. 142 require the
completion of an annual impairment test with any impairment recognized in current earnings. The
provisions of SFAS No. 141 and SFAS No. 142 may be applicable to any business combination that we
may enter into in the future.
On April 23, 2007, APTI filed a Schedule 14F-1 and as amended by a Schedule 14F-1/A filed on
June 6, 2007 regarding a change in the majority of directors to comply with Rule 14f-1. The
description of the transactions contemplated by the Merger Agreement set forth herein does not
purport to be complete and is qualified in its entirety by reference to the full text of the
exhibit in a Form 8-K filed on June 28, 2007 and incorporated herein by this reference.
The Company now operates its business through PTNV, a Henderson, Nevada based company. We
provide post-tension components and systems that reinforce concrete construction for the
residential and commercial markets of the western United States. PTNV is 20 years old, and we
believe that PTNV is one of the largest domestically owned post tension companies. PTNV provides
both full service and freight-on-board components. The full-service business accounts for 90% of
PTNVs revenues, and the margins for the full-service residential SOG market are typically higher
than for product sales. Before concrete slab (slab-on-ground (SOG)) foundations are poured, PTNV
installs the post-tension system. After the foundation is poured, with the system in place, when
the proper pressure is achieved, the post-tension cables are then tensioned to thirty-three
thousand pounds each tendon. This creates a stronger base that eliminates unwanted expansion
movement and settling that can otherwise damage interior and exterior walls. PTNV designs disburse
the load throughout the slab, not only on perimeter or load-bearing walls. In 2006, PTNV installed
approximately fifty-one million square feet of post tension foundations, utilizing approximately 50
million linear feet of post-tensioning cable. PTNV serves it customers from its 4 officesLas
Vegas, Nevada (corporate headquarters), Phoenix, Arizona, Tucson, Arizona, and Denver, Colorado.
Product and Service
According to the Post-Tensioning Institute, Post-Tensioning is a method of reinforcing
concrete, masonry, and other structural elements. Post-Tensioning is a method of prestressing.
Prestressed concrete or masonry has internal stresses (forces) induced into it during the
construction phase for the purpose of counteracting the anticipated external loads that it will
encounter during its lifecycle. There are two methods of prestressing. One is called
pre-tensioning. This method consists of stressing the reinforcing inside of large steel buttresses,
and then casting the concrete around the reinforcing. This method can only be done at a precast
manufacturing facility and requires the completed prestressed concrete members to be trucked out to
the job site and then assembled. The other method of prestressing is called post-tensioning.
Instead of stressing the reinforcing inside of large steel buttresses at a manufacturing plant, the
reinforcing is simply installed on the job site after the contractor forms up the slabs or
constructs the walls. The reinforcing steel is housed in sheathing or duct that prevents the steel
from bonding to the concrete so that it
7
can be stressed after the concrete cures (hardens). Using the post-tensioning method of
prestressing enables a builder to get all the advantages of prestressed concrete while still
enabling the freedom to construct the member (slab, wall, column, etc,) on the job site.
Today, a post-tension slab costs no more than a rebar slab (a slab with reinforcing steel
built into it at a manufacturing plant) and in some instances, even less. Post tension inhibits
unwanted expansion movement and settling that can damage interior and exterior walls. Post tension
designs disperse the load throughout the slab, not only on perimeter or load-bearing walls, and,
for more than 30 years, post tension construction has demonstrated excellent performance,
especially in poor soil, which is common in most regions of the country.
We purchase raw cable, anchors, rebar, wedges, stressing equipment and parts, splice chucks,
end protectors, dead-end spacers and pocket formers from a small number of high quality suppliers
and enjoy excellent relationships with our suppliers. We depend on our suppliers for all of our raw
materials. Like other users of steel products, we have experienced increases of the cost of our
materials over recent years. We have been able to manage these cost increases and maintain our
margins by effective management but remain susceptible to further vagaries in the price of these
raw materials. The company is also affected by the market of our main customer, subcontractors to
the housing and commercial builders.
Currently PTNV has 110 employees. We do not outsource our labor; however, we have used on
occasion temporary services to hire office personnel. None of our employees are represented by a
union, and we believe relationships with our employees are good.
Markets and Marketing
We are a well known and respected company with high saturation throughout the western United
States. Within the residential housing markets of Las Vegas, Nevada and Phoenix, Arizona, we have a
70% market share and an 80% market share in Denver, Colorado and Tucson, Arizona. In 1994, we
became the first company to provide post tension services in Arizona. We currently operate in
several high growth markets with new construction. Residential construction accounts for the
majority of our slab-on-ground revenues, while commercial construction is much smaller at this
time. We intend to expand our workforce in 2007 by hiring additional salespeople and draft
engineers. Starting in Las Vegas, we will attempt to generate sales in the high rise market, which
is expected to see $10 billion of new construction on the Las Vegas Strip in the next five years.
We can provide no assurance, however, that we will be successful in obtaining a significant, or
any, market share in the commercial construction market.
In addition to the SOG post-tensioning products and services described above, we also provide
materials to our customers on a freight-on-board (FOB) basisthe buyer assumes the
responsibility for the shipment and shipping charges of the materials purchased from us. Today, we
offer this service to clients in Utah and California Our plans are to attempt to expand the reach
of our FOB business, although we cannot provide any assurance that we will be able to increase this
segment of our business in accordance with our plans, if at all. It is our intention to expand our
presence in this market segment by expanding our workforce and marketing to this customer base as
well as acquisition of other companies with an existing presence in this market. At this time, we
have no definitive plans to acquire any other businesses, and we cannot provide assurances that we
will be able to acquire businesses in this area on terms that are favorable to us.
We have a reputation for providing superior services to our clients. Some clients have been
depending on us for 20 years, though there are no long term contracts with them. However, we are
currently negotiating with one of the largest home builders in the United States to make us the
exclusive provider of post tension services to all concrete contractors used by the builder, in the
states of Nevada, Arizona and Colorado. We cannot provide any assurances that we will be able to
successfully negotiate this arrangement or that, if we are able to negotiate such an arrangement,
the arrangement will be on terms that we prefer. The company has 99 customers. Most of them are
contractors, concrete suppliers and other subcontractors to the construction industry. The top 10
customers accounted for $7.4 million in our revenues for the nine months ended September 30,
2007.
8
Competition
Our competition in supplying full-service post tension technology and FOB service to the
target markets consists primarily of other post tension companies located in the United States,
some of which are owned by European companies. We believe that we are the largest domestic owned
post tension company in the United States. Other smaller domestic companies have no distinct
advantage, other than geographic location, over PTNV. The two largest international companies of
which we are aware have more completed high rise projects, but we do not believe that will
significantly diminish our ability to provide full service to similar projects in the future.
Of the 25 companies that belong to the Post Tensioning Institute, PTNV is the third largest.
Our two main competitors are Suncoast Post Tension, a Keller Company, and DSI (Dywidag-Systems
International) both owned by European companies. Regionally, there are a handful of firms that
provide similar services. Throughout the entire United States there are approximately 40 companies
like us. It is well known throughout the industry that both Suncoast and DSI are able to handle
larger high rise projects but struggle in the SOG market because we offer labor as part of the
total service and the others offer only materials. When they compete in our markets they have to
add the labor to be competitive from a service perspective.
Note 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation. The condensed consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States of America for
interim financial statements and with Form 10-Q and Item 310 of Regulation S-K of the Securities
and Exchange Commission. Accordingly, they do not contain all the information and footnotes
required by accounting principles generally accepted in the United States of America for annual
financial statements. The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary. All significant inter-company balances and transactions have been
eliminated in consolidation. In the opinion of the Companys management, the accompanying unaudited
condensed consolidated financial statements contain all the adjustments necessary (consisting only
of normal recurring accruals) to make the financial position of the Company as of September 30,
2007 and the results of operations and cash flows for the three months and nine months ended
September 30, 2007 and 2006 not misleading. The unaudited condensed consolidated financial
statements should be read in conjunction with the audited financial statements contained in our
Current Report on Form 8-K/A filed on June 28, 2007.
Use of EstimatesThe preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reporting amounts
of revenues and expenses during the reported period. Actual results could differ from those
estimates.
Revenue and Cost RecognitionRevenues from fixed-price construction contracts are recorded
using the completed contract method whereby revenues are earned when the contract is substantially
completed. Contracts are considered substantially completed when the concrete slab has been poured.
Revenue from sales of materials only is recorded upon shipment of the materials. Contract costs
include all direct material and labor as well as those indirect costs related to contract
performance such as indirect labor, supplies, tools, repairs, and depreciation. Selling, general,
and administrative costs are charged to expense as incurred.
Cash, Cash Equivalents and Concentration of Credit RiskThe Company considers all highly
liquid temporary cash investments with an original maturity of three months or less when purchased,
to be cash equivalents. Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist of
cash. The Company maintains its cash accounts at high quality financial institutions with
balances, at times, in excess of federally insured limits. As of September 30, 2007, the Company
had
9
cash balances of $2,076,606, which is in excess of the federally insured limit of $100,000.
The Company has substantial cash balances which are invested in a money market account with a bank.
Fair Value of Financial InstrumentsThe carrying amounts reported in the balance sheet for
accounts payable, accrued expenses, and due to related parties approximate fair value based on the
short-term maturity of these instruments.
Accounts receivable, tradeAccounts receivable are recorded at the invoiced amount and do not
bear interest. The Company extends unsecured credit to its customers in the ordinary course of
business but mitigates the associated risks by performing credit checks and actively pursuing past
due accounts. An allowance for doubtful accounts is established and determined based on
managements assessment of known requirements, aging of receivables, payment history, the
customers current credit worthiness and the economic environment. Trade receivables are written
off when deemed uncollectible. Recoveries of trade receivables previously written off are recorded
when received. The Company follows the practice of filing statutory mechanics liens on
construction projects where collection problems are anticipated. The liens serve as collateral for
those accounts receivable.
Material and Supplies InventoryInventory consists of finished goods and is stated at the
lower of cost or market using the first-in first-out method.
Equipment and Leasehold ImprovementsEquipment and leasehold improvements are stated at cost.
Depreciation is computed using the straight-line method over the estimated useful lives of the
related assets, which range from 5 to 7 years. Leasehold improvements are amortized over the lesser
of the estimated life of the asset or the lease term. The lease term for buildings leased from
shareholders is considered to be the economic life of the building. Expenditures for maintenance
and repairs are charged to operations as incurred. Renewals and betterments are capitalized. Upon
retirement or other disposition of equipment, the cost and related accumulated depreciation are
removed from the accounts and the resulting gains or losses are reflected in earnings.
Equipment Under Capital LeasesCapital leases, which transfer substantially the entire
benefits and risks incident to the ownership of the property to the Company, are accounted for as
the acquisition of an asset and the incurrence of an obligation. Under this method of accounting,
the cost of the leased asset is amortized principally using the straight-line method over its
estimated useful life, the obligation including interest thereon, is liquidated over the life of
the lease. Depreciation expense on equipment under a capital lease is included with that of owned
equipment.
Advertising CostsAdvertising costs are expensed as incurred.
Income TaxesIncome taxes are accounted for in accordance with the provisions of SFAS No. 109.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized as income in the period that includes the enactment date. Valuation
allowances are established, when necessary, to reduce deferred tax assets to the amounts expected
to be realized, but no less than quarterly.
Comprehensive IncomeSFAS No. 130, Reporting Comprehensive Income, establishes standards for
reporting and display of comprehensive income, its components and accumulated balances.
Comprehensive income as defined includes all changes in equity during a period from non-owner
sources. The Company has not identified any sources of comprehensive income for the periods
presented.
Related PartiesFor the purposes of these financial statements, parties are considered to be
related if one party has the ability, directly or indirectly, to control the party or exercise
significant influence over the party in making financial and operating decisions, or vice versa, or
where the Company
10
and the party are subject to common control or common significant influence. Related parties
may be individuals or other entities.
Basic and Diluted Earnings/(Loss) Per Share Net earnings and loss per share is computed in
accordance with Statement of Financial Standards No. 128, Earnings Per Share (SFAS No. 128).
SFAS No. 128 requires the presentation of both basic and diluted earnings per share. Basic net
earnings and loss per common share is computed using the weighted average number of common shares
outstanding during the period. Diluted loss per share reflects the potential dilution that could
occur through the potential effect of common shares issuable upon the exercise of stock options,
warrants and convertible securities. The calculation assumes: (i) the exercise of stock options and
warrants based on the treasury stock method; and (ii) the conversion of convertible preferred stock
only if an entity records earnings from continuing operations, as such adjustments would otherwise
be anti-dilutive to earnings per share from continuing operations.
Note 3: RECENT ACCOUNTING PRONOUNCEMENTS
In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections a
replacement of APB Opinion No. 20 and FASB Statement No. 3 (SFAS 154). SFAS 154 changes the
requirements for the accounting for and reporting of a change in accounting principle. These
requirements apply to all voluntary changes and changes required by an accounting pronouncement in
the unusual instance that the pronouncement does not include specific transition provisions. SFAS
154 is effective for fiscal years beginning after December 15, 2005. The adoption of SFAS 154 did
not have a material impact on the Companys financial statements or results of operations.
In September 2005, the FASBs Emerging Issues Task Force (EITF) reached a final consensus on
Issue 04-13, Accounting for Purchases and Sales of Inventory with the Same Counterparty (EITF
04-13). EITF 04-13 requires that two or more legally separate exchange transactions with the same
counterparty be combined and considered a single arrangement for purposes of applying APB Opinion
No. 29, Accounting for Nonmonetary Transactions, when the transactions are entered into in
contemplation of one another. EITF 04-13 is effective for new arrangements entered into, or
modifications or renewals of existing arrangements, in interim or annual periods beginning after
March 15, 2006. The Company does not anticipate that the adoption of this statement will have a
material effect on the Companys financial position or results of operations.
In February 2006, FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial
Instruments, an amendment of FASB Statements No. 133 and 140. SFAS 155 clarifies certain issues
relating to embedded derivatives and beneficial interests in securitized financial assets. The
provisions of SFAS 155 are effective for all financial instruments acquired or issued after fiscal
years beginning after September 15, 2006. The adoption of this pronouncement did not have a
material impact on the Companys financial position, results of operations or cash flows.
In July 2006, FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes -
an Interpretation of FASB Statement No. 109 (FIN 48). This interpretation establishes for all
entities a minimum threshold for financial statement recognition of the benefit of tax positions,
and requires certain expanded disclosures. Additionally, FIN 48 provides guidance on measurement,
derecognition, classification, interest and penalties, accounting for income taxes in interim
periods, as well as the required disclosures and transition. This interpretation is effective for
fiscal years beginning after December 31, 2006, and is to be applied to all open tax years as of
the date of effectiveness. The adoption of this pronouncement did not have a material impact on the
Companys financial position, results of operations or cash flows. There were no unrecognized tax
benefits as of January 1, 2007.
In September 2006, the SEC released SAB No. 108, Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB 108). SAB
108 provides interpretive guidance on the SECs views on how the effects of the carryover or
reversal of prior year misstatements should be considered in quantifying a current year
misstatement. The provision of SAB 108 is effective for the Company for fiscal year ending December
31, 2006. The Company is
11
currently evaluating the impact of SAB 108 but does not believe that the application of SAB 108
will have a material effect on its financial position, cash flows nor results of operations.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (Statement 157),
which addresses how companies should measure fair value when they are required to use a fair value
measure for recognition or disclosure purposes under generally accepted accounting principles.
Statement 157 defines fair value, establishes a framework for measuring fair value in generally
accepted accounting principles and expands disclosures about fair value measurements. Statement 157
is effective for financial statements issued for fiscal years beginning after November 15, 2007 and
should be applied prospectively, except in the case of a limited number of financial instruments
that require retrospective application. We are currently evaluating the potential impact of
Statement 157 on our financial statements. We do not expect the impact will be material.
In December 2006, the FASB approved FASB Staff Position (FSP) No. EITF 00-19-2, Accounting for
Registration Payment Arrangements (FSP EITF 00-19-2), which specifies that the contingent
obligation to make future payments or otherwise transfer consideration under a registration payment
arrangement, whether issued as a separate agreement or included as a provision of a financial
instrument or other agreement, should be separately recognized and measured in accordance with SFAS
No. 5, Accounting for Contingencies. FSP EITF 00-19-2 also requires additional disclosure
regarding the nature of any registration payment arrangements, alternative settlement methods, the
maximum potential amount of consideration and the current carrying amount of the liability, if any.
The guidance in FSP EITF 00-19-2 amends FASB Statements No. 133, Accounting for Derivative
Instruments and Hedging Activities, and No. 150, Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity, and FASB Interpretation No. 45, Guarantors
Accounting and Disclosure requirement for Guarantees, Including Indirect Guarantees of Indebtedness
of Others, to include scope exceptions for registration payment arrangements. FSP EITF 00-19-2 is
effective immediately for registration payment arrangements and the financial instruments subject
to those arrangements that are entered into or modified subsequent to the issuance date of this
FSP, or for financial statements issued for fiscal years beginning after December 15, 2006, and
interim periods within those fiscal years, for registration payment arrangements entered into prior
to the issuance date of this FSP. We are currently evaluating the potential impact of FSP EITF
00-19-2 on our financial statements. We do not expect the impact will be material.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities-including an amendment of FAS 115 (Statement 159). Statement 159 allows
entities to choose, at specified election dates, to measure eligible financial assets and
liabilities at fair value that are not otherwise required to be measured at fair value. If a
company elects the fair value option for an eligible item, changes in that items fair value in
subsequent reporting periods must be recognized in current earnings. Statement 159 is effective for
fiscal years beginning after November 15, 2007. We are currently evaluating the potential impact of
Statement 159 on our financial statements. We do not expect the impact will be material.
PTNV was formed as an S Corporation and terminated its Sub S tax status and elected to operate
as a C corporation in tandem with the completion of the Merger. Based on the Companys evaluation,
it has been concluded that there are no significant uncertain tax positions requiring recognition
in the Companys financial statements. The Company believes that its income tax positions and
deductions would be sustained on audit and does not anticipate any adjustments that would result in
a material change to its financial position. Consequently, the Company did not record any
cumulative effect adjustment related to the adoption of FIN 48. The Company does not expect its tax
position to change during the next twelve months. Management is currently unaware of any issues
under review that could result in significant payments, accruals or material deviation from its
position.
12
Note 4: ACCOUNTS RECEIVABLE
Accounts receivable are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
Accounts receivable |
|
$ |
2,498,503 |
|
|
$ |
2,176,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
|
(240,275 |
) |
|
|
(291,100 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount |
|
$ |
2,258,228 |
|
|
$ |
1,885,808 |
|
|
|
|
|
|
|
|
The Companys top ten customers comprised 58% of sales during the three and nine month period
ending September 30, 2007. The top ten customers comprised 64% of sales during the twelve months
ended December 31, 2006.
Note 5: PROPERTY AND EQUIPMENT, NET
As of September 30, 2007 and December 31, 2006, the Companys property and equipment, net is
comprised of:
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
Buildings |
|
$ |
372,564 |
|
|
$ |
356,124 |
|
Leasehold improvements |
|
|
219,140 |
|
|
|
219,140 |
|
Transportation equipment |
|
|
563,606 |
|
|
|
575,229 |
|
Machinery and equipment |
|
|
945,808 |
|
|
|
941,152 |
|
Furniture, fixtures and office equipment |
|
|
33,060 |
|
|
|
27,046 |
|
Computers |
|
|
49,409 |
|
|
|
43,204 |
|
Software |
|
|
49,509 |
|
|
|
10,562 |
|
|
|
|
|
|
|
|
|
|
|
2,233,096 |
|
|
|
2,172,457 |
|
|
|
|
|
|
|
|
|
|
Less: Accumulated depreciation |
|
|
(1,198,550 |
) |
|
|
(1,107,309 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net fixed assets |
|
$ |
1,034,546 |
|
|
$ |
1,065,148 |
|
|
|
|
|
|
|
|
Depreciation and amortization related to property and equipment was $93,719 and $29,144 for
the three months ended September 30, 2007 and 2006, and $139,132 and $87,433 for the nine months
ended September 30, 2007 and 2006, respectively.
Note 6: ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at September 30, 2007 and December 31, 2006 consisted of
the following:
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2007 |
|
|
2006 |
|
Accounts payable |
|
$ |
635,194 |
|
|
$ |
428,560 |
|
Payroll accrual and payroll taxes |
|
|
87,827 |
|
|
|
48,312 |
|
Sales/Use tax |
|
|
10 |
|
|
|
22,066 |
|
|
|
|
|
|
|
|
Total accounts payable and accrued expense |
|
$ |
723,031 |
|
|
$ |
498,939 |
|
|
|
|
|
|
|
|
13
Note 7: RELATED PARTY TRANSACTIONS
The Company leases substantially all of its office, maintenance and warehouse facilities from
Ed Hohman, President, and John Hohman, Chief Operating Officer, who are the Companys principal
shareholders. Rents were paid or accrued in favor of the shareholders in the amount of $62,040 and
$160,945 for the three and nine months ended September 30, 2007.
Note 8: SHAREHOLDER LOANS AND LONG TERM DEBT
At September 30 2007 and December 31, 2006 the Company had loans due to its shareholders
aggregating $321,100 and $733,790, respectively. The loans are due on April 15, 2008 and bear
interest at 7% per annum. Additionally the Company has notes payable for vehicle purchases
aggregating $1,311 and $9,577 at September 30, 2007 and December 31, 2006, respectively. The notes
bear interest at rates from 6.5% and 8% per annum and are due in monthly installments aggregating
$1,938.
Note 9: STOCKHOLDERS EQUITY
PTNV was incorporated as an S corporation. During April 2007 and prior to the consummation of
the Merger, the Company became a C corporation. As a result of the Merger, PTNV became a
wholly-owned subsidiary of APTI. Each outstanding share of PTNV common stock was converted into the
right to receive 10,160.064 shares of APTIs common stock as set forth in the Merger Agreement.
Under the terms of the Merger Agreement at closing, APTI issued, and the PTNV stockholders
received, in a tax-free exchange, shares of APTI common stock such that PTNV stockholders now own
approximately 90% of the issued and outstanding shares of the Company.
As a result of the Merger, as the acquired entitys shareholders exercise control over APTI,
the transaction is deemed to be a capital transaction whereby APTI is treated as a non-business
entity. Therefore, the accounting for the business combination is identical to that resulting from
a reverse merger, except that no goodwill or other intangible assets will be recorded as a result
of the Merger. Accordingly, the Company did not recognize goodwill or any other intangible assets
in connection with the transaction. The Merger was accounted for as a reverse merger transaction
and PTNV was deemed to be the acquirer. The assets, liabilities and the historical operations prior
to the Merger are those of PTNV. Subsequent to the Merger, the consolidated financial statements
include the assets and liabilities of PTNV and American Post Tension, Inc. and the historical
operations of PTNV and the operations of American Post Tension, Inc. from the closing date of the
Merger.
PTNV issued 526 shares of common stock to consultants and advisors prior to the consummation
of the Merger. The shares were exchanged for 5,327,840 shares of common stock of American Post
Tension, Inc. upon the consummation of the Merger. PTNV issued 10 shares of common stock to
employees prior to the consummation of the Merger that were converted into 101,600 shares of
American Post Tension, Inc. upon the consummation of the Merger agreement. The 5,327,840 shares of
common stock and 101,600 shares of common stock were valued at $0.16 per share
PTNV reclassified $4,254,317 from Retained Earnings to Additional paid-in capital when PTNV
terminated is Subchapter S election in April 2007. PTNV prior to the consummation of the Merger
made distributions to shareholders in the amount of $2,556,718 during
the three months ended March 31, 2007. The distributions to
shareholders were recorded as a reduction to Retained Earnings.
All references to shares and per share amounts in the accompanying financial statements have
been restated to reflect the aforementioned share exchange. All retained earnings of PTNV were
reclassified to Additional Paid-in Capital on the date of the termination of its Subchapter S
election in April 2007.
The Company issued 25,000 shares of restricted stock to two independent members of the Board
of Directors in July 2007 (for a total issuance of 50,000 shares of restricted common stock). The
Company
14
recorded compensation expense in the amount of $30,000 at a rate of $0.60 per share to reflect the
estimated value of the 50,000 shares of common stock.
Note 10: INCOME TAXES
Under Sections 382 and 269 (the shell corporation rule) of the Code following an ownership
change, special limitations (Section 382 Limitations) apply to the use by a corporation of its
net operating loss, or NOL, carryforwards arising before the ownership change and various other
carryforwards of tax attributes (referred to collectively as the Applicable Tax Attributes). The
Company had NOL carryforwards due to historical losses of the public shell of approximately
$364,393 at December 31, 2006 and $257,969 at September 30, 2007. These NOL carryforwards will
expire through calendar year 2026 if not utilized and are subject to review and possible adjustment
by the IRS. As a result of the Merger, the Company experienced an ownership change, and Section 382
Limitations will apply to the Applicable Tax Attributes of the Company.
The Company did not record a provision for income taxes for the three months ended March 31,
2007, as PTNV was an S corporation until April 2007. All retained earnings of PTNV were
reclassified to Additional paid-in capital on the Subchapter S election termination by PTNV. The
Company has had taxable income of $431,605 post Merger and post termination of the Subchapter S
election by PTNV. The Company recorded a $155,080 accrual for Federal Income taxes during the three
months ended June 30, 2007 and recorded a reduction in accrual in the amount of ($8,527) during the
three months ended September 30, 2007.
The Company has adopted the provisions of FIN 48. As a result of the implementation of FIN 48,
the Company performed a comprehensive review of its uncertain tax positions in accordance with
recognition and measurement standards established by FIN 48. In this regard, an uncertain tax
position represents the Companys expected treatment of a tax position taken in a filed tax return,
or expected to be taken in a tax return, that has not been reflected in measuring income tax
expense for financial reporting purposes. The Company does not expect any reasonably possible
material changes to the estimated amount of liability associated with uncertain tax positions
through January 1, 2008. The Companys continuing policy is to recognize accrued interest and
penalties related to income tax matters in income tax expense.
Note 11: NET INCOME PER SHARE
Net (loss) income per share is calculated in accordance with SFAS No. 128, Earnings Per Share,
which requires presentation of basic and diluted net (loss) income per share. Basic net (loss)
income per share excludes dilution, and is computed by dividing net (loss) income by the weighted
average number of common shares outstanding during the period. During the three and nine months
ended September 30, 2007 and for all prior periods, diluted net income per share is computed in the
same manner as basic net income per share after assuming issuance of common stock for all
potentially dilutive equivalent shares, which includes (1) stock options (using the treasury stock
method), and (2) the effect of unvested shares of common stock outstanding. Anti-dilutive
instruments are not considered in this calculation.
The following is a reconciliation of the numerator and denominator of the basic and diluted
earnings per share computation for the three and nine months ended September 30, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
. |
|
2007 |
|
|
2006 |
|
|
2007 |
|
|
2006 |
|
NUMERATOR: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common shareholders |
|
$ |
(15,866 |
) |
|
$ |
1,310,498 |
|
|
$ |
39,110 |
|
|
$ |
5,709,050 |
|
Numerator for net income per common share diluted |
|
$ |
(15,866 |
) |
|
$ |
1,310,498 |
|
|
$ |
39,110 |
|
|
$ |
5,709,050 |
|
DENOMINATOR: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares |
|
|
34,275,296 |
|
|
|
25,400,160 |
|
|
|
30,981,946 |
|
|
|
25,400,160 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for net income per common sharediluted |
|
|
34,275,296 |
|
|
|
25,400,160 |
|
|
|
30,981,946 |
|
|
|
25,400,160 |
|
Net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net incomeBasic |
|
$ |
(15,866 |
) |
|
$ |
1,310,498 |
|
|
$ |
39,110 |
|
|
$ |
5,709,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net incomeDiluted |
|
$ |
(15,866 |
) |
|
$ |
1,310,498 |
|
|
$ |
39,110 |
|
|
$ |
5,709,050 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
Note 12: SUPPLEMENTAL FINANCIAL INFORMATION
A summary of additions and deductions related to the allowance for doubtful accounts for the
year ended December 31, 2006 and the three ended March 31, 2007, three months ended June 30, 2007
and the three months ended September 30, 2007 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
|
|
|
|
|
|
|
Balance at |
|
|
Beginning |
|
|
|
|
|
|
|
|
|
End of |
|
|
of Period |
|
Additions |
|
Deductions |
|
Period |
Year ended December 31, 2006 |
|
$ |
291,100 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
291,100 |
|
Three Months ended March 31, 2007 |
|
$ |
291,100 |
|
|
|
|
|
|
|
|
|
|
$ |
291,100 |
|
Three Months ended June 30, 2007 |
|
$ |
291,100 |
|
|
|
|
|
|
|
|
|
|
$ |
291,000 |
|
Three Months ended September 30, 2007 |
|
$ |
291,000 |
|
|
|
|
|
|
|
50,725 |
|
|
$ |
240,275 |
|
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Merger Agreement with Post Tension of Nevada
On July 15, 2005, the Securities and Exchange Commission adopted final rules amending the use
of Form S-8 and Form 8-K for shell companies like us. The amendments expand the definition of a
shell company to mean a company, other than an asset-backed issuer, with no or nominal
operations/assets or assets consisting of cash and cash equivalents and no or nominal other assets,
the amendments prohibit the use of a Form S-8 (a form used by a corporation to register securities
issued to an employee, director, officer, consultant or advisor, under certain circumstances), and
revise the Form 8-K to require a shell company to include current Form 10 or Form 10-SB
information, including audited financial statements, in the filing on Form 8-K that the shell
company files to report the acquisition of the business opportunity. The rules are designed to
assure that investors in shell companies that acquire operations or assets have access on a timely
basis to the same kind of information as is available to investors in public companies with
continuing operations.
On December 28, 2006, APTI entered into a Memorandum of Understanding with PTNV, which became
firm, and was announced in a Current Report on Form 8-K, filed with the SEC on February 20, 2007.
On April 12, 2007, a Current Report on Form 8-K filed with the SEC reported the completion of the
definitive Agreement and Plan of Merger (the Merger Agreement) with PTNV and PTNV Acquisition
Corp., a Florida corporation and a wholly-owned subsidiary of APTI (Acquisition Corp.). The
Merger Agreement provided that, upon the terms and subject to the conditions set forth in the
Merger Agreement, Acquisition Corp. would merge with and into PTNV (the Merger). As a result of
the Merger, PTNV became a wholly-owned subsidiary of APTI. Each outstanding share of PTNV common
stock was converted into the right to receive 10,160.064 shares of the Companys common stock as
set forth in the Merger Agreement. Under the terms of the Merger Agreement at closing, the Company
issued, and the
16
PTNV stockholders received, in a tax-free exchange, shares of Company common stock
such that PTNV stockholders now own approximately 90% of the issued and outstanding shares of the
Company.
These transactions were accounted for as a recapitalization, whereby PTNV was treated as the
acquirer for accounting purposes. Therefore, the historic financial statements prior to merger are
those of PTNV and post merger, the financial statements represent the consolidated financial
position and operating results of American Post Tension, Inc. and its wholly-owned subsidiary, Post
Tension of Nevada. As a result of the business combination, if the acquired entitys shareholders
will exercise control over us, the transaction is deemed to be a capital transaction where we are
treated as a non-business entity. Therefore, the accounting for the business combination is
identical to that resulting from a reverse merger, except no goodwill or other intangible assets
will be recorded. The Company did not recognize goodwill or any other intangible assets in
connection with the transaction.
SELECTED HISTORICAL FINANCIAL DATA FOR POST TENSION OF NEVADA
You should read the selected historical financial data of PTNV below in conjunction the
amended Current Report on Form 8-K filed with the SEC on June 28, 2007. As stated previously, the
Merger was accounted for as a recapitalization, whereby PTNV was treated as the acquirer for
accounting purposes. Therefore, the historic financial statements prior to merger are those of PTNV
and post merger, the financial statements represent the consolidated financial position and
operating results of American Post Tension, Inc and its wholly-owned subsidiary, Post Tension of
Nevada. The information below is being presented to give the financial reader a historical
financial performance of PTNV, since PTNV is currently the sole operating entity of the Company.
The selected consolidated historical financial data may not be indicative of future performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
2003 |
|
Operating Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
30,222,079 |
|
|
$ |
39,080,007 |
|
|
$ |
32,957,035 |
|
|
$ |
22,487,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales |
|
|
19,969,739 |
|
|
|
27,767,247 |
|
|
|
23,968,096 |
|
|
|
16,375,764 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Margin |
|
|
10,252,340 |
|
|
|
11,312,760 |
|
|
|
8,988,939 |
|
|
|
6,111,389 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
4,460,243 |
|
|
|
4,928,149 |
|
|
|
3,433,581 |
|
|
|
3,673,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
5,792,097 |
|
|
|
6,384,611 |
|
|
|
5,555,358 |
|
|
|
2,437,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income and (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net |
|
|
167,830 |
|
|
|
72,775 |
|
|
|
113,239 |
|
|
|
17,667 |
|
Interest income (expense), net |
|
|
(71,759 |
) |
|
|
(89,900 |
) |
|
|
(156,749 |
) |
|
|
(1,600 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before income tax |
|
|
5,888,168 |
|
|
|
6,367,486 |
|
|
|
5,511,848 |
|
|
|
2,453,719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
5,888,168 |
|
|
|
6,367,626 |
|
|
|
5,511,848 |
|
|
|
2,453,719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.23 |
|
|
$ |
0.25 |
|
|
$ |
0.20 |
|
|
$ |
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
0.23 |
|
|
$ |
0.25 |
|
|
$ |
0.20 |
|
|
$ |
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions per share |
|
$ |
0.26 |
|
|
$ |
0.25 |
|
|
$ |
0.14 |
|
|
$ |
0.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
25,400,160 |
|
|
|
25,400,160 |
|
|
|
25,400,160 |
|
|
|
25,400,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
|
25,400,160 |
|
|
|
25,400,160 |
|
|
|
25,400,160 |
|
|
|
25,400,160 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
7,743,292 |
|
|
$ |
6,297,773 |
|
|
$ |
3,682,968 |
|
|
$ |
1,120,647 |
|
Investing activities |
|
|
132,483 |
|
|
|
(589,804 |
) |
|
|
(399,109 |
) |
|
|
(63,855 |
) |
Financing activities |
|
|
(6,614,000 |
) |
|
|
(5,129,254 |
) |
|
|
(1,774,714 |
) |
|
|
(932,612 |
) |
Capital expenditures |
|
|
(132,483 |
) |
|
|
589,804 |
|
|
|
399,109 |
|
|
|
63,855 |
|
Current tax expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
2005 |
|
2004 |
|
2003 |
Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
2,937,178 |
|
|
$ |
2,255,889 |
|
|
$ |
1,677,183 |
|
|
$ |
168,038 |
|
Working capital |
|
|
6,539,390 |
|
|
|
6,845,594 |
|
|
|
5,415,506 |
|
|
|
3,996,375 |
|
Total assets |
|
|
8,837,267 |
|
|
|
9,850,168 |
|
|
|
8,249,359 |
|
|
|
5,269,919 |
|
Long-term debt and other liabilities (including current portion) |
|
|
9,577 |
|
|
|
28,125 |
|
|
|
54,455 |
|
|
|
163,285 |
|
Shareholders equity |
|
|
7,594,962 |
|
|
|
7,977,579 |
|
|
|
6,087,359 |
|
|
|
4,232,188 |
|
17
Three Months Ended September 30, 2007 as compared to Three Months Ended September 30, 2006
Results of Operations
The following table sets forth, for the periods indicated, certain information related to our
operations, expressed in dollars and as a percentage of our net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
|
2007 |
|
|
% |
|
|
2006 |
|
|
% |
|
Net sales |
|
$ |
4,166,195 |
|
|
|
100.0 |
% |
|
$ |
6,351,282 |
|
|
|
100.0 |
% |
Cost of sales |
|
|
2,980,306 |
|
|
|
71.5 |
% |
|
|
4,135,396 |
|
|
|
65.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
1,185,889 |
|
|
|
28.5 |
% |
|
|
2,215,886 |
|
|
|
34.9 |
% |
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
1,282,564 |
|
|
|
30.8 |
% |
|
|
947,401 |
|
|
|
14.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,282,564 |
|
|
|
30.8 |
% |
|
|
947,401 |
|
|
|
14.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
(96,675 |
) |
|
|
(2.3 |
)% |
|
|
1,268,485 |
|
|
|
20.0 |
% |
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense), net |
|
|
15,429 |
|
|
|
0.4 |
% |
|
|
42,046 |
|
|
|
0.7 |
% |
Other income (expense), net |
|
|
56,853 |
|
|
|
1.4 |
% |
|
|
(33 |
) |
|
|
|
% |
Merger related expenses and costs |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense) |
|
|
72,282 |
|
|
|
1.7 |
% |
|
|
42,013 |
|
|
|
0.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes |
|
|
(24,393 |
) |
|
|
(0.6 |
)% |
|
|
1,310,498 |
|
|
|
20.6 |
% |
Provision for income taxes |
|
|
(8,527 |
) |
|
|
0.2 |
% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
(15,866 |
) |
|
|
(0.4 |
)% |
|
$ |
1,310,498 |
|
|
|
20.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
Net sales totaled $4,166,195 for the three months ended September 30, 2007, as compared to
$6,351,282 for the same period in 2006, or a decrease of 34%. Home Builders Research reported that
new home sales are down 43.8 percent in Las Vegas and permit activity is down 34.4 percent from a
year ago. The year to date 2007 metro Phoenix housing market continues at a pace 23% below that of
last year. Our revenue is derived from new construction of residential housing and is directly
related to new home sales and permits for new residential construction. The decreased activity of
new residential home construction has been pronounced in Las Vegas, Nevada and Phoenix, Arizona has
resulted in reduced sales level and gross margin.
Cost of sales
Cost of sales, including all installation expenses, during the three months ended September
30, 2007 was 71.5% of net sales, as compared to 65.1% in 2006. We are anticipating competition to
increase and downward pressure on our gross margin during the next year as current and potential
competitors seek new revenue streams.
18
Selling, general and administrative expenses
Selling, general and administrative expenses for the quarter ended September 30, 2007 were
$1,282,564 or 30.8% of net sales as compared to $947,401 or 14.9% of net sales during the same
period of the prior year. Selling, general and administrative expenses increased by $335,163 for
the three month period ending September 30, 2007 versus the same three month period ending
September 30, 2006. We hired additional sales and marketing personnel to launch our Commercial
Division, hired a full time Chief Financial Officer and incurred consulting fees related to being a
public company. Effective August 6, 2006, we appointed a full-time Chief Financial Officer, as
reported in a Current Report on Form 8-K filed with the SEC on August 9, 2007. Our Chief Executive
Officer and Chief Operating Office, whom together own approximately 75% of the outstanding shares
of common stock, have salaries of $500,000 per year. Last year they had salaries of $200,000 and
also received distributions of the Subchapter S Earnings (a non income cash disbursement). The
increase in the salaries of the Chief Executive Officer, Chief Operating Officer and CFO resulted
in additional expense of $191,666 versus the same period in the prior year.
Provision for income taxes
The Company did not record a provision for income taxes for the three months ended March 31,
2007, as PTNV was an S corporation until April 2007. All retained earnings of PTNV were
reclassified to Additional paid-in capital on the Subchapter S election termination by PTNV. The
Company has had taxable income of $431,605 post Merger and post termination of the Subchapter S
election by PTNV. The Company recorded a $155,080 accrual for Federal Income taxes during the three
months ended June 30, 2007 and recorded a reduction in accrual in the amount of ($8,527) during the
three months ended September 30, 2007.
Nine Months Ended September 30, 2007 as compared to Nine Months Ended September 30, 2006
Results of Operations
The following table sets forth, for the periods indicated, certain information related to our
operations, expressed in dollars and as a percentage of our net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
|
2007 |
|
|
% |
|
|
2006 |
|
|
% |
|
Net sales |
|
$ |
12,777,236 |
|
|
|
100.0 |
% |
|
$ |
26,350,852 |
|
|
|
100.0 |
% |
Cost of sales |
|
|
9,235,323 |
|
|
|
72.3 |
% |
|
|
17,752,520 |
|
|
|
67.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
3,541,913 |
|
|
|
27.7 |
% |
|
|
8,598,332 |
|
|
|
32.6 |
% |
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
|
3,261,616 |
|
|
|
25.5 |
% |
|
|
2,987,761 |
|
|
|
11.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
3,261,616 |
|
|
|
25.5 |
% |
|
|
2,987,761 |
|
|
|
11.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
280,297 |
|
|
|
2.2 |
% |
|
|
5,610,571 |
|
|
|
21.3 |
% |
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income (expense), net |
|
|
63,973 |
|
|
|
0.5 |
% |
|
|
105,695 |
|
|
|
0.1 |
% |
Other income (expense), net |
|
|
793,291 |
|
|
|
6.2 |
% |
|
|
22,210 |
|
|
|
0.4 |
% |
Merger related expenses and costs |
|
|
(929,289 |
) |
|
|
(7.3 |
)% |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense) |
|
|
(72,097 |
) |
|
|
(6.7 |
)% |
|
|
127,905 |
|
|
|
0.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before provision for income taxes |
|
|
208,200 |
|
|
|
1.6 |
% |
|
|
5,738,476 |
|
|
|
21.8 |
% |
Provision for income taxes |
|
|
169,090 |
|
|
|
1.3 |
% |
|
|
29,426 |
|
|
|
0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
39,110 |
|
|
|
0.3 |
% |
|
$ |
5,709,050 |
|
|
|
21.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
19
Net sales
Net sales totaled $12,777,236 for the nine months ended September 30 31, 2007, as compared to
$26,350,852 for the same period in 2006, or a decrease of 52%. Home Builders Research reported that
new home sales are down 43.8 percent in Las Vegas and permit activity is down 34.4 percent from a
year ago. The year to date 2007 metro Phoenix housing market continues at a pace 23% below that of
last year. Our revenue is derived from new construction of residential housing and is related to
new home sales and permits for new residential construction. Our revenue is derived from new
construction of residential housing and is directly related to new home sales and permits for new
residential construction. The decreased activity of new residential home construction has been
pronounced in Las Vegas, Nevada and Phoenix, Arizona has resulted in reduced sales level and gross
margin.
Cost of sales
Cost of sales, including all installation expenses, during the nine months ended September 30,
2007 was 72% of net sales, as compared to 67% in 2006, in part due to more significant competitive
pressures we are experiencing. We are anticipating competition to increase and downward pressure on
our gross margin during the next year as current and potential competitors seek new revenue
streams.
Selling, general and administrative expenses
Selling, general and administrative expenses for the nine months ended September 30, 2007 were
25.5% of net sales as compared to 11.3% of net sales during the same period of the prior year.
Selling, general and administrative expenses increased to approximately $3,261,615 for the nine
months ended September 30, 2007 compared to approximately $2,987,761 for the nine months ended
September 30, 2006. We hired additional sales and marketing personnel to launch our Commercial
Division, hired a full time Chief Financial Officer and incurred consulting fees related to being a
public company. Effective August 6, 2006, we appointed a full-time Chief Financial Officer, as
reported in a Current Report on Form 8-K filed with the SEC on August 9, 2007. Our Chief Executive
Officer and Chief Operating Office, whom together own approximately 75% of the outstanding shares
of common stock, have salaries of $500,000 per year. Last year they had salaries of $200,000 and
also received distributions of the Subchapter S Earnings (a non income cash disbursement).
Acquisition related expenses and costs
PTNV issued 526 shares of common stock to consultants and advisors prior to the consummation
of the Merger. The shares were exchanged for 5,327,840 shares of common stock of American Post
Tension, Inc. upon the consummation of the Merger. PTNV issued 10 shares of common stock to
employees prior to the consummation of the Merger that were converted into 101,600 shares of
American Post Tension, Inc. upon the consummation of the Merger agreement. The 5,327,840 shares of
common stock and 101,600 shares of common stock were valued at $0.16 per share. The Company
incurred legal, accounting and other professional services of $77,155 during the nine month period
ending September 30, 2007 as a result of being a public company and consummating the Merger.
Other income (expense), net
The Companys workmans compensation insurance company, Employers Insurance Company (EIC),
went public. The Company was a member of EIC. EIC gave to the Company stock when EIC went public.
The Company sold the shares in EIC on March 19, 2007 for net proceeds of $695,334 which resulted in
a gain on sale of stock.
Provision for income taxes
The Company did not record a provision for income taxes for the three months ended March 31,
2007, as PTNV was an S corporation until April 2007. All retained earnings of PTNV were
reclassified to Additional paid-in capital on the Subchapter S election termination by PTNV. The
Company has had
20
taxable income of $431,605 post merger and post termination of the Subchapter S election by
PTNV. The Company recorded a $155,080 accrual for Federal Income taxes during the three months
ended June 30, 2007 and recorded a reduction in accrual in the amount of ($8,527) during the three
months ended September 30, 2007.
Liquidity and Capital Resources
Significant sources of liquidity are cash on hand, cash flows from operating activities,
working capital, borrowings from our revolving line of credit and equity proceeds raised. As of
September 30, 2007 we had approximately $2,076,606 in cash on hand.
Cash flows provided from operating activities were $455,051 and $1,685,066 for the three
months ended September 30, 2007 and 2006, respectively and $2,659,275 and $7,425,477 for the nine
months ended September 30, 2007 and 2006.
Cash flows (used in) investing activities were ($64,084) and ($9,220), respectively, for the
three months ended September 30, 2007 and 2006 and ($125,060) and ($48,758) for the nine months
ended September 30, 2007 and 2006. The investing activities were for the purchase of fixed assets.
The Company installed Microsoft Dynamics GP as its new accounting system during the three months
ended September 30, 2007.
Cash flows (used in) financing activities were ($137,235) and ($1,206,763), respectively, for
the three months ended September 30, 2007 and 2006 and ($3,394,786) and ($6,164,155) for the nine
months ended September 30, 2007 and 2006. The financing activities are comprised of distributions
to the shareholders of PTNV prior to the Merger and repayment of loans due Edward Hohman and John
Hohman.
ITEM 3. CONTROLS AND PROCEDURES
a) Evaluation of Disclosure Controls and Procedures.
Under the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and
operation of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e)
under the Securities Exchange Act of 1934 (the Exchange Act)). Based on this evaluation, our
Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of the end of the period covered by this report.
Disclosure controls and procedures are controls and procedures that are designed to ensure
that information required to be disclosed in our reports filed or submitted under the Exchange Act
is recorded, processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commissions rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information required to be
disclosed in our reports filed under the Exchange Act is accumulated and communicated to
management, including our principal executive officer and our principal financial officer, as
appropriate, to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control over Financial Reporting.
During the quarter ended September 30, 2007, there was no change in our internal control over
financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that has
materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
We are not aware of any pending or threatened litigation.
21
ITEM 1A. Risk Factors
Investing in our common stock involves a high degree of risk. Certain of the risks related to
an investment in our common stock were disclosed in an amended Current Report on form 8-K, which we
filed with the SEC on June 28, 2007. The portion of that amended Current Report under the caption
Risk Factors is hereby incorporated into this report by this reference. You should carefully
consider those risk factors, as well as the following additional risk factors and other information
in this report, before deciding whether to invest in shares of our common stock.
We recently amended our bylaws to make it easier for or majority stockholders, primarily
Edward Hohman and John Hohman, to approve corporate actions that require the consent of our
stockholders. In addition to those risk factors disclosed in the amended Current Report referred
to in the preceding paragraph, on June 28, 2007, we amended our bylaws to make it easier for our
majority stockholders to approve corporate actions without the need to call a meeting of all of our
stockholders to vote on such corporate actions. The Delaware corporation laws that govern us
require that certain corporate actions, such as a merger or sale of the Company, changes to our
Certificate of Incorporation, and other actions, be approved by our stockholders prior to those
actions becoming effective. Such stockholder approval can be obtained either by holding a
stockholder meeting or, if our bylaws permit, by obtaining the written consent to such actions of
stockholders owning a sufficient number of shares of stock to approve the actions (typically a
majority of the outstanding shares of our stock). Our bylaws previously permitted action to be
approved by written consent of our stockholders, but the bylaws required the written consent of
all stockholders. We believe that obtaining the written consent of all stockholders to
approve corporate action would be impracticable, due the time and cost that would be required.
Similarly, holding a meeting of stockholders to approve certain actions would involve additional
legal and other expenses to the Corporation. Accordingly, our board of directors amended our
bylaws to permit stockholder approval of corporate actions by the written consent of the holders of
a majority of our outstanding voting shares, as permitted by Delaware law. On August 3, 2007, our
board approved, and the Companys stockholders owning a majority of the outstanding voting shares,
approved an amendment to our Certificate of Incorporation to change our name to American Post
Tension, Inc.
The decreased activity of new residential home construction has been pronounced in Las Vegas,
Nevada and Phoenix, Arizona and has resulted in significantly reduced sales and gross margin. Our
revenue is derived primarily from new construction of residential housing and is directly related
to new home sales and permits for new residential construction. The recent downturn in residential
construction in Las Vegas, Nevada and Phoenix, Arizona has resulted in a significant reduction in
our revenues for the three-month and nine-month periods ended September 30, 2007. We cannot
predict whether or when residential construction activity will rebound in those markets. Prolonged
sluggishness in residential construction, however, can be expected to continue to have a negative
impact on our revenues and earnings.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
APTI issued 50,000 of restricted shares of common stock during the three months ended
September 30, 2007 to two members of the Board of Directors (25,000 shares each).
Item 3. Defaults upon Senior Securities
There were no defaults upon senior securities during the three and nine month period ended
September 30, 2007.
Item 4. Submission of Matters to a Vote of Security Holders
None
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Item 5. Other Information
Effective August 6, 2007, our board of Directors (the Board) appointed Mr. Dean Homayouni,
Esq., CPA, 49, as our Chief Financial Officer. Mr. Homayouni replaces Mr. Kelly T. Hickel, who had
been our acting Chief Financial Officer. Mr. Hickel remains a member of our Board and an advisor
to the Company regarding mergers and acquisition activities.
Mr. Homayouni is licensed as a Certified Public Accountant and as an attorney in the states of
Nevada and California. From October 2005 until joining us, he was the Chief Financial Officer and
in-house legal counsel to Silver State Ethanol, Inc., a corporation organized to a build a 50
million gallon per year ethanol plant to be located in Burley, Idaho. From November 2002 to
Present, Mr. Homayouni is a practicing attorney and certified public accountant in Las Vegas,
Nevada. Prior to that, from 2000 to 2001, he was the controller for Need2Buy.com, an Internet
company selling electronic components utilizing the Internet.
Item 6. Exhibits
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31.1
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Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act. |
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31.2
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Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act. |
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32.1
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Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act. |
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32.2
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Certification of Principal Financial and Accounting Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act. |
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
November 13, 2007
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American Post Tension, Inc.
(Registrant)
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By: |
/s/ Edward Hohman
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Edward Hohman, Chief Executive Officer |
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By: |
/s/ C. Dean Homayouni
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C. Dean Homayouni, Esq., CPA |
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Chief Financial Officer |
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23
Exhibit Index
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Exhibit No. |
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Description |
31.1
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Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act. |
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31.2
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Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act. |
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32.1
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Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act. |
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32.2
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Certification of Principal Financial and Accounting Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act. |
24