UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended: December 31, 2004
Commission file number: 033-25900
CENUCO, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2228820
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6421 CONGRESS AVENUE, SUITE 201
BOCA RATON, FLORIDA 33487
(Address of principal executive offices)
(Zip code)
(561) 994-4446
(Registrant's telephone number, including area code)
Indicate by check mark whether 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 X No
--- ---
APPLICABLE TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practical date:
On January 21, 2005, the issuer had outstanding 12,891,896 shares of common
stock, $.001 par value per share.
CENUCO, INC. AND SUBSIDIARIES
FORM 10-QSB
QUARTERLY PERIOD ENDED DECEMBER 31, 2004
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheet
As of December 31, 2004 (Unaudited) .....................................3
Consolidated Statements of Operations (Unaudited)
For the Three and Six Months ended December 31, 2004 and 2003............4
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended December 31, 2004 and 2003......................5
Condensed Notes to Consolidated Financial Statements................. 6-14
Item 2 - Management's Discussion and Analysis and
Results of Operations.......................................15-22
Item 3 - Control and Procedures.........................................22
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings..............................................22
Item 2 - Changes in Securities and Use of Proceeds......................23
Item 4 - Submission of Matters to a Vote of Security Holders............23
Item 5 - Other Information..............................................23
Item 6 - Exhibits and Reports on Form 8-K...............................23
Signatures..............................................................23
-2-
CENUCO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 2004
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents ..................................................... $ 267,516
Short-term Investments ........................................................ 6,350,000
Note Receivable, Current Portion .............................................. 96,653
Accounts Receivable (Net of Allowance for Doubtful Accounts of $18,243) ....... 68,471
Inventories ................................................................... 35,410
Other Current Assets .......................................................... 67,191
------------
Total Current Assets ...................................................... 6,885,241
------------
PROPERTY AND EQUIPMENT:
Computer Equipment and Software ............................................... 230,497
Furniture, Fixtures and Office Equipment ...................................... 50,699
Leasehold Improvements ........................................................ 3,051
------------
Total Property and Equipment .............................................. 284,247
Less: Accumulated Depreciation ................................................ (165,139)
------------
Total Property and Equipment, Net ......................................... 119,108
------------
OTHER ASSETS:
Note Receivable, less current portion ......................................... 603,347
Security Deposits ............................................................. 7,732
------------
Total Other Assets ........................................................ 611,079
------------
Total Assets .............................................................. $ 7,615,428
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable .............................................................. $ 136,779
Other Accrued Expenses ........................................................ 148,882
------------
Total Current Liabilities ................................................. 285,661
LONG-TERM LIABILITIES:
Deferred Gain from Sale of Business ........................................... 200,000
------------
Total Liabilities ......................................................... 485,661
------------
COMMITMENTS AND CONTINGENCIES (See Note 5)
STOCKHOLDERS' EQUITY:
Preferred Stock ($.001 Par Value; 1,000,000 Shares Authorized)
No Shares Issued and Outstanding ) ...................................... -
Common Stock ($.001 Par Value; 25,000,000 Shares Authorized;
12,845,482 Shares Issued and Outstanding) ............................... 12,847
Common Stock Issuable (30,234 shares) ......................................... 30
Additional Paid-in Capital .................................................... 12,022,560
Accumulated Deficit ........................................................... (4,905,670)
------------
Total Stockholders' Equity ................................................ 7,129,767
------------
Total Liabilities and Stockholders' Equity ................................ $ 7,615,428
============
See accompanying notes to consolidated financial statements
-3-
CENUCO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended For the Six Months Ended
December 31, December 31,
-------------------------- --------------------------
2004 2003 2004 2003
------------ ----------- ------------ -----------
NET REVENUES .................................... $ 242,330 $ 36,930 $ 243,831 $ 89,717
COST OF SALES ................................... 212,663 5,290 215,986 14,373
------------ ----------- ------------ -----------
GROSS PROFIT .................................... 29,667 31,640 27,845 75,344
------------ ----------- ------------ -----------
COSTS AND EXPENSES:
Research and Development .................... 33,845 2,930 38,863 20,571
Bad Debt Expense ............................ - - 20,343 -
Selling and Promotion ....................... 42,490 20,817 141,775 56,757
General and Administrative .................. 695,964 542,388 1,469,143 879,290
------------ ----------- ------------ -----------
Total Operating Expenses ................ 772,299 566,135 1,670,124 956,618
------------ ----------- ------------ -----------
LOSS FROM OPERATIONS ............................ (742,632) (534,495) (1,642,279) (881,274)
OTHER INCOME:
Interest Income ............................. 35,030 5,063 48,233 8,845
------------ ----------- ------------ -----------
LOSS BEFORE DISCONTINUED OPERATIONS ............. (707,602) (529,432) (1,594,046) (872,429)
DISCONTINUED OPERATIONS:
Gain from Sale of Discontinued Operations,
net of income taxes ....................... - - 1,814,648 -
Income from Discontinued Operations ......... 2,506 127,886 107,128 229,979
------------ ----------- ------------ -----------
Total Income from Discontinued Operations 2,506 127,886 1,921,776 229,979
------------ ----------- ------------ -----------
NET INCOME (LOSS) ............................... $ (705,096) $ (401,546) $ 327,730 $ (642,450)
============ =========== ============ ===========
INCOME (LOSS) PER COMMON SHARE- BASIC
Loss from continuing operations ............. $ (0.06) $ (0.06) $ (0.13) $ (0.10)
Income from discontinued operations ......... 0.00 0.01 0.16 0.03
------------ ----------- ------------ -----------
Net income (loss) per common share .......... $ (0.06) $ (0.05) $ 0.03 $ (0.07)
============ =========== ============ ===========
INCOME (LOSS) PER COMMON SHARE - DILUTED
Loss from continuing operations ............. $ (0.06) $ (0.06) $ (0.11) $ (0.10)
Income from discontinued operations ......... 0.00 0.01 0.13 0.03
------------ ----------- ------------ -----------
Net income (loss) per common share .......... $ (0.06) $ (0.05) $ 0.02 $ (0.07)
============ =========== ============ ===========
Weighted Common Shares Outstanding - Basic .. 12,524,148 9,224,487 12,381,825 9,104,605
============ =========== ============ ===========
Weighted Common Shares Outstanding - Diluted 12,524,148 9,224,487 14,398,338 9,104,605
============ =========== ============ ===========
See accompanying notes to consolidated financial statements
-4-
CENUCO, INC. AND SUBSIDIAIRES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended
December 31,
-------------------------
2004 2003
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss from Continuing Operations .................................... $(1,594,046) $ (872,429)
Adjustments to Reconcile Net Loss from Continuing Operations
to Net Cash Used in Operating Activities:
Depreciation ................................................ 19,303 23,132
Stock-Based Compensation .................................... 544,321 277,336
Provision for Doubtful Accounts ............................. 20,343 (5,000)
(Increase) Decrease in:
Accounts Receivable ....................................... (61,878) 3,878
Inventories ............................................... (17,128) 9,629
Other Current Assets ...................................... 5,125 (5,740)
Secuity Deposits .......................................... 910 -
Increase (Decrease) in:
Accounts Payable .......................................... 5,162 6,794
Other Accrued Expenses .................................... 22,123 (48,329)
Deferred Revenue .......................................... (3,667) 19,180
----------- -----------
Net Cash Flows Used in Continuing Operating Activities ................. (1,059,432) (591,549)
----------- -----------
Income from Discontinued Operations ................................ 1,921,776 229,979
Adjustments to Reconcile Income from Discontinued
Operations to Net Cash Used in Discontinued Operating Activities:
Gain from Sale of Discontinued Operation .................... (1,894,648) -
Net Decrease in Net Liabilities of Discontinued Operations .. 316,979 105,964
----------- -----------
Net Cash Provided by Discontinued Operating Activities ................. 344,107 335,943
----------- -----------
Net Cash Flows Used in Operating Activities ............................ (715,325) (255,606)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in Short-term Investment .................................. (960,002) (8,291)
Acquisition of Property and Equipment .............................. (10,359) (27,344)
----------- -----------
Net Cash Flows Used in Investing Activities ............................ (970,361) (35,635)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Sale of Common Stock ................................. - 100,000
Proceeds from Exercise of Stock Options and Warrants ............... 1,646,884 -
----------- -----------
Net Cash Flows Provided by Financing Activities ........................ 1,646,884 100,000
----------- -----------
Net Decrease in Cash and Cash Equivalents .............................. (38,802) (191,241)
Cash and Cash Equivalents - Beginning of Year .......................... 306,318 295,088
----------- -----------
Cash and Cash Equivalents - End of Period .............................. $ 267,516 $ 103,847
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest ........................................................... $ - $ -
=========== ===========
Income Taxes ....................................................... $ - $ -
=========== ===========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for debt ....................................... $ - $ 9,000
=========== ===========
Common stock issued for future services ............................ $ - $ 1,195,585
=========== ===========
See accompanying notes to consolidated financial statements
-5-
CENUCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Cenuco, Inc., a Florida corporation ("Cenuco") and wholly-owned subsidiary of
Cenuco, Inc. (a Delaware corporation), has pioneered the ability to transmit
live streaming video onto cellular phones, cellular capable Personal Digital
Assistants, 802.x devices, and remote computers. The patent pending core
technology has been productized as a security remote video monitoring family of
products for the retail/consumer, small to medium size enterprise, as well as
for large enterprise, government, and homeland security market sectors. Cenuco's
cellular remote video monitoring products are approved for sale to all Federal
and military agencies, including the Department of Homeland Security. Cenuco was
issued a five-year General Services Administration Contract number,
GS-04F-0025N, in July 2003. By offering remote monitoring services and
technologies as a product and for licensing, Cenuco is positioned to grow within
the application space worldwide.
On September 30, 2004, the Company sold substantially all of the assets and
business of its education subsidiary (See Note 3).
The accompanying unaudited consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC"). The accompanying consolidated financial statements for the interim
periods are unaudited and reflect all adjustments (consisting only of normal
recurring adjustments and adjustments for the asset sale) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the periods presented. The consolidated
financial statements include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements for the year ended June 30, 2004 and notes
thereto contained in the Company's report on Form 10-KSB as filed with the SEC.
The results of operations for the six months ended December 31, 2004 are not
necessarily indicative of the results for the full fiscal year ending June 30,
2005.
Certain reclassifications have been made to the prior period's consolidated
statements of operations to conform to the current period's presentation.
Inventories
Inventories, consisting of security cameras and equipment, are stated at the
lower of cost or market utilizing the first-in, first-out method.
-6-
CENUCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company follows the guidance of the Securities and Exchange Commission's
Staff Accounting Bulletin 104 for revenue recognition. In general, the Company
records revenue when persuasive evidence of an arrangement exists, services have
been rendered or product delivery has occurred, the sales price to the customer
is fixed or determinable, and collectability is reasonably assured. The
following policies reflect specific criteria for the various revenues streams of
the Company:
In connection with the development and sale of wireless solutions and web
services, which include the development of business-to-business and
business-to-consumer wireless applications, and state of the art wireless
technology and services, the Company recognizes revenue as services are
performed on a pro-rata basis over the contract term or when products are
delivered. The Company has executed a distribution agreement whereby the
distributor may purchase wireless product on consignment. Any sales made to the
distributor under this agreement will be recorded as a deferred revenue
liability until such time as the distributor has sold the product at which time
the Company will recognize the related revenues.
Revenues are earned from licensing arrangements pursuant to the terms of those
agreements. As of December 31, 2004, no licensing revenue has been recorded.
Stock Options
The Company accounts for stock options issued to employees in accordance with
the provisions of Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations. As
such, compensation cost is measured on the date of grant as the excess of the
current market price of the underlying stock over the exercise price. Such
compensation amounts, if any, are amortized over the respective vesting periods
of the option grant. The Company adopted the disclosure provisions of SFAS No.
123, "Accounting for Stock-Based Compensation" and SFAS 148, "Accounting for
Stock-Based Compensation -Transition and Disclosure", which permits entities to
provide pro forma net income (loss) and pro forma earnings (loss) per share
disclosures for employee stock option grants as if the fair-valued based method
defined in SFAS No. 123 had been applied. The Company accounts for stock options
and stock issued to non-employees for goods or services in accordance with the
fair value method of SFAS 123.
The exercise prices of all options granted by the Company equal the market price
at the dates of grant. No compensation expense has been recognized. Had
compensation cost for the stock option plan been determined based on the fair
value of the options at the grant dates consistent with the method of SFAS 123,
"Accounting for Stock Based Compensation", the Company's net loss and loss per
share would have been changed to the pro forma amounts indicated below for the
six months ended December 31, 2004 and 2003:
-7-
CENUCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Stock Options (continued)
For the six months ended
December 31,
--------------------------
2004 2003
----------- -----------
Net income (loss) as reported ............ $ 327,730 $ (642,450)
Less: total stock-based employee
compensation expense determined under
fair value based method, net of related
tax effect ............................... (134,052) (66,159)
----------- -----------
Pro forma net income (loss) .............. $ 193,678 $ (708,609)
=========== ===========
Basic income (loss) per share:
As reported .................. $ .03 $ (.07)
=========== ===========
Pro forma .................... $ .02 $ (.08)
=========== ===========
Diluted income (loss) per share:
As reported .................. $ .02 $ (.07)
=========== ===========
Pro forma .................... $ .01 $ (.08)
=========== ===========
The above pro forma disclosures may not be representative of the effects on
reported net earnings for future years as options vest over several years and
the Company may continue to grant options to employees.
Earnings (Loss) Per Common Share
Basic net earnings (loss) per share equals net earnings (loss) divided by the
weighted average shares outstanding during the period. For the six months ended
December 31, 2003, the computation of diluted net earnings per share does not
include dilutive common stock equivalents in the weighted average shares
outstanding as they would be antidilutive. Not included in basic shares are
3,783,558 stock options and warrants because they are anti-dilutive in 2003. The
reconciliation between the computations is as follows:
2004 2003
---- ----
Income (loss) available to common shares .. $ 327,730 $ (642,450)
----------- -----------
Weighted average shares outstanding-basic . 12,381,825 9,104,605
----------- -----------
Earnings (loss) per share - Basic ......... $ 0.02 $ (0.07)
=========== ===========
Income (loss) available to common shares .. $ 327,730 $ (642,450)
----------- -----------
Weighted average shares outstanding-basic . 12,381,825 9,104,605
Effect of dilutive securities:
Stock options and warrants ................ 2,016,513 -
----------- -----------
Weighted average shares outstanding-diluted 14,398,338 9,104,605
----------- -----------
Earnings (loss) per share - Diluted ....... $ 0.02 $ (0.07)
=========== ===========
-8-
CENUCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Intangibles and other Long-Lived Assets
The Company reviews the carrying value of intangibles and other long-lived
assets for impairment at least annually or whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of long-lived assets is measured by comparison of
its carrying amount to the undiscounted cash flows that the asset or asset group
is expected to generate. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the property, if any, exceeds its fair market value. Goodwill
represents the excess of the cost of the Company's acquired subsidiaries or
assets over the fair value of their net assets at the date of acquisition. Under
Statement of Financial Accounting Standards ("SFAS") No. 142, goodwill is
subject to at least an annual assessment for impairment applying a fair-value
based test. There were no impairment losses during the three and six months
ended December 31, 2004.
Recent Accounting Pronouncements
In November 2004, the Financial Accounting Standards Board (FASB) issued SFAS
151 "Inventory Costs". This Statement amends the guidance in ARB No. 43, Chapter
4, "Inventory Pricing, to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs, and wasted material (spoilage). In
addition, this Statement requires that allocation of fixed production overhead
to the costs of conversion be based on the normal capacity of the production
facilities. The provisions of this Statement will be effective for the Company
beginning with its fiscal year ending 2006. The Company is currently evaluating
the impact this new Standard will have on its operations, but believes that it
will not have a material impact on the Company's financial position, results of
operations or cash flows.
In December 2004, the FASB issued SFAS 153 "Exchanges of Non monetary Assets -
an amendment of APB Opinion No. 29. This Statement amended APB Opinion 29 to
eliminate the exception for non-monetary exchanges of similar productive assets
and replaces it with a general exception for exchanges of non-monetary assets
that do not have commercial substance. A non-monetary exchange has commercial
substance if the future cash flows of the entity are expected to change
significantly as a result of the exchange. The adoption of this Standard is not
expected to have any material impact on the Company's financial position,
results of operations or cash flows.
In December 2004, the FASB issued SFAS 123 (revised 2004) "Share-Based Payment".
This Statement requires that the cost resulting from all share-based
transactions be recorded in the financial statements. The Statement establishes
fair value as the measurement objective in accounting for share-based payment
arrangements and requires all entities to apply a fair-value-based measurement
in accounting for share-based payment transactions with employees. The Statement
also establishes fair value as the measurement objective for transactions in
which an entity acquires goods or services from non-employees in share-based
payment transactions. The Statement replaces SFAS 123 "Accounting for
Stock-Based Compensation" and supersedes APB Opinion No. 25 "Accounting for
Stock Issued to Employees". The provisions of this Statement will be effective
for the Company beginning with its fiscal year ending 2005. The Company is
currently evaluating the impact this new Standard will have on its financial
position, results of operations or cash flows.
-9-
CENUCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2004
NOTE 3 - SALE OF SUBSIDIARY
Effective September 30, 2004, the Company entered into a Purchase and Sale
Agreement (the "Sale Agreement") and sold substantially all of the assets of its
education subsidiary for $1,000,000, subject to a reduction of $200,000 if the
buyer does not collect 95% of the receivables on the books as of September 30,
2004 prior to September 30, 2005. In connection with the Sale Agreement, the
Company received $300,000 in cash. As of December 31, 2004, the Company
reflected a receivable from the sale of business on the accompanying balance
sheet. Additionally, the buyer executed a promissory note in favor of the
Company in the amount of $700,000 payable as follows:
(a) Twenty (20) equal and consecutive quarterly payments of $29,122.87 each
(amortized on the basis of $500,000), with payments beginning on March
1, 2005. Interest accrues at a rate of 6% per annum. During the first 6
months, interest will accrue but not be paid. The $15,000 of interest
accrued is payable in 5 equal monthly installments beginning December
1, 2004. As of December 31, 2004, the Company had not received any
payments.
(b) A final balloon payment of $200,000 due on January 1, 2010. If the
purchase price is reduced due to buyer not collecting 95% of the
receivables on the books as of September 30, 2004 prior to September
30, 2005, the final balloon payment will be eliminated.
As a result of the sale of the Company's subsidiary, for the six months ended
December 31, 2004, the Company recorded a gain of $1,814,648 and a deferred gain
on the sale of $200,000 (representing the contingent balloon payment due). The
results of operations of the Company's education subsidiary is reported
separately as a discontinued operation, and prior periods have been restated in
the Company's financial statements, related footnotes and the management's
discussion and analysis to conform to this presentation.
The Company's income (loss) from discontinued operations for the six months
ended December 31, 2004 and 2003 are summarized as follows:
For the Six Months Ended,
December 31,
2004 2003
---------- ----------
Sales ........................................ $ 261,288 $ 459,004
Operating Expenses ........................... 154,160 229,025
---------- ----------
Net income from discontinued operations before
gain on sale ................................ 107,128 229,979
Gain on sale of assets of subsidiary ......... 1,814,648 -
---------- ----------
Income from discontinued operations .......... $1,921,776 $ 229,979
========== ==========
-10-
CENUCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2004
NOTE 3 - SALE OF SUBSIDIARY (continued)
The gain on sale from the sale of substantially all of the assets of the
Company's education subsidiary is calculated as follows:
Sale price for subsidiary's assets .................... $ 1,000,000
Less: direct transaction expenses:
Investment banking fee ............................. (80,000)
Add: net deficit of subsidiary at date of sale ........ 1,094,648
Less: deferred gain on sale of subsidiary ............. (200,000)
-----------
Gain on disposal of subsidiary, net of taxes .......... $ 1,814,648
===========
NOTE 4 - STOCKHOLDERS' EQUITY
Common stock
In July 2004, the Company issued 10,000 common shares previously issuable. In
October 2004, the Company issued 3,036 common shares previously issuable.
On July 23, 2004, the Company issued an aggregate of 34,000 shares of common
stock (17,000 common shares each) to two employees' of the Company for services
rendered. Such shares were valued at their market value on the date of issuance
at $3.71 per share. The Company recorded compensation of $126,140 related to
these services.
During the quarter ended September 30, 2004, the Company issued 265 shares of
common stock for accounting services rendered. The Company valued these shares
at their market value on the first date at the beginning of the service period
at $5.65 per share and recorded professional fees of $1,500.
During the quarter ended September 30, 2004, the Company issued 100,000 shares
of common stock upon the exercise of 100,000 warrants for proceeds of $100,000
or $1.00 per share.
During the quarter ended September 30, 2004, the Company issued 10,000 shares of
common stock upon the exercise of 10,000 options for proceeds of $5,500 or $.55
per share.
During the quarter ended December 31, 2004, the Company issued 300,000 shares of
common stock upon the exercise of 300,000 warrants for proceeds of $300,000 or
$1.00 per share.
During the quarter ended December 31, 2004, the Company issued 280,776 shares of
common stock upon the exercise of 236,560 and 44,216 warrants at $4.50 and $4.00
per share, respectively, for proceeds of $1,241,384. As of December 31, 2004,
30,234 of these shares have not been issued and are included in common stock
issuable on the accompanying balance sheet. These shares were issued in January
2005.
-11-
CENUCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2004
NOTE 4 - STOCKHOLDERS' EQUITY (continued)
Common stock (continued)
During the quarter ended December 31, 2004, the Company issued 368 shares of
common stock for accounting services rendered. The Company valued these shares
at their market value on the first date at the beginning of the service period
at $4.08 per share and recorded professional fees of $1,500.
Common stock options
On July 23, 2004, the Company granted options to purchase 60,000 shares of
common stock to employees of the Company. The options are exercisable at $3.71
per share, which exceeds the fair market value of the common stock at the grant
date. Accordingly, under APB 25, no compensation expense was recognized. The
options expire on July 23, 2014 or earlier due to employment termination.
On July 28, 2004, the Company granted options to purchase 40,000 shares of
common stock to employees of the Company. The options are exercisable at $4.00
per share, which exceeds the fair market value of the common stock at the grant
date. Accordingly, under APB 25, no compensation expense was recognized. The
options expire on July 28, 2014 or earlier due to employment termination.
A summary of the status of the Company's outstanding stock options as of
December 31, 2004 and changes during the six months ended December 31, 2004 is
as follows:
Weighted Average
Exercise
Shares Price
---------- ----------------
Outstanding at June 30, 2004 ........... 1,361,000 $ 0.96
Granted .............................. 100,000 3.83
Exercised ............................ (10,000) (0.55)
Forfeited ............................ (136,666) (1.81)
--------- --------
Outstanding at December 31, 2004 ....... 1,314,334 $ 1.10
========= ========
Options exercisable at end of period ... 807,666 $ 0.76
========= ========
Weighted-average fair value of options
granted during the period ............ $ 3.83
The following information applies to options outstanding at December 31, 2004:
Options Outstanding Options Exercisable
-------------------------- ---------------------
Weighted -
Range Average Weighted - Weighted -
of Remaining Average Average
Exercise Contractual Exercise Exercise
Prices Shares Life (Years) Price Shares Price
-------- --------- ------------ ---------- ------- ----------
$0.35 220,000 7.00 $ 0.35 220,000 $0.35
$0.42 220,000 7.50 $ 0.42 146,666 $0.42
$0.55 276,000 6.00 $ 0.55 276,000 $0.55
$1.15 295,000 9.10 $ 1.15 21,666 $1.15
$1.55 40,000 8.10 $ 1.55 13,334 $1.55
$2.00 138,334 9.10 $ 2.00 105,000 $2.00
$2.50 25,000 6.25 $ 2.50 25,000 $2.50
$3.71 60,000 9.25 $ 3.71 - $ -
$4.00 40,000 9.50 $ 4.00 - $ -
--------- -------
1,314,334 807,666
========= =======
-12-
CENUCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2004
NOTE 4 - STOCKHOLDERS' EQUITY (continued)
Common stock warrants
A summary of the status of the Company's outstanding stock warrants granted for
services as of December 31, 2004 and changes during the six months ended
December 31, 2004 is as follows:
Weighted
Average
Exercise
Shares Price
---------- --------
Outstanding at June 30, 2004 ...... 3,050,000 $ 3.50
Granted ........................... - -
Exercised ......................... (580,776) (2.66)
Forfeited ......................... - -
---------- --------
Outstanding at December 31, 2004 .. 2,469,224 $ 3.73
========== ========
Warrants exercisable at end of year 2,469,224 $ 3.73
========== ========
The following information applies to all warrants outstanding at December 31,
2004:
Warrants Outstanding Warrants Exercisable
-------------------------- ---------------------
Weighted -
Range Average Weighted - Weighted -
of Remaining Average Average
Exercise Contractual Exercise Exercise
Prices Shares Life (Years) Price Shares Price
-------- --------- ------------ ---------- --------- ----------
$1.00 600,000 3.95 $ 1.00 600,000 1.00
$4.00 105,784 4.48 $ 4.00 105,784 4.00
$4.50 1,413,440 4.38 $ 4.50 1,413,440 4.50
$5.00 to
$6.50 350,000 4.48 $ 5.21 350,000 5.21
---------
2,469,224
=========
NOTE 5 - TERMINATION OF A MATERIAL DEFINITIVE AGREEMENT
On October 25, 2004, the Company announced that it has entered into an Asset
Purchase Agreement, dated as of October 21, 2004 (the "Purchase Agreement") with
Omni Point Marketing, LLC, a Florida limited liability company ("Omni Point"),
pursuant to which the Company agreed to acquire substantially all of the assets
of Omni Point for an aggregate purchase price of $22,500,000, payable in a
combination of $5,400,000 in cash and $17,100,000 in shares of the Company's
common stock, valued at $4.00 per share. The material terms and conditions of
the Purchase Agreement were previously disclosed in the Company's Definitive
Proxy Statement filed with the Commission on December 13, 2004. On December 20,
2004, the Company announced that it had terminated the Purchase Agreement
because the Company's board and management had come to a decision that pursuing
the acquisition was no longer in the best interests of the Company and its
stockholders. Omni Point was informed of this decision and the escrow agent
under the Purchase Agreement refunded the Company's $5,000,000 deposit on
December 21, 2004, pursuant to Omni Point's written request.
-13-
CENUCO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 2004
NOTE 6 - SUBSEQUENT EVENTS
During January 2005, the Company issued 15,000 shares of common stock upon the
exercise of 15,000 warrants at $4.50 per share for proceeds of $67,500.
-14-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
GENERAL
The following analysis of the results of operations and financial
condition of the Company should be read in conjunction with the consolidated
financial statements for the year ended June 30, 2004 and notes thereto
contained in the Report on Form 10-KSB of Cenuco, Inc. as filed with the SEC.
These financial statements reflect the consolidated operations of Cenuco, Inc.
for the six months ended December 31, 2004 and 2003, respectively.
This report on Form 10-QSB contains forward-looking statements. These
statements consist of any statement other than a recitation of historical fact
and can be identified by the use of forward-looking terminology such as "may,"
"expect," "anticipate," "estimate" or "continue" or the negative thereof or
other variations thereon or comparable terminology. The reader is cautioned that
all forward-looking statements are necessarily speculative and there are certain
risks and uncertainties that could cause actual events or results to differ
materially from those referred to in such forward-looking statements. We do not
have a policy of updating forward-looking statements and thus it should not be
assumed that silence over time means that actual events are bearing out as we
estimated in such forward-looking statements.
The development and cultivation of wireless applications has served as
the focal point for our initiatives. Our wireless segment has produced viable
solutions for the security monitoring markets. In addition, we launched our line
of wireless video monitoring solutions, MobileMonitor(SM), MommyTrack(TM) and
our CenVid embedded and server-based product series. The products offer truly
mobile surveillance monitoring solutions for the consumer and business market.
We are engaged in a wireless application technology business, primarily
related to the transmission of secure and non-secured video onto cellular
platforms via proprietary technologies. This is also known as remote video
monitoring via cellular device. In this wireless segment, Cenuco provides
cellular carriers, Internet Service Providers, resellers, and distributors a
host of wireless video streaming products which generate an increase in
subscriber adoption of wireless data services, as well as broadband Internet
services. The business model provides additional recurring monthly service
revenue models for carriers, ISPs, resellers and distributors. We are currently
in deployment negotiations and/or testing relationships with a number of
international and national cellular carriers, retail chains, major distribution
providers, resellers, and potential technology licensees on a global basis.
On October 25, 2004, we announced that we entered into an Asset
Purchase Agreement, dated as of October 21, 2004 (the "Purchase Agreement") with
Omni Point Marketing, LLC, a Florida limited liability company ("Omni Point"),
pursuant to which we agreed to acquire substantially all of the assets of Omni
Point for an aggregate purchase price of $22,500,000, payable in a combination
of $5,400,000 in cash and $17,100,000 in shares of the Company's common stock,
valued at $4.00 per share. The material terms and conditions of the Purchase
Agreement were previously disclosed in our Definitive Proxy Statement filed with
the Commission on December 13, 2004. On December 20, 2004, we announced that we
terminated the Purchase Agreement because our board and management had come to a
decision that pursuing the acquisition was no longer in our and our
shareholders' best interests. Omni Point was informed of this decision and the
escrow agent under the Purchase Agreement refunded our $5,000,000 deposit on
December 21, 2004, pursuant to Omni Point's written request.
-15-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
(Continued)
We continue to consider acquisitions, business combinations, or start
up proposals, which could be advantageous to shareholders. As of the date of
this annual report, we have not identified any acquisition candidates nor are we
a party to any agreement at this time. No assurance can be given that any such
project or acquisition will be concluded.
RESULTS OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 2004 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
2003
Revenues
For the six months ended December 31, 2004, revenues from the sale of
our wireless products and services was $243,831 as compared to $89,717 for the
six months ended December 31, 2003, an increase of $154,114 or 172%, and is
summarized as follows.
Equipment and Software Sales ........... $238,325 $ 18,367
Wireless Solutions and Web Services .... 5,506 71,350
-------- --------
$243,831 $ 89,717
======== ========
The increase in our revenue was attributable to the sale of our
MobileMonitor product. In the latter half of this quarter, our MobileMonitor
product began shipping in larger quantities than anticipated. Significant
deployments included:
1. National product distribution through CompUSA
2. Deployment of MobileMonitor with First Cellular of Southern Illinois
3. Execution of a distribution agreement with Worthington Distribution
In May of 2004, we announced an agreement with PowerLinx. We combined
the PowerLinx SecureVue camera system with our technologies, allowing users to
see the live video from SecureVue cameras on all compatible cellular handsets
and devices. The combined offering has initiated sales through channels such as
the Home Shopping Network. Revenues from this engagement were based on product
sell through, which began in December of 2004, and will continue well into 2005.
Also, we have been successful with the signing of a number of core technology
licensing engagements. Through December 31, 2004, we have not recognized any
licensing revenues and expect to recognize licensing revenues in the near
future.
We have been engaged by Tyco Fire and Security (Sensormatic), for early
stage development to combine our core technologies into select Tyco Digital
Video Recorder and CCTV systems. We will be compensated for these development
services. Upon successful conclusion, a larger scale royalty/licensing
relationship between us and Tyco may result.
We continue deployment testing for MobileMonitor with a number of
carriers globally. It is expected that additional revenue generating
opportunities will result. Also, we have a number of software licensing
engagements under negotiation, which are currently in testing phases. It is
expected that these engagements will come to fruition near-term.
-16-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
(Continued)
RESULTS OF OPERATIONS (Continued)
SIX MONTHS ENDED DECEMBER 31, 2004 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
2003
Revenues (continued)
We also have significant interest from the consumer electronics
retailer sector. Our deployment with CompUSA represents our initial foray into
national retail. More engagements following the CompUSA model are expected for
2005.
Cost of Equipment Sales
For the six months ended December 31, 2004, we incurred cost of sales
related to the sale of equipment and software of $215,986 or 89% of revenues,
compared to $14,373 or 16% of revenues for the six months ended December 31,
2003. The increase in costs of sales and the corresponding percentage is due the
change in product. In 2004, we redesigned our product to include more hardware.
In 2003, sales from our product were software related, which had a minimal cost.
We expect our gross margins to increase as we recognize revenues from licensing
agreements associated with our software which has minimal costs associated with
it.
Research and Development
For the six months ended December 31, 2004, research and development
expense amounted to $38,863 as compared to $20,571 for the six months ended
December 31, 2003, an increase of $18,292 or 89%. We continue to develop our
products and expect this amount to increase in the future.
Bad Debt Expense
For the six months ended December 31, 2004, bad debt expense amounted
to $20,343 as compared to $0 for the six months ended December 31, 2003. The
increase in bad debt was attributable to the write off of uncollectible accounts
receivable.
Selling and Promotion
For the six months ended December 31, 2004, selling and promotion
expenses amounted to $141,775, which included $1,487 in commission expense,
$58,720 in advertising expense, printing and reproduction expense of $894,
travel expenses of $78,767, and other expenses of $1,907. For the three months
ended September 30, 2003, selling and promotion expenses amounted to $56,757,
which included $29,965 in commission expense, $11,122 in advertising expense,
printing and reproduction expense of $3,848 and travel expenses of $11,873. The
increase in selling and promotion expense was 85,018 or 150% and is attributable
to an increase in our marketing efforts in order to gain market acceptance of
our products. We will continue to aggressively market our products and plan on
attending trade shows, advertising in publications, and will seek public
relations opportunities.
-17-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
(Continued)
RESULTS OF OPERATIONS (Continued)
SIX MONTHS ENDED DECEMBER 31, 2004 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
2003
General and Administrative
For the six months ended December 31, 2004, we incurred $1,469,143 of
general and administrative expenses as compared to $879,290, an increase of
$589,853 or 67%. General and administrative expenses consisted of the following:
For the six months For the six months
ended December 31, ended December 31,
2004 2003
------------------ ------------------
Salaries ........................... $ 485,428 $ 285,681
Consulting expenses ................ 70,153 58,417
Rent ............................... 41,993 44,231
Professional fees .................. 85,480 54,635
Non-cash compensation and consulting 544,321 277,336
Other .............................. 241,768 158,990
---------- ----------
Total ................... $1,469,143 $ 879,290
========== ==========
For the six months ended December 31, 2004, our salaries increased by
$199,747 as compared to the six months ended December 31, 2003. The increase was
attributable the allocation of certain salaries in the 2003 period to our former
subsidiary that was sold on September 30, 2004. Salaries related to this former
subsidiary are in included in discontinued operations. We reallocated these
employees to our current operations. Additionally, we hired three new technical
personnel.
For the six months ended December 31, 2004, non-cash compensation and
consulting expense increase by $266,985 as compared to the six months ended
December 31, 2003. The increase was attributable to the amortization of deferred
compensation and consulting for the six months ended December 31, 2004 for
warrants granted in December 2003.
For the six months ended December 31, 2004, other general and
administrative expenses increase by $82,778 as compared to the six months ended
December 31, 2003. The increase was attributable the allocation of certain
common expenses during the periods to our former subsidiary that was sold on
September 30, 2004.
Interest Income
For the six months ended December 31, 2004 and 2003, interest income
was $48,233 and $8,845, respectively. The increase is relates to interest income
receivable of $7,572 due on note receivable from the sale our subsidiary as well
as an increase in excess cash balances in interest-bearing accounts with two
financial institutions.
-18-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
(Continued)
RESULTS OF OPERATIONS (Continued)
SIX MONTHS ENDED DECEMBER 31, 2004 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
2003
Discontinued Operations
For the six months ended December 31, 2004, income from discontinued
operations related to our former education subsidiary, was $1,921,776 and
consisted of a gain from the sale of all of the assets of our subsidiary of
$1,814,648 and income from discontinued operations of $107,128. For the six
months ended December 31, 2003, income from discontinued operations was $229,979
related to income from discontinued operations.
Net income (loss)
As a result of the foregoing factors, we recognized net income of
$327,730 on a consolidated basis for the six months ended December 31, 2004 as
compared to net loss of $(642,450) for the six months ended December 31, 2003.
Income (loss) per share is summarized as follows:
For the six For the six
months ended months ended
Decemebr 31, Decemebr 31,
2004 2003
-------------- -------------
INCOME (LOSS) PER COMMON SHARE-Basic
Loss from continuing operations .......... $ (0.13) $ (0.10)
Income from discontinued operations ...... 0.16 0.03
-------------- -------------
Net income (loss) per common share ....... $ 0.03 $ (0.07)
============== =============
Weighted Common Shares Outstanding - Basic . 12,381,825 9,104,605
============== =============
INCOME (LOSS) PER COMMON SHARE-Diluted
Loss from continuing operations .......... $ (0.11) $ (0.10)
Income from discontinued operations ...... 0.13 0.03
-------------- -------------
Net income (loss) per common share ....... $ 0.02 $ (0.07)
============== =============
Weighted Common Shares Outstanding - Diluted 14,398,338 9,104,605
============== =============
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2004, we had $6,617,516 in cash and cash equivalents
and a short-term investment on hand to meet our obligations. Our short-term
investments consist of certificates of deposit that are liquid.
-19-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
(Continued)
In fiscal 2004, in connection with a private placement, we sold one
unit for $100,000 comprised of 100,000 shares of common stock and warrants
entitling the holder to purchase up to 100,000 shares of the Company's common
stock, at an exercise price of $1.00. Additionally, in March 2004, we
consummated a capital raise through a private placement offered to accredited
investors and sold 30,000 units aggregating 1,500,000 shares of common stock and
1,500,000 warrants for net proceeds of $5,380,044 and received proceeds of
$69,300 from the exercise of options and warrants. For the six months ended
December 31, 2004, we received proceeds of $1,646,884 from the exercise of stock
options and warrants. In the future, we plan on raising additional funds to
expand our operations or to pursue acquisition opportunities or other expansion
opportunities.
During the six months ended December 31, 2004, we invested substantial
time and resources developing and evaluating products and opportunities for our
wireless solutions segment. We will continue to develop new wireless solutions
for both of our segments and may consider acquisitions, business combinations,
or start up proposals, which could be advantageous to our product lines or
business plans, although the Company expects to be profitable in the future
there can be no assurance.
Net cash used in operations was $715,325 for the six months ended
December 31, 2004 as compared to net cash used in operations of $255,606 for the
six months ended December 31, 2003. For the six months ended December 31, 2004,
we used cash in continuing operations of $1,059,432 offset by cash provided by
discontinued operations of $344,107. For the six months ended December 31, 2003,
we used cash in continuing operations of $591,549 offset by cash provided by
discontinued operations of $335,943. We feel that our current cash balance is
sufficient to sustain our operations over the ensuing 12-month period, including
the expected growth during this period.
Net cash provided by investing activities for the six months ended
December 31, 2004 was $970,361 as compared to net cash used in investing
activities of $35,635 for six months ended December 31, 2003 and primarily
related to our investment in certificate of deposits during the six months ended
December 31, 2004 and 2003 of $960,002 and $8,291, respectively. Additional we
acquired property and equipment of $(10,359) and $(27,344) for the six months
ended December 31, 2004 and 2003, respectively.
Net cash provided by financing activities for the six months ended
December 31, 2004 was $1,646,884 and related to cash proceeds received from the
exercise of stock options and warrants. For the six months ended December 31,
2003, we received proceeds of $100,000 from the sales of our common stock.
We have no material commitments for capital expenditures. Our future
growth is dependent on our ability to raise capital for expansion, and to seek
additional revenue sources. If we decide to pursue any acquisition opportunities
or other expansion opportunities, we may need to raise additional capital,
although there can be no assurance such capital- raising activities would be
successful.
-20-
CRITICAL ACCOUNTING POLICIES
A summary of significant accounting policies is included in Note 1 to
the audited financial statements included in our Annual Report on Form 10-KSB
for the year ended June 30, 2004. We believe that the application of these
policies on a consistent basis enables us to provide useful and reliable
financial information about our operating results and financial condition.
The preparation of financial statements in conformity with generally
accepted accounting principles 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 reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates.
We account for stock options issued to employees in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. As such,
compensation cost is measured on the date of grant as the excess of the current
market price of the underlying stock over the exercise price. Such compensation
amounts, if any, are amortized over the respective vesting periods of the option
grant. We adopted the disclosure provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation" and SFAS 148, "Accounting for Stock-Based Compensation
-Transition and Disclosure", which permits entities to provide pro forma net
income (loss) and pro forma earnings (loss) per share disclosures for employee
stock option grants as if the fair-valued based method defined in SFAS No. 123
had been applied. We account for stock options and stock issued to non-employees
for goods or services in accordance with the fair value method of SFAS 123.
In connection with the development and sale of wireless solutions and
web services, which include the development of business-to-business and
business-to-consumer wireless applications, and state of the art wireless
technology and services, we recognize revenue as services are performed on a
pro-rata basis over the contract term or products are delivered. We have
executed a distribution agreement whereby the distributor may purchase wireless
product on consignment. Any sales made to the distributor under this agreement
will be recorded as a deferred revenue liability until such time as the
distributor has sold the product at which time we will recognize the related
revenues.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has recently issued the
following new accounting pronouncement:
In November 2004, the Financial Accounting Standards Board (FASB)
issued SFAS 151 "Inventory Costs". This Statement amends the guidance in ARB No.
43, Chapter 4, "Inventory Pricing, to clarify the accounting for abnormal
amounts of idle facility expense, freight, handling costs, and wasted material
(spoilage). In addition, this Statement requires that allocation of fixed
production overhead to the costs of conversion be based on the normal capacity
of the production facilities. The provisions of this Statement will be effective
for the Company beginning with its fiscal year ending 2006. The Company is
currently evaluating the impact this new Standard will have on its operations,
but believes that it will not have a material impact on the Company's financial
position, results of operations or cash flows.
-21-
In December 2004, the FASB issued SFAS 153 "Exchanges of Non monetary
Assets - an amendment of APB Opinion No. 29. This Statement amended APB Opinion
29 to eliminate the exception for non-monetary exchanges of similar productive
assets and replaces it with a general exception for exchanges of non-monetary
assets that do not have commercial substance. A non-monetary exchange has
commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. The adoption of this Standard
is not expected to have any material impact on the Company's financial position,
results of operations or cash flows.
In December 2004, the FASB issued SFAS 123 (revised 2004) "Share-Based
Payment". This Statement requires that the cost resulting from all share-based
transactions be recorded in the financial statements. The Statement establishes
fair value as the measurement objective in accounting for share-based payment
arrangements and requires all entities to apply a fair-value-based measurement
in accounting for share-based payment transactions with employees. The Statement
also establishes fair value as the measurement objective for transactions in
which an entity acquires goods or services from non-employees in share-based
payment transactions. The Statement replaces SFAS 123 "Accounting for
Stock-Based Compensation" and supersedes APB Opinion No. 25 "Accounting for
Stock Issued to Employees". The provisions of this Statement will be effective
for the Company beginning with its fiscal year ending 2005. The Company is
currently evaluating the impact this new Standard will have on its financial
position, results of operations or cash flows.
ITEM 3. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we conducted an
evaluation, under the supervision and with the participation of the Chief
Executive Officer and Principal Accounting Officer, of our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (the "Exchange Act")). Based on this evaluation, the Chief
Executive Officer and Principal Accounting Officer concluded that the Company's
disclosure controls and procedures are effective to ensure that information
required to be disclosed by the Company in reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in Securities and Exchange Commission rules and
forms. There was no change in the Company's internal control over financial
reporting during the Company's most recently completed fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.
Changes in Internal Controls
There have been no significant changes (including corrective actions
with regard to significant deficiencies or material weaknesses) in our internal
controls or in other factors that could significantly affect these controls
subsequent to the Evaluation Date set forth above.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time the company faces litigation in the ordinary course
of business. Currently we are not involved with any litigation which will have a
material adverse effect on our financial condition.
-22-
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the quarter ended December 31, 2004, we issued 368 restricted
shares of common stock for accounting services rendered.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31.1 Certification of Chief Executive Officer in accordance with 18
U.S.C. Section 1350, as adopted by Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Principal Financial Officer in accordance
with 18 U.S.C. Section 1350, as adopted by Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer in accordance with 18
U.S.C. Section 1350, as adopted by Section 906 of the
Sarbanes-Oxley Act of 2002
32.1 Certification of Principal Financial Officer in accordance
with 18 U.S.C. Section 1350, as adopted by Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
On December 23, 2004, we filed an 8-K and announced that we had
terminated the Purchase Agreement because the Company's board and
management had come to a decision that pursuing the acquisition was no
longer in the best interests of the Company and its stockholders.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, duly authorized.
CENUCO, INC. AND SUBSIDIARIES
Dated: January 31, 2005 By: /s/ Steven Bettinger
--------------------
Steven Bettinger, President and
Chief Executive Officer
Dated: January 31, 2005 By: /s/ Adam Wasserman
------------------
Adam Wasserman, Chief Financial Officer
and Principal Accounting Officer
-23-