SECTOR 10, Inc. - Quarter Report: 2011 June (Form 10-Q)

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x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED June 30, 2011
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ______________

Delaware		000-24370		33-0565710
(State or other jurisdiction of incorporation)		(Commission File No.)		(IRS Employer Identification No.)

14553 South 790 West

Bluffdale, Utah 84065

 

 

 

Part I. Financial Information
Item 1.	Unaudited Consolidated Financial Statements
	Unaudited Condensed Consolidated Balance Sheets  as of June 30, 2011 and  March 31, 2011	3
	Unaudited Condensed Consolidated Statements of Operations for the three months ended June 30, 2011 and 2010 and for the period from inception, September 16, 2002 to June 30, 2011	4
	Unaudited Consolidated Statements of Cash Flows for the three months ended June 30, 2011 and 2010 and for the period from inception, September 16, 2002, to June 30, 2011.	5
	Notes to the Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis or Plan of Operation	10
Item 3	Quantitative and Qualitative Disclosures about Market Risk	13
Item 4.	Controls and Procedures	14
Part II. Other Information
Item 1.	Legal Proceedings	15
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	15
Item 3.	Defaults Upon Senior Securities	15
Item 4.	Submission of Matters to a Vote of Security Holders	15
Item 5.	Other Information	15
Item 6.	Exhibits	15
	Signatures	16

		June 30,  2011				March 31,  2011
ASSETS		(Unaudited)				(Unaudited)
Current assets:
Cash		$	-			$	-
Inventory, net			18,409				18,409
Total current assets			18,409				18,409
Fixed assets –cost			22,250				22,250
Less: accumulated depreciation			(15,723	)			(14,610	)
Net fixed assets			6,527				7,640
Other assets - Network acquisition/development costs			500,000				500,000
Total assets		$	524,936			$	526,049
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities		$	1,825,106			$	1,659,015
Note payable - short term			239,050				243,050
Total current liabilities			2,064,156				1,902,065
Long term liabilities:
Note payable			483,000				483,000
Total long term liabilities			483,000				483,000
Total liabilities			2,547,156				2,385,065
Shareholders' equity (deficit)
Preferred shares - $0.001 par value; 1,000,000 authorized, no shares issued or outstanding			-				-
Common shares - $0.001 par value; 199,000,000 authorized; 145,557,217 and 164,414,570 shares issued and outstanding, respectively			145,557				164,414
Additional paid-in-capital			5,902,940				5,796,956
Deficit accumulated during development stage			(8,070,717	)			(7,820,386	)
Total shareholders' equity (deficit)			(2,022,220	)			(1,859,016	)
Total liabilities and shareholders' equity (deficit)		$	524,936				526,049

 

 

 

		Three Months Ended								Inception to
		June 30,  2011				June 30,  2010				June 30,  2011
		(Unaudited)				(Unaudited)
Sales		$	-			$	-			$	18,500
Cost of Sales			-				-				(18,032	)
Gross Profit			-				-				468
Expenses:
General and administrative			211,389				287,424				7,292,232
Depreciation			1,113				2,005				17,580
Research and development			-				-				226,108
Total expenses			212,502				289,429				7,535,920
Income (loss) from operations			(212,502	)			(289,429	)			(7,535,452	)
Interest expense			(37,829	)			(60,522	)			(404,470	)
Other income (expense)			-				-				(130,795	)
Net income (loss) before income taxes			(250,331	)			(349,951	)			(8,070,717	)
Provision for income taxes			-				-				-
Net income (loss) after income taxes		$	(250,331	)		$	(349,951	)		$	(8,070,717	)
Weighted Average Shares Outstanding - basic and diluted			115,742,204				42,778,938
Basic and diluted income (loss) per share
Continuing Operations		$	(0.00	)		$	(0.01	)
Net Income (Loss)		$	(0.00	)		$	(0.01	)

 

 

		Three Months Ended								Inception to
		June 30, 2011				June 30, 2010				June 30, 2011
Cash Flows from Operating Activities:
Net Loss		$	(250,331	)		$	(349,951	)		$	(8,070,717	)
Adjustments to reconcile  net loss to net cash used in operating activities:
Stock for services			74,127				13,500				5,018,955
Depreciation			1,113				2,005				17,580
Net discount on convertible debt			9,000				47,255				200,259
Loss due to Impairment / Gain on restructuring			-				-				130,795
Changes in:
Inventory and other current assets			-				3,499				(4,869	)
Accounts payable and accrued liabilities			166,091				198,044				2,320,399
Net cash used in operating activities			-				(85,648	)			(387,598	)
Cash Flows from Investing Activities:
Fixed asset  / Other asset purchases			-				(19,296	)			(189,541	)
Net cash used in investing activities			-				(19,296	)			(189,541	)
Cash Flows from Financing Activities:
Net Proceeds from general financing			-				79,500				657,500
Net Proceeds (payments) from shareholder / officers			-				(95	)			(113,947	)
Proceeds from issuance of common stock			-				30,000				33,586
Net cash provided by financing activities			-				109,405				577,139
Net increase (decrease) in cash			-				4,461				-
Beginning of period - continuing operations			-				70				-
End of period - continuing operations		$	-			$	4,531			$	-
Cash paid for interest		$	-			$	4,369			$	18,295
Cash paid for income taxes		$	-			$	-			$	-

 

 

 

Interest expense		June 30,  2010				June 30,  2010
Sector 10 Holdings, Inc.  – Shareholder		$	-			$	268
Pericles DeAvila – Officer			-				137
Total related party interest expense			-				405
Interest – Johnson			1,299				1,650
Interest – Dutro Group			9,056				9,056
Interest  - Employee Group			15,177				-
Interest – Other Notes			3,297				2,156
Total interest expense without amortization of discount			28,829				13,267
Interest – Amortization of  Discount on Asher Enterprises, Inc. Note(s)			9,000				11,255
Interest – Amortization of Discount on Mazuma Funding Note			-				36,000
Total interest expense		$	37,829			$	60,522

Note Payable Balance		June 30,  2011				March 31,  2011
Edward Johnson – Johnson Financing		$	86,615			$	86,615
Patrick Madison – Other Notes			20,000				20,000
Lionel Brown – Other Notes			20,000				20,000
Patricia Fielding – Other Notes			22,000				22,000
Mark Madison – Other Notes			10,000				10,000
Richard Long – Other Notes			17,000				17,000
Asher Enterprises, Inc. – Other Notes			69,500				82,500
Total Note Payable – short term without discount			245,115				258,115
Net Discount on Convertible Notes (Asher)			(6,065	)			(15,065
Total Note Payable – short term		$	239,050			$	243,050
Vicki Davis -  Dutro Group		$	168,000			$	168,000
William Dutro – Dutro Group			65,000				65,000
Dutro Company – Dutro Group			250,000				250,000
Total Note Payable – long term		$	483,000			$	483,000
Total Notes Payable		$	722,050			$	726,050

Fiscal Year		Amount
March 31, 2012		$	239,050
March 31, 2013		$	0
March 31, 2014		$	0
March 31, 2015		$	483,000
Total		$	722,050

 

 

 

 

 

 

1)

The Form 10-K for the period ending March 31, 2011 was due on June 29, 2011; the Form 10-Q for the period ended June 30, 2011 was due on August 15, 2011and the Form 10-Q for the period ended September 30, 2011 was due on December 14, 2011.  Due to the pending litigation and the difficulties in receiving complete and critical information from the prior Directors and Officers who resigned on April 15, 2011, the Form 10-K for the fiscal year ended March 31, 2011and the Form 10-Q for the periods ended June 30, 2011 and September 30, 2011 were not completed as of the original filing deadline.  Due to the late filing, the Company Common Stock trading has been moved from the Over the Counter Bulletin Board under the symbol SECI.OB to trading on the Pink Sheets under the symbol SECI.PK. The late reports are expected to be filed on or before February 14, 2012.

2)

Reverse Stock Split. The Company is in the process of restructuring its organization as well as its operations.  A Definitive Schedule 14C was filed on January 9, 2012 regarding the 500-1 reverse stock split approved by the majority shareholders.  The Company is currently working with the regulatory authorities to process this request for a reverse split.  The impact of this restructuring will assist the Company in its efforts to reestablish its operations and to move forward as a going concern in 2012.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

		Three Months Ended			Three Months  Ended
		June 30,			June 30,
Sources and Uses of Cash		2011			2010
Net cash provided by / (used in)
Operating activities	$	-			$	(85,648	)
Investing activities		-				(19,296	)
Financing activities		-				109,405
Increase/(decrease) in cash and cash equivalents	$	-			$	4,461
Period ended June 30, 2011 and 2010
Cash and cash equivalents	$	-			$	4,531

Cash provided from financing activities for the three months ended June 30, 2010 was $109,405 comprised from net proceeds from notes payable of $134,500, payment on notes payable of ($55,000), cash exercise of options for $30,000 and net payments on shareholder / officer notes of ($95).

 

·	The Company has not generated revenues and has not executed any significant contracts for the sale of the Company’s products.

 

·	The Company uses outside sources to fulfill contract obligations and has limited control over the provider’s ability to meet the Company obligations.

 

·	The directors, executive officers and principal shareholders of the Company have effective control of the Company, preventing non-affiliate shareholders from significantly influencing the Company’s direction and future.

 

·	The market for the Company’s stock is thin and subject to manipulation.

 

·	The market price for the Common Stock is volatile and may change dramatically at any time.

 

·	Our business may be affected by increased compensation and benefits costs.

 

·	The Company has not paid dividends and does not anticipate paying dividends in the future.

 

·	The Common Stock is a “low-priced stock” or “penny stock” and subject to regulation that limits or restricts the potential market for the stock.

 

·	Compliance with existing and new regulations of corporate governance and public disclosure may result in additional expenses.

 

(a)

Based on the evaluation of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) required by paragraph (b) of Rules 13a-15 or 15d-15, the Company’s principal executive officer and principal financial officer concluded that as of June 30, 2011, the Company’s disclosure controls and procedures were effective.

(b)

There have been no changes in the Company’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

 

 

 

Exhibit	Exhibit
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 

 

			Sector 10, Inc.
	February 14, 2012		By: /s/ Pericles DeAvila
	Date		Pericles DeAvila, President
	February 14, 2012		By: /s/ Laurence A. Madison
	Date		Laurence A. Madison Chief Financial Officer

 

 

 

 

 

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