SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended March 31, 2003
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the
transition period from to .
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Commission file number: 33-2128-D
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NEXIA HOLDINGS, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 84-1062062
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
268 West 400 South, Salt Lake City, Utah 84101
-------------------------------------------------------
(Address of principal executive office) (Zip Code)
(801) 575-8073
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes XX No
-- ----
The number of outstanding shares of the issuer's common stock, $0.001
par value (the only class of voting stock), as of July 14, 2003 was 315,352,760.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS................................................2
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS................................3
ITEM 3. CONTROLS AND PROCEDURES.............................................6
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS...................................................7
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS...........................7
ITEM 5. OTHER INFORMATION...................................................7
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K....................................8
SIGNATURES...................................................................8
INDEX TO EXHIBITS............................................................9
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
1
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Nexia" refers to Nexia Holdings, Inc., a Nevada
corporation, its subsidiary corporations and predecessors unless otherwise
indicated. Unaudited, consolidated condensed interim financial statements
including a balance sheet for the Nexia for the period ended March 31, 2003, and
statements of operations, and statements of cash flows for the interim period up
to the date of such balance sheet and the comparable period of the preceding
year are attached hereto as Pages F-1 through F-6 and are incorporated herein by
this reference.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY.]
2
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Consolidated Balance Sheets.................................................F-2
Consolidated Statements of Operations.......................................F-4
Consolidated Statements of Cash Flows.......................................F-5
Notes to Consolidated Financial Statements..................................F-6
F-1
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, December 31,
2003 2002
-------------------- ------------------
ASSETS (Unaudited)
Current Assets
Cash $ 46,282 $ 108,821
Accounts receivable - trade, net of allowance of $40,031 9,974 8,681
Accounts receivable - related parties 24,173 2,930
Prepaid expenses 10,949 23,500
Notes receivable - current 279,056 279,056
Securities available for sale 128,188 144,985
----
Total Current Assets 498,622 567,973
---- --------------- ------------------
Fixed Assets
Property and equipment, net 4,260,588 4,283,266
Land 1,084,529 1,084,529
---- --------------- ------------------
Total Fixed Assets 5,345,117 5,367,795
---- --------------- ------------------
Other Assets
Loan Costs, net 86,899 45,203
Total Other Assets 86,899 45,203
---- --------------- ------------------
TOTAL ASSETS $ 5,930,638 $ 5,980,971
==== =============== ==================
The accompanying notes are an integral part of these consolidated financial statements
F-2
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (continued)
March 31, December 31,
2003 2002
---------------------- -------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
LIABILITIES
Current Liabilities
Accounts payable $ 155,305 $ 203,136
Accrued liabilities 139,219 139,752
Unearned rent 33,949 49,033
WVDEP liability 20,000 20,000
Deferred revenue 44,757 26,451
Refundable deposit 19,550 17,650
Deferred gain on sale of subsidiary 121,770 121,770
Related party payable - Axia 408,333 408,333
Current portion long-term debt 2,835,936 1,413,420
Total Current Liabilities 3,778,819 2,399,545
--- ------------------ -------------------
Long-Term Liabilities
Notes and mortgages payable 1,407,214 2,700,553
Total Long-Term Liabilities 1,407,214 2,700,553
--- ------------------ -------------------
TOTAL LIABILITIES 5,186,033 5,100,098
--- ------------------ -------------------
MINORITY INTEREST 355,766 460,557
STOCKHOLDERS' EQUITY
Preferred stock - 20,000,000 shares authorized at $0.001 par, no - -
shares issued
Common stock - 1,000,000,000 shares authorized at $0.001 par
315,352,760 and 310,352,760 shares issued and outstanding; 315,353 310,353
respectively ,
Paid-in capital 9,692,273 9,647,273
Treasury stock - 22,198,540 and 7,685,340 shares at cost, (107,741) (107,741)
respectively
Subscriptions to stock offering of subsidiary (107,800) (107,800)
Unrealized loss on securities available for sale 10,459 873
Accumulated deficit (9,413,705) (9,322,642)
TOTAL STOCKHOLDERS' EQUITY 388,839 420,316
--- ------------------ -------------------
TOTAL LIABILITIES AND STOCKHOLDERS' $ 5,930,638 $ 5,980,971
EQUITY
=== ================== ===================
The accompanying notes are an integral part of
these consolidated financial statements
F-3
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
March 31
2003 2002
---------------- ------------------
Revenue (Restated)
Consulting revenue $ 58,203 $ 79,725
Rental revenue 179,241 317,858
---------------- ------------------
Total Revenue 237,444 397,583
Costs of Revenue
Costs associated with consulting revenue 57,091 167,980
Costs associated with rental revenue 141,230 203,378
Interest associated with rental revenue 114,123 116,292
---------------- ------------------
Total Costs of Revenue 312,444 487,650
Gross Profit
Gross profit from consulting operations 1,112 (88,255)
Gross profit from real estate operations (76,112) (1,812)
---------------- ------------------
Gross Profit (75,000) (90,067)
Expenses
General & administrative expense 18,500 102,356
Impairment of marketable securities 5,022 -
---------------- ------------------
Total Expenses 23,522 102,356
Operating Loss (98,522) (192,423)
---------------- ------------------
Other Income
Interest and dividend income 2,498 126
Interest expense - (2,960)
Gain (loss) on sale of property and equipment - (100,701)
Gain (loss) on sale of marketable securities - (94,059)
Other income - 6,132
---------------- ------------------
Total Other Income (Expense) 2,498 (191,462)
Loss Before Minority Interest (96,024) (383,885)
Minority Interest in (gain) loss 4,961 60,059
---------------- ------------------
Net Loss $ (91,063) $ (323,826)
---------------- ------------------
Other Comprehensive Income
Change in Marketable Securities 9,586 -
---------------- ------------------
Total Comprehensive Loss $ (81,477) $ (323,826)
================ ==================
Net Loss Per Common Share, basic and diluted
Loss before minority interest $ (0.00) $ (0.00)
Minority interest in loss (0.00) (0.00)
--- ---------------- ------------------
Net loss per weighted average
common share outstanding
$ (0.00) $ (0.00)
================ ==================
Weighted average shares outstanding - basic & diluted 289,098,664 128,170,000
================ ==================
The accompanying notes are an integral part of these consolidated financial statements
F-4
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31
2003 2002
--------------- --------------
Cash Flows From Operating Activities (Restated)
Net Loss $ (91,063) $ (323,826)
Adjustments to reconcile net loss to net cash used in operating
activities:
Loss from sale of investments - 94,059
Loss from sale of property and equipment 100,701
Impairment of marketable securities 5,022 -
Change in minority interest (106,335) 60,059
Depreciation 48,343 56,875
Issued common stock for services - 20,000
Changes in operating assets and liabilities:
Accounts and notes receivable (22,535) (107,222)
Related party receivables - 15,137
Prepaid expenses 12,551 35,093
Other assets 8,304 -
Accounts & notes payable (47,830) 26,439
Deferred revenue 3,223 -
Refundable deposit 1,900 -
Accrued liabilities (535) (135,105)
--------------- --------------
Net Cash Used by Operating Activities (188,955) (157,790)
-
Cash Flows From Investing Activities
Proceeds on sale of securities 3,089 112,364
Purchase of property and equipment (5,850) (166,606)
Proceeds from sale of property and equipment - 391,539
Net cash received in acquisition transaction - 18,545
Issuance of notes receivable - (117,082)
Purchase of marketable securities - (56,592)
--------------- --------------
Net Cash Used by Investing Activities (2,761) 182,168
-
Cash Flows from Financing Activities
Proceeds from long term debt 690,000 -
Principal payments on notes and mortgages payable (560,823) -
Increase (reduction) in long-term debt - (20,818)
--------------- --------------
Net Cash Provided (Used) by Financing Activities 129,177 (20,818)
--------------- --------------
-
Increase (Decrease) in Cash (62,539) 3,560
Cash at Beginning of Period 108,821 295,343
--------------- --------------
Cash at End of Period $ 46,282 $ 298,903
=============== ==============
Supplemental Disclosures
Interest paid in cash $ 84,656 $ 107,496
Income taxes paid in cash $ - $ -
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Common stock issued for loan costs $ 50,000 $ -
Office equipment acquired through capital lease $ 19,815 $ -
The accompanying notes are an integral part of these consolidated financial statements
F-5
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 2003 and December 31, 2002
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated financial statements have
been prepared by the Company pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles in the United States of America have been condensed or
omitted in accordance with such rules and regulations. The
information furnished in the interim consolidated financial
statements include normal recurring adjustments and reflects all
adjustments, which, in the opinion of management, are necessary
for a fair presentation of such financial statements. Although
management believes the disclosures and information presented are
adequate to make the information not misleading, it is suggested
that these interim consolidated financial statements be read in
conjunction with the Company's most recent audited consolidated
financial statements and notes thereto included in its December
31, 2002 Annual Report on Form 10-KSB. Operating results for the
three months ended March 31, 2003 are not indicative of the
results that may be expected for the year ending December 31,
2003.
NOTE 2 - GOING CONCERN
The Company's consolidated financial statements are prepared using
accounting principles generally accepted in the United Stated of
America applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal
course of business. The Company has incurred cumulative operating
losses through March 31, 2003 of $9,413,705 and has a working
capital deficit of $3,280,197 at March 31, 2003 all of which raise
substantial doubt about the Company's ability to continue as a
going concern.
Primarily, revenues have not been sufficient to cover the
Company's operating costs. Management's plans to enable the
Company to continue as a going concern include the following:
o Increasing revenues from rental properties by implementing new
marketing programs
o Making certain improvements to certain rental
properties in order to make them more marketable
o Reducing negative cash flows by selling rental properties that do not at
least break even
o Refinancing high interest rate loans
o Increasing consulting revenues by focusing on procuring clients
that pay for services rendered in cash or highly liquid securities
o Reducing expenses through consolidating or disposing of certain
subsidiary companies
o Raising additional capital through private
placements of the Company's common stock
There can be no assurance that the Company can or will be
successful in implementing any of its plans or that they will be
successful in enabling the company to continue as a going concern.
The Company's consolidated financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
F-6
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 2003 and December 31, 2002
NOTE 3 - MATERIAL EVENTS
On January 9, 2003, Kearns Development Corporation refinanced the
underlying debt associated with certain land and real property.
The new debt obligation is for $660,000 with an interest rate of
7.16%, is due on demand with monthly installment payments of
$5,223 through January 9, 2013 at which time the remaining unpaid
balance is due and payable in full. This debt obligation is
secured by a first trust deed on the land and building and is
personally guaranteed by the president of the Company. Proceeds
from this refinancing were used to retire the previous debt
associated with the land and real property having an outstanding
balance of $615,012 at December 31, 2002.
On January 30, 2003, West Jordan Real Estate Holdings, Inc.
entered into a capital lease for a photocopy machine. The lease
has a term of 5 years, calls for a $1,056 advance payment with
monthly payments of $352 and an option to purchase the photocopy
machine for fair market value at the end of the lease. The lease
has an outstanding balance of $19,036 at March 31, 2003.
On March 14, 2003, West Jordan Real Estate Holdings, Inc. executed
a promissory note with an unrelated individual to borrow $30,000
to be repaid on or before March 14, 2004. The obligation bears
interest at a rate of 4% and is unsecured. In connection with this
debt transaction, the Company issued to this individual 5,000,000
shares of the Company's common stock as additional consideration
for making the loan. The shares have been valued at fair market
value on the date of the transaction, $0.01 per share or $50,000
in total. This amount has been recognized as loan costs and is
being amortized over the 12 month life of the loan.
NOTE 4 - SUBSEQUENT EVENTS
On May 21, 2003, suit was filed in the District Court of Sedgwick
County, Kansas seeking foreclosure on the mortgage of the office
building held by Wichita Development. The suit alleges that
mortgage payments are delinquent from February 1, 2003 and that
the sum of $270,471 is sought to satisfy the mortgage on the
building.
F-7
NOTE 5 - RESTATEMENT OF PRIOR PERIOD RESULTS
The amounts reflected in the statement of operations and statement
of cash flows for the period ended March 31, 2002 have been
restated to account for the merger transaction between Nexia and
Axia that occurred on February 28, 2002, as a reverse acquisition.
The transaction was previously accounted for as a merger between
entities under common control. As such, the operations and cash
flows previously included those of Nexia for the three months
ended March 31, 2002 and those of the acquired entities
(Diversified Holdings I, Wichita Development Corporation, Wasatch
Capital Corporation, Downtown Development Corporation, Golden
Opportunity Development Corporation, and Canton Tire Recycling of
West Virginia, Inc.) from the date of the acquisition, February
28, 2002, through March 31, 2002. The restated amounts, accounting
for the transaction as a reverse merger, reflect the operations
and cash flows of the accounting acquirer (Diversified Holdings I,
Wichita Development Corporation, Wasatch Capital Corporation,
Downtown Development Corporation, Golden Opportunity Development
Corporation, and Canton Tire Recycling of West Virginia, Inc.) for
the three months ended March 31, 2002 and those of Nexia from the
date of acquisition, February 28, 2002, through March 31, 2002.
The table below reflects the change in revenues, net loss, and net
loss per share due to this restatement.
Three Months Ended March 31, 2002
(Restated) (Originally Reported)
Revenues $ 397,583 $ 119,099
Net loss $ (323,826) $(305,222)
Net loss per share $ (.00) $ (.00)
F-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
Nexia had no substantial operations from January 2, 2001 until February 15,
2002. On February 15, 2002, Nexia entered into a Stock Purchase Agreement
("Agreement") with Axia Group, Inc. ("Axia"), pursuant to which Nexia issued to
Axia 255,100,000 restricted shares of Nexia's common stock in exchange for
essentially all of the assets and liabilities of Axia including a portfolio of
securities, real estate holdings and publicly reporting shell- companies. Nexia
intends to manage the interests acquired from Axia as a result of this
transaction in a manner similar to that previously followed by Axia. For more
information on this transaction, see the Company's Form 10- KSB filed May 30,
2003.
Nexia operates in two primary areas of business: Nexia acquires, leases and
sells real estate; and, Nexia provides financial consulting services. The
following discussion examines Nexia's financial condition as a result of
operations for the first quarter, March 31, 2003, and compares those results
with the comparable period from last year.
The amounts reflected in the statement of operations and statement of cash flows
for the period ended March 31, 2002 have been restated to account for the merger
transaction between Nexia and Axia that occurred on February 28, 2002, as a
reverse acquisition, see footnote 5 to the consolidated financial statements.
Real Estate Operations
Nexia's objective, with respect to real estate operations, is to acquire,
through subsidiaries, properties which management believes to be undervalued and
which Nexia is able to acquire with limited cash outlays. Nexia will consider
properties anywhere within the continental United States. Nexia attempts to
acquire such properties by assuming existing favorable financing and paying the
balance of the purchase price with nominal cash payments or through the issuance
of shares of common stock. Once such properties are acquired, Nexia leases them
to primarily commercial tenants. Nexia also makes limited investments to improve
the properties with the objective of increasing occupancy and cash flows.
Management believes that, with limited improvements and effective management,
properties can be sold at a profit within a relatively short period of time.
Three properties of Nexia's subsidiaries are currently delinquent in their
mortgage payments. Salt Lake Development Corporation, owner of a building
located at 268 West 400 South, Salt Lake City, Utah 84101 is four months behind
on that property's mortgage, the mortgage payment due for the month of June has
not yet been made. The amount currently due on the building is $21,542. The
mortgage on the New Brigham Buildings located in Ogden, Utah is one month behind
on its mortgage and has also not yet made its mortgage payment for the month of
June, 2003. The amount currently due on this building is $8,056. Wichita
Development Corporation is behind on its mortgage payments for its office
building location in Wichita, Kansas, having failed to make the last four
monthly payments and has failed as of the date of filing of this report to have
made its June mortgage payments. The amount currently due to bring the payments
current is $23,495. Wichita has discussed a forbearance agreement with the
mortgage holder on its building and hopes to reach an agreement in the near
future to resolve the past due balance. The lender as of May 21, 2003 has filed
suit to seek foreclosure on the Wichita property, see Legal Proceedings for more
information. Each of these properties has suffered a significant decrease in
tenant occupancy since the first of this year.
Nexia recorded rental revenues of $179,241 for the quarter ended March 31, 2003,
as compared to $317,858 for the same quarter, 2002. The decrease in rental
revenues was due to a significant decrease in occupancy rates in the West Jordan
and Wichita buildings, as well as the absence of revenue from the occupancy of
part of the Wasatch building during the 2002 Winter Olympics.
Nexia had a loss from real estate operations of $76,112 for the quarter ended
March 31, 2003, compared to a loss of $1,812 for the same quarter, 2002. This is
attributable primarily to the decrease in occupancy.
Nexia will continue efforts to improve profitability and cash flow by working to
increase occupancy and rental income from those properties which have a high
vacancy rate as well as focusing on properties with the highest per
3
square foot rental rates. Nexia also intends to continue to purchase real estate
primarily for appreciation purposes. Accordingly, Nexia hopes to not only
minimize any real estate cash flow deficit, but also generate sufficient cash to
record a substantial profit upon property disposition.
Consulting Operations
Nexia, through its majority owned subsidiary, Hudson Consulting Group, Inc.,
("Hudson") provides a variety of financial consulting services to a wide range
of clients. The primary service performed by Hudson involves assisting clients
in structuring mergers and acquisitions. This includes locating entities
suitable to be merged with or acquired by Nexia's clients, as well as providing
general advice related to the structuring of mergers or acquisitions. Hudson
also assists clients in restructuring their capital formation, advises with
respect to general corporate problem solving and provides shareholder relations
services designed to expose its clients to the investment community.
Nexia's consulting subsidiary generates revenues through consulting fees payable
in the client's equity securities, cash, other assets or some combination of the
three. The primary form of compensation received is the equity securities of
clients. When payment is made in the form of equity, the number of shares to be
paid is usually dependent upon the price of the client's common stock (if such
price is available) and the extent of consulting services provided. When stock
is received as payment it is booked as deferred revenue at its currently quoted
market value. After the stock is sold, it is then booked as revenue along with
an accompanying gain or loss on the sale.
Nexia generates cash flow, in part, by liquidating non-cash assets (equity
securities) received as fees for consulting services. As most fees are paid in
the form of equity, the revenues and cash flows realized by Nexia are somewhat
tied to the price of its clients' securities and Nexia's ability to sell such
securities. A decline in the market price of a client's stock can affect the
total asset value of Nexia's balance sheet and can result in Nexia incurring
substantial losses on its income statement.
Nexia's portfolio consists primarily of restricted and unrestricted shares of
common stock in micro to small cap publicly traded companies. This portfolio
currently consists of shares of common stock in over 25 different companies
whose operations range from that of high-tech to oil and gas companies. The
Company's ownership in the above publicly traded companies is less than 20% and
thus accounts for them as investments available for sale at the lower of cost or
market. Nonetheless, Nexia's portfolio is considered extremely volatile.
Revenues from Nexia's financial consulting operations decreased for the quarter
ended March 31, 2003, as compared to the same quarter in 2002. Nexia recorded
$58,203 in revenues for the quarter ended March 31, 2003, from its financial
consulting operations as compared to $79,725 for the same period of 2002. This
decrease in financial operations revenues was due to a lack of demand for the
Company's consulting services due to the prolonged downturn of the economy.
Notwithstanding the decrease in revenues, Nexia experienced a gain from
consulting operations of $1,112 for the quarter ended March 31, 2003 as compared
to a loss of $88,255 for the quarter ended March 31, 2002 due to efforts to
reduce costs. Nexia is further reducing costs and stepping up its efforts to
attract more clients by further utilizing its current resources.
Company Operations as a Whole
Revenues
Gross revenues for the three month period ended March 31, 2003, were $237,444 as
compared to $397,583 for the same period in 2002. The decrease in revenues of
$160,139 is due to the issues stated above and specifically includes a $21,522
decrease in consulting revenues, and a $138,617 decrease from rental revenues.
Losses
Nexia recorded an operating loss of $98,522 for the three months ended March 31,
2003, compared to a loss of $192,423 for the comparable period in the year 2002.
Nexia's decrease in operating loss for the three month period ended March 31,
2003, as compared to the same period in 2002, was due to cost cutting efforts
enacted throughout
4
the past several months.
Nexia recorded a net loss of $91,063 for the three months ended March 31, 2003,
as compared to a net loss of $323,826 for the same period in the previous year.
Nexia does not expect to operate at a profit through fiscal 2003. Since Nexia's
activities are closely tied to the securities markets and the ability to operate
its real estate properties at a profit, future profitability or its revenue
growth tends to follow changes in the securities and real estate market place.
There can be no guarantee that profitability or revenue growth can be realized
in the future.
Expenses
General and administrative expenses for the three months ended March 31, 2003,
were $18,500 compared to $102,356 for the same period in 2002.
Depreciation and amortization expenses for the three months ended March 31,
2003, and March 31, 2002, were $48,343 and $56,875, respectively. The decrease
was due primarily to the permanent impairment of one of the company's properties
for the year ended December 31, 2002, which therefore caused a significant
decrease in its depreciable base.
Capital Resources and Liquidity
On March 31, 2003, Nexia had current assets of $498,622 and $5,930,638 in total
assets compared to $567,973 of current assets and $5,980,971 in total assets at
the year ended December 31, 2002. Nexia has a net working capital deficit of
$3,280,197 at March 31, 2003 compared to a working capital deficit of $1,831,572
at year end December 31, 2002. The working capital deficit is due primarily to
mortgages which will or may come due in the next twelve months due to call
provisions present in mortgages which have recently been refinanced.
Total stockholders' equity in Nexia was $388,839 as of March 31, 2003, compared
to $420,316 at year end December 31, 2002.
Net cash used in operating activities was $188,955 for the three months ended
March 31, 2003, compared to cash flow used in operating activities of $157,790
for the three months ended March 31, 2002.
Cash used in investing activities was $2,761 for the three months ended March
31, 2003, compared to cash flow provided by investing activities of $182,168 for
the same period in 2002. The decrease is mainly due to the net cash received
from the sale of the General Lafayette Inn in Baton Rouge, Louisiana, in
January, 2002.
Cash provided by financing activities was $129,177 for the three months ended
March 31, 2003, compared to cash flows used in financing activities of $20,818
for the three months ended March 31, 2002.
Due to Nexia's debt service on real estate holdings, willingness to acquire
properties with negative cash flow shortages and acceptance of non-cash assets
for consulting services, Nexia may experience occasional cash flow shortages. To
cover these shortages we may need to sell securities from time to time at a
loss. In addition, the Company is currently experiencing challenges with regard
to cash flows. We are looking at several options to improve this situation,
including the private placement of Nexia common stock.
Impact of Inflation
Nexia believes that inflation has had a negligible effect on operations over the
past three years. Nexia believes that it can offset inflationary increases in
the cost of materials and labor by increasing sales and improving operating
efficiencies.
5
Known Trends, Events, or Uncertainties
General Real Estate Investment Risks
Nexia's investments are subject to varying degrees of risk generally incident to
the ownership of real property. Real estate values and income from Nexia's
current properties may be adversely affected by changes in national or local
economic conditions and neighborhood characteristics, changes in interest rates
and in the availability, cost and terms of mortgage funds, the impact of present
or future environmental legislation and compliance with environmental laws, the
ongoing need for capital improvements, changes in governmental rules and fiscal
policies, civil unrest, acts of God, including earthquakes and other natural
disasters which may result in uninsured losses, acts of war, adverse changes in
zoning laws and other factors which are beyond the control of Nexia.
Value and Illiquidity of Real Estate
Real estate investments are relatively illiquid. The ability of Nexia to vary
its ownership of real estate property in response to changes in economic and
other conditions is limited. If Nexia must sell an investment, there can be no
assurance that Nexia will be able to dispose of it in the time period it desires
or that the sales price of any investment will recoup the amount of Nexia's
investment.
Property Taxes
Nexia's real property is subject to real property taxes. The real property taxes
on this property may increase or decrease as property tax rates change and as
the property is assessed or reassessed by taxing authorities. If property taxes
increase, Nexia's operations could be adversely affected.
Forward Looking Statements
The information herein contains certain forward looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E
of the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors created thereby. Investors are cautioned that all
forward looking statements involve risks and uncertainty, including, without
limitation, the ability of Nexia to continue its expansion strategy, changes in
the real estate markets, labor and employee benefits, as well as general market
conditions, competition, and pricing. Although Nexia believes that the
assumptions underlying the forward looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there can
be no assurance that the forward looking statements included in the Form 10QSB/A
will prove to be accurate. In view of the significant uncertainties inherent in
the forward looking statements included herein, the inclusion of such
information should not be regarded as a representation by Nexia or any other
person that the objectives and plans of Nexia will be achieved.
ITEM 3. CONTROLS AND PROCEDURES
Nexia's president acts both as the Company's chief executive officer and chief
financial officer ("Certifying Officer") and is responsible for establishing and
maintaining disclosure controls and procedures for Nexia. The Certifying Officer
has concluded (based on his evaluation of these controls and procedures as of a
date within 90 days of the filing of this report) that the design and operation
of Nexia's disclosure controls and procedures (as defined in Rule 13a-14(c)
under the Securities Exchange Act of 1934) are effective. No significant changes
were made in Nexia's internal controls or in other factors that could
significantly affect those controls subsequent to the date of the evaluation,
including any corrective actions with regard to slight deficiencies and material
weaknesses. Due to the Certifying Officer's dual role as chief executive officer
and chief financial officer, Nexia has no segregation of duties related to
internal controls.
PART II-OTHER INFORMATION
6
ITEM 1. LEGAL PROCEEDINGS
Since the filing of Nexia's 10-KSB for the period ended December 31, 2002 no
material changes have occurred to the legal proceedings reported therein, except
as noted below. For more information please see Nexia's Form 10-KSB for the year
ended December 31, 2002, filed May 30, 2003.
Hudson Consulting Group, Inc. v. Ohana Enterprises, Inc., Isaac P. Simmons,
Kathryn A. Christmann, Gerard Nolan, David Cronshaw, Interactive Ideas, Jonathan
Thomas and Phillip Crawford. Suit was filed on March 17, 2003 in the Third
Judicial District Court in and for Salt Lake County, State of Utah, Case No.
030905949. Suit was filed by Hudson to seek payment under an August 27, 2002
Stock Purchase Agreement, wherein the named defendants purchased a controlling
interest in a Delaware corporation known as Torchmail Communications, Inc. which
changed its name subsequent to the transfer to Ohana Enterprises, Inc. The total
sales price was $300,000 of which only the first $100,000 has been paid. The
defendants have claimed that Hudson misrepresented the status of Ohana prior to
the transfer and are denying any further obligation to make payments. Suit has
been filed and attempts are ongoing to resolve the dispute through either the
return of control of the corporation or through payment of the outstanding
obligation. Six of the defendants have made an appearance in case filing a
counterclaim and naming Axia Group, Inc., Richard Surber, Ed Haidenthaller and
Rurairidh Campbell as third party defendants. Hudson denies any
misrepresentation with regard to the corporation and its status and believes
that the claims of the defendants are an attempt to alter the terms of the
written agreement.
Subsequent to end of the quarter being reported herein the following matter was
filed.
Interbay Funding, LLC v. Wichita Development Corporation and Richard D. Surber.
Suit was filed on May 21, 2003 in the District Court of Sedgwick County, Kansas,
Case No. 03CV2074. Suit has been filed seeking to foreclose on the mortgage held
by Interbay Funding on the office building operated by Wichita Development in
Wichita Kansas. The suit alleges that mortgage payments are delinquent as of and
from February 1, 2002 and that the sum of $270,470.57 is sought to satisfy the
outstanding mortgage on the building. The complaint was served on Mr. Surber on
June 4, 2003 and management has not determined the responses that will be filed
to the claim nor retained counsel in Kansas to represent Wichita's interests in
the matter.
ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES
In March of 2003, a Stock Purchase Agreement was entered into between Nexia
Holdings, Inc. and Chen Li, an individual resident of San Diego, California,
where by Nexia sold to Ms. Li Five Million (5,000,000) shares of restricted
common stock of Nexia as consideration for Ms. Li making a loan in the sum of
$30,000 to Nexia's subsidiary corporation, West Jordan Real Estate Holdings,
Inc. The Company issued the shares pursuant to section 4(2) of the Securities
Act of 1933 in an isolated private transaction by the Company which did not
involve a public offering. The Company made this offering based on the following
factors: (1) The issuance was an isolated private transaction by the Company
which did not involve a public offering, being made to a single entity; (2)
there was only one offeree who was issued stock; (3) the offeree acquired the
stock with investment intent; (4) there were no subsequent or contemporaneous
public offerings of the stock; (5) the stock was not broken down into smaller
denominations; and (6) the negotiations for the issuance of the stock took place
directly between the offeree and the Company.
ITEM 5. OTHER INFORMATION
This filing is an amendment of the form 10-QSB filed on June 20, 2003 the review
of which had not been completed as required by Rule 10-01(d) of Regulation S-X
by our independent public accountants.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Exhibits required to be attached by Item 601 of Regulation S-B
are listed in the Index to Exhibits on page 8 of this Form 10-QSB/A,
and are incorporated herein by this reference.
(b) Reports on Form 8-K During the period covered by this report, Nexia filed 1 Form 8-K report.
-------------------
1) On March 28, 2003, the Company filed a Form 8-K disclosing the dismissal of
Tanner+Co. and disclosing the retention of HJ & Associates, LLC. as the new
independent auditors for the Company.
Subsequent to the end of the period covered by this report Nexia filed 1 Form
8-K report.
(2) On April 4, 2003, the Company filed a Form 8-K announcing that
it had abandoned its efforts to acquire Industrial Maintenance
and Machine Inc., the subject of a March 5, 2003 press
release.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, this 14th day of July, 2003.
Nexia Holdings, Inc.
/s/ Richard Surber
Richard Surber, President and Director
8
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. NO. DESCRIPTION
3(i) * Articles of Incorporation of Nexia (incorporated herein by reference from Exhibit
No. 3(i) to Nexia's Form S-18 as filed with the Securities and Exchange Commission
on September 16, 1988 ).
3(ii) * Bylaws of Nexia, as amended (incorporated
herein by reference from Exhibit 3(ii) of
Nexia's Form S-18 as filed with the
Securities and Exchange Commission on
September 16, 1988).
3(iii) * Articles of Incorporation of Nexia
(incorporated herein by reference from
Appendix B of Nexia's Form 14-A as filed
with the Securities and Exchange Commission
on August 17, 2000 .)
4(a) * Form of certificate evidencing shares of
"Common Stock" in Nexia (incorporated from
Exhibit 4(a) to Nexia's Form S-18 as filed
with the Securities and Exchange Commission
on September 16, 1988 ).
Material Contracts
99.1 11 CERTIFICATION PURSUANT TO 18 U.S.C.ss.1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF
2002
* Previously filed as indicated and incorporated herein by
reference from the referenced filings previously made by
Nexia.
9
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard Surber, certify that:
1. I have reviewed this quarterly Report on Form 10-QSB/A of Nexia Holdings, Inc.;
2. Based on my knowledge, this aquarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
(c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: July 14, 2003 /s/ Richard Surber
----------------------------------------
Richard Surber, Chief Executive and Financial Officer (principal financial and accounting officer)
10
Exhibit 99.1
CERTIFICATION PURSUANT TO 18 U.S.C. ss.1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Nexia Holdings, Inc. on Form 10-QSB/A
for the period ending March 31, 2003, as filed with the Securities and Exchange
Commission on the date hereof, I Richard Surber, Chief Executive and Financial
Officer of Nexia Holdings, Inc. Certify, pursuant to 18 U.S.C. ss.1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the
best of my knowledge and belief:
(1) the Form 10-QSB/A fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) the information contained in the Form 10-QSB/A fairly
presents, in all material respects, the financial condition
and result of operations of the Company.
/s/ Richard Surber
Richard Surber
Chief Executive and Financial Officer
July 14, 2003
11