SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(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, 2004
[ ] 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: 33-22128-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, as of June 15, 2004 was 551,886,094.
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.......................................9
SIGNATURES.....................................................................9
INDEX TO EXHIBITS.............................................................10
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. The accompanying unaudited, consolidated interim financial statements
have been prepared in accordance with the instructions to Form 10-QSB pursuant
to the Securities and Exchange Commission and, therefore, do not include all
information and footnotes necessary for a complete presentation of our financial
position, results of operations, cash flows and stockholders' equity in
conformity with generally accepted accounting principles in the United States of
America. In the opinion of management, all adjustments considered necessary for
a fair presentation of the results of operations and financial position have
been included and all such adjustments are of a normal recurring nature.
Our unaudited consolidated balance sheet as of March 31, 2004, audited balance
sheet as of December 31, 2003, and the related unaudited consolidated statements
of operations, and stockholder's equity as of March 31, 2004, and cash flows for
the three months ended March 31, 2004 and 2003 are attached hereto as Pages F-1
through F-16 and are incorporated herein by this reference.
2
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Consolidated Balance Sheets..................................................F-2
Consolidated Statements of Operations and Other Comprehensive Loss...........F-5
Consolidated Statements of Stockholders' Equity..............................F-8
Consolidated Statements of Cash Flows.......................................F-10
Notes to Consolidated Financial Statements..................................F-13
F-1
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, December 31,
2004 2003
------------ ------------
ASSETS (Unaudited)
Current Assets
Cash $ 200,340 $ 94,073
Accounts receivable - trade 51,564 33,387
Related party accounts receivable 40,942 12,952
Notes receivable, net of allowance
of $315,000 45,814 36,949
Prepaid expenses 633 99
Marketable securities 12,753 205,400
------------ ------------
Total Current Assets 352,046 382,860
------------ ------------
Fixed Assets
Property and equipment, net 2,559,660 2,570,691
Land 488,895 488,895
------------ ------------
Total Fixed Assets 3,048,555 3,059,586
------------ ------------
Other Assets
Loan costs, net 34,666 38,059
------------ ------------
Total Other Assets 34,666 38,059
------------ ------------
TOTAL ASSETS $ 3,435,267 $ 3,480,505
============ ============
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,
2004 2003
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
CURRENT LIABILITIES
Accounts payable $ 109,903 $ 188,188
Accrued liabilities 130,302 130,524
Current portion of WVDEP liability - 20,000
Unearned rent 12,683 28,455
Deferred revenue 1,461 8,958
Deferred gain on sale of subsidiary - 21,770
Refundable deposit 15,541 15,541
Convertible debentures 60,000 60,000
Current portion long-term debt 1,213,859 1,213,859
------------ -----------
Total Current Liabilities 1,543,749 1,687,295
------------ -----------
LONG-TERM LIABILITIES
Long-term debt 1,529,894 1,548,740
------------ -----------
Total Long-Term Liabilities 1,529,894 1,548,740
------------ -----------
Total Liabilities 3,073,643 3,236,035
------------ -----------
MINORITY INTEREST 199,170 199,765
------------ -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $0.001 par value,
50,000,000 shares authorized, no
shares issued or outstanding - -
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (Continued)
March 31, December 31,
2004 2003
------------ ------------
Common stock, $0.001 par value, 10,000,000,000 (Unaudited)
shares authorized, 473,886,094 and 348,502,760
shares issued and outstanding, respectively 473,886 348,503
Additional paid-in capital 10,793,766 10,063,482
Treasury stock, 29,138,352 and
20,038,340 shares at cost, respectively (100,618) (100,618)
Expenses prepaid with common stock - (13,333)
Stock subscription receivable (28,310) (28,000)
Other comprehensive income (238) (862)
Accumulated deficit (10,976,032) (10,224,467)
------------ ------------
Total Stockholders' Equity 162,454 44,705
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,435,267 $ 3,480,505
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Other Comprehensive Loss
(Unaudited)
For the Three Months Ended
March 31,
--------------------------
2004 2003
------------ -----------
Revenue
Consulting revenue $ 21,614 $ 58,203
Rental revenue 128,147 130,509
------------ ------------
Total Revenue 149,761 188,712
------------ ------------
Cost of Revenue
Costs associated with consulting
revenue 109,272 57,091
Costs associated with rental revenue 136,949 91,789
Interest expense associated with rental
revenue 55,421 85,018
------------ ------------
Total Cost of Revenue 301,642 233,898
------------ ------------
Gross Deficit (151,881) (45,186)
------------ ------------
Expenses
Impairment of marketable securities 185,774 5,022
Selling, general and administrative expense 568,745 2,969
------------ ------------
Total Expenses 754,519 7,991
------------ ------------
Loss From Operations (906,400) (53,177)
------------ ------------
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Other Comprehensive Loss (Continued)
(Unaudited)
For the Three Months Ended
March 31,
--------------------------
2004 2003
------------ ------------
Loss From Operations $ (906,400) $ (53,177)
------------ ------------
Other Income (Expense)
Interest income 73 2,091
Interest expense (2,701) -
Other (expense) income 2,598 -
Gain on sale of subsidiary 139,270 -
Gain on settlement of debt 15,000 -
------------ ------------
Total Other Income (Expense) 154,240 2,091
------------ ------------
Loss Before Minority Interest and
Income Taxes $ (752,160) $ (51,086)
------------ ------------
Minority Interest In Loss 595 4,961
------------ ------------
Net Loss Before Discontinued Operations (751,565) (46,125)
------------ ------------
Discontinued Operations
Loss on discontinued operations (Note 7) - (44,938)
------------ ------------
Net Loss (751,565) (91,063)
------------ ------------
Other Comprehensive Income
Change in marketable securities 624 9,586
------------ ------------
Total Comprehensive Loss $ (750,941) $ (81,477)
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Other Comprehensive Loss (Continued)
(Unaudited)
For the Three Months Ended
March 31,
--------------------------
2004 2003
------------ ------------
Basic And Diluted Loss Per Weighted
Average Common Share:
Loss per common share before minority
interest $ (0.00) $ (0.00)
Minority interest in loss per common share - -
------------ ------------
Net loss per common share before
discontinued operations (0.00) (0.00)
Loss per common share on discontinued
operations (0.00) (0.00)
------------ ------------
Net Loss per common share $ (0.00) $ (0.00)
============ ============
Weighted average common shares outstanding,
basic and diluted 412,396,533 311,297,204
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Additional Stock Expenses Other Total
Common Stock Paid-in Treasury Subscription Prepaid with Comprehensive Accumulated Stockholders'
Shares Amount Capital Stock Receivable Common Stock Income (Loss) Deficit Equity
----------- --------- ------------ ---------- ---------- ---------- ------------ ------------- -----------
Balance, December
31, 2002 310,352,760 $ 310,353 $ 9,647,273 $(107,741) $(107,800) $ - $ 873 $ (9,322,642) $ 420,316
Common stock
issued for loan
fee 5,000,000 5,000 45,000 - - - - - 50,000
Disposition of
treasury stock
and stock
subscription
due to sale of
subsidiary - - - 7,123 107,800 - - - 114,923
Common stock
issued for
services 8,000,000 8,000 11,000 - - - - - 19,000
Common stock
issued for
Bonus 17,550,000 17,500 210,600 - - - - - 228,150
Common stock
issued for
services and
prepaid
services 2,000,000 2,000 38,000 - - (13,333) - - 26,667
Common stock
issued for
stock option
exercise to
employees 5,600,000 5,600 50,400 - (28,000) - - - 28,000
Intrinsic value
of stock
options issued to
employees - - 49,600 - - - - - 49,600
Beneficial
conversion
feature on
convertible
debentures - - 11,609 - - - - - 11,609
Adjustment for
marketable
securities - - - - - - (1,735) - (1,735)
Net loss for the
year ended
December 31, 2003 - - - - - - - (901,825) (901,825)
------------ --------- ------------ ---------- ---------- ---------- ------------ ------------- -----------
Balance, December
31, 2003 348,502,760 $ 348,503 $ 10,063,482 $(100,618) $ (28,000) $ (13,333) $ (862) $(10,224,467) $ 44,705
------------ --------- ------------ ---------- ---------- ---------- ------------ ------------- -----------
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Continued)
Additional Stock Expenses Other Total
Common Stock Paid-in Treasury Subscription Prepaid with Comprehensive Accumulated Stockholders'
Shares Amount Capital Stock Receivable Common Stock Income (Loss) Deficit Equity
------------ --------- ------------ ---------- ---------- ---------- ------------- ------------- ----------
Balance, December
31, 2003 348,502,760 $ 348,503 $ 10,063,482 $(100,618) $ (28,000) $ (13,333) $ (862) $(10,224,467) $ 44,705
Cancellation
of common
stock for
subscription
receivable
(Unaudited) (700,000) (700) (6,300) - 7,000 - - - -
Common stock
issued for
services
(Unaudited) 31,083,334 31,083 122,184 - - - - - 153,267
Common stock
issued to
directors
for services
(Unaudited) 40,000,000 40,000 440,000 - - - - - 480,000
Common stock
issued for
stock option
exercise
to consultants
(Unaudited) 18,000,000 18,000 18,000 - - - - - 36,000
Common stock
issued for
stock option
exercise to
employees
(Unaudited) 37,000,000 37,000 32,000 - (28,310) - - - 40,690
Intrinsic value
of stock
options issued
to employees
(Unaudited) - - 124,400 - - - - - 124,400
------------- --------- ------------ ---------- ---------- ---------- ------------ -------------- ----------
Balance forward 473,886,094 $ 473,886 $ 10,793,766 $(100,618) $ (49,310) $ (13,333) $ (862) $ (10,244,467) $ 879,062
------------- --------- ------------ ---------- ---------- ---------- ------------ -------------- ----------
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Continued)
Additional Stock Expenses Other Total
Common Stock Paid-in Treasury Subscription Prepaid with Comprehensive Accumulated Stockholders'
Shares Amount Capital Stock Receivable Common Stock Income (Loss) Deficit Equity
------------ --------- ------------ ---------- ---------- ---------- ------------- ------------- ----------
Balance Forward 473,886,094 $ 473,886 $ 10,793,776 $(100,618) $ (49,310) $ (13,333) $ (862) $(10,224,467) $ 879,062
Receipt of
subscriptions
receivable
(Unaudited) - - - - 21,000 - - - 21,000
Amortization of
prepaid
expenses
(Unaudited) - - - - - 13,333 - - 13,333
Adjustment for
marketable
securities
(Unaudited) - - - - - - 624 - 624
Net loss for the
three months
ended March 31,
2004
(Unaudited) - - - - - - - (751,565) (751,565)
------------ --------- ------------ ---------- ---------- ---------- ------------- ------------- ----------
Balance, March
31, 2004
(Unaudited) $473,886,094 $ 473,886 $ 10,793,766 $(100,618) $ (28,310) $ - $ (238) $(10,976,032) $ 162,454
============ ========= ============ ========== ========== ========== ============= ============= ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended
March 31,
---------------------------
2004 2003
------------ ------------
Cash Flows From Operating Activities
Net Loss $ (751,565) $ (91,063)
Adjustments to reconcile net loss to net
cash used in operating activities:
Impairment of marketable securities 185,774 5,022
Change in minority interest (595) (106,335)
Depreciation and amortization 32,325 48,343
Intrinsic value of stock options issued 124,400 -
Issued common stock for services 633,267 -
Amortization of expense prepaid with common
stock 13,333 -
Bad debt expense 23,566 -
Changes in operating assets and liabilities:
Accounts and notes receivable (78,598) (22,535)
Prepaid expenses (534) 12,551
Other assets 3,393 8,304
Accounts payable (78,284) (47,830)
Accrued liabilities (20,222) (535)
Deferred revenue (37,543) 3,223
Refundable deposit - 1,900
------------ ------------
Net Cash Provided (used) in Operating Activities 48,717 (188,955)
------------ ------------
Cash Flows From Investing Activities
Proceeds from sale of marketable securities - 3,089
Purchase of property, plant and equipment (21,294) (5,850)
------------ ------------
Net Cash Used By Investing
Activities (21,294) (2,761)
------------ ------------
The accompanying notes are an integral part of these consolidated financial
statements.
F-11
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
For the Three Months Ended
March 31,
--------------------------
2004 2003
------------ ------------
Cash Flows From Financing Activities
Principal payments on long-term debt $ (48,846) $ (560,823)
Proceeds from issuance of long-term debt 30,000 690,000
Receipt of stock subscriptions receivable 21,000 -
Issuance of common stock for stock option
exercise 76,690 -
------------ -----------
Net Cash Provided By Financing Activities 78,844 129,177
------------ -----------
Net Increase (Decrease) In Cash 106,267 (62,359)
Cash, Beginning Of Year 94,073 108,821
------------ -----------
Cash, End Of Year $ 200,340 $ 46,282
============ ===========
Supplemental Disclosure Of Information
Cash paid during the year for interest $ 51,151 $ 84,656
Cash paid during the year for income taxes $ - $ -
Supplemental Disclosure of Non-Cash Investing and
Financing Activities:
Common stock issued for services $ 633,267 $ -
Common stock issued for subscription receivable $ 28,310 $ -
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-12
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 2004 and December 31, 2003
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated financial statements are
those of Nexia Holdings, Inc. and Subsidiaries (the Company) and 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 includes normal
recurring adjustments and reflects all adjustments, which, in the
opinion of management, are necessary for a fair presentation of such
consolidated 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, 2003 Annual Report on Form
10-KSB. Operating results for the three months ended March 31, 2004
are not indicative of the results that may be expected for the year
ending December 31, 2004.
NOTE 2 - GOING CONCERN
The Company's consolidated financial statements are prepared using
accounting principles generally accepted in the United States 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, 2004 of $10,976,032 and a working capital
deficit of $1,191,703 at March 31, 2004 all of which raises
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-13
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements (continued)
March 31, 2004 and December 31, 2003
NOTE 3 - MATERIAL EVENTS
During the quarter ended March 31, 2004, the Company cancelled
700,000 shares previously issued to an officer of the Company for
cancellation of a stock subscription receivable in the amount of
$7,000.
During the quarter ended March 31, 2004, the Company issued
31,083,334 shares of its common stock for services to consultants and
employees valued at $153,267, or an average $0.005 per share.
During the quarter ended March 31, 2004 the Company issued 40,000,000
shares of its common stock for services to directors of the Company
valued at $480,000, or $0.012 per share.
During the quarter ended March 31, 2004 the Company's board of
directors authorized the issuance of 18,000,000 options to purchase
the Company's common stock for services rendered to consultants. The
options were exercised immediately at an option price of $0.002 per
share.
During the quarter ended March 31, 2004 the Company's board of
directors authorized issuance of 37,000,000 options to purchase
common stock to employees for services rendered. The options were
exercised immediately at an option price of $0.002 per share for cash
of $40,690 and subscriptions receivable of $28,310.
NOTE 4 - RELATED PARTY TRANSACTIONS
On January 29, 2004 the Company accepted 9,100,012 shares of its own
common stock held by Axia Group, Inc. (Axia), a related party, in
satisfaction of all amounts due as a result of its consulting
agreement. These shares are being held as treasury stock at
predecessor basis of zero at March 31, 2004.
On February 20, 2004, the Company's board of directors approved the
issuance to the Company's President and Chief Financial Officer,
5,100,000 shares of the Company's Series A Preferred Stock as an
incentive to retaining the officer as an employee of the Company.
During June 2004, the Company's board of directors rescinded the
issuance of these shares of preferred stock.
During the quarter ended March 31, 2004, the Company lent Axia a
total of $33,140 in the form of cash and payment of expenses. A total
of $40,942 is due from Axia at March 31, 2004.
NOTE 5 - OUTSTANDING STOCK OPTIONS
A summary of the status of the Company's stock option plans as of
March 31, 2004 and December 31, 2003 and changes during those periods
is presented below:
F-14
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 2004 and December 31, 2003
NOTE 5 - OUTSTANDING STOCK OPTIONS (CONTINUED)
March 31, 2004 December 31, 2003
------------------------ -----------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------------ ------------ ----------- ----------
Outstanding,
beginning of
period - $ - - $ -
Granted 55,000,000 0.002 5,600,000 0.01
Expired/
Cancelled/ - - - -
Exercised (55,000,000) $ 0.002 (5,600,000) $ 0.01
------------ ------------ ----------- ----------
Outstanding end of
period - $ - - $ -
============ ============ =========== ==========
Exercisable - $ - - $ -
============ ============ =========== ==========
The Company estimated the fair value of each stock option issued
during the period at the grant date by using the Black-Scholes option
pricing model based on the following assumptions:
For the Period Ended
March 31, 2004
--------------------
Risk free interest rate 0.00%
Expected life 0 years
Expected volatility 0.00%
Dividend yield 0.00%
NOTE 6 - SUBSEQUENT EVENTS
During April 2004, the Company's board of directors authorized the
issuance of 33,000,000 shares of the Company's common stock to four
employees of the Company for services rendered.
During April 2004, the Company's board of directors authorized the
issuance of 5,000,000 shares of the Company's common stock to a
consultant for serviced rendered.
During May 2004, the Company's board of directors authorized the
issuance of 40,000,000 options each to two consultants to purchase
shares of the Company's common stock at a price of 75% of the market
price on the date of exercise, 20,000,000 each, vest immediately, with
the remaining vesting at a rate of 10,000,000 each per month beginning
June 15, 2004.
During June 2004, the Company's board of directors voided the
issuance of 5,100,000 shares of preferred stock previously authorized
to be issued to the Company's President and CEO.
F-15
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
March 31, 2004 and December 31, 2003
NOTE 7 - DISCONTINUED OPERATIONS
On June 30, 2003, the Company sold its interest in Wichita
Development Corporation, and consequently its interest in Salt Lake
Development Corporation and Wichita Properties, Inc., to Diversified
Financial Resources Corporation. As a result, the operations of
Wichita for the three months ended March, 31 2003 have been reflected
as discontinued operations. The following is a summary of the loss
from discontinued operations:
For the three months ended
March 31, 2003,
--------------------------
Revenue
Rental Revenue $ 48,732
--------------------------
Cost of Revenue
Cost associated with rental revenue 49,441
Interest expense associated with
rental revenue 29,105
--------------------------
Total Cost of Revenue 78,546
--------------------------
Gross Deficit (28,814)
--------------------------
Expenses
Selling, general and administrative
expense 15,531
--------------------------
Total Expenses 15,531
--------------------------
Loss From Operations (45,345)
--------------------------
Other Income
Interest Income 407
--------------------------
Total Other Income 407
--------------------------
Net Loss $ (44,938)
==========================
No income tax benefit has been attributed to the loss from
discontinued operations.
F-16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Cautionary Statement Regarding 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 business 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 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.
General
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 three months ended March 31, 2004, and compares those
results with the comparable period from last year.
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.
Nexia recorded rental revenues of $128,147 for the three months ended March
31, 2004, as compared to $130,509 for the same period in 2003. The decrease in
rental revenues was due to a decrease in occupancy rates in the Glendale
shopping center.
3
Nexia had a loss from real estate operations of $64,223 for the three months
ended March 31, 2004, compared to a loss of $46,298 for the same period in
2003. The increase in loss 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
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 various
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 Hudson'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 EDGAR
filings.
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 restricted
equity securities, 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.
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, 2004, as compared to the comparable period in 2003.
Nexia recorded $21,614 in revenues for the three months ended March 31, 2004,
from its financial consulting operations as compared to $58,203 for the same
period of 2003. Nexia experienced a loss from consulting operations of $87,658
for the three months ended March 31, 2004 as compared to a gain of $1,112 for
the three months ended March 31, 2003.
Company Operations as a Whole
4
Revenues
Gross revenues for the three month period ended March 31, 2004, was $149,761
as compared to $188,712 for the same period in 2003. The change in three month
revenues of $38,951 is due to the issues stated above.
Losses
Nexia recorded operating losses of $151,881 for the three month period, ended
March 31, 2004, compared to losses of $45,186 for the comparable period in the
year 2003.
Nexia recorded net losses of $751,565 for the three months ended March 31,
2004, as compared to net losses of $91,063 for the same period in the previous
year. The increase in losses is attributable primarily to an increase in
expenses as a result of issuing shares of common stock for services rendered.
Nexia does not expect to operate at a profit through fiscal 2004. 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 $568,745, compared to $2,969 for the same period in 2003. The increase in
expenses is due primarily to increase in non-cash directors fees of $480,000
and $73,000 in legal and accounting fees. The Company issued 10,000,000
shares of restricted stock to each director as fees.
Depreciation and amortization expenses for the three months ended March 31,
2004 and March 31, 2003, were $32,325 and $48,343, respectively. This change
was due primarily to the sale of propertries by Company.
Capital Resources and Liquidity
On March 31, 2004, Nexia had current assets of $352,046 and $3,435,267 in
total assets. Nexia had a net working capital deficit of $1,191,703 at March
31, 2004. The working capital deficit is due primarily to mortgages, which may
come due in the next twelve months and are thus considered as current
liabilities.
Net cash provided by operating activities was $48,717 for the three months
ended March 31, 2004, compared to net cash used in operating activities of
$188,955 for the three months ended March 31, 2003.
Cash used by investing activities was $21,294 for the three months ended March
31, 2004, compared to cash flow used by investing activities of $2,761 for the
same period in 2003.
Cash provided by financing activities was $78,844 for the three months ended
March 31, 2003, compared to $129,177 for the three months ended March 31,
2003.
5
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.
Stock and Options To Employees and Contractors
During the quarter ending March 31, 2004, Nexia's subsidiary, Hudson
Consulting Group, Inc., has continued a policy of limited cash payments to its
employees and relied primarily on the issuance of common stock registered
under the Company's S-8 Registration Statement for employee compensation.
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.
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 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.
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 and
adequate.
6
There were no significant changes made in Nexia's internal controls or in
other factors that could significantly affect Nexia's 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
ITEM 1. LEGAL PROCEEDINGS
Since the filing of Nexia's 10-KSB for the period ended December 31, 2003 no
material changes have occurred to the legal proceedings reported therein. For
more information please see Nexia's Form 10-KSB for the year ended December
31, 2003, filed May 19, 2004.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
During the quarter ending March 31, 2004, a majority of the holders of voting
rights in the stock of Nexia approved an amendment to the Article of
Incorporation to increase the number of authorized shares of common stock to
Ten Billion (10,000,000,000). The number of authorized shares of preferred
stock remained at Fifty Million (50,000,000). A certificate of amendment to
carry out this change was filed with the Nevada Secretary of State on March
29, 2004. Additional information can be found by referring to the Schedule
14(c) information statement filed on March 5, 2004.
On January, 29, 2004, the Company's board of directors approved the delivery
to each of the four directors 10,000,000 restricted shares of the Company's
common stock for services rendered to the Company as directors. The shares
were issued pursuant to section 4(2) of the Securities Act of 1933.
ITEM 5. OTHER INFORMATION
On January 6, 2004, the Company's board of directors authorized the issuance
of 2,400,000 shares of the Company's common stock to Barry Monk, a consultant
to the Company who has provided services to the Company, the shares were
issued pursuant to the S-8 Registration Statement of the Company.
On January 16, 2004, the Company's board of directors authorized the issuance
of 9,100,000 shares of the Company's common stock to seven individual
employees who had provided bona fide services to the Company, the shares were
authorized pursuant to the S-8 Registration Statement of the Company.
On February 13, 2004, the Company's board of directors authorized the issuance
of 25,000,000 options for the Company's common stock to five individual
employees who had provided bona fide services to the Company, the options for
shares were authorized pursuant to the S-8 Registration Statement of the
Company, each good for the purchase of shares at an option price of $0.002 per
share.
On February 13, 2004, the Company's board of directors authorized the issuance
of 5,000,000 options for the Company's common stock to Barry Monk, an
individual who has provided construction services to the Company, the options
for shares were authorized pursuant to the S-8 Registration Statement of the
Company, each good for the purchase of shares at an option price of $0.002 per
share.
On February 20, 2004, the Company's board of directors authorized the issuance
of 5,000,000 options for the Company's common stock to Barry Monk, an
individual who has provided construction services to the Company, the options
for shares were authorized pursuant to the S-8 Registration Statement of the
Company each good for the purchase of shares at an option price of $0.002 per
shares.
7
On March 4, 2004, the Company's board of directors authorized the issuance of
6,000,000 options for the Company's common stock to Josh Vance, a real estate
professional that has provided services related to the leasing of real
property held by the Company's subsidiaries, the options for shares were
authorized pursuant to the S-8 Registration Statement of the Company, each
good for the purchase of shares at an option price of $0.002 per share.
On March 9, 2004, the Company's board of directors authorized the issuance of
13,333,334 shares of Company's common stock to Mark Low, an accountant that
has provided tax advisory services for the Company, pursuant to the S-8
Registration Statement of the Company.
On March 9, 2004, the Company's board of directors authorized the issuance of
250,000 shares of the Company's common stock, pursuant to the S-8 Registration
Statement of the Company and 2,000,000 options for the Company's common stock
to Donald Decker, a computer specialist and web site designer, pursuant to the
S-8 Registration Statement of the Company, each good for the purchase of
shares at an option price of $0.002 per share, a lower option price of $0.001
per share was later approved by the Board and
On March 9, 2004, the Company's board of directors authorized the issuance of
6,000,000 shares and the issuance of 12,000,000 options to Ernie Burch, an
employee of the Company and for services provided with regard to improvements
and maintenance to be performed on real estate held by Wasatch Capital
Corporation, a subsidiary of the Company, the shares and the options were
authorized pursuant to the S-8 Registration Statement of the Company, each
option is good for the purchase of shares at an option price of $0.002 per
share, a lower option price of $0.001 per shares was later approved by the
Board.
On April 8, 2004, the Company's board of directors authorized the issuance of
33,000,000 shares of the Company's common stock to 4 employees (Frank Adams,
Michael Golightly, Sandra Jorgensen and Brittany Stevens) of the Company for
services rendered to the Company, the shares were authorized pursuant to the
S-8 Registration Statement of the Company. Accounting, legal, filing,
secretarial, amounts payable and receivable, and other services were provided
by these individuals.
On April 8, 2004, the Company's board of directors authorized the issuance of
5,000,000 shares of the Company's common stock to Ronald Friedman for services
rendered to the Company and as additional compensation for assisting with
financing for the Company, the shares have not yet been issued but will be
issued with a restrictive legend and issued pursuant to Section 4(2) of the
Securities Act of 1933 in a private transaction.
On May 18, 2004, the Company's board of directors approved an agreement to
grant to Felix Correa options to purchase 40,000,000 shares of the Company's
common stock at an option price equal to 75% of the market price at the time
of exercise. The agreement provided that 20,000,000 of the options vested
immediately and remaining options will vest at the rate of 10,000,000 per
month. Mr. Correa has agreed to provide services related to the improvement
and maintenance of the Glendale Shopping Center a real estate investment held
by West Jordan Real Estate Holdings, Inc. a subsidiary of the Company.
On May 19, 2004, the Company's board of directors approved an agreement to
grant to Tim Hall option to purchase 40,000,000 shares of the Company's common
stock at an option price equal to 75% of the market price at the time of
exercise. The agreement provided that 20,000,000 of the options vested
immediately and the remaining options will vest at the rate of 10,000,000 per
month. Mr. Hall has agreed to provide services related to improvements of the
Wallace Bennett Building, a real estate investment held by Wasatch Capital
Corporation, a subsidiary of the Company.
On May 21, 2004 the Company, as authorized by the board of directors, filed an
amendment to its S-8 Registration Statement increasing the number of shares
registered by 500,000,000. The total number of shares now registered pursuant
to the S-8 Registration Statement and the 2004 Benefit Plan of the Company is
650,000,000.
8
ITEM 6. EXHIBITS
(a) Exhibits Exhibits required to be attached by Item 601 of Regulation S-B
--------
are listed in the Index to Exhibits on page 9 of this Form 10-QSB, and
are incorporated herein by this reference.
(b) Reports on Form 8-K During the period covered by this report, Nexia filed
one Form 8-K report.
(1) On February 26, 2004, the Company filed a Form 8-K announcing that
the Company had approved the issuance of 5,100,000 shares of its
Series A Preferred Stock to Richard Surber, president of the
Company, to retain his services as the president and a director of
the Company.
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 16th day of June 2004.
----
Nexia Holdings, Inc.
Richard Surber, President and Director
9
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
10(iv) * February 1, 2004 Stock Option Agreement between Nexia
Holdings, Inc. (the "Company") and Frank Adams issuing
1,300,000 shares of Company common stock, par value
$0.001 at a price of $0.006 per option (incorporated
herein by reference from the December 31, 2003 10-KSB).
10(v) * February 1, 2004 Stock Option Agreement between the
Company and Ernie Burch issuing 1,300,000 shares of
Company common stock, par value $0.001 at a price of
$0.006 per option (incorporated herein by reference from
the December 31, 2003 10-KSB).
10(vi) * February 1, 2004 Stock Option Agreement between the
Company and Jared Gold issuing 1,300,000 shares of
Company common stock, par value $0.001 at the price of
$0.006 per option (incorporated herein by reference from
the December 31, 2003 10-KSB).
10(vii) * February 1, 2004 Stock Option Agreement between the
Company and Michael Golightly issuing 1,300,000 shares
of Company common stock, par value $0.001 at a price of
$0.006 per option (incorporated herein by reference from
the December 31, 2003 10-KSB).
10(viii) * February 1, 2004 Stock Option Agreement between the
Company and Sandra Jorgensen issuing 1,300,000 shares of
Company common stock, par value $0.001 at the price of
$0.006 per option (incorporated herein by reference from
the December 31, 2003 10-KSB).
10
10(ix) * February 1, 2004 Stock Option Agreement between the
Company and Jose R. Prado issuing 1,300,000 shares of
Company common stock, par value $0.001 at the price of
$0.006 per option (incorporated herein by reference from
the December 31, 2003 10-KSB).
10(x) * February 1, 2004 Stock Option Agreement between the
Company and David Witesman issuing 1,300,000 shares of
Company common stock, par value $0.001 at the price of
$0.006 per option (incorporated herein by reference from
the December 31, 2003 10-KSB).
10(xi) * February 13, 2004 Stock Option Agreement between the
Company and Frank Adams issuing 5,000,000 shares of
Company common stock, par value $0.001 at a price of
$0.002 per option (incorporated herein by reference from
the December 31, 2003 10-KSB).
10(xii) * February 13, 2004 Stock Option Agreement between the
Company and Ernie Burch issuing 5,000,000 shares of
Company common stock, par value $0.001 at a price of
$0.002 per option (incorporated herein by reference from
the December 31, 2003 10-KSB).
10(xiii) * February 13, 2004 Stock Option Agreement between the
Company and Michael Golightly issuing 5,000,000 shares
of Company common stock, par value $0.001 at the price
of $0.002 per option (incorporated herein by reference
from the December 31, 2003 10-KSB).
10(xiv) * February 13, 2004 Stock Option Agreement between the
Company and Sandra Jorgensen issuing 5,000,000 shares of
Company common stock, par value $0.001 at the price of
$0.002 per option (incorporated herein by reference from
the December 31, 2003 10-KSB).
10(xv) * February 13, 2004 Stock Option Agreement between the
Company and Barry Monk issuing 10,000,000 shares of
Company common stock, par value $0.001 at the price of
$0.002 per option (incorporated herein by reference from
the December 31, 2003 10-KSB).
10(xvi) * February 13, 2004 Stock Option Agreement between the
Company and Jose R. Prado issuing 5,000,000 shares of
Company common stock, par value $0.001 at the price of
$0.002 per option (incorporated herein by reference from
the December 31, 2003 10-KSB).
10(xvii) * March 9, 2004 Stock Option Agreement between the Company
and Ernie Burch issuing 12,000,000 shares of Company
common stock, par value $0.001 at a price of $0.002 per
option (incorporated herein by reference from the
December 31, 2003 10-KSB).
10(xviii) * March 9, 2004 Stock Option Agreement between the Company
and Donald Decker issuing 2,000,000 shares of Company
common stock, par value $0.001 at a price of $0.002 per
option (incorporated herein by reference from the
December 31, 2003 10-KSB).
11
10(xix) * March 9, 2004 Stock Option Agreement between the Company
and Josh Vance issuing 6,000,000 shares of Company
common stock, par value $0.001 at the price of $0.002
per option (incorporated herein by reference from the
December 31, 2003 10-KSB).
10(xx) 15 May 19, 2004 Stock Option Agreement between the Company
and Felix Correa granting 40,000,000 options with a
floating option price set at 75% of the market price at
the time of exercise, 20,000,000 options vest upon
signing and 10,000,000 per month thereafter.
10(xxi) 17 May 19, 2004 Stock Option Agreement between the Company
and Tim Hall granting 40,000,000 options with a floating
option price set at 75% of the market price at the time
of exercise, 20,000,000 options vest upon signing and
10,000,000 per month thereafter.
10(xxii) 19 May 17, 2004 Contractor Agreement between the Company
and Hallmark Construction for the amount of $189,194.63
for construction services at Wallace-Bennett building.
14.1 * Draft of Code of Ethics for Nexia Holdings, Inc.
(incorporated herein by reference from the December 31,
2003 10-KSB).
Certifications
31(i) 13 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS
ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002.
32(i) 14 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.
12
Exhibit 31(i)
I, Richard Surber, certify that:
1. I have reviewed this quarterly Report on Form 10-QSB for Nexia Holdings, Inc.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-15(e)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under my supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to me by others within those entities,
particularly during the period in which this quarterly report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report my conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, 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 and material weaknesses in the design or
operation of internal controls over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.
Date: June 15, 2004
---------------------------------------------------------------
Richard Surber the President, CEO & CFO of Nexia Holdings, Inc.
13
Exhibit 32(i)
CERTIFICATION
I, Richard Surber, Chief Executive and Financial Officer of Nexia Holdings, Inc.
(the "Registrant"), do hereby certify, pursuant to 18 U.S.C.ss. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my
knowledge:
(1) the Quarterly Report of Form 10-QSB of the Registrant, to which this
certification is attached as an exhibit (the "Report") fully complies with the
requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C.
78m); and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Registrant.
Richard Surber
Chief Executive and Financial Officer
June 15, 2004
14
Exhibit 10(xx)
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Stock Option Agreement") is granted
effective this 19th day of May 2004 by Nexia Holdings, Inc. (the "Company") to
Felix Correa, an individual providing services to the Company ("Optionee") and a
Utah resident.
PREMISES
(f) The Company has received valuable services from Optionee in
the past and desires to compensate Optionee for these services
by issuing Optionee an option (the "Option") to purchase a
total of Forty Million (40,000,000), shares of the Company's
common stock, par value $0.001, the options will have a
floating option price set at 75% of the market price at the
time of exercise, the options and shares issued subject to the
options shall be issued pursuant to a registration statement
on Form S-8 under the Securities Act of 1933 as amended ("Form
S-8").
(g) Optionee hereby agrees that in exchange for the grant of the
options set forth herein that he will build out at least
10,000 square feet of rentable space at the Glendale Plaza
Shopping Center, these services will include but not be
limited to, subdividing spaces, splitting electrical and
plumbing services, erecting new walls, building and designing
common area hallways and other services as requested by the
property manager for the site.
GRANT
1. Grant of Options. The Company hereby grants Optionee the right
and option ("Option") to purchase the above described Forty
Million (40,000,000) shares of Common Stock, on the terms and
conditions set forth herein and subject to the provisions of
the Form S-8 registration statement in exchange for services
provided by Employee to the Company, 20,000,000 options shall
vest immediately upon the exercise hereof and thereafter
10,000,000 additional options shall vest on the 15th of the
month until all option rights have vested in the Optionee,
however Optionee shall not be allowed to exercise any option
rights that would result in Optionee holding more than 4.9% of
the total issued and outstanding shares of the Company..
2. Term of Option. This Option may be exercised, in whole or in
part, at any time but before one (1) Year has elapsed from the
date of this Option, except as limited above by vesting
rights. All rights to exercise this option end with the
termination of services with the Company, for any reason and
by any party.
3. Method of Exercising. This Option may be exercised in
accordance with all the terms and conditions set forth in this
Option, by delivery of a notice of exercise a form of which is
attached hereto as Exhibit "A" and incorporated herein by this
reference, setting forth the number of Options along with a
signed letter of instruction to the stock broker Optionee will
employ in selling the shares indicating that the specified
exercise price shall be paid within 10 days of the sale or as
otherwise specified at the time of exercise.
15
4. Optionee Not an Affiliate. Optionee hereby represents,
warrants and covenants that he is not an affiliate of the
Company as that term is defined in Rule 144(a)(1) under the
Securities Act of 1933.
5. Availability of Shares. During the term of this Option, the
Company shall reserve for issuance the number of shares of
Common Stock required to satisfy this Option.
6. Adjustments to Number of Shares. The number of shares of
Common Stock subject to this Option shall be adjusted to take
into account any stock splits, stock dividends,
recapitalization of the Common Stock as provided in the Stock
Option Plan.
7. Limitation on Exercise. If the board of directors of the
Company, in its sole discretion, shall determine that it is
necessary or desirable to list, register, or qualify the
Common Stock under any state or federal law, this Option may
not be exercised, in whole or part, until such listing,
registration, or qualification shall have been obtained free
of any conditions not acceptable to the board of directors.
8. Restrictions on Transfer. The Option has not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities statutes. The shares of Common
Stock issuable on exercise of the Option will be qualified for
registration under a Form S-8 Registration Statement filed
with the Securities and Exchange Commission.
9. Record Owner. The Company may deem the Optionee as the
absolute owner of this Option for all purposes. This Option is
exercisable only by the Optionee, or by the Optionee's duly
designated appointed representative. This Option is not
assignable.
10. Shareholder's Rights. The Optionee shall have shareholder
rights with respect to the Option shares only when Optionee
has exercised this Option to purchase those shares and
provided the Company with the letter of instruction specified
in Section 4 of this Option.
11. Validity and Construction. The validity and construction of
this Agreement shall be governed by the laws of the State of
Utah.
IN WITNESS WHEREOF, the below signatures evidence the execution of this
Option by the parties on the date first appearing herein.
OPTIONEE Nexia Holdings, Inc.
/s/ Felix Correa /s/ Richard Surber
----------------------- ---------------------------
Felix Correa, Optionee Richard Surber, President
16
Exhibit 10(xxi)
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Stock Option Agreement") is granted
effective this 19th day of May 2004 by Nexia Holdings, Inc. (the "Company") to
Tim Hall, an individual providing services to the Company ("Optionee") and a
Utah resident.
PREMISES
(h) The Company has received valuable services from Optionee in
the past and desires to compensate Optionee for these services
by issuing Optionee an option (the "Option") to purchase a
total of Forty Million (40,000,000), shares of the Company's
common stock, par value $0.001, the options will have a
floating option price set at 75% of the market price at the
time of exercise, the options and shares issued subject to the
options shall be issued pursuant to a registration statement
on Form S-8 under the Securities Act of 1933 as amended ("Form
S-8").
(i) Optionee hereby agrees that in exchange for the grant of the
options set forth herein that he will sign a contract that
provides for the renovation of approximately 3,700 square feet
of commercial space located on the second floor of the Wallace
Building, located on 100 South in Salt Lake City, these
renovations will include new plumbing, windows, heating,
venting, air conditioning, electrical work, painting, new
flooring, roof repair, installation of fire escapes, and other
items as shall be specified in the contract.
GRANT
1. Grant of Options. The Company hereby grants Optionee the right
and option ("Option") to purchase the above described Forty
Million (40,000,000) shares of Common Stock, on the terms and
conditions set forth herein and subject to the provisions of
the Form S-8 registration statement in exchange for services
provided by Employee to the Company, 20,000,000 options shall
vest immediately upon the exercise hereof and thereafter
10,000,000 additional options shall vest on the 15th of the
month until all option rights have vested in the Optionee,
however Optionee shall not be allowed to exercise any option
rights that would result in Optionee holding more than 4.9% of
the total issued and outstanding shares of the Company..
2. Term of Option. This Option may be exercised, in whole or in
part, at any time but before one (1) Year has elapsed from the
date of this Option, except as limited above by vesting
rights. All rights to exercise this option end with the
termination of services with the Company, for any reason and
by any party.
3. Method of Exercising. This Option may be exercised in
accordance with all the terms and conditions set forth in this
Option, by delivery of a notice of exercise a form of which is
attached hereto as Exhibit "A" and incorporated herein by this
reference, setting forth the number of Options along with a
signed letter of instruction to the stock broker Optionee will
employ in selling the shares indicating that the specified
exercise price shall be paid within 10 days of the sale or as
otherwise specified at the time of exercise.
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4. Optionee Not an Affiliate. Optionee hereby represents,
warrants and covenants that he is not an affiliate of the
Company as that term is defined in Rule 144(a)(1) under the
Securities Act of 1933.
5. Availability of Shares. During the term of this Option, the
Company shall reserve for issuance the number of shares of
Common Stock required to satisfy this Option.
6. Adjustments to Number of Shares. The number of shares of
Common Stock subject to this Option shall be adjusted to take
into account any stock splits, stock dividends,
recapitalization of the Common Stock as provided in the Stock
Option Plan.
7. Limitation on Exercise. If the board of directors of the
Company, in its sole discretion, shall determine that it is
necessary or desirable to list, register, or qualify the
Common Stock under any state or federal law, this Option may
not be exercised, in whole or part, until such listing,
registration, or qualification shall have been obtained free
of any conditions not acceptable to the board of directors.
8. Restrictions on Transfer. The Option has not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities statutes. The shares of Common
Stock issuable on exercise of the Option will be qualified for
registration under a Form S-8 Registration Statement filed
with the Securities and Exchange Commission.
9. Record Owner. The Company may deem the Optionee as the
absolute owner of this Option for all purposes. This Option is
exercisable only by the Optionee, or by the Optionee's duly
designated appointed representative. This Option is not
assignable.
10. Shareholder's Rights. The Optionee shall have shareholder
rights with respect to the Option shares only when Optionee
has exercised this Option to purchase those shares and
provided the Company with the letter of instruction specified
in Section 4 of this Option.
11. Validity and Construction. The validity and construction of
this Agreement shall be governed by the laws of the State of
Utah.
IN WITNESS WHEREOF, the below signatures evidence the execution of this
Option by the parties on the date first appearing herein.
OPTIONEE Nexia Holdings, Inc.
/s/ Tim Hall /s/ Richard Surber
------------------- -------------------------
Tim Hall, Optionee Richard Surber, President
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Exhibit 10(xxii)
CONTRACTOR AGREEMENT
THIS AGREEMENT made this 17th day of May, 2004, by and between Hallmark
Construction & Development, hereinafter called the Contractor, and Wasatch
Capital Corporation hereinafter called the Owner.
WITNESSETH, that the Contractor and the Owner for the consideration named herein
agree as follows.
ARTICLE 1. SCOPE OF THE WORK
The Contractor shall furnish all the materials and perform all of the work shown
on the drawings and/or described in the specification entitled Exhibit A, as
annexed hereto as it pertains to work to be performed on property located at:
ARTICLE 2. TIME OF COMPLETION
The work to be performed under this Contract shall be commenced on or before May
20, 2004 and shall be substanially completed on or before July 20, 2004, Time is
of the essence.
ARTICLE 3. THE CONTRACT PRICE
The Owner shall pay the Contractor for the material and labor to be performed
under the Contract the sum of $189194.63 Dollars ($), subject to additions and
deductions pursuant to authorized change orders.
ARTICLE 4. PROGRESS PAYMENTS
Payments of the Contract price shall be paid in the manner following: Labor thru
Finance 500 account Balance bi-weekly due to short term of project
ARTICLE 5. GENERAL PROVISIONS
1. All work shall be completed in a workmanship like manner and in
compliance with all building codes and other applicable laws.
2. To the extent required by law all work shall be performed by
individuals duly licensed and authorized by law to perform said work.
3. Contractor may at its discretion engage subcontractors to perform work
hereunder, provided Contractor shall fully pay said subcontractor and
in all instances remain responsible for the proper completion of this
contract.
4. Contractor shall furnish Owner appropriate releases or waivers of lien
for all work performed or materials provided at the time the next
periodic payment shall be due.
5. All change orders shall be in writing and signed by both Owner and
Contractor.
6. Contractor warrants it is adequately insured for injury
to its employees and others
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incurring loss or injury as a result of the acts of Contractor or its
employees and subcontractors.
7. Contractor shall at its own expense obtain all permits necessary for
the work to be performed.
8. Contractor agrees to remove all debris and leave the premises in broom
clean condition.
9. In the event Owner shall fail to pay any periodic or installment
payment due hereunder, Contractor may cease work without breach pending
payment or resolution of any dispute.
10. All disputes hereunder shall be resolved by binding arbitration in
accordance with the rules of the American Arbitration Association.
11. Contractor shall not be liable for any delay due to circumstances
beyond its control including strikes, casualty or general
unavailability of materials.
12. Contractor warrants all work for a period of 12 months following
completion.
ARTICLE 6. OTHER TERMS
Signed this 5th day fo May, 2004
Signed in the presence of
/s/ Witness By: /s/ Tim Hall
Contractor
/s/ Witness By: /s/ Richard Surber
Owner
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