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, 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 June 13, 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 6. EXHIBITS AND REPORTS ON FORM 8-K.........................................................................8
SIGNATURES........................................................................................................8
INDEX TO EXHIBITS.................................................................................................9
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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 FINANCIAL STATEMENTS
PAGE
Consolidated Balance Sheet......................................................................................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
2003 31, 2002
-------------------- ------------------
ASSETS (Unaudited)
Current Assets
Cash $ 46,282 $ 108,821
Accounts receivable - trade, net of allowance of 9,974 8,681
$40,031
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)
December
March 31, 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 - 7,685,340 shares at cost, respectively (107,741) (107,741)
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 $ 127,920
Rental revenue 179,241 317,858
-------------------- --------------------
Total Revenue 237,444 445,778
Costs of Revenue
Costs associated with consulting revenue 57,091 283,311
Costs associated with rental revenue 141,230 197,978
Interest associated with rental revenue 114,123 116,292
-------------------- --------------------
Total Costs of Revenue 312,444 597,581
Gross Profit
Gross profit from consulting operations 1,112 (155,391)
Gross profit from real estate operations (76,112) 3,588
-------------------- --------------------
Gross Profit (75,000) (151,803)
Expenses
General & Administrative Expense 18,500 169,281
Impairment of marketable securities 5,022 12,369
-------------------- --------------------
Total Expenses 23,522 181,650
Operating Loss (98,522) (333,453)
-------------------- --------------------
Other Income
Interest Income 2,498 1,694
Other income - 28,072
-------------------- --------------------
Total Other Income (Expense) 2,498 29,766
=====
-------------------- --------------------
Loss Before Minority Interest (96,024) (303,687)
Minority Interest in (gain) loss 4,961 1,460
-------------------- --------------------
Loss before income taxes (91,063) (302,227)
Benefit from (provision for) income taxes - -
-------------------- --------------------
Net Loss (91,063) (302,227)
Other Comprehensive Income
Change in Marketable Securities 9,586 -
Total Comprehensive Loss $ (81,477) $ (302,227)
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 income (loss) per weighted average
common share outstanding
$ (0.00) $ (0.00)
==================== ====================
Weighted average shares outstanding - basic & diluted 311,297,204 128,170,000
==================== ====================
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) $ (302,227)
Adjustments to reconcile net loss to net cash used in operating
activities:
Loss from sale of investments - 12,369
Impairment of marketable securities 5,022 -
Change in minority interest (106,335) (1,457)
Depreciation & amortization 48,343 56,876
Issued common stock for services - 150,850
Changes in operating assets and liabilities:
Accounts and notes receivable (22,535) 2,130
Prepaid expenses 12,551 (15,939)
Other assets 8,304 -
Accounts & notes payable (47,830) 29,379
Deferred revenue 3,223 -
Refundable deposit 1,900 -
Accrued liabilities (535) (58,525)
------------------- ----------------
Net Cash Used by Operating Activities $ (188,955) $ (126,544)
Cash Flows From Investing Activities
Proceeds on sale of securities 3,089 -
Purchase of property and equipment (5,850) -
Net cash received in acquisition transaction - 373,065
Net change in marketable securities - 27,080
------------------- ----------------
Net Cash Used by Investing Activities $ (2,761) $ 400,145
Cash Flows from Financing Activities
Proceeds from long term debt 690,000 21,023
Principal payments on notes and mortgages payable (560,823)
Decrease in amount due from shareholders/ related parties - (18,000)
------------------- ----------------
Net Cash Provided (Used) by Financing Activities $ 129,177 $ 3,023
------------------- ----------------
-
Increase (Decrease) in Cash (62,539) 276,624
Cash at Beginning of Period 108,821 22,279
------------------- ----------------
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 -
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, $0.10 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
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.
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 $8,056.32. 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 $317,858 for the quarter ended
March 31, 2002, as compared to $179,241 for the same quarter, 2003.
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 gain of $3,588 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
3
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 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 $127,920 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 as compared
to a loss of $155,391 for the quarter ended March 31, 2003 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 $445,778 for the same period in 2002.
The decrease in revenues of $208,334 is due to the issues stated
above and specifically includes a $69,717 decrease in consulting
revenues, and a $138,617 decrease from rental revenues.
4
Losses
Nexia recorded an operating loss of $98,522 for the three months
ended March 31, 2003, compared to a loss of $333,453 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 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 $302,227 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 $169,281 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 $56,874,
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 $126,544 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 $400,145 for the same period in 2002. The decrease is
due to the net cash received in the acquisition transaction with
Axia during the 2002.
Cash provided by financing activities was $129,177 for the three
months ended March 31, 2003, compared to cash flows provided by
financing activities of $3,023 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.
5
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 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 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
6
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
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
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smaller denominations; and (6) the negotiations for the issuance of
the stock took place directly between the offeree and the Company.
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, 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 19th day of June,
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 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: June 19, 2003 /s/ Richard Surber
----------------------------------------
Richard Surber, Chief Executive and Financial Officer (principal financial and accounting
officer)
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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 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 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 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
June 19, 2003
11