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DIGITILITI INC - 10-K - : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION(Edgar Glimpses Via Acquire Media NewsEdge) This Annual Report on Form 10-K contains 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, that reflect our current estimates, expectations and projections about our future results, performance, prospects and opportunities. Forward-looking statements include, without limitation, statements about our market opportunities, our business and growth strategies, our projected revenue and expense levels, possible future consolidated results of operations, the adequacy of our available cash resources, our financing plans, our competitive position and the effects of competition and the projected growth of the industries in which we operate. This Annual Report on Form 10-K also contains forward-looking statements attributed to third parties relating to their estimates regarding the size of the future market for products and systems such as our products and systems, and the assumptions underlying such estimates. Forward-looking statements are only predictions based on our current expectations and projections, or those of third parties, about future events and involve risks and uncertainties. Although we believe that the expectations reflected in the forward-looking statements contained in this Annual Report on Form 10-K are based upon reasonable assumptions, no assurance can be given that such expectations will be attained or that any deviations will not be material. In light of these risks, uncertainties and assumptions, the forward-looking statements, events and circumstances discussed in this Annual Report on Form 10-K may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Important factors that could cause our actual results, level of performance or achievements to differ materially from those expressed or forecasted in, or implied by, the forward-looking statements we make in this Annual Report on Form 10-K are discussed under "Item 1A. Risk Factors" and elsewhere in this Annual Report on Form 10-K. Executive Summary The Business Our business is developing and delivering superior information management technologies and methodologies enabling our customers to manage, control, protect and access their information and data simply and cost effectively. Our traditional business is providing a cost effective on-line data protection solution to the small to medium business ("SMB") and small to medium enterprise ("SME") markets through our DigiBAK service.". This on-line cloud storage management solution helps organizations properly manage and protect their entire network from one centralized location. Our emerging business product, released in the first quarter of 2010, is called DigiLIBE. We believe that DigiLIBE is a game-changing product that addresses the desperate need for a fiscally responsible, integrated system to manage the increasing growth, volume, and diversity of unstructured data that now represents up to 85% of enterprise information and continues to grow rapidly. Content chaos is overwhelming companies' ability to meet compliance, utilize collaboration tools and optimize storage needs for their virtualized infrastructures. DigiBAK and DigiLIBE are complementary products - DigiBAK providing cloud storage backup and recovery of structured data and operating system files and DigiLIBE offers information management and life-cycle control of unstructured data from end-user through archiving and back to the end user. The DigiBak business -------------------------------------------------------------------------------- Our DigiBAK solution can backup and restore emails and all company data on every machine in a network, including desktops, laptops, file and print servers. We provide storage through a "utility based computing" philosophy, where customers pay for the gigabytes of data they store in DigiBAK Vault facility. Through our DigiBAK service, we combine powerful, agent-less backup software with our SAS 70 compliant facility, to deliver to our customers an efficient and effective online-offsite data backup and restore solution. Our facilities enable us to provide offsite disaster recovery emphasizing intraday protection and restore for all of our customer primary data centers and geographically dispersed offices or campus settings. Our DigiBAK Vault is a top-line SAS 70 complaint facility that provides web based on-demand backup/restore service with all the benefits of direct fiber access to a "Level 5" data center. The Vault has 24/7 onsite physical security, including security guards, motion detectors, security cameras, card-key access, separate cages with individual locking cabinets and ladder racking. It also has battery generator back up power, temperature and humidity controls and fire suppression systems. Geographically, we are located at the center point of the Metropolitan area network. Being centrally located at the focal point of the Twin Cities Fiber Channel and Gig loop, the pipeline for data and load capabilities are immense. We utilize both direct in-house sales and sales through business partner channels such as VAR's (Value Added Remarketers) and third party integrators. Our resellers have extensive data storage knowledge and expertise and an established customer base. Our sales plan targets reseller, Original Equipment Manufacturer and channel partnerships regionally and nationally that possess utility-oriented sales systems. We and our partners target vertical markets specifically in the Small Business Market (SMB) and the Small and Intermediate size Enterprises of 100 - 5000 employees with an average of four sites and five - 20 Terabytes of information to archive. As a result of our sales and marketing efforts of our DigiBAK product, our customer base has expanded from approximately 20 in fiscal 2005 to approximately 100 in fiscal 2006, 508 in 2007, 731 in 2008, 789 in 2009, 890 in 2010 and 910 as of December 31, 2011. While our annual sales increased from $402,638 in 2006 up to $3,192,463 in 2009, in 2010 we began to experience a decline in annual sales posting $2,143,882 in 2010 and $1,480,154 in2011. Despite this strong overall customer trend, we continue to struggle with profitability because of increasing competitive pressure causing commodity-like pricing through cloud-like storage. While we have continued to grow our customer base, we have also had to adjust pricing to maintain competitive advantage. We have significantly improved our support infrastructure and have been able to hold our margins. We still need to raise cash in 2011 to grow our overall business, but we believe we are in a much better financial and expense position than we were a year ago through targeted expense reduction and debt conversion. The product features that we are offering to our clients we believe have superior functionality to the mainstream competition and fill a customer need. We expect this gain new business in 2012. The Emerging New DigiLIBE Product In 2008, we begun to pursue a strategy of expanding our solution to address the need of the industry for managing structured data through DigiBAK, but also provide information management abilities for the unstructured data. This effort led to the development and release of the product called DigiLIBE, a virtual corporate library that is designed to link together multiple desperate hardware and data storage environments to provide organizations with the ability to capture, classify, share, preserve, protect, achieve, and deliver the right information, to the right people, at the right time, helping them make smart informed business decisions. DigiLIBE should be understood as follows - as a company continues to virtualize their hardware and data storage environments, DigiLIBE provides a complementary virtualized environment for the company's primary asset - its information. It does not matter if the information is on a user machine, on a server, or in archive. A customer can control it, secure it, and access it. Growing both Business Segments: We believe the benefits of making a strategic decision to grow both the DigiBAK and DigiLIBE businesses are: (i) solving a major industry and customer problem of managing continually growing information volume and associated cost of storage and retrieval; (ii) being able to access a larger share of opportunity in the information management storage business; (iii) offering significant technological advantages in corporate policy level control of information and ability to leverage knowledge from the information it creates; and (iv) optimizing how we synergistically allocate capital and resources between both business. DigiLIBE has received excellent feedback on the capability, performance, and function it delivers since its initial release. -------------------------------------------------------------------------------- Our sales and prospecting efforts have also reaffirmed the potential of selling DigiBAK services as part of a DigiLIBE sale. To date, Digitiliti has achieved significant market recognition and brand value having successfully established its presence in several vertical markets such as Finance, Legal, Telco, Managed Service Provider, Healthcare, Information Technology Services, and Management Consulting. In June 2010, DigiLIBE won the Tech Awards Circle Gold Award in the Midrange Software category. In briefings, leading industry analysts have described DigiLIBE as a unique and potentially disruptive product integrating both the storage management and information management markets. We believe DigiLIBE is a fiscally responsible solution at a price, performance, and ease of use level that disrupts the current competitors' point solution landscape and positions while exceeding customers' expectations and needs. Our new product represents a significant step toward our goal of becoming a technology leader in the information content and context management marketplace. Intellectual Property Protection We have taken action to protect our key DigiLIBE technologies. Currently pending are four key claims filed for patent protection in our initial patent application filed in January, 2009. Going forward, we will strive to enhance our innovative products and we will continue to protect Digitiliti's Intellectual Property. The Market and Resellers Our channel strategy for DigiBAK and DigiLIBE is to target regional and national resellers who have technical support and infrastructure to deploy the products into the small and intermediate size enterprises of 50 to 5000 employees or workstations. Our strategy is to target and develop these channels with a vertical market focus on regulation and compliance, collaboration, and virtualization. For resellers, we believe their incentive is that they can grow their business by selling the products, they get a monthly annuity from the cost of data archiving as they improve cost and efficiency of their client's environment, and they can provide value-added consulting and software services through DigiLIBE's Application Program Interfaces, (AP's) and compliance engine. Company Funding In order to fund continuing operations and the growth of the new product DigiLIBE, we have aggressively reduced overall operating costs to increase profitability of our DigiBAK operations. We have continued to reduce the annual salaries and wages associated with our DigiBAK operations by over 20% in the past two years, while increasing operational efficiencies and lowering overall costs of goods sold. As previously stated, we implemented additional restructuring of our DigiBAK operations to increase profitability, improve cash flow and reduce cash burn rate. Through these actions, we have continued to reduce our cash burn rate per month associated with DigiBAK business. At present, we continue to raise additional capital to provide the financial resources needed to achieve our strategy, while we are balancing our desire to aggressively launch our new product with the reality of available capital. Throughout 2011, our continuing operations have been funded, in large part, through the following: 1. On February 28, 2011, the Company completed the placement of $1,182,844 of Secured Convertible Promissory Note (the "Notes") and Warrants (collectively, the "First Secured Convertible Debt Offering"). The Lenders in the First Secured Convertible Debt Offering paid a 10% discount for their investment, resulting in a "stepped-up" basis in their individual Notes for a total principal amount of $1,301,128. The Notes bear interest at the rate of 12% per annum, have an 18-month maturity date and are convertible to common shares at $0.20 per share. The Notes are secured by a first lien on all assets of the Company. In conjunction with the First Secured Convertible Debt Offering, the Lenders received warrants to purchase an aggregate of 3,252,821 common shares. The warrants vested immediately, have a five year term, a $0.30 exercise price and are redeemable by the Company in the event of an acquisition. 2. On June 28, 2011, the Company initiated the placement of a $1,500,000 Junior Secured Convertible Debt Offering that provides for the sale of up to an aggregate principal amount of $1,500,000 Junior Secured Convertible Promissory Notes (the "Junior Notes") and Warrants. The Junior Notes bear interest at 8% per annum, have a 24-month maturity date and are secured by the assets of the Company with the repayment being subordinated to the repayment of all secured notes previously issued by the Company. In addition, the investors in this Junior Secured Convertible Debt Offering receive five-year warrants to purchase that number of common shares equal -------------------------------------------------------------------------------- to 10% of the principal amount of their Junior Note(s) divided by the exercise price of $.06 per share. On June 28, 2011, we closed on the first $500,000 tranche of the Junior Secured Convertible Debt Offering. In conjunction with the closing of the first tranche of the Junior Secured Convertible Debt Offering, the investors received warrants to purchase an aggregate of 833,333 common shares. The warrants vested immediately, have a five year term and an exercise price of $0.06 per share. On September 15, 2011, we broke escrow on the remaining $1,000,000 available under the second tranche of the $1,500,000 Junior Secured Convertible Debt Offering by closing on $550,000 of proceeds from the sale of the Junior Notes. In conjunction with the sale of $550,000 of these Junior Notes, the investors received an aggregate of 916,667 common stock warrants. The warrants vested immediately, have a five year term and an exercise price of $0.06 per share. On December 5, 2011, we broke escrow on the third tranche of the $1,500,000 Junior Secured Convertible Debt Offering by closing on $30,000 of proceeds from the sale of Junior Notes. In conjunction with the sale of $30,000 of these Junior Notes, the investors received an aggregate of 50,000 common stock warrants. The warrants vested immediately, have a five year term and an exercise price of $0.06 per share. And on December 31, 2011, we closed the fourth tranche of the $1,500,000 Junior Secured Convertible Debt Offering by converting $379,534 of existing convertible debt into the Junior Secured Convertible Debt Offering. In conjunction with the conversion of this $379,534 of existing convertible debt through the issuance of the Junior Notes, the investors received an aggregate of 682,556 common stock warrants. The warrants vested immediately, have a five year term and an exercise price of $0.06 per share. Liquidity and Capital Resources Our liquidity is dependent, in the short term, on proceeds from newly issued debt and the sale of our common stock and preferred stock for cash. In the long term, we may need to continue expanding our capacity of the Data Storage Center by investing in property and equipment and software licenses. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and a working capital deficit. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. We have financed our operations, debt service and capital requirements through cash flows generated from operations, the issuance of secured and unsecured convertible debt financing, capital leases and issuance of equity securities. We had a working capital deficit of $2,324,242 at December 31, 2011. We had cash of $499 as of December 31, 2011, compared to having cash of $27,557 at December 31, 2010. We used $1,657,773 of net cash in operating activities for the year ended December 31, 2011, compared to net cash flows used in operating activities of $1,916,844 for the year ended December 31, 2010. Cash used in operating activities during the year ended December 31, 2011, funded a net loss of $3,988,543. This net loss was offset by non-cash charges of $385,154 for amortization and depreciation, $755,409 associated with stock options expense, $414,402 related to amortization of the discount on our convertible debt and deferred financing costs, $67,614 loss on settlement of debt, $54,840 bad debts expense, $111,050 for common stock issued for services and $58,548 warrants expense. Cash used in operating activities during the year ended December 31, 2010, funded a net loss of $6,414,639. This net loss was offset by non-cash charges of $632,670 for amortization and depreciation, $310,967 associated with stock options expense, $372,836 related to amortization of the discount on our convertible debt and deferred financing costs, $306,428 loss on settlement of debt, $40,893 bad debt expense, $238,340 for common stock issued for services, $1,522,950 additional beneficial conversion feature on converted notes, and $456,329 of warrants expense. Net cash flows used by investing activities was $5,863 for the year ended December 31, 2011, compared to net cash flows used in investing activities of $69,509 for the year ended December 31, 2010. Both comparable totals are attributed to our purchase of property and equipment and software licenses during these two periods. Net cash flow provided by financing activities were $1,636,578 for the year ended December 31, 2011, compared to net cash provided by financing activities of $1,872,824 for the year ended December 31, 2010. During 2011, cash provided by financing activities is primarily due to net proceeds of $1,891,494 received from the issuance of convertible debt, proceeds from debt and related party debt of $166,000 and proceeds from the sale of common stock of $63,000 that supported payments of $23,308 on capital lease obligations, $235,607 payments on notes payable and $225,001 payments on convertible note. During 2010, cash provided by financing activities is primarily due to proceeds of $1,619,050 received -------------------------------------------------------------------------------- from the issuance of equity securities, $509,900 received from the exercise of warrants and proceeds of $250,000 from convertible notes payable that supported payments of $46,554 on capital lease obligations, $364,572 payments on notes payable and $95,000 payments on convertible notes. Results of Operations Year Ended December 31, 2011 as compared to the Year Ended December 31, 2010 Our sales for 2011 decreased to $1,480,154 compared to $2,143,882 in 2010, reflecting a $663,728 decrease in annual revenue, despite an increase in the number of our customers to 910 at December 31, 2011 from 890 at December 31, 2010. During 2011, we experienced considerable competitive and economic pressure on our pricing due to an ever-expanding range of viable alternative storage platforms and services offered throughout the industry and the weak economy. Concurrent with the pricing pressure, we took action to restructure our resources, strengthened our VAR relationships, repositioned our offering and refined other aspects of the DigiBAK business to increase our margins. Customers remain highly satisfied with the service and simplicity of our DigiBAK offering, attributes of which are competitive differentiators and sought after by new customers. Gross profit for 2011 was $165,930 compared to $640,119 in 2010, reflecting a 74% decrease from 30% in 2010 down to 11% in 2011. Our overall gross margin has remained stable due to actions taken in 2011 to restructure the resources associated with our DigiBAK business and the inherent benefits of our business model that relies on the organic growth of our customer's data, yet does not require a proportionate expenditure in capital costs. We manage our Data Storage Center to plan for growth and capacity and can efficiently manage and support this data growth without requiring significant capital cost in the short term. We do, however, plan to refresh our hardware technology on a three to four year cycle, which will be coming up in 2012. Research and development expenses during 2011 were $447,476 compared to $992,210 in 2010. In 2009, we reorganized out development effort by redefining the DigiLIBE architecture and release plan, we brought the software development in-house with a combination of internal and targeted skilled contractors and streamlined the development process, which produced a much more efficient and effective approach. We continued this effort during 2010 and 2011 producing greater focus and oversight over design architecture and cost control which resulted in the successful development and first quarter 2010 roll-out of our DigiLIBE product. During 2011, we incurred sales and marketing expense of $527,399, compared to $849,337 incurred during 2010. Our 2011 sales and marketing plan reflected a redesign of our website coupled with our transition to a new public relations firm, which helped get our message viral, generate qualified leads and be able to increase Digitiliti's reach across the internet to potential customers more effectively. General and administrative expenses decreased by $262,080 to $2,419,445 in 2011 compared to $2,681,525 incurred during 2010. The decrease is primarily attributable to a reduction in our overall personnel and those attendant costs including associated insurance cost and other resources. This reduction in general and administrative expenses reflects the company's disciplined cost containment system that has historically reduced the general overhead expenses through personnel realignment to priorities and goals, vendor contract negotiations, stock based compensation alternatives, insurance costs and a daily/weekly focus between the CEO and CFO on expenditures. Interest expense for 2011 decreased by $1,532,719 to $692,539, compared to $2,225,258 incurred in 2010. During 2010, the company initiated a program to convert its outstanding convertible debt into shares of the company's common stock. During 2010, the company converted a large portion of its convertible note debt portfolio which resulted in the recognition of associated beneficial conversion feature and unamortized warrant cost that was reflected as interest expense during 2010. Recent and other Significant Events affecting our results of Operations and Financial Condition On February 28, 2011, the Company completed the placement of $1,182,844 First Secured Convertible Promissory Note and Warrants (the "First Secured Convertible Debt Offering"). All of the securities issued in conjunction with the First Secured Convertible Debt Offering were made to "accredited investors" as those terms are defined on Rule 501 of Regulation D of the Securities and Exchange Commission, The Lenders in the First Secured Convertible Debt Offering paid a 10% discount for their investment, resulting in a "stepped-up" basis in their individual Secured Convertible Promissory Notes. The First Secured Convertible Promissory Notes bear interest at the rate of 12% per annum, have an 18-month maturity date and a $.20 per share conversion rate in the Company's common stock. The First Secured Convertible Promissory Notes are secured by a first lien on all assets of the Company; provided, however, that the Lenders -------------------------------------------------------------------------------- agreed to subordinate to a lien with respect to up to $100,000 of original principal amount of other notes against the Company's vault. The Lenders received Warrants to purchase an aggregate of 3,252,821 shares of Company Common Stock. The Warrants have a five year term, $.30 exercise price and include a cashless exercise provision and a put right in the event of an acquisition of the Company valued at the Black Scholes Value of the unexercised portion of the Warrant obtained from the "OV" function on Bloomberg determined as of the day prior to announcement of the transaction. The Warrants include antidilution provisions for stock splits, stock dividends and recapitalization only. The First Secured Convertible Debt Offering was conducted in order to implement a previously approved repayment of debt obligations owed to two stockholders (the "Miners") (see Footnote 6, Note Payable and Footnote 7, under "Other Convertible Notes"), as well as provide additional working capital for the Company. The debt obligations owed to the Miners by the Company ( the "Miner Debt") were secured by a first lien on the Company's assets and consisted of the following: a $250,000 12% secured convertible note issued in November 2008 with a $0.35 per share conversion rate; a $50,000 payable that was due on demand and bore interest at 10% per annum; and a $231,540 6% promissory note that was due on demand. Contemporaneously with the closing of the Secured Convertible Debt Offering, the Company and the Miners executed a Repayment of Note Obligations and Release of Security Interest Agreement that provided for the repayment of $431,540 of principal of the Miner Debt with the remaining principal balance owed of $100,000 being converted into a secured promissory note under the Secured Convertible Debt Offering. Correspondingly, all outstanding accrued interest owed on the Miner Debt of $103,109 was paid to the Miners in the form of 687,393 shares of the Company's common stock, along with a modification in terms on 350,000 common stock purchase warrants previously issued to the Miners and the issuance of an additional 200,000 warrants reflecting a five year term and a $.30 per share exercise price. After completion of all documentation reflecting the repayment of the Miner Debt, the Miners released their first lien in the Company's assets in preference to those Lenders associated with the Secured Convertible Debt Offering. In June, 2011, the Company initiated the placement of $1,500,000 Junior Secured Convertible Promissory Note and Warrants (the "Junior Secured Convertible Debt Offering").The investors in the Junior Secured Convertible Debt Offering received five-year warrants to purchase that number of common shares equal to 10% of the principal amount of their Junior Note(s) divided by the exercise price of $.06 per share. The Junior Notes bear interest at 8% per annum, have a 24-month maturity date and are secured by the assets of the Company with the repayment being subordinated to the repayment of all secured notes previously issued by the Company. The Junior Notes also contain a contingent conversion option wherein, at the option of 60% of the investors and twelve months following the closing of the first tranche, all or a portion of the principal amount and accrued interest may be converted into common shares at an exercise price of $.06 per share but only if the Junior Secured Convertible Debt Offering has been raised. However, the Junior Notes automatically convert into common shares upon a subsequent equity funding round of at least $3 million of new equity capital ("Qualified Round") at a per share price equal to the per share price of the qualified round. All of the securities issued in conjunction with the Junior Secured Convertible Debt Offering were sold to "accredited investors" as those terms are defined on Rule 501 of Regulation D of the Securities and Exchange Commission, and each such person had prior access to all material information about the Company. The offer and a sale of these securities were exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), pursuant to, among other reasons, Section 4(2) and 4(6) thereof, and Rule 506 of Regulation D of the Securities and Exchange Commission. Registration of sales to "accredited investors" are preempted from state regulation. On June 28, 2011, we closed on the first $500,000 tranche of the Junior Secured Convertible Debt Offering. In conjunction with the closing of the first tranche of the Junior Secured Convertible Debt Offering, the investors received warrants to purchase an aggregate of 833,333 common shares. The warrants vested immediately, have a five year term and an exercise price of $0.06 per share. On September 15, 2011, we broke escrow on the remaining $1,000,000 available under the second tranche of the $1,500,000 Junior Secured Convertible Debt Offering by closing on $550,000 of proceeds from the sale of the Junior Notes. In conjunction with the sale of $550,000 of these Junior Notes, the investors received an aggregate of 916,667 common stock warrants. The warrants vested immediately, have a five year term and an exercise price of $0.06 per share. -------------------------------------------------------------------------------- On December 5, 2011, the Company closed on the sale of $30,000 of proceeds from the sale of the Junior Notes. In conjunction with the sale of $30,000 of these Junior Notes, the investors received an aggregate of 50,000 common stock warrants. The warrants vested immediately, have a five year term and an exercise price of $0.06 per share. On December 31, 2011, we closed the fourth tranche of the $1,500,000 Junior Secured Convertible Debt Offering by converting $379,534 of existing convertible debt into the Junior Secured Convertible Debt Offering. In conjunction with the conversion of this $379,534 of existing convertible debt through the issuance of the Junior Notes, the investors received an aggregate of 632,556 common stock warrants. The warrants vested immediately, have a five year term and an exercise price of $0.06 per share. Critical Accounting Policies and Estimates Software Revenue Recognition The Company derives its revenue from sales of its products and services. Product revenue is derived from sales of the Company's DigiBak service and new DigiLibe service. The DigiBak service provides an offsite storage solution through a "utility based computing philosophy" where customers pay for the gigabytes of data they store in the DigiBak vault. The DigiLibe service is a multiple element software sales arrangement that is comprised of three key components that act as one: Client Agent, Information Director, and Archive Information Store. For multiple element software license sales arrangements that do not require significant modification or customization of the underlying software, we recognize revenue when: (1) we enter into a legally binding software arrangement with a customer for the license of software, (2) we deliver the software, (3) price is deemed fixed or determinable and free of contingencies of significant uncertainties and (4) collection is probable. For sales arrangements with multiple elements, we defer revenue for any undelivered elements, and recognize revenue when the product is delivered or over the periods in which the service is performed. If we cannot objectively determine the fair value of any undelivered element included in bundled arrangements, we defer revenue until all elements are delivered and services have been performed, or until fair value can objectively be determined for any remaining undelivered elements. Share-Based Payment The Company accounts for share-based awards issued to employees and non-employees in accordance with the guidance on share-based payments. Accordingly, employee share-based payment compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period (generally the vesting is over a 3-year period). Additionally, share-based awards to non-employees are expensed over the period in which the related services are rendered at their fair value. New Accounting Pronouncements We do not expect the adoption of any recently issued accounting pronouncement's to have, a material impact on the Company's consolidated financial statements. Off-Balance Sheet Arrangements We had no off-balance sheet arrangements during 2011 and 2010. |