##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 (Mark One)
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2006
 OR
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 000-25499
 SIENA TECHNOLOGIES, INC.
  Nevada
    
    88-0390360State or other jurisdiction of
    
    (IRS EmployerIncorporation or organization
    
    Identification Number)5625 South Arville Street, Suite E, Las Vegas Nevada
    
    89118(Address of principal executive offices)
    
    (Zip Code)
 (Issuers telephone number, including area code)
 þ o
 o þ
  o þ




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##### 



PagePart I  Financial Information
    
    
    3Item 1  Financial Statements
    
    
    3Consolidated Balance Sheets as of September 30, 2006 (Unaudited) and December 31, 2005
    
    
    3Unaudited Consolidated Statements of Operations for the Three and Nine Months Ended
September 30, 2006 and September 30, 2005
    
    
    4Unaudited Consolidated Statements of Cash Flows for the Nine Months Ended September
30, 2006 and September 30, 2005
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2  Managements Discussion and Analysis or Plan of Operation
    
    
    22Item 3  Controls and Procedures
    
    
    31Part II  Other Information
    
    
    32Item 1  Legal Proceedings
    
    
    32Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 3  Defaults Upon Senior Securities
    
    
    32Item 4  Submission of Matters to a Vote of Security Holders
    
    
    32Item 5  Other Information
    
    
    32Item 6 Exhibits
    
    
    32Letter AgreementCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of Officers Pursuant to Section 906
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS.
 
 
  September 30,
    
    
    December 31,2006
    
    
    2005(Unaudited)ASSETS:CURRENT ASSETS:Cash
    
    $
    133,664
    
    
    $
    415,937Accounts
Receivable, Net of Allowance for Doubtful Accounts of $63,814 ($62,631 at 2005)
    
    
    1,546,073
    
    
    
    911,137Inventories
    
    
    1,080,402
    
    
    
    2,928,366Costs in Excess of Billings
    
    
    487,697
    
    
    
    232,778Prepaid
Expenses and Other Current Assets
    
    
    352,467
    
    
    
    133,810Total Current Assets
    
    
    3,600,303
    
    
    
    4,622,028Fixed
Assets, Net of Accumulated Depreciation of $538,968 ($446,661 at 2005)
    
    
    289,690
    
    
    
    328,599OTHER ASSETS:Goodwill
    
    
    7,344,216
    
    
    
    7,344,216Patents
    
    
    2,500
    
    
    
    2,500Assets Held
for Sale
    
    
    957,715
    
    
    
    195,393Total Other Assets
    
    
    8,304,431
    
    
    
    7,542,109TOTAL ASSETS
    
    $
    12,194,424
    
    
    $
    12,492,736LIABILITIES & STOCKHOLDERS EQUITY (DEFICIT):CURRENT LIABILITIESBank Loans Payable
    
    $
    599,557
    
    
    $
    432,562Accounts Payable
    
    
    2,424,630
    
    
    
    2,232,295Billings in Excess of Costs
    
    
    753,527
    
    
    
    1,443,588Current Portion of Notes Payable
    
    
    240,254
    
    
    
    336,115Current Portion of Related Party Notes Payable
    
    
    308,576
    
    
    
    261,802Current Portion of Convertible Debenture
    
    
    
    
    
    
    316,333Current Portion of Related Party Convertible Debentures
    
    
    
    
    
    
    474,500Total
Current Liabilities
    
    
    4,326,544
    
    
    
    5,497,195LONG-TERM DEBTNotes Payable
    
    
    7,323,675
    
    
    
    1,262,979Related Party Notes Payable
    
    
    375,551
    
    
    
    95,497Related
Party Convertible Debentures, Net of Debt Discount
    
    
    
    
    
    
    3,291,265Total
Long-Term Debt
    
    
    7,699,226
    
    
    
    4,649,741NET LIABILITIES OF DISCONTINUED OPERATIONS
    
    
    734,093
    
    
    
    781,177STOCKHOLDERS EQUITY (DEFICIT):Common Stock, $.001 par value; 100,000,000 shares authorized 29,180,914 and 49,534,721 shares
issued and outstanding in 2006 and 2005, respectively
    
    
    29,181
    
    
    
    49,535Additional Paid-in Capital
    
    
    26,992,950
    
    
    
    26,586,266Shares to be Returned
    
    
    
    
    
    
    (18,568
    )Shares to be Issued
    
    
    116,543
    
    
    
    116,358Warrants
    
    
    28,796
    
    
    
    Accumulated Deficit
    
    
    (27,732,909
    )
    
    
    (25,168,968
    )Total
Stockholders Equity (Deficit)
    
    
    (565,439
    )
    
    
    1,564,623TOTAL LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
    
    $
    12,194,424
    
    
    $
    12,492,736
 3




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##### Table of Contents



Nine Months Ended
    
    
    Three Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005REVENUESales
    
    $
    15,817,664
    
    
    $
    221,959
    
    
    $
    4,174,364
    
    
    $
    221,959Cost of Goods Sold
    
    
    12,684,666
    
    
    
    169,725
    
    
    
    3,165,793
    
    
    
    169,725GROSS PROFIT
    
    
    3,132,998
    
    
    
    52,234
    
    
    
    1,008,571
    
    
    
    52,234OPERATING EXPENSESInvestor Relations
    
    
    137,925
    
    
    
    241,685
    
    
    
    72,142
    
    
    
    Non Cash Officer Compensation
    
    
    
    
    
    
    6,575,426
    
    
    
    
    
    
    
    Salaries
    
    
    1,770,666
    
    
    
    28,390
    
    
    
    612,978
    
    
    
    28,390Other Operating Expenses
    
    
    1,632,121
    
    
    
    273,422
    
    
    
    593,874
    
    
    
    137,244Total Operating Expenses
    
    
    3,540,712
    
    
    
    7,118,923
    
    
    
    1,278,994
    
    
    
    165,634LOSS FROM CONTINUING OPERATIONS
    
    
    (407,714
    )
    
    
    (7,066,689
    )
    
    
    (270,423
    )
    
    
    (113,400
    )OTHER INCOME (EXPENSE)Interest Expense
    
    
    (1,695,305
    )
    
    
    (930,918
    )
    
    
    (155,770
    )
    
    
    (431,467
    )Gain on Debt Restructuring
    
    
    903,771
    
    
    
    
    
    
    
    
    
    
    
    Loss on Disposition of Assets
    
    
    (194,452
    )
    
    
    
    
    
    
    (201,407
    )
    
    
    Total Other (Expense)
    
    
    (985,986
    )
    
    
    (930,918
    )
    
    
    (357,177
    )
    
    
    (431,467
    )LOSS FROM DISCONTINUED OPERATIONS
    
    
    (1,170,241
    )
    
    
    (2,130,760
    )
    
    
    
    
    
    
    (1,380,298
    )Net Loss
    
    $
    (2,563,941
    )
    
    $
    (10,128,367
    )
    
    $
    (627,600
    )
    
    $
    (1,925,165
    )Basic and Diluted Loss Per Common Share
    
    $
    (0.07
    )
    
    $
    (0.49
    )
    
    $
    (0.02
    )
    
    $
    (0.11
    )Weighted Average Shares Outstanding
    
    
    35,837,851
    
    
    
    20,606,252
    
    
    
    29,180,914
    
    
    
    17,764,338
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##### Table of Contents



Nine-Months EndedSeptember 30,2006
    
    
    2005CASH FLOWS USED IN OPERATING ACTIVITIES:Net loss
    
    $
    (2,563,941
    )
    
    $
    (10,128,367
    )Adjustments to reconcile net loss to net cash used in operating activitiesStock issued for settlement
    
    
    139,800
    
    
    
    Stock issued for officer compensation
    
    
    
    
    
    
    6,476,085Amortization of stock-based officer compensation
    
    
    
    
    
    
    99,341Beneficial conversion feature expense
    
    
    777,090
    
    
    
    556,250Stock rescinded
    
    
    
    
    
    
    (530,590
    )Stock warrants issued for debt inducement
    
    
    302,493
    
    
    
    Amortization of debt discount
    
    
    267,610
    
    
    
    172,750Amortization of stock-based compensation for services
    
    
    100,125
    
    
    
    230,587Conversion of debt
    
    
    
    
    
    
    65,000Accretion of notes payable balances
    
    
    65,979
    
    
    
    Depreciation
    
    
    102,070
    
    
    
    660Gain on disposal of assets
    
    
    (6,955
    )
    
    
    Loss on writeoff of inventory
    
    
    201,407
    
    
    
    Gain on debt restructuring
    
    
    (903,771
    )
    
    
    Changes in operating assets and liabilities(Increase) decrease in accounts receivable
    
    
    (634,936
    )
    
    
    52,434Decrease
(increase) in inventories
    
    
    1,646,557
    
    
    
    (150,250
    )(Increase) decrease in costs in excess of billings
    
    
    (254,919
    )
    
    
    79,470(Increase) decrease in prepaid expenses and other assets
    
    
    (108,657
    )
    
    
    530,206Increase in accounts payable
    
    
    120,609
    
    
    
    193,404Decrease in billings in excess of costs
    
    
    (690,061
    )
    
    
    (207,029
    )(Decrease)
increase in net liabilities of discontinued operations
    
    
    (47,084
    )
    
    
    126,021NET CASH USED IN OPERATING ACTIVITIES
    
    
    (1,486,584
    )
    
    
    (2,434,028
    )CASH FLOWS USED IN INVESTING ACTIVITIES:Investments in assets held for sale
    
    
    (762,322
    )
    
    
    Cash paid to acquire COM
    
    
    
    
    
    
    (50,000
    )Purchase of property and equipment
    
    
    (30,885
    )
    
    
    (9,523
    )NET CASH USED IN INVESTING ACTIVITIES
    
    
    (793,207
    )
    
    
    (59,523
    )CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:Payments made on notes payable  related party
    
    
    (149,422
    )
    
    
    Proceeds from notes payable
    
    
    
    
    
    
    45,389Proceeds from convertible debt financing
    
    
    2,803,712
    
    
    
    1,900,000Proceeds from factor
    
    
    4,560,000
    
    
    
    128,750Payments to factor
    
    
    (4,560,000
    )
    
    
    (213,707
    )Payments on notes payable
    
    
    (656,772
    )
    
    
    (35,000
    )Issuances of stock for cash
    
    
    
    
    
    
    943,451NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    1,997,518
    
    
    
    2,768,883NET (DECREASE) INCREASE IN CASH & CASH EQUIVALENTS
    
    
    (282,273
    )
    
    
    275,332BEGINNING CASH & CASH EQUIVALENTS
    
    
    415,937
    
    
    
    CASH ACQUIRED
    
    
    
    
    
    
    930,828ENDING CASH & CASH EQUIVALENTS
    
    $
    133,664
    
    
    $
    1,206,160SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONCash paid for interest
    
    $
    430,255
    
    
    $
    452,157Cash paid for Income Taxes
    
    $
    
    
    
    $
    SUPPLEMENTAL DISCLOSURES OF NON-CASH TRANSACTIONSAssets acquired in exchange for capital lease obligation
    
    $
    25,321
    
    
    $
    Shares of common stock to be issued for prepaid services
    
    $
    110,000
    
    
    $
    Conversion of debentures
    
    $
    153,783
    
    
    $
    Stock issued for acquisition
    
    $
    
    
    
    $
    200,000
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##### Table of Contents



SIENA TECHNOLOGIES, INC.
(Formerly Network Installation Corp.)
 
   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  OVERVIEW
     ACQUISITION OF KELLEY COMMUNICATION COMPANY, INC. (d/b/a Kelley Technologies)
   6




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##### Table of Contents



Cash
    
    $
    177,495Accounts receivable
    
    
    1,234,668Inventory
    
    
    965,927Costs in excess of billings
    
    
    488,370Other assets
    
    
    5,599Fixed assets
    
    
    713,220Accumulated depreciation
    
    
    (407,534
    )Goodwill
    
    
    11,144,216Accounts payable
    
    
    (879,995
    )Notes payable
    
    
    (2,297,227
    )Billings in excess of earnings
    
    
    (912,638
    )Total
    
    $
    10,232,101
  Nine Months Ended
    
    Three Months EndedSeptember 30, 2005
    
    September 30, 2005Net Revenues
    
    $
    3,257,574
    
    
    $
    221,959Net loss
    
    $
    (7,810,903
    )
    
    $
    (4,232
    )
 ACQUISITION OF COM SERVICES, INC.
  Accounts receivable
    
    $
    142,073Fixed assets
    
    
    56,032Goodwill
    
    
    331,895Bank line of credit
    
    
    (100,000
    )Total assets and liabilities
    
    $
    430,000
  ACQUISITION OF DEL MAR SYSTEMS INTERNATIONAL, INC.
   PRINCIPLES OF CONSOLIDATION
  7




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##### Table of Contents



CASH & CASH EQUIVALENTS
  PROPERTY & EQUIPMENT
  ACCOUNTS RECEIVABLE
  INVENTORY
  FAIR VALUE OF FINANCIAL INSTRUMENTS
  GOODWILL
  ACCOUNTING FOR IMPAIRMENTS IN LONG-LIVED ASSETS
  USE OF ESTIMATES
  8




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##### Table of Contents



REVENUE RECOGNITION
   STOCK-BASED COMPENSATION
        9




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##### Table of Contents



BASIC AND DILUTED NET LOSS PER SHARE
     401(k) AND PROFIT SHARING PLANS
    DEFINED BENEFIT PLAN
  10




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##### Table of Contents



At December31, 2005Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    379,331Interest cost
    
    
    20,863Benefit obligation at end of year
    
    $
    400,194Change in plan assets:Fair value of plan assets at beginning of year
    
    $
    371,951Actual return on plan assets
    
    
    30,708Fair value of plan assets at end of year
    
    $
    402,659
 For the yearendedDecember 31,2005Funded status
    
    $
    (2,465
    )Unrecognized actuarial gain
    
    
    1,131Net amount recognized
    
    $
    (1,334
    )Amounts recognized in the statement of financial position
consist of:Prepaid benefit cost
    
    $
    (1,334
    )Net amount recognized
    
    $
    (1,334
    )Weighted-average assumptions as of December 31:Discount rate
    
    
    5.50
    %Expected return on plan assets
    
    
    6.00
    %Rate of compensation increase
    
    
    3.00
    %
  For the yearendedDecember 31,2005Service cost
    
    $
    0Interest cost
    
    
    20,863Expected return on plan assets
    
    
    (22,197
    )Net periodic benefit cost
    
    $
    (1,334
    )
      11




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##### Table of Contents



September 30, 2006
    
    
    December 31, 2005Consulting services
    
    $
    11,812
    
    
    $
    124,360Investor relations services
    
    
    30,417
    
    
    
    9,450Employee advances
    
    
    14,311
    
    
    
    Deferred financing fees
    
    
    295,927
    
    
    
    $
    352,467
    
    
    $
    133,810
      September 30, 2006
    
    
    December 31, 2005Accounts payable
    
    $
    2,394,430
    
    
    $
    2,062,295Litigation accrual
    
    
    30,200
    
    
    
    170,000$
    2,424,630
    
    
    $
    2,232,295
 12




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##### Table of Contents



Notes Payable  Related to the Acquisition of Kelley
      13




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##### Table of Contents




    
    if prior to the Companys full payment and satisfaction of the Amended and Restated
Promissory Notes, the Company borrows money or raises capital from the sale of the Companys
common stock in excess of $3,500,000 (after the payment of all financing fees and expenses),
the Company is obligated to pay to both holders 20% of such excess up to the unpaid balance
on the new promissory note within 10 days after receipt of such funds and if such funds are
raised prior to when the Company is obligated to begin making payments, such obligation will
be accelerated and will begin one month following such financing; and
    
    if at any time during which the Amended and Restated Promissory Notes remain unpaid, the
Companys earnings on a consolidated basis during any calendar year exceeds $1,000,000
(before interest, taxes, depreciation and amortization, but after deducting all principal
and interest payments on outstanding debts, other than certain mandatory prepayments as
discussed herein), the Company is obligated to pay to both holders 13% of the excess
earnings, up to the unpaid balance of the new promissory note as a prepayment, within 10
business days of the filing of the Companys Annual Report on Form 10-KSB.
    Notes Payable Related to the Acquisition of COM
      Notes Payable Related to the Acquisition of DMSI
  14




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##### Table of Contents



Other Notes Payable and Convertible Debentures
     RELATED PARTY NOTES PAYABLE and DEBT RESTRUCTURING
    15




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##### Table of Contents



2007
    
    $
    495,0002008
    
    
    975,0002009
    
    
    1,350,0002010
    
    
    1,725,0002011
    
    
    3,035,642Total
    
    $
    7,580,642
  
    
    the Company to obtain written consent from Dutchess, not to be unreasonably withheld, in
order to grant a lien or security interest in any of the assets of the Company and to borrow
money or sell common stock of the Company, which borrowing or sale either alone or
aggregated during any six month period exceeds $250,000;
    
    if prior to the Companys full payment and satisfaction of the new promissory note, the
Company borrows money or raises capital from the sale of the Companys common stock in
excess of $3,500,000 (after the payment of all financing fees and expenses), the Company is
obligated to pay to Dutchess 50% of such excess up to the unpaid balance on the new
promissory note within 10 days after receipt of such funds;
    
    if at any time during which the new promissory note remains unpaid, the Companys
earnings on a consolidated basis during any calendar year exceeds $1,000,000 (before
interest, taxes, depreciation and amortization, but after deducting all principal and
interest payments on outstanding debts, other than certain mandatory prepayments as
discussed herein), the Company is obligated to pay Dutchess 33% of the excess earnings, up
to the unpaid balance of the new promissory note as a prepayment, within 10 business days of
the filing of the Companys Annual Report on Form 10-KSB; and
    
    the Company to obtain written consent of Dutchess, not to be unreasonably withheld, to
sell any assets of the Company (other than sales of inventory or other assets sold in the
normal course of business) and in the event of an asset sale, the Company shall pay to
Dutchess 33% of the proceeds of the asset sale, up to the unpaid principal balance as a
prepayment on the new promissory note, within 10 business days after receipt of funds by the
Company.
    16




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Date
    
    
    Amount
    
    
    Financing Fees5/15/2006

    
    $
    650,000
    
    
    $
    5,0004/13/2006

    
    
    500,000
    
    
    
    5,0004/12/2006

    
    
    200,000
    
    
    
    5,0003/27/2006

    
    
    450,000
    
    
    
    5,0003/20/2006

    
    
    650,000
    
    
    
    5,0003/9/2006

    
    
    360,000
    
    
    
    5,0002/21/2006

    
    
    100,000
    
    
    
    5,0002/16/2006

    
    
    850,000
    
    
    
    5,0001/30/2006

    
    
    150,000
    
    
    
    5,0001/27/2006

    
    
    650,000
    
    
    
    5,000Totals

    
    
    4,560,000
    
    
    $
    50,000Repayments

    
    
    4,560,000Balance at September 30, 2006

    
    $
    0
   September 30,
    
    
    December 31,2006
    
    
    2005Assets of discontinued operationsCash
    
    $
    1,960
    
    
    $
    22,530Accounts receivable, net
    
    
    79,408
    
    
    
    588,567Inventory
    
    
    6,500
    
    
    
    91,747Fixed assets, net
    
    
    
    
    
    
    55,129Security deposit
    
    
    
    
    
    
    20,690Total assets
    
    $
    87,868
    
    
    $
    778,663Liabilities of discontinued operationsAccounts payable and accrued expenses
    
    $
    548,680
    
    
    $
    1,188,627Payroll taxes payable
    
    
    273,281
    
    
    
    371,213Total liabilities
    
    $
    821,961
    
    
    $
    1,559,840Net liabilities of discontinued operations
    
    $
    734,093
    
    
    $
    781,177
  Nine Months ended
    
    
    Three Months endedSeptember 30
    
    
    September 302006
    
    
    2005
    
    
    2006
    
    
    2005Sales
    
    $
    101,913
    
    
    $
    2,742,611
    
    
    $
    
    
    
    $
    853,512Cost of goods sold
    
    
    175,626
    
    
    
    2,071,353
    
    
    
    
    
    
    
    744,655Gross profit
    
    
    (73,713
    )
    
    
    671,258
    
    
    
    
    
    
    
    108,857Less expensesSalaries
    
    
    97,413
    
    
    
    813,493
    
    
    
    
    
    
    
    338,234Insurance
    
    
    24,931
    
    
    
    269,939
    
    
    
    
    
    
    
    46,987Travel
    
    
    22,206
    
    
    
    52,057
    
    
    
    
    
    
    
    37,639Contingency accrual
    
    
    150,000
    
    
    
    
    
    
    
    
    
    
    
    Interest expense
    
    
    39,009
    
    
    
    3,073
    
    
    
    
    
    
    
    Other
    
    
    762,969
    
    
    
    1,663,456
    
    
    
    
    
    
    
    1,066,295Loss from discontinued operations
    
    $
    (1,170,241
    )
    
    $
    (2,130,760
    )
    
    $
    
    
    
    $
    (1,380,298
    )
 17




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##### Table of Contents



September 30,
    
    
    December 31,2006
    
    
    2005Tax benefit of net operating loss carry-forward
    
    $
    8,600,000
    
    
    $
    7,800,000Valuation allowance
    
    
    (8,600,000
    )
    
    
    (7,800,000
    )$
    
    
    
    $
    
  September 30, 2006
    
    December 31, 2005Tax expense (credit) at statutory rate-federal
    
    
    (34
    )%
    
    
    (34
    )%State tax expense net of federal tax
    
    
    (6
    )
    
    
    (6
    )Changes in valuation allowance
    
    
    40
    
    
    
    40Tax expense at actual rate
    
    
    
    
    
    
    
   LITIGATION
    18




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##### Table of Contents



OTHER COMMITMENTS
   September 30, 2007
    
    $
    160,000September 30, 2008
    
    $
    28,000
   EQUITY
   
    
    Agreed to issue 294,871 shares of common stock, valued at $110,000 for financial
advisory services rendered on behalf of the Company, such shares were issued in November
2006;
    
    Issued 2,349,000 warrants to purchase common stock, valued at $302,493 as an
inducement to certain shareholders to invest in the Company;
    
    Issued 300,000 shares of common stock related to the
DMSI settlement;
    
    Recorded beneficial conversion feature expense of $777,090 in conjunction with the
debt financing consummated during this period;
    
    Issued warrants to purchase approximately 2,887,600 shares of common stock in
exchange for 2,880,000 shares of common stock to be returned to the Company;
    
    Issued 250,000 shares of common stock valued at $100,125 for services rendered on
behalf of the Company;
    
    Retired approximately 5,954,000 million warrants to purchase common stock of the
Company related to the aforementioned debt restructurings. As a result, the Company wrote
off $1,149,412 in unamortized discounts against Additional Paid in Capital;
    
    Issued 434,484 shares of common stock to Dutchess upon Dutchess conversion of a
convertible debenture, valued at $153,783.
  
    
    Acquired 100% of the outstanding shares of common stock of Spectrum Cabling
Company, Inc., a California corporation for $14,000,000 in common stock, pursuant to an
acquisition agreement dated November 1, 2005. Robert Rivera, the 100% owner of Spectrum
prior to the acquisition, received 18,567,639 shares of the Companys common stock. On
January 6, 2006, the Company rescinded the purchase. Pursuant to the Rescission
Agreement, Spectrum returned 18,567,639 shares of the Companys common stock and a
promissory note for $1.5 million in exchange for 100% of the outstanding shares of
Spectrum. Additionally, Spectrums two appointed directors to the Companys board
resigned. The purchase and subsequent rescission of Spectrum had no financial impact on
the Companys operations or financial statements;
 19




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##### Table of Contents




    
    Acquired 100% of the outstanding shares of common stock of Kelley Communication
Company, Inc., a Nevada corporation for $10,232,101 in common stock, pursuant to an
acquisition agreement dated September 22, 2005. Mike Kelley, the 100% owner of Kelley
prior to the acquisition, received 14,016,577 shares of the Companys common stock;
    
    Issued 1,460,692 shares of common stock to accredited investors for a total of
$943,451;
    
    Issued 18,939 shares of common stock upon notification of an investors intent to
exchange a convertible debenture for common stock, valued at $65,000;
    
    Issued 560,000 shares of common stock valued at $373,088 for services rendered on
behalf of the Company;
    
    Issued 2,094,000 warrants to purchase common stock, valued at $387,184 as an
inducement to certain shareholders to invest in the Company;
    
    Issued 3,550,000 warrants to officers of the Company valued at $6,575,426;
    
    Recorded beneficial conversion feature of $617,000 in conjunction with the debt
financing consummated during this time period; and
    
    Agreed to issue 108,696 shares of common stock in connection with the acquisition
of COM. These shares were valued at $200,000 on the date of the acquisition. These shares
were issued during the nine months ended September 30, 2006.
         20




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##### Table of Contents



21




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
  CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
  EFFECT OF DISCONTINUANCE OF NIC AND COM OPERATIONS ON PRESENTATION
   CRITICAL ACCOUNTING POLICIES
   Revenue Recognition
  22




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##### Table of Contents



Accounts Receivable and Allowance for Doubtful Accounts
  Goodwill
  Stock-Based Compensation
   Going Concern
  Cash and Cash Equivalents
  23




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##### Table of Contents



Property and Equipment
  Inventory
  Fair Value of Financial Instruments
  Accounting for Impairments in Long-Lived Assets
  Use of Estimates
  Basic and Diluted Net Loss Per Share
     24




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##### Table of Contents



NINE MONTH PERIOD ENDED SEPTEMBER 30, 2006 AS COMPARED TO NINE MONTH PERIOD ENDED SEPTEMBER 30,
2005
 RESULTS OF OPERATIONS
 SALES
  COST OF GOODS SOLD
  GROSS PROFITS
  OPERATING EXPENSES
  OTHER EXPENSE
  NET LOSS
  25




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##### Table of Contents



BASIC AND DILUTED LOSS PER SHARE
  THREE MONTH PERIOD ENDED SEPTEMBER 30, 2006 AS COMPARED TO THREE MONTH PERIOD ENDED SEPTEMBER 30,
2005
 RESULTS OF OPERATIONS
 SALES
  COST OF GOODS SOLD
  GROSS PROFITS
  OPERATING EXPENSES
  OTHER EXPENSE
  NET LOSS
  BASIC AND DILUTED LOSS PER SHARE
  26




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
     FINANCING ACTIVITIES
   Date
    
    
    Amount
    
    
    Financing Fees5/15/2006
    
    
    $
    650,000
    
    
    $
    5,0004/13/2006
    
    
    
    500,000
    
    
    
    5,0004/12/2006
    
    
    
    200,000
    
    
    
    5,0003/27/2006
    
    
    
    450,000
    
    
    
    5,0003/20/2006
    
    
    
    650,000
    
    
    
    5,0003/9/2006
    
    
    
    360,000
    
    
    
    5,0002/21/2006
    
    
    
    100,000
    
    
    
    5,0002/16/2006
    
    
    
    850,000
    
    
    
    5,0001/30/2006
    
    
    
    150,000
    
    
    
    5,0001/27/2006
    
    
    
    650,000
    
    
    
    5,000Totals
    
    
    
    4,560,000
    
    
    $
    50,000Repayments
    
    
    
    4,560,000Balance at September 30, 2006
    
    $
    0
 27




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##### Table of Contents




    
    if prior to our full payment and satisfaction of the Amended and Restated
Promissory Notes, we borrow monies or raise capital from the sale of our common stock in
excess of $3,500,000 (after the payment of all financing fees and expenses), we are
obligated to pay to both holders 20% of such excess up to the unpaid balance on the new
promissory note within 10 days after receipt of such funds and if such funds are raised
prior to when we are obligated to begin making payments, such obligation will be
accelerated and will begin one month following such financing; and
    
    if at any time during which the Amended and Restated Promissory Notes remain
unpaid, our earnings on a consolidated basis during any calendar year exceed $1,000,000
(before interest, taxes, depreciation and amortization, but after deducting of all
principal and interest payments on outstanding debts, other than certain mandatory
prepayments as discussed herein), we are obligated to pay to both holders 13% of the
excess earnings, up to the unpaid balance of the new promissory note as a prepayment,
within 10 business days of the filing of our Annual Report on Form 10-KSB.
    2007
    
    $
    495,0002008
    
    
    975,0002009
    
    
    1,350,0002010
    
    
    1,725,0002011
    
    
    3,036,000Total
    
    $
    7,581,000
 28




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##### Table of Contents




    
    that we must obtain written consent from Dutchess, not to be unreasonably withheld,
in order to grant a lien or security interest in any of our assets and to borrow money or
sell our common stock, which borrowing or sale either alone or aggregated during any six
month period exceeds $250,000;
    
    if prior to our full payment and satisfaction of the new promissory note, we borrow
money or raise capital from the sale of our common stock in excess of $3,500,000 (after
the payment of all financing fees and expenses), we are obligated to pay to Dutchess 50%
of such excess up to the unpaid balance on the new promissory note within 10 days after
receipt of such funds;
    
    if at any time during which the new promissory note remains unpaid, our earnings on
a consolidated basis during any calendar year exceeds $1,000,000 (before interest, taxes,
depreciation and amortization, but after deducting all principal and interest payments on
outstanding debts, other than certain mandatory prepayments as discussed herein), we are
obligated to pay Dutchess 33% of the excess earnings, up to the unpaid balance of the new
promissory note as a prepayment, within 10 business days of the filing of our Annual
Report on Form 10-KSB; and
    
    that we must obtain written consent of Dutchess, not to be unreasonably withheld,
to sell any of our assets (other than the sales of inventory or other assets sold in the
normal course of business) and in the event of an asset sale, we shall pay to Dutchess
33% of the proceeds of the asset sale, up to the unpaid principal balance as a prepayment
on the new promissory note, within 10 business days after we receive the funds.
  COMMITMENTS
       29




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##### Table of Contents



OTHER COMMITMENTS
  For the year ended:September 30, 2007
    
    $
    160,000September 30, 2008
    
    $
    28,000
       MATERIAL TRENDS AND UNCERTAINTIES
  30




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##### Table of Contents



SUBSIDIARIES
  
 ITEM 3. CONTROLS AND PROCEDURES.
  31




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##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS.
   
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
   
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  
 ITEM 5. OTHER INFORMATION.
  
 ITEM 6. EXHIBITS.
 Exhibits.No.
    
    Description2.1
    
    Plan of Reorganization between the Company and Michael Kelley, dated September 22, 2005
(included as exhibit 2.1 to the Form 8-K filed October 6, 2005, and incorporated herein by
reference).2.2
    
    Acquisition Agreement and Plan of Reorganization between the Company and Robert and Sherry
Rivera dated November 1, 2005 (included as exhibit 10.1 to the Form 8-K filed November 7,
2005, and incorporated herein by reference).3.1
    
    Articles of Incorporation, dated March 24, 1998 (included as exhibit 3.1 to the Form 10-SB
filed March 5, 1999, and incorporated herein by reference).3.2
    
    By-laws, dated March 24, 1998 (included as exhibit 3.2 to the Form 10-SB filed March 5,
1999, and incorporated herein by reference).
 32




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##### Table of Contents



Exhibits.No.
    
    Description3.3
    
    Amendment to By-laws, dated May 6, 1999 (included as exhibit 3.2.2 to the Form 10-SB filed
May 14, 1999, and incorporated herein by reference).3.4
    
    Certificate of Amendment of Articles of Incorporation (included as exhibit 3.2 to the Form
8-K filed November 29, 2000, and incorporated herein by reference).3.5
    
    Certificate of Amendment of Articles of Incorporation (included as exhibit 3.3 to the Form
8-K filed November 29, 2000, and incorporated herein by reference).3.6
    
    Certificate of Amendment to Articles of Incorporation, dated January 10, 2003 (included as
exhibit 3.3 to the Form 10-KSB filed April 15, 2003, and incorporated herein by
reference).3.7
    
    Certificate of Amendment to the Certificate of Incorporation, dated June 26, 2003
(included as exhibit 4.1 to the Form 10-QSB filed November 13, 2003, and incorporated
herein by reference).3.8
    
    Certificate of Amendment to Articles of Incorporation dated October 25, 2006 (included as
exhibit 3.1.5 to the Form S-8 filed November 2, 2006, and incorporated herein by
reference).4.1
    
    Form of Warrant, dated December 1, 2004 (included as exhibit 4.19 to the Form 10-KSB filed
May 6, 2005, and incorporated herein by reference).4.2
    
    Convertible Debenture Agreement between the Company and Dutchess Private Equities Fund,
L.P., dated December 9, 2004 (included as exhibit 4.20 to the Form 10-KSB filed May 6,
2005, and incorporated herein by reference).4.3
    
    Form of Warrant, dated December 9, 2004 (included as exhibit 4.21 to the Form 10-KSB filed
May 6, 2005, and incorporated herein by reference).4.4
    
    Convertible Debenture Agreement between the Company and Dutchess Private Equities Fund,
L.P., dated December 22, 2004 (included as exhibit 4.22 to the Form 10-KSB filed May 6,
2005, and incorporated herein by reference).4.5
    
    Form of Warrant, dated December 22, 2004 (included as exhibit 4.23 to the Form 10-KSB
filed May 6, 2005, and incorporated herein by reference).4.6
    
    Form of Debenture between the Company and Dutchess Private Equities Fund, II, LP, dated
January 6, 2005 (included as exhibit 4.24 to the Form 10-QSB filed May 24, 2005, and
incorporated herein by reference).4.7
    
    Warrant Agreement between the Company and Dutchess Private Equities Fund, II, LP, dated
January 6, 2005 (included as exhibit 4.25 to the Form 10-QSB filed May 24, 2005, and
incorporated herein by reference).4.8
    
    Form of Debenture between the Company and Dutchess Private Equities Fund, II, LP, dated
January 21, 2005 (included as exhibit 4.26 to the Form 10-QSB filed May 24, 2005, and
incorporated herein by reference).4.9
    
    Warrant Agreement between the Company and Dutchess Private Equities Fund, II, LP, dated
January 21, 2005 (included as exhibit 4.27 to the Form 10-QSB filed May 24, 2005, and
incorporated herein by reference).4.10
    
    Form of Debenture between the Company and Preston Capital Partners, LLC, dated February 3,
2005 (included as exhibit 4.28 to the Form 10-QSB filed May 24, 2005, and incorporated
herein by reference).4.11
    
    Form of Debenture between the Company and Preston Capital Partners, LLC, dated February
10, 2005 (included as exhibit 4.29 to the Form 10-QSB filed May 24, 2005, and incorporated
herein by reference).4.12
    
    Form of Debenture between the Company and Dutchess Private Equities Fund, II, LP, dated
April 22, 2005 (included as exhibit 4.30 to the Form 10-QSB filed July 29, 2005, and
incorporated herein by reference).4.13
    
    Warrant Agreement between the Company and Dutchess Private Equities Fund, II, LP, dated
April 22, 2005 (included as exhibit 4.31 to the Form 10-QSB filed July 29, 2005, and
incorporated herein by reference).4.14
    
    Form of Debenture between the Company and Dutchess Private Equities Fund, II, LP, dated
May 12, 2005 (included as exhibit 4.32 to the Form 10-QSB filed July 29, 2005, and
incorporated herein by reference).4.15
    
    Warrant Agreement between the Company and Dutchess Private Equities Fund, II, LP, dated
May 12, 2005 (included as exhibit 4.33 to the Form 10-QSB filed July 29, 2005, and
incorporated herein by reference).
 33




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##### Table of Contents



Exhibits.No.
    
    Description4.16
    
    Form of Debenture between the Company and Preston Capital Partners, dated May 26, 2005
(included as exhibit 4.34 to the Form 10-QSB filed July 29, 2005, and incorporated herein
by reference).4.17
    
    Form of Debenture between the Company and Dutchess Private Equities Fund, II, LP, dated
May 27, 2005 (included as exhibit 4.35 to the Form 10-QSB filed July 29, 2005, and
incorporated herein by reference).4.18
    
    Warrant Agreement between the Company and Dutchess Private Equities Fund, II, LP, dated
May 27, 2005 (included as exhibit 4.36 to the Form 10-QSB filed July 29, 2005, and
incorporated herein by reference).4.19
    
    Form of Debenture between the Company and Dutchess Private Equities Fund, II, LP, dated
June 6, 2005 (included as exhibit 4.37 to the Form 10-QSB filed July 29, 2005, and
incorporated herein by reference).4.20
    
    Warrant Agreement between the Company and Dutchess Private Equities Fund, II, LP, dated
June 6, 2005 (included as exhibit 4.38 to the Form 10-QSB filed July 29, 2005, and
incorporated herein by reference).4.21
    
    Form of Debenture between the Company and Preston Capital Partners, dated June 20, 2005
(included as exhibit 4.39 to the Form 10-QSB filed July 29, 2005, and incorporated herein
by reference).4.22
    
    Collateral Agreement between the Company and Dutchess Private Equities Fund, II, L.P.,
dated September 19, 2005 (included as exhibit 4.1 to the Form 8-K filed October 6, 2005,
and incorporated herein by reference).4.23
    
    Form of Debenture between the Company and Dutchess Private Equities Fund, II, L.P., dated
September 22, 2005 (included as exhibit 4.2 to the Form 8-K filed October 6, 2005, and
incorporated herein by reference).4.24
    
    Debenture Registration Rights Agreement between the Company and Dutchess Private Equities
Fund L.P., Dutchess Private Equities Fund, II, L.P., Dutchess Capital Management, LLC,
dated September 22, 2005 (included as exhibit 4.3 to the Form 8-K filed October 6, 2005,
and incorporated herein by reference).4.25
    
    Subscription Agreement between the Company and Dutchess Private Equities Fund L.P.,
Dutchess Private Equities Fund, II, L.P., Dutchess Capital Management, LLC, dated
September 22, 2005 (included as exhibit 4.4 to the Form 8-K filed October 6, 2005, and
incorporated herein by reference).4.26
    
    Warrant between the Company and Dutchess Private Equities Fund, II, L.P., dated September
22, 2005 (included as exhibit 4.5 to the Form 8-K filed October 6, 2005, and incorporated
herein by reference).4.27
    
    Promissory Note between the Company and Michael Kelley, dated September 22, 2005 (included
as exhibit 4.6 to the Form 8-K filed October 6, 2005, and incorporated herein by
reference).4.28
    
    Promissory Note between the Company and Robert Unger, dated September 22, 2005 (included
as exhibit 4.7 to the Form 8-K filed October 6, 2005, and incorporated herein by
reference).4.29
    
    Security Agreement between the Company and Dutchess Private Equities Fund L.P. and
Dutchess Private Equities Fund, II, L.P., dated September 22, 2005 (included as exhibit
4.8 to the Form 8-K filed October 6, 2005, and incorporated herein by reference).4.30
    
    Promissory Note between the Company and Robert and Sherry Rivera, dated November 1, 2005
(included as exhibit 10.2 to the Form 8-K filed November 7, 2005, and incorporated herein
by reference).4.31
    
    Security Agreement between the Company and Spectrum Communication Cabling Services, Inc.,
dated November 1, 2005 (included as exhibit 10.3 to the Form 8-K filed November 7, 2005,
and incorporated herein by reference).4.32
    
    Form of Debenture between the Company and Preston Capital Partners, dated July 20, 2005
(included as exhibit 4.50 to the 10QSB/A filed November 22, 2005, and incorporated herein
by reference).4.33
    
    Form of Debenture between the Company and Preston Capital Partners, dated August 17, 2005
(included as exhibit 4.51 to the 10QSB/A filed November 22, 2005, and incorporated herein
by reference).4.34
    
    Form of Debenture between the Company and Dutchess Private Equities Fund, II, LP, dated
September 14, 2005 (included as exhibit 4.52 to the 10QSB/A filed November 22, 2005, and
incorporated herein by reference).4.35
    
    Warrant Agreement between the Company and Dutchess Private Equities Fund, II, LP, dated
September 14, 2005 (included as exhibit 4.53 to the 10QSB/A filed November 22, 2005, and
incorporated herein by reference).
 34




---



##### Table of Contents



Exhibits.No.
    
    Description4.36
    
    Form of Debenture between the Company and Dutchess Private Equities Fund, II, LP, dated
September 19, 2005 (included as exhibit 4.54 to the 10QSB/A filed November 22, 2005, and
incorporated herein by reference).4.37
    
    Warrant Agreement between the Company and Dutchess Private Equities Fund, II, LP, dated
September 19, 2005 (included as exhibit 4.55 to the 10QSB/A filed November 22, 2005, and
incorporated herein by reference).4.38
    
    Common Stock for Warrant Exchange Agreement between the Company and Dutchess Private
Equities Fund, LP, dated March 10, 2006 (included as exhibit 4.1 to the Form 8-K filed
March 20, 2006, and incorporated herein by reference).4.39
    
    Common Stock for Warrant Exchange Agreement between the Company and Dutchess Advisors,
Ltd., dated March 10, 2006 (included as exhibit 4.2 to the Form 8-K filed March 20, 2006,
and incorporated herein by reference).4.40
    
    Promissory Note dated August 1, 2000 by the Company and Kelley in favor of Dutchess
Private Equities Fund LP, Dutchess Private Equities Fund II, LP and Dutchess Advisors,
Ltd., (included as exhibit 4.58 to the 10-QSB filed August 14, 2006, and incorporated
herein by reference).4.41
    
    Promissory Note dated August 7, 2000 by the Company in favor of Preston Capital Partners,
(included as exhibit 4.59 to the 10-QSB filed August 14, 2006, and incorporated herein by
reference).4.42
    
    Amended and Restated Promissory Note dated August 14, 2006, by the Company in favor of
Michael Kelley, (included as exhibit 4.60 to the 10-QSB filed August 14, 2006, and
incorporated herein by reference).4.43
    
    Amended and Restated Promissory Note dated August 14, 2006 by the Company in favor of
Robert Unger (included as exhibit 4.61 to the 10-QSB filed August 14, 2006, and
incorporated herein by reference).10.1
    
    Stock Purchase Agreement between the Company, Raymond Mallory, and Will Stice, dated
January 17, 2005 (included as exhibit 2.1 to the Form 8-K filed January 24, 2005, and
incorporated herein by reference).*
    10.2
    
    Employment Agreement between the Company and Jeffrey R. Hultman, dated March 7, 2005
(included as exhibit 99.2 to the Form 8-K filed March 9, 2005, and incorporated herein by
reference).*
    10.3
    
    Employment Agreement between the Company and Michael V. Rosenthal, dated March 14, 2005
(included as exhibit 99.2 to the Form 8-K filed March 14, 2005, and incorporated herein by
reference).10.4
    
    Intercreditor Agreement between the Company and Nottingham Mayport, LLC, Dutchess Private
Equities Fund L.P., Dutchess Private Equities Fund II, L.P., and Robert Unger, dated
September 22, 2005 (included as exhibit 10.1 to the Form 8-K filed October 6, 2005, and
incorporated herein by reference).10.5
    
    Rescission and Settlement Agreement among the Company and Robert Rivera, Sherry Perry
Rivera and Spectrum Communications Cabling Services, Inc., dated January 6, 2006 (included
as exhibit 10.1 to the Form 8-K filed January 6, 2006, and incorporated herein by
reference).*
    10.6
    
    Employment Agreement between the Company and Chris Pizzo effective March 27, 2006
(included as exhibit 10.37 to the 10-QSB filed August 14, 2006, and incorporated herein by
reference).10.7
    
    Loan Restructure Agreement dated August 1, 2006, by and between the Company, Kelley,
Dutchess Private Equities Fund, LP, Dutchess Private Equities Fund II, LP and Dutchess
Advisors, Ltd., 2006 (included as exhibit 10.38 to the 10-QSB filed August 14, 2006, and
incorporated herein by reference).10.8
    
    Loan Restructure Agreement dated August 7, 2006, by and between the Company and Preston
Capital partners, LLC, 2006 (included as exhibit 10.39 to the 10-QSB filed August 14,
2006, and incorporated herein by reference).**
    10.9
    
    Letter Agreement with Ascendiant Securities, LLC dated October 24, 2006, filed herewith.31.1
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002, filed herewith.31.2
    
    Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002, filed herewith.32.1
    
    Certification of Officers pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
 
 *
    
    Designates a Compensatory Plan.**
    
    Confidential treatment has been requested for a portion of
this document. 35




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SIGNATURE
  SIENA TECHNOLOGIES, INC.
(Registrant)Date: November 14, 2006
    By:
    /s/ Jeffrey R. HultmanJeffrey R. HultmanChairman & Chief Executive OfficerBy:
    /s/ Christopher G. PizzoChristopher G. PizzoChief Financial Officer, (Principal Accounting
Officer) 36