SUBJEX CORP - FORM 10-Q - November 16, 2009

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EX-32 - EXHIBIT 32 CERTIFICATION - SUBJEX CORP	subjex32-1.htm
EX-31 - EXHIBIT 31 CERTIFICATION - SUBJEX CORP	subjex31-1.htm

UNITED STATES SECURITIES & EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

AND EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE

ACT OF 1934

Commission File Number 0-29711

Subjex Corporation

(Exact name of issuer in its charter)

Minnesota (State or other jurisdiction of incorporation or organization)	41-1596056 (IRS Employer Identification No.)
3245 Hennepin Ave S Suite 3, Minneapolis MN (Address of Principal Executive Offices)	55408 (Zip Code)

612-827-2203

(Issuer’s telephone number)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act:

Common Stock, no par value

Check whether the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. [ ]

Check whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter periods that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.

Large accelerated filer [ ] Accelerated filer [ ]

Non-accelerated filer [ ] Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Traditional Small Business Disclosure Format: Yes [ ] No [X]

As of November 12, 2009 there were 99,902,500 outstanding shares of common stock, no par value.

The aggregate market value of the common stock of the issuer held by non-affiliates of the issuer on November 12, 2009 based on the closing price of the common stock as reported on the OTC Bulletin Board on such date was $999,025.

SUBJEX CORPORATION INDEX

Page Number


PART I - FINANCIAL INFORMATION	3

ITEM 1. FINANCIAL STATEMENTS	3

Balance Sheets as of September 30, 2009 (unaudited) and (unreviewed) and December 31, 2008	3

Statements of Operations for the nine months ended September 30, 2009 (unaudited) and (unreviewed) and September 30, 2008 (unaudited)	4

Statements of Cash Flows for the nine months ended September 30, 2009 (unaudited)and (unreviewed) and September 30, 2008 (unaudited)	5

Notes to the Financial Statements	6

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	7

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	8

ITEM 4. CONTROLS AND PROCEDURES	9

ITEM 4T. CONTROLS AND PROCEDURES	9

PART II – OTHER INFORMATION	10

ITEM 1. LEGAL PROCEEDINGS	10

ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS	10

ITEM 3. DEFAULTS UPON SENIOR SECURITIES	10

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	10

ITEM 5. OTHER INFORMATION	10

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K	10

SIGNATURES	10

References to the “Company,” the “Registrant,” “we”, “us” or “our” in this Quarterly Report on Form 10-Q refer to Subjex Corporation., unless the context indicates otherwise.

SUBJEX CORPORATION
BALANCE SHEETS

				September 30,		December 31,
				2009		2008
				(Unaudited)		(Audited)
ASSETS

Current Assets:
	Cash		$	7	$	1,546
	Accounts receivable			-		3,011

		Total current assets		7		4,557

Property and equipment, net				-		-
	Other assets, net			2,611		2,611

		Total assets	$	2,618	$	7,168


LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:
	Short-term notes payable			17,677		19,177
	Subordinated convertible notes payable			23,000		23,000
	Accounts payable			206,287		184,087
	Accrued expenses:
	Accrued expenses-related party			622,814		206,956
	Payroll and payroll taxes			17,642		38,085
	Accrued interest			27,022		25,320
	Accrued expenses			4,207		3,947

		Total current liabilities		918,647		500,572

Long-term debt:
	Long-term debt, less current portion			-		-

		Total liabilities		918,647		500,572

Stockholders' deficit:
	Common stock, no par or stated value;
		100,000,000 shares authorized: 99,875,631 and
		99,497,720 shares issued and outstanding at
		September 30, 2009 and December 31, 2008, respectively		6,202,359		6,505,147
	Accumulated deficit			(7,118,388)		(6,998,551)

Stockholders' deficit				(916,029)		(493,404)


	Total liabilities and stockholders’ deficit		$	2,618	$	7,168


The accompanying notes are an integral part of these financial statements.

SUBJEX CORPORTION
STATEMENTS OF OPERATIONS
(Unaudited)

			Three Months Ended September 30,				Nine Months Ended September 30,
				2009		2008		2009		2008

Revenues			$	3,000	$	575	$	11,025	$	575

Expenses:
	Selling, general and administrative			15,369		115,160		128,473		242,046

		Total operating expense		15,369		115,160		128,473		242,046

		Operating loss		(12,369)		(114,585)		(117,449)		(241,471)

Other income (expense)
	Interest expense			(567)		(1,457)		(2,389)		(3,624)

Net loss			$	(12,936)	$	(116,042)	$	(119,837)	$	(245,095)

Net loss per basic and diluted common share			$	(0.001)	$	(0.001)	$	(0.001)	$	(0.001)


Weighted average common shares
	outstanding - basic and diluted			99,574,566		99,297,720		99,574,566		99,297,720


The accompanying notes are an integral part of these financial statements.

SUBJEX CORPORTION

STATEMENTS OF CASH FLOWS

(Unaudited)

		Nine Months Ended September 30,
			2009		2008

Cash flow from operating activities:
	Net loss	$	(119,837)	$	(245,095)
	Adjustments to reconcile net loss to
	net cash flows used in operating activities:
	Depreciation and amortization		-		3,838
	Non cash common stock issued for consulting services		(44,000)		53,800
	Changes in operating assets and liabilities:
	Accounts receivable		3,010		1,517
	Prepaid expenses		-		23,125
	Accounts payable		22,200		18,886
	Payroll and payroll taxes		(20,443)		22,895
	Accrued expenses		(1,241)		(7,042)
	Accrued interest		1,701		1,701
	Accrued expenses-related party		415,858		(23,676)

	Net cash used in operating activities		257,248		(150,051)


Cash flow from investing activities:
	Notes Receivable		-		1,000

	Net cash used in investing activities		-		1,000


Cash flow from financing activities:
	Proceeds from issuance of capital stock		(258,788)		146,338
	Proceeds from stock subscriptions		-		(10,000)

	Net cash provided by financing activities		(258,788)		136,338


Decrease in cash			(1,540)		(12,712)
Cash at beginning of period			1,546		15,217

Cash at end of period		$	7	$	2,505

Supplemental cash flow information:
	Cash paid for interest	$	-	$	-
	Cash paid for income taxes	$	-	$	-

The accompanying notes are an integral part of these financial statements.

SUBJEX CORPORTION

Notes to the Financial Statements (unaudited) and (unreviewed)

Note 1. Basis of Presentation

The accompanying unaudited and unreviewed interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-K filed with the SEC as of and for the period ended December 31, 2008. In the opinion of management, all adjustments necessary in order for the financial statements to be not misleading have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

Securities regulations require that interim financial statements contained in Form 10-Q be reviewed by an independent auditor. The Company’s independent auditor, Maddox Ungar Silberstein, PLCC, has not yet completed its review of the Company’s financial statements for the period ending September 30, 2009. Pursuant to the Company’s obligation to report, the Company has reviewed and has filed the unaudited and unreviewed results of its operations herein. While this filing may not constitute the current filing requirements with the Securities and Exchange Commission, and should not be interpreted to be a substitute for the review that would normally occur by the Company’s independent auditor, the Company believes the filing to be otherwise materially accurate and complete.

Note 2. Acquisition of Assets

None.

Note 3. Going Concern

The Company had a working capital deficit and recurring net losses from operations in the third quarter ending September 30, 2009 and had insufficient cash on hand to support its ongoing operations. These factors create doubt about the Company's ability to continue as a going concern.

Note 4. Payroll and Payroll Taxes

The Company owes the IRS related to employee payroll withholdings and payroll taxes aggregating approximately $7,000 at September 30, 2009. This liability is included in accrued expenses – payroll and payroll taxes. The Company is working with the IRS and has been set up with a payment arrangement. Until all amounts owed are paid to the IRS, the IRS will maintain a federal tax lien on the Company’s property.

Note 5. Stockholders’ Deficit

Despite management’s desire to contain dilution, during the third quarter of 2009, the Company issued 2,515,000 shares of common stock for operational funds. There were 1,263,256 shares retired into the Company’s Treasury by related parties to help with these operations. The company is diligently working hard to grow its revenues without future dilution.

ITEM 2. Management’s Discussion and Analysis and Results of Operation

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Statements in this discussion which are not historical facts may be considered "forward looking statements" within the meaning of Section 21E of the Securities Act of 1934, as amended. The words "believe", "expect", "anticipate", "estimate", and similar expressions identify forward looking statements. Any forward looking statement involves risks and uncertainties that could cause actual events or results to differ, perhaps materially, from the events described in the forward looking statements. Readers are cautioned not to place undue reliance on these forward looking statements. The Company undertakes no obligation to publicly update or revise any forward looking statement, whether as a result of new information, future events or otherwise. The risks associated with the Company's forward looking statements include, but are not limited to, risks associated with the Company's losses and uncertain profitability, sales and marketing strategies, competition, general economic conditions, reliance on key management and production people, current and future capital needs, dilution, effects of outstanding notes and convertible debentures, limited public market for the Company’s capital stock, low stock price, and lack of liquidity.

The following discussion and analysis should be read in conjunction with the Financial Statements, related notes and other information included in this quarterly report on Form 10-Q and the annual report Form 10K for 12-31-2008.

Description of Business

Subjex Corporation, is a Minnesota corporation formed in 1999, for the creation, custom development and incubation of unique artificial intelligence technologies. We translate our advanced technology development methods into extreme value solutions for specialized industries. Therefore we attempt to develop products that our clientele or partners bring to the market directly or as a private labeled product.

Since 1999, Subjex Corporation has strived to be a leader in artificial intelligence software development. Our development projects have included SEO (Search Engine Optimization) “cloaking” software, e-commerce, automated dialogue CSR/CRM, advertising, search engine and technology products for the capital markets.

One of our technologies is Forecast Market Software (FMS), a trade timing and index forecasting engine that forecasts the DJIA, the XAU, and the DJT. Since its launch in February 2006, FMS has performed well as Qubitrage LLC (www.qubitrage.com) a Nevada based hedge fund (averaging nearly 5% per quarter average returns since inception).

Subjex Corporation developed one the first semi-autonomous virtual agent Customer Service Representative (CSR) products in the market in 2001. “SubjexCSR” as it was called originally was tested on over 500 e-commerce business web sites for over 4 years. Our latest artificial intelligence CSR/CRM project called AiNDEE (www.AiNDEE.com) was introduced in 2008. Unlike conventional CSR/CRM software solutions on the market, that are mainly auto responder “dialogue based” (stimulus response) products, AiNDEE is one of the most highly advanced artificial intelligent CRM/sales solutions available. It incorporates many new ground breaking advancements in virtual communication and human interaction. Able to engage in real “interview” conversation, where it asks users questions about what they just asked (multi-tiered bi-directional dialogue), AiNDEE is a break-through in CRM (Customer Relationship Management).

Principal Product Development and Resulting Services

In 2009 the Company launched version 4 of FMS which since this time has performed up to managements expectations. During 2008, the Company licensed the use of the underlying algorithms of Forecast Market Software to Qubitrage LLC “Qubitrage” a Nevada based hedge fund to monetize the “FMS” (Forecast Market Software) technology. See “Recent Developments” for more details.

Trademarks and Patents

The Company’s policy is to hold trademarks and patent protection for its business that management feels is necessary to protect the Company interests.

Environmental Compliance

The Company believes it is in compliance with all current federal and state environmental laws.

Employees

The Company currently has employees, an outside team of consultants and contractors to fit the Company’s operational needs. The Company considers its relations with its consultants and contractors to be outstanding.

Competition

The Company is aware of other companies selling solutions that appear to be similar to Subjex; however management is not aware of any companies that are selling the same solutions as we offer. In addition, management continues to market it products to businesses through the use of third party partners. The Company believes that its solutions are more effective than its competition. Management believes that while some companies may have greater resources than us, we have more advanced products which continue to grow in power and client usage.

Recent Developments

Subjex Corporation has recently initated a sales development project to bring human interactive artificial intelligent CSR/CRM solutions like “AiNDEE” to a select group of resellers in the call center industry, thus creating revenue share opportunities.

Recently the Company has become engaged with Qubitrage LLC “Qubitrage” a Nevada based hedge fund to monetize the “FMS” (Forecast Market Software) technology. In exchange for the exclusive use of the FMS technology Qubitrage agreed to give all earned fees (2% annual management fee and 20% performance fee) to the Company. This agreement is designed to create a revenue stream to the Company in direct proportion to the success of the FMS technology in the markets and the funds under management. Therefore the Company has agreed to market the hedge fund at its own expense. Further the Company has provided its CEO, Andrew Dean Hyder as the fund manager. Mr. Hyder will not receive any additional compensation for this duty.

FMS (Forecast Market Software) is based upon a proprietary artificial intelligence trade timing engine invented by Andrew D. Hyder. Subjex Corporation licenses the algorithm processes for its FMS product from its Chief Executive Officer, Andrew D. Hyder, on an exclusive 10 year self-renewing contract basis. FMS has proven to be successful in terms of its long term objective of generating positive returns. The performance of FMS has been exceptional in terms of percentage returns when averaged over its nearly 4 year history. However as with any system in the markets, there are risks associated with any investment.

The Company’s basis of accounting contemplates the realization of assets and the satisfaction of its liabilities and commitments in the normal course of operations. Since inception, the Company has incurred losses of $7,118,388 and has a working capital deficit of $916,029 as of September 30, 2009. The Company had a working capital deficit and recurring net losses from operations in 2008 as well. Despite the net losses of past years operations, the funds spent have resulted in a significant ownership and control of technology and infrastructure which the company expects to generate considerable earnings in the future.

The Company decreased operating expenses to $12,936 for the three months ended September 30, 2009 as compared to $114,485 for the three months ended September 30, 2008. Operating expenses decreased due to the company revenue outlook along with very few shares available to create operating capital. The Company had $3,000 in revenues for the three months ended September 30, 2009 as compared to $575 for the three months ended September 30, 2008. Revenue levels in the third quarter of 2009 were not sufficient to sustain the Company's operations; therefore funds were raised from the sale of common stock to the Company's investor base to meet its financial needs. Further, management has accepted various smaller software development projects yet retained intellectual property rights, to fill its short –term revenue needs.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is subject to certain market risks, including changes in interest rates and currency exchange rates. The Company does not undertake any specific actions to limit those exposures.

Before deciding to buy, hold or sell our common stock, you should carefully consider the risks described below, in addition to the other information contained in this report and in our other filings with the Securities and Exchange Commission, including our reports on Forms 10-Q and 8-K. The risks and uncertainties described below are what we consider our most significant risks. Additional risks and uncertainties not presently known or that are currently deemed immaterial may also affect our business.

If any of these known or unknown risks or uncertainties actually occurs, they could have a material adverse effect on our business, financial condition, results of operations and cash flow. In that event, the market price for our common stock could decline and you may lose all or part of your investment.

Revenue growth from the AiNDEE technology (formerly known as “SubjexCSR”) will primarily be as a result of finding new customers. Revenue from this technology did not grow during 2008 due to a focus on other projects. In 2008 and 2009 a significant upgrade to the model has been preformed. With many new features, it is being demonstrated to a select few prospects. While the AiNDEE technology is being well received the Company cannot guarantee that sales of any significance will be made in 2009.

Further the Company stock is thinly traded. Accordingly, you may not be able to resell your shares of common stock at or above the price you paid for them. The Company’s common stock has historically maintained a low trading volume of shares per day. However due to potential revenue flow, management feels that this trend is not likely to continue if and when significant deposits are made into Qubitrage Hedge Fund.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on their most recent review, as of the end of the period covered by this report, the Company’s principal executive officer has concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure and are effective to ensure that such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect those controls subsequent to the date of their evaluation.

ITEM 4T. Controls and Procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 ("Exchange Act"), the Company carried out an evaluation, with the participation of the Company's management, including the Company's Chief Executive Officer ("CEO") and Board of Directors of the effectiveness of the Company's disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company's CEO and Board of Directors concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including the Company's CEO and Board of Directors as appropriate, to allow timely decisions regarding required disclosure.

Management's Report on Internal Controls over Financial Reporting

Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of consolidated financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. There has been no change in the Company's internal control over financial reporting during the quarter ended September 30, 2009 that has materially affected, or is reasonably likely to materially affect,

the Company's internal control over financial reporting.

Our management does not expect that our disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent

limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by

management or board override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent

limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

This quarterly report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this quarterly report.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

There were no legal proceedings pending or, to the Company's knowledge, that would be material to the financial position of the Company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults on Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to the vote of the Company’s stockholders in this quarter.

Item 5. Other Information

None.

Item 6. Exhibits and reports on form 8-K

On January 23, 2009 an event occurred which was not made in the ordinary course of Subjex Corporation business thus prompting an 8K filing with the SEC.

The Company received verification of the SubjexFMS system performance results for the period January 1, 2008 to December 31, 2008 in accordance with Global Investment Performance Standards (“GIPS”) for the purpose of determining whether any material modifications should be made to our trading activity gain calculations in order for it to conform with GIPS. The letter of audit confirmation was included in this 8-K report.

No other reports were filed in the period ending September 30, 2009

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Issuer has duly caused this report to be signed on its behalf by the undersigned officers and/or Directors, there unto duly authorized.

Subjex Corporation

Date: November 14, 2009

NAME TITLE

/s/ Andrew D. Hyder President and Chief Executive Officer

SUBJEX CORP - FORM 10-Q - November 16, 2009

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