MAXSYS HOLDINGS, INC. - FORM 10-Q

Attached files

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EX-31.1 - SECTION 302 CERTIFICATION BY THE CORPORATION?S CHIEF EXECUTIVE OFFICER - MAXSYS HOLDINGS, INC.	maxsys10q20090930ex31-1.htm
EX-31.2 - SECTION 302 CERTIFICATION BY THE CORPORATION?S CHIEF FINANCIAL OFFICER - MAXSYS HOLDINGS, INC.	maxsys10q20090930ex31-2.htm
EX-32.2 - SECTION 906 CERTIFICATION BY THE CORPORATION'S CHIEF FINANCIAL OFFICER - MAXSYS HOLDINGS, INC.	maxsys10q20090930ex32-2.htm
EX-32.1 - SECTION 906 CERTIFICATION BY THE CORPORATION'S CHIEF EXECUTIVE OFFICER - MAXSYS HOLDINGS, INC.	maxsys10q20090930ex32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]	Quarterly Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934

For the quarterly period ended: September 30, 2009

[__]	Transition Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934

For the transition period from ______________ to _______________

Commission File Number: 000-53148

MAXSYS HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware		26-0904488
(State or other jurisdiction of incorporation of origination)		(I.R.S. Employer Identification Number)

22817 Ventura Blvd., Suite #462 Woodland Hills, California		91364
(Address of principal executive offices)		(Zip code)

(818) 943-8068
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [__]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [__] 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. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]	Accelerated filer [ ]

Non-accelerated filer [ ] (Do not check if a smaller reporting company)	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]

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each issuer’s classes of common stock, as of the latest practicable date: 81,960,552 issued and outstanding as of November 19, 2009.

Transitional Small Business Disclosure Form (Check one): Yes [ ] No [X]

TABLE OF CONTENTS

TO QUARTERLY REPORT ON FORM 10-Q

FOR QUARTER ENDED SEPTEMBER 30, 2009

PART I	FINANCIAL INFORMATION	Page
Item 1.	Financial Statements (unaudited)	2
	Balance Sheets as of September 30, 2009 (unaudited) and December 31, 2008	2
	Statements of Operations for the three months and nine months ended September 30, 2009 and 2008 (unaudited) and from inception to September 30, 2009 (unaudited)	3
	Statements of Stockholders’ Deficit (unaudited)	4
	Statements of Cash Flows for the nine months ended September 30, 2009 and 2008 (unaudited) and from inception to September 30, 2009 (unaudited)	5
	Notes to the Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	16
Item 4.	Controls and Procedures	16

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	17
Item 1A.	Risk Factors	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3.	Defaults Upon Senior Securities	18
Item 4.	Submission of Matters to a Vote of Security Holders	18
Item 5.	Other Information	18
Item 6.	Exhibits	18
Signatures		19

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Maxsys Holdings, Inc.

(Formerly known as Tai Pan Holding, Inc. and Unicapital Acquisition Corp.)

(A Development Stage Company)

Balance Sheets

		September 30,
		2009			December 31,
		(unaudited)			2008
ASSETS
Current assets
Cash		$	1,527		$	27,932
Accounts receivable			401			1,092
Other receivables			8,219			30,764
Inventories			987			116,201
	Total current assets		11,134			175,989

Property and equipment - net			39,033			58,647
Other assets			-			315,901
	Total assets	$	50,167		$	550,537

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable		$	700		$	8,035
Accrued liabilities			144,429			136,321
Note payable to related party			73,264			112,564
Line of credit			-			299,940
Other current liabilities			21,305			28,484
	Total current liabilities		239,698			585,344



Stockholders' deficit
Preferred stock: $0.01 par value, 20,000,000 shares authorized; none issued			-			-
Common stock: $0.01 par value; 300,000,000 shares authorized; 81,888,889 and 78,000,000 issued in 2009 and 2008, respectively			818,889			780,000
Additional paid-in capital			513,611			382,500
Retained earnings deficit			(1,522,031	)		(1,197,307	)
Total stockholders' deficit			(189,531	)		(34,807	)

Total liabilities and stockholders' deficit		$	50,167		$	550,537

See notes to the financial statements.

Maxsys Holdings, Inc.

(Formerly known as Tai Pan Holding, Inc. and Unicapital Acquisition Corp.)

(A Development Stage Company)

Statements of Operations

(Unaudited)

													Period from
	For the three						For the nine						September 5, 2007
	months ended						months ended						(inception) to
	September 30, 2009			September 30, 2008			September 30, 2009			September 30, 2008			September 30, 2009

Revenues	$	1,085		$	73,653		$	159,194		$	108,165		$	340,764

Cost of sales		853			53,713			151,251			80,678			287,698

Gross profit		232			19,940			7,943			27,487			53,066

Operating expenses
Sales and marketing		3,248			31,691			34,299			68,420			156,692
Research and development		-			31,731			-			196,387			337,489
General and administrative		38,377			108,027			291,163			465,723			1,069,171
Total operating expenses		41,625			171,449			325,462			730,530			1,563,352

Loss from operations		(41,393	)		(151,509	)		(317,519	)		(703,043	)		(1,510,286	)

Other income (expense)
Interest income		13			4,496			1,256			7,166			13,689
Finance charges		(251	)		(3,508	)		(4,683	)		(3,757	)		(19,716	)
Franchise taxes		-			-			(1,114	)		(1,309	)		(3,291	)
Miscellaneous income		2			-			791			-			769
Miscellaneous expenses		-			(18	)		(3,455	)		(17	)		(3,196	)

Net loss	$	(41,629	)	$	(150,539	)	$	(324,724	)	$	(700,960	)	$	(1,522,031	)

Basic and diluted loss per common share		*			*			*			*

Basic and diluted weighted average common shares outstanding		81,888,889			75,000,000			81,888,889			75,000,000

* Less than $0.01.

See notes to the financial statements.

Maxsys Holdings, Inc.

(Formerly known as Tai Pan Holding, Inc. and Unicapital Acquisition Corp.)

(A Development Stage Company)

Statements of Stockholders’ Deficit

(Unaudited)

					Additional		Retained			Total
	Common Stock				paid-in		Earnings			Stockholders'
	Shares		Amount		capital		Deficit			deficit

Balance, September 5, 2007		-	$	-	$	-	$	-		$	-

Issuance of stock for cash at $0.01
per share in September 2007		75,000,000		750,000		-		-			750,000

Net loss		-		-		-		(126,101	)		(126,101	)

Balance, December 31, 2007		75,000,000	$	750,000	$	-	$	(126,101	)	$	623,899

Issuance of stock for cash at $0.0125
per share in December 2008		3,000,000		30,000		7,500		-			37,500

Recognition of stock based compensation		-		-		375,000		-			375,000

Net loss		-		-		-		(1,071,206	)		(1,071,206	)

Balance, December 31, 2008		78,000,000	$	780,000	$	382,500	$	(1,197,307	)	$	(34,807	)

Issuance of stock for cash at $0.025
per share in January 2009		3,000,000		30,000		45,000		-			75,000

Recognition of stock based compensation		-		-		75,000		-			75,000

Issuance of stock for cash at $0.0225
per share in September 2009		888,889		8,889		11,111					20,000

Net loss		-		-		-		(324,724	)		(324,724	)

Balance, September 30, 2009		81,888,889	$	818,889	$	513,611	$	(1,522,031	)	$	(189,531	)

See notes to the financial statements.

Maxsys Holdings, Inc.

(Formerly known as Tai Pan Holding, Inc. and Unicapital Acquisition Corp.)

(A Development Stage Company)

Statements of Cash Flows

(Unaudited)

	Nine			Nine			September 5, 2007
	months ended			months ended			(inception) to
	September 30, 2009			September 30, 2008			September 30, 2009

Operating activities
Net loss	$	(324,724	)	$	(700,960	)	$	(1,522,031	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation		11,184			26,624			56,944
Non-cash stock based compensation		75,000			225,000			450,000
Changes in operating assets and liabilities:
Accounts receivable		691			(15,419	)		(401	)
Other receivables		22,545			(4,720	)		(8,219	)
Inventories		115,213			(146,190	)		(987	)
Other asssets		315,901			(302,646	)		-
Accounts payable		(7,335	)		(5,934	)		700
Other current liabilities		(7,179	)		-			1,304
Accrued liabilities		8,108			(695	)		144,429
Net cash provided by (used in) operating activities		209,404			(924,940	)		(878,261	)

Investing activities
Proceeds from sale of property and equipment		8,431			-			8,431
Purchase of property and equipment		-			(79,844	)		(104,407	)
Net cash provided by (used in) investing activities		8,431			(79,844	)		(95,976	)

Financing activities
Proceeds from (payment of) line of credit		(299,940	)		299,940			-
Proceeds from issuance (payment of) of note payable		(39,300	)		116,850			93,264
Proceeds from issuance of common stock		95,000			500,000			882,500
Net cash provided by (used in) financing activities		(244,240	)		916,790			975,764

Net change in cash		(26,405	)		(87,994	)		1,527

Cash, beginning of period		27,932			98,321			-
Cash, end of period	$	1,527		$	10,327		$	1,527

Supplemental disclosure of cash flow information
Cash paid for:
Interest	$	4,683		$	3,757		$	22,290

See notes to the financial statements.

BASIS OF PRESENTATION

Maxsys Holdings, Inc. (formerly known as Tai Pan Holding, Inc. and Unicapital Acquisition Corp.) (the “Company”) was incorporated in the state of Delaware on January 11, 2008. The Company is a distributor and retailer of ATSC digital converter box.

The accompanying unaudited financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for the preparation of interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Financial results for the three months and nine months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.

Management is required to make certain estimates and assumptions which affect the amounts of assets, liabilities, revenue and expenses reported. Actual results could differ materially from these estimates and assumptions.

MERGER AND ACQUISITION

On January 2, 2009, William Tay, the majority shareholder of the Company entered into a Share Purchase Agreement with Tai Pan Holding, Inc. (“Tai Pan”), a Delaware corporation incorporated on September 5, 2007 under the name “Gridlink Technologies, Inc.” On January 18, 2009, pursuant to such agreement, Mr. Tay sold all 31,340,000 common shares of the Company held by him to Tai Pan for $39,950 in consideration.

On March 11, 2009, the Company entered into an Agreement and Plan of Merger with Tai Pan. On March 16, 2009, pursuant to this agreement, Tai Pan merged with and into the Company, whereupon the separate existence of Tai Pan ceased and the Company was the surviving entity. Concurrently, the Company cancelled the common shares acquired from Mr. Tay. In connection therewith, on March 25, 2009, the Company changed its name from “Unicapital Acquisition Corp.” to “Tai Pan Holding, Inc.”

The merger transaction has been accounted for as a reverse merger, with the Company as the legal acquirer and Tai Pan as the accounting acquirer. Prior to the merger with Tai Pan, the Company was a shell company with no operations and no net assets. Consequently, the financial information presented herein is that of Tai Pan.

On September 3, 2009 the Company changed its name to Maxsys Holdings, Inc.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Managements’ Plan

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred losses from operations and has negative cash flows from operating activities since its inception. At September 30, 2009 and December 31, 2008 the Company had $1,527 and $27,932, respectively in unrestricted cash. The Company requires funding to maintain working capital to meet its growth plans until such time revenues are sufficient to meets its anticipated cost structure. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans are to obtain additional funding through an offering of common stock. There are no assurances that management will be successful in its plans. The accompanying financial statements do not include any adjustments that might result from the outcome of the uncertainty.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported periods. Actual results could materially differ from those estimates.

Cash and Cash Equivalents

For purpose of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

Revenue Recognition

The Company recognizes revenues when the earnings process is complete, evidenced by an agreement between the Company and the customer, there has been delivery and acceptance, collectability is probable, and pricing is fixed and determinable. Revenue from service agreements is generally recognized ratably over the service period or as the service is rendered. Allowances are established for anticipated product returns, price protection, cooperative marketing, and sales incentive programs.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined by using the first-in first-out method.

Research and Development

Research and development costs are expensed as incurred. The costs of materials and equipment that will be acquired or constructed for research and development activities, and that have alternative future uses, both in research and development, marketing or sales, will be classified as property and equipment and depreciated over their estimated useful lives.

Income Taxes

The Company accounts for income taxes in accordance with Financial Accounting Standards Board ("FASB") Statement No. 109 "Accounting for Income Taxes." SFAS No. 109 requires the Company to provide a net deferred tax asset/liability equal to the expected future tax benefit/expense of temporary reporting differences between book and tax accounting methods and any available operating loss or tax credit carry forwards. A valuation allowance is established to offset the deferred tax assets when it is more likely than not, that such tax assets will not be recovered.

Loss per Common Share

The Company presents basic loss per share ("EPS") and diluted EPS on the face of the statement of operations. Basic loss per share is computed as net loss divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock options, warrants, and other convertible securities.

Risk and Uncertainties

The Company's operations are subject to new innovations in product design and function. Significant technical changes can have an adverse effect on product lives. Design and development of new products are important elements to achieve and maintain profitability in the Company's industry segment.

The Company may be subject to federal, state and local environmental laws and regulations. The Company does not anticipate expenditures to comply with such laws and does not believe that regulations will have a material impact on the Company's financial position, results of operations, or cash flows. The Company believes that its operations comply, in all material respects, with applicable federal, state, and local environmental laws and regulations.

Concentrations of Risk

The Company, at times, maintains cash balances at certain financial institutions in excess of amounts insured by federal agencies. The Company’s sale and packaging of its product and other related services in 2008 and beginning of 2009 were concentrated solely with a third party. The loss of this third party could have a material effect on the Company. The Company will explore opportunities with other third parties as it continues to expand its business.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. The provision for depreciation is computed using the straight-line method over the estimated useful lives of the assets ranging from three (3) to seven (7) years. Significant renewals and betterments are capitalized while maintenance and repairs are charged to expense as incurred. Leasehold improvements are amortized on the straight-line basis over the lesser of their estimated useful lives or the term of the related lease.

The Company reviews its property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

Stock-Based Compensation

At inception, the Company adopted SFAS No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123R"). SFAS 123R requires that the Company account for all stock-based compensation using a fair-value method and recognize the fair value of each award as an expense over the service period.

Accounting for Stock Options Issued to Consultants

The Company measures compensation expense for its non-employee stock-based compensation under Emerging Issues Task Force ("EITF") No. 96-18 "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services". The fair value of the option issued or committed to be issued is used to measure the transaction, as this is more reliable than the fair value of the services received. The fair value is measured at the value of the Company's common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty's performance is complete. The fair value of the equity instrument is charged directly to stock-based compensation expense and credited to additional paid-in capital.

Fair Value Measurements

On January 1, 2008, the Company adopted SFAS No. 157 (SFAS 157), Fair Value Measurements which became effective for the Company. SFAS 157 relates to financial assets and financial liabilities. In February 2008, the FASB issued FASB Staff Position (FSP) No. FAS 157-2, Effective Date of FASB Statement No. 157, which delayed the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on at least an annual basis, until January 1, 2009 for calendar year-end entities.

SFAS 157 defines fair value, establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (GAAP), and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements and are to be applied prospectively with limited exceptions. FSP FAS 157-1 amends SFAS 157 to exclude from the scope of SFAS 157 certain leasing transactions accounted for under Statement of Financial Accounting Standards No. 13, “Accounting for Leases.” FSP FAS 157-2 amends SFAS 157 to defer the effective date of SFAS 157 for all non-financial assets and non-financial liabilities except those that are recognized or disclosed at fair value in the financial statements on a recurring basis to fiscal years beginning after November 15, 2008. In addition, effective for the third quarter of 2008, the Company adopted FASB Staff Position 157-3 “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active” (“FSP FAS 157-3”). FSP FAS 157-3 clarifies the application of SFAS 157 to financial instruments in an inactive market. The adoption of SFAS 157 and FSP FAS 157-3 did not have a material impact on the Company’s financial statements since the Company generally does not record its financial assets and liabilities in its financial statements at fair value.

Effective January 1, 2008, the Company also adopted, on a prospective basis, Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The adoption of SFAS 159 did not have a material impact on the Company’s financial statements since the Company elected not to apply the fair value option for any of its eligible financial instruments or other items.

In April 2009, the FASB issued FSP FAS 107-1 and Accounting Principles Board (APB) 28-1, Interim Disclosures about Fair Value of Financial Instruments. The FSP amends SFAS No. 107 “Disclosures about Fair Value of Financial Instruments” to require an entity to provide disclosures about fair value of financial instruments in interim financial information. This FSP is to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The adoption of this FSP did not have an impact on the Company’s financial statements.

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, which became effective January 1, 2009 via prospective application to business combinations. This Statement requires that the acquisition method of accounting be applied to a broader set of business combinations, amends the definition of a business combination, provides a definition of a business, requires an acquirer to recognize an acquired business at its fair value at the acquisition date and requires the assets and liabilities assumed in a business combination to be measured and recognized at their fair values as of the acquisition date (with limited exceptions). The Company adopted this Statement on January 1, 2009. There was no impact upon adoption, and its effects on future periods will depend on the nature and significance of business combinations subject to this statement.

In April 2009, the FASB issued FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies. This FSP requires that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value if fair value can be reasonably estimated. If fair value cannot be reasonably estimated, the asset or liability would generally be recognized in accordance with SFAS No. 5, “Accounting for Contingencies” and FASB Interpretation No. 14, “Reasonable Estimation of the Amount of a Loss”. Further, the FASB removed the subsequent accounting guidance for assets and liabilities arising from contingencies from SFAS No. 141(R). The requirements of this FSP carry forward without significant revision the guidance on contingencies of SFAS No. 141, “Business Combinations”, which was superseded by SFAS No. 141(R) (see previous paragraph). The FSP also eliminates the requirement to disclose an estimate of the range of possible outcomes of recognized contingencies at the acquisition date. For unrecognized contingencies, the FASB requires that entities include only the disclosures required by SFAS No. 5. This FSP was adopted effective January 1, 2009. There was no impact upon adoption, and its effects on future periods will depend on the nature and significance of business combinations subject to this statement.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events,” which requires entities to disclose the date through which they have evaluated subsequent events and whether the date corresponds with the release of their financial statements. The statement establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS No. 165 is effective for interim or annual financial periods ending after June 15, 2009, and shall be applied prospectively. The adoption of SFAS No. 165 did not have an impact to the Company’s financial statements.

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles,” Replaces SFAS No. 162, establishes the source of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. Statement 168 and the Codification is effective for the Company this period ended September 30, 2009 and references to pre-codification statements have been retained with references to the Codification as follows:

Pre- Codification		FASB Accounting Standards Codification

FAS 109 - Accounting for Income Taxes		Topic 740 - Income Taxes
FAS 123 (R) - Share-Based Payment		Topic 718-1- - Compensation - Stock Compensation
EITF 96-18 - Accounting for Equity Instruments that are		Topic 505 - 50 - Equity-Based Payments to Non-Employees
Issued to Other Than Employees for Acquiring
FAS 157 - Faive Value Measurements		Topic 820 - Fair Value Measurements and Disclosures
FAS 159 - The Fair Value Option for Financial Assets and		Topic 825 - Financial Instruments
Financial Liabilities
FSP FAS 107-1 and APB 28-1- Interim disclosures about		Topic 320 -10-35 - Investments - Debt and Equity Securities
Fair Value of Financial Statements
FAS 141(R) - Business Combinations		Topic 805 - Business Combinations
FAS 5 - Accounting for Contingencies		Topic 450 - Contingencies
FAS 165 - Subsequent Events		Topic 855 - Subsequent Events
FAS 7 - Accounting and Reporting by Development Stage Enterprises		Topic 915 - Development Stage Entities

PROPERTY AND EQUIPMENT

At September 30, 2009 and December 31, 2008, property and equipment consisted of the following:

	September 30,		December 31,
	2009		2008
Furniture and fixtures	$	9,495	$	9,495
Leasehold improvements		1,350		1,350
Machinery and equipment		19,138		19,138
Test equipment		30,603		39,033
Software		35,391		35,391
		95,977		104,407
Less accummulated depreciation		56,944		45,760
	$	39,033	$	58,647

Provisions for depreciation for the nine months ended September 30, 2009 and September 30, 2008 were $11,184 and $26,624, respectively.

OTHER ASSETS

At September 30, 2009 and December 31, 2008, other assets consisted of the following:

	September 30,			December 31,
	2009			2008
Certificate of deposit - restricted		$	-		$	302,614
Deposit			-			13,287
		$	-		$	315,901

LINE OF CREDIT

On March 12, 2008, the Company obtained a line of credit from United Commercial Bank amounting to $300,000. The line of credit bears interest at 4.44% per annum and is collateralized by the Company’s certificate of deposit. The Company paid off the total balance of $299,940 at the maturity date of February 13, 2009.

RELATED PARTY TRANSACTION

On April 21, 2008, the Company issued a promissory note payable to Tai Pan Capital Private Limited, an affiliate, amounting to $120,000. The promissory note bears interest at 6% per annum and is collateralized by the Company’s inventories and accounts receivable. As of September 30, 2009, the balance of the promissory note amounted to $73,264.

In April, June and September 2009, the Company obtained advances from a director totaling $21,000 (presented in the balance sheet as part of other current liabilities).

STOCKHOLDERS’ EQUITY

During the period from September 5, 2007 (Inception) to September 30, 2009, the Company issued 81,888,889 shares of its common stock for a total consideration of $882,500.

On October 28, 2009 the Company issued 71,652 shares of its common stock for a total consideration of $2,150.

COMMITMENT AND CONTINGENCIES

a) Agreements with Apex Digital, Inc.

On November 16, 2008, in connection with the sale and packaging of its products and other related services, the Company entered into various agreements with Apex Digital, Inc. These agreements are as follows: (a) Product Sales and Purchase Agreement; (b) Fulfillment and Service Agreement (c) Sales Commission Agreement; and, (d) Service and Payment Agreement. These agreements were terminated on July 31, 2009.

b) Litigation

Two of the Company’s former employees filed a legal action against the Company for breach of contract for failure to pay severance pay upon their termination from employment and pursuant to their employment agreements. The Company accrued this liability as of September 30, 2009. In April 2009, the Company filed a cross-complaint against the former CEO upon breach of fiduciary duty, fraud, and negligence in relation to the above legal action, and request for indemnification. In June 2009, the former CEO filed another cross-complaint against the Company for wrongful termination and others. The court granted another continuance to extend the trial day to April 5, 2010 at final status conference on October 23, 2009.

INCOME TAXES

As of September 30, 2009, the Company has available net operating loss (NOL) carry-forwards that approximate $1,522,031 and may be applied against future taxable income through tax year 2025. A valuation reserve has been set up to entirely offset any deferred tax asset since it is more likely than not that the deferred tax assets will not be realized.

STOCK OPTION PLANS AND GRANTS

On February 28, 2008, the Company adopted the 2008 stock incentive plan (the "2008" Plan). Under the 2008 Plan, the Board of Directors may grant to selected employees, directors and other independent advisors options to purchase up to 50,000,000 shares of common stock during their period of service with the Company.

On March 1, 2008, the Board of Directors granted 50,000,000 stock options to key employees, directors, and consultants at a $0.01 exercise price per share. The value of the options was determined using the Black-Scholes model with the following assumptions:

Estimated fair value of underlying common stock	0.01
Expected life (in years)	6.0
Risk-free interest rate	2.78%
Expected volatility	134%
Dividend yield	0%

The expected option life was estimated based upon the average of the contractual term of the underlying stock option under the 2008 Plan and the vesting term. The expected volatility of the Company's stock price is based upon the average of three similar competitors' historical daily changes in the price of their common stock. The risk-free interest rate is based upon the current yield on U.S. Treasury securities having a term similar to the expected option term. Dividend yield is estimated at zero because the Company does not anticipate paying dividends in the foreseeable future.

The value estimated to the options was $450,000 and will be expensed over the vesting period of one year. On April 28, 2009, the Company terminated the stock option plan and grants there under. The Company recognized compensation expenses during the nine months ended September 30, 2009 and 2008 amounting to $75,000 and $225,000, respectively.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statement Notice

Certain statements made in this periodic report on Form 10-Q are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) in regard to the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Tai Pan Holding, Inc. (“we”, “us”, “our” or the “Company”) to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Quarterly Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.

Overview

Maxsys Holdings, Inc., Inc. (the “Company”), formerly known as Tai Pan Holding, Inc. and Unicapital Acquisition Corp., was incorporated in Delaware on January 11, 2008. On March 11, 2009, the Company entered into a merger agreement with Tai Pan Holding, Inc. (“Tai Pan”), a Delaware corporation, pursuant to which the Company merged with Tai Pan on March 16, 2009, with the Company as the surviving entity. We accounted for this merger transaction as a reverse acquisition and recapitalization and, as a result, our financial statements are in substance those of Tai Pan, with the assets and liabilities, and revenues and expenses, of the Company being included effective from the date of the merger transaction. In connection with the merger, the Company changed its name to “Tai Pan Holding, Inc.” on March 25, 2009.

Prior to the merger acquisition, Tai Pan was developing high-speed wireless communications equipment and accessories that enable the transmission of data, voice, and video with throughput speeds and capacity. In May 2008, Tai Pan’s management decided to discontinue the development project due to the lack of the funds and the resignation of its founder/CEO. Instead, Tai Pan continued its operations as a distributor and retailer of ATSC digital converter box, a business which the Company continues since the merger transaction. ATSC digital converter box allows analog televisions to receive digital signals after analog broadcasting terminates on June 12, 2009.

On September 3, 2009 the Company decided to change its name to Maxsys Holdings, Inc. The Company continues to locate and identify suitable business entities for potential combination with any such entity. The combination will normally take the form of a merger, stock-for-stock exchange or stock-for- assets exchange. No assurances can be given, however, that the Company will be successful in locating or negotiating with any target business.

The Company has not restricted its search for any specific kind of businesses, and it may acquire a business which is in its preliminary or development stage, which is already in operation, or in essentially any stage of its business life. It is impossible to predict the status of any business in which the Company may become engaged, in that such business may need to seek additional capital, may desire to have its shares publicly traded, or may seek other perceived advantages which the Company may offer. In implementing a structure for a particular business acquisition, the Company may become a party to a merger, consolidation, reorganization, joint venture, or licensing agreement with another corporation or entity. It is anticipated that any securities issued in any such business combination would be issued in reliance upon exemption from registration under applicable federal and state securities laws. In some circumstances, however, as a negotiated element of its transaction, the Company may agree to register all or a part of such securities immediately after the transaction is consummated or at specified times thereafter. If such registration occurs, it will be undertaken by the surviving entity after the Company has entered into an agreement for a business combination or has consummated a business combination. The issuance of additional securities and their potential sale into any trading market which may develop in the Company's securities may depress the market value of the Company's securities in the future if such a market develops, of which there is no assurance.

The Company will participate in a business combination only after the negotiation and execution of appropriate agreements. Negotiations with a target company will likely focus on the percentage of the Company which the target company shareholders would acquire in exchange for their shareholdings. Although the terms of such agreements cannot be predicted, generally such agreements will require certain representations and warranties of the parties thereto, will specify certain events of default, will detail the terms of closing and the conditions which must be satisfied by the parties prior to and after such closing and will include miscellaneous other terms. Any merger or acquisition effected by the Company can be expected to have a significant dilutive effect on the percentage of shares held by the Company's shareholders at such time.

There is presently no trading market for the Company's common stock and no market may ever exist for the Company's common stock. The Company plans to apply for a corporate CUSIP number for its common stock and to assist broker-dealers in complying with Rule 15c2-11 of the Securities Exchange Act of 1934, as amended, so that such brokers can trade the Company's common stock in the Over- The-Counter Electronic Bulletin Board (the "OTC Bulletin Board"). There can be no assurance to investors that any broker-dealer will actually file the materials required in order for such OTC Bulletin Board trading to proceed.

Accounting for Business Combination

As a result of any business combination, if the acquired entity's shareholders will exercise control over us, the transaction will be deemed to be a capital transaction where we are treated as a non-business entity. Therefore, the accounting for the business combination is identical to that resulting from a reverse merger, except no goodwill or other intangible assets will be recorded. For accounting purposes, the acquired entity will be treated as the accounting acquirer and, accordingly, will be presented as the continuing entity.

Our principal operations commenced in September 2007. However, to date, we have had limited revenues. Financial Accounting Standards Board Statement No. 7 (“FAS 7”) sets forth guidelines for identifying an enterprise in the development stage and the standards of financial accounting and reporting applicable to such an enterprise. In the opinion of management, our activities from our inception through September 30, 2009 fall within the referenced guidelines. Accordingly, we report our activities in this report in accordance with FAS 7.

The FASB finalized the FASB Accounting Standards Codification effective for periods ending on or after September 15, 2009. The Company has currently retained references to FASB but provides references to the Codification as follows:

Pre- Codification		FASB Accounting Standards Codification

FAS 109 - Accounting for Income Taxes		Topic 740 - Income Taxes
FAS 123 (R) - Share-Based Payment		Topic 718-1- - Compensation - Stock Compensation
EITF 96-18 - Accounting for Equity Instruments that are		Topic 505 - 50 - Equity-Based Payments to Non-Employees
Issued to Other Than Employees for Acquiring
FAS 157 - Faive Value Measurements		Topic 820 - Fair Value Measurements and Disclosures
FAS 159 - The Fair Value Option for Financial Assets and		Topic 825 - Financial Instruments
Financial Liabilities
FSP FAS 107-1 and APB 28-1- Interim disclosures about		Topic 320 -10-35 - Investments - Debt and Equity Securities
Fair Value of Financial Statements
FAS 141(R) - Business Combinations		Topic 805 - Business Combinations
FAS 5 - Accounting for Contingencies		Topic 450 - Contingencies
FAS 165 - Subsequent Events		Topic 855 - Subsequent Events
FAS 7 - Accounting and Reporting by Development Stage Enterprises		Topic 915 - Development Stage Entities

Results of Operations--Three month period ended September 30, 2009 as compared to three month period ended September 30, 2008

Revenue. During the three-month period ended September 30, 2009, we had revenues of $1,085 as compared to revenues of $73,653 during the same period in 2008, a decrease of 99%. This decrease is mainly attributable to the Company’s decision to stop selling convertible boxes and antennas in the beginning of June 2009.

Operating Expenses. Our operating expenses for the three months ended September 30, 2009 were $41,625, as compared to $171,449 in the same period of 2008, a decrease of 76%. The decrease is mainly attributable to the discontinuance of our research and development activities.

Selling and Marketing Expenses. Our selling and marketing expenses for the three months ended September 30, 2009 were $3,248, as compared to $31,691 for the same period in 2008, a decrease of 90%. This decrease is mainly because of the declining selling activities of converter boxes in the third quarter of 2009.

Research and Development Expenses. We did not incur research and development expenses during the three months ended September 30, 2009. The Company decided to discontinue the development project and shifted to the sale of converter boxes.

General and Administrative Expenses. Our general and administrative expenses for the three months ended September 30, 2009 were $38,377, as compared to $108,027 for the same period in 2008, a decrease of 64%. This decrease is mainly because of the discontinuation of our development project.

Loss from Operations. Our losses from operations for the three months ended September 30, 2009, amounted to $41,629, as compared to $150,539 for the same period in 2008, a decrease of 73%. This decrease is mainly because of the discontinuance of our research and development projects.

Interest Expense. We incurred interest expense amounting to $251 for the three months ended September 30, 2009 in connection with the promissory notes. For the same period in 2008, the Company paid interest totaling $4,496 for the line of credit.

Results of Operations--Nine month period ended September 30, 2009 as compared to nine month period ended September 30, 2008

Revenue. During the nine month period ended September 30, 2009, we had revenues of $159,194 as compared to revenues of $108,165 during the same period in 2008, an increase of 31%. This increase is mainly because we did not have any revenues for the first 4 months of 2008 as we were still engaged in our development project and had not commenced selling ATSC digital converter box.

Operating Expenses. Our operating expenses for the nine months ended September 30, 2009 were $325,462, as compared to $730,530 for the same period in 2008, a decrease of 55%. The decrease is mainly attributable to the discontinuance of our research and development activities.

Selling and Marketing Expenses. Our selling and marketing expenses for the nine months ended September 30, 2009 were $34,299, as compared to $68,420 for the same period of 2008, a decrease of 50%. This decrease is primarily because of our declining selling activities of converter boxes.

Research and Development Expenses. We did not incur research and development expenses during the nine months ended September 30, 2009. The Company decided to discontinue the development project and shifted to the sale of converter boxes.

General and Administrative Expenses. Our general and administrative expenses for the nine months ended September 30, 2009 were $291,163, as compared to $465,723 for the same period in 2008, a decrease of 37%. This decrease is mainly because of the discontinuation of our development project.

Loss from Operations. Our losses from operations in the nine months period ended September 30, 2009, amounted to $324,724, as compared to our losses from operations of $700,960 for the same period of 2008, a decrease of 54%. This decrease is mainly because of the discontinuance of our research and development projects.

Interest Expenses. We incurred interest expenses amounting to $4,683 for the nine months ended September 30, 2009 in connection with the promissory notes and line of credit and $3,757 of such expenses for the same period in 2008.

Other Expenses. For the nine months ended September 30, 2009, we recorded other expenses $3,455 in connection with the disposal of equipment. We did not have such expenses for the same period in 2008.

Liquidity and Capital Resources

For the nine-month period ended September 30, 2009, we generated $209,404 from operating activities, as compared to $924,940 that we used in operating activities for the nine-month period ended September 30, 2008. This increase is primarily due to increase in sales and decrease in operating expenses for the first nine months of 2009 and maturity of a $300,000 certificate of deposit in February 2009.

For the nine-month period ended September 30, 2009, we used $244,240 in financing activities, primarily in connection with paying off a line of credit, as compared to $916,790 that we generated in financing activities during the nine-month period ended September 30, 2008, mainly in connection with the proceeds received from the issuance of common stock and obtaining of line of credit.

For the nine-month period ended September 30, 2009, $8,431 was provided from investing activities from the disposal of test equipment, as compared to $79,844 that we used in investing activities to purchase computer hardware and software for our development project for the nine-month period ended September 30, 2008.

As of September 30, 2009, we had cash of $1,527. Our total current assets were $11,134 and our total current liabilities were $239,698, which resulted in negative net working capital of $228,564.

To provide sufficient funding for our business plan, we will need to raise approximately $3 million to $4 million of additional capital during fiscal year of 2009. We expect to achieve this financing goal through public or private equity offerings. We may raise the capital in more than one transaction according to the economy and market conditions. However, we have encountered unexpected difficulties with implementation of our previous business plans, and there can be no assurance that unexpected difficulties can be avoided when we carry on our future business plans. This fact alone could compromise our chances of raising sufficient funds in the foreseeable future. If we are able to raise the funds, the terms and conditions may be highly dilutive to our existing stockholders.

As part of our plan to augment our financial resources and consider attractive business opportunities, we and our principal stockholders have entered into discussions with an unaffiliated third party with respect to a potential merger transaction which could result in change of control/ownership and new management. However, there can be no assurance that a merger or other significant transaction will be consummated with the third party or, if consummated, that the Company or its stockholders would realize any benefits from it.

Contractual Obligations

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Going Concern

The financial statements included with this report have been prepared in conformity with generally accepted accounting principles that contemplate the continuance of the Company as a going concern. Due to our lack of cash, we are unable pay all of the costs associated with our operations. Management intends to use borrowings and sales of securities to mitigate the effects of our cash position; however, no assurance can be given that debt or equity financing, if and when required, will be available. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and classification of liabilities that might be necessary should we be unable to continue existence.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures:

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules, regulations and related forms, and that such information is accumulated and communicated to our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

The Company's management does not expect that their disclosure controls or their internal controls over financial reporting will prevent all error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, but not absolute, assurance that the objectives of a control system are met. Further, any control system reflects limitations on resources, and the benefits of a control system must be considered relative to its costs. These limitations also 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 override of a control. A design of a control system is also based upon certain assumptions about potential future conditions; over time, controls 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 may not be detected.

As of September 30, 2009, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective.

Changes in Internal Controls

There have been no changes in our internal controls or in other factors that could significantly affect these controls and procedures during the quarter ended September 30, 2009.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The following discussion discusses all known or anticipated material legal proceedings commenced by or against us. Occasionally we may be named as a party in claims and legal proceedings arising out of the normal course of our business. These claims and legal proceedings may relate to contractual rights and obligations, employment matters, or to other matters relating to our business and operations.

Other than the matter discussed below, we are not aware of any material pending legal proceedings involving us.

Shen v. Gridlink Technologies, Inc. (Superior Court of California, County of Los Angeles, Case No. B0394915). Manling Shen, a former employee of the Company, filed suit against the Company in the Superior Court of California, County of Los Angeles, alleging the Company of breach of the employment contract and failure to provide her with the severance payment upon the termination of his employment pursuant to the employment contract.

Liu v. Gridlink Technologies, Inc. (Superior Court of California, County of Los Angeles, Case No. B0397482). Joshua Liu, a former employee of the Company, filed suit against the Company in the Superior Court of California, County of Los Angeles, alleging the Company of breach of the employment contract and failure to provide him with the severance payment upon the termination of his employment pursuant to the employment contract.

Although neither of the above two cases have been decided so far, the Company’s outside legal counsel suggested that the Company could pay a total of approximately $100,000 to settle with Manling Shen and Josuha Liu.

Grillink Technologies, Inc. a Delaware corporation, Cross-Complainant, vs Jay Wang, an individual (Superior Court of California, County of Los Angeles, Case No. BC394915 c/w BC 397482). In connection with the suits filed by Manling Shen and Joshua Liu against the Company, the Company filed a cross-complaint against the Company’s former CEO—Jay Wang, in the Superior Court of California, County of Los Angeles, alleging Jay Wang of breach of fiduciary duty, fraud, and negligence, and requesting for indemnification. This case has not been decided yet.

Jay Wang, an individual, Cross complainant, v Gridlink Technologies, Inc. (Superior Court of California, County of Los Angeles, Case No. BC394915 c/w BC397482). In connection with the above-mentioned suits, in June 2009, the Company’s former CEO—Jay Wang filed cross-complaint against the Company for accounting, declaratory relief, and indemnification, alleging the Company of wrongful termination in violation of public policy, violation of California Labor Code 1102.5, breach of contract to terminate for cause, breach of fiduciary duty, breach of duty of loyalty, breach of contract, and breach of the covenant of good faith and fair dealing. This case has not been decided yet.

The final status conference was held on October 23, 2009 and the court granted continuance to extend trial date to April 5, 2010.

ITEM IA. RISK FACTORS

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

On September 18, 2009, the Company issued 888,889 shares of common stock for total consideration of $20,000 for general operation of the Company under the exemption from registration afforded the Company under Section 4(2) of the Securities Act of 1933, as amended.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS

EXHIBIT INDEX

Exhibit
Number		Description

2.1		Agreement and Plan of Merger (1)

3.1		Certificate of Incorporation (2)

3.2		Certificate of Merger (3)

3.3		Bylaws (2)

31.1		Section 302 Certification by the Corporation’s Chief Executive Officer *
31.2		Section 302 Certification by the Corporation’s Chief Financial Officer *

32.1		Section 906 Certification by the Corporation's Chief Executive Officer *
32.2		Section 906 Certification by the Corporation's Chief Financial Officer *

* Filed herewith.

(1) Incorporated by reference from the Registrant’s Current Report on Form 8-K filed on March 19, 2009.

(2) Incorporated by reference from the Registrant’s registration statement on Form 10-12G filed on March 28, 2008.

(3) Incorporated by reference from the Registrant’s Current Report on Form 8-K filed on March 26, 2009.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

November 19, 2009	MAXSYS HOLDINGS, INC.


	By: /s/ William Elder
	William Elder
	Chief Executive Officer

	By: /s/ Cheng-Yu Wang
	Cheng-Yu Wang
	Chief Financial Officer

Attached files

MAXSYS HOLDINGS, INC. Reports

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