Attached files
file | filename |
---|---|
EX-32.2 - EX-32.2 - BAETA CORP | v193027_ex32-2.htm |
EX-31.1 - EX-31.1 - BAETA CORP | v193027_ex31-1.htm |
EX-31.2 - EX-31.2 - BAETA CORP | v193027_ex31-2.htm |
EX-32.1 - EX-32.1 - BAETA CORP | v193027_ex32-1.htm |
EX-10.1 - BAETA CORP | v193027_ex10-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 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 June 30, 2010
OR
o
|
TRANSACTION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
transition period
from ___________________________ to ___________________________
Commission
file number: 333-154243
BAETA
CORP.
(Exact
Name of Registrant as Specified in Its Charter)
New
Jersey
|
26-0722186
|
|
(State of Other Jurisdiction of Incorporation or
Organization)
|
(I.R.S. Employer Identification Number)
|
1
Bridge Plaza
Second
Floor, Suite 275
Fort
Lee, NJ
(201)
471-0988
|
07024
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
(201)
471-0988
(Registrant’s
Telephone Number, Including Area Code)
N/A
(Former
Name, Former Address and Former Fiscal Year, If Changed Since Last
Report)
Copies
to:
The
Sourlis Law Firm
Virginia
K. Sourlis, Esq.
214
Broad Street
Red
Bank, New Jersey 07701
(732)
530-9007
www.SourlisLaw.com
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 o
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 o No o
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,”
“non-accelerated filer” and “smaller reporting company” in Rule 12b-2 of
the Exchange Act. (Check one):
Large
accelerated filer o
|
|
Accelerated
filer o
|
|
|
Non-accelerated
filer o
|
|
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 o No x
Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date.
As of
August 10, 2010, there were 22,852,926 shares of Common Stock outstanding, 100
shares of Series A Preferred Stock outstanding and 2 Shares of Series B
Convertible Preferred Stock outstanding.
TABLE OF CONTENTS
Page
|
|||
PART
I – FINANCIAL INFORMATION
|
|||
Item
1.
|
Financial
Statements
|
3
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Plan of
Operations
|
14
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
19
|
|
Item
4T.
|
Controls
and Procedures
|
19
|
|
|
|||
PART
II – OTHER INFORMATION
|
|||
Item
1.
|
Legal
Proceedings
|
21
|
|
Item
1A.
|
Risk
Factors
|
21
|
|
Item
2.
|
Unregistered
Sale of Equity Securities and Use of Proceeds
|
21
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
24
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
24
|
|
Item
5.
|
Other
Information
|
24
|
|
Item
6.
|
Exhibits
|
25
|
|
SIGNATURES
|
26
|
2
PART
I
Item 1. Financial Statements.
Baeta
Corp.
(
a Developmental Stage Company)
Balance
Sheet
As
of
June
30,
2010
|
As
of
December
31,
2009
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
|
$ | 13,517 | $ | 3,189 | ||||
Inventory
|
11,359 | 1,713 | ||||||
Total
Current Assets
|
24,876 | 4,901 | ||||||
Other
Assets
|
||||||||
Software
Application
|
250,607 | 203,357 | ||||||
Plant
Property & Equipment, net of accumulated depreciation of
$794
|
24,118 | 21,694 | ||||||
Organization,
net of accumulated amortization of $ 204
|
146 | 181 | ||||||
Deposit
|
1,904 | 1,904 | ||||||
Total
Other Assets
|
276,776 | 227,136 | ||||||
TOTAL
ASSETS
|
$ | 301,651 | $ | 232,037 | ||||
LIABILITIES
& STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||
Current
Liabilities
|
||||||||
Accounts
Payable
|
$ | 60,209 | $ | 69,805 | ||||
Accounts
Payable Related Party
|
171,000 | 110,000 | ||||||
Line
of Credit
|
45,984 | 46,708 | ||||||
Other
Current Liabilities
|
56,825 | 56,492 | ||||||
Shareholder
Advance - Short Term
|
15,972 | - | ||||||
Shareholder
Note - Short Term
|
20,000 | 10,000 | ||||||
Total
Current Liabilities
|
369,990 | 293,006 | ||||||
Long-Term
Liabilities
|
||||||||
Convertible
Note
|
105,694 | - | ||||||
Interest
Payable, Convertible Note
|
1,667 | - | ||||||
Shareholder
Advance
|
45,564 | 28,510 | ||||||
Shareholder
Note
|
288,850 | 288,850 | ||||||
Total
Long-Term Liabilities
|
441,775 | 317,360 | ||||||
TOTAL
LIABILITIES
|
811,765 | 610,366 | ||||||
Stockholders'
Equity (Deficit)
|
||||||||
Preferred
stock, 10,000,000 shares authorized with a par value of $ 0.0001. 100
shares of Series A issued or outstanding (100 issued and
outstanding as of 2008); 10 shares of Series B authorized with a par value
of $0.0001 and issued and outstanding 2 shares at June 30,
2010
|
- | - | ||||||
Common
stock, 100,000,000 shares authorized with a par value of $ 0.0001, issued
and outstanding 23,079,825 shares at March 31, 2010
|
2,308 | 2,250 | ||||||
Paid-in
capital
|
1,431,055 | 981,800 | ||||||
Losses
that have accumulated during the development stage
|
(1,943,477 | ) | (1,362,378 | ) | ||||
Total
Stockholders' Equity (Deficit)
|
(510,114 | ) | (378,328 | ) | ||||
TOTAL
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
|
$ | 301,651 | $ | 232,037 |
See
Notes Financial Statements
3
Baeta
Corp.
(
a Developmental Stage Company)
Statement
of Operations
Three-Month
Period Ended
June
30
2010
|
Three-Month
Period Ended
June
30
2009
|
Six-Months
Period
Ended
June
30
2010
|
Six-Months
Period
Ended
June
30
2009
|
Cumulative
during
development
stage August 14,
2007
to June 30, 2010
|
||||||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||||||||||
Revenues
|
||||||||||||||||||||
Revenue
|
$ | - | $ | - | $ | - | $ | 9,003 | $ | 9,074 | ||||||||||
Total
Revenue
|
- | - | - | 9,003 | 9,074 | |||||||||||||||
Cost
of Goods Sold
|
||||||||||||||||||||
Cost
of Goods Sold
|
- | - | - | 2,595 | 2,612 | |||||||||||||||
Total
Cost of Goods Sold
|
- | - | - | 2,595 | 2,612 | |||||||||||||||
Gross
Profit
|
- | - | - | 6,408 | 6,462 | |||||||||||||||
Operating
Expenses
|
||||||||||||||||||||
Amortization
|
150 | 17 | 301 | 122 | 998 | |||||||||||||||
Research
& Development
|
45,750 | 111,000 | 253,412 | |||||||||||||||||
Sales
& Marketing
|
61,091 | 33,935 | 112,974 | 50,645 | 287,716 | |||||||||||||||
General
& Administrative Personnel Expenses
|
111,615 | 117,723 | 255,902 | 205,719 | 1,023,132 | |||||||||||||||
Professional
Service Fees
|
27,728 | 14,109 | 48,559 | 22,109 | 209,069 | |||||||||||||||
Other
miscellaneous operating expenses
|
14,235 | 25,472 | 30,024 | 29,650 | 131,130 | |||||||||||||||
Total
Operating Expenses
|
260,569 | 191,256 | 558,759 | 308,244 | 1,905,457 | |||||||||||||||
Loss
From Operations
|
(260,569 | ) | (191,256 | ) | (558,759 | ) | (301,836 | ) | (1,898,995 | ) | ||||||||||
Other
income (expense)
|
- | |||||||||||||||||||
Charitable
Donation
|
(7,500 | ) | ||||||||||||||||||
Interest
expense
|
(15,218 | ) | (1,080 | ) | (22,340 | ) | (2,242 | ) | (34,854 | ) | ||||||||||
Net
Loss Before Provision For Income Taxes
|
(275,787 | ) | (192,336 | ) | (581,099 | ) | (304,078 | ) | (1,941,349 | ) | ||||||||||
Provision
For Income Taxes
|
- | - | - | - | 2,128 | |||||||||||||||
Net
Loss
|
$ | (275,787 | ) | $ | (192,336 | ) | $ | (581,099 | ) | $ | (304,078 | ) | $ | (1,943,477 | ) | |||||
Net
loss per common share - basic and diluted
|
$ | (0.01 | ) | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.01 | ) | $ | |||||||
Weighted
average number of common shares - basic and diluted
|
22,870,918 | 21,605,434 | 22,729,832 | 21,531,573 |
See
Notes Financial Statements
4
Baeta
Corp.
(
a Developmental Stage Company)
Statement
of Stockholders' Equity (Deficit)
Additional
|
Retained
|
|||||||||||||||||||||||||||||||||||
Preferred
Shares A
|
Preferred
Shares B
|
Common
Stock
|
Paid-in
|
Earnings
|
|
|||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
(Deficit)
|
Total
|
||||||||||||||||||||||||||||
Balance,
August 14, 2007
|
- | - | - | - | - | |||||||||||||||||||||||||||||||
Common
stock issued, August 14, 2007
|
20,000,000 | 2,000 | - | - | 2,000 | |||||||||||||||||||||||||||||||
Loss
for the period beginning Aug 14, 2007 ( inception) to December 31,
2007
|
(11,529 | ) | (11,529 | ) | ||||||||||||||||||||||||||||||||
Balance, December
31, 2007
|
20,000,000 | 2,000 | - | (11,529 | ) | (9,529 | ) | |||||||||||||||||||||||||||||
Preferred Stock
- Series A
|
100 | - | ||||||||||||||||||||||||||||||||||
Stock
issued for service and consulting
|
536,280 | 54 | 146,016 | 146,070 | ||||||||||||||||||||||||||||||||
Private
Placement Issuances, August 1, 2008
|
930,400 | 93 | 232,507 | 232,600 | ||||||||||||||||||||||||||||||||
Charitable
donation, Nov 17, 2008
|
10,000 | 1 | 2,499 | 2,500 | ||||||||||||||||||||||||||||||||
Loss
for the year ended Dec 31, 2008
|
(548,200 | ) | (548,200 | ) | ||||||||||||||||||||||||||||||||
Balance, December
31, 2008
|
100 | - | 21,476,680 | 2,148 | 381,022 | (559,729 | ) | (176,559 | ) | |||||||||||||||||||||||||||
Stock
issued for service and consulting
|
627,372 | 63 | 313,623 | 313,686 | ||||||||||||||||||||||||||||||||
Option
Holder's Equity
|
88,694 | 88,694 | ||||||||||||||||||||||||||||||||||
Private
Placement Issuances
|
387,000 | 39 | 193,461 | 193,500 | ||||||||||||||||||||||||||||||||
Charitable
donation
|
10,000 | 1 | 4,999 | 5,000 | ||||||||||||||||||||||||||||||||
Loss
for the year ended Dec 31, 2009
|
(802,649 | ) | (802,649 | ) | ||||||||||||||||||||||||||||||||
Balance, December
31, 2009
|
100 | - | 22,501,052 | 2,250 | 981,800 | (1,362,378 | ) | (378,328 | ) | |||||||||||||||||||||||||||
Preferred Stock
- Series B
|
2 | - | 100,000 | 100,000 | ||||||||||||||||||||||||||||||||
Stock
issued for service and consulting
|
238,150 | 24 | 119,051 | 119,075 | ||||||||||||||||||||||||||||||||
Option
Holder's Equity
|
20,382 | 20,382 | ||||||||||||||||||||||||||||||||||
Private
Placement Issuances
|
10,000 | 1 | 4,999 | 5,000 | ||||||||||||||||||||||||||||||||
Charitable
donation
|
- | - | - | - | ||||||||||||||||||||||||||||||||
Loss
for the quarter ended March 31, 2010
|
(305,312 | ) | (305,312 | ) | ||||||||||||||||||||||||||||||||
Balance, March
31, 2010 - Unaudited
|
100 | - | 2 | - | 22,749,202 | 2,275 | 1,226,232 | (1,667,689 | ) | (439,183 | ) | |||||||||||||||||||||||||
Preferred Stock
- Series B
|
0 | - | - | - | ||||||||||||||||||||||||||||||||
Stock
issued for service and consulting
|
210,623 | 21 | 105,290 | 105,312 | ||||||||||||||||||||||||||||||||
Option
Holder's Equity
|
19,545 | 19,545 | ||||||||||||||||||||||||||||||||||
Private
Placement Issuances
|
120,000 | 12 | 29,988 | 30,000 | ||||||||||||||||||||||||||||||||
Beneficial
Conversion feature on Convertible Note
|
50,000 | 50,000 | ||||||||||||||||||||||||||||||||||
Charitable
donation
|
- | - | - | - | ||||||||||||||||||||||||||||||||
Loss
for the quarter ended June 30, 2010
|
(275,787 | ) | (275,787 | ) | ||||||||||||||||||||||||||||||||
Balance, June
30, 2010 - Unaudited
|
100 | - | 2 | - | 23,079,825 | 2,308 | 1,431,055 | (1,943,476 | ) | (510,113 | ) |
See
Notes Financial Statements
5
Baeta
Corp.
(
a Developmental Stage Company)
Statement
of Cash Flows
Six-Months Period Ended June
30, 2010
|
Six-Months Period Ended June
30, 2009
|
Cumulative
during development stage August 14, 2007 to June 30, 2010
|
||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||||
CASH FLOWS FROM OPERATING
ACTIVITIES
|
||||||||||||
Net
income (loss)
|
$ | (581,099 | ) | $ | (304,078 | ) | $ | (1,943,476 | ) | |||
Adjustments
to reconcile net loss to net cash provided
by (used in) operating activities:
|
||||||||||||
Depreciation
|
266 | 87 | 794 | |||||||||
Amortization
|
35 | 35 | 204 | |||||||||
Stock
Based Compensation
|
264,314 | 170,302 | 812,763 | |||||||||
Increase
in current assets and liabilities;
|
||||||||||||
Increase
(decrease) in accounts payable
|
(9,596 | ) | 42,563 | 60,209 | ||||||||
Increase
(decrease) in accounts payable related party
|
61,000 | 30,000 | 171,000 | |||||||||
Increase
(decrease) in Other Current Liabilities
|
333 | 57,122 | 56,825 | |||||||||
Decrease
(Increase) in Inventory
|
(9,646 | ) | 2,595 | (11,359 | ) | |||||||
Decrease
(Increase) in Deposit
|
0 | (1,904 | ) | (1,904 | ) | |||||||
Net
cash provided by (used in) operating activities
|
(274,393 | ) | (3,278 | ) | (854,943 | ) | ||||||
CASH FLOWS FROM INVESTING
ACTIVITIES
|
||||||||||||
PP&E
|
(2,691 | ) | (20,911 | ) | (24,912 | ) | ||||||
Expenditure
for organization expense
|
- | - | (350 | ) | ||||||||
Software
Application
|
(47,250 | ) | (90,000 | ) | (250,607 | ) | ||||||
Net
cash provided by (used in) investing activities
|
(49,941 | ) | (110,911 | ) | (275,870 | ) | ||||||
CASH FLOWS FROM FINANCING
ACTIVITIES
|
||||||||||||
Convertible
Note
|
155,694 | 155,694 | ||||||||||
Interest
Payable, Convertible Note
|
1,667 | 1,667 | ||||||||||
Shareholder
Advance
|
33,026 | 106,250 | 61,536 | |||||||||
Shareholder
Note
|
10,000 | 308,850 | ||||||||||
Line
of Credit
|
(725 | ) | 1,663 | 45,984 | ||||||||
Additional
Fianncing Fees
|
0 | 0 | ||||||||||
Change
in Comon Stock Value
|
0 | 0 | ||||||||||
Common
Stock Issued
|
35,000 | 3,000 | 470,600 | |||||||||
Preferred
Stock Issued
|
100,000 | 535,600 | ||||||||||
Net
cash provided by (used in) financing activities
|
334,662 | 110,913 | 1,579,931 | |||||||||
Net
increase (decrease) in cash & cash equivalents
|
10,329 | (3,276 | ) | 449,117 | ||||||||
Cash
& Cash Equivalents at beginning of period
|
3,189 | 14,475 | - | |||||||||
Cash
& Cash Equivalents at end of period
|
$ | 13,517 | $ | 11,199 | $ | 13,517 | ||||||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
||||||||||||
|
||||||||||||
Income
taxes paid
|
- | - | 1,998 |
6
(A
Development Stage Enterprise)
NOTES
TO FINANCIAL STATEMENTS
June
30, 2010
NOTE
1: Summary of Significant Accounting Policies, Nature of Operations and Use of
Estimates:
Nature
of Business and Basis of Presentation
BAETA
Corp. (a development stage company) (“the Company”) was incorporated in the
State of New Jersey on August 14, 2007 as a product-driven medical technology
company that manufactures advanced products for the global vital signs
monitoring industry. The Company has developed a patent-pending pain management
and pain assessment product for the estimated 25 million chronic pain sufferers
in the U.S. alone.
As of
June 30, 2010, the Company had not yet commenced any substantive commercial
operations. All activity through June 30, 2010 relates to the Company’s
formation and initial research and development.
The
Company is considered to be a development stage company and as such the
financial statements presented herein are presented in accordance with FASB
Accounting Standards Codification (“ASC”) 915 “Development Stage Entities.”
The Company is subject to the risks associated with activities of
development stage companies.
Basis
of Presentation
The
accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America and
pursuant to the rules and regulations of the Securities and Exchange Commission
(“SEC”).
The
preparation of the financial statements requires management to make estimates
and assumptions that affect the reported amounts in the financial statements,
including the estimated useful lives of tangible and intangible assets.
Management believes the estimates used in preparing the financial statements are
reasonable and prudent. Actual results could differ from these
estimates.
Revenue
Recognition
Revenue
is recognized in accordance with FASB ASC 605, “Revenue Recognition”. The
Company recognizes revenue when the significant risks and rewards of ownership
have been transferred to the customer pursuant to applicable laws and
regulations, including factors such as when there has been evidence of a sales
arrangement, delivery has occurred, or service have been rendered, the price to
the buyer is fixed or determinable, and collectability is reasonably
assured.
Evidence
of a sales arrangement and a fixed or determinable price can be provided by a
purchase order from the customer or from the customer paying for and accepting
the product. Unless indicated differently in a contract between the customer and
the Company, the Company assumes delivery to have occurred and title to have
passed upon receipt of the product by the customer. Because the Company does not
have a history with its customers yet, it assures collectability by recognizing
revenue only after payment for product is received.
The
Company has no significant post delivery obligations and its customers do not
have any significant refund rights, acceptance terms, discounts, or other terms
that serve to reduce the amount recorded relative to the sales price nor to
delay the timing of recognition of revenue.
Use
of Estimates
The
preparation of financial statements, in conformity with accounting principals
generally accepted in the United States of America requires management to make
estimates and assumptions, which 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 revenues and expenses
during the reporting period.
Cash
and Cash Equivalents:
Cash and
cash equivalents are considered to be all highly liquid investments purchased
with an initial maturity of three (3) months or less.
7
Software
Application Asset:
The
Company complies with the provisions of FASB ACS 985-20 “Costs of Software to Be Sold,
Leased, or Marketed”. The Software Application Asset is for software that
will be used in the company’s products and began being capitalized after
technological feasibility was established, which as required by FASB ACS 985-20
was after a working model was delivered to BAETA Corp and the working model
software was tested for completeness, functionality, and consistency with
expected product design. The testing was performed by the vendor that developed
and delivered the product as well as by BAETA Corp and select potential
customers. Capitalized software costs will begin being amortized when the
software product is available for general release to customers. The asset is
reviewed for impairment at an executive management meeting quarterly, during the
review of the Company’s financial results. Impairment is reviewed on a
product-by-product basis by comparing the unamortized capitalized costs to the
asset’s net realizable value. The amount by which the unamortized capitalized
costs exceed the net realizable value would be recognized as an impairment
charge.
Inventories:
Inventories
are stated at the lower of average costs incurred or estimated net realizable
value. Major types of inventories include materials and supplies.
Property,
Plant and Equipment:
Property,
Plant and Equipment is capitalized at historical cost. Property, Plant and
Equipment for the Company currently consists of Computer and Office Equipment
and of Tooling. Computer and Office Equipment is depreciated over the time of
its useful life. Tooling is depreciated in proportion to the units produced by
the related tooling relative to the total number of units the tooling is
expected to be able to produce. Each asset in Property, Plant and Equipment is
reviewed for impairment at an executive management meeting quarterly, during the
review of the Company’s financial results, and an impairment charge would be
recognized if the carrying amount of the asset is not recoverable and exceeds
its fair value. Expenditures incurred that enhance the productivity of the asset
and/or extends the existing asset’s life are capitalized. Expenditures for
typical normal wear and tear items are expensed when incurred.
Stock
Compensation:
Stock
issued for services rendered is valued at the time of service with the most
relevant measurement at the time being either current stock price of the company
stock in a recent private placement or equity offering or vendor
invoice/contract that most closely reflects the value of services performed
or product delivered.
Stock
Options Issued for Services Rendered:
The
Company complies with the provisions of FASB ACS 718 “Compensation - Stock Compensation”.
The company uses the Black-Scholes-Merton closed-form model to value its
stock options. Using that model, the Company includes as inputs to the model
assumptions for the exercise price of each option, the expected term of each
option, the current price of the underlying share, the expected volatility in
the price of the underlying share for the expected term of each option, the
expected dividends on the underlying share for the expected term of each option,
and the risk free rate for the expected term of each option.
The
exercise date of each option is included on the contractual agreements with each
compensated provider. To estimate the expected term of options, the company used
the “simplified” method as allowed in SEC Staff Accounting Bulletin:
Codification of Staff Accounting Bulletins Topic 14: “Share-Based Payment”. The
price of the underlying share is valued at the time of option grant with
the most relevant measurement at the time being either current stock price of
the company stock in a recent private placement or equity offering or vendor
invoice/contract that most closely reflects the value of services performed
or product delivered. Volatility is estimated by using the implied volatility a
comparable company that is public, with publicly traded options, that is in a
similar industry, with a similar product set, at a stage of life and size as
close to the Company as possible for the set of similar companies with publicly
traded options. The Company is using implied volatility, because historic
volatility for the Company does not exist and is not practicable to obtain from
comparable companies. There are no dividends expected to be paid on the
underlying shares during the expected term of any options. And, the risk free
rate is obtained from the yield on a similar term U.S. Treasury.
Income Taxes:
The
Company complies with the provisions of FASB ACS 740 “Income Taxes”. Deferred
income tax assets and liabilities are computed for differences between the
financial statement and tax bases of assets and liabilities that will result in
future taxable or deductible amounts and are based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred income tax assets to the amount expected, by management in management’s
quarterly financial review and based on available evidence, that is more likely
than not to be realized.
8
Income
(Loss) Per Share:
In
accordance with FASB ACS 260 “Earnings Per Share”, the
basic net loss per common share is computed by dividing net loss available to
common stockholders by the weighted average number of common shares
outstanding during the period presented. Diluted net loss per common share is
computed similar to basic net loss per common share except that the denominator
is increased to include the number of additional common shares that would have
been outstanding if the potential common shares had been issued and if the
additional common shares were dilutive. As at June 30, 2010, diluted net loss
per share is equivalent to basic net loss per share as there were no dilutive
securities outstanding.
Concentration
of Credit Risk
Financial
instruments, which potentially subject the Company to concentrations of credit
risk, consist of cash and cash equivalents and accounts receivables. The Company
places its cash with high quality financial institutions and at times may exceed
the FDIC $250,000 insurance limit. The Company extends credit based on an
evaluation of the customer’s financial condition, generally without collateral.
Exposure to losses on receivables is principally dependent on each customer’s
financial condition. The Company monitors its exposure for credit losses and
maintains allowances for anticipated losses, as required. Accounts are
“written-off” when deemed uncollectible.
As of
June 30, 2010 the Company has cash balance of $ 13,517 and no accounts
receivable.
Special
– purpose entities
The
Company does not have any off-balance sheet financing activities.
Fiscal
Year
Company
adopted December 31st for its
accounting fiscal year
Control
by Principal Stockholders
The
directors, executive officers and their affiliates or related parties, own
beneficially and in the aggregate, the majority of the voting power of the
outstanding shares of the common stock of the Company. Accordingly, the
directors, executive officers and their affiliates, if they voted their shares
uniformly, would have the ability to control the approval of most corporate
actions, including increasing the authorized capital stock of the Company and
the dissolution, merger or sale of the Company’s assets or
business.
NOTE
2: Revolving line of credit
As of
June 30, 2010, the Company is obligated under unsecured line of credit of
$50,000 from a bank and principal balance of such a loan is $45,984. The current
interest rate on this line of credit is 9.24%, with no maturity date. The debt
is also guaranteed by a personal liability of an officer and
shareholder.
NOTE
3: Related Party Transactions
On August
19, 2009, the Company and Dr. Alexander Gak entered into an agreement to
document the terms of the Shareholder Advance of $288,850 that had accrued to
that point. The agreement converted the advance into a loan. The material terms
are that the Company will owe an interest rate of 8% per year, beginning on
August 19, 2009, for the outstanding loan amount. The company will begin payment
of the principal and accrued interest only after the Company’s operating
checking account exceeds $250,000 in net cash on hand, at which time the company
will pay $5,000 per month. Any principal and accrued interest not already repaid
is due on August 18, 2019. The Company is allowed to pre-pay the note without
penalty, but the debt-holder does not have the right to demand
pre-payment.
On
December 29, 2009, Leonid Pushkantser lent the Company $10,000.00. The material
terms are that the Company will pay an interest rate of 5% per year and that the
principal plus interest is due six months from the date of the note. The Company
is allowed to pre-pay the note without penalty, but the debt-holder does not
have the right to demand pre-payment.
9
On
January 6, 2010, shareholder Daniel Lundin lent the Company $10,000.00. The
material terms are that the Company will pay an interest rate of 5% per year and
that the principal plus interest is due six months from the date of the note.
The Company is allowed to pre-pay the note without penalty, but the debt-holder
does not have the right to demand pre-payment.
Shareholder
Advance increased to $61,536 as of June 30, 2010. The advance relates to accrued
interest from the Shareholder Loans plus an additional $40,950 advance from Dr.
Alexander Gak. The advance consists of $25,500 long term and $15,450 short
term.
On
September 16, 2008, Dr. Alexander Gak and Extranome, Inc., a New Jersey
corporation entered into an Exclusive Software Agreement (the “Agreement”).
Pursuant the Agreement, Extranome sold to Baeta Corp. all commercial rights to
its software entitled MyHealthID Medical Records Systems for a period of
twenty-five years, subject to renewal. Pursuant to the Agreement, the Company
agreed to pay Extranome $0.00 upfront, and in perpetuity approximately
forty-nine percent of all net revenues generated from advertising by MyHealthID.
Our CEO and sole director, Dr. Alexander Gak, is the 100% owner of Extranome,
Inc., a New Jersey corporation.
On
November 1, 2008, BAETA Corp. entered into a Software Development Contract with
Extranome, Inc. At the time of the transaction, BAETA and Extranome were
controlled by Dr. Alexander Gak. Pursuant to the Software Development Agreement,
Extranome has been providing ongoing software development and product support
services for BAETA since November 01, 2008. The Software Development Agreement
is a non-exclusive agreement and is not related to BAETA’s Exclusive Software
Agreement regarding MyHealthID product. In accordance with the Software
Development Agreement, BAETA is to pay Extranome for the contracted work in cash
form; however BAETA currently does not have a sufficient amount of cash on hand.
Therefore, BAETA is paying Extranome in shares of its common stock. Extranome
has received 30,000 shares for each month since November as non-cash part of
compensation for services rendered which represent approximately 50% of
Extranome’s due monthly compensation. BAETA will continue to issue company
shares to Extranome in the amount of 50% of the monthly compensation for
services rendered until it is able to compensate Extranome fully in cash.
Through June 30, 2010, BAETA had issued to Extranome 450,000
shares.
On June
1, 2009, the Company founder and CEO, Dr. Alexander Gak, moved to become
Chairman of the Board and hired Mr. Leonid Pushkantser as CEO. The significant
compensation for Mr. Pushkantser is as follows: Mr. Pushkantser is compensated
with a base salary of $180,000 per year for the first six months and $250,000
per year after. In addition, Mr. Pushkantser has been granted options to acquire
400,000 shares, which options vest 25% of the amount for each of four
years.
NOTE
4: Stockholders’ Equity:
Preferred
stock
The
Company is also authorized to issue 10,000,000 shares of Series A preferred
stock with a par value of $ 0.0001. On June 23, 2008, the Board of Directors
approved the designation of 100 shares of preferred stock as Series A Preferred
Stock. As of June 30, 2010, Company has 100 preferred shares Series A issued or
outstanding.
The
Company is also authorized to issue 10 shares of Series B preferred stock with a
par value of $ 0.0001. On February 8, 2010, the Board of Directors approved the
designation of 2 shares of preferred stock as Series B Preferred Stock. As of
June 30, 2010, Company has 2 preferred shares Series B issued or
outstanding.
On
February 8, 2010, our Board of Directors and majority shareholders approved the
designation of 10 shares of our preferred stock as Series B Preferred Stock (the
“Series B Preferred Shares”) and authorized our officers to file a Certificate
of Designation for the Series B Preferred Shares, which occurred on February 9,
2010. The outstanding shares of Series B Preferred Stock have no voting rights.
Each share of Series B Convertible Preferred Stock carries with it the immediate
right by its owner to convert such share of Series B Convertible Preferred Stock
into the amount of shares of BAETA Corp. Common Stock equivalent to one percent
(1%) of the total amount of BAETA Corp. Common Stock then issued and outstanding
at the time of the conversion election. All of the outstanding shares of Series
B Preferred Stock (2 outstanding) are held by MBB Holdings, Inc., a
non-affiliate.
On
February 9, 2010, the Company issued its 2 shares of Series B Preferred Stock to
MBB Holdings, Inc., a New York corporation. The shares are beneficially held by
Mr. Shmyer Breuer, a qualified and sophisticated investor. The sale was made in
accordance with the exemption from registration pursuant to Section 4(2) under
the Securities Act, as it did not constitute a public offering of securities.
The Company sold 2 shares of the Series B Preferred, par value $0.0001 per
share, at a purchase price of $50,000 per share, to MBB Holdings, Inc. for an
aggregate purchase price of $100,000.
Common
stock
The
Company is authorized to issue 100,000,000 shares of common stock with a par
value of $ 0.0001. As of December 31, 2009, the Company had 22,501,052 shares
issued and outstanding. As of June 30, 2009, Company has 23,079,825 shares
issued and outstanding.
10
On
January 8, 2010, the Company conducted an offering of its common stock to an
accredited investor and issued 10,000 shares to that investor. The investor
purchased the shares at $0.50 per share.
On
January 29, 2010, the Company issued 65,464 shares of its common stock for
marketing and software services. The shares are accounted for at $0.50 per
share, based the assumption that the market price was equal to that used in the
private placement that closed on January 8, 2009, and because the bills paid for
by the shares were for an amount equal to $0.50 per share
compensation.
On
February 28, 2010, the Company issued 100,185 shares of its common stock for
software services. The shares are accounted for at $0.50 per share, based the
assumption that the market price was equal to that used in the private placement
that closed on January 8, 2009, and because the bills paid for by the shares
were for an amount equal to $0.50 per share compensation.
On March
25, 2010, the Company issued 72,501 shares of its common stock for software
services. The shares are accounted for at $0.50 per share, based the assumption
that the market price was equal to that used in the private placement that
closed on January 8, 2009, and because the bills paid for by the shares were for
an amount equal to $0.50 per share compensation.
On April
29, 2010, the Company issued 67,501 shares of its common stock for marketing and
software services. The shares are accounted for at $0.50 per share, because the
bills paid for by the shares were for an amount equal to $0.50 per share
compensation.
On May
17, 2010, the Company conducted an offering of its common stock to an accredited
investor and issued 100,000 shares to that investor. The investor purchased the
shares at $0.25 per share.
On May
29, 2010, the Company issued 71,561 shares of its common stock for marketing and
software services. The shares are accounted for at $0.50 per share, because the
bills paid for by the shares were for an amount equal to $0.50 per share
compensation.
On June
22, 2010, the Company conducted an offering of its common stock to an accredited
investor and issued 20,000 shares to that investor. The investor purchased the
shares at $0.25 per share.
On June
29, 2010, the Company issued 71,561 shares of its common stock for marketing and
software services. The shares are accounted for at $0.50 per share, because the
bills paid for by the shares were for an amount equal to $0.50 per share
compensation.
Stock
Options
As of
December 31, 2009, the Company had granted options to purchase 1,631,125 shares.
As of June 30, 2010, the Company had granted options to purchase 1,649,350
shares, of which options to purchase 499,350 shares had vested. During the
period, the Company awarded option grants to purchase a total of 18,225 shares,
which had an average contract life of 10 years until they expire, and options to
purchase 368,225 shares vested. For those grants during the period, the company
used the valuation method described in the Significant Accounting Policies
(Footnote 1 “Stock Options Issued for Services Rendered” section) and used the
options with the closest expiration date available for the similar entity, with
the closest strike price to the current share price because all of the Company’s
option grants are issued at a strike price equal to the current share price at
the time, which resulted in an implied volatility, from the average of the bid
and ask implied volatilities, of 57.45, a risk free rate of 3.19%, and a
resulting total value of $4,310 for those option grants. $39,927 of options were
expensed as compensation costs during the period and $0 was on the balance
sheet.
During
the six-month period, the following aggregate option grants were
made:
Shares Available for the
Grant(s)
|
Vesting Period (same as Service
Period)
|
Maximum Contractual Life
|
||
18,225
|
Immediate
|
10
years
|
Below is
information about the options outstanding:
Number of Shares
|
Weighted Average Exercise
Price
|
Average Remaining Contractual Life
(years)
|
Value
|
|||||||||||||
Outstanding
December 31, 2009
|
1,631,125 | $ | 0.50 | 8.9 | $ | 340,825 | ||||||||||
Granted
|
18,225 | $ | 0.50 | 10 | $ | 4,310 | ||||||||||
Exercised
|
0 | |||||||||||||||
Forfeited
|
0 | |||||||||||||||
Expired
|
0 | |||||||||||||||
Outstanding
June 30, 2010
|
1,649,350 | $ | 0.50 | 7.62 | $ | 345,135 | ||||||||||
Vested
during the Period
|
368,225 | $ | 0.50 | 7.55 | $ | 76,768 | ||||||||||
Total
vested at June 30, 2010
|
499,350 | $ | 0.50 | 7.88 | $ | 105,983 |
* All
vested options are currently exercisable
11
Total
nonvested awards that are not yet recognized as compensation cost have a value
of $216,514 and are expected to be recognized over a weighted-average period of
3.2 years.
NOTE
5: Income Tax
The
Company accounts for income taxes under FASB ACS 740, “Income Taxes” (“ACS 740”).
ACS 740 requires the recognition of deferred tax assets and liabilities for both
the expected impact of differences between the financial statements and the tax
basis of assets and liabilities, and for the expected future tax benefit to be
derived from tax losses and tax credit carryforwards. ACS 740 additionally
requires the establishment of a valuation allowance to reflect the likelihood of
realization of deferred tax assets. Realization of deferred tax assets,
including those related to the U.S. net operating loss carryforwards, are
dependent upon future earnings, if any, of which the timing and amount are
uncertain. Accordingly, the net deferred tax asset related to the net operating
loss carryforward has been fully offset by a valuation allowance.
The
Company has a net operating loss carry forward for tax purposes totaling
approximately $ 1,693,833 at June 30, 2010. The net operating loss carries
forward for income taxes, which may be available to reduce future years’ taxable
income. These carry forwards will expire, if not utilized, through 2028 and are
subject to the Internal Revenue Code Section 382, which places a limitation on
the amount of taxable income that can be offset by net operating losses after a
change in ownership. Management believes that the realization of the benefits
from these losses appears uncertain due to the Company’s continuing losses for
United States income tax purposes. Accordingly, the Company has provided a 100%
valuation allowance on the deferred tax asset benefit to reduce the asset to
zero. Management will review this valuation allowance periodically and make
adjustments as warranted.
June
30
2010
|
December
31
2009
|
|||||||
Tax
benefit of net operating loss carryforward
|
$ | 592,841 | $ | 389,457 | ||||
Valuation
allowance
|
(592,841 | ) | (389,457 | ) | ||||
Net
deferred tax asset recorded
|
$ | - | $ | - |
NOTE
6: Going Concern
The
Company’s financial statements are prepared using accounting principles
generally accepted in the United States of America applicable to a going concern
that contemplates the realization of assets and liquidation of liabilities in
the normal course of business.
The
Company’s accumulated operating loss since inception was $1,941,477, working
capital deficit of $345,114 and stockholders’ equity deficit of $510,114 as of
June 30, 2010.
The
Company will actively pursue its business activities, offer noncash
consideration, secure additional or refinance the debt and/or raise equity as a
means of financing its operations and meet the credit obligations. If the
Company is unable to return to its profitability or obtain necessary financing,
it may substantially curtail or terminate its operations or seek other business
opportunities through strategic alliances, acquisitions or other arrangements
that may dilute the interests of existing stockholders. The company’s management
is currently seeking additional capital to support operations, but has not
received any firm or other commitments from any parties and may, or may not, be
successful in obtaining capital sufficient to perpetuate the operations of the
Company.
NOTE 7: Commitment and
contingencies
On July
1, 2009, the Company began a one-year lease for office space for its
headquarters operation from Regus at a minimum monthly rent of $952 which
expires on June 30, 2010. The minimum rental commitment to June 30, 2010 is
$11,424.
12
On March
12, 2010 the Company extended its office space lease for its headquarters
operation from Regus for an additional year, through June 30, 2011, at a minimum
monthly rent of $1,000, starting July 1, 2010. The minimum full year rental
commitment from July 1, 2010 to June 30, 2011 is $12,000.
Exclusive
Software Agreement
On
September 16, 2008, Dr. Alexander Gak, our Chief Executive Officer and
President, and Extranome, Inc., a New Jersey corporation entered into an
exclusive Software Agreement (the “Agreement”). Pursuant the
Agreement, Extranome sold to Baeta Corp. all commercial rights to its software
entitled MyHealthID Medical Records Systems. Pursuant to the Agreement, the
Company agreed to pay Extranome $0.00 upfront, and in perpetuity approximately
forty-nine percent of all net revenues generated from advertising by MyHealthID.
Our sole officer and director, Dr. Alexander Gak, is the 100% owner of
Extranome, Inc., a New Jersey corporation.
NOTE
8: Convertible Notes
On April
8, 2010, the Company issued a convertible note of $100,000 to an accredited
investor. The material terms are that the note will accrue an interest rate of
10% per year and that the principal plus interest is due two years from the date
of the note. At any time during the term of the note, the holder may convert
principal plus accrued interest into common stock in the Company at a value
equal to 50% of the average of the lowest three trading prices for the prior
five days, but not less than $0.25 per share. The Company is allowed to pre-pay
the note without penalty, but the debt-holder does not have the right to demand
pre-payment.
On May
19, 2010, the Company issued a convertible note of $50,000 to an accredited
investor. The material terms are that the note will accrue an interest rate of
10% per year and that the principal plus interest is due two years from the date
of the note. At any time during the term of the note, the holder may convert
principal plus accrued interest into common stock in the Company at a value
equal $0.50 per share. The Company is allowed to pre-pay the note without
penalty, but the debt-holder does not have the right to demand
pre-payment.
NOTE
9: Interest Expense
Interest
Expense on the Income Statement is for interest paid on the Line of Credit, the
Shareholder Notes, and the Convertible Notes.
NOTE
10: Material Subsequent Events (unaudited)
On July
19, 2010, the Company purchased 304,000 shares from Mr. Douglas Rogers for
$25,000.
On July
20, 2010, the Company purchased 1,000 shares of Company stock on the open market
for $1 per share.
On August
10, 2010, Leonid Pushkantser, the Company’s Chief Executive Officer and
Director, loaned the Company $100,000.00. The material terms are that the
Company will pay an interest rate of 5% per year. The Company will pay $5,000 in
principal, plus accrued interest, on the first of each month after the date of
the loan. The Company is allowed to pre-pay the note without penalty, but the
debt-holder does not have the right to demand pre-payment.
13
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
You
should read the following discussion together with our consolidated financial
statements and the related notes included elsewhere in this Quarterly Report on
Form 10-Q. This discussion contains forward-looking statements, which involve
risks and uncertainties. Our actual results may differ materially from those we
currently anticipate as a result of many factors.
Forward
Looking Statements
Some of
the information in this section contains forward-looking statements that involve
substantial risks and uncertainties. You can identify these statements by
forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,”
“estimate” and “continue,” or similar words. You should read statements that
contain these words carefully because they:
|
·
|
discuss
our future expectations;
|
|
·
|
contain
projections of our future results of operations or of our financial
condition; and
|
|
·
|
state
other “forward-looking”
information.
|
We
believe it is important to communicate our expectations. However, there may be
events in the future that we are not able to accurately predict or over which we
have no control. Our actual results and the timing of certain events could
differ materially from those anticipated in these forward-looking statements as
a result of certain factors.
Unless
stated otherwise, the words “we,” “us,” “our,” “the Company” or “BAETA Corp” in
this Quarterly Report on Form
10-Q collectively refers to the Company, BAETA Corp.
Organizational
History
BAETA
Corp. (a development stage company) (“the Company”) was incorporated in the
State of New Jersey on August 14, 2007 as a product-driven medical technology
company that manufactures advanced products for the global vital signs
monitoring industry. The Company has developed a patent-pending pain management
and pain assessment product for the estimated 25 million chronic pain sufferers
in the U.S. alone.
All
activity through June 30, 2010 relates to the Company’s formation and initial
research and development.
The
Company is considered to be a development stage company and as such the
financial statements presented herein are presented in accordance with FASB
Accounting Standards Codification (“ASC”) 915 “Development Stage Entities.”
The Company is subject to the risks associated with activities of
development stage companies.
Forward
Stock Split
On May
16, 2008, BAETA filed an amendment to the Company’s Certificate of Incorporation
with the Secretary of State of the State of New Jersey thereby effectuating a
forward stock split of 20,000-to-1, effective 12:01 a.m. on May 16, 2008. The
Company did not amend the par value of the Company’s common stock.
Prior to
the Forward Split, there were 1,000 shares of the Company’s common stock, par
value $0.0001 per share, issued and outstanding, all held by Dr. Alexander Gak,
our President and Director. Upon the effectiveness of the Forward Split as of
May 16, 2008, there became 20,000,000 shares of the Company’s Common Stock
issued and outstanding, all held by Dr. Gak. Currently, there are 22,852,926
shares of the Company’s common stock issued and outstanding to approximately 88
shareholders of record as of the date of this filing.
Effectiveness
of S-1 Registration Statement
On May
14, 2010, the Securities and Exchange Commission declared the Company’s
Registration Statement on Form S-1 (File No.: 333-154243) effective. The
Registration Statement registered 915,400 shares of Common Stock, par value
$0.0001 per share of the Company on behalf of the selling stockholders named in
the Registration Statement. The Company will not receive any proceeds from the
sale of those shares.
Plan
of Operations
We
anticipate that the Company will require approximately $500,000 to $1,000,000 in
additional capital to execute its current 12-month plan of operations; including
but not necessarily limited to expenses related to the patents pending for its
developing products and technology, expansion of infrastructure and physical
office space, hiring of key employees and sales and administrative and executive
personnel as well as for the registration of its shares and compliance with
securities regulations. We do not currently have sufficient capital to meet our
needs for the next 12 months, and we are extremely reliant upon future
financings to fund our operations. We intend procure this additional capital by
way of private offerings of our common stock, exempt from the registration
requirements of the Federal and state securities laws. We may retain the
services of one or more placement agents to obtain this financing. To date, we
have been in discussions with potential placement agents regarding the
commencement of such private offerings, however, no such private offerings have
yet commenced.
14
During
the next 12 months, we intend to continue to outsource our product research and
development to Ionidea Ukraine of Crimea, Ukraine for technical development and
prototyping and M.B. Turnkey Design, LLC of Manville, New Jersey for physical
product prototyping and production. We anticipate that we will incur costs of
approximately $10,000 to $20,000 per month for ongoing technology development.
We have started the MyPainAway™ device manufacturing process with M.B. Turnkey
Design, LLC of Manville, New Jersey.
We have
also obtained MyPainAway™ device manufacturing quotes from Ultraflex,
Ronkonkoma, New York, and OCM Manufacturing, Ontario, Canada. We expect that the
cost of production will be significantly lower than the average sale price of
the product and that terms will be predicated on actual product ordered at any
given time. We anticipate that we will use additional capital to hire sales
personnel and administrative and executive personnel at a level consistent with
available capital, but aggressively to support initial product sales and market
penetration. We do not believe that we can sustain or execute our plan of
operations, nor bring our proposed products to market without additional capital
of approximately $500,000 to $1,000,000.
Exclusive
Software Agreement
On
September 16, 2008, Dr. Alexander Gak, our President and Chairman, and
Extranome, Inc., a New Jersey corporation entered into an Exclusive Software
Agreement (the “Agreement”). Pursuant the Agreement, Extranome sold to Baeta
Corp. all commercial rights to its software entitled MyHealthID Medical Records
Systems for a twenty five year term. Pursuant to the Agreement, the Company
agreed to pay Extranome $0.00 upfront, and in perpetuity approximately
forty-nine percent of all net revenues generated from advertising by MyHealthID.
Our President and sole director, Dr. Alexander Gak, is the 100% owner of
Extranome, Inc., a New Jersey corporation.
Software
Development Agreement with Extranome, Inc.
On
November 1, 2008, BAETA Corp. entered into a Software Development Contract with
Extranome, Inc. At the time of the transaction, BAETA and Extranome were
controlled by Dr. Alexander Gak, our President and Chairman.
Pursuant
to the Software Development Agreement, Extranome has been providing ongoing
software development and product support services for BAETA since November 01,
2008. The Software Development Agreement is a non-exclusive agreement and is not
related to BAETA’s Exclusive Software Agreement regarding MyHealthID product. In
accordance with Section 2 of the Software Development Agreement, BAETA is to pay
Extranome for the contracted work in cash form; however BAETA currently does not
have a sufficient amount of cash on hand. Therefore, BAETA is paying Extranome
50% in shares of its common stock, and 50% in cash. Extranome has received
30,000 for each month since November 2008 as non-cash part of compensation for
services rendered which represent approximately 50% of Extranome’s due monthly
compensation, and to date has received 600,000 shares of BAETA Corp. BAETA will
continue to issue company shares to Extranome in the amount of 50% of the
monthly compensation for services rendered until it is able to compensate
Extranome fully in cash.
Going
Concern
The
Company’s financial statements are prepared using accounting principles
generally accepted in the United States of America applicable to a going concern
that contemplates the realization of assets and liquidation of liabilities in
the normal course of business.
The
Company’s accumulated operating loss since inception is $1,943,477. As of June
30, 2010, the Company has total liabilities of $811,765 compared to total assets
of $301,651, limited cash on hand in the amount of $13,517, and stockholders’
deficit of ($510,114).
The
Company will actively pursue its business activities, offer noncash
consideration, secure additional or refinance the debt and/or raise equity as a
means of financing its operations and meet the credit obligations. If the
Company is unable to return to its profitability or obtain necessary financing,
it may substantially curtail or terminate its operations or seek other business
opportunities through strategic alliances, acquisitions or other arrangements
that may dilute the interests of existing stockholders. The company’s management
is currently seeking additional capital to support operations, but has not
received any firm or other commitments from any parties and may or may not, be
successful in obtaining capital sufficient to perpetuate the operations of the
Company.
15
Evolving
Industry Standards; Rapid Technological Changes
The
Company’s success in its business will depend in part upon its continued ability
to enhance its existing products and services, to introduce new products and
services quickly and cost effectively to meet evolving customer needs, to
achieve market acceptance for new product and service offerings and to respond
to emerging industry standards and other technological changes. There can be no
assurance that the Company will be able to respond effectively to technological
changes or new industry standards. Moreover, there can be no assurance that
competitors of the Company will not develop competitive products, or that any
such competitive products will not have an adverse effect upon the Company’s
operating results.
Moreover,
management intends to continue to implement “best practices” and other
established process improvements in its operations going forward. There can be
no assurance that the Company will be successful in refining, enhancing and
developing its operating strategies and systems going forward, that the costs
associated with refining, enhancing and developing such strategies and systems
will not increase significantly in future periods or that the Company’s existing
software and technology will not become obsolete as a result of ongoing
technological developments in the marketplace.
Sufficiency
of Cash Flows
Because
current cash balances and projected cash generation from operations are not
sufficient to meet the Company’s cash needs for working capital and capital
expenditures, management intends to seek additional equity or obtain additional
credit facilities. The sale of additional equity could result in additional and
substantial dilution to the Company’s shareholders. A portion of the Company’s
cash may be used to acquire or invest in complementary businesses or products or
to obtain the right to use complementary technologies. From time to time, in the
ordinary course of business, the Company evaluates potential acquisitions of
such businesses, products or technologies.
Results of Operations at
June 30, 2010 compared to December 31, 2009
Assets. Our
total assets were $301,651 at June 30, 2010 compared to $232,037 as of December
31, 2009 primarily as a result of the acquisition of property, the development
of our Software Asset, addition of some inventory, and a small increase in
cash.
Liabilities. Our total
liabilities were $811,765 at June 30, 2010 compared to $610,366 at December 31,
2009. This increase was primarily due to an increase in Accounts Payable to
Extranome (Related Party), a small decrease in Accounts Payable, an increase in
Shareholder Notes and Advances, and the addition of two Convertible
Notes.
Total Stockholders’ Deficit.
Our stockholders’ deficit was ($510,114) at June 30, 2010 compared to ($387,328)
at December 31, 2009. This increase in deficit was primarily due to continuing
losses offset some by additional paid in capital, but primarily funded by
Liabilities.
Results of Operations for
the three months ended June 30, 2010 compared to the three months ended June 30,
2009
Revenues. Our
revenues were $0 for the three months ended June 30, 2010, compared with $0 for
the three months ended June 30, 2009.
Research & Development
expenses. Research & Development costs were $45,750 for
the three months ended June 30, 2010, compared to $0 for the three months ended
June 30, 2009. The increase in research & development costs for this time
period is attributed to research into two new products, which are extensions of
the My Pain Away product line.
Sales & Marketing
expenses. Sales & Marketing costs were $61,091 for the
three months ended June 30, 2010, compared to $33,935 for the three months ended
June 30, 2009. The increase in sales & marketing costs for this time period
is attributed to increasing marketing efforts related to company
products.
General & Administrative
Personnel expenses. General & Administrative Personnel
Expenses were $111,615 for the three months ended June 30, 2010, compared to
$117,723 for the three months ended June 30, 2009. The decrease in General &
Administrative Personnel Expenses for this time period is attributed to
decreased reliance on contractors, offset somewhat by increased employee costs
associated with the hiring of a full time CEO.
Professional Service Fees
expenses. Professional Services Fees were $27,728 for the
three months ended June 30, 2010, compared to $14,109 for the three months ended
June 30, 2009. The increase in Professional Service Fees for this time period is
attributed to increased legal costs, offset by slightly decreased accounting
fees.
16
Other miscellaneous operating
expenses. Other miscellaneous operating expenses were $14,235
for the three months ended June 30, 2010, compared to $25,472 for the three
months ended June 30, 2009. The decrease in Other miscellaneous operating
expenses for this time period is attributed to a decrease in trademark and
patent fees from $22,195 to $0, offset by a new Directors & Officers
Insurance policy as well as a slight increase in most other general business
expenses.
Net Loss. We had a net loss
of ($275,787) for the three months ended June 30, 2010, compared to a net loss
of ($192,.336) for the three months ended June 30, 2009. This increase in net
loss is due primarily to an increase in Research & Development and Sales
& Marketing Expenses
Results of Operations for
the six months ended June 30, 2010 compared to the six months ended June 30,
2009
Revenues. Our
revenues were $0 for the six months ended June 30, 2010, compared with $9,003
for the six months ended June 30, 2009. The decrease is attributable
to no customer purchases placed nor delivered during the six months ended June
30, 2010.
Research & Development
expenses. Research & Development costs were $111,000 for
the six months ended June 30, 2010, compared to $0 for the six months ended June
30, 2009. The increase in research & development costs for this time period
is attributed to research into two new products, which are extensions of the My
Pain Away product line.
Sales & Marketing
expenses. Sales & Marketing costs were $112,974 for the
six months ended June 30, 2010, compared to $50,645 for the six months ended
June 30, 2009. The increase in sales & marketing costs for this time period
is attributed to increasing marketing efforts related to company
products.
General & Administrative
Personnel expenses. General & Administrative Personnel
Expenses were $255,902 for the six months ended June 30, 2010, compared to
$205,719 for the six months ended June 30, 2009. The decrease in General &
Administrative Personnel Expenses for this time period is attributed to
decreased reliance on contractors, offset somewhat by increased employee costs
associated with the hiring of a full time CEO.
Professional Service Fees
expenses. Professional Services Fees were $48,559 for the six
months ended June 30, 2010, compared to $22,109 for the six months ended June
30, 2009. The increase in Professional Service Fees for this time period is
attributed to increased legal costs, offset by decreased accounting
fees.
Other miscellaneous operating
expenses. Other miscellaneous operating expenses were $30,024
for the six months ended June 30, 2010, compared to $29,650 for the six months
ended June 30, 2009. The decrease in Other miscellaneous operating expenses for
this time period is attributed to a decrease in trademark and patent fees from
$22,195 to $2,464, offset by a new Directors & Officers Insurance policy,
filing fees associated with delivering stock certificates, as well as a slight
increase in most other general business expenses.
Net Loss. We had a net loss
of ($581,099) for the six months ended June 30, 2010, compared to a net loss of
($304,078) for the six months ended June 30, 2009. This increase in net loss is
due primarily to an increase in Research & Development, Sales &
Marketing Expenses, General & Administrative Personnel Expenses, and
Professional Service Fees.
Liquidity and Capital
Resources; Going Concern
Cash Balance. At June 30,
2010, we had $13,517 cash on-hand and our stockholder’s deficit was ($510,114),
and there is substantial doubt as our ability to continue as a going concern. We
anticipate incurring losses in the near future. We do not have an established
source of revenue sufficient to cover our operating costs
in the next 12 months. Our ability to continue as a going concern is dependent
upon our ability to successfully compete, operate profitably and/or raise
additional capital through other means. If we are unable to reverse our losses,
we will have to discontinue operations.
Off
–Balance Sheet Operations
The
Company does not have any off-balance sheet operations.
CRITICAL
ACCOUNTING POLICIES
The
Company’s financial statements included herein were prepared in accordance with
United States generally accepted accounting principles. Significant accounting
policies are as follows:
|
a.
|
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, which 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 revenues and expenses
during the reporting period.
17
|
b.
|
Cash and Cash
Equivalents
|
Cash and
cash equivalents are considered to be all highly liquid investments purchased
with an initial maturity of three (3) months or less.
|
c.
|
Income
Taxes
|
The
Company complies with the provisions of FASB ACS 740 “Income Taxes”. Deferred
income tax assets and liabilities are computed for differences between the
financial statement and tax bases of assets and liabilities that will result in
future taxable or deductible amounts and are based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred income tax assets to the amount expected, by management in management’s
quarterly financial review and based on available evidence, that is more likely
than not to be realized.
|
d.
|
Fair Value of
Financial Instruments
|
The
carrying value of cash equivalents, software development costs, and accrued
expenses approximates fair value.
|
e.
|
Revenue
Recognition
|
Revenue
is recognized in accordance with FASB ASC 605, “Revenue
Recognition”. The Company recognizes revenue when the
significant risks and rewards of ownership have been transferred to the customer
pursuant to applicable laws and regulations, including factors such as when
there has been evidence of a sales arrangement, delivery has occurred, or
service have been rendered, the price to the buyer is fixed or determinable, and
collectability is reasonably assured.
Evidence
of a sales arrangement and a fixed or determinable price can be provided by a
purchase order from the customer or from the customer paying for and accepting
the product. Unless indicated differently in a contract between the
customer and the Company, the Company assumes delivery to have occurred and
title to have passed upon receipt of the product by the
customer. Because the Company does not have a history with its
customers yet, it assures collectability by recognizing revenue only after
payment for product is received.
The
Company has no significant post delivery obligations and its customers do not
have any significant refund rights, acceptance terms, discounts, or other terms
that serve to reduce the amount recorded relative to the sales price nor to
delay the timing of recognition of revenue.
|
f.
|
Software Development
Costs
|
The
Company complies with the provisions of FASB ACS 985-20 “Costs of Software to Be Sold,
Leased, or Marketed”. The Software Application Asset is for
software that will be used in the company’s products and began being capitalized
after technological feasibility was established, which as required by FASB ACS
985-20 was after a working model was delivered to BAETA Corp and the working
model software was tested for completeness, functionality, and consistency with
expected product design. The testing was performed by the vendor that
developed and delivered the product as well as by BAETA Corp and select
potential customers. Capitalized software costs will begin being
amortized when the software product is available for general release to
customers. The asset is reviewed for impairment at an executive
management meeting quarterly, during the review of the Company’s financial
results. Impairment is reviewed on a product-by-product basis by
comparing the unamortized capitalized costs to the asset’s net realizable
value. The amount by which the unamortized capitalized costs exceed
the net realizable value would be recognized as an impairment
charge.
|
g.
|
Stock
Options
|
The
Company complies with the provisions of FASB ACS 718 “Compensation - Stock
Compensation”. The company uses the Black-Scholes-Merton
closed-form model to value its stock options. Using that model, the
Company includes as inputs to the model assumptions for the exercise price of
each option, the expected term of each option, the current price of the
underlying share, the expected volatility in the price of the underlying share
for the expected term of each option, the expected dividends on the underlying
share for the expected term of each option, and the risk free rate for the
expected term of each option.
18
The
exercise date of each option is included on the contractual agreements with each
compensated provider. To estimate the expected term of options, the
company used the “simplified” method as allowed in SEC Staff Accounting
Bulletin: Codification of Staff Accounting Bulletins Topic 14: “Share-Based
Payment”. The price of the underlying share is valued at
the time of option grant with the most relevant measurement at the time being
either current stock price of the company stock in a recent private placement or
equity offering or vendor invoice/contract that most closely reflects the
value of services performed or product delivered. Volatility is
estimated by using the implied volatility a comparable company that is public,
with publicly traded options, that is in a similar industry, with a similar
product set, at a stage of life and size as close to the Company as possible for
the set of similar companies with publicly traded options. The
Company is using implied volatility, because historic volatility for the Company
does not exist and is not practicable to obtain from comparable
companies. There are no dividends expected to be paid on the
underlying shares during the expected term of any options. And, the
risk free rate is obtained from the yield on a similar term U.S.
Treasury.
|
h.
|
Stock
Compensation
|
Stock
issued for services rendered is valued at the time of service with the most
relevant measurement at the time being either current stock price of the company
stock in a recent private placement or equity offering or vendor
invoice/contract that most closely reflects the value of services performed
or product delivered.
|
i.
|
Inventories
|
Inventories
are stated at the lower of average costs incurred or estimated net realizable
value. Major types of inventories include materials and
supplies.
|
j.
|
Property, Plant and
Equipment
|
Property,
Plant and Equipment is capitalized at historical cost. Property,
Plant and Equipment for the Company currently consists of Computer and Office
Equipment and of Tooling. Computer and Office Equipment is
depreciated over the time of its useful life. Tooling is depreciated
in proportion to the units produced by the related tooling relative to the total
number of units the tooling is expected to be able to produce. Each
asset in Property, Plant and Equipment is reviewed for impairment at an
executive management meeting quarterly, during the review of the Company’s
financial results, and an impairment charge would be recognized if the carrying
amount of the asset is not recoverable and exceeds its fair
value. Expenditures incurred that enhance the productivity of the
asset and/or extends the existing asset’s life are capitalized.
Expenditures for typical normal wear and tear items are expensed when
incurred.
N/A.
Item
4T. Controls and Procedures.
Evaluation
of Disclosure 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 Chief
Financial Officer (“CFO”) (the Company’s principal financial and accounting
officers), 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 on
their evaluation of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2010, our
Principal Executive Officer and Principal Financial Officer have concluded that
our disclosure controls and procedures were not effective to ensure that
the information required to be disclosed by us in this Report was recorded,
processed, summarized and reported accurately, completely, and within the time
periods specified in the SEC’s rules and instructions for Form
10-Q.
Our
Principal Executive Officer and Principal Financial Officer have concluded that
our disclosure controls and procedures had the following material
weaknesses:
|
·
|
We
were unable to maintain any segregation of duties within our financial
operations due to our reliance on limited personnel in the finance
function. While this control deficiency did not result in any audit
adjustments to our 2007 through 2010 interim or annual financial
statements, it could have resulted in a material misstatement that might
have been prevented or detected by a segregation of
duties.
|
19
|
·
|
The
Company’s current accounting staff is relatively small and the Company’s
resources are limited given its
size;
|
|
·
|
The
Company lacks sufficient resources to perform the internal audit function
and does not have an Audit
Committee;
|
|
·
|
We
do not have an independent Board of Directors, nor do we have a board
member designated as an independent financial expert for the Company. The
Board of Directors is comprised of two members of management. As a result,
there may be lack of independent oversight of the management team, lack of
independent review of our operating and financial results, and lack of
independent review of disclosures made by the Company;
and
|
|
·
|
Documentation
of all proper accounting procedures is not yet
complete.
|
To the
extent reasonably possible given our limited resources, we intend to take
measures to cure the aforementioned material weaknesses, including, but not
limited to, the following:
|
·
|
Considering
the engagement of consultants to assist in ensuring that accounting
policies and procedures are consistent across the organization and that we
have adequate control over financial statement
disclosures;
|
|
·
|
Hiring
additional qualified financial personnel on a full-time
basis;
|
|
·
|
Expanding
our current board of directors to include additional individuals willing
to perform directorial functions;
and
|
|
·
|
Increasing
our workforce in preparation for exiting the exploration stage and
commencing revenue producing
operations.
|
Since the
recited remedial actions will require that we hire or engage additional
personnel, these material weaknesses may not be overcome in the near term due to
our limited financial resources. Until such remedial actions can be realized, we
will continue to rely on the advice of outside professionals and
consultants.
We
anticipate that these initiatives will be at least partially, if not fully,
implemented by December 31, 2010.
Changes
in Internal Controls
No change
in our internal control over financial reporting (as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act) occurred during the three months ended
June 30, 2010 that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
20
PART
II
OTHER
INFORMATION
Item
1. Legal Proceedings.
The
Company is currently not a party to any pending legal proceedings and no such
action by or to the best of its knowledge, against the Company has been
threatened.
Item
1A. Risk Factors.
N/A.
Item
2. Unregistered Sale of Equity Securities and Use of Proceeds.
On April
29, 2010, the Company issued 7,500 shares of its common stock to Leroy and
Lisbet Smith. The Company issued the stock in consideration for marketing
consultation services rendered by Mr. Smith as the Company’s Chief Marketing
Officer and upon reliance on the exemption from registration requirements of the
Securities Act of 1933, as amended, provided under Section 4(2) promulgated
thereunder as the issuance of the stock did not involve a public offering of
securities.
On April
29, 2010, the Company issued 30,000 shares of Common Stock due to Extranome
pursuant to the Software Development Contract between BAETA Corp. and Extranome,
Inc. As noted above, our President and Chairman, Dr. Alexander Gak, is the 100%
owner of Extranome. Therefore he is deemed to beneficially own these 30,000
shares as he maintains voting and dispositive control over
Extranome.
On April
29, 2010, the Company issued 8,334 shares of Common Stock to Boris Mordkovich
MD. The Company issued the stock in consideration for product development
services, in accordance with the August 2009 consulting agreement between BAETA
Corp. and Boris Mordkovich MD, and issued upon reliance on the exemption from
registration requirements of the Securities Act of 1933, as amended, provided
under Section 4(2) promulgated thereunder as the issuance of the stock did not
involve a public offering of securities.
On April
29, 2010, the Company issued 5,000 shares of its common stock to Eugene Gribov.
The Company issued the stock in consideration for technology services rendered
as the Company’s Chief Tech Officer and upon reliance on the exemption from
registration requirements of the Securities Act of 1933, as amended, provided
under Section 4(2) promulgated thereunder as the issuance of the stock did not
involve a public offering of securities.
On April
29, 2010, the Company issued 11,667 shares of its common stock to Leonid
Pushkantser. The Company issued the stock in consideration for executive
services rendered as the Company’s Chief Executive Officer and upon reliance on
the exemption from registration requirements of the Securities Act of 1933, as
amended, provided under Section 4(2) promulgated thereunder as the issuance of
the stock did not involve a public offering of securities.
On April
29, 2010, the Company issued 5,000 shares of its common stock to Joseph Cusack.
The Company issued the stock in consideration for consulting services rendered
as the Company’s Product Sales Services consultant pursuant to an Agreement
executed between BAETA Corp. and Mr. Cusack on January 1, 2010, and upon
reliance on the exemption from registration requirements of the Securities Act
of 1933, as amended, provided under Section 4(2) promulgated thereunder as the
issuance of the stock did not involve a public offering of
securities.
On May
17, 2010, the Company issued 100,000 shares of its Common Stock to Dr. Anroy
Ottley, a qualified and sophisticated investor. The sale was made in accordance
with the exemption from registration pursuant to Section 4(2) under the
Securities Act, as it did not constitute a public offering of securities. The
Company sold 100,000 shares of Common Stock, par value $0.0001 per share, at a
purchase price of $0.25 per share, to Dr. Ottley for an aggregate purchase price
of $25,000.
On May
29, 2010, the Company issued 11,560 shares of its common stock to Leroy and
Lisbet Smith. The Company issued the stock in consideration for marketing
consultation services rendered by Mr. Smith as the Company’s Chief Marketing
Officer and upon reliance on the exemption from registration requirements of the
Securities Act of 1933, as amended, provided under Section 4(2) promulgated
thereunder as the issuance of the stock did not involve a public offering of
securities.
On May
29, 2010, the Company issued 30,000 shares of Common Stock due to Extranome
pursuant to the Software Development Contract between BAETA Corp. and Extranome,
Inc. As noted above, our President and Chairman, Dr. Alexander Gak, is the 100%
owner of Extranome. Therefore he is deemed to beneficially own these 30,000
shares as he maintains voting and dispositive control over
Extranome.
21
On May
29, 2010, the Company issued 8,334 shares of Common Stock to Boris Mordkovich
MD. The Company issued the stock in consideration for product development
services, in accordance with the August 2009 consulting agreement between BAETA
Corp. and Boris Mordkovich MD, and issued upon reliance on the exemption from
registration requirements of the Securities Act of 1933, as amended, provided
under Section 4(2) promulgated thereunder as the issuance of the stock did not
involve a public offering of securities.
On May
29, 2010, the Company issued 5,000 shares of its common stock to Eugene Gribov.
The Company issued the stock in consideration for technology services rendered
as the Company’s Chief Tech Officer and upon reliance on the exemption from
registration requirements of the Securities Act of 1933, as amended, provided
under Section 4(2) promulgated thereunder as the issuance of the stock did not
involve a public offering of securities.
On May
29, 2010, the Company issued 11,667 shares of its common stock to Leonid
Pushkantser. The Company issued the stock in consideration for executive
services rendered as the Company’s Chief Executive Officer and upon reliance on
the exemption from registration requirements of the Securities Act of 1933, as
amended, provided under Section 4(2) promulgated thereunder as the issuance of
the stock did not involve a public offering of securities.
On May
29, 2010, the Company issued 5,000 shares of its common stock to Joseph Cusack.
The Company issued the stock in consideration for consulting services rendered
as the Company’s Product Sales Services consultant pursuant to an Agreement
executed between BAETA Corp. and Mr. Cusack on January 1, 2010, and upon
reliance on the exemption from registration requirements of the Securities Act
of 1933, as amended, provided under Section 4(2) promulgated thereunder as the
issuance of the stock did not involve a public offering of
securities.
On June
22, 2010, the Company issued its common stock to Ignatius Scalia, a qualified
and sophisticated investor. The sale was made in accordance with the exemption
from registration pursuant to Section 4(2) under the Securities Act, as it did
not constitute a public offering of securities. The Company sold 20,000 shares
of its Common Stock, par value $0.0001 per share, at a purchase price of $0.50
per share, to Mr. Scalia for an aggregate of $10,000.
On June
29, 2010, the Company issued 11,560 shares of its common stock to Leroy and
Lisbet Smith. The Company issued the stock in consideration for marketing
consultation services rendered by Mr. Smith as the Company’s Chief Marketing
Officer and upon reliance on the exemption from registration requirements of the
Securities Act of 1933, as amended, provided under Section 4(2) promulgated
thereunder as the issuance of the stock did not involve a public offering of
securities.
On June
29, 2010, the Company issued 30,000 shares of Common Stock due to Extranome
pursuant to the Software Development Contract between BAETA Corp. and Extranome,
Inc. As noted above, our President and Chairman, Dr. Alexander Gak, is the 100%
owner of Extranome. Therefore he is deemed to beneficially own these 30,000
shares as he maintains voting and dispositive control over
Extranome.
On June
29, 2010, the Company issued 8,334 shares of Common Stock to Boris Mordkovich
MD. The Company issued the stock in consideration for product development
services, in accordance with the August 2009 consulting agreement between BAETA
Corp. and Boris Mordkovich MD, and issued upon reliance on the exemption from
registration requirements of the Securities Act of 1933, as amended, provided
under Section 4(2) promulgated thereunder as the issuance of the stock did not
involve a public offering of securities.
On June
29, 2010, the Company issued 5,000 shares of its common stock to Eugene Gribov.
The Company issued the stock in consideration for technology services rendered
as the Company’s Chief Tech Officer and upon reliance on the exemption from
registration requirements of the Securities Act of 1933, as amended, provided
under Section 4(2) promulgated thereunder as the issuance of the stock did not
involve a public offering of securities.
On June
29, 2010, the Company issued 11,667 shares of its common stock to Leonid
Pushkantser. The Company issued the stock in consideration for executive
services rendered as the Company’s Chief Executive Officer and upon reliance on
the exemption from registration requirements of the Securities Act of 1933, as
amended, provided under Section 4(2) promulgated thereunder as the issuance of
the stock did not involve a public offering of securities.
On June
29, 2010, the Company issued 5,000 shares of its common stock to Joseph Cusack.
The Company issued the stock in consideration for consulting services rendered
as the Company’s Product Sales Services consultant pursuant to an Agreement
executed between BAETA Corp. and Mr. Cusack on January 1, 2010, and upon
reliance on the exemption from registration requirements of the Securities Act
of 1933, as amended, provided under Section 4(2) promulgated thereunder as the
issuance of the stock did not involve a public offering of
securities.
22
On July
19, 2010, the Company repurchased 304,000 shares of its common stock held by
Douglas A. Rogers for an aggregate purchase price of $25,000, or $0.0822 per
share. The repurchase was made upon reliance on the exemption from registration
requirements of the Securities Act of 1933, as amended. The entirety of the
304,000 shares were surrendered to the Company’s treasury and thereafter retired
and accounted for in the Company’s authorized but unissued common stock
reserves.
On July
29, 2010, the Company issued 14,100 shares of its common stock to Leroy and
Lisbet Smith. The Company issued the stock in consideration for marketing
consultation services rendered by Mr. Smith as the Company’s Chief Marketing
Officer and upon reliance on the exemption from registration requirements of the
Securities Act of 1933, as amended, provided under Section 4(2) promulgated
thereunder as the issuance of the stock did not involve a public offering of
securities.
On July
29, 2010, the Company issued 30,000 shares of Common Stock due to Extranome
pursuant to the Software Development Contract between BAETA Corp. and Extranome,
Inc. As noted above, our President and Chairman, Dr. Alexander Gak, is the 100%
owner of Extranome. Therefore he is deemed to beneficially own these 30,000
shares as he maintains voting and dispositive control over
Extranome.
On July
29, 2010, the Company issued 8,334 shares of Common Stock to Boris Mordkovich
MD. The Company issued the stock in consideration for product development
services, in accordance with the August 2009 consulting agreement between BAETA
Corp. and Boris Mordkovich MD, and issued upon reliance on the exemption from
registration requirements of the Securities Act of 1933, as amended, provided
under Section 4(2) promulgated thereunder as the issuance of the stock did not
involve a public offering of securities.
On July
29, 2010, the Company issued 5,000 shares of its common stock to Eugene Gribov.
The Company issued the stock in consideration for technology services rendered
as the Company’s Chief Tech Officer and upon reliance on the exemption from
registration requirements of the Securities Act of 1933, as amended, provided
under Section 4(2) promulgated thereunder as the issuance of the stock did not
involve a public offering of securities.
On July
29, 2010, the Company issued 11,667 shares of its common stock to Leonid
Pushkantser. The Company issued the stock in consideration for executive
services rendered as the Company’s Chief Executive Officer and upon reliance on
the exemption from registration requirements of the Securities Act of 1933, as
amended, provided under Section 4(2) promulgated thereunder as the issuance of
the stock did not involve a public offering of securities.
On July
29, 2010, the Company issued 5,000 shares of its common stock to Joseph Cusack.
The Company issued the stock in consideration for consulting services rendered
as the Company’s Product Sales Services consultant pursuant to an Agreement
executed between BAETA Corp. and Mr. Cusack on January 1, 2010, and upon
reliance on the exemption from registration requirements of the Securities Act
of 1933, as amended, provided under Section 4(2) promulgated thereunder as the
issuance of the stock did not involve a public offering of
securities.
On July
29, 2010, the Company issued 3,000 shares of its common stock to Vesta Caldwell.
The Company issued the stock in consideration for consulting services rendered
as the Company’s Sales consultant pursuant to an Agreement executed between
BAETA Corp. and Ms. Caldwell on April 12, 2010, and upon reliance on the
exemption from registration requirements of the Securities Act of 1933, as
amended, provided under Section 4(2) promulgated thereunder as the issuance of
the stock did not involve a public offering of securities.
Issuance
of Promissory Note and Warrant
On April
8, 2010, The Company issued a $100,000 Promissory Note and a 5-year Warrant with
a cashless exercise option to purchase up to 400,000 shares of common stock at
an exercise price of $0.25 per share, to one accredited investor for an
aggregate purchase price of $100,000.00. In accordance with the terms of the
promissory note, and in consideration for the receipt of $100,000 in proceeds
from the investment, the Company promises to pay to the Note holder the
principal sum of One Hundred Thousand Dollars and Zero Cents ($100,000.00),
together with interest on the unpaid principal of the note at the rate of ten
percent (10%) per year (computed on the basis of a 365-day year and the actual
days elapsed) from the date of the Note until paid. All principal and accrued
interest shall be due and payable two (2) calendar years from the date of the
Note’s execution (April 8, 2010), in cash; provided, however, in the event that
the Company receives any financing from any other source all proceeds received
in connection with any such financing shall be paid to the Note holder until
such time that all outstanding principal and accrued interest has been paid to
the Note holder. All payment amounts shall be first applied to interest, if any,
and then to the balance to principal.
At any
time on or prior to the Note’s maturity, in the sole discretion of the Note
holder, any amount of the unpaid principal may be converted into free-trading
and unrestricted shares of Common Stock of the Company equal to the result of
(i) the Conversion Amount, divided by (ii) the Variable Conversion Price (as
defined below):
23
The
“Variable Conversion Price” shall mean the Applicable Percentage (as defined
herein) multiplied by the Market Price (as defined herein); provided, however,
the Variable Conversion Price shall not be less than $0.25 cents per share.
“Market Price” means the average of the lowest three (3) Trading Prices (as
defined below) for the Common Stock during the five (5) Trading Day period
ending one Trading Day prior to the date the Conversion Notice is sent by the
Holder to the Company via facsimile (the “Conversion Date”). “Trading Price”
means, for any security as of any date, the intraday trading price on the Pink
Sheets or, if the Pink Sheets is not the principal trading market for such
security, the intraday trading price of such security on the principal
securities exchange or trading market where such security is listed or traded
or, if no intraday trading price of such security is available in any of the
foregoing manners, the average of the intraday trading prices of any market
makers for such security that are listed in the Pink Sheets by the National
Quotation Bureau, Inc. “Applicable Percentage” shall mean 50%.
The
issuance of the promissory note and warrant was part of a private offering up to
$1,000,000 by the Company that was made without registration under the
Securities Act of 1933, as amended, made only to “accredited
investors,” (as such term is defined in as defined in the rules to the
Securities Act of 1933, as amended) pursuant to Regulation D, Rule 504 and
Sections 7309(b)(8) of the Delaware Securities Act, and Section 510(a)(1) of
Part E under the Rules and Regulations Pursuant to the Delaware Securities Act.
The Company filed a Form D with the SEC on April 13, 2010 thereby filing Notice
with Commission.
Item
3. Defaults Upon Senior Securities.
N/A.
Item
4. Submission of Matters to a Vote of Security Holders.
N/A.
Item
5. Other Information.
Subsequent
Events:
On May
14, 2010, the Securities and Exchange Commission declared the Company’s
Registration Statement on Form S-1 (File No.: 333-154243) effective. The
Registration Statement registered 915,400 shares of Common Stock, par value
$0.0001 per share of the Company on behalf of the selling stockholders named in
the Registration Statement. The Company will not receive any proceeds from the
sale of those shares.
On July
19, 2010, the Company purchased 304,000 shares from Mr. Douglas Rogers for
$25,000.
On July
20, 2010, the Company purchased 1,000 shares of Company stock on the open market
for $1 per share.
Officer Loan:
On August
10, 2010, Leonid Pushkantser, the Company’s Chief Executive Officer and
Director, loaned the Company $100,000.00. The material terms are that the
Company will pay an interest rate of 5% per year. The Company will pay $5,000 in
principal, plus accrued interest, on the first of each month after the date of
the loan. The Company is allowed to pre-pay the note without penalty, but the
debt-holder does not have the right to demand pre-payment.
24
Item
6. Exhibits.
Exhibit No.
|
Description
|
|
10.1
|
Promissory Note executed by Leonid
Pushkantser and BAETA Corp. dated August 9,
2010.
|
|
31.1
|
Certification
by Leonid Pushkantser, the Principal Executive Officer of BAETA Corp.,
pursuant to SEC Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification
by Jeff Burkland, the Principal Financial Officer and Principal Accounting
Officer of BAETA Corp., pursuant to SEC Rule 13a-14(a)/15d-14(a), as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
32.1
|
Certification
by Leonid Pushkantser, the Principal Executive Officer of BAETA Corp.,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
|
32.2
|
Certification
by Jeff Burkland, the Principal Financial Officer and Principal Accounting
Officer of BAETA Corp., pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
25
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, there unto duly
authorized.
BAETA Corp. | |||
Dated:
August 10, 2010
|
/s/ LEONID PUSHKANTSER | ||
Leonid Pushkantser | |||
Chief Executive Officer and Director | |||
(Principal Executive Officer) |
|
/s/ JEFF BURKLAND | ||
Jeff Burkland | |||
Chief Financial Officer | |||
(Principal
Financial Officer and
Principal Accounting Officer)
|
26