Cautionary Statement regarding Forward-Looking
This Annual Report on Form 10-K
includes forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. The Registrant has based these forward-looking statements on its current
expectations and projections about future events. These forward-looking statements are
subject to known and unknown risks, uncertainties and assumptions about the Registrant
that may cause its actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. In some cases, you
can identify forward-looking statements by terminology such as "may,"
"will," "should," "could," "would,"
"expect," "plan," "anticipate," "believe,"
"estimate," "continue," or the negative of such terms or other similar
expressions. Factors that might cause or contribute to such a discrepancy include, but are
not limited to, those described in this Annual Report on Form 10-K and in the Registrant's
other Securities and Exchange Commission filings.
ITEM 1. DESCRIPTION OF BUSINESS Back to Table of Contents
Biogenetic Sciences, Inc., a Delaware corporation, is sometimes referred to herein as
"we", "us", "our", "Company" and the
"Registrant". The Registrant was formed in 1983 for the purpose of
researching, developing and marketing cardiovascular and neurobiology products for
commercial development and distributing vaccines. The Registrant's products were designed
for in vitro and in vivo diagnostic procedures and therapeutic drugs, and its products had
been identified for use in the treatment of epilepsy, migraine and mania,
neurodegenerative diseases, coronary artery diseases and cancer. The Registrant
commenced selling its products during the last quarter of 1997 but did not generate any
sufficient revenues from operations to fund its operating expenses.
On September 19, 2002, the Registrant filed a petition
under the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Eastern District of
New York. On November 4, 2005, the Bankruptcy Court approved an order authorizing a change
in control and provided that the Company, subsequent to the bankruptcy proceeding, is free
and clear of all liens, claims and other obligations.
Objectives of the Registrant
Registrant has no present operations and has determined to direct its efforts and limited
resources to pursue and effect a business combination.
Management believes that as
a result of the relative uncertainty in the United States equity markets over the past
years, many privately-held companies have been closed off from the public market and
traditional IPOs. During the past few years, many privately-held as well as public
companies attempted to divest non-core assets and divisions and valuations of these assets
and divisions have often decreased significantly. Therefore, Management believes that
there are substantial business opportunities to effect attractive acquisitions. As a
public entity with its shares of common stock registered under the Exchange Act and
publicly trading, Management believes to be well positioned to identify target
acquisitions and to effect a business combination in order to take advantage of these
Effecting a business combination
Prospective purchasers of
the Registrant's common stock will invest in the Company without an opportunity to
evaluate the specific merits or risks of any one or more business combinations. A business
combination may involve the acquisition of, or merger with, a company which needs to raise
substantial additional capital by means of being a publicly traded company, while avoiding
what it may deem to be the adverse consequences of undertaking an initial public offering
itself. These include time delays, significant expense, loss of voting control and
compliance with various Federal and state securities laws. A potential business
combination may involve a company which may be financially unstable or in its early stages
of development or growth.
Registrant has not identified a target business or target industry
The Registrant's effort in
identifying a prospective target business will not be limited to a particular industry and
the Company may ultimately acquire a business in any industry Management deems
appropriate. To date, the Registrant has not selected any target business or industry on
which to concentrate its search for a business combination. While the Registrant intends
to focus on target businesses in the United States, we are not limited to those entities
and may consummate a business combination with a target business outside of the United
States. Accordingly, there is no basis for investors in the Registrant's common stock to
evaluate the possible merits or risks of the target business or the particular industry in
which we may ultimately operate. To the extent we effect a business combination with a
financially unstable company or an entity in its early stage of development or growth,
including entities without established records of sales or earnings, we may be affected by
numerous risks inherent in the business and operations of financially unstable and early
stage or potential emerging growth companies. In addition, to the extent that we effect a
business combination with an entity in an industry characterized by a high level of risk,
we may be affected by the currently unascertainable risks of that industry. An extremely
high level of risk frequently characterizes many industries which experience rapid growth.
In addition, although the Company's Management will endeavor to evaluate the risks
inherent in a particular industry or target business, we cannot assure you that we will
properly ascertain or assess all significant risk factors.
of target businesses
The Registrant anticipates
that target business candidates will be brought to our attention from various sources,
including broker-dealers, investment bankers, venture capitalists, bankers and other
members of the financial community who may present solicited or unsolicited proposals.
While we do not presently anticipate engaging the services of professional firms that
specialize in business acquisitions on any formal basis, we may engage these firms in the
future, in which event we may pay a finder's fee or other compensation. In no event,
however, will we pay Management any finder's fee or other compensation for services
rendered to us prior to or in connection with the consummation of a business combination.
of a target business and structuring of a business combination
In evaluating a prospective
target business, our Management will consider, among other factors, the following:
- financial condition and
results of operation of the target company;
- growth potential;
- experience and skill of management and availability of additional personnel;
- capital requirements;
- competitive position;
- stage of development of the products, processes or services;
- degree of current or potential market acceptance of the products, processes or services;
- proprietary features and degree of intellectual property or other protection of the
products, processes or services;
- regulatory environment of the industry; and
- costs associated with effecting the business combination.
These criteria are not
intended to be exhaustive. Any evaluation relating to the merits of a particular business
combination will be based, to the extent relevant, on the above factors as well as other
considerations deemed relevant by our Management in effecting a business combination
consistent with our business objective. In evaluating a prospective target business, we
will conduct a due diligence review which may encompass, among other things, meetings with
incumbent management and inspection of facilities, as well as review of financial and
other information which will be made available to us.
The time and costs required
to select and evaluate a target business and to structure and complete the business
combination cannot presently be ascertained with any degree of certainty. Any costs
incurred with respect to the identification and evaluation of a prospective target
business with which a business combination is not ultimately completed will result in a
loss to us.
lack of business diversification
We may seek to effect
business combinations with more than one target business, it is probable that we will have
the ability to effect only a single business combination. Accordingly, the prospects for
our success may be entirely dependent upon the future performance of a single business.
Unlike other entities which may have the resources to complete several business
combinations with entities operating in multiple industries or multiple areas of a single
industry, it is probable that we will not have the resources to diversify our operations
or benefit from the possible spreading of risks or offsetting of losses. By consummating a
business combination with only a single entity, our lack of diversification may:
- subject us to numerous
economic, competitive and regulatory developments, any or all of which may have a
substantial adverse impact upon the particular industry in which we may operate subsequent
to a business combination; and
- result in our dependency upon the development or market acceptance of a single or
limited number of products, processes or services.
ability to evaluate the target business' management
Although we intend to
closely scrutinize the management of a prospective target business when evaluating the
desirability of effecting a business combination, we cannot assure you that our assessment
of the target business' management will prove to be correct. In addition, we cannot assure
you that the future management will have the necessary skills, qualifications or abilities
to manage a public company intending to embark on a program of business development.
Furthermore, the future role of our directors, if any, in the target business cannot
presently be stated with any certainty. While it is possible that our sole director will
remain associated in some capacity with us following a business combination, it is
unlikely that he will devote their full efforts to our affairs subsequent to a business
combination. Moreover, we cannot assure you that our director will have significant
experience or knowledge relating to the operations of the particular target business.
Following a business
combination, we may seek to recruit additional managers to supplement the incumbent
management of the target business. We cannot assure you that we will have the ability to
recruit additional managers, or that additional managers will have the requisite skills,
knowledge or experience necessary to enhance the incumbent management.
In identifying, evaluating
and selecting a target business, we expect to encounter intense competition from other
entities having a business objective similar to ours. Many of these entities are well
established and have extensive experience identifying and effecting business combinations
directly or through affiliates. Many of these competitors possess greater technical, human
and other resources than the Registrant and our financial resources will be relatively
limited when contrasted with those of many of these competitors. While we believe there
are numerous potential target businesses that may be interested in effecting a business
combination with a current, reporting public company, Management believes that we may have
only very limited ability to compete in acquiring certain sizable target businesses
because of our limited available financial resources. This inherent competitive limitation
gives others an advantage in pursuing the acquisition of a target business. Further, any
of these obligations may place us at a competitive disadvantage in successfully
negotiating a business combination. Our management believes, however, that our status as a
public entity and potential access to the United States public equity markets may give us
a competitive advantage over privately-held entities having a similar business objective
as us in acquiring a target business with significant growth potential on favorable terms.
If we succeed in effecting a
business combination, there will be, in all likelihood, intense competition from
competitors of the target business. In particular, certain industries which experience
rapid growth frequently attract an increasingly larger number of competitors, including
competitors with increasingly greater financial, marketing, technical and other resources
than the initial competitors in the industry. The degree of competition characterizing the
industry of any prospective target business cannot presently be ascertained. We cannot
assure you that, subsequent to a business combination, we will have the resources to
compete effectively, especially to the extent that the target business is in a high-growth
Richard Rubin, is our chief
executive officer and chief financial officer. Mr. Rubin is not obligated to contribute
any specific number of hours per week and intend to devote only as much time as he deems
necessary to the Company's affairs. The amount of time he will devote in any time period
will vary based on the availability of suitable target businesses to investigate. We do
not intend to have any full time employees prior to the consummation of a business
Conflicts of Interest
The Company's Management is not required
to commit its full time to the Company's affairs. As a result, pursuing new business
opportunities may require a greater period of time than if Management would devote his
full time to the Company's affairs. Management is not precluded from serving as officer or
director of any other entity that is engaged in business activities similar to those of
the Registrant. In the future, Management may become associated or affiliated with
entities engaged in business activities similar to those we intend to conduct. In such
event, Management may have conflicts of interest in determining to which entity a
particular business opportunity should be presented. In the event that the Company's
Management has multiple business affiliations, it may have legal obligations to present
certain business opportunities to multiple entities. In the event that a conflict of
interest shall arise, Management will consider factors such as reporting status,
availability of audited financial statements, current capitalization and the laws of the
jurisdictions of the target entities. If several business opportunities or operating
entities approach Management with respect to a business combination, Management will
consider the foregoing factors as well as the preferences of the incumbent management of
the operating company. However, Management will act in what it believes will be in the
best interests of the shareholders of the Registrant. The Registrant shall not enter into
a transaction with a target business that is affiliated with Management.
Periodic Reporting and Audited Financial Statements
We have registered our securities under the Securities Exchange Act of
1934 and have reporting obligations, including the requirement that we file annual and
quarterly reports with the SEC. In accordance with the requirements of the Exchange Act,
our annual reports will contain financial statements audited and reported on by our
independent public accountants.
We will not acquire a target business if audited financial statements
cannot be obtained for the target business. Our Management believes that the requirement
of having available audited financial statements for the target business will limit the
pool of potential target businesses available for acquisition.
ITEM 1A. RISK FACTORS RELATED TO OUR
BUSINESS Back to Table of Contents
The Company, since emergence from
bankruptcy, has very limited operations and resources.
Since the Company emerged from bankruptcy, its
operations have been limited to seeking a potential business combinations and has no
revenues from operations. Our investors will have no basis upon which to evaluate the
Company's ability to achieve the Company's business objective, which is to effect a merger
or business combination with an operating business. The Company will not generate any
revenues until, at the earliest, after the consummation of a business combination.
Since the Company has not currently selected
a particular target industry or target business with which to complete a business
combination, the Company is unable to currently ascertain the merits or risks of the
Since the Company has not yet identified a particular
industry or prospective target business, there is no basis for investors to evaluate the
possible merits or risks of the particular industry in which the Company may ultimately
operate or the target business which the Company may ultimately acquire. To the extent the
Company completes a business combination with a financially unstable company or an entity
in its development stage, the Company may be affected by numerous risks inherent in the
business operations of those entities. Although the Company's Management will endeavor to
evaluate the risks inherent in a particular industry or target business, the Company
cannot assure you that it will properly ascertain or assess all of the significant risk
factors. There can be no assurance that any prospective business
combination will benefit shareholders or prove to be more favorable to shareholders than
any other investment that may be made by shareholders and investors.
There is no basis for shareholders to
evaluate the possible merits or risks of potential business combination or the particular
industry in which the Company may ultimately operate. To the extent that the Company
effects a business combination with a financially unstable operating company or an entity
that is in its early stage of development or growth, including entities without
established records of revenues or income, the Company will become subject to numerous
risks inherent in the business and operations of that financially unstable company. In
addition, to the extent that the Company effects a business combination with an entity in
an industry characterized by a high degree of risk, the Company will become subject to the
currently unascertainable risks of that industry. An extremely high level of risk
frequently characterizes certain industries that experience rapid growth. Although
Management will endeavor to evaluate the risks inherent in a particular business or
industry, there can be no assurance that Management will properly ascertain or assess all
such risks or that subsequent events may not alter the risks that the Company perceived at
the time of the consummation of a business combination.
The Company may issue shares of the
Company's common stock and preferred stock to complete a business combination, which would
reduce the equity interest of the Company's stockholders and likely cause a change in
control of the Company's ownership.
The Company's certificate of incorporation authorizes
the issuance of up to 900,000,000 shares of common stock, par value $0.0001 per share, and
10,000,000 shares of preferred stock, par value $0.0001 per share. The Company currently
has 898,900,260 authorized but unissued shares of the Company's common stock available for
issuance and all of the 10,000,000 shares of preferred stock available for issuance.
Although the Company currently has no commitments to issue any securities, the Company
will, in all likelihood, issue a substantial number of additional shares of its common
stock or preferred stock, or a combination of common and preferred stock, in connection
with a business combination. To the extent that additional shares of common and/or
preferred stock are issued, the Company's shareholders would experience dilution of their
respective ownership interests in the Company. The issuance of additional shares of common
stock and/or convertible preferred stock may adversely affect the market price of the
Company's common stock, in the event that an active trading market commences, of which
there can be no assurance. The issuance of additional shares of the Company's common stock
or any number of shares of the Company's preferred stock:
- may significantly reduce the equity interest of
- will likely cause a change in control if a substantial number of the Company's shares of
common stock are issued and most likely also result in the resignation of the Company's
present officer and director; and
- may adversely affect prevailing market price for the Company's common stock.
Similarly, if the Company issues debt securities, it
could result in:
- default and foreclosure on the Company's assets if the Company's operating revenues
after a business combination were insufficient to pay the Company's debt obligations;
- acceleration of the Company's obligations to repay the indebtedness even if the Company
has made all principal and interest payments when due if the debt security contains
covenants that require the maintenance of certain financial ratios or reserves and any
such covenant is breached without a waiver or renegotiation of that covenant;
- the Company's immediate payment of all principal and accrued interest, if any, if the
debt security is payable on demand; and
- the Company's inability to obtain additional financing, if necessary, if the debt
security contains covenants restricting the Company's ability to obtain additional
financing while such security is outstanding.
It is likely that the Company's current
officer and director will resign upon consummation of a business combination and the
Company will have only limited ability to evaluate the management of the target business.
The Company's ability to successfully effect a business
combination will be dependent upon the efforts of the Company's Management. The future
role of the Company's key personnel in the target business, however, cannot presently be
ascertained. Although it is possible that Management will remain associated in some
capacity with the target business following a business combination, it is likely that the
management of the target business at the time of the business combination will remain in
place. Although the Company intends to closely scrutinize the management of a prospective
target business in connection with evaluating the desirability of effecting a business
combination, the Company cannot assure you that the Company's assessment of management
will prove to be correct.
Dependence on key personnel
The Company is dependent upon the
continued services of its officer and director. To the extent that his services become
unavailable, the Company will be required to obtain other qualified personnel and there
can be no assurance that it will be able to recruit and hire qualified persons at
The Company's officer and director may
allocate his time to other businesses thereby causing conflicts of interest in his
determination as to how much time to devote to the Company's affairs. This could have a
negative impact on the Company's ability to consummate a business combination.
The Company's officer and director is not required to
commit his full time to the Company's affairs, which may result in a conflict of interest
in allocating his time between the Company's plan of operations and other businesses. The
Company does not intend to have any full time employees prior to the consummation of a
business combination. Management of the Company is engaged in several other business
endeavors and is not obligated to contribute any specific number of his hours per week to
the Company's affairs. If Management's other business affairs require him to devote more
substantial amounts of time to such affairs, it could limit his ability to devote time to
the Company's affairs and could have a negative impact on the Company's ability to
consummate a business combination.
The Company's officer and director is now,
and may in the future become, affiliated with entities engaged in business activities
similar to those intended to be conducted by the Company and, accordingly, may have
conflicts of interest in determining which entity a particular business opportunity should
be presented to.
The Company's officer and director is now, and may in
the future become, affiliated with entities, including other companies engaged in business
activities similar to those intended to be conducted by this Company. Additionally, the
Company's officer and director may become aware of business opportunities which may be
appropriate for presentation to this Company as well as the other entities with which he
is or may be affiliated. Additionally, due to the existing affiliations of the Company's
officer and director with other entities, he may have a fiduciary obligation to present
potential business opportunities to those entities in addition to presenting them to us
which could cause additional conflicts of interest. Accordingly, Management may have
conflicts of interest in determining to which entity a particular business opportunity
should be presented.
It is probable that the Company will only be
able to enter into one business combination, which will cause us to be solely dependent on
such single business and a limited number of products, processes or services.
It is probable that the Company will enter into a
business combination with a single operating business. Accordingly, the prospects for the
Company's success may be:
- solely dependent upon the performance of a single
operating business; or
- dependent upon the development or market acceptance of a single or limited number of
products, processes or services.
In this case, the Company will not be able to diversify
the Company's operations or benefit from the possible spreading of risks or offsetting of
losses, unlike other entities which may have the resources to complete several business
combinations in different industries or different areas of a single industry.
The Company has limited resources and there
is significant competition for business combination opportunities. Therefore, the Company
may not be able to enter into or consummate an attractive business combination.
The Company expects to encounter intense competition
from other entities having a business objective similar to the Company's, including
venture capital funds, leveraged buyout funds and operating businesses competing for
acquisitions. Many of these entities are well established and have extensive experience in
identifying and effecting business combinations directly or through affiliates. Many of
these competitors possess far greater technical, human and other resources than does the
Company and the Company's financial resources are very limited when contrasted with those
of many of these competitors. While the Company believes that there are numerous potential
target businesses that it could acquire, the Company's ability to compete in acquiring
certain sizable target businesses will be limited by the Company's limited financial
resources and the fact that the Company will use its common stock to acquire an operating
business. This inherent competitive limitation gives others an advantage in pursuing the
acquisition of far more target businesses than the Company.
The Company may be unable to obtain
additional financing, if required, to complete a business combination or to fund the
operations and growth of the target business, which could compel the Company to
restructure a potential business transaction or abandon a particular business combination.
The Company has not yet identified any prospective
target business. If we require funds because of the size of the business combination, we
will be required to seek additional financing. We cannot assure you that such financing
would be available on acceptable terms, if at all. To the extent that additional financing
proves to be unavailable when needed to consummate a particular business combination, we
would be compelled to restructure the transaction or abandon that particular business
combination and seek an alternative target business candidate. In addition, if we
consummate a business combination, we may require additional financing to fund the
operations or growth of the target business. The failure to secure additional financing
could have a material adverse effect on the continued development or growth of the target
business. None of the Company's officers, directors or stockholders is required to provide
any financing to us in connection with or after a business combination.
requirements associated with compliance with reporting requirements under the Exchange
The Company has no revenues and is
dependent upon the willingness of the Company's Management to fund the costs associated
with the reporting obligations under the Exchange Act, other administrative costs
associated with the Company's corporate existence and expenses related to the Company's
business objective. The Company may not generate any revenues until the consummation of a
business combination. The Company anticipates that it will have available sufficient
financial resources to continue to pay accounting and other professional fees and other
miscellaneous expenses that may be required until the Company commence business operations
in connection with a business combination. In the event that the Company's available
financial resources from its Management prove to be insufficient for the purpose of
achieving its business objective through a business combination, the company will be
required to seek additional financing. The Company's failure to secure additional
financing could have a material adverse affect on the Company's ability to pursue a
business combination. The Company does not have any arrangements with any bank or
financial institution to secure additional financing and there can be no assurance that
any such arrangement would be available on terms acceptable and in the Company's best
interests. The Company does not have any written agreement with Management to provide
funds for the Company's operating expenses.
requirements may delay or preclude a business combination
the requirements of Section 13 of the Exchange Act, the Company is required to provide
certain information about significant acquisitions and other material events. The Company
will continue to be required to file quarterly reports on Form 10-Q and annual reports on
Form 10-K, which annual report must contain the Company's audited financial statements. As
a reporting company under the Exchange Act, following any business combination, we will be
required to file a report on Form 8-K, which report contains audited financial statements
of the acquired entity. These audited financial statements must be filed with the SEC
within 5 days following the the transaction. While obtaining audited financial statements
is typically the responsibility of the acquired company, it is possible that a potential
target company may be a non-reporting company with unaudited financial statements. The
time and costs that may be incurred by some potential target companies to prepare such
audited financial statements may significantly delay or may even preclude consummation of
an otherwise desirable business combination. Acquisition prospects that do not have or are
unable to obtain the required audited statements may not be appropriate for acquisition
because we are subject to the reporting requirements of the Exchange Act.
The Company's shares of common stock are
quoted on the Pinksheets, which limits the liquidity and price of the Company's common
The Company's shares of common stock are traded on the
Pinksheets. Quotation of the Company's securities on the Pinksheets limits the liquidity
and price of the Company's common stock more than if the Company's shares of common stock
were listed on The NASDAQ Stock Market or a national exchange. There
is currently no active trading market in the Company's common stock. There can be no
assurance that there will be an active trading market for the Company's common stock
following a business combination. In the event that an active trading market commences,
there can be no assurance as to the market price of the Company's shares of common stock,
whether any trading market will provide liquidity to investors, or whether any trading
market will be sustained.
If the Company is deemed to be an investment
company, the Company may be required to institute burdensome compliance requirements and
the Company's activities may be restricted, which may make it difficult for the Company to
enter into a business combination.
If we are deemed to be an investment company under the
Investment Company Act of 1940, our activities may be restricted, including:
- restrictions on the nature of the Company's
- restrictions on the issuance of securities, which may make it difficult for us to
complete a business combination.
In addition, we may have imposed upon us burdensome
- registration as an investment company;
- adoption of a specific form of corporate structure; and
- reporting, record keeping, voting, proxy and disclosure requirements and other rules and
The Company does not believe that its anticipated
activities will subject it to the Investment Company Act of 1940.
The Company may be deemed to have no
"Independent Directors", actions taken and expenses incurred by our officer and
director on behalf of the Company will generally not be subject to "Independent
The company has one officer and director. He also may be
reimbursement for out-of-pocket expenses incurred by him in connection with activities on
the Company's behalf such as identifying potential target businesses and performing due
diligence on suitable business combinations. There is no limit on the amount of these
out-of-pocket expenses and there will be no review of the reasonableness of the expenses
by anyone other than our board of directors, which consists of one person. Our sole
director will not be deemed "independent," he will generally not have the
benefit of independent directors examining the propriety of expenses incurred on our
behalf and the sums subject to reimbursement. Although the Company believes that all
actions taken by our director on the Company's behalf will be in the Company's best
interests, the Company cannot assure our shareholders or investors that this will actually
be the case. If actions are taken, or expenses are incurred that are actually not in the
Company's best interests, it could have a material adverse effect on our business and plan
of operations and adversely effect the price of our stock held by the public stockholders.
State blue sky
registration; potential limitations on resale of the Company's common stock
The holders of the Company's
shares of common stock registered under the Exchange Act and those persons who desire to
purchase them in any trading market that may develop in the future, should be aware that
there may be state blue-sky law restrictions upon the ability of investors to resell the
Company's securities. Accordingly, investors should consider the secondary market for the
Registrant's securities to be a limited one.
It is the
intention of the Registrant's Management following the consummation of a business
combination to seek coverage and publication of information regarding the Registrant in an
accepted publication manual which permits a manual exemption. The manual exemption permits
a security to be distributed in a particular state without being registered if the
Registrant issuing the security has a listing for that security in a securities manual
recognized by the state. However, it is not enough for the security to be listed in a
recognized manual. The listing entry must contain (1) the names of issuers, officers, and
directors, (2) an issuer's balance sheet, and (3) a profit and loss statement for either
the fiscal year preceding the balance sheet or for the most recent fiscal year of
operations. Furthermore, the manual exemption is a nonissuer exemption restricted to
secondary trading transactions, making it unavailable for issuers selling newly issued
Most of the accepted manuals
are those published by Standard and Poor's, Moody's Investor Service, Fitch's Investment
Service, and Best's Insurance Reports, and many states expressly recognize these manuals.
A smaller number of states declare that they "recognize securities manuals" but
do not specify the recognized manuals. The following states do not have any provisions and
therefore do not expressly recognize the manual exemption: Alabama, Georgia, Illinois,
Kentucky, Louisiana, Montana, South Dakota, Tennessee, Vermont and Wisconsin.
The Company does not expect
to pay dividends for the foreseeable future because it has no revenues and no cash. The
payment of dividends will be contingent upon the Company's future revenues and earnings,
if any, capital requirements and overall financial conditions. The payment of any future
dividends will be within the discretion of the Company's board of directors as then
constituted. It is the Company's expectation that future management following a business
combination will determine to retain any earnings for use in its business operations and
accordingly, the Company does not anticipate declaring any dividends in the foreseeable
stock is subject to the Penny Stock Rules of the SEC and the trading market in our
common stock is limited, which makes transactions in our common stock cumbersome and may
reduce the value of an investment in our common stock
The Company's common stock
is considered a Penny Stock, as defined in the Exchange Act and the rules thereunder,
unless and until the price of the Company's shares of common stock is at least $5.00. The
Company's share price presently is, and prior to any business combination, the share price
is expected to be less than $5.00. Unless the Company's common stock is otherwise excluded
from the definition of Penny Stock, the Penny Stock rules apply. The Penny Stock rules
require a Broker-Dealer prior to a transaction in a Penny Stock not otherwise exempt from
the rules, to deliver a standardized risk disclosure document prepared by the SEC that
provides information about the Penny Stock and the nature and level of risks in the Penny
Stock market. The Broker-Dealer also must provide the customer with current bid and offer
quotations for the Penny Stock, the compensation of the Broker-Dealer and its sales person
in the transaction, and monthly account statements showing the market value of each Penny
Stock held in the customer's account. In addition, the Penny Stock rules require that the
Broker-Dealer, not otherwise exempt from such rules, must make a special written
determination that the Penny Stock is suitable for the purchaser and receive the
purchaser's written agreement prior to the transaction. These disclosure rules have the
effect of reducing the level of trading activity in the secondary market for a stock that
is subject to the Penny Stock rules. So long as the common stock is subject to the Penny
Stock rules, it may become more difficult to sell such securities. Such requirements could
result in reduction in the level of trading activity for the Company's common stock and
could make it more difficult for investors to sell the Company's common stock.
The Company's current and
future business plans are dependent, in large part, on the state of the general economy.
Adverse changes in economic conditions may adversely affect the Company's plan of
operation and business objective. These conditions and other factors beyond the Company's
control include, but are not limited to regulatory changes.
UNRESOLVED STAFF COMMENTS Back to Table of Contents
DESCRIPTION OF PROPERTIES Back to Table of Contents
The Registrant's corporate office
is located at 40 Wall Street, 28th Floor, New York, NY 10005. These facilities consist of approximately 300 square feet of executive
office space. The Registrant believes that the office facilities are sufficient for the
foreseeable future and this arrangement will remain in effect until we will consummate a
ITEM 3. LEGAL PROCEEDING Back to Table of Contents
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS Back to Table of Contents
MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTER Back to Table of Contents
(a) Market Price Information
The Registrant's common stock
is subject to quotation on the FINRA BB under the symbol MABA. The following table shows
the high and low bid prices for the Registrant's common stock during the fiscal years 2010
and 2009 as reported by the National Quotation Bureau Incorporated. These prices reflect
inter-dealer quotations without adjustments for retail markup, markdown or commission, and
do not necessarily represent actual transactions.
Quarter ended March 31
Second Quarter ended June 30
Third Quarter ended September 30
Fourth Quarter ended December 31
(b) Approximate Number of Holders of Common Stock
On December 31, 2010, there were 640 shareholders of record of the Company's common stock.
We currently do not pay cash dividends on the Company's common stock and have no plans to
reinstate a dividend on the Company's common stock.
(d) Recent Sales of
(e) Equity Compensation Plans
We have no equity compensation plans at December 31, 2010.
ITEM 6. SELECTED FINANCIAL DATA Back to Table of Contents
7. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION Back to Table of Contents
The Company's current
business objective is to seek a business combination with an operating company. We intend
to use the Company's limited personnel and financial resources in connection with such
activities. The Company will utilize its capital stock, debt or a combination of
capital stock and debt, in effecting a business combination. It may
be expected that entering into a business combination will involve the issuance of
restricted shares of capital stock. The issuance of additional shares of our
- may significantly reduce the equity
interest of our current stockholders;
- will likely cause a change in control if a substantial number of our shares are issued,
and most likely will also result in the resignation of our present officer and director;
- may adversely affect the prevailing market price for our common stock.
Similarly, if we issued debt securities, it
could result in:
- default and foreclosure on our assets if our operating revenues after a business
combination were insufficient to pay our debt obligations;
- acceleration of our obligations to repay the indebtedness even if we have made all
principal and interest payments when due if the debt security contained covenants that
required the maintenance of certain financial ratios or reserves and any such covenants
were breached without a waiver or renegotiation of such covenants;
- our immediate payment of all principal and accrued interest, if any, if the debt
security was payable on demand; and
- our inability to obtain additional financing, if necessary, if the debt security
contained covenants restricting our ability to obtain additional financing while such
security was outstanding.
Liquidity and Capital
The Registrant has neither
engaged in any operations nor generated any revenues during the year 2010. While we are dependent upon interim funding provided by the Company's
majority shareholder to pay professional fees and expenses, we have no written finance
agreement with the Company's majority
shareholder to provide any continued funding.
However, we may need to raise additional funds through a private offering of debt or
equity securities if additional administrative funds are required to consummate a business
combination that is presented to us. We have no agreements to issue
any debt or equity securities and cannot predict whether equity or debt financing will
become available at terms acceptable to us, if at all.
There are no limitations in the
Company's articles of incorporation on the Company's ability to borrow funds or raise
funds through the issuance of restricted common stock to effect a business combination.
The Company's limited resources and lack of having cash-generating business operations may
make it difficult to borrow funds or raise capital. The Company's inability to borrow
funds or raise funds through the issuance of restricted capital stock required to effect
or facilitate a business combination may have a material adverse effect on the Company's
financial condition and future prospects, including the ability to complete a business
combination. To the extent that debt financing ultimately proves to be available, any
borrowing will subject us to various risks traditionally associated with indebtedness,
including the risks of interest rate fluctuations and insufficiency of any future cash
flow to pay principal and interest, including debt of an acquired business.
As of December 31,
2010, we did not have any off-balance sheet arrangements as defined in
Item 303(a)(4)(ii) of Regulation S-K promulgated under the Securities Exchange Act of
Obligations and Commitments
As of December 31,
2010 we did not have any contractual obligations.
accounting policies are described in the note to our financial statements included
elsewhere in this annual report.
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Back to Table of Contents
The Registrant's audited financial statements for the
fiscal years ended December 31, 2010 and 2009 are attached to this annual report.
Financial Statements for the Fiscal Year ended December 31, 2010 and 2009
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE Back to Table of Contents
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Evaluation of disclosure controls and procedures. As of December 31, 2010, the
Company's chief executive officer/chief financial officer conducted an evaluation
regarding the effectiveness of the Company's disclosure controls and procedures (as
defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the
evaluation of these controls and procedures, our chief executive officer/chief financial
officer concluded that our disclosure controls and procedures were effective as of the end
of the fiscal year 2010.
Managements Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control
over financial reporting and for the assessment of the effectiveness of those internal
controls. As defined by the SEC, internal control over financial reporting is a process
designed by our principal executive officer/principal financial officer, who is also
the sole member of our Board of Directors, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of the financial statements in
accordance with U.S. generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures
Management has assessed the effectiveness of our internal control over financial
reporting as of December 31, 2010. In making this assessment, management used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
in Internal Control-Integrated Framework. Based on our assessment and those criteria, we
have concluded that our internal control over financial reporting was effective as of
December 31, 2010.
This annual report does not include an attestation report of the companys
registered public accounting firm regarding internal control over financial reporting.
Managements report was not subject to attestation by the Companys registered
public accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit the Company to provide only Managements report in this annual
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting or in other
factors identified in connection with the evaluation required by paragraph (d) of Exchange
Act Rules 13a-15 or 15d-15 that occurred during the fourth quarter ended December 31, 2010
that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
ITEM 9B. OTHER INFORMATION Back to Table of Contents
AMERICAN BIOGENETIC SCIENCES, Inc.
Background and Significant Accounting Policies
December 31, 2010 Back to Table of
American Biogenetic Sciences, Inc. (the "Company",
We or "ABS") was incorporated in Delaware on September 1, 1983. Prior to ceasing its operations in 2002,
the Company was engaged in the research, development and production of bio-pharmaceutical
Bankruptcy Proceedings: On September 19, 2002, the Registrant filed for
bankruptcy under the U.S. Bankruptcy Code in the U.S. Bankruptcy Court
Eastern District of New York. On November 4,
2005, the Company emerged from bankruptcy Court.
Basis of Presentation: We adopted "fresh-start" accounting as
of September 20, 2002 in accordance with procedures specified by AICPA Statement of
Position ("SOP") No. 90-7, "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code.
Significant Accounting Policies
Use of Estimates : The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statement and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ
from the estimates.
Cash and Cash Equivalents : For financial statement presentation purposes, the
Company considers those short-term, highly liquid investments with original maturities of
three months or less to be cash or cash equivalents.
Property and Equipment: New property and equipment are recorded at cost.
Depreciation is computed using the straight-line method over the estimated useful lives of
the assets, generally 5 years. Expenditures for renewals and betterments are capitalized.
Expenditures for minor items, repairs and maintenance are charged to operations as
incurred. Gain or loss upon sale or retirement due to obsolescence is reflected in the
operating results in the period the event takes place.
Valuation of Long-Lived Assets : We review the recoverability of our long-lived
assets including equipment, goodwill and other intangible assets, when events or changes
in circumstances occur that indicate that the carrying value of the asset may not be
recoverable. The assessment of possible impairment is based on our ability to recover the
carrying value of the asset from the expected future pre-tax cash flows (undiscounted and
without interest charges) of the related operations. If these cash flows are less than the
carrying value of such asset, an impairment loss is recognized for the difference between
estimated fair value and carrying value. Our primary measure of fair value is based on
discounted cash flows. The measurement of impairment requires management to make estimates
of these cash flows related to long-lived assets, as well as other fair value
Stock Based Compensation: Stock-based awards to non-employees are accounted for
using the fair value method in accordance with SFAS No. 123, Accounting for
Stock-Based Compensation , and EITF Issue No. 96-18, Accounting for Equity
Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling Goods or Services . All transactions in which goods or services are the
consideration received for the issuance of equity instruments are accounted for based on
the fair value of the consideration received or the fair value of the equity instrument
issued, whichever is more reliably measurable. The measurement date used to determine the
fair value of the equity instrument issued is the earlier of the date on which the
third-party performance is complete or the date on which it is probable that performance
On January 1, 2006, we adopted the provisions of Statement of Financial Accounting
Standards (SFAS) 123R, Share-Based Payment (SFAS
123(R)), which requires that companies measure and recognize compensation expense at
an amount equal to the fair value of share-based payments granted under compensation
arrangements. Prior to January 1, 2006, we accounted for our stock-based compensation
plans under the recognition and measurement principles of Accounting Principles Board
(APB) Opinion 25, Accounting for Stock Issued to Employees, and
related interpretations, and would typically recognize no compensation expense for stock
option grants if options granted had an exercise price equal to the market value of the
underlying common stock on the date of grant.
We adopted SFAS 123(R) using the modified prospective method, which results
in no restatement of prior period amounts. Under this method, the provisions of SFAS
123(R) apply to all awards granted or modified after the date of adoption. In addition,
compensation expense must be recognized for any unvested stock option awards outstanding
as of the date of adoption on a straight-line basis over the remaining vesting period. We
calculate the fair value of options using a Black-Scholes option pricing model. We do not
currently have any outstanding options therefore no charge is required for the year ended
December 31, 2010. SFAS 123(R) also requires the benefits of tax deductions in excess of
recognized compensation expense to be reported in the Statement of Cash Flows as a
financing cash inflow rather than an operating cash inflow. In addition, SFAS 123(R)
required a modification to the Companys calculation of the dilutive effect of stock
option awards on earnings per share. For companies that adopt SFAS 123(R) using the
modified prospective method, disclosure of pro forma information for periods
prior to adoption must continue to be made.
Fair Value Accounting: On January 1, 2009, we adopted Statement of Financial
Accounting Standards No. 157, Fair Value Measurements (SFAS
157) (as amended by FSP No. 157-2), which defines fair value, establishes guidelines
for measuring fair value and expands disclosures regarding fair value measurements.
SFAS 157 does not require any new fair value measurements, and has been partially
deferred for non-financial assets and non-financial liabilities, except those that are
recognized or disclosed at fair value in the financial statements on a recurring basis (at
least annually). The partial adoption of SFAS 157 for financial assets and liabilities did
not have a material impact on our consolidated financial position, results of operations
or cash flows.
In addition, on January 1, 2009, we adopted Statement of Financial Accounting Standards
No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities (SFAS 159). Under SFAS 159, companies may elect to
measure certain financial instruments and certain other items at fair value. The
standard requires that unrealized gains and losses on items for which the fair value
option has been elected be reported in earnings. We did not elect to use the fair
value option. Therefore, the adoption of SFAS 159 did not impact our consolidated
financial position, results of operations or cash flows.
Fair Value of Financial Instruments : Statements of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of fair value information about financial instruments. Fair value
estimates discussed herein are based upon certain market assumptions and pertinent
information available to management as of December 31, 2010. The respective carrying value
of certain on-balance sheet financial instruments approximated their fair values.
These financial instruments include cash and cash equivalents, accounts payable and
accrued expenses. Fair values were assumed to approximate carrying values for these
financial instruments since they are short-term in nature and their carrying amounts
approximate fair values or they are receivable or payable on demand.
Earnings per Common Share : Basic net loss per share is computed using the
weighted average number of common shares outstanding during the period. Diluted net loss
per common share is computed using the weighted average number of common and dilutive
equivalent shares outstanding during the period. Dilutive common equivalent shares consist
of options to purchase common stock (only if those options are exercisable and at prices
below the average share price for the period) and shares issueable upon the conversion of
our Preferred Stock. Due to the net losses reported, dilutive common equivalent shares
were excluded from the computation of diluted loss per share, as inclusion would be
anti-dilutive for the periods presented. We consummated a 1 for 100 reverse split on July
11, 2008, which became effective on August 4, 2008. All per share disclosures
retroactively reflect shares outstanding or issuable as though the reverse split had
occurred January 1, 2007.
There were no common equivalent shares required to be added to the basic weighted
average shares outstanding to arrive at diluted weighted average shares outstanding in
2010 or 2009.
Income Taxes: The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," ("SFAS 109") which requires recognition of estimated income taxes
payable or refundable on income tax returns for the current year and for the estimated
future tax effect attributable to temporary differences and carry-forwards. Measurement of
deferred income tax is based on enacted tax laws including tax rates, with the measurement
of deferred income tax assets being reduced by available tax benefits not expected to be
In 2006, the FASB issued FIN 48, which clarifies the accounting for uncertainty in tax
positions. FIN 48 requires that the Company recognize in its financial statements the
impact of a tax position, if that position is more likely than not of being sustained on
audit, based on the technical merits of the position. The Company adopted the provisions
of FIN 48 on January 1, 2007.
Management of the Company is not aware of any additional needed liability for
unrecognized tax benefits at December 31, 2010 and 2009.
Accounting For Obligations And Instruments Potentially To Be Settled In The
Companys Own Stock : We account for obligations and instruments potentially
to be settled in the Companys stock in accordance with EITF Issue No. 00-19, Accounting
for Derivative Financial Instruments Indexed To, and Potentially Settled In a
Companys Own Stock . This issue addresses the initial balance sheet
classification and measurement of contracts that are indexed to, and potentially settled
in, the Companys own stock.
Recent Accounting Pronouncements
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No.
46(R) (SFAS 167). SFAS 167 amends FASB Interpretation No. 46 (revised
December 2003), Consolidation of Variable Interest Entities to require an
enterprise to qualitatively assess the determination of the primary beneficiary of a
variable interest entity (VIE) based on whether the entity (1) has the power to direct the
activities of a VIE that most significantly impact the entitys economic performance
and (2) has the obligation to absorb losses of the entity or the right to receive benefits
from the entity that could potentially be significant to the VIE. Also, SFAS 167 requires
an ongoing reconsideration of the primary beneficiary, and amends the events that trigger
a reassessment of whether an entity is a VIE. Enhanced disclosures are also required to
provide information about an enterprises involvement in a VIE. This statement shall
be effective as of the beginning of each reporting entitys first annual reporting
period that begins after November 15, 2009, for interim periods within that first annual
reporting period, and for interim and annual reporting periods thereafter. Earlier
application is prohibited. The Company does not expect the adoption of SFAS 167 to have a
material impact on its consolidated financial statements.
In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification TM and the Hierarchy
of Generally Accepted Accounting Principles (SFAS 168). SFAS 168 establishes
the FASB Accounting Standards Codification TM (the
Codification) as the single source of authoritative U.S. GAAP recognized by
the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the
SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP
for SEC registrants. When effective, the Codification will supersede all existing non-SEC
accounting and reporting standards. All other non-grandfathered non-SEC accounting
literature not included in the Codification will become non-authoritative. Following SFAS
168, the FASB will not issue new standards in the form of Statements, FASB Staff
Positions, or Emerging Issues Task Force Abstracts. Instead, the FASB will issue
Accounting Standards Updates, which will serve only to: (a) update the Codification; (b)
provide background information about the guidance; and (c) provide the bases for
conclusions on the change(s) in the Codification. SFAS 168 and the Codification are
effective for financial statements issued for interim and annual periods ending after
September 15, 2009. The Company has evaluated this new statement and has determined that
it will not have a significant impact on the determination or reporting of its financial
In May 2009, the FASB issued SFAS No. 165, Subsequent Events
("SFAS 165"). SFAS 165 establishes guidance related to accounting for
and disclosure of events that happen after the date of the balance sheet but before the
release of the financial statements. SFAS 165 is effective for reporting periods
ending after June 15, 2009. The Company adopted SFAS 165 on December 31, 2009.
SFAS 165 affects disclosures only .
Management does not anticipate that the adoption of these standards will have a
material impact on the financial statements.
AMERICAN BIOGENETIC SCIENCES, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 2010
1. Fresh Start Accounting:
On September 19, 2002 in connection with the Company emerging from bankruptcy we
adopted "fresh-start" accounting in accordance with procedures specified by
AICPA Statement of Position ("SOP") No. 90-7, "Financial Reporting by
Entities in Reorganization under the Bankruptcy Code." All results for periods
subsequent to September 19, 2002 are referred to as those of the "Successor
In accordance with SOP No. 90-7, the reorganized value of the Company was allocated to
the Company's assets based on procedures specified by SFAS No. 141, "Business
Combinations". Each liability existing at the plan sale date, other than deferred
taxes, was stated at the present value of the amounts to be paid at appropriate market
rates. It was determined that the Company's reorganization value computed immediately
before November 6, 2002 was $0. We adopted "fresh-start" accounting because
holders of existing voting shares immediately before filing and confirmation of the sale
received less than 50% of the voting shares of the emerging entity and its reorganization
value is less than its post-petition liabilities and allowed claims.
2. Income Taxes:
The Company has a
net operating loss carryovers available to reduce future income taxes. We have adopted
SFAS 109 which provides for the recognition of a deferred tax asset based upon the value
the loss carry-forwards will have to reduce future income taxes and management's estimate
of the probability of the realization of these tax benefits. We have determined it more
likely than not that our net operating loss carry-forwards will not be utilized.
Utilization of federal and state NOL and tax credit carryforwards may be subject to a
substantial annual limitation due to the ownership change limitations provided by the
Internal Revenue Code of 1986, as amended, and similar state provisions. The annual
limitation may result in the expiration of NOL and tax credit carryforwards before full
utilization. The Company is not under examination by any jurisdiction for any tax year. At
31, 2010 and 2009,
the Company had no material unrecognized tax benefits and no adjustments to liabilities or
operations were required under FIN 48.
The Company is not a party to any leases and does not have any commitments
4. Convertible Long-Term Debt:
In 2009, we issued a convertible promissory note in the amount of
$76,000 to our President. The note bears interests at 12% per annum until paid or
converted. Interest is payable upon the maturity date (December 31, 2010). The initial
conversion rate is $0.001 per share (subject to standard anti-dilution provisions).
The note formalized a like amount due through the accretion of cash advances and the fair
value of services provided without cost covering several years. The note holder and the
Company agreed to extent the maturity date of the convertible promissory note to December
The convertible debt securities were issued with a non-detachable
conversion feature. We evaluate and account for such securities in accordance with EITF
Issue Nos. 98-5, 00-19, 00-27, 05-02, 05-04 and 05-08, and SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities as amended.
In accordance SFAS No. 133, we evaluate that the holders
conversion right provision, interest rate adjustment provision, liquidated damages clause,
cash premium option (if applicable), and the redemption option (collectively, the debt
features) contained in the terms governing the Note to determine whether they are or are
not clearly and closely related to the characteristics of the Note. Accordingly, if
the features qualify as embedded derivative instruments at issuance and, furthermore if
they do or do not qualify for any scope exception within SFAS No. 133 (paragraphs
12-32), then they are required by SFAS No. 133 to be accounted for separately from
the debt instrument and recorded as derivative financial instruments.
The values ascribed to the note, the conversion feature of the note,
other potential embedded derivative features, and common stock follow the guidance of EITF
Issue No. 00-19, Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Companys Own Stock ; SFAS No. 150, Accounting
for Certain Financial Instruments with Characteristics of both Liabilities and Equity
; and EITF Issue No. 00-27, Application of Issue No. 98-5 to Certain Convertible
Instruments . The Company evaluated the embedded conversion feature and determined its
effect based on EITF Issue No. 00-19. In accordance with EITF Issue No. 00-19, a
transaction which includes a potential for net-cash settlement, including liquidated
damages, requires that derivative financial instruments, including warrants and the
embedded conversion feature, be bifurcated, and initially recorded at fair value as an
asset or liability and subsequent changes in fair value be reflected in the statement of
In accordance with the FASB Emerging Issues Task Force
(EITF) Issue No. 98-5 Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion Ratios and EITF
Issue No. 00-27 Application of Issue No. 98-5 to Certain Convertible
Instruments, we determined that the convertible notes did not contains an embedded
beneficial conversion feature. The effective conversion price exceeded the stock price on
the valuation date.
5. Stockholders' Equity:
In November 2005, we modified our authorized shares of common stock to 900,000,000, par
value $0.0001. All issued shares of common stock are entitled to one vote per share of
In November 2005, we modified our authorized preferred shares to 10,000,000, par value
$0.0001. The preferred shares may be issued in one or more series. The Board of Directors
of the Corporation is authorized to fix the powers, preferences, rights, qualifications,
limitations or restrictions of the preferred shares and any series thereof pursuant to
Section 151 of the Delaware General Corporation Law. As of December 31, 2010, there are no
preferred shares issued and outstanding.
Stock Based Compensation
There are no employee or non-employee options or warrants outstanding or
6. Related Party Transactions not Disclosed Elsewhere:
Fair value of services: The principal stockholder provided, without
cost to the Company, his services and office space. The total of these expenses was
$46,000 for 2010 and $36,000 for 2009, and was reflected in the statement of operations as
general and administrative expenses.
Due Related Parties: Amounts due to related parties consist of
corporate regulatory compliance expenses paid directly by and cash advances received by
affiliates. These paid items totaled $6,000 for 2010 and $4,657 for 2009.