On December 31, 2009, the Company entered into a patent agreement with Allkey, Ltd. to obtain the patents for a personal massaging device. In consideration for such patent rights, the Company contracted to pay $26,500,000 to Allkey, Ltd., payable by issuing and delivering to them 3,750,000 Series 2, Class P-2 preferred shares (each $7.00 par value) of the Company. The Company has the right to repurchase some or all of the shares for $26,250,000 on or before December 31, 2012. If the Company chooses not to repurchase all of the shares by such date, Allkey, Ltd. has the right to sell the shares to a third-party (subject to the Company's right of first refusal). If the proceeds from such third-party sale are less than $26,250,000, then the Company is obligated to pay the difference to Allkey, Ltd.
On May 27, 2010, the Board approved cancellation of 2,500 common shares, which were returned to the Companys transfer agent.
On August 6, 2010, the Company entered into a purchase agreement with Allkey Ltd, where Allkey would purchase 6,000,000 shares of the Companys common stock with 1.5 warrants attached to each share. The warrants issued with the common stock can be converted into 9,000,000 share of Common Stock if all warrants are exercised. Allkey is obligated to pay $7.00 per share for a total price of $42,000,000 payable in 7 tranches, the first one being due 30 days from the date of the SEC approval of the Companys registration statement, S-1 originally filed August 25, 2010. As a result of this stock issuance the controlling interest in the company changed, with Allkey owning 73% of all issued and outstanding shares.
On October 13, 2010, we filed an amendment to the registration statement with the SEC, which updates the purchase price of the 6,000,000 shares and 9,000,000 warrants from $7.00 to $10.20 per share.
On December 7, 2010, we entered into a rescission agreement with Allkey whereby the parties agreed to mutually rescind the patent and purchase agreements. As a result of the rescission agreement, the 3,750,000 Series 2, Class P-2 preferred shares and 6,000,000 common shares that were issued to Allkey were returned to the Companys transfer agent, and the 9,000,000 warrants were cancelled.
NOTE 7 RELATED PARTY TRANSACTIONS
The current majority shareholder loaned the Company $338,039 during the year ended December 31, 2010 to be used for working capital. These advances are unsecured, non-interest bearing and due on demand.
In 2009, the Company issued 22,000 shares of Series 1, Class P-1 preferred stock (par value $8.75 per share) to Louis Bertoli (director and officer of the Company) in settlement of amounts owed to Mr. Bertoli totaling $192,500. Series 1, Class P-1 preferred stock can be converted to common stock in the ratio of 1.25:1.
On July 20, 2009, the Company entered into a two-year consulting agreement with Amersey Investment Holding LLC, a company controlled by a director (Amersey). Amersey will provide office space, office identity and assist the Company with corporate, financial, administrative and management records. For the year ended December 31, 2010 and 2009, the Company incurred expenses of $60,000 and $9,000, respectively, in relation to these services.
The Company uses Bay City Transfer Agency & Registrar Inc. (BCTAR) to do its stock transfers. BCTAR is a company controlled by a director. For the year ended December 31, 2010 and 2009, the Company incurred expenses of $11,190 and $2,290, respectively, in relation to these services.
A patent was purchased December 31, 2009 from a related party, as described in detail in Note 5, and terminated in December 2010.
NOTE 8 SUBSEQUENT EVENTS
Events that have occurred subsequent to December 31, 2010 have been evaluated through the date of this audit report. There have been no subsequent events that occurred during such period that would require
disclosure in these consolidated financial statements or would be required to be recognized in the consolidated financial statements as of or for the year ended December 31, 2010.