Attached files
| file | filename |
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| EX-31.1 - EXHIBIT 31.1 - SUBJEX CORP | subjexexhibit31141811.htm |
| EX-32.1 - EXHIBIT 32.1 - SUBJEX CORP | subjexexhibit32141811.htm |
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KA AMENDED
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[ x ]
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Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2010
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[ ]
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Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ___to___
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Commission File Number 0-29711
Subjex Corporation
(Exact name of registrant as specified in its charter)
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Minnesota
(State or other jurisdiction of incorporation or organization)
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41-1596056
(I.R.S. Employer Identification No.)
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3240 Aldrich Ave S Suite 301, Minneapolis, MN
(Address of Principal Executive Offices)
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55408
(Zip Code)
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612-382-5566
(Registrant’s telephone number, including area code)
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
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Securities registered pursuant to Section 12(g) of the Exchange Act:
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Title of each class Name of each exchange on which registered
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Common Stock, no par value OTC Bulletin Board
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [ ] No [X]
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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer (Do not check if a smaller reporting company) [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
This Amended 10-K is being filed because the Edgar Filing Company that Subjex Corporation used to file
the original document on April 15, 2011 left out certain pages and signatures. This document is unaudited
and unreviewed all financials herein are restated.
The aggregate market value of the common stock of the issuer held by non-affiliates of the issuer on April 14, 2011 based on the closing price of the common stock as reported on the OTC Bulletin Board on such date was $1,734,459
As of April 15, 2011 there were 173,445,887 outstanding shares of common stock, no par value.
| SUBJEX CORPORATION | |||
| FORM 10-KA | |||
| YEAR ENDED DECEMBER 31, 2010 | |||
| TABLE OF CONTENTS | |||
| ITEM | PAGE | ||
| PART I | |||
| 1. | Business | 3 | |
| 1A. | Risk Factors | 5 | |
| 1B. | Unresolved Staff Comments | 5 | |
| 2. | Description of Property | 5 | |
| 3. | Legal Proceedings | 5 | |
| 4. | Submission of Matters to a Vote of Security Holders | 6 | |
| PART II | |||
| 5. | Market for Registrant’s Common Equity, Related Stockholder Matters & | 6 | |
| Issuer Purchases of Equity Securities | |||
| 6. | Selected Financial Date | 6 | |
| 7. | Management's Discussion & Analysis of Financial Condition and | ||
| Results of Operations | 7 | ||
| 7A. | Quantitative and Qualitative Disclosures about Market Risk | 7 | |
| 8. | Financial Statements & Supplementary Data | ||
| 9. | Changes in and Disagreements with Accountants on Accounting and | ||
| Financial Disclosure | 7 | ||
| 9A. | |||
| (T). | Controls and Procedures | 8 | |
| 9B. | Other Information | 9 | |
| PART III | |||
| 10. | Directors, Executive Officers, and Corporate Governance | 10 | |
| 11. | Executive Compensation | 11 | |
| 12. | Security Ownership of Certain Beneficial Owners and Management and | ||
| Related Shareholder Matters. | 12 | ||
| 13 | Certain Relations and Related Transactins, and Director Independence | 13 | |
| 14 | Principal Accountant Fees and Services | 14 | |
| 15 | Exhibits, Financial Statement Schedules | 15 | |
| Signatures | 28 | ||
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Statements in this discussion which are not historical facts may be considered "forward looking statements" within the meaning of Section 21E of the Securities Act of 1934, as amended. The words "believe", "expect", "anticipate", "estimate", and similar expressions identify forward looking statements. Any forward looking statement involves risks and uncertainties that could cause actual events or results to differ, perhaps materially, from the events described in the forward looking statements. Readers are cautioned not to place undue reliance on these forward looking statements. The Company undertakes no obligation to publicly update or revise any forward looking statement, whether as a result of new information, future events or otherwise. The risks associated with the Company's forward looking statements include, but are not limited to, risks associated with the Company's history of losses and uncertain profitability, sales and marketing strategies, competition, general economic conditions, reliance on key management and production people, current and future capital needs, dilution, effects of outstanding notes and convertible debentures, limited public market for the Company’s capital stock, low stock price, and lack of liquidity.
The following discussion and analysis should be read in conjunction with the Financial Statements, related notes and other information included in this annual report on Form 10-K.A
ITEM 1. Business.
Introduction
References to the “Company,” the “Registrant,” “we”, “us” or “our” in this Annual Report on Form 10-KA refer to Subjex Corporation, unless the context indicates otherwise.
Overview
Subjex Corporation is a Minnesota corporation formed in 1999, for the creation, custom development and incubation solution based artificial intelligence technologies. We translate our technology development methods into specific solutions for specialized industries and business. We develop or co-develop products that our clientele bring to the market directly or as a private labeled product.
Since 1999, Subjex Corporation has developed and added to its software cache an impressive array of technology. Our development projects have included SEO (Search Engine Optimization) “cloaking” software, e-commerce advertising, search engine technology and other products for the capital markets. See http://subjex.com/assets.html
One of Subjex more successful projects, in terms of its operational functionality was Forecast Market Software (FMS), a trade timing and index forecasting engine that forecasts large indices such as the NASDAQ-100. During its operation as measured from 2006 through 2009, FMS has become a quantitative analysis industry leader, in terms of its average percentage gains, providing nearly 20% average annual returns.
Subjex Corporation developed one the first semi-autonomous virtual agent Customer Service Representative (CSR) products in the market in 2001. “SubjexCSR” as it was called originally was tested on over 500 e-commerce business web sites for over 4 years. Reengineered and upgraded in 2008 and again in 2010, this artificial intelligence CSR/CRM project is now called AiNDEE (http://www.AiNDEE.com) and now powers auction company Penny 20 inc. (http://www.Penny20.com). Unlike conventional CSR/CRM software solutions on the market that are mainly auto responder “dialogue based” (stimulus response) products, AiNDEE is one of the most highly advanced artificial intelligent CRM/sales solutions available in the world today. It incorporates many new ground breaking advancements in virtual communication and human interaction. Able to engage in real “interview” conversation, where it asks users questions about what they just asked (multi-tiered bi-directional dialogue), AiNDEE is a break-through in CRM (Customer Relationship Management).
Trademarks and Patents
The Company has held trademarks and patent pending protection for most of its business that management feels are necessary to protect the Company’s interests. However the Company now provides most of its technology as a proprietary service offering, (black box) which maintains the interworking of the technology secret to clients and resellers and does not patent its innovations.
Environmental Compliance
The Company believes it is in compliance with all current federal and state environmental laws.
Employees
The Company had a full-time staff and a team of outside consultants to fit the Company’s operational needs. The Company's employees and or consultants are not represented by any labor unions. The Company considers its relations with both former and present employees and consultants to be good.
Competition
The Company is aware of other companies selling solutions that appear to be similar to Subjex; however management is not aware of any companies that are selling the same solutions as Subjex. In addition, management continues to market its products in methods it believes to be efficient use of its resources. The Company believes that its solutions are more effective than its competition and that while some companies may have greater resources the company has more advanced products which continue to grow in power and client usage.
Recent Developments
Recently the Company formed a technology partnership with Penny 20 inc. “Penny20” a Nevada based private company. Penny20 is an open public auction platform for sellers to sell without fees, and for bidders to win products and services at significant discounts. In exchange for Subjex development services to build the platform, and for the use of Subjex AiNDEE technology, Penny20 has given Subjex a 40% equity stake in Penny20, as well as a revenue split. This arrangement is designed to create a revenue stream to the Company in direct proportion to the success of the auction platform. Therefore Subjex has agreed to market Penny20 to its search engine members at Subjex’s expense. Further the Company has provided its CEO, Andrew Dean Hyder as the chief engineer to operate the auction technology.
For more information see http://www.Subjex.com/penny20 or http://www.penny20.com
ITEM 1A. Risk Factors
Before deciding to buy, hold or sell our common stock, you should carefully consider the risks described below, in addition to the other information contained in this report and in our other filings with the Securities and Exchange Commission, including our reports on Forms 10-Q and 8-K. The risks and uncertainties described below are what we consider our most significant risks. Additional risks and uncertainties not presently known or that is currently deemed immaterial may also affect our business.
If any of these known or unknown risks or uncertainties actually occurs, they could have a material adverse effect on our business, financial condition, results of operations and cash flow. In that event, the market price for our common stock could decline and you may lose all or part of your investment.
Revenue growth from the AiNDEE technology (formerly known as “SubjexCSR”) will primarily be as a result of finding new customers. Revenue from this technology did not grow during 2010 due to financial constraints affecting the ability to marketing AiNDEE. In 2008 and 2009 a significant upgrade to the model has been preformed and is being tested on a number of BETA clients including Penny20. With many new and exciting features, the new technology is being well received but the Company cannot guarantee that sales of any significance will be made in 2011.
Further the Company stock is thinly traded. Accordingly, you may not be able to resell your shares of common stock at or above the price you paid for them. The Company’s common stock has historically maintained a low trading volume of shares per day. However due to potential revenue flow, management feels that this trend is not likely to continue if and when significant growth occurs with the Penny20 project. See: http://www.Subjex.com/finance.html
ITEM 1B. Unresolved Staff Comments
None.
ITEM 2. Description of Property
The Company's principal operations ending December 31, 2010 are in Minneapolis, Minnesota. The previous and typical occupancy requirement is approximately 1,000 square feet and utilized for office space on a month to month lease. Management believes that comparable office space is readily available.
ITEM 3. Legal Proceedings
There were no legal proceedings in 2010 nor are there any legal proceedings as of this filling pending, to the Company's knowledge that would be material to the financial position of the Company.
There were no other legal proceedings pending or, to the Company's knowledge, that would be material to the financial position of the Company.
ITEM 4. Submission of Matters to a Vote of Security Holders
On January 18, 2010 a meeting of the shareholders took place. An 8K was filed showing the matters that were voted on and passed as follows:
An Annual Meeting of Shareholders was scheduled for 6:40 P.M. (Central Time) January 18, 2010 in Savage MN. This meeting was open to All Shareholders of Record and Shareholder Proxy Holders qualified to vote on matters brought forth at the meeting. The meeting was able to be held because a Quorum did exist. The actual voting shares counted were 49,953,189 which was the amount needed to hold the Annual Meeting of Shareholders and therefore the meeting went forward. All of management’s proposals were approved by well over 90%. The following agenda was presented and approved.
1. To authorize the Board of Directors to file with the Minnesota Secretary of State for an increase in the number of Authorized Shares from the current 100,000,000 to 200,000,000 of which 160,000,000 shall be designated as common shares and 40,000,000 shall be undesignated, to be designated as to type, class or series by the Board of Directors. The motion was passed with 46,434,402 votes. 92.96%
2. To authorize the Board of Directors to change the corporate domicile or to open other office(s) in other US States at any future date should the Board of Directors feel this will become necessary for managements execution of its plan and or to attract suitable investments into the company.
The motion was passed with 33,496,845 votes. 90.83%
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
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(a)
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Market Information
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The Company’s Common Stock was traded on the Over the Counter Bulletin Board since January 2000 under the symbol “PGBN”. The Company changed it ticker symbol in 2003 to “SBJX”. Its high and low sales prices of common stock in 2010 were $0.006 and $0.001, respectively. These prices are inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
The following table lists the high and low price for our common stock as quoted, in U.S. dollars, on the internet tracking services during each quarter within the last two fiscal years:
Price per Share - Calendar Year 2010
Quarter High Low
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First
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$ | 0.006 | $ | 0.0018 | ||||
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Second
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$ | 0.0038 | $ | 0.002 | ||||
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Third
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$ | 0.0025 | $ | 0.002 | ||||
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Fourth
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$ | 0.0017 | $ | 0.001 |
Price per Share - Calendar Year 2009
Quarter High Low
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First
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$ | 0.03 | $ | 0.0151 | ||||
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Second
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$ | 0.02 | $ | 0.005 | ||||
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Third
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$ | 0.029 | $ | 0.01 | ||||
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Fourth
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$ | 0.0185 | $ | 0.005 |
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(a)
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Record Holders
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On December 31, 2010 there were 252 holders of the Company’s 140,806,887 outstanding shares of common stock.
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(b)
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Dividends
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The Company has not paid or declared any dividends on our common stock; however, one of Managements goals is to pay dividends on the common stock at some future date.
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(c)
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Recent Sales of Unregistered Securities
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During 2010, the Company issued pursuant to private placement offerings to certain of our security holders an aggregate of 20,000,000 shares of our common stock, at an average price per share of $0.002175, resulting in net proceeds to the Company of $43,500.
The sales of the securities identified above were made pursuant to privately negotiated transactions that did not involve a public offering of securities and, accordingly, we believe that these transactions were exempt from the registration requirements of the Securities Act pursuant to Section 4(2) thereof and rules promulgated there under. Based on representations from the above-referenced investors, we have determined that such investors were “accredited investors” (as defined by Rule 501 under the Securities Act) and were acquiring the shares for investment and not distribution, that they could bear the risks of the investment and could hold the securities for an indefinite period of time. The investors received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to a registration or an available exemption from such registration. All of the foregoing securities are deemed restricted securities for purposes of the Securities Act.
ITEM 6. Selected Financial Data.
None.
ITEM 7. Management's Discussion & Analysis of Financial Condition and Results of Operations
In 2010 the Company’s operating expenses included payments to consultants and vendors. The total value of non-cash stock compensation issued to these entities was $65,000. Some of the other expenses consisted of Legal and Accounting $12,911, and others in the amount of $56,936. The total operating expenses for 2010 were $134,847 as compared to the operating expenses in 2009 of $169,638.
The Company generated revenues of $49 and $11,025 in 2010 and 2009, respectively. Revenue levels by themselves were not sufficient to sustain the Company’s operations in 2010; therefore funds were raised from the sale of common stock to the Company’s investor base to meet its financial needs. The Company used a “just-in-time” funding method, in an effort to hold off dilution of its stock, by not raising more funds than necessary while its stock price was low.
Liquidity and Capital Resources
The accumulated deficit from inception to December 31, 2010 was $7,297,187 to date; most of the operations of the Company have been funded by monies raised through the issuance of common stock. Management believes it has the relationships in place to continue this type of funding until its revenues can sustain operations on a going forward basis.
The Company plans to use its future profits to further grow its market share, start its dividend program, and buy back its stock. This stock buyback program is intended to support the public stock price and build a stock reserve for future use in possible acquisitions or as security in debt financings. Proceeds from debt financings (if any) will be used to further build its revenues.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk
At December 31, 2010 and 2009 our cash and cash equivalents were approximately $0 and $147, respectively. We presently do not have any interest bearing investments.
Equity Price Risk
Outside of the Company stock buyback initiative as described herein, the Company does not invest in available-for-sale equity securities, and, therefore, are not Subject any additional equity price risk that such activity might bring.
ITEM 8. Financial Statements
The financial statements of the Company are included herein following the signatures.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
As of this filing Subjex Corporation does not have any disagreements on accounting and financial disclosure with its Accounting Firm.
ITEM 9A
(T) Controls and Procedures.
Internal Control Over Financial Reporting
Since the Company does not have an audit committee, its Board of Directors oversees the responsibilities of the audit committee. Its members review all accounts and figures (accounting systems) that pertain to accounting and the financial condition of the company. This includes banking, accounts payable, stocks etc. These are then forwarded to an out of house accounting firm who does all our accounting on Quick Books. Our staff and the accounting firm are in contact on a daily basis. The accounting firm is owned by Sharon Hyder, a member of our board of directors and the mother of the CEO, Andrew Hyder. Management believes that the fees paid to the accounting firm are equivalent to those that would be paid for similar services in an arm’s length transaction.
The Board is fully aware that there is not a clear segregation of duties due to the small number of employees dealing with general administrative and financial matters. However, the board has determined that considering the employees involved the control procedures in place, risks associated with such lack of segregation are insignificant and the potential benefits of adding employees to clearly segregate duties does not justify the expenses associated with such increases at this time.
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Evaluation of Disclosure Controls and Procedures
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Management evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. This evaluation was conducted by our chief executive officer, principal accounting officer and the Board of Directors. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended ("Exchange Act"), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
Based upon their evaluation of our controls, the chief executive officer and principal accounting officer have concluded that the disclosure controls are not effective as of December 31, 2010.
Limitations on the Effectiveness of Controls
Our management does not expect that our disclosure controls or our internal controls over financial reporting will prevent all error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, but no absolute, assurance that the objectives of the control system are met. Further, any control system reflects the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control. A design of a control system is also based in part upon certain assumptions about potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
MANAGEMENT’S REPORT OF INTERNAL CONTROLS OVER FINANCIAL REPORTING
It is the responsibility of Subjex Corporation’s management to establish and maintain adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) of the Securities Exchange Act of 1934, as amended. Subjex Corporation’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States of America.
Internal control over financial reporting includes policies and procedures that (1) pertain to the daily maintenance and reconciliation of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Subjex Corporation; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States of America; (3) provide reasonable assurance that receipts and expenditures of Subjex Corporation are being made only in accordance with authorizations of management and directors of Subjex Corporation; and (4) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Subjex Corporation’s assets that could have a material effect on the financial statements. 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 may deteriorate.
Management assessed the effectiveness of Subjex Corporation’s internal controls over financial reporting as of December 31, 2010. Management based this assessment on criteria for effective internal control over financial reporting described in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management’s assessment included an evaluation of the design of Subjex Corporation’s internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting. Based on our assessment, management determined that for year ending December 31, 2010, our internal controls were effective.
There were no significant changes in our internal controls over financial reporting which occurred in the fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.
Sincerely,
Andrew Hyder
President, Chief Executive Officer and Director
ITEM 9B. Other Information.
None.
PART III
ITEM 10. Directors, Executive Officers, and Corporate Governance
The following table sets forth the name and position of each of our directors and executive officers:
Name Age Positions
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Paul W. Peterson
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61
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Director
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Andrew D. Hyder
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44
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Director, Chairman of the Board, Chief Executive Officer and President
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Sharon R. Hyder
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64
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Director
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Paul W. Peterson as alternative fuels energy advisor to government has consulted to the United States and Chinese governments. He spearheaded the engineering and construction of distillation towers and ethanol plants for production. He has combined his knowledge of the energy sector with his I.T. development and data security protocol, to construct forward-looking financial and data models. Former clients included Continental airlines, Pheco Energy and the Montgomery County Sheriff’s office. Mr. Peterson became a director of Subjex Corporation June 6, 2008. He currently works closely with and oversees Forecast Market Software (FMS) data security.
Andrew D. Hyder has been the President and Chief Executive Officer and a Director since October 1999. As Founder and CEO of Subjex Corp. Hyder has over 20 years of software and A.I. engineering experience. He developed in 1996 one of the first of its kind "cloaking engines" for search engine optimization kicked off a revolution in search engine marketing. As a lifelong entrepreneur he has designed flight simulators, market timing engines and payroll software. He has a passion for viral marketing & sales psychology, with expertise in the areas of finance, corporate governance, direct mail and product branding. Mr. Hyder has developed projects in most computer-programming languages. Mr. Hyder is passionate about self-education and personal innovation.
Sharon R. Hyder has been a director of Subjex Corporation since October 2006. She is serving a three year term on the board of directors which began on October 18, 2006. Sharon is the mother of the Company’s Chief Executive Officer, President, and Chairman of the Board, Andrew D. Hyder. Sharon holds a Bachelor of Arts in Business and Accounting, and an MBA in Business and Finance. Her extensive industry certifications and IRS/tax/audit training make her well suited for board membership with an impressive background in public, private and academic work. Sharon was CFO for Optidynamic Communications Inc. A VA Corporation from January 2002 to December of 2005. In addition she owns her own accounting firm, “Hyder Accounting, Tax and Consulting Services”. Her firm currently handles the accounting for Subjex Corporation along with others throughout the US.
Section (a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires executive officers and directors and persons who beneficially own more than 10% of the Company’s Common Stock to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission (“SEC”). Executive officers, directors, and greater than 10% beneficial owners are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the Company and written representations from the executive officers, directors and holders of 10% or more of the Company’s Common Stock, the Company believes that its executive officers, directors and 10% shareholders complied with all Section 16(a) filing requirements applicable to them.
Code of Ethics
We have a Code of Business Conduct and Ethics that applies to all officers, directors and employees of our company. A copy of our Code of Business Conduct and Ethics is available on our company’s website. If we make any substantive amendments to the Code of Business Conduct and Ethics or grant any waiver from a provision of the code to an executive officer or director, we will promptly disclose the nature of the amendment or waiver by filing with the SEC a current report on Form 8-K.
Audit Committee and Audit Committee Financial Expert
We do not have an audit committee and as a result our entire board of directors performs the duties of an audit committee. Our board of directors evaluates the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. As a result, we do not rely on established pre-approval policies and procedures.
ITEM 11. Executive Compensation
Executive Compensation
Summary Compensation Table
The following table sets forth all of the compensation awarded to, earned by or paid to (i) each individual serving as our principal executive officer during our last completed fiscal year; and (ii) each other individual that served as our executive officer at the conclusion of the fiscal year ended December 31, 201. (Collectively, the “named executives”).
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Name and
Principal Position
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Year
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Salary
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Bonus (1)
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Option Awards (2)
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Non-Equity Incentive Plan Compensation
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All Other Compensation
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Total
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Andrew D. Hyder
Chief Executive Officer and President
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2010
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$0
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$0
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$0
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$0
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$17,944
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$17,944
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Executive Bonus Compensation
Our named executive officers are eligible for discretionary annual bonuses, the maximum amount of which is determined as a percentage of such executive’s annual salary. The determination of whether to declare such bonuses, and if declared, the amount of such bonuses, are made in the sole discretion of our board of directors, and may be based upon the recommendation of our chief executive officer. The chief executive officer does not provide recommendations or other input with respect to his own bonus. A number of performance factors are considered in bonus decisions, including (i) professional ability (job knowledge and professionalism), (ii) human relation skills (interpersonal skills, communication and coordination), (iii) strengths and (iv) areas of developments. We currently do not anticipate changing our informal bonus policy as it pertains to executives.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information regarding each unexercised option held by each of our named executive officers as of December 31, 2010. None of our named executive officers received any stock awards during 2010.
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Option Awards (1)
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Name
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Number
of
Securities Underlying Unexercised Options
Exercisable
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Number of Securities Underlying Unexercised Options
Unexercisable
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Option Exercise Price
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Option Expiration Date
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Andrew D. Hyder
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2,500
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0
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n/a
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n/a
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(1) All options granted pursuant to our 1999 Stock Option and Stock Award Plan, as amended.
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Executive Compensation under the 1999 Stock Option and Stock Award Plan
As of December 31, 2010, we have outstanding options to purchase 12,500 shares of our common stock and no outstanding warrants to purchase any shares of our common stock all issued under our 1999 Stock Option and Stock Award Plan, of which 2,500 have been issued to the named executives through December 31, 2010.
Director Compensation.
None.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related shareholder Matters.
The following table sets forth certain information regarding beneficial ownership of the our common stock as of April 9, 2010 by (i) each person known by us to be the beneficial owner of more than 5 percent of the outstanding common stock, (ii) each director and director nominee, (iii) each named executive officer (as defined under Item 402(a) (2) of Regulation S-B), and (iv) all named executive officers and directors as a group. The number of shares beneficially owned is determined under rules promulgated by the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under those rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares which the individual has the right to acquire within 60 days of the date hereof, through the exercise or conversion of any stock option, convertible security, warrant or other right. Inclusion of shares in the table does not, however, constitute an admission that the named stockholder is a direct or indirect beneficial owner of those shares. Unless otherwise indicated, each person or entity named in the table has sole voting power and investment power (or shares that power with that person’s spouse) with respect to all shares of capital stock listed as owned by that person or entity.
|
Name of Beneficial Owner
|
Shares of Common Stock Beneficially Owned (#)
|
Percentage of Common Stock Beneficially
Owned (%) (1)
|
|||||
|
Andrew D. Hyder
|
1,276,408 | (2) | .73 | %* | |||
|
Sharon R. Hyder
|
15,683 | (3) | .008 | % * | |||
|
Paul W Peterson
|
1,100,000 | (3) | .63 | % * | |||
|
All officers and directors as a group (3 persons)
|
2,392,091 | (4) | 1.93 | % | |||
|
|
* Less than 1%.
|
|
(1)
|
Beneficial ownership is determined in accordance with SEC rules, and includes any shares as to which the security or stockholder has sole or shared voting power or investment power, and also any shares which the security or stockholder has the right to acquire within 60 days of the date hereof, whether through the exercise or conversion of any stock option, convertible security, warrant or other right. The indication herein that shares are beneficially owned is not an admission on the part of the security or stockholder that he, she or it is a direct or indirect beneficial owner of those shares.
|
|
(2)
|
Includes shares of common stock issuable upon exercise of options to purchase an aggregate of 2,500 shares of common stock that are currently exercisable or will become exercisable within the next 60 days. Also includes 25,000 shares of common stock held by Mr. Hyder’s daughter, whom Mr. Hyder disclaims any beneficial ownership interest to, except to the extent of his pecuniary interest therein.
|
|
(3)
|
Directors
|
(4) All officers and directors as a group
Equity Compensation Plan Information
|
The following table sets forth, as of December 31, 2010, the (i) number of securities to be issued upon the exercise of outstanding options, warrants and rights issued under the equity compensation plans, (ii) the weighted average exercise price of such options, warrants and rights, (each as converted pursuant to the merger). All outstanding options identified herein are governed by the terms of the Company’s 1999 Stock Option and Stock Award Plan, as amended.
|
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
(a)
|
Weighted -average price of outstanding options, warrants and rights
(b)
|
Number of securities remaining available for future issuance under equity compensation plan (excluding (a))
(c)
|
|
|
Equity compensation plans not approved by security holders
|
0
|
$0.00
|
-
|
|
Total
|
0
|
$0.00
|
-
|
ITEM 13. Certain Relationships and Related Transactions
None.
ITEM 14. Principal Accountant Fees and Services
The Board of Directors of the Company selected Silberstein Ungar, PLLC (“Silberstein”) (formally known as Maddox Ungar Silberstein, PLLC), with offices in Bingham Farms, Michigan, to audit the Company’s financial statements for the year ended December 31, 2009. Silberstein Ungar, PLLC resigned as our auditors as of December 22, 2010. Therefore the Company’s financial statements for the years ended December 31, 2010 have not been audited. The following table details the fees billed by the independent auditors in the years ended December 31, 2010 and 2009.
|
2010
|
2009
|
|
|
Audit fees
|
$0
|
$15,500
|
No services in connection with appraisal or valuation services, fairness opinions or contribution-in-kind reports were rendered by Silberstein.
ITEM 15. Exhibits, Financial Statements Schedules
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Issuer has duly caused this report to be signed on its behalf by the undersigned officers and/or Directors, there unto duly authorized.
Subjex Corporation
Date: April 18, 2011
NAME TITLE
/s/ Andrew D. Hyder President and Chief Executive Officer,
In accordance with the Securities Exchange Act, this report has been signed below by the following persons on behalf of Subjex Corporation and in the capacities and on the dates indicated.
|
Signature
|
Title
|
Date
|
|
/s/ Andrew D. Hyder
Andrew D. Hyder
|
President and CEO
|
April 18, 2011
|
Exhibit Index
Exhibit 31.1 Certification of Chief Executive Officer
Exhibit 32.1 Certificate pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
SUBJEX CORPORATION
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2010 AND 2009
TABLE OF CONTENTS
Financial Statements:
Balance Sheets - unaudited, unreviewed and restated.
Statements of Operations - unaudited, unreviewed and restated.
Statement of Stockholders' Deficit - unaudited, unreviewed and restated.
Statements of Cash Flows - unaudited, unreviewed and restated.
Notes to Financial Statements - unaudited, unreviewed and restated.
|
SUBJEX CORPORATION
|
||||||||||
|
BALANCE SHEETS
|
||||||||||
|
AS OF DECEMBER 31, 2010 AND 2009
|
||||||||||
|
Restated
|
||||||||||
|
Decmeber 31, 2010
|
December 31, 2009
|
|||||||||
|
unaudited
|
audited
|
|||||||||
|
ASSETS
|
||||||||||
|
Current Assets
|
||||||||||
|
Cash and cash equivalents
|
$ | - | $ | 147 | ||||||
|
Accounts receivable
|
- | - | ||||||||
|
Total current assets
|
- | 147 | ||||||||
|
Other Assets
|
- | - | ||||||||
|
Total assets
|
$ | - | $ | 147 | ||||||
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
||||||||||
|
Current Liabilities
|
||||||||||
|
Short-term notes payable
|
$ | 17,677 | $ | 17,677 | ||||||
|
Subordinated convertible notes payable
|
23,000 | 23,000 | ||||||||
|
Accounts payable
|
223,297 | 224,017 | ||||||||
|
Accrued expenses:
|
||||||||||
|
Accrued expenses-related party
|
50,461 | 629,903 | ||||||||
|
Payroll and payroll taxes
|
18,266 | 18,266 | ||||||||
|
Accrued interest
|
29,857 | 27,589 | ||||||||
|
Accrued expenses
|
4,207 | 4,207 | ||||||||
|
Total current liabilities
|
366,764 | 944,659 | ||||||||
|
Total liabilities
|
366,764 | 944,659 | ||||||||
|
Stockholders' Deficit
|
||||||||||
|
Common stock, no par or stated value;
|
||||||||||
|
200,000,000 shares authorized: 140,806,887 and
|
||||||||||
| 99,903,131 December 31, 2010 and | ||||||||||
|
December 31, 2009, respectively
|
6,905,923 | 6,215,609 | ||||||||
|
Subscriptions received
|
24,500 | |||||||||
|
Accumulated deficit
|
(7,297,187 | (7,160,121 | ) | |||||||
|
Total stockholders' deficit
|
(366,764 | (944,512 | ) | |||||||
|
Cash and cash equivalents at end of year
|
$ | 0 | $ | 147 | ||||||
|
The accompanying notes are an integral part of these financial statements.
|
||||||||||
|
SUBJEX CORPORATION
|
||||||||
|
STATEMENTS OF OPERATIONS
|
||||||||
|
FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
|
||||||||
|
Restated
|
||||||||
|
For the year ended December 31, 2010
|
For the year ended December 31, 2009
|
|||||||
|
unaudited
|
audited
|
|||||||
|
REVENUES
|
$ | 49 | $ | 11,025 | ||||
|
EXPENSES
|
||||||||
|
Selling, general and administrative
|
134,847 | 169,639 | ||||||
|
TOTAL OPERATING EXPENSES
|
134,847 | 169,639 | ||||||
|
OPERATING LOSS
|
(134,798 | ) | (158,614 | ) | ||||
|
OTHER INCOME (EXPENSE)
|
||||||||
|
Interest expense
|
(2,268 | ) | (2,956 | ) | ||||
|
NET LOSS
|
$ | (137,066 | ) | $ | (161,570 | ) | ||
|
NET LOSS PER SHARE: BASIC AND DILUTED
|
$ | (0.00 | ) | $ | (0.00 | ) | ||
|
WEIGHTED AVERAGE NUMBERS OF SHARES OUTSTANDING: BASIC AND DILUTED
|
124,178,313 | 99,682,409 | ||||||
|
The accompanying notes are an integral part of these financial statements.
|
||||||||
|
SUBJEX CORPORATION
|
||||||||
|
STATEMENTS OF CASH FLOWS
|
||||||||
|
FOR THE YEARS ENDED DECEMBER 31, 2010 AND 2009
|
||||||||
|
Restated
|
||||||||
|
For the year ended December 31, 2010
|
For the year ended December 31, 2009
|
|||||||
|
unaudited
|
audited
|
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net loss for the period
|
$ | (137,066 | ) | $ | (161,570 | ) | ||
|
Adjustments to reconcile net loss to
|
||||||||
|
net cash flows from operating activities:
|
||||||||
|
Court order settled with issuance of common stock
|
- | 73,000 | ||||||
|
Non cash common stock issued for consulting services
|
65,000 | 250 | ||||||
|
Changes in operating assets and liabilities:
|
||||||||
|
Accounts receivable
|
- | 3,011 | ||||||
|
Accounts payable
|
(720 | ) | 39,930 | |||||
|
Accrued expenses
|
- | 260 | ||||||
|
Accrued expenses-related party
|
(579,443 | ) | 422,947 | |||||
|
Payroll and payroll taxes payable
|
- | (19,819 | ) | |||||
|
Accrued interest
|
2,268 | 2,269 | ||||||
|
Short-term note payable
|
- | (1,500 | ) | |||||
|
Net cash flows used in operating activities
|
(649,961 | ) | 358,778 | |||||
|
Cash flows from investing activities:
|
||||||||
|
Deposits
|
- | 2,611 | ||||||
|
Net cash flows used in investing activities
|
- | 2,611 | ||||||
|
Cash flows from financing activities:
|
||||||||
|
Proceeds from issuance of common stock
|
43,500 | 87,900 | ||||||
|
Subscriptions received
|
24,500 | - | ||||||
|
Notes retired-related party
|
581,814 | - | ||||||
|
Shares retired-related party
|
- | (438,688 | ) | |||||
|
Shares retired- unrelated party
|
- | (12,000 | ) | |||||
|
Net cash flows used in financing activities
|
649,814 | (362,788 | ) | |||||
|
Net decrease in cash and equivalents
|
(147 | ) | (1,399 | ) | ||||
|
Cash and cash equivalents at beginning of year
|
147 | 1,546 | ||||||
|
Cash and cash equivalents at end of year
|
$ | 0 | $ | 147 | ||||
|
The accompanying notes are an integral part of these financial statements.
|
||||||||
|
STATEMENT OF STOCKHOLDERS' DEFICIT
|
||||||||||||||||
|
YEARS ENDED DECEMBER 31, 2010 AND 2009
|
||||||||||||||||
| Unaudited, Unreviewed, and Restated | ||||||||||||||||
|
Common Stock
|
Accumulated
|
Stockholders'
|
||||||||||||||
|
Shares
|
Amount
|
Deficit
|
Deficit
|
|||||||||||||
|
Balance, December 31, 2008
|
99,497,720 | 6,505,147 | $ | (6,998,551 | ) | $ | (493,404 | ) | ||||||||
|
Common stock issuance
|
7,359,167 | 87,900 | 87,900 | |||||||||||||
|
Common stock issuance for consulting services
|
10,000 | 250 | 250 | |||||||||||||
|
Shares retired-Related party
|
(8,803,756 | ) | (438,688 | ) | (438,688 | ) | ||||||||||
|
Shares retired- consulting services
|
(60,000 | ) | (12,000 | ) | (12,000 | ) | ||||||||||
|
Common stock issuance for court orderd settlement
|
1,900,000 | 73,000 | 73,000 | |||||||||||||
|
Net Loss
|
(161,570 | ) | (161,570 | ) | ||||||||||||
|
Balance, December 31, 2009
|
99,903,131 | $ | 6,215,609 | $ | (7,160,121 | ) | $ | (944,512 | ) | |||||||
|
Common stock issuance
|
20,000,000 | 43,500 | 43,500 | |||||||||||||
|
Common stock issuance for consulting services
|
9,000,000 | 65,000 | 65,000 | |||||||||||||
|
Notes retired-Related party
|
11,903,756 | 581,814 | 581,814 | |||||||||||||
|
Subscriptions received
|
- | - | 24,500 | |||||||||||||
|
Net Loss
|
(137,066 | ) | (137,066 | ) | ||||||||||||
| 140,806,887 | $ | 6,905,923 | $ | (7,297,187 | ) | $ | (366,764 | ) | ||||||||
SUBJEX CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2010 AND 2009
NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Past and Current Business
Subjex Corporation provided a software service, Subject CSR, through an ASP (application service provider) model. Customers could use the software online or by downloading it, and did not need to install it on their server. This software service was wrapped in a subscription model, and was billed monthly until customer cancellation.
Revenue Recognition
Revenue from the sale of software and other products is recognized when an agreement is made, delivery is complete, no significant obligations remain unfulfilled, and collection of the resulting receivable is probable. In instances where a significant obligation exists, revenue recognition is delayed until the obligation has been satisfied. Revenue from services, including training and consulting are recognized as the services are performed.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash Deposits in Excess of Federally Insured Limits
The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The balances are insured by the Federal Deposit Insurance Company up to $250,000. At December 31, 2010 the Company had no uninsured cash balances.
Cash and Cash Equivalents
The Company is not currently considering any investments outside of growing its own business model at this time.
Fair Value of Financial Instruments
The company considers that the carrying amount of financial instruments, including accounts receivable, accounts payable, accrued liabilities and notes payable, approximates fair value. Interest on the notes payable is payable at rates which approximate fair value.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization is provided using the straight-line method over the estimated useful lives of the related assets. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is included in operating income for the period. The cost of maintenance and repairs is expensed as incurred; significant renewals and betterments are capitalized. Deduction is made for retirements resulting from renewals and betterments. Property and equipment have been fully depreciated.
The estimated useful lives are as follows:
|
Computers & Equipment
|
3 to 5 yrs
|
|
Furniture
|
5 to 7 yrs
|
NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impairment of Long-Lived Assets
Long-lived assets, such as equipment are reviewed for impairment whenever changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset.
Research and Development
Research and development costs, whether performed by the Company or by outside parties under contract, are charged to operations as incurred. The company incurred no R&D expenses during 2010 and 2009.
Software Development Costs
The Company capitalizes certain software development and production costs once technological feasibility has been achieved. Software development costs incurred prior to achieving technological feasibility are expensed as incurred.
The Company fully expensed the software maintenance incurred and there were no additional software development costs in 2010 and 2009.
Basic and Diluted Net Loss Per Share
Basic per-share amounts are computed, generally, by dividing net income or loss by the weighted-average number of common shares outstanding. Diluted per-share amounts assume the conversion, exercise, or issuance of all potential common stock instruments, unless their effect is anti-dilutive, thereby reducing the loss or increasing the income per common share. The Company has granted options and warrants to purchase shares of common stock at various amounts per share. Those options and warrants were not included in the computation of diluted earnings per share because the Company incurred losses in both years. The inclusion of potential common shares in the calculation of diluted loss per share would have an anti-dilutive effect. Therefore, basic and diluted loss per share amounts are the same in each year presented.
Stock-Based Consideration
As permitted by Accounting Standards Codification 718 (ASC 718) “Accounting for Stock-Based Compensation,” the Company accounts for share-based payments to employees and directors using the intrinsic value method. As such, we do not recognize compensation cost related to these stock option grants if the exercise price of the options equals or exceeds the fair value of the underlying stock at issuance date. Our general policy is to grant stock options and warrants at fair value at the date of grant. We recorded expense related to stock based compensation issued to non-employees in accordance ASC.
For the years ended December 31, 2010 and 2009, we recorded no compensation expense.
No employee stock options were granted during 2010 and 2009.
Comprehensive Income (Loss)
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 130 (ASC 220-10), “Reporting Comprehensive Income”, which establishes standards for the reporting and display of comprehensive income and its components in the financial statements. There were no items of comprehensive income (loss) applicable to the Company during the period covered in these financial statements.
NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Trade Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount. The Company grants uncollateralized credit to customers, but requires deposits on unique orders. The Company reviews customers’ credit history before extending unsecured credit. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on historical write-off experience. The Company reviews its allowance for doubtful accounts monthly or quarterly depending on the service offered the account. Past due balances over 90 days and over a specified dollar amount are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
Income Taxes
The Company provides for income taxes under Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (ASC 740-10). SFAS No. 109 (ASC 740-10) requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. The Company’s predecessor operated as entity exempt from Federal and State income taxes. See Note 6.
NOTE 2 – GOING CONCERN AND LIQUIDITY
The Company had a working capital deficit and recurring net losses from operations in 2010, and at December 31, 2010 had insufficient cash on hand to support its ongoing operations. These factors create doubt about the Company's ability to continue as a going concern.
The ability of the Company to continue as a going concern is dependent upon the Company’s ability to attain a satisfactory level of profitability and obtain suitable and adequate financing. There can be no assurance that management's plan will be successful.
NOTE 3 – FIXED ASSETS
Property and equipment consisted of the following at December 31:
|
2010
|
2009
|
|||||||
|
Company Vehicle
|
$ | 11,186 | $ | 11,186 | ||||
|
Office and Computer Equipment
|
49,583 | 49,583 | ||||||
|
Furniture and Fixtures
|
14,231 | 14,231 | ||||||
|
Accumulated Depreciation
|
(60,192 | ) | (60,192 | ) | ||||
|
Impairment of Fixed Assets
|
(14,808 | ) | (14,808 | ) | ||||
|
Property and Equipment, net
|
$ | 0 | $ | 0 | ||||
Depreciation and amortization expense on property and equipment was $0 and $0 for the years ended December 31, 2010 and 2009, respectively.
NOTE 4 – FINANCING ARRANGEMENTS
Notes Payable
The notes payable to related parties were issued in exchange for the retirement of shares at the original price that the shares were issued and bear no interest rate and have no due date. The related parties all requested that the shares be replaced at some future date however in order to book these transactions promissory notes were made with each party.
Subordinated Notes Payable
The subordinated convertible notes payable are unsecured, bear interest at 10% and were due at various dates, with all currently being due. To date the Company has not repaid these amounts. The outstanding balance at December 31, 2010 and 2009 is $23,000 and $23,000 respectively.
Long-Term Debt
None.
NOTE 5 - SHAREHOLDERS’ EQUITY
Stock Options
In 2007 the Board of Directors adopted to bring to an end the 1999 Pagelab Network, Inc. Stock Option and Stock Award Plan. The Plan permitted the granting of incentive stock options meeting the requirements of Section 422 of the Internal Revenue Code of 1986, as amended and nonqualified options, which do not meet the requirements of Section 422. A total of 2,500,000 shares were reserved under the Plan. All options were granted at an exercise price not less than the fair market value of the common stock on the grant date according to the Plan provisions. The options granted to participants owning more than 10 percent of the Company’s outstanding voting stock were to be granted at an exercise price not less than 110 percent of fair market value of the common stock on that date. The options expired on the date determined by the Board of Directors, but not greater than 10 years from the grant date. No options were granted under the old Plan during the years ended December 31, 2010 and 2009.
A summary of outstanding options under the Plan as of December 31 is as follows:
|
2010
|
2009
|
|||||||||||||||
|
Shares
|
Weighted
Average Exercise Price
|
Shares
|
Weighted Average Exercise Price
|
|||||||||||||
|
Outstanding at beginning of year
|
12,500 | $ | 0.80 | 12,500 | $ | 0.80 | ||||||||||
|
Canceled/Expired
|
(0 | ) | 0.00 | (0 | ) | 0.00 | ||||||||||
|
Outstanding at end of year
|
12,500 | $ | 0.80 | 12,500 | $ | 0.80 | ||||||||||
All options were fully vested and have a have weighted average remaining contractual life of .05 years at December 31, 2010.
Stock Warrants
All warrants have expired and none were granted in 2010.
NOTE 5 - SHAREHOLDERS’ EQUITY (CONTINUED)
A summary of outstanding warrants as of December 31 is as follows:
|
2010
|
2009
|
|||||||||||||||
|
Shares
|
Weighted
Average Exercise Price
|
Shares
|
Weighted
Average Exercise Price
|
|||||||||||||
|
Outstanding at beginning of year
|
101,000 | $ | 0.17 | 176,000 | $ | 0.40 | ||||||||||
|
Granted
|
0.00 | 0 | 0.00 | |||||||||||||
|
Exercised
|
- - | - - | - - | - - | ||||||||||||
|
Canceled/Expired
|
-101000 | 0.40 | -75,000 | 0.40 | ||||||||||||
|
Outstanding at end of year
|
0.00 | $ | 0.00 | 101,000 | $ | 0.17 | ||||||||||
All warrants were fully vested and had a weighted average remaining contractual life of 0 years at December 31, 2010.
Issued Shares
The Company issued 20,000,000 shares of its common stock for $43,500 during 2010.
Retired Shares
The company accepted the retirement of 8,803,756 shares from related parties during 2009 with the understanding that they would be returned at some future time. The price of the shares that were brought back into the Company was a total of $438,688 and promissory notes were issued to each related party. In 2010 the Company settled some of its related party debt using equity stock issuances, bringing its related party debt from $626,903 to $50,461.
NOTE 6 - INCOME TAXES
|
2010
|
2009
|
|||||||||||||||
|
Amount
|
%
|
Amount
|
%
|
|||||||||||||
|
Expected Federal
|
$ | (46,602 | ) | (34 | %) | $ | (54,932 | ) | (34 | %) | ||||||
|
Expected State
|
(5,483 | ) | (4 | %) | (6,463 | ) | (4 | %) | ||||||||
|
Valuation allowance
|
53,085 | 38 | % | 61,395 | 38 | % | ||||||||||
|
Total
|
$ | - | $ | - | ||||||||||||
The Company has a net operating loss carry forward totaling approximately $6,213,000 at December 31, 2010 that can be used to offset future taxable income. Due to the uncertainty of the Company’s future taxable income, a valuation allowance has been established. The following is a listing of the Company's net deferred tax assets as of December 31:
|
2010
|
2009
|
|||||||
|
Deferred tax asset relating to net
operating loss carry-forwards
|
$ | 1,970,900 | $ | 1,970,900 | ||||
|
Valuation allowance
|
(1,970,900 | ) | (1,970,900 | ) | ||||
|
Net deferred tax asset
|
$ | 0 | $ | 0 | ||||
At December 31, 2010, the Company has federal net operating loss carry forwards as follows:
NOTE 6 - INCOME TAXES (CONTINUED)
|
Federal
|
||||
|
December 31, 2019
|
$ | 49,000 | ||
|
2020
|
1,010,000 | |||
|
2021
|
1,051,000 | |||
|
2022
|
778,000 | |||
|
2023
|
300,000 | |||
|
2024
|
280,000 | |||
|
2025
|
464,000 | |||
|
2026
|
348,000 | |||
|
2027
|
1,328,000 | |||
|
2028
|
307,000 | |||
|
2029
|
161,000 | |||
|
2030
|
137,000 | |||
| $ | 6,213,000 | |||
NOTE 7 - SUPPLEMENTAL CASH FLOWS INFORMATION
Supplemental disclosure of cash flow information:
|
2010
|
2009
|
|||||||
|
Cash paid during year for interest
|
$ | 0 | $ | 0 | ||||
|
Cash paid during year for income tax
|
$ | 0 | $ | 0 | ||||
NOTE 8 – LEASE
The Company rented its offices under a month to month lease. Rent expense was $3,927 in 2010 and $8,732 in 2009.
NOTE 9 – RECENT ACCOUNTING PRONOUNCEMENTS
In May 2009, the FASB issued SFAS 165 (ASC 855-10) entitled “Subsequent Events”. Companies are now required to disclose the date through which subsequent events have been evaluated by management. Public entities (as defined) must conduct the evaluation as of the date the financial statements are issued, and provide disclosure that such date was used for this evaluation. SFAS 165 (ASC 855-10) provides that financial statements are considered “issued” when they are widely distributed for general use and reliance in a form and format that complies with GAAP. SFAS 165 (ASC 855-10) is effective for interim and annual periods ending after June 15, 2009 and must be applied prospectively. The adoption of SFAS 165 (ASC 855-10) during the quarter ended September 30, 2009 did not have a significant effect on the Company’s financial statements as of that date or for the quarter or year-to-date period then ended.
In June 2009, the FASB issued SFAS 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. (“SFAS 168” or ASC 105-10) SFAS 168 (ASC 105-10) establishes the Codification as the sole source of authoritative accounting principles recognized by the FASB to be applied by all nongovernmental entities in the preparation of financial statements in conformity with GAAP. SFAS 168 (ASC 105-10) was prospectively effective for financial statements issued for fiscal years ending on or after September 15, 2009 and interim periods within those fiscal years. The adoption of SFAS 168 (ASC 105-10) on July 1, 2009 did not impact the Company’s results of operations or financial condition. The Codification did not change GAAP, however, it did change the way GAAP is organized and presented.
NOTE 9 – RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
As a result, these changes impact how companies reference GAAP in their financial statements and in their significant accounting policies. The Company implemented the Codification in this Report by providing references to the Codification topics alongside references to the corresponding standards.
With the exception of the pronouncements noted above, no other accounting standards or interpretations issued or recently adopted are expected to have a material impact on the Company’s financial position, operations or cash flows.
NOTE 10 – RELATED PARTY TRANSACTION
The company accepted the retirement of 8,803,756 shares from related parties during 2009 with the understanding that they would be returned at some future time. The price of the shares that were brought back into the Company was a total of $438,688 and promissory notes were issued to each related party. In 2010 the Company settled some of this related party debt using equity stock issuances, bringing its related party debt from $626,903 to $50,461
NOTE 11 – SUBSEQUENT EVENTS
The Board of Directors of the Company selected Silberstein Ungar, PLLC (“Silberstein”) (formally known as Maddox Ungar Silberstein, PLLC), with offices in Bingham Farms, Michigan, to audit the Company’s financial statements for the year ended December 31, 2009. Silberstein Ungar, PLLC resigned as our auditors as of December 22, 2010. The Board of Directors of the Company has not selected another auditing firm as of this filing. Therefore the Company’s financial statements for the years ended December 31, 2010 have not been audited.
In accordance with SFAS 165 (ASC 855-10) the Company has analyzed its operations subsequent to December 31, 2010 to the date these financial statements were filed with the Securities and Exchange Commission, and has determined that it does not have any additional material subsequent events to disclose in these financial statements.