Attached files
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| EX-31.1 - EXHIBIT 31.1 - SUBJEX CORP | subjexexh31152011.htm |
| EX-32.1 - EXHIBIT 32.1 - SUBJEX CORP | subjexexh32152011.htm |
UNITED STATES SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2011
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT OF 1934
Commission File Number 0-29711
Subjex Corporation
(Exact name of issuer in its charter)
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Minnesota
(State or other jurisdiction of incorporation or organization)
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41-1596056
(IRS 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
(Issuer’s telephone number)
(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
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, no par value
Check whether the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. [ ]
Check whether the registrant: (1) 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 periods that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] 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]
Traditional Small Business Disclosure Format: Yes [ ] No [X]
As of May 18, 2011 there were 175,745,887 outstanding shares of common stock, no par value.
The aggregate market value of the common stock of the issuer held by non-affiliates of the issuer on May 18, 2011 based on the closing price of the common stock as reported on the OTC Bulletin Board on such date was $966,602.
SUBJEX CORPORATION INDEX
| Page Number | |||
| PART I | FINANCIAL INFORMATION | ||
| ITEM 1. | FINANCIAL STATEMENTS | ||
| Balance Sheets as of March 31, 2011 (unaudited and unreviewed) and December 31, 2010 (unaudited) | 4 | ||
| Statements of Operations for the three months ended March 31, 2011 and 2010 (unaudited and unreviewed) | 5 | ||
| Statements of Cash Flows for the three months ended March 31, 2011 and 2010 (unaudited and unreviewed) | 6 | ||
| Notes to the Financial Statements | 7 | ||
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 8 | |
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 9 | |
| ITEM 4. | CONTROLS AND PROCEDURES | 10 | |
| ITEM 4T. | CONTROLS AND PROCEDURES | 10 | |
| PART II | OTHER INFORMATION | 10 | |
| ITEM 1. | LEGAL PROCEEDINGS | ||
| ITEM 2. | CHANGE IN SECURITIES AND USE OF PROCEEDS | ||
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | ||
| ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS | ||
| ITEM 5. | OTHER INFORMATION | ||
| ITEM 6. | EXHIBITS AND REPORTS ON FORM 8-K | ||
| CERTIFICATION PURSUANT TO SECTION 06 OF THE SARBANES-OXLEY ACT OF 2002 | |||
| CERTIFICATIONS | 13 | ||
References to the “Company,” the “Registrant,” “we”, “us” or “our” in this Quarterly Report on Form 10-Q refer to Subjex Corporation., unless the context indicates otherwise.
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SUBJEX CORPORATION
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BALANCE SHEETS
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(Unreviewed)
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(Unaudited)
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March 31,
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December 31,
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2011
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2010
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ASSETS
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Current Assets:
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Cash
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$ | - | $ | - | ||||
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Total current assets
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- | - | ||||||
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Other Assets:
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Trademarks
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494 | - | ||||||
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Total assets
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$ | 494 | $ | - | ||||
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LIABILITIES AND STOCKHOLDERS' DEFICIT
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Current Liabilities:
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Short-term notes payable
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$ | 17,677 | $ | 17,677 | ||||
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Subordinated convertible notes payable
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23,000 | 23,000 | ||||||
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Accounts payable
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220,911 | 223,297 | ||||||
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Accrued expenses:
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Accrued expenses-Related party
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47,927 | 50,461 | ||||||
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Payroll and payroll taxes
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18,166 | 18,266 | ||||||
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Accrued interest
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30,424 | 29,857 | ||||||
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Accrued expenses
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4,207 | 4,207 | ||||||
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Total current liabilities
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362,312 | 366,764 | ||||||
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Total liabilities
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361,818 | 366,764 | ||||||
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Stockholders' Deficit:
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Common stock, no par or stated value;
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200,000,000 shares authorized: 167,445,887 and
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140,806,887 shares issued and outstanding at
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March 31, 2011 and December 31, 2010, respectively
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6,985,019 | 6,905,923 | ||||||
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Subscriptions received
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10,000 | 24,500 | ||||||
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Accumulated deficit
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(7,356,836 | (7,297,187 | ) | |||||
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Total stockholders' Deficit
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(361,818 | (366,764 | ) | |||||
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Total liabilities and stockholders’ deficit
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$ | - | $ | 0 | ||||
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The accompanying notes are an integral part of these financial statements.
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SUBJEX CORPORATION
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STATEMENTS OF OPERATIONS
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(Unreviewed)
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Three Months Ended March 31,
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2011
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2010
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Revenues:
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Gross revenue
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$ | 1,500 | $ | 49 | ||||
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Expenses:
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Selling, general and administrative
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60,583 | 9,922 | ||||||
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Total operating expense
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60,583 | 9,922 | ||||||
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Operating loss
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(59,083 | ) | (9,873 | ) | ||||
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Other income (expense):
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Interest expense
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(567 | ) | (567 | ) | ||||
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Net loss
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$ | (59,650 | ) | $ | (10,440 | ) | ||
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Net loss per basic and diluted common share
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$ | (0.0004 | ) | $ | (0.001 | ) | ||
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Weighted average common shares
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outstanding - basic and diluted
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146,303,591 | 99,903,131 | ||||||
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The accompanying notes are an integral part of these financial statements.
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SUBJEX CORPORATION
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STATEMENTS OF CASH FLOWS
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(Unaudited)
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Three Months Ended March 31,
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2011
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2010
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Cash flows from operating activities:
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Net loss
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$ | (59,650 | ) | $ | (10,440 | ) | ||
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Adjustments to reconcile net loss to
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net cash flows from operating activities:
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Non cash common stock issued for consulting services
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34,596 | - | ||||||
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Non cash common stock issued to settle other liability
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2,500 | - | ||||||
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Changes in operating assets and liabilities:
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Accounts payable
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(2,386 | ) | 3,205 | |||||
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Accrued expenses-Related party
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(2,533 | ) | (2,433 | ) | ||||
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Payroll and payroll taxes payable
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(100 | ) | - | |||||
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Accrued interest
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567 | 567 | ||||||
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Net cash flows used in operating activities
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(27,006 | ) | (9,101 | ) | ||||
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Cash flows from investing activities:
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Trademarks
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(494 | ) | - | |||||
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Net cash flows used in investing activities
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(494 | ) | - | |||||
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Cash flows from financing activities:
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Proceeds from issuance of common stock
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17,500 | - | ||||||
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Subscriptions received
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10,000 | 9,000 | ||||||
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Net cash flows provided by financing activities
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27,500 | 9,000 | ||||||
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Net increase (decrease) in cash and equivalents
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(0 | ) | (101 | ) | ||||
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Cash and cash equivalents at beginning of period
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- | 147 | ||||||
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Cash and cash equivalents at end of period
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$ | (0 | ) | $ | 46 | |||
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The accompanying notes are an integral part of these financial statements.
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Notes to the Financial Statements (unaudited and unreviewed)
Note 1. Basis of Presentation
The accompanying unaudited and unreviewed interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Form 10-KA filed with the SEC as of and for the period ended December 31, 2010. In the opinion of management, all adjustments necessary in order for the financial statements to be not misleading have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.
Note 2. Acquisition of Assets
The Company acquired a Tradmark in the quarter ending March 31, 2011.
Note 3. Going Concern
The Company had a working capital deficit and recurring net losses from operations in the first quarter ending March 31, 2011 and 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.
Note 4. Payroll and Payroll Taxes
The Company owes the IRS related to employee payroll withholdings and payroll taxes aggregating approximately $7,000 at March 31, 2011. This liability is included in accrued expenses – payroll and payroll taxes. Until all amounts owed are paid to the IRS, the IRS will maintain a federal tax lien on the Company’s property.
Note 5. Stockholders’ Deficit
During the first quarter of 2011, the Company issued 26 million shares of common stock for operational funds. Also the Company did receive Subscription Agreements. The Company is diligently working hard to grow its revenues without future dilution.
ITEM 2. Management’s Discussion and Analysis
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 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 quarterly report on Form 10-Q and the annual report Form 10KA for 12-31-2010.
Description of Business
Subjex Corporation is a Minnesota corporation formed in 1999, for the creation, custom development and incubation of artificial intelligence technologies. We translate our advanced technology development methods into extreme value solutions for specialized industries. Our goal is to 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, and the development of auction technology. 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).
Principal Product Development and Resulting Services
Subjex Corporation is advancing its go-to-market strategy for its technology with bold new ideas and methods that management expects to grow from a grass roots initiative. Several of these initiatives are expected to launch this year. See “Recent Developments” for more details.
Trademarks and Patents
The Company has held trademarks and patent pending protection for most of its business that management feels is necessary to protect the Company’s interests. However the Company provides most of its technology as a proprietary service offering, (black box) which maintains the interworking of the technology secret to clients and resellers.
Environmental Compliance
The Company feels it is in complete compliance with all Federal and State Environmental Compliance laws.
Employees
The Company had employees, and a team of outside consultants and contractors to fit the Company’s operational needs. The Company’s employees and consultants are not represented by any labor unions. The Company considers its relations with its consultants and contractors to be outstanding.
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 identical solutions as we offer. In addition, management continues to market it products to businesses through the use of third party resellers. The Company believes that its solutions are more effective than its competition. Management believes that while some companies may have greater resources than us, we have 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
The Company’s basis of accounting contemplates the realization of assets and the satisfaction of its liabilities and commitments in the normal course of operations. Since inception, the Company has incurred losses of $7,356,836 and has a working capital deficit of $361,818 as of March 31, 2011. The Company had a working capital deficit and recurring net losses from operations in 2010 as well. Despite the net losses of past years operations, the funds spent have resulted in a significant ownership and control of technology and infrastructure which the company expects to generate considerable earnings in the future.
The Company’s operating expenses for the three months ended March 31, 2011 was $60,583 as compared to $9,922 for the three months ended March 31, 2010. Operating expenses increased overall due to the company’s revenue outlook. The Company had $1,500 in revenues for the three months ended March 31, 2011 as compared to $49 for the three months ended March 31, 2010. Revenue levels in the first quarter of 2011 were not sufficient to sustain the Company's operations; therefore funds were raised from the sale of common stock and Subscription Agreements for the sale of common stock to the Company's investor base to meet its financial needs.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is subject to certain market risks, including changes in interest rates and currency exchange rates. The Company does not undertake any specific actions to limit those exposures.
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 are 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 will primarily be as a result of finding new customers. Revenue from this technology did not grow during 2010 due to a focus on other projects. In 2008 and 2009 a significant upgrade to the model has been preformed. With many new features, it is being demonstrated to a select few prospects. While the AiNDEE technology is being well received 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 management feels that this trend is not likely to continue if future revenue expectations from its initiatives occur.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on their most recent review, as of the end of the period covered by this report, the Company’s principal executive officer has concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure and are effective to ensure that such information is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect those controls subsequent to the date of their evaluation.
ITEM 4T. Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 ("Exchange Act"), the Company carried out an evaluation, with the participation of the Company's management, including the Company's Chief Executive Officer ("CEO") and Board of Directors of the effectiveness of the Company's disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company's CEO and Board of Directors concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including the Company's CEO and Board of Directors as appropriate, to allow timely decisions regarding required disclosure.
Management's Report on Internal Controls over Financial Reporting
Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of consolidated financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. There has been no change in the Company's internal control over financial reporting during the quarter ended March 31, 2011 that has materially affected, or is reasonably likely to materially affect,
the Company's internal control over financial reporting.
Our management does not expect that our disclosure controls and internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect 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 inherent 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. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control 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.
This quarterly report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this quarterly report.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
On September 28, 2009 an “Order Granting Summary Judgment” was issued. Halleland, Lewis, Nilan & Johnson, PA plaintiffs, were granted a judgment in the amount of $72,346 against Subjex Corporation and Andrew Dean Hyder for providing legal sevices in another, now settled case. The Company is in the process of making long-term payoff arrangements with the Plaintiffs on terms with possible future revenues. No specific outcome can be assured.
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 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults on Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None.
Item 6. Exhibits and reports on form 8-K
No reports were filed in the period ending March 31, 2011.
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: May 20, 2011
NAME TITLE
/s/ Andrew D. Hyder President and Chief Executive Officer