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EX-31.1 - CERTIFICATION - CEPHAS HOLDING CORP.chec_ex311.htm
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EXCEL - IDEA: XBRL DOCUMENT - CEPHAS HOLDING CORP.Financial_Report.xls


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q /A
(Amendment No. 1)
 
(Mark One)
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011
 
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ________________ to _______________

000-24835
(Commission file number)
 
CEPHAS HOLDING CORP.
 (Exact name of small business issuer as specified in its charter)
 
Delaware   38-3399098
(State or other jurisdiction of incorporation or organization)   (IRS Employer Identification No.)

2942 North 24th Street Ste. 114-508 Phoenix, AZ 85016
 (Address of principal executive offices)

623-850-1356
 (Issuer's telephone number)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o   No x

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of August 1, 2011  –196,283,679  shares of common stock

Transitional Small Business Disclosure Format (check one):  Yes o   No x
 


 
 

 
EXPLANATORY NOTE
 
The sole purpose of this Amendment No. 1 to Cephas Holding Corp. Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011, filed with the Securities and Exchange Commission on August 15, 2011 (the Form 10-Q), is to furnish Exhibit 101 in accordance with Rule 405 of Regulation S-T. Exhibit 101 to this report provides the consolidated financial statements and related notes from the Form 10-Q formatted in XBRL (eXtensible Business Reporting Language).
 
No other changes have been made to the Form 10-Q. This Amendment No. 1 to the Form 10-Q speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date and does not modify or update in any way disclosures made in the original Form 10-Q.
 
Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
 
 
 
 

 
CEPHAS HOLDING CORP.
 
Index
 
      Page Number  
  PART I. FINANCIAL INFORMATION      
         
 Item 1. Financial Statements        
  Consolidated Balance Sheet as of June 30, 2011 (unaudited) and December 31, 2010(audited)      
  Consolidated Statements of Operations for the three  months ended June 30, 2011  and 2010 (unaudited)      
  Consolidated Statements of Cash Flows for the Six months June 30, 2011 and 2010 (unaudited)      
  Notes to Consolidated Interim Financial Statements (unaudited)      
Item 2. Management's Discussion and Analysis or Plan of Operation     15   
Item 3. Controls and Procedures     17   
           
  PART II. OTHER INFORMATION        
           
Item 1. Legal Proceedings     18   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds     18   
Item 3. Defaults Upon Senior Securities     18   
Item 4. Submission of Matters to a Vote of Security Holders     18   
Item 5. Other Information     18   
Item 6. Exhibits     18   
           
SIGNATURES       19   
 
 
2

 
 
             
CEPHAS HOLDING CORP. AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
 
   
         
ASSETS
       
   
June 30,
   
December 31,
 
   
2011
   
2010
 
   
(Unaudited)
   
(Audited)
 
CURRENT ASSETS:
           
Cash
  $ 449     $ 1,539  
Prepaid expenses
    36,000       36,000  
                 
TOTAL CURRENT ASSETS
    36,449       37,539  
                 
FIXED ASSETS - at cost
               
Computer and office equipment
    54,124       52,930  
Less: Accumulated depreciation
    (53,050 )     (52,930 )
                 
NET FIXED ASSETS
    1,074       -  
                 
INVESTMENTS
    135,000       135,000  
                 
TOTAL ASSETS
  $ 172,523     $ 172,539  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
         
                 
CURRENT LIABILITIES:
               
Accounts payable
  $ 229,307     $ 229,307  
Accrued expenses
    1,128,000       1,040,500  
Accrued interest
    2,182,365       2,015,726  
Accrued derivative liability
    313,975       305,864  
License fees payable
    200,000       200,000  
Due to related parties
    58,423       52,698  
Advances from an officer
    99,580       112,670  
Notes payable
    565,750       615,250  
Note payable - officer
    1,189,416       1,217,149  
Note payable - other
    76,250       83,750  
TOTAL CURRENT LIABILITIES
    6,043,066       5,872,914  
                 
COMMITMENTS AND CONTINGENCIES
    -       -  
                 
STOCKHOLDERS' DEFICIT
               
Series A Preferred Stock, $0.001 par value, 1,000,000 shares
               
authorized; 44,500 shares issued and outstanding
    44       44  
Series B Convertible Preferred Stock, $0.01 par value; 850,000
               
shares authorized; 850,000 shares issued and outstanding
               
authorized; 1,000,000 Class A shares issued and outstanding
    8,500       8,500  
Series C Convertible Preferred Stock, $0.01 par value; 147,775
           
shares authorized; 147,775 shares issued and outstanding
    1,478       1,478  
Common stock; $0.001 par value; 75,000,000,000 shares
               
authorized;180,533,679( December 31, 2010 - 114,983,679) shares
    180,534       114,984  
 issued and outstanding
               
Additional paid-in capital
    16,536,703       16,492,903  
Stock subscription receivable
    (156,300 )     (156,300 )
Non-controlling interest
    (9,168 )     (9,168 )
Accumulated deficit
    (22,432,334 )     (22,152,816 )
                 
TOTAL STOCKHOLDERS' DEFICIT
    (5,870,543 )     (5,700,375 )
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  $ 172,523     $ 172,539  

The accompanying notes are an integral part of these financial statements.

 
3

 

CEPHAS HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED INTERIM STATEMENT OF OPERATIONS
(UNAUDITED)
   
THREE MONTHS ENDED
   
SIX MONTHS ENDED
 
   
JUNE 30,
   
JUNE 30,
 
   
2011
   
2010
   
2011
   
2010
 
                         
                         
REVENUE
  $ 40     $ -     $ 141     $ 172  
                                 
COST OF REVENUE
    -       -       -       -  
                                 
GROSS PROFIT
    40       -       141       172  
                                 
EXPENSES:
                               
Selling, general and administrative
    52,776       48,534       104,909       94,676  
                                 
TOTAL EXPENSES
    52,776       48,534       104,909       94,676  
                                 
LOSS FROM OPERATIONS
    (52,736 )     (48,534 )     (104,768 )     (94,504 )
                                 
OTHER INCOME (EXPENSE):
                               
Change in derivative
    (2,658 )     -       (8,111 )     -  
Interest expense and financing costs
    (83,209 )     (84,431 )     (166,639 )     (167,925 )
                                 
TOTAL OTHER INCOME (EXPENSE)
    (85,867 )     (84,431 )     (174,750 )     (167,925 )
LOSS BEFORE PROVISION FOR INCOME TAXES
  $ (138,603 )   $ (132,965 )   $ (279,518 )   $ (262,429 )
                                 
PROVISION FOR INCOME TAXES
    -       -       -       -  
                                 
NET LOSS
  $ (138,603 )   $ (132,965 )   $ (279,518 )   $ (262,429 )
                                 
BASIC AND DILUTED LOSS PER
                               
  COMMON SHARE
  $ (0.001 )   $ (0.001 )   $ (0.002 )   $ (0.003 )
                                 
WEIGHTED AVERAGE NUMBER OF
                               
  COMMON SHARES OUTSTANDING -
                               
  BASIC AND DILUTED
    141,111,161       97,983,679       141,111,161       97,983,679  

The accompanying notes are an integral part of these financial statements.
 
 
4

 
 
             
CEPHAS HOLDING CORP. AND SUBSIDIARIES
           
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
           
(UNAUDITED)
           
             
   
SIX MONTHS ENDED
 
   
JUNE 30,
 
   
2011
   
2010
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net loss
  $ (279,518 )   $ (262,429 )
Adjustment to reconcile net loss to net cash used in operating activities
               
 Stock issued for services rendered
    2,000       -  
 Depreciation
    120       -  
 Change in derivative liability
    8,111          
Changes in operating assets and liabilities:
               
 Prepaid expenses
    -       -  
 Accounts payable
    87,500       87,500  
 Accrued interest
    166,639       167,925  
                 
Net cash used in operating activities
    (15,148 )     (7,004 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Acquisition of computer equipment
    (1,194 )     -  
Investment in Network Talent, LLC
    -       (62,000 )
                 
Net cash used in investing activities
    (1,194 )     (62,000 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Advances from an officer, net
    9,527       (15,823 )
Notes payable
    5,725       85,000  
Advances from related parties, net
    -       (90 )
                 
Net cash provided by financing activities
    15,252       69,087  
                 
INCREASE (DECREASE) IN CASH
    (1,090 )     83  
                 
CASH, Beginning of period
    1,539       176  
                 
CASH, End of period
  $ 449     $ 259  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
               
Interest paid
  $ -     $ -  
Income taxes paid
  $ -     $ -  
                 
NONCASH TRANSACTIONS:
               
Conversion of notes and payables to equity
  $ 107,350     $ -  

The accompanying notes are an integral part of these financial statements.
 
 
5

 
 
CEPHAS HOLDING CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2011

Note 1 - Organization and Significant Accounting Policies

Organization and Lines of Business
CEPHAS Holding Corp formerly Legend Mobile, Inc., (the "Company"), was incorporated in Delaware on January 13, 1998 and is the successor to Interactive Entertainment Studio, Inc. (IES). IES was incorporated in the State of Nevada on May 27, 1997 and was merged into the Company in March 1998 for the sole purpose of changing the domicile of the Company to Delaware. On June 27, 2002, the Company filed a Certificate of Amendment to its Certificate of Incorporation to amend the Company's Certificate of Incorporation name from PTN Media, Inc. to Legend Mobile, Inc. In October 2008, the Company amended its articles to change the name to CEPHAS Holding Corp.
  
The Company is a developer and marketer of branded mobile phone applications for the iPhone platform. The Company is an approved developer by Apple Computer to distribute its products on their iTunes store. The Company currently sells the “Iron Sheik Soundboard” and it distributes free of charge “MMA Underboss” -a newswire dedicated to mixed martial arts news.  The Company also has a license from Mixed Martial Arts Champion, Fedor Emelianeko to produce iPhone applications under his brand and is currently developing that application.
  
In February 2001, the Company formed Legend Credit as a wholly owned subsidiary.  On April 1, 2003, Mr. Peter Klamka, CEO of the Company, contributed the rights to an affinity credit card business valued at $37,000 to Legend Credit. Mr. Klamka's contribution has been determined pursuant to Accounting Principles Board Opinion No. 29, "Non monetary Transactions," using his cost basis in the investment, which is the most readily determinable cost.  In exchange for this contribution, Legend Credit issued to Mr.  Peter Klamka 60% of the issued and outstanding shares of Legend Credit common stock and the Company issued to Mr. Klamka 850,000 shares of Series B convertible preferred stock. These issuances were valued at $22,200 and $14,800, respectively.  The Company retains a 40% minority interest in Legend Credit which is accounted for using the equity method.  Effective October 1, 2004, Mr. Klamka contributed an additional 10% interest in Legend Credit to the Company that was valued at $3,700 (10% of $37,000, the original value of the affinity credit card business). The Company now owns 50% of Legend Credit and accounts for the subsidiary using the acquisition method. The subsidiary currently has no business operations.
  
In July 1999, the Company formed Legend Studios, Inc. (formerly FragranceDirect.com, Inc.)  ("Legend Studios"), a majority owned subsidiary.   As of June 30, 2011, Legend Studios did not have any operations.

Basis of Presentation and Going Concern
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern.  The Company incurred a net loss for the six months ended June 30, 2011 and 2010,  had an accumulated  deficit and a working  capital  deficit. In addition, the Company generates minimal revenue from its operations and is in default on the payment of notes payable and license fee payable obligations. These conditions raise substantial doubt as to the Company's   ability to continue as a going concern.   These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.  These interim financial statements however, do include all necessary adjustments to not make them misleading

The Company plans to take the following steps that it believes will be sufficient to provide the Company with the ability to continue in existence.  The Company is seeking additional equity or debt capital to expand its mobile application business. 

Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its 91%-owned subsidiary, Legend Studios, and its 50% owned subsidiary, Legend Credit. Significant intercompany accounts and transactions have been eliminated.
 
 
6

 

Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company defines cash equivalents as all highly liquid debt instruments purchased with a maturity of three months or less, plus all certificates of deposit.

Use of Estimates
The preparation of consolidated financial statements in conformity with accounting  principles  generally accepted in the  United States of America requires management to make  estimates and  assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial  statements and the reported  amounts of revenue and expenses during the reporting periods. As of March 31, 2011 the Company used estimates in determining the value of common stock issued to consultants for services. Actual results could differ from these estimates.

Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash. The Company places its cash with high quality financial institutions and at times may exceed the FDIC $250,000 insurance limit. The Company extends credit based on an evaluation of the customer's financial condition, generally without collateral.  Exposure to losses on receivables is principally dependent on each customer's financial condition. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses, as required.

Comprehensive Income
The Company has adopted SFAS No. 130 (ASC220-10), "Reporting Comprehensive Income." This statement establishes standards for reporting comprehensive income and its components in a financial statement. Comprehensive income as defined includes all changes in equity (net assets) during a period from non-owner sources. Examples of items to be included in comprehensive income, which are excluded from net income, include foreign currency translation adjustments and unrealized gains and losses on available-for-sale securities. Comprehensive income (loss) is not presented in the Company's financial statements since there is no difference between net loss and comprehensive loss in any period presented.

Stock Based Compensation
 
Stock-based compensation is accounted for at fair value in accordance with ASC 718.  During the six months ended June 30, 2011, the Company has not adopted a stock option plan and has not granted any stock options.

Stock-based compensation represents the cost related to common stock and options to purchase common stock granted to employees and related parties of the Company. The Company determines the cost of common stock grants at the date the common stock was issued, based on the quoted market price of the Company’s common stock and recognizes the cost as expense over the requisite service period. The Company estimates the fair value of all warrants and options issued during the period using the Black-Scholes option-pricing model with the assumptions appropriate to the circumstances of the Company at the time of the transaction. There were no options or warrants issued during the six months ended June 30, 2011.

The Company records deferred tax assets for awards that result in deductions on the Company’s income tax returns, based on the amount of compensation cost recognized and the Company’s statutory tax rate in the jurisdiction in which it will receive a deduction. Differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported on the Company’s income tax return are recorded in Additional Paid-In Capital.

Fair Value of Financial Instruments
For certain of the Company's  financial  instruments,  including  cash, accounts  payable,  accrued  expenses,  accrued  interest,  license fee payable, due to related parties, and advances from an officer,  the carrying  amounts  approximate fair value due to their short  maturities.  The amounts shown for notes payable also approximate fair value because current interest rates and terms offered to the Company for similar debt are substantially the same.
 
 
7

 

Property and equipment
Property and equipment is recorded at cost. Depreciation is provided on a straight-line basis over estimated useful lives of the assets.

Expenditures for maintenance and repairs are charged to operations as incurred while renewals and betterments are capitalized.  Gains and losses on disposals are included in the results of operations.

Revenue Recognition
The Company generates revenue from the sale of products on its web sites and through other channels, the sale of advertisements on radio stations it operated and service fees from the sale of debit cards. The Company recognizes revenue for these product sales when the product is shipped to the customer.  The Company recognizes revenue from the radio stations it operated when advertisements were aired.  The Company recognizes service fee revenue from the sale of debit cards at the time the customer is sent the debit card.  Shipping and handling costs are recorded as revenue and related costs are charged to cost of sales.

Income Taxes
Income taxes are computed using the asset and liability method.  Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws.  A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
 
Impairment of Long-Lived Assets
In October 2001, the FASB issued SFAS No. 144 (ASC 360), "Accounting for Impairment or Disposal of Long-Lived Assets".  This statement also amends ARB No. 51 (ASC 810), "Consolidated Financial Statements", to eliminate the exception to consolidation for a subsidiary for which control is likely to be impaired. SFAS No. 144 (ASC 360) requires that long-lived assets  to be  disposed  of by sale,  including  those of  discontinued operations,  be measured at the lower of carrying  amount or fair value less cost to sell,  whether  reported in  continuing  operations  or in discontinued  operations.  SFAS No. 144 (ASC 360)  broadens  the  reporting  of discontinued  operations  to include all  components  of an entity with operations  that can be  distinguished  from the rest of the entity and that will be eliminated from the ongoing  operations of the entity in a disposal  transaction.  SFAS No. 144 (ASC 360) also establishes a "primary-asset" approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. The Company's adoption effective January 1, 2002 did not have a material impact to the Company's financial position or results of operations.

Earnings (Loss) Per Share
The Company reports earnings (loss) per share in accordance with SFAS No. 128 (ASC 260), "Earnings per Share."  Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares available.  Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share  except  that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.  Diluted earnings (loss) per share has not been presented since the effect of the assumed conversion of options and warrants to purchase common shares would have an anti-dilutive effect.  The following potential common shares have been excluded from the computation of diluted net loss per share for six months ended June 30, 2011 and 2010 respectively because the effect would have been anti-dilutive:

   
2011
   
2010
 
Conversion of Series A preferred stock
    44,500       44,500  
Conversion of Series B preferred stock
    8,500,000       8,500,000  
Conversion of Series C preferred stock
    14,777,500       14,777,500  
Total
    23,322,000       23,322,000  

All warrants and stock options were cancelled during the year ended December 31, 2007.
 
 
8

 

Non-Controlling Interest
In December 2007, the FASB issued SFAS No. 160 (ASC 810), “Non-controlling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (ASC 810)”, which addresses the accounting and reporting framework for minority interests by a parent company. SFAS 160 (ASC 810) also addresses disclosure requirements to distinguish between interests of the parent and interests of the non-controlling owners of a subsidiary. SFAS 160 (ASC 810) became effective beginning with our first quarter of 2009. We will be reporting minority interest as a component of equity in our Consolidated Balance Sheets and below income tax expense in our Consolidated Statement of Operations. As minority interest will be recorded below income tax expense, it will have an impact to our total effective tax rate, but our total taxes will not change. For comparability, we will be retrospectively applying the presentation of our prior year balances in our Consolidated Financial Statements.
 
Recently Issued Accounting Pronouncements
Effective January 1, 2010, the Company adopted an accounting standard update regarding accounting for transfers of financial assets. As codified under Accounting Standards Codification, or ASC, 860, this update prescribes the information that a reporting entity must provide in its financial reports about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement in transferred financial assets. Specifically, among other aspects, the update amends Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, or SFAS 140, by removing the concept of a qualifying special-purpose entity from SFAS 140 and removes the exception from applying FASB Interpretation No. 46, Consolidation of Variable Interest Entities (revised), to variable interest entities that are qualifying special-purpose entities. It also modifies the financial-components approach used in SFAS 140. Since the update is effective for transfer of financial assets occurring on or after January 1, 2010 and the Company has not had any such transactions subsequent to January 1, 2010 to date, the adoption of this update did not have an impact on the Company’s condensed consolidated financial statements.
  
Effective January 1, 2010, the Company adopted an accounting standard update regarding fair value measures. As codified under ASC 820, this update requires additional disclosures about fair value measurements including transfers in and out of Levels 1 and 2 and a higher level of disaggregation for the different types of financial instruments. For the reconciliation of Level 3 fair value measurements, information about purchases, sales, issuances and settlements should be presented separately. Since this update addresses disclosure requirements, the adoption of this update did not impact the Company’s financial position, results of operations or cash flows.

In February 2010, FASB issued ASU 2010-9 Subsequent Events (Topic 855) Amendments to Certain Recognition and Disclosure Requirements”. ASU 2010-9 amends disclosure requirements within Subtopic 855-10. An entity that is an SEC filer is not required to disclose the date through which subsequent events have been evaluated. This change alleviates potential conflicts between Subtopic 855-10 and the SEC's requirements. ASU 2010-9 is effective for interim and annual periods ending after June 15, 2010. The Company expects the adoption of ASU 2010-06 will not have a material impact on the Company’s results of operations or financial position.

Note 2 – Property and Equipment

Property and equipment as at June 30, 2011 and 2010 consisted of the following:
 
             
   
2011
   
2010
 
Computer equipment
  $ 54,124     $ 52,930  
Less: Accumulated depreciation
    (53,050 )     (52,930 )
Net Fixed Assets
  $ 1,074     $ 0  

Depreciation expense for the six months ended June 30, 2011 and 2010 was $120 and $0, respectively.
 
 
9

 

Note 3 - Accrued Expenses

Accrued expenses at June 30, 2011 and December 31, 2010 consisted of the following:
 
The amount owing to Michael Jordan bears interest at 12% per annum and is currently in default.  Accrued interest on that settlement to date amounts to $459,892.

             
   
June 30, 2011
   
Dec 31, 2010
 
Michael Jordan settlement
  $ 468,750     $ 468,750  
Management salary
    656,250       568,750  
Professional fees
    3,000       3,000  
Total Accrued Expenses
  $ 1,128,000     $ 1,040,500  
 
Note 4 - Notes Payable - Officer

As of September 30, 2004, the Company converted $291,000 of advances from its CEO, Mr. Klamka, into a note payable that bears interest at 21% per annum and is payable upon demand.  As of March 31, 2011, the balance on this note is $263,496 with accrued interest related to this note amounted to $366,894.

During the year ended December 2006 the Company converted certain of the accrued amounts owing to the CEO and for salaries payable to the CEO into a note totaling $758,920.  This note is unsecured and bears interest at the rate of 21% per annum.  Accrued interest to date is $762,271.

Additional notes were issued during 2007 to Peter Klamka for unpaid salaries of $167,000 bearing interest at the rate of 8% per annum. Interest accrued to date is $50,637.

The total amount due for notes payable – officer is $1,189,416 as of June 30, 2011.

The notes are convertible at the option of the holder to common stock at share prices of $0.01 per share. The notes are due on demand from date of issuance, require no monthly payments, and bear interest at rates ranging from 7%, to 10% per annum.
 
Per the convertible debt agreements the conversion price is to be calculated by dividing the amount of outstanding principal by the stated conversion price.   Since the convertible debt can be converted at anytime from the signing of the agreement forward, the closing prices of the convertible debt agreement dates were used for the calculation of the beneficial conversion feature, in accordance with ASC 470.  There was no beneficial conversion feature associated with the convertible debt, as the conversion rate approximated the fair market value of the trading shares at the date of signing.
 
 
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Note 5 - Notes Payable

In July and August 1997, the Company received $56,250 through the issuance of 8% promissory notes and common stock purchase warrants to acquire Company stock.  In 1999, one of the note holders converted $25,000 of principal and $5,500 of accrued interest into 6,100 shares of the Company's common stock. The remainder of the notes, which amounts to $31,250, continues to be outstanding notwithstanding the fact that payments owed by the Company there under are now past due.  Interest accrued to date is $31,625.

In July and August of 1999, the Company's Subsidiaries, Legend Studios issued 10% promissory notes aggregating to $160,000.  The notes are due the earlier of one year or the completion of an initial public offering of Legend Studios common stock. In addition, Legend Studios issued to the note  holders  an  aggregate  of  96,000  two-year  stock  purchase warrants to purchase  Legend  Studios  common stock at $3.50 per share. During the year ended  December  31, 2002,  two note holders  converted principal  and accrued  interest  of $35,000  and  $13,358  into 48,358 shares of the Company's common stock. As of June 30, 2011, $125,000 of these notes and accrued interest of $145,834 are still outstanding. These notes were in default as of December 31, 2006.

In August  2001,  the Company  issued  notes  payable for  $100,000 and $300,000  which  were  due in 60 days  and 14  days,  respectively. The balance of those loans as of June 30, 2011 was $304,000.

The loan for $100,000 plus accrued interest of $132,000 was in default and has now been settled for a total of $110,000 including accrued interest.  The loan is repayable in installments and has a balance owing as of June 30, 2011 of $50,000 plus accrued interest of $16,000.

During the year ended December 31, 2010, the Company converted $88,000 of certain notes payable into 17,600,000 shares of the company’s common stock.

During the year ended December 31, 2010, an outside party loaned the Company a total $85,000.  This loan is repayable interest only at the rate of 7% per annum with no fixed terms of repayment and may be converted into common stock at $.005 per share. The balance of the loan as at June 30, 2011 is $55,500.

The total amount due for notes payable is $565,750 as of December 31, 2010.

Note 6 – Notes Payable – Related Party

The Company issued a note to Eric Joffe for unpaid salaries for 2006 for $100,000 of which $23,750 was repaid. The remaining balance of $76,250 bears interest at 7% per annum and accrued interest to date is $25,317.
 
 
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Note 7 - Stockholders' Deficit

Series A Preferred Stock
The Company has 1,000,000 shares of $0.001 par value Series A Preferred Stock ("Series A") authorized of which 2,225 shares are issued and outstanding at September 30, 2010. Each share of Series A can be converted into 20 shares of common stock.

Series B Convertible Preferred Stock
The Company has 850,000 shares of $0.01 par value Series B Convertible Preferred Stock (‘Series B”) authorized of which 850,000 shares are issued and outstanding at September 30, 2010.

In the event of a voluntary or involuntary liquidation,  dissolution or winding  up of the  Company,  prior to the time  the  Series B  becomes convertible  into  common  shares,  the  holders  of  Series B shall be entitled to $0.01 per share. In the event of a voluntary or involuntary liquidation,  dissolution  or winding up of the Company  after the time the Series B becomes  convertible  into common  shares,  the holders of Series B shall be entitled  to share with the  holders of common  stock pari  passu in the assets of the  Company,  on an as  converted  basis, whether such assets are capital or surplus of any nature. The Series B shall be convertible upon the earlier to occur of: (i) the date the Company generates net profits in any two consecutive fiscal quarters or (ii) April 1, 2006.

The  conversion  of  Series B shall be on the  basis of ten  shares  of common  stock for one Series B share,  as may be adjusted  from time to time. Upon conversion, the holder of the Series B will be required to pay to the Company a conversion price for each share of common stock equal to $0.10.

The holders of the Series B shall vote on all matters with the holders of the common stock (and not as a separate class) on a ten votes per share basis.  The holders of the Series B shall be entitled to receive all notices relating to voting as are required to be given to the holders of the common stock.

During 2003, the Company issued to Mr. Peter Klamka, the Company's CEO, 850,000 shares of Series B as consideration for the contribution of an affinity credit card business to Legend Credit.

Series C Convertible Preferred Stock
The Company has 147,775 shares of $0.01 par value Series C Convertible Preferred Stock (“Series C”) authorized of which 147,775 shares are issued and outstanding at September 30, 2010.

In the event of a voluntary or involuntary liquidation,  dissolution or winding  up of the  Company  prior  to the time  the  Series C  becomes convertible  into  common  shares,  the  holders  of  Series C shall be entitled to $0.01 per share. In the event of a voluntary or involuntary liquidation,  dissolution  or winding up of the Company  after the time the Series C becomes  convertible  into common  shares,  the holders of Series C shall be  entitled  to share with the holders of  shares of common stock and Series B convertible preferred stock pari passu in the assets of the Company, on an as converted  basis, whether such assets are capital or surplus of any nature.   The Series C shall be convertible upon the earlier to occur of:  (i) the date the Company generates net profits in any two consecutive fiscal quarters; (ii) April 1, 2006; or (iii) any date that the market price per share of common stock equals or exceeds $0.50.
 
 
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Series C Convertible Preferred Stock (continued)

The  conversion of Series C shall be on the  basis of one hundred shares of common stock for one Series C share,  as may be adjusted  from time to time. Upon conversion, the holder of the Series C will be required to pay to the Company a conversion price for each share of common stock equal to $0.10.

The holders of the Series C shall vote on all matters with the holders of the common stock (and not as a separate class) on a ten votes per share basis.  The holders of the Series C shall be entitled to receive all notices relating to voting as are required to be given to the holders of the common stock.

During 2004, the Company issued to Mr. Peter Klamka, the Company's CEO, 147,775 shares of Series C as consideration for the contribution of an additional 10% ownership in Legend Credit. (See Note 3)
 
Common Stock
During the three months ended March 31, 2010 the Company issued a total of 3,100,000 common shares to convert notes payable for a total consideration of $15,500.

During the three months ended September the Company issued a total of 8,000,000 shares of common stock to convert certain notes payable in the amount of $40,000.

During the three months ended September 30, 2010 the Company issued a total of 2,000,000 shares of common stock for services rendered totaling $14,000.

During the three months ended December 31, 2010, the Company issued a total of 7,000,000 shares of common stock for services totaling $5,000 and to reduce notes payable by $32,500.

During the three months ended March 31, 2011, the Company issued a total of 54,800,000 shares for services of $2,000 and to reduce notes and loans by $85,600.

During the three months ended June 30, 2011 a total of 10,750,000 shares was issued to reduce notes payable by $21,750.
 
 
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Note 8 - Commitments and Contingencies

Litigation
Legend Studios, Inc. vs. Quorum Radio Partners, Inc., Quorum Radio Partners of Virginia, Inc. and Quorum Communications, Inc.

Legend Studios lawsuit arises from defendants' breach of the parties' Asset Purchase Agreement and Time Brokerage Agreement that govern the sale, programming, operations and revenues of certain radio stations (KELE-AM, KELE-FM, WIQO, WKEY and WKCI). Legend Studios seeks specific performance of the agreements, as well as in excess of $1.5 million in damages.  Defendants have been served with the complaint, but have not filed answers and may be subject to entry of default.  Quorum Radio Partners of Virginia, Inc., however, filed a bankruptcy petition after being served with the complaint, which stays Legend Studios’ proceedings solely against that entity.

In the ordinary course of business, the Company is generally subject to claims, complaints, and legal actions. At June 30, 2011, management believes that the Company is not a party to any action which result would have a material impact on its financial condition, operations, or cash flows.

Commitments
In September, 2007, Legend Credit, Inc. entered into an agreement with UCE, Inc. in which the Company agreed to contribute $500,000 toward production, marketing and promotion costs for a weekly mixed martial arts event scheduled and produced by UCE, Inc.  The Company contributed $29,562 toward the agreed-upon.  The investment of $29,562 was fully impaired during the year ended December 31, 2008.

During the year ended December 31, 2010 the Company invested a total of $135,000 worth of units in Network Talent, LLC.

 
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Item 2. Management's Discussion and Analysis or Plan of Operation
 
Forward looking statements

This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Shareholders are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation, our ability to fully establish our proposed websites and our ability to conduct business with Palm, Inc. and be successful in selling products. Although we believe the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements contained in the report will prove to be accurate.

GENERAL

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related footnotes for the year ended December 31, 2010 included in our Annual Report on Form 10-K.  The discussion of results, causes and trends should not be construed to imply any conclusion that such results or trends will necessarily continue in the future.

We were incorporated in Delaware on January 13, 1998 and are the successor to Interactive Entertainment Studio, Inc. (IES). IES was incorporated in the State of Nevada on May 27, 1997 and was merged into us in March 1998 for the sole purpose of changing the domicile of the company to Delaware. This merger was retroactively reflected in the December 31, 1997 financial statements. On June 27, 2002 we changed our name to Legend Mobile, Inc. In October 2008, the Company amended its articles to change the name to Cephas Holding Corp.
.
We currently sell two  applications on the iTunes store. Are first application is  “The Iron Sheik Soundboard.” The Iron Sheik is a popular character from professional wrestling. Are second application available for purchase is Mobile Fedor featuring  MMA star Fedor Emelineko

We also distribute free of charge an iPhone application called MMAUnderboss which is a collection of newswires covering the sport of mixed martial arts.  We believe that this application will allow us to advertise additional apps that will be sold on a per download basis. We also have the option to add advertising to the MMA Underboss application but have not done so yet.

We are also developing applications for the iPhone under license from MMA star, Fedor Emelinekos Wanderlai Silva and Rich Franklin .
We are negotiating with several other MMA and UFC personalities and brands for licenses related to the iPhone platform.

We also offer a newswire dedicated to rock music called Metal News. Metal News is advertiser supported and is a free download to users who agree to look at banner ads in exchange for free content.

We intend to develop more free applications with the intention of creating a large user base that can be attractive to advertisers as well as to allow us to  sell virtual goods such as images and ringtones, develop fantasy-type sports contests, and for location based incentives such as coupons and geographically specific offers.  We also expect to use our free newswire apps such as MMAUnderboss for the promotion and sale of fee based apps like Mobile Fedor.
 
 
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Since our inception, we have incurred significant losses and at June 30, 2011 our current liabilities exceeded current assets. In addition, we are delinquent in certain payments due for license fees and notes payable. In an effort to preserve our cash, we are currently using shares of our common stock to pay down debt.

We may be unable to continue in existence unless we are able to arrange additional financing and achieve profitable operations. We plan to raise additional capital

Significant Accounting Policies and Estimates

Management's Discussion and Analysis of Financial Condition and Results of Operations discusses the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates and judgments on historical experiences and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of the Company's financial statements relate to the allowance for doubtful accounts. These accounting policies are described at relevant sections in this discussion and analysis and in the notes to the consolidated financial statements included in this Annual Report on Form l0-K for the year ended December 31, 2010.

Results of Operations
Three  months ended  June 30, 2011  vs. June 30, 2010

Revenue for the three  months ended June 30, 2011 was $40 compared to $0 for the three months ended June 30, 2010

The cost of revenue for the three months ended June 30, 2011 was $0  as compared to  $0 for the period ended June 30, 2010

Selling, general and administrative expenses for the three months ended June 30, 2011 was $52,776  as compared to $48,534 for the three months ended June 30, 2010.  

Six  months ended  June 30, 2011  vs. June 30, 2010

Revenue for the six months ended June 30, 2011 was $141 compared to $172 for the six months ended June 30, 2011

The cost of revenue for the six months ended June 30, 2011 was $0  as compared to  $0 for the period ended June 30, 2010

Selling, general and administrative expenses for the six months ended June 30, 2011 was $104,909  as compared to $94,676 for the six months ended June 30, 2010.  

Interest expense and financing costs for the six  months ended June 30, 2011 was $166,639 as compared to $ 166,925 for the nine months ended June 30 , 2010.
 
 
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Liquidity and Capital Resources

We have incurred an accumulated deficit since our inception of $22,432334. In order for us to continue in existence, we will have to raise additional capital through the sale of equity or debt or generate sufficient profits from operations, or a combination of both.  

Off-balance sheet arrangements

There are no off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Item 3. Controls and Procedures

As required by SEC rules, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures at the end of the period covered by this report. This evaluation was carried out under the supervision and with the participation of our management, including our principal executive officer and principal financial officer. Based on this evaluation, these officers have concluded that the design and operation of our disclosure controls and procedures are effective except in regard weakness in our controls related to the issuance of shares for the year ending December 31, 2010. There were no changes in our internal control over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Disclosure controls and procedures are our controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities & Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 
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Part II. OTHER INFORMATION

Item 1. Legal Proceedings

The company is party to legal proceedings from time to time. None of the legal proceedings in management’s opinion would have an adverse material impact on the company.

On September 26, 2008, Mr. Denner filed a suit against the Company and Mr. Klamka in the Iowa District Court for Polk County alleging, among other things, that the Company’s and Mr. Klamka’s alleged failure to pay a loan made by Mr. Denner to the Company constituted a breach of contract.  The company and Mr. Klamka denied these claims.  As Of July 31, 2010 case against Cephas Holdings f/k/a Legend Mobile and Peter Klamka,, individually, was dismissed.

There are several judgments against our company that could effect our operations

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the quarter ended March 31, 2011 the Company issued 15,500,000 for a total of consideration of 37,500

Item 3. Defaults Upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 5. Other Information

None

Item 6. Exhibits

31.1 Certification of the Chief Executive Officer and Principal Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 Certification of the Chief Executive Officer and Principal Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 
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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
Cephas Holding ,Corp.
 
       
 
By:
/s/ Peter Klamka  
    Peter Klamka, Principal  Executive  
    Officer  and  Principal Financial  Officer  
       

 
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