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EXCEL - IDEA: XBRL DOCUMENT - AQUENTIUM INC | Financial_Report.xls |
EX-32.1 - CERTIFICATION - AQUENTIUM INC | aqnm_ex32.htm |
EX-31.1 - CERTIFICATION - AQUENTIUM INC | aqnm_ex31.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended September 30, 2012
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
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For transition period ____________, to ____________.
Commission file number: 000-23402
AQUENTIUM, INC.
(Exact name of registrant as specified in its charter)
Delaware | 11-2863244 | |
(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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571 Crane Street Building A Perris, CA | 92530 | |
(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code: (951) 674-9200
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes o No x
Indicate by check mark 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 preceding 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K 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. o
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
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Accelerated filed
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Non-accelerated filer | o | 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 o No x
The aggregate market value of the voting and non-voting common equity of 16,657,403 shares held by non-affiliates computed by reference to the price at which the common equity was last sold as of December 21, 2012 was $533,037. The number of shares outstanding of the registrant’s common stock, as of December 26, 2012, was 56,957,403.
Documents incorporated by reference: None
TABLE OF CONTENTS
PART I
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Item 1:
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Business
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Item 1A:
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Risk Factors
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Item 2:
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Properties
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Item 3:
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Legal Proceedings
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Item 4:
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Mine Safety Information
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PART II
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Item 5:
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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Item 6:
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Selected Financial Data
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Item 7
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Item 7A:
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Quantitative and Qualitative Disclosures About Market Risk
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Item 8
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Financial Statements and Supplementary Data
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Item 9:
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
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Item 9A (T):
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Controls and Procedures
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Item 9B:
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Other Information
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PART III
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Item 10:
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Directors, Executive Officers and Corporate Governance
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Item 11:
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Executive Compensation
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Item 12:
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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Item 13:
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Certain Relationships and Related Transactions, and Director Independence
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Item 14:
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Principal Accounting Fees and Services
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PART IV
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Item 15:
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Exhibits, Financial Statement Schedules
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Signatures
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In this annual report references to “Aquentium,” “we,” “us,” and “our” refer to Aquentium, Inc. and its subsidiaries.
FORWARD LOOKING STATEMENTS
The Securities and Exchange Commission (“SEC”) encourages companies to disclose forward-looking information so that investors can better understand future prospects and make informed investment decisions. This report contains these types of statements. Words such as “may,” “expect,” “believe,” “anticipate,” “estimate,” “project,” or “continue” or comparable terminology used in connection with any discussion of future operating results or financial performance identify forward-looking statements. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. All forward-looking statements reflect our present expectation of future events and are subject to a number of important factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.
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PART I
ITEM 1: BUSINESS
General Development of Business
Aquentium, Inc. was incorporated in the state of Delaware in April 1987 as Arnex Investment Group, LTD. The corporation name was changed to WaterPur International, Inc. in 1997. On April 2, 2002, WaterPur International entered into an agreement to acquire Aquentium, Inc., a Nevada corporation incorporated on April 30, 2001. The transaction was treated as a reverse acquisition and Aquentium, Inc. became the accounting survivor. On May 7, 2002, WaterPur International changed its name to Aquentium, Inc.
Description of Business
Since 2002, Aquentium, Inc. has been structured as a holding company that seeks to acquire or invest in viable green technologies. Our current operations consist of sales and marketing of our ozone equipment and marketing distributorships for the resale of our ozone equipment to food and beverage processors. The company is also seeking water purification projects that will utilize the ozone technology. We also are manufacturer of structural insulated panels (SIPs) for commercial and residential buildings. In addition, we are seeking waste to energy projects and solar energy projects throughout the United States and internationally. . We are also a holding company for six wholly-owned subsidiaries, which are development stage companies without commercial operations. Our management serves both as a financial and professional business partner for our subsidiaries. Our role is to improve each subsidiary’s access to potential capital, help them benefit from the economics of scale through the consolidation of administrative functions, and to provide universal access to the financial and management expertise of each subsidiary's corporate personnel.
We continue to identify, locate and evaluate additional acquisitions. Our focus for the next twelve months will be to obtain additional funding to develop and expand our marketing and manufacturing operations and new projects. Our success will depend on our ability to obtain funding through equity and/or debt transactions. However, we will encounter substantial competition for the limited financing that will be available in the market place. If we are unable to obtain financing, then we will likely delay further business development of any of our products, marketing and other projects and joint ventures. Potential investors must recognize that we have limited capital available for the development of our business plan and all risks inherent in a new and inexperienced enterprise are inherent in our plan to launch operations.
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Products, Equipment and Services
Ozone Equipment
Aquentium is a manufacturer of ozone sanitation and water purification equipment that is marketed worldwide by the Company and through distributors. Our ozone equipment is designed to improve food safety and improve the work environment for food and beverage processing plants. It also may be used for water purification.
In addition to selling directly, Aquentium plans to rely upon distributor agreements with third parties to sell and market our ozone equipment throughout the world. Generally, our distributor agreements provide that the distributor has an exclusive or non-exclusive marketing right in a specific geographical market and we agree to pay the distributor a discount based on each sale. As of the date of this filing we have not recorded revenues from any distributor agreements.
The Food and Drug Administration approved ozone in bottled water in 1982 and granted a petition for use with fruits, vegetables, meat and poultry in June 2000. The Environmental Protection Agency allows use of ozone with no reporting or record keeping. The United States Department of Agriculture approved ozone as organic under the USDA Organic Rule in 2000.
Ozone is a gas composed of three oxygen atoms in an unstable and highly reactive form. Ozone naturally tends to seek its normal state, exhibiting a short half-life as it reverts to oxygen fairly rapidly. Ozone is dissolved into water at precise concentrations for use as a safe spray disinfectant. The solution kills pathogens and controls a broad spectrum of food borne and waterborne microorganisms. Our ozone technology is an all-natural solution that reduces or eliminates E. Coli 0157:H7 and other bacteria and viruses in processing plants for meat, poultry, seafood, fruit, vegetable and beverages. Ozone does not react with organic matter, thus, it leaves no residue in the water or on the product, does not form any toxic byproducts and the water in which it is delivered can be filtered and reused. This means no change in color or flavor results from the ozone treatment, unlike chlorine treatment. In addition, ozone is unique in that it can be generated onsite from ambient air and on demand with no storage required. It is an effective sanitizing agent that's economically produced and remarkably effective in applications involving food processing and equipment sanitizing. Ozone technology is replacing conventional sanitation techniques such as chlorine, steam or hot water.
Ozone applications include water treatment, plant sanitation, food processing, and air treatment. Our ozone equipment is designed to improve the work environment for food and beverage processing plants as well as in schools, hospitals and hotels. We are currently seeking global distributors and/or joint venture partners to market this product in the United States and internationally
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Our current line of ozone equipment includes air systems and water systems. Our water systems can be built to process up to 1500 gpm. We also manufacture mobile wash down units that can be used by hospitals, hotels, schools, restaurants, and food or beverage processors.
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Structural Insulated Panels Housing System
In September 2006, Aquentium opened a manufacturing facility for structural insulated panels (“SIP’s”). Any manufacturing of the panels is done based on orders. Aquentium does not stock inventory. We expect to grow this business through sales of panels to distributors or general contractors.
Aquentium’s SIP’s can be used for both commercial and residential buildings. SIP’s are building panels for floors, walls and roofs, and consist of a thick core of rigid insulation sandwiched between two skins and bonded together with a structural adhesive. The skins range from 0.026 to one inch thick and common materials used for the skins are fiber-cement, aluminum, oriented strand board, plywood, and drywall. This composite construction forms a monolithic pre-stressed element with steel I-Beam properties. An I-Beam has two flanges, where a SIP has the skins and a web. The flange of an I-Beam is a small percentage of the I-Beam, but in a SIP the web (the foam) is up to 100% of the flange (skin). The insulating core and two skins are flimsy and insubstantial by themselves, but when combined properly, the stressed skin principle transforms these elements into a rigid construction panel that requires no wood studs for structural support. When a force is exerted on a SIP or an I-Beam, one surface is under compression while the opposite side is under tension. The I-Beam will eventually give out, twist and bend well before the SIP will do so. In our testing, SIP’s usually do not reach a total structural failure. They do reach failure points, and then the loads can be built back up to a subsequent failure point without a total, non-supportive failure point. Comparing the same tests on steel, lumber or block; when these materials reach a failure point they are destroyed. The steel is bent, the lumber splinters and breaks, and the blocks implode and crumble; all resulting in a total structural failure.
Our SIP building system includes:
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Orient strand board laminated to an expanded polystyrene insulation core.
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Installation instructions (SIP panel layouts), and installation guide.
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Option to receive "site advisory service" to assist in an installation.
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We offer a "Ready to Assemble" (RTA) option – The RTA process reduces construction time and improves efficiency. We can manufacture SIP’s to the customer’s exact specifications and then deliver them to the location as a ready-to-assemble building system.
On August 18, 2008, Aquentium signed a business development agreement with Megaros, Inc. Under the terms of the agreement Megaros will receive commissions related to building contracts using our SIP’s. As of the date of this filing we have not paid any commissions related to this agreement and we do not foresee any future business from Megaros, Inc.
Deployable Housing
Our SIP’s are an integral part of the deployable housing structures we offer which are based upon a standard shipping container. Our current focus is on obtaining funding to launch manufacturing and then market deployable housing internationally. Aquentium uses a process in which new or decommissioned standard shipping containers can be used as housing or building structures. Aquentium's design incorporates SIP’s inside the shipping container in order to provide better insulation for those working or living in the container building structure. For emergency applications, Aquentium can offer a solution that includes a 20 or 40 foot shipping unit. One application uses a standard 20 x 8 foot or 40 x 8 foot container for living or office space. A second application allows for three times the normal space of a container, transforming the container into a rapidly deployable, expandable and versatile shelter, home or office. However, the market appears to be much greater for the non-expandable units and because of this, Aquentium intends to focus on building container structures that do not have the expanding feature.
Once the structure has fulfilled its need in one location, it can be refolded and transported to another location. These container units are designed to accommodate not only housing applications but can also be offered as shelter for services such as deployable hospitals, stores, food commissaries, and a variety of other applications. Since the housing or office units are developed from an industry standard shipping container, they can be quickly transported to any area in time of need. The unit stacks seamlessly with other containers on transport ships and can be easily placed onto trucks or trailers for transportation purposes. Our primary markets for these structures are the low cost, mass-housing market or commercial buildings.
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New Projects
Waste-to-Energy Projects
In January 2009, we announced that the company was pursuing waste-to-energy projects internationally as well as domestically. The waste-to-energy projects will vary in costs based on the amount of MSW to be processed. As of the date of this filing, we have signed to Power Purchase Agreements (PPA) with Municipalities in China. Both of these projects are contingent of Aquentium receiving financing to build the facilities. Our initial projects in China are projected to cost approximately $200 million (US). We would generate revenues based on the sale of electricity to each municipality. Each (PPA) is for 30 years.
Waste-to-energy projects are important because consumption habits of modern consumer lifestyles are causing a huge worldwide waste problem. Having overfilled local landfill capacities, many first world nations are now exporting their refuse to third world countries. We believe this approach to waste management is having a devastating impact on ecosystems and cultures throughout the world. The enormous increase in the quantity and diversity of waste materials generated by human activity and their potentially harmful effects on the general environment and public health, have led to an increasing awareness about an urgent need to adopt scientific methods for safe disposal of wastes.
Aquentium intends to focus on new technologies to recycle waste by generating electricity from landfill waste and pollution. While there is an obvious need to minimize the generation of wastes and to reuse and recycle them, the technologies for recovery of energy from wastes can play a vital role in mitigating the problems.
Aquentium’s Subsidiaries
H.E.R.E. International, Inc.: In November 2004, Aquentium acquired the exclusive worldwide manufacturing and marketing rights for a patent related to a containerized habitable structure that can be transformed into a rudimentary home in the case of disaster. This patent is the basis for our deployable housing. In November 2006, the exclusive license converted to a non-exclusive license under the terms of the agreement. The licensing agreement provides that the worldwide manufacturing and marketing rights granted to Aquentium also include all future developments of products, trademarks, copyrights, patents and other intellectual property pertaining to the original patent. Patents and certain other intellectual property shall be negotiated for a fee and used on a case by case basis. This agreement expires simultaneously with the expiration of the patent or any extension or deviation of the patent.
In April 2006, Aquentium incorporated H.E.R.E International, Inc. in the state of Colorado. “H.E.R.E.” stands for Housing & Emergency Relief Efforts. This subsidiary was incorporated to market and manufacture our deployable housing structures. Although the company receives numerous inquiries on this product, this business will only become operational with orders of 50 units or more to start. As of September 30, 2012, this subsidiary does not have business operations.
Aquentium de Mexico: On October 24, 2007, we incorporated Aquentium de Mexico, in the country of Mexico. This wholly-owned subsidiary was formed to do business in Mexico in the area of low cost housing. We are currently are seeking housing and alternative energy business in Mexico. As of September 30, 2012, this subsidiary does not have any operating business operations.
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New American Energy, Inc.: In December 2003, Aquentium acquired Charis Energy Development, Inc. and subsequently changed the name of the company to New American Energy. This business seeks solutions in the alternative energy sector. New American Energy is going to be the Aquentium subsidiary that specializes in the production of algae bio-fuels. This subsidiary is seeking capital in order to be able to validate the production of an algae prototype system at a major university. As of September 30, 2012, this subsidiary does not have business operations.
Canby Group: In September 2002, Aquentium acquired Canby Group Inc. Canby Group is an entertainment development stage company. The business plan for this subsidiary is to acquire operating companies or projects within the entertainment industry or sector which may have products to license or distribute. As of September 30, 2012, this subsidiary does not have business operations.
Environmental Waste Management, Inc.: In January 2004, Aquentium acquired Environmental Waste Management, Inc. This subsidiary has an operational Styrofoam recycling machine that condenses Styrofoam into blocks at a ratio of 20-1. As of September 30, 2012, this subsidiary does not have business operations.
Aquentium Solar Inc.: In August 2002, Aquentium acquired USA Public Auction, Inc. The name of this company was recently changed to Aquentium Solar. This company will focus on developing solar energy projects in the USA and internationally. As of September 30, 2012, this subsidiary does not have business operations.
Aquentium’s Joint Ventures
Aquentium Hong Kong, Ltd.: In March 2004, Aquentium formed Aquentium Hong Kong, Ltd. as a 50% joint venture with Mr. Chak Cheuk Kau, an individual who resides in Hong Kong. The parties agreed that Aquentium-Hong Kong will market and sell Aquentium’s products and/or services in Asia for a period of 10 years. Aquentium Hong Kong is focused on marketing our ozone technology in Asia and finding potential acquisitions for Aquentium in Asia.
Other Business Opportunities
Our business plan is to seek, investigate, and, if warranted, acquire business opportunities which are profitable, or we anticipate will become profitable. The selection of a business opportunity is complex and extremely risky and will be made by management in the exercise of its business judgment; however, our executive officer is not a professional business analyst. (See Part III, Item 10, “Directors and Executive Officers,” below). We cannot assure you that we will be able to identify and acquire a business opportunity which will ultimately prove to be beneficial to us and our stockholders.
Our management has discretion in seeking and participating in a business opportunity, subject to the availability of such opportunities, economic conditions and other factors. We anticipate that business opportunities will come to our attention through prior personal and business relationships. Also, our search for business opportunities will not be limited to any particular geographical area or industry and may include both the United States and international companies.
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A decision to participate in a specific business opportunity may be made upon our management’s analysis of the following factors:
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Quality of the business opportunity’s management and personnel;
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Potential for growth and profitability;
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Capital requirements and anticipated availability of required funds to be provided by us or from operations, through the sale of additional securities, through joint ventures or similar arrangements, or from other sources;
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The anticipated acceptability of the business opportunity’s new products or marketing concept;
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The merit of its technological offerings or changes;
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The perceived benefit that it will derive from becoming a publicly held entity; and,
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Numerous other factors which are difficult, if not impossible, to analyze through the application of any objective criteria.
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In many instances, we anticipate that the historical operations of a specific business opportunity may not necessarily be indicative of the potential for future operations because of the possible need to substantially shift marketing approaches, significantly expand or change product emphasis, change or substantially augment management, or the necessity to make other changes. We will be dependent upon the owners of any business opportunity to identify problems which may exist and to implement, or be primarily responsible for the implementation of, required changes.
It is possible that the range of business opportunities that might be available for consideration by us could be limited by impact of the SEC regulations regarding the purchase and sale of “penny stock.” Our common stock is thinly traded and we cannot assure you that a market will develop or that a stockholder ever will be able to liquidate his/her/its investment without considerable delay, if at all. If an active market develops, our shares will likely be subject to the rules of the Penny Stock Suitability Reform Act of 1990. The liquidity of penny stock is affected by specific disclosure procedures required by this Act. (See Part II, Item 5, “Market Information,” below, for further details.)
We cannot predict the manner in which we may participate in a business opportunity. Specific business opportunities will be reviewed as well as our needs and desires and those of the specific business opportunity. The legal structure or method deemed by management to be suitable will be selected based upon our review and our relative negotiating strength. Such methods may include, but are not limited to, leases, purchase and sale agreements, licenses, joint ventures and other contractual arrangements. We may act directly or indirectly through an interest in a partnership, corporation or other forms of organization. We likely will acquire our participation in a business opportunity through the issuance of common stock or other securities.
Competition
We expect to encounter substantial competition in our effort to develop our SIP’s housing system and ozone equipment business operations and our projects, joint venture or subsidiaries’ business plans. With the decline in the overall economic vitality in the United States, we anticipate that obtaining funding from any source will be difficult. We will continue to seek funding from business development companies, venture capital partnerships and corporations, venture capital affiliates of large industrial and financial companies, small investment companies, and wealthy individuals; however, if we are unsuccessful in our efforts to obtain funding we will likely delay or postpone the further development of our business operations.
Employees
We currently have no employees.
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ITEM 1A: RISK FACTORS
We need additional external capital and may be unable to raise it.
Based on our current plan, we believe we may require at least $1 to $10 million dollars of additional financing within the next twelve months to expand our alternative energy business, SIP and ozone operations, to satisfy our accrued legal settlements and to meet our commitments to any other new projects. Our success will depend upon our ability to access equity capital markets or borrow on terms that are financially advantageous to us. In the current economy, we may not be able to obtain additional funds on acceptable terms. If we are able to borrow funds, we could be forced to use a large portion of our future revenue to repay principal and interest on those funds. If we issue our securities for capital, then the interests of our shareholders will be diluted. If we fail to obtain funds on acceptable terms, then we might be forced to delay or abandon some or all of our business plans.
We currently have interests in several very different business opportunities and management must determine where to spend our limited resources at the risk of losing market opportunities in the remaining businesses.
We currently have two business lines, five subsidiaries and own interests in joint ventures. We have very limited cash and are able to fund only one or two of these business opportunities. Management must determine which business opportunities are the most viable and which will provide immediate revenue, at the risk of not developing our other business opportunities. We cannot assure you that the business opportunities we choose to develop will become viable and result in cash flows.
We may pursue acquisitions of complementary service product lines, technologies or other businesses and these acquisitions may interfere with our operations and negatively affect our financial position.
From time to time, we evaluate potential acquisitions of businesses, services, products, or technologies. These acquisitions may result in a potentially dilutive issuance of equity securities, the incurrence of debt and contingent liabilities, and recognition of expenses related to goodwill and other intangible assets. In addition, acquisitions involve numerous risks, including difficulties in the assimilation of the operations, technologies, services, and products of the acquired companies; the diversion of our management’s attention from other business concerns; risks of entering markets in which we have no or limited direct prior experience; and, the potential loss of key employees of the acquired company. We cannot assure you that we will be successful in developing and implementing a business strategy that provides for continued growth of all of our subsidiaries or business opportunities.
Certain conflicts of interest exist or may develop between Aquentium and our officer and director.
As of the date of this filing, we have one director and officer, Mr. Mark T. Taggatz, and he has other business interests to which he currently devotes attention, which include his primary employment. He may be expected to continue to devote his attention to these other interests although management time should be devoted to our business. As a result, conflicts of interest may arise that can be resolved only through his exercise of judgment in a manner which is consistent with his fiduciary duties to Aquentium.
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Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could lead to loss of investor confidence in our reported financial information.
If we fail to achieve and maintain the adequacy of our internal control over financial reporting, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act (“Section 404"). Effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, then our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our stock could drop significantly.
Pursuant to Section 404, in our annual report for the year ended September 30, 2012 we will be required to provide an attestation from our independent registered public accounting firm as to the effectiveness of our internal control over financial reporting. We cannot assure you as to our independent registered public accounting firm’s conclusions at September 30, 2012 with respect to the effectiveness of our internal control over financial reporting and there is a risk that our independent registered public accounting firm will not be able to conclude at that time that our internal controls over financial reporting are effective as required by Section 404.
ITEM 2: PROPERTIES
Principal Office Lease
Starting October 1, 2009 we sublease 8,000 square feet of office space for a three year term from Sani-Dri, Inc. The rate is $0.50 per square foot per month in year one, $0.60 per square foot per month in year two and $0.75 per square foot per month in year three. The building is a one level commercial office and manufacturing space, with a reception area and two offices. This lease was canceled on August 31, 2012.
In September 2012 we subleased space from Mark Taggatz the CEO and sole director of the Company. The Company pays $1,600 per month rent and is on a month to month lease.
ITEM 3: LEGAL PROCEEDINGS
As of the date of this filing, we are not a party to any ongoing legal proceeding.
ITEM 4: MINE SAFETY INFORMATION
None
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PART II
ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our shares of common stock trade under the symbol “AQNM” and are listed on the OTC Bulletin Board. Our common stock is thinly traded and we do not have an active trading market at the time of this filing. The following table lists the range of the high and low bid price for our common stock for each quarter of the 2012 and 2011 fiscal years as reported by the OTC Bulletin Board. Over-the-counter market bid quotations reflect inter-dealer prices, without retail mark-up, mark-downs or commissions, and may not necessarily represent actual transactions.
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Low
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December 31, 2011
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0.02 | 0.005 | ||||||
March 31, 2012
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0.011 | 0.05 | ||||||
June 30, 2012
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0.095 | 0.006 | ||||||
September 30, 2012
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0.09 | 0.026 | ||||||
December 31, 2010
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0.04 | 0.01 | ||||||
March 31, 2011
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0.02 | 0.01 | ||||||
June 30, 2011
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0.03 | 0.01 | ||||||
September 30, 2011
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0.03 | 0.011 |
Our shares are subject to Section 15(g) and Rule 15g-9 of the Securities and Exchange Act, commonly referred to as the “penny stock” rule. The rule defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. The rule provides that any equity security is considered to be a penny stock unless that security is registered and traded on a national securities exchange meeting specified criteria set by the SEC; issued by a registered investment company; or excluded from the definition on the basis of share price or the issuer’s net tangible assets.
These rules may restrict the ability of broker-dealers to trade or maintain a market in our common stock and may affect the ability of shareholders to sell their shares. Broker-dealers who sell penny stocks to persons other than established customers and accredited investors must make a special suitability determination for the purchase of the security. Accredited investors, in general, include individuals with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse, and certain institutional investors. The rules require the broker-dealer to receive the purchaser’s written consent to the transaction prior to the purchase and require the broker-dealer to deliver a risk disclosure document relating to the penny stock prior to the first transaction. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the security. Finally, monthly statements must be sent to customers disclosing recent price information for the penny stocks.
Holders
As of September 30, 2012, we had approximately 100 shareholders of record of our common stock, which does not include shares held in “street accounts” of securities brokers.
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Dividends
We have not paid cash or stock dividends and have no present plan to pay any dividends. Instead, we intend to retain any earnings to finance the operation and expansion of our business and the payment of any cash dividends on our common stock is unlikely. However, our board of directors may revisit this matter from time to time and may determine our earnings, financial condition, capital requirements and other factors allow the payment of dividends.
Recent Sales of Unregistered Security
On May 14, 2012 the Company issued 10,000,000 shares of common stock with a value of $60,000 ($0.006 per share) for accrued salary.
On June 8, 2012 the Company issued 500,000 shares of common stock with a value of $12,500 ($0.025 per share) for cash.
Issuer Purchase of Securities
None
ITEM 6: SELECTED FINANCIAL DATA
Not required for smaller reporting companies.
ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Executive Overview
During the past year, Aquentium has actively expanded our operational focus to providing “green technologies” to businesses throughout the world. We continue to introduce our ozone system for use in food processing, beverage processing, hotels, schools, hospitals, and veterinarian clinics. We intend to market that product directly to businesses as well as sell directly to third party distributors. On a daily operational basis the company plans to sell and market our complete line of ozone sanitation equipment. During the next 12 months, the company plans on designing larger commercial water purification systems for use beyond the food and beverage industry.
We are also expanding our business in the area of alternative energy. Currently, we are pursuing waste-to-energy projects throughout the world. We have focused our efforts on bringing waste-to-energy solutions to Asia, Europe, and North, Central and South America. Management is excited about the worldwide demand for such technology.
13
We continue to market our SIPs and with this technology we are actively seeking real estate projects in the market of affordable living or commercial office buildings that could utilize our SIP system. This product can be used worldwide.
As part of the company’s original business model, we are actively seeking other businesses to acquire or invest in.
In summary, management continues to position the company in a way to best benefit from worldwide economic conditions, trends, events, and demand for new technologies.
Liquidity and Capital Resources
At September 30, 2012, Aquentium had an accumulated deficit of $3,547,160 and recorded a net loss of $322,449 for the year ended September 30, 2012. We have recorded revenues of $17,160 during the period ending September 30, 2012 and $5,000 during the same period 2011. We have minimal cash or assets. Based on these factors there is substantial doubt that we can continue as a going concern unless we obtain external funding. Management plans to continue limited operations until we obtain additional funding to expand our operations.
During the past two fiscal years we have relied primarily on related party advances and loans and the issuance of our common stock to satisfy our cash requirements. During fiscal year 2012 we received net advances of $1,560 from our President, Mark T. Taggatz, compared to advances of $1,000 he provided in 2011. Also, in 2012, Ozone Safe Food, a related party, advanced $2,900 to us. (See Part III, Item 13 “Certain Relationships and Related Transactions,” below.) The advances are used for operational expenses in the normal course of business. We anticipate that Mr. Taggatz or our affiliates may provide advances in the future; however, we have not entered into written agreements with any person and, therefore, no one is obligated to provide advances to us.
Historically, we also issue shares of our common stock to pay for services and loans. During the fiscal year 2012 we issued 10,000,000 shares of common stock, value as $60,000 for accrued salary. In addition we issued 500,000 shares of common stock, valued at $12,500 for cash. During fiscal year 2010 we issued an aggregate of 1,100,000 common shares, valued at $45,000, in consideration for consulting services. During the fiscal year 2009 we issued 17,650,000 shares of common stock with a value of $455,700. Of those shares 1,250,000 were issued in October 2008 to Raymond Sabbaghi in consideration for consulting services related to business development for our ozone equipment and housing system operations valued at approximately $37,500. We also issued 12, 800,000 shares for accrued salaries and debt owed to Ozone Safe Food (and we issued 3,600,000 shares for marketing and consulting services. During the 2008 fiscal year we issued 100,000 shares, valued at $23,000, for business development services related to Aquentium de Mexico.
Management expects to continue to issue common stock to pay for acquisitions, services and agreements. Any issuance of common stock will likely be pursuant to exemptions to the registration requirements provided by federal and state securities laws. The purchasers and manner of issuance will be determined according to our financial needs and the available exemptions. We do not currently intend to make a public offering of our stock. We also note that if we issue more shares of our common stock our shareholders may experience dilution in the value per share of their common stock.
We intend to rely on debt and equity financing, capital contributions from management and sales of our common stock to pay for costs, services, operating leases, litigation expense and future development of our business opportunities. Accordingly, our focus for the next twelve months will be to obtain additional funding through debt or equity financing, but as of the date of this filing we have not finalized agreements for additional funding. Our success in obtaining funding will depend upon our ability to sell our common stock or borrow on terms that are financially advantageous to us. If we are unable to obtain financing, then expansion of our ozone distribution network and SIP’s manufacturing program may be delayed and our subsidiaries may remain inactive.
14
Results of Operations
We recorded revenue of $17,160 in 2012 and $5,000 in 2011. Our general and administrative expenses were $323,769 in 2012 compared to $320,559 in2011. Interest expense was $12,040 in 2012 and for the same period in 2011. Net loss in 2012 was $322,449 compared to $327,599 in 2011. The decrease in net loss was due primarily to lower overhead costs in 2012. Management anticipates net losses will continue over the next two to three years as we develop our distribution methods for our products.
Financing Activities
Cash used in operating activities was $16,318 for the period ending September 30, 2012 compared to $11,089 for the same period in 2011. The lower amount in 2011 was due primarily to prepay of $3,200 offset by lower rent and accounts payable in 2012 over 2011.
Cash provided by investing activities was $16,944 in 2012 compared to $11,089 in the same period in 2011. Cash advances by related parties plus the sale of common stock for $12,500 in 2012 were the source of the cash provided by financing activities in both 2012 and 2011.
Off-Balance Sheet Arrangements
None
Commitments and Contingent Liabilities
Prior to the 2007 year, we leased the Tennant Desert property in North Palm Springs, California. We subleased portions of this building and received rental income from the subleases. Due to a dispute with the landlord of the Tennant Desert property in August 2007 we moved to a new office. As a result of the legal action brought by the landlord a judgment was filed against Aquentium and we have recognized an accrued a liability of $237,815, including interest, related to the judgment awarded to the landlord of the Tennant Desert property.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements are audited and included herein beginning on Exhibit 1, page 1 and are incorporated herein by this reference.
15
ITEM 9: CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLSOURE
None
ITEM 9A (T): CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our filings under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC. This information is accumulated to allow timely decisions regarding required disclosure. Our Chief Executive Officer, who also acts in the capacity of principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report and based on that evaluation he concluded that our disclosure controls and procedures were effective.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our Chief Executive Officer (Principal Officer) is responsible to design or supervise a process that provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The policies and procedures include:
•
|
maintenance of records in reasonable detail to accurately and fairly reflect the transactions and dispositions of assets,
|
•
|
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and directors, and
|
•
|
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.
|
For the year ended September 30, 2012, our management has relied on the Committee of Sponsoring Organizations of the Treadway Commission (COSO), “Internal Control - Integrated Framework,” issued in 1992, to evaluate the effectiveness of our internal control over financial reporting and based upon that framework management has determined that our internal control over financial reporting is effective.
Our principal officer has also determined that there were no changes made in our internal controls over financial reporting during the fourth quarter of fiscal year 2012 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
This annual report does not include an attestation report of our registered public accounting firm regarding management’s report on internal control over financial reporting. The management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit the company to provide only the management’s report in this annual report.
ITEM 9B: OTHER INFORMATION
None:
16
PART III
ITEM 10: DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
Our executive officer and director is listed below. Our bylaws require three directors who serve until our next annual meeting or until each is replaced by a qualified director. We have two vacancies on our board of directors which we intend to fill at a later date. Our executive officers are appointed by our board of directors and serve at its discretion.
Name
|
Age
|
Positions Held
|
Director Term
|
|||
Mark T. Taggatz
|
48
|
President, CEO, Secretary/Treasurer, and Chairman of the Board
|
From April 2, 2002 until next annual meeting
|
Mark T. Taggatz was appointed Chairman of the Board on April 2, 2002, and he was appointed as President and Chief Executive Officer on April 15, 2002. He assumed the duties of Secretary/Treasurer in May 2003. He is also the President of Ozone Safe Food, Inc.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers and persons who own more than five percent of a registered class of our equity securities to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our common stock. Officers, directors and greater than ten-percent beneficial owners of our common stock are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file and provide written representation that no Form 5 is required. Based upon review of the forms and representations furnished to us during the fiscal year ended September 30, 2011, we believe Mr. Taggatz failed to timely file two Forms 4 related to two transactions.
Code of Ethics
We have only one officer and director and minimal operations and, as a result, have not adopted a code of ethics for our principal executive and financial officers. Our board of directors will revisit this issue in the future to determine if adoption of a code of ethics is appropriate. In the meantime, our management intends to promote honest and ethical conduct, full and fair disclosure in our reports to the SEC and compliance with applicable governmental laws and regulations.
Audit Committee
We are a smaller reporting company with one director and executive officer who has an active role in our operations. As a result, we do not have an audit committee with an audit committee financial expert serving on that committee. Our entire board of directors acts as our nominating and audit committee.
17
ITEM 11: EXECUTIVE COMPENSATION
Executive Officer Compensation
The following table shows the compensation paid to our named executive officer in all capacities during the past three fiscal years. We have not entered into employment contracts with our executive officer and his compensation, if any, will be determined at the discretion of our board of directors. We are unable to pay cash for services rendered by our principal executive officer, Mr. Taggatz, and accordingly, we have accrued his compensation for the past three fiscal years.
SUMMARY COMPENSATION TABLE
|
||||||||||||||
Name and Principal Position
|
Year
|
Compensation
|
All Other
Compensation
|
Total
|
||||||||||
Mark T. Taggatz CEO | 2012 | $ | 240,000 | (1) | $ | 0 | $ | 240,000 | ||||||
2011
|
$ | 240,000 | (1) | $ | 0 | $ | 240,000 | |||||||
2010
|
$ | 240,000 | (1) | $ | 0 | $ | 240,000 |
_________
(1) Represents accrued salary.
Our CEO accrued compensation for the year ended September 30, 2012 and has salary payable totaling $1,655,347 at 2012 year end. We have not entered into an employment contract with our executive officer and his compensation, if any, will be determined at the discretion of our board of directors, of which he is the sole director.
We do not offer retirement benefit plans to our executive officer, nor have we entered into any contract, agreement, plan or arrangement, whether written or unwritten, that provides for payments to a named executive officer at, or in connection with, the resignation, retirement or other termination of a named executive officer, or a change in control of the company or a change in the named executive officer’s responsibilities following a change in control.
Outstanding Equity Awards
Our executive officer does not have any outstanding equity awards as of September 30, 2012.
Compensation of Directors
We do not have any standard arrangement for compensation of our directors for any services provided as director, including services for committee participation or for special assignments.
18
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Securities Authorized Under Equity Compensation Plans
The following table lists the securities authorized for issuance as of September 30, 2012 under any equity compensation plans approved by our shareholders and any equity compensation plans not approved by our shareholders.
EQUITY COMPENSATION PLAN INFORMATION
|
||||||||||||
Plan category
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
(a)
|
Weighted-average exercise price of outstanding options,
warrants and rights
(b)
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)
|
|||||||||
Equity compensation plans approved by security holders
|
0 | $ | 0 | - | ||||||||
Equity compensation plans not approved by security holders
|
0 | $ | 0 | 10,000,000 | ||||||||
Total
|
0 | $ | 0 | 10,000,000 |
2003 Stock Option Plan - On February 21, 2003, our board of directors approved the 2003 Stock Option Plan. This plan has not been approved by our shareholders. The plan provides for the grant of both incentive stock options pursuant to Section 422 of the Internal Revenue Code and non-qualified stock options. The plan is administered by the full board of directors, which determines the terms of the options granted. The board of directors may amend the plan without the approval of the shareholders, except shareholder approval is required for certain amendments described more fully in the plan.
We reserved 10,000,000 shares for issuance under this stock option plan. The exercise price of options under the plan must be equal to the fair market value of the common stock on the date of grant. If the incentive stock option is granted to a person possessing more than 10% of the voting rights of the outstanding common stock, then the exercise price must be no less than 110% of the fair market value of the common stock on the date of grant. The term for each option can be no more than three years. In the event the holder terminates employment with Aquentium, then the option may be exercised during a three-month period after termination and the option terminates after that time period.
As of the date of this filing, we do not have any outstanding options or rights under this plan.
19
Beneficial Ownership
The following table sets forth the beneficial ownership of our outstanding common stock by our management and each person or group known to us to own beneficially more than 5% of our outstanding common stock. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Due to these rules, two or more persons may be deemed to be the beneficial owners of the same securities. The percentage of beneficial ownership is based on 56,957,403 shares of common stock outstanding as of December 21, 2012.
CERTAIN BENEFICIAL OWNERS
|
|||||||||||
Title of class
|
Name and address of beneficial owners
|
Amount and nature
of beneficial ownership
|
Percent
of class
|
||||||||
Common
|
Ozone Safe Food, Inc.
571 Crane Street Building A Perris, CA , 92530
|
12,800,000 | 22.5 | ||||||||
Common
|
Wall Street Marketing Group, Inc.
571 Crane Street Building A Perris, CA , 92530
|
9,000,000 | 15.8 | ||||||||
Common
|
Sherry L. Wilson
29743 Vacation Drive Canyon Lake, CA 92587
|
5,000,000 | 8.7 | ||||||||
Common
|
Mark T. Taggatz
571 Crane Street Building A Perris, CA , 92530
|
13,500,000 | 23.7 | ||||||||
All Officers and Directors as a group (1)
|
13,500,000 | 23.7 |
_____________
(1) Mr. Taggatz has sole power to vote and invest for Ozone Safe Food, Inc., and Wall Street Marketing Group, Inc.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Transactions with Related Persons
The following information summarizes transactions or proposed transactions in which we were a participant since the beginning of our 2012 fiscal year. The following transactions between Aquentium and our present director and officer and his affiliates have been negotiated between related parties without “arms length” bargaining and, as a result, the terms of these transactions may be different than transactions negotiated between unrelated persons.
In October 2009, we entered into a lease agreement with Sani-Dri, Inc. to sublease for a period of three years office space in the building Sani-Dri leases. Aquentium paid Sani-Dri rent of $4,000 for the year ending September 30, 2010; $4,800 for year two ending September 30, 2011 and $6,000 for year three ending September 30, 2012. The lease was terminated on August 31, 2012 by mutual agreement.
20
On September 1, 2012 the Company leased on a month to month basis space from its CEO and sole director mark Taggatz. The lease includes a deposit for the first and last month of $3,200 plus monthly rent of $1,600.
During the fiscal year ended September 30, 2012, Mr. Taggatz, advanced $1,560 to Aquentium and its affiliates. As of September 30, 2011, $175,197 was due to Mr. Taggatz for advances to Aquentium and its affiliates.
Director Independence
Our director is not an independent director as defined by Nasdaq Stock Market Rule 4200(a) (15).
ITEM 14: PRINCIPAL ACCOUNTING FEES AND SERVICES
Accountant Fees
The following table presents for each of the last two fiscal years the aggregate fees billed in connection with the audits of our financial statements and other professional services rendered by our independent registered public accounting firm, Johnson Mattson & Smail, PLLC.
2011
|
2012
|
|||||||
Audit fees
|
$ | 7,500 | $ | 7,500 | ||||
Audit related fees
|
0 | 0 | ||||||
Tax fees
|
0 | 0 | ||||||
All other fees
|
$ | 0 | $ | 0 |
Audit fees represent the professional services rendered for the audit of our annual financial statements and the review of our financial statements included in quarterly reports, along with services normally provided by the accounting firm in connection with statutory and regulatory filings or engagements. Audit-related fees represent professional services rendered for assurance and related services by the accounting firm that are reasonably related to the performance of the audit or review of our financial statements that are not reported under audit fees.
Tax fees represent professional services rendered by the accounting firm for tax compliance, tax advice, and tax planning. All other fees represent fees billed for products and services provided by the accounting firm, other than the services reported for in the other categories.
Audit Committee Pre-approval Policies
We do not have an audit committee currently serving, and as a result, our board of directors performs the duties of an audit committee. Our board of directors will evaluate and approve in advance, the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. We do not rely on pre-approval policies and procedures.
21
PART IV
ITEM 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Exhibits
No. | Description | |
31.1 | Chief Executive Officer Certification | |
31.2 | Principal Financial Officer Certification | |
32.1 | Section 1350 Certification |
101.INS **
|
XBRL Instance Document
|
|
101.SCH **
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL **
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF **
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
101.LAB **
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE **
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
22
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
AQUENTIUM, INC.
|
|||
Date: December 26, 2012
|
By:
|
/s/ Mark Taggatz
|
|
Mark T. Taggatz,
|
|||
President |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: December 26, 2012
|
By:
|
/s/ Mark Taggatz | |
Mark T. Taggatz
|
|||
Chairman of the Board, President,
|
|||
Chief Executive Officer, Secretary/Treasurer,
|
|||
Principal Financial and Accounting Officer
|
23
Page
|
||||
Report of Independent Registered Public Accounting Firms
|
F-1 | |||
Consolidated Balance Sheets
|
F-2 | |||
Consolidated Statements of Operations
|
F-3 | |||
Consolidated Statement of Stockholders’ Deficit
|
F-4 | |||
Consolidated Statements of Cash Flows
|
F-6 | |||
Notes to Consolidated Financial Statements
|
F-8 |
24
JOHNSON MATTSON & SMAIL, PLLC.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Aquentium, Inc. and subsidiaries (a Delaware Corporation)
(A Development Stage Company)
Perris, California
We have audited the accompanying consolidated balance sheets of Aquentium, Inc. and subsidiaries (A Development Stage Company) as of September 30, 2012, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for the years ended September 30, 2012 and 2011, and from inception (April 20, 2001) through September 30, 2012. Aquentium Inc.’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Aquentium, Inc. as of September 30, 2012, and the results of its operations and its cash flows for each of the years ended September 30, 2012 and 2011, and from inception (April 30, 2001) through September 30, 2012 in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations, which raise substantial doubt about its ability to continue as a going concern. Management’s plans to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Johnson Mattson & Smail, PLLC.
|
Johnson Mattson & Smail, PLLC
|
Buffalo, MN
|
December 21, 2012
|
F-1
AQUENTIUM, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(AUDITED)
As of September 30,
|
||||||||
2012
|
2011
|
|||||||
ASSETS
|
||||||||
Current assets
|
||||||||
Cash
|
$ | 626 | $ | -- | ||||
Deposits
|
3,200 | -- | ||||||
|
||||||||
Total current assets
|
3,826 | -- | ||||||
Total assets
|
3,826 | -- | ||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
||||||||
Current liabilities
|
||||||||
Bank overdraft
|
-- | 16 | ||||||
Accounts payable
|
39,322 | 34,830 | ||||||
Accrued expense – litigation
|
177,247 | 177,247 | ||||||
Accrued interest
|
60,568 | 48,528 | ||||||
Advances-related parties
|
193,234 | 188,774 | ||||||
Rent payable-related party
|
168,000 | 115,200 | ||||||
Compensation payable- related party
|
1,655,347 | 1,475,357 | ||||||
|
||||||||
Total current liabilities
|
2,293,728 | 2,039,952 | ||||||
|
||||||||
Total liabilities
|
2,293,728 | 2,039,952 | ||||||
Stockholders’ deficit
|
||||||||
Preferred shares, par value $0.00001, 10,000,000 authorized
|
||||||||
no shares issued and outstanding
|
-- | -- | ||||||
Common stock, par value $0.005, 100,000,000 authorized
|
||||||||
issued and outstanding as of September 30, 2012 and
|
||||||||
September 30, 2011, respectively: 56,957,403 and 46,457,403
|
284,787 | 232,287 | ||||||
Additional paid-in capital
|
972,471 | 952,471 | ||||||
Accumulated deficit during the development stage
|
(3,547,160 | ) | (3,224,710 | ) | ||||
Total stockholders’ deficit
|
(2,289,902 | ) | (2,039,952 | ) | ||||
Total liabilities and stockholders’ deficit
|
$ | 3,826 | $ | -- |
The accompanying notes are an integral part of the consolidated financial statements
F-2
AQUENTIUM, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(AUDITED)
From Inception
|
||||||||||||
For Year Ended
|
(April 30, 2001) to
|
|||||||||||
September 30,
|
September 30,
|
|||||||||||
2012
|
2011
|
2012
|
||||||||||
Income
|
$ | 17,160 | $ | 5,000 | $ | 22,160 | ||||||
Cost of goods sold
|
(5,434 | ) | -- | (5,434 | ) | |||||||
Impairment loss
|
-- | -- | 15,000 | |||||||||
General and administrative expenses
|
323,769 | 320,559 | 5,141.103 | |||||||||
Depreciation
|
-- | -- | 3,973 | |||||||||
|
||||||||||||
Loss from operations
|
(312,043 | ) | (315,559 | ) | (5,143,350 | ) | ||||||
Other income (expense)
|
||||||||||||
Gain (loss) on sale of investment/business
|
-- | -- | 370,000 | |||||||||
Rental income
|
-- | -- | 1,471,279 | |||||||||
Other income
|
1,634 | -- | 3,511 | |||||||||
Expense – litigation settlement
|
-- | -- | (177,247 | ) | ||||||||
Impairment loss
|
-- | -- | (71,271 | ) | ||||||||
Interest expense
|
(12,040 | ) | (12,040 | ) | (71,352 | ) | ||||||
Total other income (expense)
|
(10,406 | ) | (12,040 | ) | 1,596,191 | |||||||
Net loss
|
$ | (322,449 | ) | $ | (327,599 | ) | $ | (3,547,159 | ) | |||
Loss per common share- basic
|
$ | (0.01 | ) | $ | (0.01 | ) | ||||||
|
||||||||||||
Basic weighted average number of common shares outstanding
|
50,339,595 | 46,457,403 |
The accompanying notes are an integral part of the consolidated financial statements
F-3
AQUENTIUM, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FROM INCEPTION (APRIL 30, 2001) THROUGH SEPTEMBER 30, 2012
(AUDITED)
Other
|
||||||||||||||||||||||||
Common Stock
|
Paid in
|
Accumulative
|
Comprehensive
|
Stockholders’
|
||||||||||||||||||||
Shares
|
Amount
|
Capital
|
(Deficit)
|
(Loss)
|
Deficit
|
|||||||||||||||||||
Founder's capital contribution
|
- | $ | - | $ | 500 | $ | - | $ | - | $ | 500 | |||||||||||||
Capital contributed, office space
|
- | - | 3,000 | - | - | 3,000 | ||||||||||||||||||
Common stock issued for reverse merger
|
4,000,000 | 20,000 | (20,000 | ) | - | - | - | |||||||||||||||||
Preferred stock converted
|
1,000,000 | 5,000 | (5,000 | ) | - | - | - | |||||||||||||||||
Common stock retained by shareholders April,
|
||||||||||||||||||||||||
2002 for the acquisition of Aquentium,
|
||||||||||||||||||||||||
Delaware valued at par value per share
|
76,014 | 380 | (380 | ) | - | - | - | |||||||||||||||||
Stock for services
|
500,000 | 2,500 | 7,500 | - | - | 10,000 | ||||||||||||||||||
Acquisitions of subsidiaries
|
900,000 | 4,500 | 13,500 | - | - | 18,000 | ||||||||||||||||||
Net loss
|
||||||||||||||||||||||||
September 30, 2002
|
- | - | - | (61,987 | ) | - | (61,987 | ) | ||||||||||||||||
Balance September 30, 2002
|
6,476,014 | 32,380 | (880 | ) | (61,987 | ) | - | (30,487 | ) | |||||||||||||||
Stock options compensation
|
- | - | 100,000 | - | - | 100,000 | ||||||||||||||||||
Stock for services
|
2,160,000 | 10,800 | 32,400 | - | - | 43,200 | ||||||||||||||||||
Acquisition of subsidiaries
|
250,000 | 1,250 | 3,750 | - | - | 5,000 | ||||||||||||||||||
Debt settlement
|
2,000 | 10 | 30 | - | - | 40 | ||||||||||||||||||
Capital contributed, office space
|
- | - | 3,000 | - | - | 3,000 | ||||||||||||||||||
Net loss
|
- | - | - | (259,910 | ) | - | (259,910 | ) | ||||||||||||||||
Balance September 30, 2003
|
8,888,014 | 44,440 | 138,300 | (321,897 | ) | - | (139,157 | ) | ||||||||||||||||
Acquisition of subsidiaries
|
2,080,000 | 10,400 | (10,400 | ) | - | - | - | |||||||||||||||||
Lease deposit
|
5,140 | 26 | 77 | - | - | 103 | ||||||||||||||||||
Stock for services
|
1,007,000 | 5,035 | 15,105 | - | - | 20,140 | ||||||||||||||||||
Rescission of 2002 acquisition
|
(500,000 | ) | (2,500 | ) | 2,500 | - | - | - | ||||||||||||||||
Officer compensation
|
3,000,000 | 15,000 | 45,000 | - | - | 60,000 | ||||||||||||||||||
Capital contributed, office space
|
- | - | 3,000 | - | - | 3,000 | ||||||||||||||||||
Net income
|
391,123 | 391,123 | ||||||||||||||||||||||
Other comprehensive income (loss):
|
||||||||||||||||||||||||
Unrealized loss on stock
|
- | - | - | - | (230,000 | ) | (230,000 | ) | ||||||||||||||||
Comprehensive income
|
- | - | - | - | - | - |
F-4
Balance September 30, 2004
|
14,480,154 | $ | 72,401 | $ | 193,582 | $ | 69,226 | $ | (230,000 | ) | $ | 105,209 | ||||||||||||
Stock for patent
|
200,000 | 1,000 | 3,000 | - | - | 4,000 | ||||||||||||||||||
Net loss
|
- | - | - | (242,875 | ) | - | (242,875 | ) | ||||||||||||||||
Other comprehensive income:
|
||||||||||||||||||||||||
Unrealized loss on stock
|
- | - | - | - | (37,500 | ) | (37,500 | ) | ||||||||||||||||
Comprehensive income
|
- | - | - | - | - | - | ||||||||||||||||||
Balance September 30, 2005
|
14,680,154 | 73,401 | 196,582 | (173,649 | ) | (267,500 | ) | (171,166 | ) | |||||||||||||||
Comprehensive income
|
- | - | - | - | 267,500 | 267,500 | ||||||||||||||||||
Stock for services
|
7,035,000 | 35,175 | 105,525 | - | - | 140,700 | ||||||||||||||||||
Net loss
|
- | - | - | (780,184 | ) | - | (780,184 | ) | ||||||||||||||||
Balance September 30, 2006
|
21,715,154 | 108,576 | 302,107 | (953,833 | ) | - | (543,150 | ) | ||||||||||||||||
Stock for services issued
|
5,750,000 | 28,750 | 215,625 | - | - | 244,375 | ||||||||||||||||||
Stock issued for license agreement
|
100,000 | 500 | 5,500 | - | - | 6,000 | ||||||||||||||||||
Booking common stock difference
|
42,249 | 211 | (211 | ) | - | - | - | |||||||||||||||||
Net loss
|
- | - | - | (733,410 | ) | - | (733,410 | ) | ||||||||||||||||
Balance September 30, 2007
|
27,607,403 | 138,037 | 523,021 | (1,687,243 | ) | - | (1,026,185 | ) | ||||||||||||||||
Stock for service
|
100,000 | 500 | 22,500 | - | - | 23,000 | ||||||||||||||||||
Net loss
|
- | - | - | (366,279 | ) | - | (366,279 | ) | ||||||||||||||||
Balance September 30, 2008
|
27,707,403 | 138,537 | 545,521 | (2,053,522 | ) | - | (1,369,464 | ) | ||||||||||||||||
Stock issued for services
|
4,850,000 | 24,250 | 105,050 | - | - | 129,300 | ||||||||||||||||||
Stock issued for debt
|
5,292,549 | 26,463 | 108,497 | - | - | 134,960 | ||||||||||||||||||
Stock issued for interest
|
467,647 | 2,338 | 9,587 | - | - | 11,925 | ||||||||||||||||||
Stock issued for salaries payable
|
7,039,804 | 35,199 | 144,316 | - | - | 179,515 | ||||||||||||||||||
Net loss
|
- | - | - | (456,222 | ) | - | (456,222 | ) | ||||||||||||||||
Balance September 30, 2009
|
45,357,403 | $ | 226,787 | $ | 912,971 | $ | (2,509,744 | ) | - | $ | (1,369,986 | ) | ||||||||||||
Stock issued for service
|
1,100,000 | 5,500 | 39,500 | - | - | 45,000 | ||||||||||||||||||
Net loss
|
- | - | - | (387,367 | ) | - | (387,367 | ) | ||||||||||||||||
Balance September 30, 2010
|
46,457,403 | 232,287 | 952,471 | (2,897,111 | ) | - | (1,712,353 | ) | ||||||||||||||||
Net loss
|
- | - | - | (327,599 | ) | - | (327,599 | ) | ||||||||||||||||
Balance September 30, 2011
|
46,457,403 | $ | 232,287 | $ | 952,471 | $ | (3,224,710 | ) | - | (2,039,952 | ) | |||||||||||||
Stock issued for cash
|
500,000 | 2,500 | 10,000 | - | - | 12,500 | ||||||||||||||||||
Stock issued for accrued salary
|
10,000,000 | 50,000 | 10,000 | - | - | 60,000 | ||||||||||||||||||
Net loss
|
- | - | - | (322,449 | ) | - | (322,449 | ) | ||||||||||||||||
Balance September 30, 2012
|
56,957,403 | $ | 284,787 | $ | 972,471 | $ | (3,547,160 | ) | - | $ | 2,289,902 |
The accompanying notes are an integral part of the consolidated financial statements
F-5
AQUENTIUM, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AUDITED)
From
|
||||||||||||
inception
|
||||||||||||
April 30,
|
||||||||||||
Year Ended
|
2001 to
|
|||||||||||
September 30,
|
September 30,
|
|||||||||||
2012
|
2011
|
2012
|
||||||||||
CASH FLOW FROM OPERATING ACTIVITIES:
|
||||||||||||
Net loss
|
$ | (322,449 | ) | $ | (327,599 | ) | $ | (3,547,159 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||||||
Depreciation
|
-- | -- | 3,973 | |||||||||
Stock for services
|
-- | -- | 715,755 | |||||||||
Stock for joint venture
|
-- | -- | 6,000 | |||||||||
Realized investment loss (gain)
|
-- | -- | (370,000 | ) | ||||||||
Disposition of subsidiaries
|
-- | -- | 18,465 | |||||||||
Impairment loss
|
-- | -- | 18,638 | |||||||||
Stock option compensation
|
-- | -- | 100,000 | |||||||||
Changes in operating assets and liabilities:
|
||||||||||||
Accrued expense-litigation settlement
|
-- | -- | 177,247 | |||||||||
Accrued rent
|
52,800 | 57,600 | 168,000 | |||||||||
Accounts payable
|
4,491 | 6,870 | 40,125 | |||||||||
Accrued interest
|
12,040 | 12,040 | 72,493 | |||||||||
Prepaid
|
(3,200 | ) | (3,200 | ) | ||||||||
Accrued compensation-officer
|
240,000 | 240,000 | 2,132,253 | |||||||||
|
||||||||||||
Net cash used in operating activities
|
(16,318 | ) | (11,089 | ) | (467,410 | ) | ||||||
CASH FLOW FROM INVESTING ACTIVITIES:
|
||||||||||||
Investment in joint venture
|
-- | -- | (15,000 | ) | ||||||||
Purchase of fixed asset
|
-- | -- | (3,973 | ) | ||||||||
|
||||||||||||
Net cash used in investing activities
|
-- | -- | (18,973 | ) | ||||||||
CASH FLOW FROM FINANCING ACTIVITIES:
|
||||||||||||
Bank overdraft
|
(16 | ) | (111 | ) | -- | |||||||
Stock issued for cash
|
12,500 | -- | 12,500 | |||||||||
Loan - affiliated company
|
-- | -- | 137,860 | |||||||||
Advances - related parties
|
4,460 | 11,200 | 327,149 | |||||||||
Capital contribution - founder
|
-- | -- | 500 | |||||||||
Capital contribution - office space
|
-- | -- | 9,000 | |||||||||
|
||||||||||||
Net cash provided by financing activities
|
16,944 | 11,089 | 487,009 | |||||||||
|
||||||||||||
NET CHANGE IN CASH
|
626 | -- | 626 | |||||||||
CASH AT BEGINNING OF YEAR
|
-- | -- | -- | |||||||||
CASH AT END OF YEAR
|
$ | 626 | $ | -- | $ | 626 |
F-6
Non-Monetary Transactions
|
||||||||||||
Stock issued for debt 5,292,549 shares and 2,000,000 shares
|
||||||||||||
respectively @ $0.0255 and $0.02 respectively
|
$ | -- | $ | -- | $ | 135,000 | ||||||
Stock for interest 467,631 shares @ $0.0255
|
$ | -- | $ | -- | $ | 11,925 | ||||||
Stock issued for accrued salary 10,000,000 @$0.006 per share
|
$ | 60,000 | -- | -- | ||||||||
1,150,000 common shares issued for acquisitions at $0.02 per share
|
$ | -- | $ | -- | $ | 23,000 | ||||||
|
||||||||||||
Stock for salary 7,039,820 shares and 3,000,000 shares
|
||||||||||||
respectively issued at $0.0255 and$0.02 respectively
|
$ | -- | $ | -- | $ | 239,515 | ||||||
Stock for licensing agreement 100,000shares issued at $0.06 per share
|
$ | -- | $ | -- | $ | 6,000 | ||||||
Stock for acquisitions 1,150,000shares issued at $0.02 per share
|
$ | -- | $ | -- | $ | 23,000 | ||||||
Stock for patent pending 4,000 shares @ $1.00 per share
|
$ | -- | $ | -- | $ | 4,000 | ||||||
Reduction of liability to a related party by an exchange in investment
|
$ | -- | $ | -- | $ | 375,000 |
The accompanying notes are an integral part of the consolidated financial statements
F-7
AQUENTIUM, INC. AND SUBSIDIARIES
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2012
(Audited)
NOTE 1: BUSINESS AND HISTORY
A. Business
Aquentium, Inc. (a Delaware corporation) is a diversified holding company in the development stage. (See Note 2 H "Development Stage Company"). Its holdings include an early-stage entertainment division that will develop and license products and publications (Canby Group, Inc.), a full service integrator (Aquentium Solar, Inc.), the research and development of alternative energy biofuel projects, (North American Energy, Inc.), and the development of waste recycling systems (Environmental Waste Management, Inc.) and the development of portable housing (HERE, Inc.) and (Aquentium De Mexico). All the above companies were inactive during fiscal years ending September 30, 2012 and 2011, however, See Note 1C, "Acquisitions and Dispositions" for additional information.
B. History
Aquentium Inc., formerly WaterPur International, Inc. (the Company) was incorporated in the state of Delaware on April 3, 1987 as Arnex Investment Group, Ltd. (“Aquentium – Delaware”) Then the corporation name was changed to Vector Environmental Technologies, Inc. in 1993 and then to WaterPur International, Inc. in 1997. Up through September 30, 1997, WaterPur operated principally in one business segment, the development and sale of environmental technologies, primarily water purification. WaterPur became an inactive shell as of September 30, 1998.
On April 2, 2002, Aries Ventures, Inc., formerly Casmyn Corp. and holder of 100% of the 5% cumulative convertible preferred stock of WaterPur received 1,000,000 post-split shares and 250,000 warrants in consideration for the release of any and all outstanding debts or claims that Aries had or may have had against WaterPur.
On April 2, 2002 Aquentium - Delaware acquired 100% of Aquentium, Inc., a Nevada corporation incorporated on April 30, 2001 (“Aquentium-Nevada”), in exchange for 4,000,000 shares of its common stock. With this transaction the common stock of Aquentium -Delaware outstanding was: 5,076,014 shares with 4,000,000 shares held by the Aquentium shareholders, 1,000,000 shares held by Aries and the remaining shares of 76,014 (post reverse split 200 to 1) held by the former stockholders of WaterPur.
Aquentium – Delaware, formerly WaterPur, entered into an asset purchase agreement with Duck Marine Systems, Inc. (a British Columbia Corporation) on May 7, 1999. The agreement was rescinded April 2, 2002.
In connection with the above transactions the officers and principal stockholders of Aquentium - Delaware, on one hand and Aquentium - Delaware and its subsidiary, Aquentium - Nevada, on the other hand, affected a mutual release of any and all debts and claims that either party may have against each other.
In substance, the Aquentium - Delaware transaction is considered to be a capital transaction rather than a business combination. Consequently, the transaction is considered a reverse takeover and the accounting treatment will be as if Aquentium - Nevada acquired Aquentium - Delaware. Accordingly, these financial statements are the historical financial statements of Aquentium - Nevada
On October 24, 2007, Aquentium formed Aquentium De Mexico, a Mexican subsidiary, to manufacture and market our low-cost housing model units in the Mexican Republic.
F-8
C. Acquisitions and Dispositions
Subsequent to Aquentium - Delaware acquiring Aquentium - Nevada, the following acquisitions were made:
On June 29, 2002, 100% of Fiber Application Systems Technology (FAST) was acquired for 500,000 common shares at $0.02 per share or $10,000. The Company acquired cash of $4,363, organization costs of $10,817 (written off) and accounts payable of $15,080 for a net asset value of $100 resulting in goodwill of $9,900.
On March 12, 2003, FAST was disposed of for 500,000 preferred shares of Alpha Solarco, Inc., a publicly traded company. The preferred shares can be converted into 5,000,000 common shares. Because Alpha Solarco stock is thinly traded no value has been assigned to this transaction. An $817 gain, measured by the accounts payable, cash reduction and $9,900 cost basis, has been recognized. In March 2004, the Company agreed to rescind the acquisition and sale of FAST by canceling the 500,000 shares of Aquentium common stock issued for the acquisition and FAST agreed to cancel the 500,000 ten-dollar convertible preferred shares.
On August 9, 2002, 100% of USA Public Auction, Inc. (now Aquentium Solar, Inc.) was acquired for 250,000 common shares at $0.02 per share or $5,000. The Company acquired cash of $82 and organization costs of $4,280 (written off) resulting in goodwill of $638.
On September 9, 2002, 100% of Canby Group, Inc. was acquired for 150,000 common shares at $0.02 per share or $3,000 with no net assets.
On October 28, 2002, 100% of Food Safe, Inc., a Texas corporation, was acquired for 250,000 common shares valued at $5,000 in exchange for 100% of its shares. Food Safe was sold on October 29, 2003 to a publicly traded corporation (eFoodSafety.com Inc.). Aquentium received 500,000 (split 3 to 1 on December 8, 2003) restricted shares valued at $650,000 resulting in a gain of $645,000.
On December 8, 2003, Charis Energy Development, Inc., (now New American Energy, Inc.) a privately held company, was acquired for 1,000,000 restricted shares. As there were no assets or liabilities, the acquisition is treated as a capital transaction instead of a business combination and no goodwill or other intangibles are recognized.
On January 27, 2004, Environmental Waste Management, Inc., a privately held company, was acquired for 1,080,000 restricted shares. As there were no assets or liabilities, the acquisition is treated as a capital transaction instead of a business combination and no goodwill or other intangibles are recognized.
On October 24, 2007, Aquentium formed Aquentium De Mexico, a Mexican subsidiary, to manufacture and market our low-cost housing model units in the Mexican Republic.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. | Basis |
The Company uses the accrual method of accounting.
B. | Cash and cash equivalents |
The Company considers all short term, highly liquid investments that are readily convertible within three months to known amounts as cash equivalents. Currently, it has no cash equivalents.
C. | Loss per share |
Net loss per share is provided in accordance with Financial Accounting Standards Board Accounting Standards Codification (FASB ASC 205) "Earnings per Share". Basic loss per share reflects the amount of losses for the period available to each share of common stock outstanding during the reporting period, while giving effect to all dilutive potential common shares that were outstanding during the period, such as stock options and convertible securities of which the Company has none outstanding.
F-9
D. | Estimates |
The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statement and accompanying notes. Actual results could differ from those estimates.
E. | Policy in Regards to Issuance of Common Stock in a Non-Cash Transaction |
The Company’s accounting policy for issuing shares in a non-cash transaction is to issue the equivalent amount of stock equal to the fair market value of the assets or services received.
F. | Revenue Recognition |
Revenue is recognized when it is received in accordance with the basic FASB ASC 605-10 “Revenue Recognition”. The Company received no revenue for the years ending September 30, 2012 and 2011.
G. | Principles of Consolidation |
The consolidated financial statements include the accounts of the Company and its subsidiaries. There was no activity in the Company’s subsidiaries.
H. | Development Stage Company |
The accompanying consolidated financial statements have been prepared in accordance with the FASB ASC 915-205 "Development-Stage Entities". A development-stage enterprise is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenue there from. Development-stage companies report cumulative costs from the enterprise's inception.
I. | Recently Issued Accounting Pronouncements |
The Company does not expect the adoption of any recently issued accounting pronouncements to have a significant impact on their financial position, results of operations or cash flows.
NOTE 3: GOING CONCERN
The Company's financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has an accumulated deficit of $3,547,160 and has minimal revenues to cover its operating costs. This uncertainty raises substantial 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 on additional sources of capital and the success of the Company's plan. These 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 result from this uncertainty.
F-10
NOTE 4: STOCK ISSUED
On May 14, 2012 the Company issued 10,000,000 shares of common stock with a value of $60,000 ($0.006 per share) for accrued salary.
On June 8, 2012 the Company issued 500,000 shares of common stock with a value of $12,500 ($0.025 per share) for cash.
The following table summarizes, by date, the stock transactions from inception through September 30, 2012:
Period/
Date of Share Issuance
|
Description |
Shares
|
Price per
Share
|
Cost of
Shares
|
||||||||||
06/29/02
|
Acquisition of subsidiaries
|
500,000 | 0.020 | $ | 10,000 | |||||||||
08/06/02
|
Acquisition of subsidiaries
|
250,000 | 0.020 | 5,000 | ||||||||||
09/09/02
|
Acquisition of subsidiaries
|
150,000 | 0.020 | 3,000 | ||||||||||
09/30/02
|
Shares issued for reverse merger
|
4,000,000 | 0.000 | - | ||||||||||
09/30/02
|
Preferred Shares converted common
|
1,000,000 | 0.000 | - | ||||||||||
09/30/02
|
Shares retained by shareholders
|
76,014 | 0.000 | - | ||||||||||
09/30/02
|
Shares issued for services
|
500,000 | 0.020 | 10,000 | ||||||||||
2002 TOTAL
|
6,476,014 | $ | 28,000 | |||||||||||
10/28/02
|
Acquisition of subsidiaries
|
250,000 | 0.020 | $ | 5,000 | |||||||||
09/30/03
|
Shares issued for settlement
|
2,000 | 0.020 | 40 | ||||||||||
09/30/03
|
Shares issued for services
|
2,160,000 | 0.020 | 43,200 | ||||||||||
2003 TOTAL
|
2,412,000 | $ | 48,240 | |||||||||||
03/12/04
|
Shares to be cancelled
|
(500,000 | ) | $ | 0.000 | $ | - | |||||||
09/30/04
|
Acquisition of subsidiaries
|
2,080,000 | 0.000 | - | ||||||||||
09/30/04
|
Shares issued for lease deposit
|
5,140 | 0.020 | 103 | ||||||||||
09/30/04
|
Shares issued as stock based compensation
|
3,000,000 | 0.020 | 60,000 | ||||||||||
09/30/04
|
Shares issued for services
|
1,007,000 | 0.020 | 20,140 | ||||||||||
2004 TOTAL
|
5,592,140 | $ | 80,243 | |||||||||||
09/30/05
|
Shares issued for patent/ licensing
|
200,000 | 0.020 | $ | 4,000 | |||||||||
2005 TOTAL
|
200,000 | $ | 4,000 | |||||||||||
10/03/05
|
Shares issued for services
|
5,000 | 0.020 | $ | 100 | |||||||||
10/03/05
|
Shares issued for services
|
5,000 | 0.020 | 100 | ||||||||||
10/15/05
|
Shares issued for services
|
200,000 | 0.020 | 4,000 | ||||||||||
10/31/05
|
Shares issued for services
|
500,000 | 0.020 | 10,000 | ||||||||||
11/25/05
|
Shares issued for services
|
3,500,000 | 0.020 | 70,000 | ||||||||||
12/01/05
|
Shares issued for services
|
25,000 | 0.020 | 500 | ||||||||||
12/09/05
|
Shares issued for services
|
2,800,000 | 0.020 | 56,000 | ||||||||||
2006 TOTAL
|
7,035,000 | $ | 140,700 | |||||||||||
08/27/07
|
Shares issued for funds
|
50,000 | 0.043 | $ | 2,125 | |||||||||
08/27/07
|
Shares issued for funds
|
200,000 | 0.043 | 8,500 | ||||||||||
09/07/07
|
Shares issued for services
|
5,500,000 | 0.043 | 233,750 | ||||||||||
09/20/07
|
Shares issued for licensing agreement
|
100,000 | 0.060 | 6,000 | ||||||||||
09/30/07
|
Shares issued in prior year not recorded
|
42,249 | 0.000 | - | ||||||||||
2007 TOTAL
|
5,892,249 | $ | 250,375 | |||||||||||
11/08/07
|
Shares issued for services
|
100,000 | 0.230 | $ | 23,000 | |||||||||
2008 TOTAL
|
100,000 | $ | 23,000 |
F-11
Period/
Date of Share Issuance
|
Description
|
Shares
|
Price per
Share
|
Cost of
Shares
|
||||||||||
10/03/08
|
Shares issued for service
|
100,000 | $ | 0.0255 | $ | 2,550 | ||||||||
10/03/08
|
Shares issued for service
|
3,500,000 | 0.0255 | 89,250 | ||||||||||
10/03/08
|
Shares issued for service
|
1,250,000 | 0.0300 | 37,500 | ||||||||||
10/16/08
|
Shares issued for debt
|
5,292,549 | 0.0255 | 134,900 | ||||||||||
10/16/08
|
Shares issued for interest
|
467,647 | 0.0255 | 11,925 | ||||||||||
10/16/08
|
Shares issued for salaries payable
|
7,039,804 | 0.0255 | 179,515 | ||||||||||
2008 TOTAL
|
17,650,000 | $ | 455,700 | |||||||||||
3/1/2010
|
Shares issued for service
|
100,000 | $ | 0.05 | $ | 5.000 | ||||||||
5/20/2010
|
Shares issued for service
|
1,000,000 | 0.04 | $ | 40,000 | |||||||||
2010 TOTAL
|
1,100,000 | 45,000 | ||||||||||||
2011 TOTAL
|
-- | -- | -- | |||||||||||
5/14/2012
|
Shares issued for accrued salary
|
10,000,000 | 0.006 | 60,000 | ||||||||||
6/8/2012
|
Shares issued for cash
|
500,000 | 0.035 | 12,500 | ||||||||||
2012 TOTAL
|
10,500,000 | 72,500 | ||||||||||||
ACCUMULATED TOTAL
|
56,957,403 | $ | 1,247,758 |
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NOTE 5: INCOME TAX
At September 30, 2012 and 2011, the Company had a federal operating loss carryforward of approximately $3,009,785 and $2,678,336, respectively, which expires in varying amounts between 2031and 2030.
Components of net deferred tax assets, including a valuation allowance, are as follows at September 30:
2012
|
2011
|
|||||||
Deferred tax assets:
|
||||||||
Net operating loss carryforward
|
$ | 1,261,081 | $ | 1,148,224 | ||||
Stock-based compensation
|
235,370 | 235,370 | ||||||
Total deferred tax assets
|
1,496,451 | 1,383,595 | ||||||
Less: Valuation Allowance
|
(1,496,451 | ) | (1,383,595 | ) | ||||
Net Deferred Tax Assets
|
$ | -- | $ | -- |
The valuation allowance for deferred tax assets as of September 30, 2012 and 2011 was $1,496,451 and $1,383,595, respectively. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. As a result, management determined it was more likely than not the deferred tax assets would not be realized as of September 30, 2012 and 2011 and, accordingly, recorded a full valuation allowance.
Reconciliation between the statutory rate and the effective tax rate is as follows at September 30:
2012
|
2011
|
|||||||
Federal statutory tax rate
|
(35.0 | )% | (35.0 | )% | ||||
State taxes, net of federal benefit
|
(8.8 | )% | (8.8 | )% | ||||
Change in valuation allowance
|
43.8 | % | 43.8 | % | ||||
Effective tax rate
|
0.0 | % | 0.0 | % |
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NOTE 6: RELATED PARTY TRANSACTIONS
Mark T. Taggatz, President, CEO and Chairman of the Board, had the following transactions with the Company:
a.
|
Advanced $1,560 during the fiscal year 2012 with a total of $175,197 to the Company as of September 30, 2012.
|
b.
|
Recorded compensation of $240,000 as compensation payable for each year ending September 30, 2012 and 2011 which are accrued and not paid totaling $1,655,347 and $1,475,357 as of September 30, 2012 and 2011, respectively.
|
c.
|
Exchanged the shares held by the Company as investment for unpaid compensation in 2008. (See Note 11: Gain (Loss) on Sale of Investments)
|
d.
|
Leased space as of September 1, 2012 at the rate of $1,600 per month.
|
During the year ending September 30, 2012 the Company:
·
|
Accrued rent to a related party Sani Dri of $52,800 for a total outstanding of 168,000
|
·
|
Was advanced $2,900 by a related party OSF for a total outstanding of $18,037.
|
Mr. Taggatz is and officer and shareholder of both the related parties in these transactions.
NOTE 7: INTEREST EXPENSE
As a result of arbitration during the fiscal year 2007, a former landlord was awarded a judgment against the Company totaling $177,247. The Company is accruing interest on the judgment at an annual rate of seven percent on the outstanding balance totaling $60,568 and $48,528 as of September 30, 2012 and 2011 respectively. (See Note 9: Commitments and Contingencies)
NOTE 8: COMMITMENTS AND CONTINGENCIES
Effective September 1, 2004, the Company exercised an option to lease the entire 84,772 square feet of building space on an average monthly basis of $31,897 per month. The Company was assigned the lease rights of the other tenants in the building and collected rents from those tenants. For the years ending September 30, 2010 and 2008, the Company recorded no lease expense in connection with these leases. The Company had an option to purchase the building for $5.1 million. The largest tenant in the building was eFoodsafety.com.
During the year ended 2007 the Company was party to an arbitration hearing with the landlord pertaining to the lease of the building and the sub-lease of portions of the building to its sub-tenants. On April 11, 2007, the arbitrator granted legal fees to the landlord in the amount of $47,000. On April 19, 2007 and June 29, 2007, amended notices of ruling were heard by the Superior Court of California, County of Riverside resulting in a judgment awarded on September 21, 2007 to the landlord of $146,917 including fees and interest. Additionally, on August 17, 2007 the landlord received a judgment against the Company of $29,692 pertaining to termination of the Company’s occupancy of the building.
The Company is a plaintiff in suits against the individual sub-tenants pertaining to rent withheld by the sub-tenants. No determination of these cases has been concluded. As of September 30, 2012, $177,247 for the judgment plus accrued interest of $60,568 has been accrued by the Company for a total liability of $237,815.
On August 22, 2007, Aquentium, Inc. entered into a Commercial Lease Agreement, with Halleck Family Trust, the landlord, for 5,000 square feet of light industrial and office space located in North Palm Springs, California. The lease was effective September 1, 2007, and expired on August 31, 2009. The Company has accrued a payable for unpaid rent of $17,500 as of September 30, 2012.
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