ITEM 1. BUSINESS.
BUSINESS
iDcentrix, Inc. (formerly known as Sterling Gold Corp.) was incorporated in the State of Nevada on January 26, 2004. The Company maintains its statutory registered agent’s office at 6100 Neil Road, Suite 400, Reno, Nevada 89544. On October 23, 2009, the Company entered into a material definitive agreement (the “Belmont Stock Purchase Agreement”) with Belmont Partners, LLC (“Belmont”) whereby Belmont purchased a controlling interest of the Company’s common stock (the “Belmont Purchase Transaction”). Pursuant to the Belmont Stock Purchase Agreement, Joseph Meuse, a managing member of Belmont, was appointed as a member of the Company’s Board of Directors and to the offices of President and Secretary and all other Directors and officers of the Company resigned. As of October 28, 2009, the Company changed its plan of business from the development and marketing of high-end security identification cards to seeking to acquire or merge with a revenue-producing company or a company with technology assets. Concurrent with this change of business focus, the Company moved its principal executive offices to 360 Main Street, Washington, VA 22747. On April 5, 2010, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) by and among Tsoi Tik Man, or the Buyer, Belmont, or the Seller, and the Company. Pursuant to the terms of the Purchase Agreement, on April 5, 2010, Tsoi Tik Man acquired from Belmont a controlling interest in the in the Company’s common stock. Pursuant to the terms of the Purchase Agreement, Joseph J. Meuse resigned on the Closing Date and Tsoi Tik Man was named as the sole officer and director of the Company. Such resignation and appointment were effective as of the Closing Date with respect to the sole officer of the Company. The resignation of Joseph J. Meuse and the naming of Tsoi Tik Man as a director will take effect on the tenth day following the mailing by the Company of an information statement that complies with the requirements of Section 14f-1 of the Securities Exchange Act of 1934. Concurrent with this change of control, the Company moved its principal executive offices to Rm 1903, 19/F, Hing Yip COMM Centre, No. 272 Des Voeux Rd, Central, Hong Kong. The Company’s telephone number is 00852-9090 9003. The Company’s fiscal year end is January 31.
Background
Prior to the Belmont Purchase Transaction, the Company conducted business operations primarily through a subsidiary, IDCX Co. (“IDCX”), which was formed as a Delaware corporation in January 2007, and became a wholly-owned subsidiary of iDcentrix on January 31, 2008, pursuant to a share exchange agreement whereby each share of IDCX was exchanged for one share of iDcentrix (the “Share Exchange”). Prior to the Share Exchange, the business of iDcentrix had been the acquisition and exploration of mineral properties. This business was in the early exploration stage and was focused on the mineral exploration of the “K-2 Mining Claim”, Claim No. 406354, recorded November 7, 2003. The property was originally staked by Lloyd Tattersall on behalf of Glengarry Development Corp., a British Columbia corporation, which subsequently sold its interests in the property to Woodburn Holdings, Ltd., a British Columbia corporation. iDcentrix’s former president, Robert M. Baker, entered into an oral agreement with Woodburn Holdings, Ltd. regarding the acquisition of the property by iDcentrix. iDcentrix engaged in minimal exploration work on the property in 2005 through 2007. iDcentrix did not generate or realize any revenues from its prior mineral exploration business operations.
On January 31, 2008, iDcentrix consummated the Share Exchange with all of the shareholders of IDCX pursuant to a Share Exchange Agreement, dated January 16, 2008, by and between iDcentrix, IDCX, all of the shareholders of IDCX and Francine Dubois as
representative of the shareholders of IDCX (the “Exchange Agreement”). Pursuant to the Exchange Agreement, the issued and outstanding common shares of IDCX (the “IDCX Shares”) were exchanged on a one-for-one basis for common shares of iDcentrix (the “Company Shares”). iDcentrix issued 18,762,000 Company Shares to the former shareholders of IDCX upon consummation of the Share Exchange.
As a result of the Share Exchange, IDCX became a wholly-owned subsidiary of iDcentrix, and iDcentrix continued its existence as the surviving corporation. Further, under the terms of the Exchange Agreement, the Linda S. Smith, the Company’s sole Director prior to the Exchange Agreement, agreed to resign and simultaneously appoint Francine Dubois, Michael S. Harris, Paul Gifford Bruce Morris to the IDCX Board of Directors. Additionally, the Board of Directors accepted the resignation of Linda S. Smith as president, principal executive officer, principal accounting officer, principal financial officer, secretary and treasurer and appointed Francine Dubois to the office of Chief Executive Officer and Chief Financial Officer. Subsequently, David E. Fractor was appointed to the offices of Chief Financial Officer and Treasurer of the Company. Since January 31, 2008, iDcentrix’s Board of Directors has consisted of Francine Dubois, Michael S. Harris, Paul Gifford Bruce Morris, and Joseph Meuse.
The acquisition was accounted for as a reverse merger (recapitalization) with IDCX deemed to be the accounting acquirer and iDcentrix deemed to be the legal acquirer. Following the Share Exchange, iDcentrix’s new Board of Directors and management adopted the plan of operation of IDCX and has abandoned its previous plan of operation regarding the acquisition and exploration of mineral properties.
iDcentrix’s interest in the property in British Columbia, Canada, held by Woodburn Holdings Ltd., and the oral agreement with Woodburn Holdings, Ltd. with respect thereto have been abandoned by the Company.
From inception, the Company has not generated any revenue, and remains a development stage business with limited operations. We have limited assets, and our prospects of future profitable operations may be delayed or never realized. We may encounter difficulties that prevent us from operating our business as intended or that will prevent us from doing so in a profitable manner. Our business must be evaluated in view of possible delays, additional expenses, and other unforeseen complications that are often encountered by new business ventures.
On October 20, 2009, Paul Gifford and Bruce Morris tendered their resignations from our Board of Directors. On October 21, 2009, David E. Fractor and Michael S. Harris tendered their resignations from our Board of Directors as well as all other positions they previously held in the Company. Their resignations were not in any way the result of any disagreement with the Company or the Board of Directors, but pursuant to the Stock Purchase Agreement with Belmont in which Belmont acquired a controlling interest of our common stock, and the Board of Directors determination that a material change in the Company’s plan of operation would be in the Company’s best interest. On October 28, 2009, a special meeting of the Board of Directors was held during which Joseph J. Meuse, our sole remaining Director, was appointed to the offices of President and Secretary. On the same date, Francine Dubois tendered her resignation from the positions of President and Chief Executive Officer of the Company.
The following is a description of IDCX’s business, which constitutes the Company’s business moving forward.
General Business Description
Selection of a Business Combination
Management has adopted a conservative policy of seeking opportunities that it considers to be of exceptional quality. Therefore, we may have to wait some time before consummating a suitable transaction. Management recognizes that the higher the standards it imposes upon us, the greater may be its competitive disadvantage when vying with other acquiring interests or entities.
Although our focus may be on opportunities related to the technologies in the security, medical, transportation, and entertainment sectors, we do not intend to restrict considerations to internet related applications, rather we intend to consider business opportunities in any business or industry segment. Due to our lack of financial resources, the scope and number of suitable business ventures is limited. We are therefore most likely to participate in a single business venture. Accordingly, the Company will not initially be able to diversify and will be limited to one merger or acquisition. The lack of diversification will prevent us from offsetting losses from one business opportunity against profits from another.
The decision to participate in a specific business opportunity will be made upon management’s analysis of the quality of the opportunity’s management and personnel, the anticipated acceptability of products or marketing concepts, the merit of technological changes and numerous other factors which are difficult, if not impossible, to analyze through the application of any objective criteria. Further, it is anticipated that the historical operations of a specific venture may not necessarily be indicative of the potential for the future because of the necessity to substantially shift a marketing approach, expand operations, change product emphasis, change or substantially augment management, or make other changes. The Company will be partially dependent upon the management of any given business opportunity to identify such problems and to implement, or be primarily responsible for the implementation of required changes.
Since we may participate in a business opportunity with a newly organized business or with a business which is entering a new phase of growth, it should be emphasized that the Company may incur risk due to the failure of the target’s management to have proven its abilities or effectiveness, or the failure to establish a market for the target’s products or services, or the failure to realize profits.
The Company will not acquire or merge with any company for which audited financial statements cannot be obtained. Management anticipates that any opportunity in which we participate will present certain risks. Many of these risks cannot be adequately identified prior to selection of a specific opportunity. Our shareholders must therefore depend on the ability of management to identify and evaluate such risks. Further, in the case of some of the opportunities available to us, it may be anticipated that some of such opportunities are yet to develop as going concerns or that some of such opportunities are in the development stage in that same have not generated significant revenues from principal business activities prior to our participation.
Acquisition of Business
Implementation of a structure for any particular business acquisition may involve a merger, consolidation, reorganization, joint venture, franchise or licensing agreement with another corporation or entity. The Company may also purchase stock or assets of an existing business. On the completion of a transaction, it is possible that present management and shareholders of the Company would not remain in control of the Company. Further, our sole officer and director may, as part of the terms of any transaction, resign, to be replaced by new officers and directors.
We anticipate that any securities issued in any such reorganization would be issued in reliance on exemptions from registration under applicable federal and state securities laws. However, in certain circumstances, as a negotiated element of any transaction, the Company may agree to register securities either at the time a transaction is consummated, under certain conditions, or at a specified time thereafter. The issuance of substantial additional securities and their potential sale into any trading market may have a depressive effect on such market.
While the actual terms of a transaction to which the Company may be a party cannot be predicted, it may be expected that the parties to a business transaction will find it desirable to avoid the creation of a taxable event and thereby structure the acquisition in a so called “tax-free” reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the “Code”). In order to obtain tax-free treatment under the Code, it may be necessary for the owners of the acquired business to own 80% or more of the voting stock of the surviving entity. In such event, our shareholders would retain less than 20% of the issued and outstanding shares of the surviving entity, which could result in significant dilution in the equity of such shareholders.
Our due diligence process will require that management meet personally with the personnel involved in any given transaction, visit and inspect material facilities, obtain independent analysis or verification of the information provided, check references for management and key persons, and take other reasonable investigative measures, to the extent of our limited financial resources and management expertise.
The manner in which we participate in an opportunity will depend on the nature of the opportunity and the respective needs and desires of the Company and other parties. Negotiations that involve mergers or acquisitions will focus on the percentage of the Company that the target company shareholders would acquire in exchange for their shareholdings in the target company. Depending upon, among other things, the target company’s assets and liabilities, our shareholders will in all likelihood hold a lesser percentage ownership interest in the Company following any merger or acquisition. The percentage ownership may be subject to significant reduction in the event the Company acquires a target company with substantial assets. Any merger or acquisition effected by the Company can be expected to have a significant dilutive effect on the percentage of shares held by our current shareholders.
Operation of Business after Acquisition
The Company’s operation following its merger or acquisition of a business will be dependent on the nature of the business and the interest acquired. We are unable to determine at this time whether the Company will be in control of the business or whether present management will be in control of the Company following the acquisition. We may expect that any future business will present various challenges that cannot be predicted at the present time.
Competition
We will be involved in intense competition with other business entities to obtain a suitable business opportunity, many of which competitors will have a considerable edge over us by virtue of their stronger financial resources and prior experience in business.
Marketability
As we are currently not involved in selling products or services, there can be no assurance that we will be successful in marketing any such products or services or whether a market will develop.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements and Labor Contracts
We currently have no patents, trademarks, licenses, franchises, concessions, royalty agreements or labor contracts.
Organization
We are comprised of one corporation with one subsidiary, IDCX Co..
Raw Materials
The use of raw materials is not a material factor in our operations at the present time.
Backlog
At January 31, 2010, we had no backlogs.
Employees
At this time we have no full time employees. Tsoi Tik Man is our sole officer and Director nominee.
While Mr. Tsoi has extensive experience in business start ups and consulting, as we expand, we may hire additional employees. However, at this time, we have no present plans to do so. We may hire part-time help as needed from time-to-time for specific projects. We do not pay salaries to our officers; however, we reimburse them for any out-of-pocket expenses they incur on our behalf. In addition, in the future, we may approve the payment of salaries for our management, but currently, no such plans have been approved. We do not currently pay for vacation, holidays or provide major medical coverage. None of our officers or Directors is a party to any employment agreement; however, we may adopt such plans in the future.
Segment Information
Our management views our operations as one segment.
Proprietary Information
We own no proprietary information.
Government Regulation
We are not subject to any material government or industry regulation regarding our planned activities.
Research and Development
To date, we have expended $40,096 on research and development.
Environmental Compliance
To date, compliance with federal, state and local laws relating to the protection of the environment have not had a material effect upon our capital expenditures, results of operations or competitive position.
Geographic Areas
While we plan to market our products and services internationally, to date we have not derived any material revenues from outside the United States. We do not hold any material assets located outside the United States.
How to Obtain Our SEC Filings
We file annual, quarterly, and special reports, proxy statements, and other information with the Securities Exchange Commission (SEC). Reports, proxy statements and other information filed with the SEC can be inspected and copied at the public reference facilities of the SEC at 100 F Street N.E., Washington, DC 20549. Such material may also be accessed electronically by means of the SEC's website at www.sec.gov
ITEM 1A.
ITEM 1A. RISK FACTORS.
A smaller reporting company is not required to provide the information required by this Item.
ITEM 2.
ITEM 2. PROPERTIES.
We do not own any properties. The following describes our leasing arrangements.
During fiscal year 2009 we leased office space for our corporate headquarters in El Segundo, California for which we paid rent in the amount of $3,715 per month through February 29, 2008 and $3,827 per month for the period from March 1, 2008 to expiration on February 28, 2009. The lease on this facility was not renewed. On March 1, 2009, we moved into a smaller facility with a limited amount of office space in El Segundo, California on a rent free and interim basis. On October 28, 2009, we moved our headquarters to office space owned by our sole officer and Director Joseph J. Meuse and continued to have no lease agreement or obligation. On April 5, 2010, we moved our headquarters to office space owned by our sole officer Tsoi Tik Man and continue to have no lease agreement or obligation.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
We are not currently involved in any material pending legal proceeding.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock is traded on the OTC Bulletin Board under the ticker symbol “IDCX”. The following table sets forth the range of high and low bid information for our common stock for each full quarterly period during each of the past two fiscal years:
These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not represent actual transactions.
Holders
As of March 30, 2010, there were 63 shareholders of record of our common stock.
Dividends
We have never declared or paid dividends on our common stock. We presently intend to retain our cash for use in the operation and expansion of our business and, therefore, do not expect to declare or pay dividends in the foreseeable future. We are not currently subject to any contractual restrictions respecting the payment of dividends. The payment of any future dividends will be subject to the discretion of the Board of Directors and will depend upon the Company’s earnings, capital requirements and financial position, applicable requirements of law, general economic conditions and other factors considered relevant by the Board of Directors.
Securities Authorized for Issuance Under Equity Compensation Plans
The information required by this Item 5 with respect to Equity Compensation Plans is set forth in Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters, contained in this Annual Report and incorporated herein by reference.
Item 6.
Item 6. Selected Financial Data.
Not applicable.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.
The following discussion and analysis should be read together with the factors discussed in Item 1A “Risk Factors” and with the consolidated financial statements, including the notes thereto, and the other financial information appearing elsewhere in this Report. Period-to-period comparisons of financial data are not necessarily indicative, and therefore should not be relied upon as indicators, of the Company’s future performance. Words or phrases such
as “believes,” “does not believe,” “will,” “may,” “plan,” “estimate,” “anticipate,” “expect,” “intend” and similar expressions may identify “forward-looking statements.”
Plan of Operations
We are a start-up, exploration stage corporation and have not yet generated or realized any revenues from our business operations.
Whereas sales and marketing activities were our focus during fiscal 2009, we were unable to realize any revenues during fiscal 2010 as a result of these activities. As a result of our lack of revenues and inability to secure additional funding to allow business operations to continue, our Board of Directors determined that it was necessary to terminate the execution of our prior business plan, and that a change in business focus was needed and in the best interests of the Company and its shareholders. The goal of the new business plan is to merge with or acquire a revenue-producing business or a development stage business with a high potential for growth.
We will need additional capital in fiscal 2011. As of January 31, 2010, we had $0 in cash. Prior to our fiscal year end, we made certain cost reductions. As of October 23, 2009, we have no remaining employees. Our former President and CEO Francine DuBois and our former Chief Financial Officer David Fractor tendered their resignations as part of our winding down of business operations. In addition to these resignations which occurred in conjunction with the termination of our prior business plan, we undertook additional measures to reduce expenses including (i) relocating our corporate offices to the offices of our sole officer and Director which are provided on a rent free basis, and (ii) our board members agreed to waive the cash component of their compensation. As a result of these initiatives, we significantly reduced our cash expenses.
Although we continue to look for ways to raise additional capital, we recognize that it is not likely this will be successful. As an alternative strategy, we have decided to focus on identifying suitable candidates to merge with or acquire. We believe that our ability to continue to operate depends on finding a suitable merger target with the ability to raise additional needed capital. Notwithstanding the elimination of most of our remaining expenses, we may need additional cash during the next twelve months.
Concurrent with the Company’s sale of its business operations, the Company terminated the Canadian Sublicensing Agreement and the Worldwide Sublicensing Agreement, in accordance with their terms.
As a result of our current limited cash availability we do not anticipate hiring any additional employees for the foreseeable future.
Results of Operations
Year Ended January 31, 2010 Compared to the Year Ended January 31, 2009
For the year ended January 31, 2010, we incurred a net loss of approximately $269,755, which was approximately $1,827,200 less, or 677% less than the prior year. During the year ended January 31, 2009, the Company’s activities were focused on administrative activities and developing our sales and marketing capabilities requiring several full time employees. During the most recent year, we terminated all our employees pursuant to the change in our business focus, and our expenses were primarily a result of professional fees associated with being a public company and the sale of our business operations.
Liquidity and Capital Resources
As of January 31, 2010, we have not generated any revenue and we have no cash on-hand. During the third quarter of the fiscal year 2010, we undertook several cost reduction measures including the following:
·
We terminated all remaining staff
·
We asked our Board of Directors forgo cash compensation
Despite the reductions mentioned above, and the inability to raise additional financing, we will not have enough capital resources available to continue operating through the end of our next fiscal year. We estimate that we will require minimum additional funding in fiscal year 2011 of approximately $30,000 to fund our operations. Our ability to continue operating depends on our ability to locate and merge with a business generating revenues.
During the fiscal year ended January 31, 2010, we issued 35,938,800 shares of common stock pursuant to a stock purchase agreement in exchange for approximately $122,444 of net proceeds, and 317,500 shares of common stock in exchange for the surrender of 6,350,000 outstanding warrants.
To date, the Company has been unsuccessful in raising additional equity. The Company believes that the current market conditions, coupled with the Company’s lack of revenue and net losses, have been deterrents to its ability to raise capital. The Company will continue to seek additional sources of capital; however, there can be no assurance that additional capital can be raised on terms that will be acceptable to the Company or at all. If the Company is successful in finding a suitable merger target, it may result in significant dilution to existing shareholders.
We have no long-term debt and do not regard long-term borrowing as a good, prospective source of financing.
Going Concern
We incurred a net loss of approximately $269,755 for the fiscal year ended January 31, 2010, and a cumulative net loss of approximately $4,082,106 since inception (January 3, 2007) through January 31, 2010, and there is substantial doubt about our ability to continue as a going concern. As of January 31, 2010, we had approximately $0 in cash. In order to continue to operate we need to develop additional sources of capital and to ultimately achieve profitable operations. We do not have sufficient resources to fund our operations for the next twelve months.
We estimate that we will require minimum funding in fiscal year 2011 of approximately $30,000 in order to fund our operations. Although we are actively seeking new sources of equity and reduce our expenses while seeking a suitable merger candidate, there can be no assurances that we will be able to raise additional capital on terms that are acceptable to us or at all. Additionally, there can be no assurance that we will be able to find a suitable merger candidate.
Current market conditions, continued negative cash flows and lack of liquidity create significant uncertainty about the our ability to fully implement our operating plan, as a result of which we may have to further reduce the scope of our operations.
Critical Accounting Policies
Use of Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported revenues and expenses during the reporting period. Actual results could differ from those estimates
Equity Based Compensation
The Company periodically issues restricted stock, stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company uses the modified prospective method in which compensation cost is recognized beginning with the effective date
(a) based on the requirements of GAAP for all share-based payments granted after the effective date and (b) based on the requirements of GAAP for all awards granted to employees prior to the effective date and that remain unvested on the effective date. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with GAAP.
"Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” and GAAP, whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete.
Long-Lived Assets
SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If the cost basis of a long-lived asset is greater than the projected future undiscounted net cash flows from such asset (excluding interest), an impairment loss is recognized. Impairment losses are calculated as the difference between the cost basis of an asset and its estimated fair value.
As of January 31, 2009, the Company conducted an impairment test of its sublicense agreement and determined that its future undiscounted net cash flows were less than the net book value of the sublicense and recorded an impairment equal to the remaining net book value of the asset.
Recent Accounting Pronouncements
In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” This standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with generally accepted accounting principles in the United States for non-governmental entities. SFAS No. 162 is effective 60 days following approval by the U.S. Securities and Exchange Commission of the Public Company Accounting Oversight Board's amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.”
Inflation
We believe that inflation has not had a material effect on our operations to date.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 8.
Item 8. Financial Statements.
The Index to Financial Statements and Schedules appears on page. The Report of Independent Public Accountants appears on, and the Consolidated Financial Statements and Notes to Consolidated Financial Statements appear on pages to.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There have been no disagreements of the type described in paragraph (a)(1)(iv) or any reportable event as described in paragraph (a)(1)(v) of Item 304(a) of Regulation S-K in connection with a change in accountants. Changes in Registrant’s Certifying Accountant
Effective March 4, 2010, iDcentrix, Inc. (the “Company”) approved the dismissal of Weinberg & Company, P.A. (“Weinberg”) as the Company’s independent accountant and the engagement of the accounting firm of Friedman LLP (“Friedman”) to serve as the Company’s independent accountant to audit the Company’s financial statements for the year ending January 31, 2010. The dismissal of Weinberg was effective on March 4 2010. The engagement of Friedman was effective March 4, 2010.
The audit reports of Weinberg on the financial statements of the Company as of and for the years ended January 31, 2009 and 2008 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to audit scope or accounting principles. The opinion did include a modification relating to the company’s ability to continue as a going concern.
During the years ended January 31, 2009 and 2008, and the subsequent interim period through March 4, 2010, the effective date of the dismissal of Weinberg, there were no disagreements with Weinberg on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to Weinberg’s satisfaction, would have caused Weinberg to make reference thereto in its reports on the Company’s financial statements for such years.
During the years ended January 31, 2009 and 2008 and the subsequent interim period through March 4, 2010, the effective date of the dismissal of Weinberg, there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.
Item 9A(T).
Item 9A(T). Controls and Procedures.
Management’s Report on Disclosure Controls and Procedures
Our management has conducted an evaluation of the effectiveness of disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Disclosure controls and procedures are controls and other procedures that are designed to ensure that the information we are required to disclose in our periodic reports filed or submitted under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to management, as appropriate, to allow timely decisions regarding required disclosure.
Based on the results of this evaluation, and the material weaknesses in our internal control over financial reporting discussed below, our management has concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of January 31, 2010.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with existing policies or procedures may deteriorate.
Our management conducted an assessment of our internal control over financial reporting as of January 31, 2010 based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”). A material weakness is a deficiency or a combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected.
Based upon that assessment, we have identified the following material weaknesses:
Lack of documented internal control system.
We have a material weakness due to the lack of a documented and reviewed system of internal controls. We have determined that to perform the processes and remediate this internal control deficiency, we will either need to engage an internal control consultant or reassign existing personnel. During fiscal 2010, we began to enhance some of our internal control systems and began to document those changes; however, this process is on-going and the implementation of policies and procedures may take several quarters.
Lack of segregation of duties.
We have limited staff in our corporate offices and, as such, there is a lack of segregation of duties. Many functions, including, purchasing, accounts payable, bank reconciliations and month end closings, are not adequately segregated. The lack of a proper segregation of duties can lead to individuals performing incompatible functions. During fiscal year 2010, we modified certain procedures related to our disbursement program including the requirement that all checks require two signatures and bank reconciliations are reviewed by management. We implemented additional controls whereby a non-management member of our board of directors reviews our monthly bank reconciliations. We also strengthened our payroll procedures. Due to our limited number of personnel, until such time as we have additional employees we may require additional oversight from our board of directors in addressing certain weaknesses related to a proper segregation of duties.
Inadequate disaster recovery program.
We do not currently have a comprehensive disaster recovery program.
Lack of controls over purchasing, accounts payable and disbursements.
Our employees are authorized to purchase goods and services and approve the related invoices for payment without obtaining supervisory approval. Additionally, the same employees are authorized to sign checks. This lack of control and lack of segregation of duties can lead to errors and irregularities. As discussed below in “Changes in Internal Control Over Financial Reporting,” we have implemented a delegation of authority and improved our internal control procedures related to check signing and bank reconciliation processes. We will continue to strengthen our internal controls in this area in future periods.
Lack of controls over payroll processing.
Our management is authorized to initiate and approve our payrolls and related payroll functions. Additionally, both individuals have access to our bank accounts. The lack of proper controls could allow each of these individuals to conceal errors and irregularities related to payroll processing. During fiscal 2009, we modified our payroll controls so that the former CEO and CFO both received payroll reports from our payroll provider thereby providing an opportunity to timely identify errors and irregularities.
Our information technology system lacks appropriate application and general controls.
The application and general controls over our information and technology systems are not adequate. Our accounting software lacks appropriate controls and most computer generated reports are reviewed by the author without independent verification. To partially compensate for this weakness, the Company’s board of directors receives monthly financial statements that compare actual results to budgeted results and variances are analyzed.
As a result of the material weaknesses described above, management concluded that, as of January 31, 2010, we did not maintain effective control over financial reporting based on the criteria established in Internal Control - Integrated Framework, issued by COSO .
Changes in Internal Control over Financial Reporting
From its incorporation in 2004 through January 31, 2010, the Company had minimal operations and few, if any, full time employees. In addition, IDCX Co., which became a wholly-owned subsidiary of the Company on January 31, 2008 through a share exchange, and whose business plan the Company has now adopted, was a private company prior to the share exchange and was not subject to the requirements of SOX.
The Company’s former directors and management succeeded to those positions on January 31, 2008, and had no opportunity to plan, implement and evaluate the Company’s system of internal control over financial reporting prior to assuming their positions. Since January 31, 2008, the Company’s management has been focused on beginning the implementation of its business plan and has begun to fully consider the implementation of a system of internal control appropriate to its level of business and operations. The Company currently has no employees. The Company intends to develop a system of internal control over financial reporting appropriate under SOX for a company of its size and complexity and to remediate the deficiencies that continue to exist as promptly as reasonably practical. As described below, we have taken certain initial steps to begin the remediation process. However, because this process is still in its initial stages, and due to our limited personnel resources and cash availability, we can give no assurance as to when it will be completed.
During the second fiscal quarter of 2009, we began to change some of our internal control procedures and to document these changes. We also eliminated some of the deficiencies relating to our purchasing, disbursement and bank reconciliation functions, including adding a requirement that all checks require two signatures and that bank reconciliations be reviewed by our former CEO and CFO. During the third quarter of fiscal 2009, we engaged a new payroll service and improved our payroll controls. We also developed policies and procedures to improve our internal control over purchasing and accounts payable and added a requirement that a non-management member of the board of directors review our monthly bank reconciliations in addition to the former CEO and CFO. To the extent reasonably possible, we will continue to seek the advice of outside consultants and internal resources to implement additional controls.
Because the remedial actions additionally require hiring of personnel, upgrading certain of our information technology systems, and relying extensively on manual review and approval, the successful operation of these controls for several quarters may be required before management may be able to conclude that the material weaknesses have been remediated. Additionally, the Company’s lack of capital resources may impact its ability to remediate many of the aforementioned deficiencies.
There was no change in the Company's internal control over financial reporting known to the management, that occurred during the Company's fiscal year ended January 31, 2010, that has materially impacted, or is reasonably likely to materially impact, the Company's internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION.
Not applicable.
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Information Regarding Directors and Executive Officers
The following table sets forth, as of March 31, 2010, the name, age, position and term of office for each executive officer and Director of the Company.
* Our executive officers and Directors serve until death, removal or resignation or until their successors have been duly elected and have qualified.
Information regarding the business backgrounds of our directors and executive officers is set forth below.
Joseph Meuse, age 39, resides in Warrenton, VA. Mr. Meuse has been involved with corporate restructuring since 1995. He is the Managing Member of Belmont Partners, LLC and was previously a Managing Partner of Castle Capital Partners. Mr. Meuse maintains a position as a Board Member of numerous public companies including Data Storage Consulting Services, Inc., Cienega Creek Holdings, Inc., Luke Entertainment, Inc., Daytona Systems, Inc., and Heroes, Inc. Mr. Meuse attended the College of William and Mary.
None of the Company’s directors or executive officers is related by blood, marriage or adoption to any other director or executive officer. No director or executive officer has been convicted of a criminal offense within the past five years or is the subject of a pending criminal proceeding. No director or executive officer has been the subject of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities. No director or officer has been found by a court to have violated a federal or state securities or commodities law.
Code of Ethics
We do not currently have a formal code of ethics.
Committees of the Board of Directors
Nominating Committee
On April 15, 2008, our Board of Directors established a Nominating and Governance Committee, which has powers and performs the functions customarily performed by such a committee. Until October 23, 2009, our Nominating and Governance Committee was composed of Paul Gifford and Bruce Morris, however they have resigned and there have been no replacements appointed to this committee to date. The Nominating and Governance Committee previously assisted our Board in discharging and performing its duties and responsibilities with respect to nomination of directors, selection of committee members, assessment of performance of our Board and other corporate governance matters. Without limiting the scope of such activities, the Committee shall, among other things:
•
review candidates for nomination for election as directors submitted by directors, officers, employees and stockholders;
•
establish procedures to be followed by stockholders in submitting nominees, and determine any differences in the manner in which the Committee evaluates nominees based on whether a stockholder made the recommendation or any differences in procedures to be followed for nominees of stockholders who beneficially owned more than 5% of our common stock for at least one year as of the date the recommendation is made;
•
review at least annually the current directors of our Board to determine whether such individuals are independent under applicable listing standards, SEC rules and under the Sarbanes-Oxley Act of 2002, non-employee directors under the Securities Exchange Act of 1934 and outside directors under the Internal Revenue Code of 1986;
•
recommend to the Board nominees for election as directors at each annual meeting of stockholders, to fill a vacancy on the Board or to increase the size of the Board; and
•
develop and recommend to the Board corporate governance guidelines.
The Committee will annually assess the composition of our Board and its standing committees to determine whether they comply with requirements under Board and Committee Charters, SEC rules, applicable listing standards and applicable laws and possess the core competencies described below. In addition, the Committee will assess whether each director has the skills and characteristics described below and undertake director succession and other planning as to our future needs. The Committee will gather suggestions as to individuals who may be available to meet those future needs from a variety of sources, such as past and present directors, stockholders, colleagues and other parties with which we have business dealings, and will undertake a preliminary review of the individuals suggested. The preliminary review may include preliminary searches of public information available about the individuals. At such times as the Committee determines that a relatively near term need exists and if, following a preliminary review, the Committee believes that an individual may strengthen the core competencies and possess the skills and characteristics described below, the Committee will contact the individual to ascertain his or her interest in serving us and obtain further information about and insight as to such individual. In connection therewith, the Committee will typically review detailed resumes and questionnaires, contact references, conduct in-depth interviews and undertake in-depth searches of public information. Based thereon and on the Committee’s evaluation of other potential nominees and our needs, the Committee will determine whether to recommend that the Board nominate the individual for election as a director. While we have not in the past engaged any third party to identify or evaluate nominees, the Committee may do so in the future.
There will be no differences in the manner in which the Committee evaluates nominees for directors recommended by a stockholder. To submit a nominee for election as a director for consideration by the Committee, a stockholder must submit a written request to that effect to the Secretary of the company at our principal executive office. Any such request will be subject to the requirements described in our By-Laws.
The Committee believes that our Board, as a whole, should possess the following core competencies:
•
strategy/vision: ability to provide strategic insight and direction by encouraging innovation, conceptualizing key trends, and evaluating strategic decisions and continuously challenging us to sharpen our vision;
•
leadership: ability to attract, motivate and energize a high-performance leadership team;
•
industry knowledge: ability to assess opportunities and threats unique to our industry;
•
crisis response: ability and time to perform during periods of both short-term and prolonged crisis;
•
management: ability to apply general management best practices in a complex, rapidly evolving business environment;
•
business judgment: ability to assess business risk and stockholder valuation creation strategies;
•
accounting, finance and disclosure: ability to protect and inform security holders and debt holders through liquidity and capital resource management and internal financial and disclosure controls; and
•
conflict resolution: ability to effectively assess the needs and goals of partners, counterparties, stockholders and employees and logically resolve conflicts in a fiduciary and mutually beneficial manner.
The Committee also believes that each director should possess the following skills and characteristics:
•
high personal standards of integrity, honesty and a desire to make full disclosure of all present and future conflicts of interest;
•
the ability to make informed business judgments;
•
literacy in financial and business matters;
•
the ability to be an effective team member;
•
a commitment to active involvement and an ability to give priority to our company;
•
no affiliations with competitors;
•
achievement of high levels of accountability and success in his or her given fields;
•
an ability and willingness to learn our business;
•
preferably experience in the Company’s business or in professional fields or in other industries or as a manager of international business so as to have the ability to bring new insight, experience or contacts and resources to the Company;
•
preferably no direct affiliations with major suppliers or vendors; and
•
preferably previous public company board experience together with good references.
Audit Committee
Our Board of Directors has a standing Audit Committee which until October 23, 2009, was comprised of Paul Gifford and Michael Harris; however, since these individuals resigned from all previously held positions, there have been no other individuals named as their replacements. The Audit Committee is responsible for: (i) the selection and oversight of our independent accountant; (ii) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (iii) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (iv) engaging outside advisors; and, (v) funding for the outside auditory and any outside advisors engagement by the Audit Committee. The Audit Committee has approved an Audit Committee Charter, describing the responsibilities of the Audit Committee.
Audit Committee Financial Expert
Our Board of Directors has determined that we do not currently have an “audit committee financial expert”, as defined under Item 407(d)(5) of Regulation S-K under the Exchange Act, serving on our Audit Committee. The Audit Committee consists of two independent directors, each of whom has been determined by the Board of Directors to be qualified in their judgment, to monitor the performance of management, the Company’s internal accounting operations and independent auditors and to be qualified to monitor the Company’s disclosures. In addition, the Audit Committee has the ability to retain its own independent accountants, attorneys and other advisors, whenever it deems appropriate to advise it. The Company does not pay an annual retainer to the members of its Board of Directors which may make it difficult to locate an individual, meeting the definition of “audit committee financial expert,” who would be willing to serve. As a result, the Board of Directors believes that the time and expense involved in seeking an individual meeting the requirements of the definition, without assurance that he could be persuaded to become a member of the Board of Directors, is not justified at this time.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation
The following table sets forth information with respect to compensation paid by the Company to its officers during the two most recent fiscal years. This information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any, payable for the fiscal years ending January 31, 2010 and 2009.
Name and Principal Position (a)
Year (b)
Salary ($)
(c)
Bonus ($)
(d)
Stock Awards ($)
(e)
Option Awards
($)
(f)
Non-Equity Incentive Plan Compensation
($)
(g)
Change in Pension Value
and Non-Qualified Deferred Compensation Earnings
($)
(h)
All other compensation ($)
(i)
Total ($)
(j)
Francine DuBois, President and Chief Executive Officer (1)
20,625
28,398
-
-
-
-
-
49,023
137,697
30,625
-
74,688
-
-
-
243,010
David Fractor, CFO
49,369
-
-
-
-
-
-
49,369
115,187
-
-
-
-
-
-
115,187
James Tate Preston, VP Sales and Marketing
137,697
32,250
-
30,467
-
-
-
200,414
Joseph Meuse, President and Secretary
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1)
Ms. Dubois became the Company’s President and Chief Executive Officer on January 31, 2008. Prior to January 31, 2008, Ms. Dubois acted as the President and Chief Executive Officer of IDCX, where she was paid a base salary and received equity awards between February 2, 2007 and January 31, 2008.
(2)
These amounts for 2009 include cash salary and the value of 94,000 stock options that were each granted to Ms. Dubois and Mr. Preston during the year in lieu of cash compensation.
(3)
Payment of the 2009 bonus to Ms. Dubois of $30,625 is contingent upon the Company having cash on hand that exceeds all liabilities by a minimum of $800,000 at any month end subsequent to January 31, 2009.
(4)
The value listed reflects the dollar amount recognized by the Company for financial statement reporting purposes with respect to the fiscal year in accordance with FAS 123R based on assumptions disclosed in the Company’s consolidated financial statements.
Francine Dubois-Employment Contract
On January 3, 2007, IDCX entered into an employment contract with Francine Dubois, which was amended and restated as of November 6, 2007 (the “Employment Agreement”), pursuant to which the parties contracted for Francine Dubois’ services as the president and chief executive officer of IDCX in consideration of an annual salary of $120,000, an aggregate cash bonus of $50,000 payable on the achievement of objectives contained in the employment agreement (as detailed below), full benefits, a grant of five hundred thousand (500,000) shares of common stock subject to restrictions (as detailed below) and one million shares of common stock pursuant to an Option Plan Agreement (the terms of which are described in “Option Plans and Agreements” below). In addition, Francine Dubois was entitled to purchase five hundred thousand (500,000) shares of common stock by issuing a note to IDCX for $50,000, which shares are subject to a repurchase right in IDCX. The note issued by Francine Dubois was forgiven immediately prior to the Share Exchange. The obligations under the Employment Agreement were assumed by the Company in connection with the Share Exchange.
The term of the Employment Agreement is for a period of one year, but is subject to automatic renewal for additional one year periods unless the agreement is terminated at least 60 days prior to its expiration (as renewed). Upon a termination of Ms. Dubois’ employment by the Company without Cause (as defined in the Employment Agreement) while the Employment Agreement is in effect, Ms. Dubois would be entitled to the following payments as severance following 2 months’ notice of termination and upon execution of a release in favor of the Company as well as returning all confidential information and materials:
•
base salary payable for 12 months plus one month for each year of employment with the Company (up to 24 months);
•
pro-rated bonus for the year of termination;
•
accelerated vesting of all stock options; and
•
lump sum payment of the Company’s cost for providing medical benefits for the period during which Ms. Dubois receives base salary as severance.
Upon the termination of Ms. Dubois’ employment by the Company for Cause or by Ms. Dubois for any reason, Ms. Dubois is not entitled to any severance payments. None of the payments to Ms. Dubois are exempt from the limitation on deductions imposed by Section 162(m) of the Internal Revenue Code, although the Company does not anticipate at this time that Ms. Dubois’ compensation would exceed the $1,000,000 annual limitation.
On January 16, 2008, the Board of Directors of IDCX approved an increase in Ms. Dubois’ annual salary to $140,000, granted an incentive bonus of $40,000 based on her preparation of a narrative of achievements against goals in her employment contract for 2007 and agreed that her target incentive for calendar year 2008 would be $60,000. The original cash bonus to be awarded to Ms. Dubois for IDCX’s fiscal year ended December 31, 2007 contemplated a $50,000 bonus upon achievement of specified goals. Although certain goals were not attained in the time frame initially contemplated, the Board determined that certain goals were likely to be attained and substantial progress had been made in attaining IDCX’s objectives.
On January 9, 2009, the Board of Directors of IDCX granted Ms. Dubois options to purchase 94,000 shares of common stock with an exercise price of $0.12 per share. The options will vest on July 1, 2009 and expire on January 8, 2019. The options were granted to Ms. Dubois in consideration of her agreement to accept a twenty percent (20%) reduction in her base salary for a period of up to one year, ending no later than December 15, 2009. If the Company achieves certain capital raising targets prior to December 15, 2009, the reduction in Ms. Dubois’ base salary will be eliminated on the later of (i) July 1, 2009 and (ii) the date on which the targets are achieved. Regardless of whether the capital raising targets are achieved, the reduction in Ms. Dubois’ base salary will be eliminated on December 15, 2009.
On April 24, 2009, Ms. Dubois’ employment agreement was further modified to reduce her annual base salary to approximately $33,000. In the event the Company’s cash exceeds its liabilities by a minimum of $800,000 as measured at month end, Ms. Dubois’ salary will increase to $112,000 through June 30, 2009 and effective July 1, 2009, the Executive’s salary will increase to $140,000. The April 24, 2009 amendment also provides for a sales commission based upon the Company’s gross profits (based on proceeds actually received by the Company on or before June 30, 2009) with respect to four specified projects for which the Company has submitted proposals. Additionally, the modification relieves the Company from incurring severance in the event that Ms. Dubois is terminated as part of a plan to cease operations.
The restrictions on 500,000 shares of the Company’s restricted stock granted to Ms. Dubois on November 6, 2007 vested or will vest as follows:
Business Milestones
Restricted Share Vesting
Successful listing on a public stock exchange (1)
125,000
Completion of License Agreement (Fortress Paper) (1)
125,000
Closing of 2 nd financing (after becoming public) ($3,000,000)
125,000
Closing of 1 st Strategic Deal (Alliance or Contract)
125,000
______________________
(1)
The Board of Directors determined that consummation of the share exchange and the completion of the license agreement with Fortress Paper met the Board’s intention in establishing these conditions as of January 31, 2008 and that they should be deemed satisfied.
On October 28, 2009, Francine DuBois entered into a Release and Resignation Agreement with the Company, whereby Ms. DuBois tendered her resignation and released the Company from any further obligation to her pursuant to the sale of the Company’s operating business and change in the business plan. Pursuant to the Belmont transaction, Ms. DuBois agreed to a rescission of all remaining stock options held, and accordingly forfeited 250,000 shares of common stock effective October 21, 2009.
David Fractor - Employment Agreement
On February 15, 2008, the Company engaged Mr. Fractor to serve as the Company’s Chief Financial Officer on a per diem basis. Mr. Fractor is compensated at the rate of $125 per hour for each hour devoted to the Company. Mr. Fractor did not receive any Company provided benefits.
Mr. Fractor resigned from all positions in the Company effective October 21, 2009.
James Tate Preston - Employment Agreement
On February 9, 2008, the Company entered into an employment agreement with Mr. Preston. Pursuant to that employment agreement Mr. Preston was engaged as the Company’s Vice President, Sales and Marketing. Mr. Preston’s compensation included an annual base salary of $140,000, an aggregate potential annual cash bonus of $60,000 based upon the achievement of certain business objectives, a grant of 100,000 options to purchase shares of
the Company’s common stock at an exercise price of $1.40 and full benefits. Mr. Preston is an at-will employee; however, in the event that Mr. Preston is terminated without Cause (as defined in the employment agreement), he will be entitled to a severance payment equal to three months of base salary.
On January 9, 2009, the Board of Directors of IDCX granted Mr. Preston options to purchase 94,000 shares of common stock with an exercise price of $0.12 per share. The options will vest on July 1, 2009 and expire on January 8, 2019. The options were granted to Mr. Preston in consideration of his agreement to accept a twenty percent (20%) reduction in his base salary for a period of up to one year, ending no later than December 15, 2009. If the Company achieves certain capital raising targets prior to December 15, 2009, the reduction in Mr. Preston’s base salary will be eliminated on the later of (i) July 1, 2009 and (ii) the date on which the targets are achieved. Regardless of whether the capital raising targets are achieved, the reduction in Mr. Preston’s base salary will be eliminated on December 15, 2009.
On April 24, 2009, Mr. Preston’s employment agreement was further amended to reduce his base annual salary to approximately $17,000 through June 30, 2009. Mr. Preston is also entitled to a sales commission (based on proceeds actually received by the Company on or before June 30, 2009) with respect to four specified projects for which the Company has submitted proposals. Additionally, the April 24, 2009 amendment relieves the Company from incurring severance in the event that Mr. Preston is terminated as part of a plan to cease operations. The Company and Mr. Preston have agreed to renegotiate his employment agreement subsequent to June 30, 2009. As of October 28, 2009, Mr. Preston resigned from all positions previously held in the Company.
The material terms of the Company’s equity plans, the 2005 Nonqualified Stock Option Plan and The 2007 Equity Participation Plan of iDcentrix, Inc. are described in Item 12
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Equity Compensation Plan Information
The Company has two stock option plans providing for equity grants to certain directors, employees and consultants of the Company and its subsidiaries:
(i) The 2005 Nonqualified Stock Option Plan (the “2005 Plan”), pursuant to which 10,000,000 shares of common stock may be issued upon the exercise of options; and
(ii) The 2007 Equity Participation Plan of iDcentrix, Inc. (the “2007 Plan”), which the Company assumed as part of the Share Exchange with IDCX, pursuant to which up to 3,400,000 shares of common stock, in the aggregate, may be issued upon exercise of stock options, as well as in the form of restricted stock, performance, dividend equivalent or stock payment awards.
The 2005 Plan is administered by the Board and the 2007 Plan is administered by the Compensation Committee of the Board.
2005 Nonqualified Stock Option Plan
The 2005 Plan is registered on Form S-8, Registration No. 333-126739, and authorizes the issuance of stock options to officers, directors, employees and consultants for services rendered to the Company. The Board of Directors is vested with the power to determine the terms and conditions of the options (e.g., the number of options subject to a grant and the exercise price of the options granted). The plan covers 10,000,000 shares of our common stock. As of the date hereof, no options had been granted under this plan.
The 2007 Equity Participation Plan of iDcentrix, Inc.
The 2007 Equity Participation Plan of iDcentrix, Inc., effective May 1, 2007, as amended (the “2007 Plan”) provides for awards in respect of up to 3,400,000 shares of common stock in the form of stock options, as well as restricted stock, performance, dividend equivalent or stock payment awards. iDcentrix assumed the 2007 Plan and all agreements entered into thereunder in connection with the Share Exchange. The 2007 Plan is administered by the compensation committee of the Board. Employees, independent directors and consultants selected by the committee are eligible to receive awards under the 2007 Plan. Incentive stock options, however, may only be granted to employees and no more than 500,000 shares may be subject to incentive stock options. A participant may not
receive awards in respect of more than 2,000,000 shares, in the aggregate, in one year. As of January 31, 2009, 1,154,000 shares remained available for grant under the 2007 Plan. The 2007 Plan was approved by the shareholders of IDCX. Pursuant to the Stock Purchase Agreement with Belmont Partners, LLC, there are no stock options outstanding as of January 31, 2010.
On October 21, 2009, Francine DuBois, Bruce Morris, Michael Harris, and Paul Gifford cumulatively authorized the return of 322,000 common stock shares to the Company’s treasury that were previously issued pursuant to the Company’s Equity Compensation Plan and Restricted Stock and Compensation Agreements between the Company and these individuals. These shares were cancelled. As of January 31, 2010, the Company has no Equity Award Compensation outstanding pursuant to the change of the business plan.
The following table sets forth, as of January 31, 2010, the total number of shares owned beneficially by each of our directors, officers and key employees, individually and as a group, and the present owners of 5% or more of our total outstanding shares. A total of 68,176,300 shares are issued and outstanding.
(1)
All shares of owned beneficially or of record.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and officers and holders of more than 10% of the issued and outstanding shares of our common stock to file with the SEC initial reports of ownership, and reports of changes in ownership, of common stock and other equity securities of iDcentrix. Based solely on our review of copies of the reports by some of those persons, iDcentrix believes that, during fiscal year 2010, all of its directors and officers and holders of more than 10% of the issued and outstanding shares of our common stock complied with all reporting requirements under Section 16(a) except that Fortress Paper Ltd. filed its Schedule 13D late.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Director Independence
We currently do not have any independent directors, as the term “independent” is defined by the rules of the American Stock Exchange. Since October 28, 2009, Joseph Meuse has been our sole Director.
ITEM 14:
ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
A summary of fees billed by Weinberg & Company during fiscal years 2010 and 2009 is set forth below:
Audit Fees . Weinberg & Company billed the Company approximately $45,382 in 2010, and $77,046 in 2009 for audit fees. Friedman LLP audit fees are anticipated to be $7,500 to $10,000.
The Audit Committee has established a policy requiring approval by it of all fees for audit and non-audit services to be provided by the Company’s independent registered public accountants, prior to commencement of such services. Consideration and approval of fees generally occurs at the Committee’s regularly scheduled meetings or, to the extent that such fees may relate to other matters to be considered at special meetings, at those special meetings.
None of the fees described above under the captions “Audit-Related Fees,” “Tax Fees” and “Other Fees” were approved by the Committee pursuant to the “de minimis” exception set forth in Rule 2-01(c)(7)(i)(C) under SEC Regulation S-X.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedules.
I. Listing of Documents
(1)
Financial Statements.
Reports of Independent Registered Public Accounting Firms
Consolidated Balance Sheets - As of January 31, 2010 and 2009
Consolidated Statements of Operations - For the Years Ended January 31, 2010 and 2009 and For the Period January 3, 2007 (Inception) to January 31, 2010
Consolidated Statements of Stockholders’ Equity (Deficit) - For the Years Ended January 31, 2010 and 2009 and For the Period January 3, 2007 (Inception) to January 31, 2010
Consolidated Statements of Cash Flows - For the Years Ended January 31, 2010 and 2009 and For the Period January 3, 2007 (Inception) to January 31, 2010
Notes to Consolidated Financial Statements
(3)
The following Exhibits are filed as part of this report on Form 10-K:
Item 8. Financial Statements and Supplementary Data.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and
Shareholders’ of iDcentrix, Inc.
We have audited the accompanying consolidated balance sheet of iDcentrix, Inc. as of January 31, 2010, and the related consolidated statements of operations, changes in shareholders’ deficit, and cash flows for the year ended January 31, 2010, and from January 3, 2007 (inception) through January 31, 2010. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit 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. We were not engaged to perform an audit of the Company’s 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 of the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit 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, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of iDcentrix, Inc. as of January 31, 2010, and the consolidated results of their operations and their cash flows for the year ended January 31, 2010, and from January 3, 2007 (inception) through January 31, 2010, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s accumulated deficit and lack of capital raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
/s/ Friedman LLP
East Hanover, New Jersey
May 5, 2010
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of
iDcentrix, Inc. and Subsidiary
(A Development Stage Company)
El Segundo, California
We have audited the accompanying consolidated balance sheet of iDcentrix, Inc. and Subsidiary (the “Company”) (a development stage company) as of January 31, 2009 and the related consolidated statements of operations, stockholders' equity and cash flows for the year ended January 31, 2009. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with 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 consolidated 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes 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 provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of iDcentrix, Inc. (a development stage company) as of January 31, 2009 and the results of their operations and their cash flows for the year ended January 31, 2009, in conformity with accounting principles generally accepted in the United States.
The accompanying consolidated financial statements have been prepared assuming iDcentrix, Inc. will continue as a going concern. The Company has incurred recurring operating losses since inception and has an accumulated deficit at January 31, 2009. These conditions raise substantial doubt regarding the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
Weinberg & Company, P.A.
Los Angeles, California
April 14, 2009
IDCENTRIX
(A Development Stage Company)
Notes to Consolidated Financial Statements
For the Years Ended January 31, 2010 and 2009
and the Period January 3, 2007 (inception) to January 31, 2010
NOTE 1 -DESCRIPTION OF THE BUSINESS
iDcentrix (the “Company”) was incorporated in Delaware in January of 2007. The Company is in the business of producing hi-tech security identification solutions. Substantially all of the efforts of the Company are devoted to these business activities. The Company is a development stage company as defined by Generally Accepted Accounting Principles (GAAP). All losses accumulated since the inception of the Company will be considered as part of the Company’s development stage activities. The Company has generated no revenue. The ability of the Company to carry out its business plan rests with its ability to secure equity and other financing.
On January 31, 2008, the Company consummated a Share Exchange Agreement with Sterling Gold Corp which was incorporated in January of 2004. Pursuant to the terms of the Share Exchange Agreement all of the issued and outstanding common shares of iDcentrix were exchanged on a one-for-one basis for common shares of Sterling Gold Corp. The acquisition was accounted for as a reverse merger (recapitalization) with iDcentrix deemed to be the accounting acquirer and Sterling Gold deemed to be the legal acquirer. As such, the consolidated financial statements herein reflect the historical activity of iDcentrix since its inception, and the historical stockholders’ equity of iDcentrix has been retroactively restated for the equivalent number of shares received in the exchange after giving effect to any differences in the par value offset to paid in capital. In connection with the Share Exchange Agreement, the Company is deemed to have issued an additional 13,480,000 shares of common stock to the shareholders of Sterling Gold. Upon the exchange, the Company reflected the receipt of Sterling Gold’s net assets, including $503,055 of cash less the costs of the reverse merger of approximately $59,000, as an adjustment to paid-in capital .
On October 23, 2009, the Company entered into a material definitive agreement with Belmont Partners, LLC (“Belmont”) whereby Belmont purchased a controlling interest of the Company’s common stock. Pursuant to the Stock Purchase Agreement, Joseph Meuse, a member of the Company’s Board of Directors, was appointed to the offices of President and Secretary and all other Directors and officers tendered their resignations. As of October 28, 2009, the Company changed its plan of business from the development and marketing of high-end security identification cards to seeking to acquire or merge with a revenue-producing company or a company with technology assets. Concurrent with this change of business focus, the Company moved its principal executive offices to 360 Main Street, Washington, VA 22747.
NOTE 2 -SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, IDCX Co. Intercompany transactions have been eliminated in consolidation.
Basis of Presentation and going concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of its liabilities. Since inception, the Company has been engaged in organizational activities, sales and marketing activities to create market awareness of its products, and obtaining financing. Through January 31, 2010, the Company has incurred accumulated losses of approximately $4,082,106.
The Company’s ability to continue as a going concern is dependent upon its ability to develop additional sources of capital and to ultimately achieve profitable operations through the acquisition of a revenue producing company or one with technology assets that can be developed . The Company’s consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
At January 31, 2010, the Company had not yet commenced any revenue-generating operations. All activity through January 31, 2010 has been related to the Company’s formation, capital raising efforts and sales and marketing activities. As such, the Company has yet to generate any cash flows from operations, and is dependent on equity funding from both related and unrelated parties to finance its operations.
The Company does not have sufficient resources to fund its operations for the next twelve months. Accordingly, the Company needs to raise additional funds in order to satisfy its future working capital requirements.
F - 7
The Company estimates that it will require minimum funding in fiscal 2010 of approximately $30,000 in order to fund operations. The Company is actively seeking new sources of equity while attempting to generate revenue from operations and reducing expenses. There can be no assurances that the Company will be able to raise additional capital on terms that are acceptable to the Company or at all. Additionally, there can be no assurance that the Company will be able to generate any revenue from operations.
Use of Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of less than three months at the date of purchase to be cash equivalents.
Property and Equipment
Property and equipment is recorded at cost. The Company uses the straight-line method of depreciation over the estimated useful lives of the respective assets for financial reporting purposes. Leasehold improvements are amortized over the shorter of the term of the lease or the life of the improvements. The estimated useful lives used are as follows:
Machinery and equipment
4 years
Trade show stand
3 years
Computer equipment
3 years
Leasehold improvements
2 years
Normal repairs and maintenance are expensed as incurred, whereas significant changes that materially increase values or useful lives are capitalized and depreciated over the estimated useful lives of the related assets.
Equity Based Compensation
Under the fair value recognition principles of accounting standards regarding share based payments, share-based compensation costs are measured at the grant date based on the fair value of the award and is recognized as expense over the applicable vesting period of the stock award (generally three years) using the straight-line method.
Long-Lived Assets
GAAP requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If the cost basis of a long-lived asset is greater than the projected future undiscounted net cash flows from such asset (excluding interest), an impairment loss is recognized. Impairment losses are calculated as the difference between the cost basis of an asset and its estimated fair value.
As of January 31, 2009, the Company evaluated its sublicense agreement and determined that the future undiscounted net cash flows was less than the carrying amount of the asset and recognized an impairment loss equal to the remaining book value of the sublicense.
Income Taxes
The Company accounts for income taxes under the provisions of GAAP which requires a company to recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized.
Research and Development
Research and development costs related to future products are charged to operations.
Loss per common share
Basic loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding during the period.
Diluted loss per share is calculated assuming the issuance of common shares, if dilutive, resulting from the exercise of stock options and warrants. At January 31, 2009, potentially dilutive securities consisted of outstanding common stock options to acquire an aggregate of 1,326,000 shares, and 12,375,000 warrants to acquire 6,187,000 shares. At January 31, 2010, the Company has no share options outstanding and the outstanding warrants are 6,025,000 to acquire 3,012,500 shares. Since the Company reported a net loss for the years ended January 31, 2010 and 2009, these potentially dilutive common shares were excluded from the diluted loss per share calculation because they were anti-dilutive.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash and cash equivalents with high credit quality financial institutions. From time to time such cash balances may be in excess of the FDIC insurance limit of $250,000.
Reclassification
In presenting the Company’s statement of operations for the year ended January 31, 2009 and for the period from January 3, 2007 (inception) to January 31, 2009, the Company presented the impairment of its sublicenses of $171,000 as a component of other income. In computing the loss for the year ended January 31, 2009 and the cumulative loss since inception for the period January 3, 2007 (inception) to January 30, 2010, the Company has reclassified the impairment of the sublicenses of $171,000 to loss from operations.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of:
Depreciation expense for the fiscal year ended January 31, 2010 and 2009 was $992 and $6,331, respectively.
NOTE 4 - SUBLICENSE AGREEMENT
The Company entered into a sublicensing agreement (“Canadian Sublicensing Agreement”) with Fortress Identification Cards, Ltd. (“Fortress”) on April 25, 2007 whereby the Company licensed certain patents and security card intellectual property, on a royalty free basis, in exchange for 3,500,000 shares of the Company’s common stock. The Canadian Sublicensing Agreement was valued at $228,000 based on management’s assessment which involved obtaining an independent valuation. The sublicensing agreement consists of the exclusive utilization of the intellectual property associated with Landqart AG’s security cards for the territory of Canada, and the term of the agreement shall be through the expiration of the final patent licensed under this agreement.
On January 31, 2008, the Company entered into an additional sublicensing agreement (“Worldwide Sublicensing Agreement”) with Fortress. Under the terms of this additional sublicensing agreement, the Company received a license for the same patents and security card intellectual property as described in the Canadian Sublicense Agreement on a royalty free basis, in exchange for 6,500,000 shares of the Company’s common stock. This Worldwide Sublicensing Agreement provides exclusive access to the intellectual property in the United States and Mexico and non-exclusive access to the intellectual property in the rest of the world (excluding Switzerland and Africa). The term of this agreement shall be through the expiration of the final patent licensed under this agreement. At the time of the agreement Fortress was deemed to be a related party and significant shareholder based upon its ownership percentage in the Company both before and after the transaction. As a result, the Company has valued this sublicense agreement using the Fortress’ carrying value, which was nil.
The Company was required to expend a minimum amount of $2 million on research and development to improve the licensed technology during the initial five (5) years under the two sublicense agreements with a minimum expenditure of $800,000 by January 31, 2010. During the year ended January 31, 2009, the agreement was amended to remove all minimum research and development expenditure requirements and no amounts were expended for research and development.
In conjunction with the Canadian and Worldwide Sublicensing Agreements, the Company also signed a Registration Rights Agreement with Fortress. Per such agreement, the Company was required to register Fortress’s common shares of the Company in 2,500,000 increments, with (a) the registration statement for such initial tranche required to be filed no later than ninety (90) days subsequent to the effective date of the Exchange Agreement, and (b) the Company is required to use its best efforts to have the registration statement effective no later than one hundred eighty (180) days subsequent to the effective date of the Exchange Agreement. Additionally, Fortress is permitted to request future registrations for its remaining shares in 2,500,000 share tranches on each anniversary relative to the initial registered tranche. During the year ended January 31, 2009, Fortress agreed to defer the filing date of the second registration statement for a period of three months. The Company was required to use its best efforts to have this registration statement effective no later than one hundred eighty (180) days subsequent to the filing of the second registration statement. The filing requirements for the remaining registration statements remain unchanged.
In the event that the Company does not (a) meet any of the registration deadlines discussed above, (b) does not maintain the effectiveness of a previously filed registration statement as required under this agreement or (c) does not meet other requirements discussed in the agreement, then the Company must pay damages to Fortress as defined in the agreement. The registration rights agreement requires the payment of liquidated damages to Fortress calculated as the total Transfer Restricted Shares multiplied by $0.75 multiplied by the sum of the prime rate (as defined by the Royal Bank of Canada) plus 5% per annum applied to the number of days delinquent in the filing. On April 25, 2008, a waiver of the potential liability for failure to timely file a registration statement covering the registration of the initial tranche of common stock was obtained from Fortress. The waiver was effective from May 1, 2008 to May 15, 2008 and the Company filed the initial registration statement on May 15, 2008. The registration statement was declared effective by the SEC on October 23, 2008. As of January 31, 2009, the Company evaluated its sublicense agreement and determined that the future undiscounted net cash flows was less than the carrying amount of the asset and recognized an impairment loss of $171,000 equal to the remaining book value of the sublicense.
With the Company’s sale of its business operations, the Company terminated the Canadian Sublicensing Agreement and the Worldwide Sublicensing Agreement, in accordance with their terms. The company also terminated the previously filed Registration Statement and obtained a release of potential claims relating to the Registration Statement and Sub-License Agreements.
NOTE 5 - COMMON STOCK
During the year ended January 31, 2009, the Company completed a private placement offering resulting in the sale of 500,000 shares of common stock at $0.75 per share and received net proceeds after offering costs of approximately $372,000.
During the year ended January 31, 2010, the Company issued 35,938,800 shares to Belmont Partners, LLC and received net proceeds after offering cost of approximately $86,272.
NOTE 6 - OPTIONS AND WARRANTS
For the years ended January 31, 2010 and 2009 and for the period January 3, 2007 (inception) to January 31, 2010, the Company recognized compensation expense related to the fair value of the vested stock options of $54,048, $109,430, and $231,956, respectively. As of January 31, 2010, following the Share Purchase Agreement with Belmont Partners, all outstanding options were forfeited. The majority of options were fully vested as of the forfeiture date.
Stock Options
On May 1, 2007, the Company adopted the Equity Participation Plan (the “Plan”), which provides for the issuance of restricted stock, incentive stock options and nonqualified stock options to key employees, independent directors of, and consultants to the Company. The Board of Directors administers the Plan, approves the individuals to whom options will be granted, determines the number of options to be granted, and sets the term and exercise price of each option. Generally, the Plan provides for options to be granted at fair market value on the date of grant. The term of the options granted under the Plan cannot be greater than ten years, or five years for certain optionees who have certain level of ownership in the Company. An aggregate of 3,400,000 shares of common stock has been reserved for issuance under the plan.
On May 1, 2007, the Company granted options to purchase a total of 1,000,000 shares of common stock at $0.30 per share to its former chief executive officer. The fair value of the options is measured on the grant date and is recognized over the vesting period. The options vest over the two years from the date of grant and expire May 1, 2014. The options were valued at $182,608, the fair value of the stock on the date granted determined using a Black-Scholes pricing model with the following assumptions: expected volatility of 50.00%, average risk free rate of 4.75%, dividend yield of 0.00%, and expected life of 8 years. The weighted average fair value of options granted during the year ended January 31, 2008 was $0.183.
On April 28, 2008, the Company granted options to certain employees to purchase a total of 110,000 shares of common stock at $1.40 per share. One option grant for 100,000 options vests over two years and the other option grant for 10,000 options vests over four years and they both expire on April 28, 2018. The options were valued at $89,370, the fair market value of the options on the date granted determined using a Black-Scholes pricing model with the following assumptions: expected volatility of 50%, average risk free rate of 3.19%, dividend yield of 0.00%, and expected life of eight years.
On January 9, 2009, the Company granted options to certain employees to purchase a total of 216,000 shares of common stock at $0.12 per share including 94,000 options to its former chief executive officer. The options vest over six months and expire on January 9, 2019. The options were issued in exchange for a reduction in cash compensation. The options were valued at $16,509, the fair market value of the options on the date granted using the Black-Scholes pricing model with the following assumptions: expected volatility of 50%, risk free interest rate 0.25%, dividend yield of 0.00% and expected life of five years. The weighted average fair value of options granted during the year ended January 31, 2009 was $0.32.
As of January 31, 2010, following the Share Purchase Agreement with Belmont Partners, all outstanding options are forfeited.
Activity under the plan for the year ended January 31, 2010 and 2009 is as follows:
As of January 31, 2010, the intrinsic value of all fully vested stock options and all stock options outstanding was nil.
A summary of the status of the Company’s non vested options granted under the Company’s stock option plan as of January 31, 2010 and changes during the year ended January 31, 2010 is presented below:
Non-vested Options
Options
Weighted Average Grant Date Fair Value
Non-vested Options as of January 31, 2009
551,000
0.23
Granted
-
-
Vested
371,500
0.20
Forfeited
179,500
0.33
Non-vested Options as of January 31, 2010
-
-
As of January 31, 2010, the Company has no options outstanding.
Warrants
As of January 31, 2010, the Company has 6,025,000 warrants for the issuance of 3,012,500 shares of common stock outstanding, all of which are exercisable at a price of $0.25 per share. Each warrant is exercisable for a period of five (5) years from the date of the subscriber’s subscription agreement and will expire in 2012. On August 20, 2009, the Company issued 317,500 shares of common stock pursuant to agreements privately negotiated with holders of the outstanding warrants to terminate 6,350,000 outstanding warrants. Following the termination of the warrants, the
Company has outstanding 6,025,000 warrants for the issuance of 3,012,500 shares of common stock.
NOTE 7 - INCOME TAXES
At January 31, 2010, the Company had available Federal and state net operating loss carry forwards to reduce future taxable income. The amounts available were approximately $4,241,000 for Federal purposes and $3,855,000 for state purposes. The Federal carry forward expires in 2029 and the state carry forward expires in 2014. Given the Company’s history of net operating losses, management has determined that it is more likely than not the Company will not be able to realize the tax benefit of the carry forwards. Accordingly, the Company has not recognized a deferred tax asset for this benefit.
GAAP requires that a valuation allowance be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. Due to restrictions imposed by Internal Revenue Code Section 382 regarding substantial changes in ownership of companies with loss carry-forwards, the utilization of the Company’s net operating loss carry-forwards will likely be limited as a result of cumulative changes in stock ownership. The company has not recognized a deferred tax asset and, as a result, the change in stock ownership has not resulted in any changes to valuation allowances.
Upon the attainment of taxable income by the Company, management will assess the likelihood of realizing the tax benefit associated with the use of the carryforwards and will recognize a deferred tax asset at that time.
Significant components of the Company’s deferred income tax assets consist of the following as of:
Reconciliation of effective income tax rate to the U.S. statutory rate is as follows:
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. At the date of adoption, and as of January 31, 2010 and 2009, the Company does not have a liability for unrecognized tax benefits.
The Company files income tax returns in the U.S. federal jurisdiction and various states. The Company is subject to U.S. federal or state income tax examinations by tax authorities for five years after 2002. During the periods open to examination, the Company has net operating loss and tax credit carry forwards for U.S. federal and state tax purposes that have attributes from closed periods. Since these NOLs and tax credit carry forwards may be utilized in future periods, they remain subject to examination.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Employment Agreement
The Company entered into an employment agreement with an executive (“Executive”), to serve as the CEO of the Company on January 3, 2007 and signed an Amended and Restated Employment Agreement on November 9, 2007. The agreement was further amended on January 9, 2009 and on April 24, 2009. The agreements are effective through December 31, 2009, with automatic one year extensions unless terminated at least sixty (60) days prior to the end of the current annual contract term. Pursuant to the November 9, 2007 Amended and Restated Employment Agreement the Executive earned an annual salary of $140,000, subject to review on no less than an annual basis. The Executive is also able to earn an annual cash bonus of up to $60,000, based on obtaining pre-determined goals and objectives for the year. The January 9, 2009 amendment reduced the Executive’s annual salary to $112,000 through June 30, 2009 and the April 24, 2009 amendment further reduced the Executive’s annual salary to approximately $33,000. In the event the Company’s cash exceeds its liabilities
by a minimum of $800,000 as measured at month end, the Executive’s salary will increase to $112,000 through June 30, 2009 and effective July 1, 2009, the Executive’s salary will increase to $140,000. The April 24, 2009 amendment also provides for a sales commission based upon gross profits of future sales through June 30, 2009. The Executive was given the following rights relative to the participation in equity ownership of the Company:
·
The right to purchase 500,000 shares of the Company’s common stock in exchange for a note receivable of $50,000. As of January 31, 2008, the note receivable was forgiven by the Company and $50,000 was recognized as officer compensation and is included in selling, general and administrative expenses,
·
A grant of one million stock options exercisable at $0.30 per share (valued at $182,608-See Note 6) and a grant of 94,000 stock options exercisable at $0.12 per share (valued at $7,184-See Note 6), and
·
A grant of 500,000 shares of restricted common stock of the Company, which vests according to a schedule of specific milestones. During the year ended January 31, 2008, two milestones were met. Accordingly, the Company issued 500,000 shares to the CEO, of which 250,000 have vested, and recognized $187,500 of officer compensation that is included in selling, general and administrative expense for the year ended January 31, 2008. No additional milestones were met during the year ended January 31, 2009, therefore no additional shares vested and no officer compensation was recognized.
The Executive’s compensation for the years ended January 31, 2010 and 2009 includes a bonus of approximately $28,398 and $30,000 respectively.
On October 28, 2009, the Executive resigned and the Company has no further obligations under the Agreement.
Board of Directors Compensation
Effective November 1, 2007, members of the Company’s board of directors were granted an aggregate of 420,000 shares of restricted common stock as well as cash payments for their services. Of that amount 132,000 shares, at a value of $99,000, vested upon the Company completing the Share Exchange Agreement, which occurred on January 31, 2008, and the Company paid cash of $66,000. Accordingly, during the year ended January 31, 2008, the Company recognized $165,000 of director compensation expense. The remaining 288,000 shares of restricted common stock will vest through November 6, 2009. During the years ended January 31, 2010 and 2009, the Company recognized $27,000 and $108,000, respectively, of direct compensation expense associated with the vesting of these restricted shares of common stock and paid cash of $0 and $82,800, respectively. On November 7, 2008, the Board members waived the cash payment portion of the Share Exchange Agreement and in May 2009, the Board members waived the vesting of additional stock owed to them. The agreement was terminated at that time and all unvested shares were forfeited.
Operating Leases
The Company leases its office at 2101 Rosecrans Avenue, Suite 4240, El Segundo, California, from The Plaza CP LLC, under an operating leased that expired on February 28, 2009. The Company was also obligated to pay real estate taxes, general liability insurance, property insurance and periodic rent escalation. Total rent and lease expense charged to operations during the years ended January 31, 2010 and January 31, 2009 and for the period from January 3, 2007 (inception”) to January 31, 2010 was $3,896, $58,449, and $114,907 respectively.
NOTE 9- SUBSEQUENT EVENTS
On April 5, 2010, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) by and among Tsoi Tik Man, or the Buyer, Belmont Partners, LLC (“Belmont”), or the Seller, and the Company. Pursuant to the terms of the Purchase Agreement, on April 5, 2010, Tsoi Tik Man acquired from Belmont 36,688,800 shares of the Company’s common stock, which at the closing of the transaction, represented a 53.81% controlling interest, for a consideration of $300,000 US Dollars. In addition, the Company agreed to issue to the seller shares of its common stock such that the seller will own 10% of the issued and outstanding capital stock of the Company after the closing of a merger transaction with an as yet unidentified target corporation. Pursuant to the terms of the Purchase Agreement, Joseph J. Meuse resigned on the Closing Date and Tsoi Tik Man was named as the sole officer and director of the Company. Such resignation and appointment were effective as of the Closing Date with respect to the sole officer of the Company. The resignation of Joseph J. Meuse and the naming of Tsoi Tik Man as a director will take effect on the tenth day following the mailing by the Company of an information statement that complies with the requirements of Section 14f-1 of the Securities Exchange Act of 1934. Concurrent with this change of control, the Company moved its principal executive offices to Rm 1903, 19/F, Hing Yip COMM Centre, No. 272 Des Voeux Rd, Central, Hong Kong.
Exhibit
Number
Exhibit
3.1
Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Form SB-2 of the Company filed with the SEC on February 20, 2004)
3.2
Certificate of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Form 8-K of the Company filed with the SEC on March 10, 2008)
3.3
Amended and Restated By-Laws (incorporated by reference to Exhibit 99.2 to the Form 8-K of the Company filed with the SEC on February 6, 2008)
4.1
Share Exchange Agreement between Sterling Gold Corp. (now known as iDcentrix, Inc.), iDcentrix, Inc. (now known as IDCX Co.), the Shareholders of IDCX Co., and the Shareholders Representative made as of January 16, 2008 (incorporated by reference to Exhibit 99.5 to the Form 8-K of the Company filed with the SEC on February 6, 2008)
4.2
Registration Rights Agreement between Fortress Paper Ltd., iDcentrix Inc. (now known as IDCX Co.) and Sterling Gold Corp. (now known as iDcentrix, Inc.) dated January 31, 2008 (incorporated by reference to Exhibit 99.10 to the Form 8-K of the Company filed with the SEC on February 6, 2008)
10.1
Amended and Restated Technology Sub-License Agreement, dated January 31, 2008, by and between Fortress Paper Ltd. and iDcentrix, Inc. (now known as IDCX Co.) (incorporated by reference to Exhibit 99.6 to the Form 8-K of the Company filed with the SEC on February 6, 2008)
10.2
Technology Sub-License Agreement (US), dated January 31, 2008, by and between Fortress Paper Ltd. And iDcentrix, Inc. (now known as IDCX Co.) (incorporated by reference to Exhibit 99.7 to the Form 8-K of the Company filed with the SEC on February 6, 2008)
10.3
Amended and Restated Employment Agreement, made November 6, 2007, by and between iDcentrix, Inc. (now known as IDCX Co.) and Francine Dubois (incorporated by reference to Exhibit 10.3 to the Form 10-K of the Company filed with the SEC on May 15, 2008)
10.4
Stock Escrow Agreement, dated as of January 31, 2008, among iDcentrix, Inc. (now known as IDCX Co.), Sterling Gold Corp. (now known as iDcentrix, Inc.), Fortress Paper Ltd. And Kelley Drye & Warren LLP (incorporated by reference to Exhibit 99.9 to the Form 8-K of the Company filed with the SEC on February 6, 2008)
10.5
2007 Equity Participation Plan of iDcentrix, Inc. (incorporated by reference to Exhibit 99.16 to the Form 8-K of the Company filed with the SEC on February 6, 2008)
10.6
Amendment No. 1 to 2007 Equity Participation Plan of iDcentrix, Inc. (incorporated by reference to Exhibit 10.6 to the Form 10-K of the Company filed with the SEC on May 15, 2008)
10.7
Amendment No. 2 to 2007 Equity Participation Plan of iDcentrix, Inc. (incorporated by reference to Exhibit 10.7 to the Form 10-K of the Company filed with the SEC on May 15, 2008)
10.8
Stock Purchase Agreement, dated February 5, 2007, by and between iDcentrix, Inc. (now known as IDCX Co.) and Francine Dubois (incorporated by reference to Exhibit 10.8 to the Form 10-K of the Company filed with the SEC on May 15, 2008)
10.9
Assignment and Assumption Agreement, dated January 31, 2008, by and between iDcentrix, Inc. (now known as IDCX Co.), and Sterling Gold Corp. (now known as iDcentrix, Inc.) (incorporated by reference to Exhibit 99.17 to the Form 8-K of the Company filed with the SEC on February 6, 2008)
10.10
2005 Non-Qualified Stock Option Plan (incorporated by reference to Exhibit 10.1 to the Form S-8 of the Company filed with the SEC on July 20, 2005)
10.11
Nonqualified Stock Option Agreement dated May 1, 2007 between iDcentrix, Inc. (now known as IDCX Co.) and Francine Dubois (incorporated by reference to Exhibit 10.11 to the Form 10-K of the Company filed with the SEC on May 15, 2008)
10.12
Stockholders Agreement dated November 6, 2007 between iDcentrix, Inc. (now known as IDCX Co.) and Francine Dubois (incorporated by reference to Exhibit 10.12 to the Form 10-K of the Company filed with the SEC on May 15, 2008)
10.13
Restricted Stock Agreement dated November 6, 2007 between iDcentrix, Inc. (now known as IDCX Co.) and Francine Dubois (incorporated by reference to Exhibit 10.13 to the Form 10-K of the Company filed with the SEC on May 15, 2008)
10.14
Restricted Stock and Compensation Agreement dated November 6, 2007 between iDcentrix, Inc. (now known as IDCX Co.) and Bruce Morris (incorporated by reference to Exhibit 10.14 to the Form 10-K of the Company filed with the SEC on May 15, 2008)
10.15
Restricted Stock and Compensation Agreements (2) dated November 6, 2007 between iDcentrix, Inc. (now known as IDCX Co.) and Paul Gifford (incorporated by reference to Exhibit 10.15 to the Form 10-K of the Company filed with the SEC on May 15, 2008)
10.16
Restricted Stock and Compensation Agreements (2) dated November 6, 2007 between iDcentrix, Inc. (now known as IDCX Co.) and Michael Harris (incorporated by reference to Exhibit 10.16 to the Form 10-K of the Company filed with the SEC on May 15, 2008)
10.17
Nonqualified Stock Option Agreement dated January 9, 2009 between iDcentrix, Inc. and Francine Dubois (incorporated by reference to Exhibit 10.2 to the Form 8-K of the Company filed with the SEC on January 14, 2009)
10.18*
Amendment, dated April 24, 2009, to Amended and Restated Employment Agreement made November 6, 2007, by and between iDcentrix, Inc. (now known as IDCX Co.) and Francine Dubois (confidential treatment requested as to certain portions which are omitted and filed separately with the SEC)
10.19*
Offer Letter Agreement, dated February 9, 2008, by and between iDcentrix, Inc. (now known as IDCX Co.) and James Tate Preston
10.20*
Amendment, dated April 24, 2009, to Offer Letter Agreement, dated February 9, 2008, by and between iDcentrix, Inc. (now known as IDCX Co.) and James Tate Preston (confidential treatment requested as to certain portions which are omitted and filed separately with the SEC)
Restated Code of Conduct (incorporated by reference to Exhibit 14 to the Form 10-K of the Company filed with the SEC on May 15, 2008)
List of Subsidiaries (incorporated by reference to Exhibit 21 to the Form 10-K of the Company filed with the SEC on May 15, 2008)
31.1*
Rule 13a-14(a) Certification of Principal Executive Officer
31.2*
Rule 13a-14(a) Certification of Principal Financial Officer
32.1*
Section 1350 Certification of Principal Executive Officer
32.2*
Section 1350 Certification of Principal Financial Officer
_____________
*Filed herewith.
SIGNATURES
Pursuant to the requirements of 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, thereunto duly authorized on the 3rd day of May 2010.
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 indicated .
/s/ Tsoi Tik Man
Chief Executive Officer
(Tsoi Tik Man)
(Principal Executive Officer)
/s/ Tsoi Tik Man
Chief Financial Officer
(Tsoi Tik Man)
(Principal Financial Officer and
Principal Accounting Officer)