ITEM 1. BUSINESS.
General Development of Business
Corporate Equity Investments, Inc. (“CEI”) was incorporated under the laws of the State of Florida on December 22, 2006. On July 30, 2009, the Board of Directors and a majority of the shareholders approved the filing of Articles of Conversion with the Nevada Secretary of State which effectively changed the domicile of CEI from Florida to Nevada and changed the name of the Company from Corporate Equity Investments, Inc. to Security Solutions Group, Inc. (the "Company", ”SSG”, "our", "us" or "we") In conjunction with the incorporation in the State of Nevada, SSG increased its number of authorized shares of common stock from 100,000,000 to 500,000,000. On August 6, 2009, the Board of Directors of the Company approved an 8 to 1 forward common stock split stock to all shareholders of record on August 6, 2009. All stock transactions noted herein have been adjusted to account for the forward stock split unless otherwise noted. We have been in the developmental stage since inception and have conducted virtually no business operations, other than organizational and administrative activities. We have retained one employee to initiate the development of the Company. We own no real estate or personal property. Our business purpose is to seek the acquisition of, or merger with, an existing company. On April 1, 2009, DMP Holdings, Inc., (“DMP”) acquired 32,312,000 shares of common stock of the Company resulting in DMP owning 99.48% of the outstanding shares of the Company’s common stock and effected a change of control. The Company filed a Current Report on Form 8-K with the United States Securities and Exchange Commission (“SEC”) on April 7, 2009.
Business of Issuer
Our discussion of the proposed business under this caption and throughout this Annual Report is purposefully general and is not meant to restrict our virtually unlimited discretion to search for and enter into potential business opportunities.
Based on proposed business activities, we are a "blank check" company. The U.S. Securities and Exchange Commission (the "SEC") defines such companies as "any development stage company that is issuing a penny stock, within the meaning of Section 3 (a)(51) of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") and that has no specific business plan or purpose, or has indicated that its business plan is to merge with an unidentified company or companies." Under SEC Rule 12b-2 under the Securities Act of 1933, as amended (the "Securities Act"), we also qualify as a "shell company," because we have no or nominal assets (other than cash) and no or nominal operations. Many states have enacted statutes, rules and regulations limiting the sale of securities of "blank check" companies in their respective jurisdictions. No trading market currently exists for our securities, and Management does not intend to undertake any efforts to cause a market to develop in our securities, either debt or equity, or to register any securities under the Securities Act or state blue sky laws or the regulations there under until we have successfully concluded a business combination. We intend to comply with the periodic reporting requirements of the Exchange Act for so long as we are subject to those requirements.
We were organized as a vehicle to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation. Our principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings. We will not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.
We have conducted no business operations to date and expect to conduct none in the future, other than our efforts to effectuate a business combination. We, therefore, can be characterized as a "shell"
- 3 -
corporation. As a "shell" corporation, we face risks inherent in the investigation, acquisition, or involvement in a new business opportunity. Further, as a "development stage" or "start-up" company, we face all of the unforeseen costs, expenses, problems, and difficulties related to such companies, including whether we will continue to be a going concern entity for the foreseeable future.
We may consider a business which has recently commenced operations, is a developing company in need of additional funds for expansion into new products or markets, is seeking to develop a new product or service, or is an established business which may be experiencing financial or operating difficulties and is in need of additional capital. In the alternative, a business combination may involve the acquisition of, or merger with, a company which does not need substantial additional capital, but which desires to establish a public trading market for its shares, while avoiding, among other things, the time delays, significant expense, and loss of voting control which may occur in a public offering.
We do not currently engage in any business activities that provide cash flow. The costs of investigating and analyzing business combinations for the next 12 months and beyond such time will be paid with money in our treasury, if any, with additional money contributed by our stockholders, via borrowings from a related entity, or another source.
During the next 12 months, we anticipate incurring costs related to filing of Exchange Act reports and costs relating to consummating an acquisition. We believe we will be able to meet these costs through use of funds in our treasury and additional amounts, as necessary, to be loaned to or invested in us by our stockholders, management or other investors.
There are no acquisitions, business combinations, or mergers pending or which have occurred involving the Company. Presently, we have no plans, proposals, agreements, understandings or arrangements of any kind or nature whatsoever to acquire or merge with any specific business or company, and we have not identified any specific business or company for investigation and evaluation.
The analysis of new business opportunities will be undertaken by, or under the supervision of, Mr. Phil Viggiani, the Company’s president. We have unrestricted flexibility in seeking, analyzing and participating in potential business opportunities. In our efforts to analyze potential acquisition targets, we will consider the following kinds of factors:
•
Potential for growth, indicated by new technology, anticipated market expansion or new products;
•
Competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole;
•
Strength and diversity of management, either in place or scheduled for recruitment;
•
Capital requirements and anticipated availability of required funds, to be provided by the Registrant or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources;
•
The cost of participation by the Registrant as compared to the perceived tangible and intangible values and potentials;
•
The extent to which the business opportunity can be advanced;
•
The accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items; and
•
Other relevant factors.
In applying the foregoing criteria, no one of which will be controlling, management will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data. Potentially available business opportunities may occur in many different
- 4 -
industries, and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Due to our limited capital available for investigation, we may not discover or adequately evaluate adverse facts about the opportunity to be acquired.
We anticipate that we will locate and make contact with target businesses primarily through our reputation and a network of business contacts.
In connection with our evaluation of a prospective target business, our board of directors and primary shareholder, anticipate that they will conduct a due diligence review which will encompass, among other things, meetings with incumbent management and inspection of facilities, as well as review of financial or other information which will be made available to us. The time and costs required to select and evaluate a target business, including conducting a due diligence review, negotiating relevant agreements and preparing requisite documents for filing pursuant to applicable Federal securities laws, state blue sky laws, foreign securities laws, if any, and corporation laws cannot presently be ascertained with any degree of certainty.
It is anticipated that the investigation of specific business opportunities and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial cost for accountants, attorneys and others. If a decision is made not to participate in a specific business opportunity, the costs theretofore incurred in the related investigation would not be recoverable and may reduce the amount of capital available to otherwise complete a business combination or for the resulting entity to utilize. Furthermore, even if an agreement is reached for the participation in a specific business opportunity, the failure to consummate that transaction may result in a loss to us of the related costs incurred.
We presently have no employees apart from our management. We expect no significant changes in the number of our employees other than such changes, if any, incident to a business combination.
Our president is engaged in outside business activities and anticipates that he will devote to our business very limited time until the acquisition of a successful business opportunity has been identified. However, our president will devote such time as he deems reasonably necessary to carry out the business and affairs of the Company, including, the evaluation of potential target businesses and the negotiation of a business combination, and, as a result, the amount of time devoted to our business and affairs may vary significantly depending upon, among other things, whether we have identified a target business or are engaged in active negotiations of a business combination.
Although we are currently issuing shares of common stock to finance our administrative expenses, we will, in all likelihood, issue a substantial number of additional securities in connection with the consummation of a business combination. To the extent that such additional securities are issued, dilution to the interests of our shareholders will inevitably occur. Additionally, if a substantial number of shares of common stock are issued in connection with the consummation of a business combination, a change in our control will occur which will also likely affect, among other things, our ability to utilize net operating loss carry forwards, if any. Any such change in control will likely result in the resignation or removal of our president. If there is a change in the person serving as president, no assurance can be given as to the experience or qualifications of our new management. Our president considers it likely that in order to consummate a business combination, a change in control will ultimately occur; therefore, he anticipates offering not less than a controlling interest to a target business in order to effectuate a business combination. This will require the consent of the majority shareholder, DMP, to achieve.
- 5 -
Our majority shareholder and parties related thereto may actively negotiate for or otherwise consent to the disposition of any portion of their common stock as a condition to or in connection with a business combination. Therefore, it is possible that the terms of any business combination will provide for the sale of all or any portion of the shares of common stock owned beneficially by our president. If we have additional shareholders at the time a business combination is effected, it is possible that none of our other shareholders other than our current majority shareholders will be afforded the right to sell their shares of common stock in connection with a business combination pursuant to the same terms that our current shareholders will be provided.
There are currently no limitations relating to our ability to borrow funds to increase the amount of capital available to us to effect a business combination or otherwise finance our operations or the operations of the target business. However, our limited resources and lack of operating history could make it difficult for us to borrow additional funds from other sources. The amount and nature of any borrowings by us will depend on numerous considerations, including our capital requirements, potential lenders' evaluation of our ability to meet debt service on borrowings and the then prevailing conditions in the financial markets, as well as general economic conditions. We do not have any arrangements with any bank or financial institution to secure additional financing and there can be no assurance that such arrangements, if required or otherwise sought, would be available on terms commercially acceptable or otherwise in our best interests. Our inability to borrow funds required to effect or facilitate a business combination, or to provide funds for an additional infusion of capital into a target business, may have a material adverse effect on our financial condition and future prospects, including the ability to effect a business combination. To the extent that debt financing ultimately proves to be available, any borrowings may subject us to various risks traditionally associated with indebtedness, including the risks of interest rate fluctuations and insufficiency of cash flow to pay principal and interest. Furthermore, a target business may have already incurred debt financing and, therefore, all the risks inherent thereto.
If our securities are issued as part of an acquisition, such securities are required to be issued either in reliance upon exemptions from registration under applicable Federal or state securities laws or registered for public distribution. We intend to primarily target only those companies where an exemption from registration would be available; however, since the structure of the business combination has yet to be determined, no assurances can be made that we will be able to rely on such exemptions. Registration of securities typically requires significant costs, and time delays are typically encountered. In addition, the issuance of additional securities and their potential sale in any trading market which might develop in our common stock, of which there is presently no trading market and no assurances can be given that one will develop, could depress the price of our common stock in any market which may develop in our common stock. Further, such issuance of additional securities would result in a decrease in the percentage ownership of our shareholders.
Due to our small size and limited amount of capital, our ability to raise additional capital, if and when needed, could be constrained. Until such time as any enterprise, product or service which we acquire generates revenues sufficient to cover operating costs, it is conceivable that we could find ourselves in a situation where we need additional funds in order to continue our operations. This need could arise at a time when we are unable to borrow funds and when market acceptance for the sale of additional shares of our common stock does not exist. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."
We have neither the present intention, nor does the present potential exist for us, to consummate a business combination with a target business in which our president or his affiliates or associates, directly or indirectly, have a pecuniary interest, although no existing corporate policies would prevent this from occurring. Although there are no current plans to do so, we may engage the services of professional firms that specialize in finding business acquisitions and pay a finder's fee or other compensation. Since we
- 6 -
have no current plans to utilize any outside consultants or advisors to assist in a business combination, no policies have been adopted regarding use of such consultants or advisors, the criteria to be used in selecting such consultants or advisors, the services to be provided, the term of service, or regarding the total amount of fees that may be paid. However, because of our limited resources, it is likely that any such fee we agree to pay would be paid in cash and/or shares of our common stock. In no event will we pay a finder's fee or commission to any officer or director or to any entity with which they are affiliated for such service. Moreover, in no event shall we issue any of our securities to any of our officers, directors, or promoters, if any, or any of their respective affiliates or associates, in connection with activities designed to locate a target business.
Since the effective date of our registration statement on Form 10-SB12G, as amended, we have had preliminary contact or discussions with representatives of several entities regarding a possible business combination with us. Any target business that is selected may be a financially unstable company or an entity in its early stages of development or growth, including entities without established records of sales or earnings. In that event, we will be subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies. In addition, we may effect a business combination with an entity in an industry characterized by a high level of risk, and, although our management will endeavor to evaluate the risks inherent in a particular target business, there can be no assurance that we will properly ascertain or assess all significant risks.
Investment Company Act and Other Regulation
We may participate in a business combination by purchasing, trading or selling the securities of such target business. We do not, however, intend to engage primarily in such activities. Specifically, we intend to conduct our activities so as to avoid being classified as an "investment company" under the Investment Company Act of 1940, as amended (the "Investment Act"), and, therefore, to avoid application of the costly and restrictive registration and other provisions of the Investment Act, and the regulations promulgated there under.
We will not enter into any business combination until the target business has obtained the requisite audited financial statements required to be included in a report on Form 8-K to be filed by us with the SEC pursuant to the requirements of Form 8-K, the Exchange Act, and the applicable rules and regulations there under.
No assurances are given that subsequent to such a business combination that a trading market in our securities will develop, or, if such a trading market is developed, that it can be maintained with liquidity. We presently have 500,000,000 shares of common stock authorized of which 32,720,000 shares are currently issued and outstanding. None of these outstanding shares have been registered under the Securities Act, and all of which are deemed to be "restricted securities", as that term is defined under Rule 144 promulgated under the Securities Act, because such shares were issued in a private placement transaction to "accredited investors" not involving a public offering. These shares may not be resold under Rule 144 unless and until the Company has acquired an operating business and has met the holding period requirements of Rule 144 or has registered these shares for resale.
We cannot estimate the time that it will take to effectuate a business combination. It could be time consuming; possibly in excess of many months or years. Additionally, no assurance can be made that we will be able to effectuate a business combination on favorable terms, or, if such a business combination can be effected at all. We might identify and effectuate a business combination with a target business which proves to be unsuccessful for any number of reasons, many of which are due to the fact that the target business is not identified at this time. If this occurs, the Company and its shareholders might not realize any type of profit.
- 7 -
No assurances can be given that we will be able to enter into a business combination, as to the terms of a business combination, or as to the nature of the target company.
Form of Acquisition
The manner in which we participate in an opportunity will depend upon the nature of the opportunity, the respective needs and desires of our company and the promoters of the opportunity, and the relative negotiating strength of our company and such promoters.
As a general rule, federal and state tax laws and regulations have a significant impact upon the structuring of business combinations. We will evaluate the possible tax consequences of any prospective business combination and will endeavor to structure a business combination so as to achieve the most favorable tax treatment for us, the target business and their respective stockholders. There can be no assurance that the Internal Revenue Service or relevant state tax authorities will ultimately assent to our proposed tax treatment of a particular business combination.
It is likely that we will acquire our participation in a business opportunity through the issuance of our own stock or other securities of our company. Although the terms of any such transaction cannot be predicted, it should be noted that in certain circumstances the criteria for determining whether or not an acquisition is a so-called "tax free" reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), depends upon whether the owners of the acquired business own 80% or more of the voting stock of the surviving entity. If a transaction were structured to take advantage of these provisions rather than other "tax free" provisions provided under the Code, all prior stockholders would in such circumstances retain 20% or less of the total issued and outstanding shares. Under other circumstances, depending upon the relative negotiating strength of the parties, prior stockholders may retain substantially less than 20% of the total issued and outstanding shares of the surviving entity. This could result in substantial additional dilution to the equity of those who were stockholders of our company prior to such reorganization.
To the extent the Internal Revenue Service or any relevant state tax authorities ultimately prevail in recharacterizing the tax treatment of a business combination, there may be adverse tax consequences to us, the target business and their respective stockholders. Tax considerations, as well as other relevant factors, will be evaluated in determining the precise structure of a particular business combination, which could be effected through various forms of a merger, consolidation or stock or asset acquisition.
Our present stockholders will likely not have control of a majority of the voting shares following a reorganization transaction. As part of such a transaction, all or a majority of our directors may resign and new directors may be appointed without any vote by stockholders.
In the case of an acquisition, the transaction may be accomplished upon the sole determination of management without any vote or approval by stockholders, other than our current stockholders. In the case of a statutory merger or consolidation directly involving our company, it will likely be necessary to call a stockholders' meeting and obtain the approval of the holders of a majority of the outstanding shares.
The necessity to obtain such stockholder approval may result in delay and additional expense in the consummation of any proposed transaction and will also give rise to certain appraisal rights to dissenting stockholders. Most likely, management will seek to structure any such transaction so as not to require stockholder approval.
- 8 -
Voluntary Exchange Act Registration
We have voluntarily become a reporting company under the Exchange Act, but we are under no obligation to do so pursuant to the requirements of the Exchange Act.
ITEM 1A.
ITEM 1A. RISK FACTORS.
Investing in our common stock is highly speculative and involves a high degree of risk. Any potential investor should carefully consider the risks and uncertainties described below before purchasing any shares of our common stock. The risks described below are those we currently believe may materially affect us. If any of them occur, our business, financial condition, operating results or cash flow could be materially harmed. As a result, the trading price of our stock could decline, and you might lose all or part of your investment. Our business, financial condition and operating results, or the value of any investment you make in the stock of our Company, or both, could be adversely affected by any of the factors listed and described below. These risks and uncertainties, however, are not the only ones that we face. Additional risks and uncertainties not currently known to us, or that we currently think are immaterial, may also impair our business operations or the value of your investment.
Risks Related to our Business
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE NO OPERATING HISTORY.
As we have no operating history or revenue and only minimal assets, there is a risk that we will be unable to consummate a business combination. We have had no recent operating history nor any revenues or earnings from operations since inception. We have no significant assets or financial resources. We will, in all likelihood, sustain operating expenses without corresponding revenues, at least until the consummation of a business combination. This may result in our incurring a net operating loss that will increase continuously until we can consummate a business combination with a profitable business opportunity. We cannot assure you that we can identify a suitable business opportunity and consummate a business combination.
THERE IS COMPETITION FOR THOSE PRIVATE COMPANIES SUITABLE FOR A MERGER TRANSACTION OF THE TYPE CONTEMPLATED BY MANAGEMENT.
We are in a highly competitive market for a small number of business opportunities which could reduce the likelihood of consummating a successful business combination. We are and will continue to be an insignificant participant in the business of seeking mergers with, joint ventures with, and acquisitions of, small private and public entities. A large number of established and well-financed entities, including small public companies and venture capital firms, are active in mergers and acquisitions of companies that may be desirable target candidates for us. Nearly all these entities have significantly greater financial resources, technical expertise and managerial capabilities than we do; consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. These competitive factors may reduce the likelihood of our identifying and consummating a successful business combination.
- 9 -
WE HAVE YET TO EARN REVENUE FROM OUR OPERATIONS AND, BECAUSE OUR ABILITY TO SUSTAIN OUR OPERATIONS IS DEPENDENT ON OUR ABILITY TO RAISE FINANCING, OUR ACCOUNTANTS BELIEVE THAT THERE IS SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.
We have incurred net losses of $117,893 for the period from our inception on December 22, 2006 to December 31, 2009, and have no revenues to date. Our future is dependent upon our ability to obtain financing or find a company suitable to merge with or acquire. These factors raise substantial doubt that we will be able to continue as a going concern. LBB & Associates Ltd., LLP, Certified Public Accountants, our independent auditors, have raised substantial doubt about our ability to continue as a going concern given our accumulated losses. This opinion could materially limit our ability to raise additional funds by issuing new debt or equity securities or otherwise. If we fail to raise sufficient capital, we will not be able to complete our business plan. As a result we may have to liquidate our business and you may lose your investment. You should consider our auditor's comments when determining if an investment in the Company is suitable.
FUTURE SUCCESS IS HIGHLY DEPENDENT ON THE ABILITY OF MANAGEMENT TO LOCATE AND ATTRACT A SUITABLE ACQUISITION.
The nature of our operations is highly speculative and there is a consequent risk of loss of your investment. The success of our plan of operation will depend to a great extent on the operations, financial condition and management of the identified business opportunity. While management intends to seek business combination(s) with entities having established operating histories, we cannot assure you that we will be successful in locating candidates meeting that criterion. In the event we complete a business combination, the success of our operations may be dependent upon management of the successor firm or venture partner firm and numerous other factors beyond our control.
While seeking a business combination, management anticipates devoting no more than a few hours per week to our company's affairs in total. Our director has not entered into a written employment agreement with us and is not expected to do so in the foreseeable future. This limited commitment may adversely impact our ability to identify and consummate a successful business combination.
LIMITED ABILITY TO EVALUATE TARGET BUSINESS’ MANAGEMENT
While our ability to successfully effect a business combination will be dependent upon certain key personnel, the future role of such personnel in the target business cannot presently be stated with any certainty. There can be no assurance that our president will remain associated in any operational capacity with us following a business combination. Moreover, there can be no assurances that our president will have any experience or knowledge relating to the operations of the particular target business. Furthermore, although we intend to scrutinize the management team of a prospective target business in connection with evaluating the desirability of effecting a business combination with such target business, there can be no assurances that our assessment of such management team will prove to be correct, especially since our president is not a professional business analyst. See Item 10, "Directors, Executive Officers and Corporate Governance."
Accordingly, we may be completely dependent on the ability of the management team of the target business who are unidentifiable as of the date hereof. In addition, there can be no assurances that such future management team will have the necessary skills, qualifications or abilities to manage a public company. We may also seek to recruit additional managers to supplement the incumbent management
- 10 -
team of the target business. There can be no assurances that we will have the ability to recruit such additional managers, or that such additional managers will have the requisite skill, knowledge or experience necessary or desirable to enhance the incumbent management team.
NO OPPORTUNITY FOR NON-AFFILIATE SHAREHOLDER EVALUATION OR APPROVAL OF BUSINESS COMBINATIONS
Our non-affiliate shareholders, if any, will, in all likelihood, not receive nor otherwise have the opportunity to evaluate any financial or other information which will be made available to us in connection with selecting a potential business combination until after we have entered into an agreement to effectuate a business combination. Such agreement to effectuate a business combination, however, will be subject to shareholder approval pursuant to applicable law. As a result, our non-affiliate shareholders, if any, will be almost entirely dependent on the judgment and experience of our president, his advisors, and perhaps also with the judgment of our other shareholder, in connection with the selection and ultimate consummation of a business combination.
In addition, under Nevada law, the form of business combination could have an impact upon the availability of dissenters' rights (i.e., the right to receive fair payment with respect to our common stock) to shareholders disapproving the proposed business combination. See Item 1, "Business - `Business of Issuer'" and Item 13, "Certain Relationships and Related Transactions, and Director Independence."
THE COMPANY HAS NO EXISTING AGREEMENT FOR A BUSINESS COMBINATION OR OTHER TRANSACTION.
There are no acquisitions, business combinations, or mergers pending or which have occurred involving the Company. Presently, we have no plans, proposals, agreements, understandings or arrangements of any kind or nature whatsoever to acquire or merge with any specific business or company, and we have not identified any specific business or company for investigation and evaluation.
THE TIME AND COST OF PREPARING A PRIVATE COMPANY TO BECOME A PUBLIC REPORTING COMPANY MAY PRECLUDE US FROM ENTERING INTO A MERGER OR ACQUISITION WITH THE MOST ATTRACTIVE PRIVATE COMPANIES.
Target companies that fail to comply with SEC reporting requirements may delay or preclude acquisition. Sections 13 and 15 (d) of the Exchange Act require reporting companies to provide certain information about significant acquisitions, including certified financial statements for the company acquired, covering one, two, or three years, depending on the relative size of the acquisition. The time and additional costs that may be incurred by some target entities to prepare these statements may significantly delay or essentially preclude consummation of an acquisition. Otherwise suitable acquisition prospects that do not have or are unable to obtain the required audited statements may be inappropriate for acquisition so long as the reporting requirements of the Exchange Act are applicable.
THE COMPANY MAY BE SUBJECT TO REGULATION UNDER THE INVESTMENT COMPANY ACT WHICH WOULD ADVERSELY AFFECT OUR OPERATIONS.
Although we will be subject to the reporting requirements under the Exchange Act, management believes we will not be subject to regulation under the Investment Company Act, since we will not be engaged in the business of investing or trading in securities. If we engage in business combinations which result in our holding passive investment interests in a number of entities, we could be subject to regulation under the Investment Company Act. If so, we would be required to register as an investment company and could be expected to incur significant registration and compliance costs. We have obtained no formal
- 11 -
determination from the SEC as to our status under the Investment Company Act and, consequently, violation of the Investment Company Act could subject us to material adverse consequences.
ANY POTENTIAL ACQUISITION OR MERGER WITH A FOREIGN COMPANY MAY SUBJECT US TO ADDITIONAL RISKS.
If we enter into a business combination with a foreign concern, we will be subject to risks inherent in business operations outside of the United States. These risks include, for example, currency fluctuations, regulatory problems, punitive tariffs, unstable local tax policies, trade embargoes, risks related to shipment of raw materials and finished goods across national borders and cultural and language differences. Foreign economies may differ favorably or unfavorably from the United States economy in growth of gross national product, rate of inflation, market development, rate of savings, and capital investment, resource self-sufficiency and balance of payments positions, and in other respects.
THE COMPANY MAY BE SUBJECT TO CERTAIN TAX CONSEQUENCES IN A BUSINESS COMBINATION, WHICH MAY INCREASE OUR COST OF ACQUISITION.
We may not be able to structure our acquisition to result in tax-free treatment for the companies or their stockholders, which could deter third parties from entering into certain business combinations with us or result in being taxed on consideration received in a transaction. Currently, a transaction may be structured so as to result in tax-free treatment to both companies, as prescribed by various federal and state tax provisions. We intend to structure any business combination so as to minimize the federal and state tax consequences to both us and the target entity; however, we cannot guarantee that the business combination will meet the statutory requirements of a tax-free reorganization or that the parties will obtain the intended tax-free treatment upon a transfer of stock or assets. A non-qualifying reorganization could result in the imposition of both federal and state taxes that may have an adverse effect on both parties to the transaction.
OUR BUSINESS WILL HAVE NO REVENUES UNLESS AND UNTIL WE MERGE WITH OR ACQUIRE AN OPERATING BUSINESS.
We are a development stage company and have had no revenues from operations. We may not realize any revenues unless and until we successfully merge with or acquire an operating business.
THE COMPANY HAS NOT CONDUCTED MARKET RESEARCH OR IDENTIFICATION OF BUSINESS OPPORTUNITIES, WHICH MAY AFFECT OUR ABILITY TO IDENTIFY A BUSINESS TO MERGE WITH OR ACQUIRE.
We have neither conducted nor have others made available to us results of market research concerning prospective business opportunities. Therefore, we have no assurances that market demand exists for a merger or acquisition as contemplated by us. Our management has not identified any specific business combination or other transaction for formal evaluation by us, such that it may be expected that any such target business or transaction will present such a level of risk that conventional private or public offerings of securities or conventional bank financing will not be available. There is no assurance that we will be able to acquire a business opportunity on terms favorable to us. Decisions as to which business opportunity to participate in will be unilaterally made by our management, which may act without the consent, vote or approval of our stockholders.
- 12 -
PRESIDENT CONFLICTS OF INTEREST
Our president is not required to commit his full time to our affairs and, accordingly, such person may have a conflict of interest in allocating management time among various business activities. Our president engages in other business activities similar and dissimilar to those we are engaged in without any limitations or restrictions applicable to such activities (see, for example Item 10, "Directors, Executive Officers and Corporate Governance," for a description of our officer and director's other business affiliations). To the extent that our officer and director engages in such other activities, he will have possible conflicts of interest in diverting opportunities to other companies, entities or persons with which he is or may be associated or have an interest, rather than diverting such opportunities to us. As no policy has been established for the resolution of such a conflict, we could be adversely affected should our president choose to place his other business interests before ours. No assurance can be given that such potential conflicts of interest will not cause us to lose potential opportunities. Our president may become aware of investment and business opportunities which may be appropriate for presentation to us as well as the other entities with which they are affiliated. Our president may have conflicts of interest in determining which entity a particular business opportunity should be presented. Accordingly, as a result of multiple business affiliations, our president may have similar legal obligations relating to presenting certain business opportunities to multiple entities. In addition, conflicts of interest may arise in connection with evaluations of a particular business opportunity by the board of directors with respect to the foregoing criteria. There can be no assurances that any of the foregoing conflicts will be resolved in our favor. We may also consider business combinations with entities owned or controlled by persons other than those persons described above. There can be no assurances that any of the foregoing conflicts will be resolved in our favor.
Our president may actively negotiate for or otherwise consent to the disposition of all or any portion of his shares of common stock, as a condition to, or in connection, with a business combination. Therefore, it is possible that the terms of any business combination will provide for the sale of all or a portion of the shares of common stock held by such shareholder. In the event that such a sale occurs, the Company's president intends to approve the business combination pursuant to the Nevada Revised Statute Section 78, which will have the effect of removing the transaction from the purview of the control-share acquisition statute promulgated under the Nevada Revised Statutes. Thus, it is likely that no other shareholders, if any, will be afforded the right to sell shares of common stock in connection with a business combination pursuant to the same terms that our president will be provided. Also, such other shareholders, if any, will not be afforded an opportunity to approve or consent to the purchase of all or any portion of the shares of common stock being sold by our president. See Item 1, "Business -`Business of Issuer'."
Risks Related to an Investment in Our Securities
THERE IS CURRENTLY NO TRADING MARKET FOR OUR COMMON STOCK, AND LIQUIDITY OF SHARES OF OUR COMMON STOCK IS LIMITED.
Our shares of common stock are not registered under the securities laws of any state or other jurisdiction, and accordingly there is no public trading market for our common stock. Further, no public trading market is expected to develop in the foreseeable future unless and until we complete a business combination with an operating business. Therefore, outstanding shares of our common stock cannot be offered, sold, pledged or otherwise transferred unless subsequently registered pursuant to, or exempt from registration under, the Securities Act and any other applicable federal or state securities laws or regulations. Compliance with the criteria for securing exemptions under federal securities laws and the securities laws of the various states is extremely complex, especially in respect of those exemptions affording flexibility and the elimination of trading restrictions in respect of securities received in exempt
- 13 -
transactions and subsequently disposed of without registration under the Securities Act or state securities laws.
Penny Stock Regulations - State Blue Sky Restrictions - Restrictions on Marketability.
The SEC has adopted regulations which generally define a "penny stock" to be any equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities may be covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors, which are, generally, institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. For transactions covered by this rule, the broker-dealers must make a special suitability determination for the purchase and receive the purchaser's written agreement of the transaction prior to the sale. Consequently, the rule may affect the ability of broker-dealers to sell our securities and also may affect the ability of any shareholder to sell shares of common stock in the secondary market.
In addition, the SEC has adopted a number of rules to regulate "penny stocks". Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, and 15g-9 under the Exchange Act. Because our securities may from time to time, and at the present time, constitute "penny stocks" within the meaning of these rules, the rules would apply to the Company and to its securities. These rules may further affect the ability of our shareholders to sell their shares in any public market which might develop.
Shareholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include the following:
•
control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
•
manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
•
“boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales
persons;
•
excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses.
We are aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, our president will strive within the confines of practical limitations and applicable laws and regulations to prevent the described patterns from being established with respect to our securities.
FINANCIAL INDUSTRY REGULATORY AUTHORITY (FINRA) SALES PRACTICE REQUIREMENTS MAY ALSO LIMIT A STOCKHOLDER’S ABILITY TO BUY AND SELL OUR COMMON STOCK.
FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA
- 14 -
requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
WE HAVE NEVER PAID DIVIDENDS ON OUR COMMON STOCK.
We have never paid dividends on our common stock and do not presently intend to pay any dividends in the foreseeable future. We anticipate that any funds available for payment of dividends will be re-invested into the Company to further its business strategy.
THE COMPANY MAY ISSUE MORE SHARES IN A MERGER OR ACQUISITION, WHICH WILL RESULT IN SUBSTANTIAL DILUTION.
Our Amended and Restated Articles of Incorporation authorize the issuance of a maximum of 500,000,000 shares of common stock. Any merger or acquisition effected by us may result in the issuance of additional securities without stockholder approval and may result in substantial dilution in the percentage of our common stock held by our then existing stockholders. Moreover, the common stock issued in any such merger or acquisition transaction may be valued on an arbitrary or non-arm's-length basis by our management, resulting in an additional reduction in the percentage of common stock held by our then existing stockholders. Our board of directors has the power to issue any or all of such authorized but unissued shares without stockholder approval. To the extent that additional shares of common stock are issued in connection with a business combination or otherwise, dilution to the interests of our stockholders will occur and the rights of the holders of common stock might be materially and adversely affected.
BECAUSE WE MAY SEEK TO COMPLETE A BUSINESS COMBINATION THROUGH A "REVERSE MERGER", FOLLOWING SUCH A TRANSACTION WE MAY NOT BE ABLE TO ATTRACT THE ATTENTION OF MAJOR BROKERAGE FIRMS.
Additional risks may exist since we will assist a privately held business to become public through a "reverse merger." Securities analysts of major brokerage firms may not provide coverage of us since there is no incentive to brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct any secondary offerings on behalf of our post-merger company in the future.
WE CANNOT ASSURE YOU THAT FOLLOWING A BUSINESS COMBINATION WITH AN OPERATING BUSINESS, OUR COMMON STOCK WILL BE LISTED ON NASDAQ OR ANY OTHER SECURITIES EXCHANGE.
Following a business combination, we may seek the listing of our common stock on NASDAQ or another securities exchange. However, we cannot assure you that following such a transaction, we will be able to meet the initial listing standards of either of those or any other stock exchange, or that we will be able to maintain a listing of our common stock on either of those or any other stock exchange. After completing a business combination, until our common stock is listed on the NASDAQ or another stock exchange, we may seek to become eligible to trade on the OTC Bulletin Board, another over-the-counter quotation system, or on the "pink sheets," where our stockholders may find it more difficult to dispose of shares or obtain accurate quotations as to the market value of our common stock. In addition, we would be subject to an SEC rule that, if it failed to meet the criteria set forth in such rule, imposes various practice requirements on broker-dealers who sell securities governed by the rule to persons other than established
- 15 -
customers and accredited investors. Consequently, such rule may deter broker-dealers from recommending or selling our common stock, which may further affect its liquidity. This would also make it more difficult for us to raise additional capital following a business combination.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not Applicable.
ITEM 2.
ITEM 2. DESCRIPTION OF PROPERTY.
The registered office and sole location of the Company is 3651 Lindell Road, Suite D-150,
Las Vegas, NV 89103.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
Presently, there are no legal proceedings to which we are a party, and we do not know of any legal proceedings threatened or contemplated against us.
ITEM 4
ITEM 4 [RESERVED]
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 has not been registered with the SEC or any state securities agency or authority. No public trading market presently exists for our shares of common stock, and there are no present plans, proposals, arrangements or understandings with any person with regard to the development of any trading market in any of our securities. No assurances can be made that a trading market for our common stock will ever develop. No shares of common stock have been registered for resale under the blue sky laws of any state. The holders of shares of common stock, and persons who may desire to purchase shares of common stock in any trading market that might develop in the future, should be aware that there may be significant state blue sky law restrictions upon the ability of shareholders to sell their shares and of purchasers to purchase the shares of common stock. Some jurisdictions may not allow the trading or resale of blind pool or "blank-check" securities under any circumstances. Accordingly, shareholders should consider the secondary market for our securities to be an extremely limited market for the resale of our securities, until such time that a trading market for our shares of common stock has developed, if any.
The SEC is of the opinion that Rule 504 of Regulation D, which exempts from Securities Act registration limited offerings and sales of securities not exceeding $1,000,000, is not available to blank check companies.
None of our shares of common stock are presently subject to outstanding options or warrants to purchase, or securities convertible into our common equity. There are forty three (43) shareholders of our common stock holding beneficial control of a total of 32,720,000 shares. All of these shares are "restricted securities", as that term is defined under Rule 144 promulgated under the Securities Act, in that such shares were issued in a private transaction not involving a public offering in accordance with the
- 16 -
exemptions from registration afforded by Section 4(2) of the Securities Act. These shares may not be resold under Rule 144 unless and until the Company has acquired an operating business and has met the holding period requirements of Rule 144 or has registered these shares for resale.
Neither the Company, our president, nor our shareholders have, at the present time, any plans, proposals, arrangements, understandings or intention of selling any unissued or outstanding shares of common stock in the public market subsequent to a business combination. Nevertheless, in the event that substantial amounts of common stock are sold in the public market subsequent to a business combination, such sales may adversely affect the price for the sale of the Company's equity securities in any trading market which may develop, if at all. No prediction can be made as to the effect, if any, that market sales of restricted shares of common stock or the availability of such shares for sale will have on the market prices prevailing from time to time, if any.
We presently serve as our own transfer agent and registrar for our common stock.
Dividends
We have not paid any dividends on our common stock to date and do not presently intend to pay cash dividends prior to the consummation of a business combination. The payment of cash dividends in the future, if any, will be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition subsequent to the consummation of a business combination. The payment of any dividends subsequent to a business combination will be within the discretion of our then existing board of directors. It is the present intention of our president to retain all earnings, if any, for use in our business operations, and, accordingly, the board of directors does not anticipate paying any cash dividends in the foreseeable future.
Recent Sales of Unregistered Securities
The following sets forth information relating to all previous sales of our common stock, which sales were not registered under the Securities Act. As of the date of this report, we have forty-three (43) shareholders and 32,720,000 shares of common stock issued and outstanding.
In connection with our organization on December 22, 2006, 16,000,000 shares of restricted common stock were issued to Waterford Capital Group, Inc. in exchange for $2,000 in cash. Charles J. Scimeca subscribed to another 16,000,000 shares of restricted common stock in exchange for $2,000 in cash, on July 31, 2007. In January 2008, we issued a total of 480,000 shares of restricted common stock to six accredited investors in transactions exempt from registration under the Securities Act, pursuant to Section 4(2) of the Securities Act and/or Rule 506. In each of the Regulation D transactions conducted in January 2008, the offering price was $0.003125 per share. Thus, we issued 480,000 shares of common stock to six accredited investors for $1,499 in transactions exempt from registration.
On or about April 1, 2008, Waterford Capital Group, Inc. gifted 1,600,000 shares to one other entity but retained voting control of the shares until the Company makes a business acquisition. On or about April 1, 2008, Waterford Capital Group, Inc. also gifted 2,400,000 shares to the family of Ms. Weigel, but Waterford Capital Group, Inc. retained beneficial ownership of these shares until they are sold or until the respective owners reach the age of majority.
On April 1, 2009, DMP Holdings, Inc. acquired 32,312,000 shares of restricted common stock from 16 shareholders in exchange for $50,000. The acquisition resulted in DMP owning 99.48% of the outstanding shares of the Company’s common stock and effected a change of control.
- 17 -
During July 2009, 240,000 shares of restricted common stock were sold to thirty (30) investors who primarily consisted of employees and family members of DMP for $0.0125 per share or a total of $3,000 in cash.
The purchasers listed above represented their intention to acquire the securities for investment purposes and their understanding that the securities were not issued pursuant to a registration statement under the Securities Act. A legend was placed on the stock certificates stating that the securities have not been registered under the Securities Act and cannot be sold or otherwise transferred without an effective registration or an exemption there from.
We have never utilized an underwriter for an offering of our securities, and there were no underwriting discounts or commissions involved in any of our securities transactions. Other than the securities described above, we have not issued or sold any securities.
No securities have been issued for services, and no services were performed by any purchaser as consideration for the shares issued. Neither we nor any person acting on our behalf offered or sold the securities by means of any form of general solicitation or general advertising.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC Regulation S-K.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
We were organized as a vehicle to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation. Our principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings. We will not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business. We have not had any revenues since inception.
We may consider a business which has recently commenced operations, is a developing company in need of additional funds for expansion into new products or markets, is seeking to develop a new product or service, or is an established business which may be experiencing financial or operating difficulties and is in need of additional capital. In the alternative, a business combination may involve the acquisition of, or merger with, a company which does not need substantial additional capital, but which desires to establish a public trading market for its shares, while avoiding, among other things, the time delays, significant expense, and loss of voting control which may occur in a public offering.
We do not currently engage in any business activities that provide cash flow. The costs of investigating and analyzing business combinations for the next 12 months and beyond such time will be paid with money in our treasury, if any, or with additional money contributed by our stockholders, or another source.
During the next 12 months, we anticipate incurring costs related to filing of Exchange Act reports and costs relating to consummating an acquisition. We believe we will be able to meet these costs through use of funds in our treasury and additional amounts, as necessary, to be loaned to or invested in us by our stockholders, management or other investors. After the reporting period, we began selling common stock to raise funds for this purpose.
- 18 -
We have not had any preliminary contact or discussions with any representative of any other entity regarding a business combination with us. Any target business that is selected may be a financially unstable company or an entity in its early stages of development or growth, including entities without established records of sales or earnings. In that event, we will be subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies. In addition, we may effect a business combination with an entity in an industry characterized by a high level of risk, and, although our management will endeavor to evaluate the risks inherent in a particular target business, there can be no assurance that we will properly ascertain or assess all significant risks.
Our management anticipates that it will likely be able to effect only one business combination, due primarily to our limited financing, and the dilution of interest for present and prospective stockholders, which is likely to occur as a result of our management's plan to offer a controlling interest to a target business in order to achieve a tax-free reorganization. This lack of diversification should be considered a substantial risk in investing in us, because it will not permit us to offset potential losses from one venture against gains from another.
We anticipate that the selection of a business combination will be complex and extremely risky. Because of general economic conditions, rapid technological advances being made in some industries and shortages of available capital, our management believes that there are numerous firms seeking even the limited additional capital that we will have and/or the perceived benefits of becoming a publicly traded corporation. Such perceived benefits of becoming a publicly traded corporation include, among other things, facilitating or improving the terms on which additional equity financing may be obtained, providing liquidity for the principals of and investors in a business, creating a means for providing incentive stock options or similar benefits to key employees, and offering greater flexibility in structuring acquisitions, joint ventures and the like through the issuance of stock. Potentially available business combinations may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex.
Results of Operations
The Company has not conducted any active operations since inception, except for its efforts to locate suitable acquisition candidates. No revenue has been generated by the Company from December 22, 2006 (Inception) to December 31, 2009. It is unlikely the Company will have any revenues unless it is able to effect an acquisition or merger with an operating company, of which there can be no assurance. It is management's assertion that these circumstances may hinder the Company's ability to continue as a going concern. The Company’s plan of operation for the next twelve months shall be to continue its efforts to locate suitable acquisition candidates.
For the year ended December 31, 2009 the Company had a net loss from operations of approximately $80,000, consisting of legal, accounting, audit and other professional service fees incurred in relation to the filing of its quarterly reports on form 10-Q and various other filings with the United States Securities and Exchange Commission (the “SEC”), the sale of the majority of the Company’s outstanding common stock to DMP as well as certain costs necessary to run a public company. Activities include development of the business plan, hiring of a legal firm, minimal operational set up (i.e. office), costs for SEC, transfer agent and State regulatory filings, additional auditor costs for business reviews, as well as minimum compensation paid to the former President. This compares with a net loss from operations of approximately $22,000 for the year ended December 31, 2008, comprised mostly of legal, accounting, audit and other professional service fees incurred in relation to the filing of the Company’s registration statement on Form 10-SB12G filed in September 2008, its one amendment and its quarterly reports filed on form 10-Q.
- 19 -
For the period from December 22, 2006 (Inception) to December 31, 2009, the Company had a net loss from operations of approximately $118,000, comprised mostly of legal, accounting, audit and other professional service fees incurred in relation to various annual and quarterly filings of the Company with the SEC in addition to those costs noted above.
Capital Contribution-related party
Prior to a change in control, the Company had a $33,022 note payable to a related party, accounts payable of $6,425 and cash of $170. In conjunction with the change of control of the Company, the note payable, along with the accounts payable less the cash, were eliminated with the proceeds received from DMP. The resulting extinguishment of debt, totaling $39,277, was treated as contributed capital-related party in the accompanying financial statements as of December 31, 2009.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Contractual Obligations
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
Liquidity and Capital Resources
As of December 31, 2009, the Company had $3,000 cash resulting from the sale of 240,000 shares of common stock during July 2009, as compared with cash of $170 as of December 31, 2008. The Company’s current liabilities as of December 31, 2009 totaled $72,437, comprised of accounts payable and amounts payable to a related party. This compares to the Company’s current liabilities as of December 31, 2008 of $31,537 which comprised of accounts payable and related party payables. In conjunction with the change of control, a note payable to a related party along with the outstanding accounts payable less the cash, were forgiven resulting in a forgiveness of debt totaling $39,277 for the year ended December 31, 2009.
The Company can provide no assurance that it can continue to satisfy its cash requirements for at least the next twelve months.
The following is a summary of the Company's cash flows provided by (used in) operating, investing, and financing activities:
- 20 -
The Company has generated no revenues since inception. The Company is also dependent upon the receipt of capital investments or other financing to fund its ongoing operations and to execute its business plan of seeking a combination with a private operating company. Recurring expenses, which include accounting, auditing, legal, and administrative expenses, have averaged $5,500 per month during fiscal year 2009 and are expected to continue until such time as we execute our business plan to acquire or merge with a private operating company. In addition, the Company is dependent upon its largest shareholders and new investors to provide continued funding and capital resources. If continued funding and capital resources are unavailable at reasonable terms, the Company may not be able to implement its plan of operations.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC Regulation
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by Item 8 are submitted in a separate section of this report, beginning on, and are incorporated herein and made a part hereof.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On February 3, 2010, R.R. Hawkins and Associates International, PSC (“Hawkins”) was dismissed as the Registrant’s independent registered public accounting firm. On the same date, February 3, 2010, the accounting firm of LBB & Associates Ltd., LLP (“LBB”) was engaged as the Registrant’s new independent registered public accounting firm. The Registrant’s Board of Director’s approved both the dismissal of Hawkins and the engagement of LBB on February 3, 2010.
Except as described below, the report of Hawkins on the financial statements of Security Solutions Group, Inc. (then known as Corporate Equity Investments, Inc.) as of and for the years ended December 31, 2008 and December 31, 2007 did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles for either of the years ended December 31, 2008 and 2007 as described under Item 304 (a)(1)(ii) of Regulation S-K. Hawkins’ audit report relating to the audit of Security Solutions Group, Inc.’s financial statements for the year ended December 31, 2008 and filed on March 23, 2009 indicated the auditors’ substantial doubt about the Company’s ability to continue as a going concern because the Company required additional funds to meet its obligations and the costs of its operations.
Since the Company’s inception on December 22, 2006, during the period that Hawkins was the Registrant’s independent registered public accounting firm, the Registrant (or someone on its behalf) had not consulted with LBB, or any other auditor, regarding any accounting or audit concerns for the two most recent years and the subsequent interim period through the date the firm was engaged, to include, but not by way of limitation, those stated in Item 304 of Regulation S-K.
During the Registrant’s two most recent fiscal years ended December 31, 2008 and 2007, and through the date of dismissal, the Registrant has not had any disagreements with Hawkins, whether resolved or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to said accountants' satisfaction, would have caused it to make
- 21 -
reference to the subject matter of the disagreements(s) in connection with its report. Additionally, there have been no reportable events within the meaning set forth in Item 304 of Regulation S-K.
A copy of Hawkins’ letter to the SEC describing the above was filed with the Company’s Current Report on Form 8-K/A on February 22, 2010.
ITEM 9A(T).
ITEM 9A(T).
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We have carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer/Principal Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of December31, 2009. Based on such evaluation, we have concluded that, as of such date, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in applicable SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer/Principal Financial Officer, as appropriate, to allow timely discussions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Security Solutions Group, Inc.’s management is responsible for establishing and maintaining internal control over financial reporting for the Company. The Company’s internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting of the Company includes those policies and procedures that:
(1)
pertain to the maintenance of records that in reasonable detail accurately and fairy reflect the transactions of the company.
(2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorization of management and directors of the Company; and
(3)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s financial statements.
All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error or circumvention through collusion of improper overriding of controls. Therefore, even those internal control systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may vary over time.
The management of Security Solutions Group, Inc. assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009. In making its assessment of internal control over financial reporting management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal-Control-Integrated Framework and implemented a process to monitor and assess both the design and operating effectiveness of the
- 22 -
Company’s internal controls. Based on this assessment, management believes that as of December 31, 2009, the Company’s internal control over financial reporting was effective.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only Management’s report in this annual report.
Changes in Internal Control Over Financial Reporting
Management of the Company has evaluated, with the participation of the Company’s Chief Executive Officer/Chief Financial Officer, changes in the Company’s internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the fourth quarter of 2009. In connection with such evaluation, there have been no changes to the Company’s internal control over financial reporting that occurred since the beginning of the Company’s fourth quarter of 2009 that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.
ITEM 9B.
ITEM 9B.
OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Directors and Executive Officers
Our executive officers and directors and additional information concerning them are as follows:
Name
Age
Position
Phil Viggiani
President, Secretary, Treasurer and Director
Wayne Lipkus
Director
Phil Viggiani -Mr. Viggiani has been the Company’s Secretary, Treasurer and Director since November 2009 to the present. Mr. Viggiani is the Vice President of Sales and Marketing for Praesidium which is his primary position. Mr. Viggiani is also a Director on DMP Holdings Inc which acquired control of the company on April 1, 2009. There are no agreements in place with Mr. Viggiani or expectations for him to devote his sole efforts to the management of the business. Until such time as a business combination occurs, Mr. Viggiani, does not expect any changes in management.
Wayne Lipkus - Mr. Lipkus received his Bachelor of Commerce degree from the University of Toronto in 1986. Mr. Lipkus then attended Seneca College where he graduated in Computer Programming and Analysis in 1988. Since graduation from college, Mr. Lipkus has worked extensively in the computer programming industry where he has created numerous computer software programs and anti-counterfeiting training manuals for major intellectual property owners. Mr. Lipkus currently owns and operates a computer consultant business, Lipkus & Associates Computer Consultants, Inc.
- 23 -
Term of Office
The term of office of each director expires at our annual meeting of stockholders or until their successors are duly elected and qualified.
Significant Employees
We have no significant employees other than our president, Mr. Phil Viggiani.
Family Members
There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.
Audit Committee
The Board of Directors acts as the Audit Committee and the Board has no separate committees. We have no qualified financial experts at this time because we have not been able to hire a qualified candidate. Further, we believe that we have inadequate financial resources at this time to hire such an expert. We intend to continue to search for a qualified individual for hire.
Promoters and Control Persons
On April 1, 2009, DMP acquired 32,312,000 shares of common stock of the Company resulting in DMP owning 99.48% of the outstanding shares of the Company’s common stock.
Compliance with Section 16(a) of the Exchange Act
We are not aware of any person required to file reports required by Section 16(a) of the Exchange Act who has not done so on a timely basis. Further, we are aware that no Forms 5 are required to be filed by persons required to file reports pursuant to Section 16(a) of the Exchange Act.
Code of Ethics
We do not currently have a code of ethics applicable to our principal executive and financial officers. We do not believe that we will need a code of ethics at the present time because we are not an operating company, but we believe that having a code of ethic will be important for the Company after it conducts a business combination.
Corporate Governance
We have not held any board or committee meetings because we have only one (1) director. We do not have any committees for the same reason. We are not seeking to expand the board of directors because we do not believe that having additional directors or committees will facilitate the execution of our singular business purpose. We do not have an audit committee financial expert as that term is defined in Regulation SK, Item 407 (d)(5). We do not have a process for shareholders to send communication to the board because our shareholders and our director have ready access to each other.
- 24 -
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
Neither Mr. Viggiani nor Mr. Lipkus receive any compensation for services rendered to us. They have not received such compensation in the past, and are not accruing any compensation pursuant to any agreement with us. No remuneration of any nature has been paid for or on account of services rendered by a director in such capacity. Mr. Viggiani and Mr. Lipkus intend to devote no more than a few hours a week to our affairs.
Neither Mr. Viggiani nor Mr. Lipkus will receive a finder's fee or other compensation, either directly or indirectly, as a result of their efforts to implement our business plan outlined herein. It is possible that, after we successfully consummate a business combination with an unaffiliated entity, that entity may desire to employ or retain one or a number of members of our management for the purposes of providing services to the surviving entity. However, we have adopted a policy whereby the offer of any post-transaction employment to members of management will not be a consideration in our decision whether to undertake any proposed transaction. No retirement, pension, profit sharing, stock option or insurance programs or other similar programs have been adopted by us for the benefit of our employees.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Beneficial Ownership of Securities
The following table sets forth, certain information as of March 31, 2010, regarding the beneficial ownership of our common stock by (i) each stockholder known by us to be the beneficial owner of more than five percent of our common stock, (ii) by each of our executive officers named in the Summary Compensation Table and our directors and (iii) by all of our executive officers and directors as a group. Each of the persons named in the table has sole voting and investment power with respect to common stock beneficially owned. Unless otherwise noted in the table, the address for each of the persons identified is 3651 Lindell Road, Suite D-150, Las Vegas, NV 89103. Beneficial ownership is calculated based upon 32,720,000 shares of common stock issued and outstanding as of March 31, 2010.
(1) The number of shares of common stock owned are those “beneficially owned” as determined under the rules of the Securities and Exchange Commission, including any shares of common stock as to which a person has sole or shared voting or investment power and any shares of common stock which the person has the right to acquire within sixty (60) days through the exercise of any option, warrant or right. No beneficial owner has the right to acquire within sixty (60) days additional shares of common stock from options, warrants, rights or similar obligations.
(2)Mr. Viggiani owns one-third of DMP Holdings, Inc.
- 25 -
Director Independence
We do not have any independent directors.
Transactions with Promoters
A description of the Company’s founding shareholders and their contributions to the Company are set forth above in Item 10, “Directors, Executive Officers and Corporate Governance.”
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The aggregate fees billed for the years ended December 31, 2009 and December 31, 2008 for the professional services rendered by Hawkins Accounting, our independent public accounting firm during fiscal years 2009 and 2008, for the audit of the Company’s annual financial statements, review of financial statements or services that are normally provided by our independent public accounting firm in connection with statutory and regulatory filings or engagements for such fiscal years, equaled $24,750 and $10,500, respectively.
Audit Related Fees
There were no fees billed for the years ended December 31, 2008 and December 31, 2009, for assurance and related services by Hawkins Accounting that are reasonably related to audit or review of the Company’s financial statements not reported under “Audit Fees” above.
Tax Fees
Hawkins Accounting does not provide us with tax compliance, tax advice or tax planning services.
All Other Fees
No other fees were billed by Hawkins Accounting to the Company during the years ended December 31, 2009 and December 31, 2008.
PART IV
ITEM 15.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The Company’s financial statements and related notes thereto are listed and included in this Annual Report beginning on page. The following exhibits are filed with, or are incorporated by reference into, this Annual Report.
Exhibit Number
Description
31.1
Certification pursuant to Section 302 of the Sarbanes-Oxley Act*
32.1
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act*
*Filed here with.
- 26 -
Report of Independent Registered Public Accounting Firm
To the Board of Directors of
Security Solutions Group, Inc. (formerly Corporate Equity Investments, Inc.)
(A Development Stage Company)
Las Vegas, Nevada
We have audited the accompanying balance sheet of Security Solutions Group, Inc. (the “Company”) as of December 31, 2009, and the related statement of operations, stockholders' deficit, and cash flows for the year then ended and for the period from December 22, 2006 (Inception) through December 31, 2009. These 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 did not audit the balance sheet as of December 31, 2008 or the statements of operations, stockholder’s deficit and cash flows for the period from December 22, 2006 (Inception) to December 31, 2008, which totals reflected a deficit of $37,546 accumulated during the development stage. Those financial statements and cumulative totals were audited by other auditors whose report dated March 23, 2009, expressed an unqualified opinion on those statements and cumulative totals, and included an explanatory paragraph regarding the Company’s ability to continue as a going concern. Our opinion, insofar as it relates to amounts included for that period is based on the report of other independent auditors, mentioned above.
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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Security Solutions Group, Inc. as of December 31, 2009, and the results of its operations and its cash flows for the year then ended and for the period from December 22, 2006 (Inception) through December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 3 to the consolidated financial statements, the Company's losses from operations, and its need for additional financing in order to fund its projected loss in 2010 raise substantial doubt about its ability to continue as a going concern. The 2009 financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ LBB & Associates Ltd, LLP
LBB & Associates Ltd., LLP
Houston, Texas
March 29, 2010
- -
To the Board of Directors and Shareholders
Corporate Equity Investments, Inc. Miami, Florida
Report of Independent Registered Public Accounting Firm
We have audited the balance sheet of Corporate Equity Investments, Inc. as of December 31, 2008 and the related statements of operations, stockholders' deficit and cash flows for the year ending December 31, 2008 and for the period from December 22, 2006 (Inception) to December 31, 2008. These 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Corporate Equity Investments, Inc. as of December 31, 2008, the results of operations and its cash flows for the year ended December 31, 2008 in conformity with generally accepted accounting principles in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has incurred net losses since inception, which raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustment that might result from the outcome of this uncertainty.
/s/ Hawkins Accounting
Hawkins Accounting
March 23, 2009
Los Angeles, CA
- -
SECURITY SOLUTIONS GROUP, INC.
(Formerly known as Corporate Equity Investments, Inc.)
(A Development Stage Company)
BALANCE SHEETS
See accompanying notes to financial statements
- -
SECURITY SOLUTIONS GROUP, INC.
(Formerly known as Corporate Equity Investments, Inc.)
(A Development Stage Company)
STATEMENTS OF OPERATIONS
See accompanying notes to financial statements
- -
See accompanying notes to financial statements
- -
SECURITY SOLUTIONS GROUP, INC
(Formerly known as Corporate Equity Investments, Inc.)
(A Development Stage Company)
Statements of Cash Flows
See accompanying notes to financial statements
- -
SECURITY SOLUTIONS GROUP, INC.
(Formerly known as Corporate Equity Investments, Inc.)
(A Development Stage Company)
Notes to Financial Statements
December 31, 2009
Note 1 - Nature of Operations and Summary of Significant Accounting Policies
Nature of operations
Security Solutions Group, Inc. (“SSG”) (formerly Corporate Equity Investments, Inc. (“CEI”)) was incorporated in Florida on December 22, 2006. CEI was formed to serve as a vehicle to effect an asset acquisition, merger, or business combination with a domestic or foreign business. On April 1, 2009, DMP Holdings, Inc., (“DMP”) a privately held Utah company, acquired from various shareholders 32,312,000 shares of common stock of CEI at varying prices, which resulted in a change of control. DMP beneficially and directly owns 32,312,000 shares of common stock which represents 98.75% of the outstanding shares of the common stock of the company based on 32,720,000 shares outstanding as of December 31, 2009.
On July 30, 2009, the Board of Directors and a majority of the shareholders approved the filing of Articles of Conversion with the Nevada Secretary of State which effectively changed the domicile of CEI from Florida to Nevada and changed the name of the company from Corporate Equity Investments, Inc. to Security Solutions Group, Inc. In conjunction with the incorporation in the State of Nevada, SSG increased its number of authorized shares of common stock from 100,000,000 to 500,000,000. On August 6, 2009, the Board of Directors of the Company approved an 8 to 1 forward common stock split to all shareholders of record on August 6, 2009. All stock transactions noted herein have been adjusted to account for the forward stock split unless otherwise noted.
Unless the context indicates otherwise, references herein to “we,” “our,” “CEI” or the “Company” during periods prior to April 1, 2009 refer solely to CEI, while references to “we,” “our,” “SSG” or the "Company" after April 1, 2009 refer to SSG.
Development Stage
The Company’s financial statements are presented as those of a development stage enterprise. Activities during the development stage primarily include related party equity-based financing and development of the business plan, hiring of a legal firm, minor operational set up (i.e. office), costs for United States Security and Exchange Commission, transfer agent and State regulatory filings, additional auditor costs for business reviews, as well as minimum compensation paid to the former president of $6,000. As of December 31, 2009 the Company had not yet commenced operations.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
A significant estimate in 2009 and 2008 included a 100% valuation allowance for deferred taxes due to the Company’s continuing and expected future losses.
- -
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an original maturity of three months or less and money market accounts to be cash equivalents. At December 31, 2009, the Company has no cash equivalents.
Net Loss per Share
Basic loss per share is computed by dividing net loss by weighted average number of shares of common stock outstanding during each period. Diluted income per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. At December 31, 2009 and 2008, the Company does not have any outstanding common stock equivalents; therefore, a separate computation of diluted loss per share is not presented.
Income Taxes
The Company accounts for income taxes utilizing the liability method. Under such method, deferred income tax assets are recognized for the tax consequences of temporary differences between the tax and financial statement reporting bases of assets and liabilities. A valuation allowance can be provided for a net deferred tax asset, due to uncertainty of realization.
Reclassifications
Certain amounts in the year 2008 financial statements have been reclassified to conform to the year 2009 presentation. The results of these reclassifications did not materially affect the Company’s financial position, results of operations or cash flows.
Recently Issued Accounting Pronouncements
On September 30, 2009, the Company adopted changes issued by the Financial Accounting Standards Board (FASB) to the authoritative hierarchy of GAAP. These changes establish the FASB Accounting Standards CodificationTM (Codification) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting Standards Updates. Accounting Standards Updates will not be authoritative in their own right as they will only serve to update the Codification. These changes and the Codification itself do not change GAAP. Other than the manner in which new accounting guidance is referenced, the adoption of these changes had no impact on the Financial Statements.
The Company adopted changes issued by the FASB regarding accounting for business combinations. These changes apply to all assets acquired and liabilities assumed in a business combination that arise from certain contingencies and requires (i) an acquirer to recognize at fair value, at the acquisition date, an asset acquired or liability assumed in a business combination that arises from a contingency if the acquisition-date fair value of that asset or liability can be determined during the measurement period otherwise the asset or liability should be recognized at the acquisition date if certain defined criteria are met; (ii) contingent consideration arrangements of an acquiree assumed by the acquirer in a business combination be recognized initially at fair value; (iii) subsequent measurements of assets and liabilities arising from contingencies be based on a systematic and rational method depending on their nature and contingent consideration arrangements be measured subsequently; and (iv) disclosures of the amounts and measurement basis of such assets and liabilities and the nature of the contingencies. These guidelines are effective for business combinations completed on or after the first annual reporting period beginning on
- -
or after December 15, 2008. The adoption of these guidelines had no material impact to the Company’s financial position, results of operations or cash flows.
In March 2008, the FASB issued new disclosure requirements regarding derivative instruments and hedging activities. Entities must now provide enhanced disclosures on an interim and annual basis regarding how and why the entity uses derivatives; how derivatives and related hedged items are accounted for, and how derivatives and related hedged items affect the entity’s financial position, financial results and cash flow. Pursuant to the transition provisions, the Company adopted these new requirements on January 1, 2009. The adoption of this standard did not have a material effect on our consolidated financial statements.
In May 2009, the FASB issued guidelines on subsequent event accounting which sets forth: 1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; 2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and 3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This disclosure should alert all users of financial statements that an entity has not evaluated subsequent events after that date in the set of financial statements being presented. The adoption of this guidance did not have an impact on this company’s financial statements.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the financial statement upon adoption.
Note 3 - Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has incurred a net operating loss of $80,347 for the year ended December 31, 2009; a deficit accumulated during the development stage of $117,893 and a stockholders’ deficit of $69,437 as of December 31, 2009, all of which raise substantial doubt about the Company’s ability to continue as a going concern. In addition, the Company is in the development stage and has not yet generated any revenues. The ability of the Company to continue as a going concern is dependent on Management’s plans, which include potential asset acquisitions, mergers or business combinations with other entities, further implementation of its business plan and continuing to raise funds through debt or equity raises. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
Note 4 - Asset Purchase and Rescission Agreement
On November 12, 2009, the Company entered into an Asset Purchase, Sale and Transfer Agreement (the “Agreement”) with DMP. Under the terms of the Agreement, DMP agreed to sell, transfer and assign, and the Company agreed to purchase and accept all of DMP’s rights, title and interest in and to certain assets, including brand protection, loss prevention and asset management technology, intellectual property, agreements, contracts, documents, equipment and inventory, specifically designed to provide a total solution in the area of brand protection and loss prevention products and services (the “Assets”). In consideration for the Assets, the Company issued a promissory note in favor of DMP in the amount of $407,500.
- -
On December 31, 2009, the Company entered into a Rescission Agreement (the “Rescission Agreement”) rescinding the Asset Purchase, Sale and Transfer Agreement it entered into with DMP Holdings, Inc. on November 12, 2009. Under the terms of the Agreement, the Promissory Note previously entered into by the Company was cancelled by DMP, and all of the rights, title and interest in and the Assets was transferred back to DMP. The Company’s results of operations do not reflect any activity based on its inability to meet all merger terms.
Note 5 - Due to Related Parties
Operations since the change in control on April 1, 2009 have been funded solely by a company also owned by DMP. As of December 31, 2009, $37,725 was owed to this related party, for which interest is not being charged.
Note 6 - Extinguishment of Debt
Prior to the change in control on April 1, 2009, the Company had a $33,022 note payable to a related party, accounts payable of $6,425 and cash of $170. In conjunction with the change in control of the Company, the note payable, along with the accounts payable less the cash, were eliminated with the proceeds received from DMP. The resulting extinguishment of debt, totaling $39,277 was treated as contributed capital-related party in the accompanying financial statements as of December 31, 2009.
Note 7 - Income Taxes
The Company recognizes deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carryforwards. The Company establishes a valuation allowance to reflect the likelihood of realization of deferred tax assets.
The Company has a net operating loss carryforward for tax purposes totaling approximately $118,000 at December 31, 2009 expiring through the year 2029. Due to our change in control on April 1, 2009, there is the potential that a portion of our net operating loss carryforward may not be recognizable.
The provision for refundable Federal income tax consists of the following as of December 31:
Refundable Federal income tax calculated at statutory rate of 35%
$
28,000
8,000
Less - Change in valuation allowance
(28,000)
(8,000)
Net refundable amount
$
-
$
-
The cumulative tax effect at the expected rate of 35% of significant items comprising our net deferred tax amount is as follows at December 31:
Deferred tax asset attributable to
Net operating losses carried forward
$
42,000
$
13,700
Less: Valuation allowance
(42,000)
(13,700)
Net deferred tax asset
$
-
$
-
- -
The Company established a full valuation allowance in accordance with the provision of ASC No. 760, “Deferred Tax Assets and Liabilities.” The Company continually reviews the adequacy of the valuation allowance and recognizes a benefit from income taxes only when reassessment indicates that it is more likely than not that the benefits will be realized.
No provision was made for federal income tax since the Company has net operating losses.
Note 8 - Stockholders’ Equity
Common Stock
·
Year ended December 31, 2006
On December 22, 2006, the Company issued 16,000,000 shares of common stock, par value $.001 per share, to its founding shareholders in exchange for $2,000 in cash.
·
Year ended December 31, 2007
On July 31, 2007, the Company issued 16,000,000 shares of common stock, par value $.001 per share, to an individual in exchange for $2,000 in cash.
·
Year ended December 31, 2008
On February 22, 2008, the Company issued 480,000 shares of common stock, par value $.001 per share, in exchange for $1,499 in cash.
·
Year ended December 31, 2009
On July 15, 2009, the Company issued 240,000 shares of common stock, par value $.001 per share, in exchange for $3,000 in cash. Said shares were sold primarily to employees of a company related to DMP and their family members.
Contributed Capital - Related Party
·
Year ended December 31, 2006
A related party of the Company’s President paid $70 for certain general and administrative expenses on behalf of the Company
·
Year ended December 31, 2007
A related party of the Company’s President contributed professional services to the Company aggregating $400. The value of services was based upon the fair value of the services provided.
A related party of the Company’s President paid $210 for certain general and administrative expenses on behalf of the Company.
Note 9 - Subsequent Events
Management evaluated all activity of the Company through the date the financial statements were issued and concluded that no subsequent events have occurred that would require recognition in the Financial Statements or disclosure in the Notes to the Financial Statements.
- -
Signatures
In accordance with Section 13 or 15(d) of the Exchange Act, the company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name
Title
Date
/s/ Phil Viggiani
President, Secretary, Treasurer and Director (Principal Accounting Officer and Authorized Officer)
April 5, 2010
/s/ Wayne Lipkus
Director
April 5, 2010
-