ITEM 1.
BUSINESS
ITEM 1B.
ITEM 1B.
RISK FACTORS
ITEM 2.
Item 2. Description Of Property.
Our executive and operations offices are located in Canyon Country, California. The Company shares office space with other related parties.
Item 3.
Item 3. Legal Proceedings.
We are currently subject to the following legal proceedings:
In 2005, the Company retained the legal services of Weed & Co, LLP. On December 3, 2007, Weed & Co, LLP filed a complaint in Superior Court of the State of California in dispute over payment of legal fees against the Company and other defendants. On March 11, 2008, the other defendants entered into a settlement agreement where Weed & Co, LLP was to be paid $87,500. Weed & Co., LP has the right to re-file the complaint should the other defendants not satisfy this agreement. There is no liability reflected in the accompanying consolidated financial statements for this uncertainty. Weed & Co, LLP exercised its rights and received shares as settlement outlined in the agreement referenced above.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders.
On October 21, 2008, pursuant to a written consent, the holders of the majority of our voting stock approved us to enter into a share exchange agreement with FLNU and ECV Holdings. Pursuant to the share exchange agreement, FLNU will transfer all of the issued and outstanding common stock of ECV Holdings in exchange for 50,000,000 shares of our newly issued common shares. A copy of the Share Exchange Agreement was filed as exhibit to the Form 8-K filed on October 27, 2008 and incorporated herewith by reference.
Effective December 16, 2009 there was a 1:1500 reverse split, approved and accepted by shareholders, along with the fore mentioned rescission.
The transactions on March 26, 2008, May 8, 2008, and October 21, 2008 have all been rescinded effective January 24, 2010. All memberships, assets , interests or stock positions have been returned to the appropriate entity or persons.
In consideration for execution of the rescission agreement 50,000,000 common shares previously issued be returned to the treasury stock of the Company. The preferred shares held by Mr. Richardson have been purchased in a separate transaction. In addition as part of the rescission agreement all assets, property, securities or items of value have been transferred back to the original holders pre-acquisition.
The company will continue to develop Dream Apartments, TV. Dream Apartments TV is a diverse apartment advertising and search engine company for Apartments and properties in California and Nationwide. We have been working on making the intellectual property of Dream Apts. more suited for 2010. We have also been adding many aspects to the core structure enabling us to be able to roll out our technology into apartment searching and finding properties.
PART II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock was initially quoted on OTCBB under the symbol PSPP. On September 22, 2008, we changed our symbol to MODY. In February 2010 we changed our symbol to STKO. The following table sets forth for the indicated periods the high and low sales prices per share for our common stock on the OTCBB.
Holders of Record
As of January 8, 2010, there were approximately172 stockholders of record of our common stock, and the closing price of our common stock was $0.01 per share as reported by OTCBB. Because many of our shares of Class A common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Dividend Policy
We have never declared or paid any cash dividend on our common stock. We do not expect to pay any dividends in the foreseeable future.
Item 6.
Item 6. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
We make forward-looking statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report based on the beliefs and assumptions of our management and on information currently available to us. Forward-looking statements include information about our possible or assumed future results of operations which follow under the headings “Business and Overview,” “Liquidity and Capital Resources,” and other statements throughout this report preceded by, followed by or that include the words “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates” or similar expressions.
Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed in these forward-looking statements, including the risks and uncertainties described below and other factors we describe from time to time in our periodic filings with the U.S. Securities and Exchange Commission (the “SEC”). We therefore caution you not to rely unduly on any forward-looking statements. The forward-looking statements in this report speak only as of the date of this report, and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
Overview
Results of Operations
Comparison of Years Ended December 31, 2008 and 2009
General: We had conducted operations through December 31, 2008 under MODY. This includes the operations from three hotels; Hanover, Clinton, and Absecon. Upon the rescission of the previous agreements the Company has continued to develop Dream Apts, TV and associated software opportunities for the company.
Cash . As of December 31, 2008, we had cash of $-0-, as compared to $1,000 as of December 31, 2009. This decrease was primarily due to the substantial decrease in net cash provided by financing activities in the fiscal year 2009.
We believe we can meet our liquidity and capital requirements in 2010 from a variety of sources. These include our present capital resources, internally generated cash, and future equity financings.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Item 9. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to the Combined Financial Statements
Larry O'Donnell, CPA, P.C.
Telephone (303)745-4545
2228 South Fraser Street
Fax (303)369-9384
Unit 1
e-mail larryodonnelcpa@comcast.net
Aurora, Colorado 80014 www.larryodonnellcpa.com
Report of Independent Registered Public Accounting Firm
To the Board of Directors
Stakool, Incorporated
Canyon Country, California
I have audited the accompanying consolidated balance sheets of Stakool, Incorporated and subsidiaries as of December 31, 2009, and the related consolidated statements of operations, changes in stockholders’ deficiency, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. My responsibility is to express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that I 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. I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Stakool, Incorporated and subsidiaries as of December 31, 2009, and the results of their operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
These consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has operating and liquidity concerns, has incurred an accumulated deficit of approximately $5,839,000 through the period ended December 31, 2009. This condition raises substantial doubt about the Company's ability to continue as a going concern. Management's plans as to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties.
/s/ Larry O’Donnell
Larry O’Donnell, CPA, P.C.
March 25, 2010
See accompanying notes to consolidated financial statements, which are an integral part of the financial statements.
See accompanying notes to consolidated financial statements, which are an integral part of the financial statements.
See accompanying notes to consolidated financial statements, which are an integral part of the financial statements.
See accompanying notes to consolidated financial statements, which are an integral part of the financial statements.
STAKOOL. INC.
F/KA/ MOD HOSPITALITY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2009
_________________________________________________________________________________________
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUTING POLICIES AND BASIS OF PRESENTATION
Nature of Business
On February 12, 2008, East Coast Realty Ventures, LLC (ECRV, LLC) purchased from Airport Road Associates One, LLC ("Airport LLC"), the then controlling shareholder of the issuer, 900,000 shares of Preferred Stock and 25,865,000 shares of Common Stock in a privately negotiated transaction. ECRV, LLC paid $153,750 for the Preferred and Common Stock.
As of February 12, 2008, ECRV, LLC may be deemed to have sole voting power over 132,873,855 shares of Common Stock (which includes the 107,008,855 votes from the Series A Shares) and dispositive power over 81,553,282 shares of Common Stock (which includes shares of Common Stock issuable upon the conversion of the Series A Shares). Airport LLC may be deemed to have shared voting and dispositive power over no shares of Common Stock.
As of February 12, 2008, Frederic Richardson may be deemed to have sole voting and dispositive power over no shares of Common Stock and may be deemed to have shared voting power over 132,873,855 shares of Common Stock (which includes the 107,008,855 votes from the Series A Shares held by Airport LLC) and shared dispositive power over 81,553,282 shares of Common Stock (which includes shares of Common Stock issuable upon the conversion of the Series A Shares held by Airport LLC).
On March 26, 2008, ECV Holdings, Inc. (“ECV”) is a corporation formed under the laws of Delaware. On April 4, 2008, ECV entered into a stock for membership interest agreement with East Coast Realty Ventures, LLC (“ ECRV ”) which owned all of the issued and outstanding capital (the “ Membership Interest ”) of ECRV Hanover LeaseCo, LLC (the “ Hanover ”), ECRV Clinton LeaseCo, LLC (the “ Clinton ”), and ECRV FM LeaseCo, LCC (the “ Absecon ”). Hanover, Clinton, and Absecon are limited liability companies organized under the law of the State of Delaware. As a result of the stock for membership interest transaction, ECV acquired 100% of the membership interest in Hanover, Clinton and Absecon by issuing Frederic Richardson 100,000 shares of its common stock.
Effective May 8, 2008, ECV entered into a share exchange agreement with Frederic Richardson, and FLNU, a non-reporting small public company listed on the Pink Sheets Grey Market, whereby, Frederic Richardson transferred to FLNU 100% of the issued and outstanding common stock of ECV, in exchange for 28,000,000 shares of common stock of FLNU, which represents 80% of FLNU’s outstanding common stock. As a result of the share exchange transaction, Hanover, Clinton and Absecon became the wholly owned subsidiaries of FLNU.
On October 21, 2008 (“the Closing Date”), the Company acquired all of the issued and outstanding common stock of ECV Holdings, Inc., (“ECV”) a Delaware corporation, in accordance with the Share Exchange Agreement. On
the Closing Date, pursuant to the terms of the Securities Exchange Transaction, the Company acquired all of the outstanding common stock of ECV from Flora Nutrients, Inc. (“FLNU”). In exchange, the Company issued FLNU 50,000,000 common stock, or approximately 99.912% of the Company’s common stock outstanding.
The Company conducts its business operations through ECRV Hanover LeaseCo, LLC (“Hanover”), ECRV Clinton LeaseCo, LLC (“Clinton”), and ECRV FM LeaseCo, LCC (“Absecon”).
Hanover was organized as a limited liability company under the laws of the State of Delaware on June 16, 2006. Clinton was organized as a limited liability company under the laws of the State of Delaware on March 08, 2007. Absecon was organized as a limited liability company under the laws of the State of Delaware on May 10, 2007.
Stakool, Inc. f/k/a Mod Hospitality, Inc. f/k/a PSPP Holdings, Inc. (“the Company”) was incorporated in the State of Delaware in 1993. In 1997, the Company changed its Corporate Charter to the State of Nevada. As of December 31, 2008, the Company maintained its Corporate Charter in the State of Nevada.
On September 22, 2008, the Company changed its name to Mod Hospitality, Inc.
On December 16, 2009 the Company changed its name to Stakool, Inc.
The transactions on March 26, 2008, May 8, 2008, and October 21, 2008 have all been rescinded effective January 24, 2010. All memberships, assets , interests or stock positions have been returned to the appropriate entity or persons.
In consideration for execution of the rescission agreement 50,000,000 common shares previously issued be returned to the treasury stock of the Company. The preferred shares held by Mr. Richardson have been purchased in a separate transaction. In addition as part of the rescission agreement all assets, property, securities or items of value have been transferred back to the original holders pre-acquisition.
The company will continue to develop Dream Apartments, TV. Dream Apartments TV is a diverse apartment advertising and search engine company for Apartments and properties in California and Nationwide. We have been working on making the intellectual property of Dream Apts. more suited for 2010. We have also been adding many aspects to the core structure enabling us to be able to roll out our technology into apartment searching and finding properties.
Investments
The Company accounts for investments, where the Company holds from 20% up to 50%, in the common stock, or membership interest, of an entity, using the equity method. The investment is initially recorded at cost and the carrying amount is adjusted to recognize the Company’s proportionate share of the earnings or losses of the investee after the date of acquisition. The amount of the adjustment is included in the determination of net income or loss of the Company in the period of the adjustment. Any dividends received from the investee reduce the carrying value of the investment.
As of December 31, 2008, Dream Apartments TV continued to pursue its planned operations, therefore, current management made the decision to reflect the $58,000 as the fair value of this investment.
BASIS OF PRESENTATION
Management's plans in this regard include raising additional cash from current and potential stockholders and lenders, making strategic acquisitions and increasing the marketing of its products and services. Until the Company generates sufficient revenues from the sale of its products, the Company will continue to be dependent on raising substantial amounts of additional capital through any one of a combination of debt offerings or equity offerings. The Company has no current arrangements with respect to any additional financing. Consequently, there can be no assurance that any future financing will be available to the Company when needed, and on commercially reasonable terms. The Company's inability to derive sufficient revenues from the sale of its products, or obtain additional financing when needed, would have a material adverse effect on the company, requiring the Company to curtail or
cease operations. In addition, any equity financing may involve substantial dilution to the Company's then current stockholders.
Being a development stage company, the Company is subject to all the risks inherent in the establishment of a new enterprise and the marketing and manufacturing of a new product, many of which risks are beyond the control of the Company. All of these factors raise substantial doubt as to the ability of the Company to continue as a going concern.
These consolidated financial statements do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary as a result of the above uncertainty.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation.
BASIS OF PRESENTATION
The condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP"). All material intercompany balances and transactions have been eliminated
Financial Reporting
The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America. Revenues and expenses are reported on the accrual basis, which means that income is recognized as it is earned and expenses are recognized as they are incurred.
Use of Estimates
The Company’s significant estimates include allowance for doubtful accounts and accrued expenses. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While the Company believes that such estimates are fair when considered in conjunction with the financial statements taken as a whole, the actual amounts of such estimates, when known, will vary from these estimates. If actual results significantly differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted.
Cash and Cash Equivalents
Cash and cash equivalents include all interest-bearing deposits or investments with maturities of three and nine months or less.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company maintains cash balances at one financial institution, which is insured by the Federal Deposit
Insurance Corporation (“FDIC”). The FDIC insured institution insures up to $250,000 on account balances. The amounts that are not insured by FDIC limitations are held in short-term securities.
Fair value of financial instruments
The carrying amounts reported in the balance sheet for cash, accounts receivable, accounts payable and accrued expenses, debenture and loans payable approximate their fair market value based on the short-term maturity of these instruments.
Accounts Receivable
The Company extends credit to its customers in the normal course of business. Further, the Company regularly reviews outstanding receivables, and provides estimated losses through an allowance for doubtful accounts. In evaluating the level of established loss reserves, the Company makes judgments regarding its customers’ ability to make required payments, economic events and other factors. As the financial condition of these parties change, circumstances develop or additional information becomes available, adjustments to the allowance for doubtful accounts may be required. The Company also performs ongoing credit evaluations of customers’ financial condition. The Company maintains reserves for potential credit losses, and such losses traditionally have been within its expectations.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company accounts for the impairment of long-lived assets in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of” (“SFAS No. 144”). SFAS No. 144 requires write-downs to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount.
GOODWILL AND OTHER INTANGIBLE ASSETS
In June 2001, the FASB issued Statement No. 142 Goodwill and Other Intangible Assets. This statement addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, Intangible Assets. It addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. This Statement also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements.
Goodwill and intangible assets with indefinite useful lives are not amortized. Intangible assets with finite useful lives are amortized generally on a straight-line basis over the periods benefited, with a weighted average useful life of 15 years.
In performing this assessment, management uses the income approach and the similar transactions method of the market approach to develop the fair value of the acquisition in order to assess its potential impairment of goodwill. The income approach is based on a discounted cash flow model which relies on a number of factors, including operating results, business plans, economic projections and anticipated future cash flows. Rates used to discount future cash flows are dependent upon interest rates and the cost of capital at a point in time. The similar transactions method is a market approach methodology in which the fair value of a business is estimated by analyzing the prices at which companies similar to the subject, which are used as guidelines, have sold in controlling interest transactions (mergers and acquisitions). Target companies are compared to the subject company, and multiples paid in transactions are analyzed and applied to subject company data, resulting in value indications. Comparability can be affected by, among other things, the product or service produced or sold, geographic markets served, competitive position, profitability, growth expectations, size, risk perception, and capital structure. There are inherent uncertainties related to these factors and management’s judgment in applying them to the analysis of goodwill impairment. It is possible that assumptions underlying the impairment analysis will change in such a manner that impairment in value may occur in the future.
REVENUE RECOGNITION
Revenue for video streaming and maintenance services is recognized monthly as services are provided pursuant to the terms of contracts or purchase orders, which have prices that are fixed and determinable. The Company assesses the client’s ability to meet the contract terms, including meeting payment obligations, before entering into the contract. Deferred revenue results from customers who are billed for monitoring in advance of the period in which the services are provided, on a monthly, quarterly or annual basis.
The Company follows Staff Accounting Bulletin 104 (SAB 104), which requires the Company to defer certain installation revenue and expenses, primarily equipment related to, and direct labor incurred. The capitalized costs and deferred revenues related to the installation are then amortized over the life of an average customer relationship, on a straight line basis. If the customer is discontinued prior to the expiration of the original expected life, the unamortized portion of the deferred installation revenue and related capitalized costs are recognized in the period the discontinuation becomes effective. In accordance with EITF 00-21, “Revenue Arrangements with Multiple Deliverables”, the service contracts that include both installation and video streaming are considered a single unit of accounting. The criteria in EITF 00-21 that the Company does not meet for services and installation services to be considered separate units of accounting is that the installation service to customers has no stand alone value. The installation service alone is not functional to customers without the service.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Expenditures for major betterments and additions are capitalized while replacement, maintenance and repairs, which do not extend the lives of the respective assets, are currently charged to expense. Any gain or loss on disposition of assets is recognized currently in the statement of income.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash, accounts payable and accrued expenses, and debt. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments. The estimated fair value is not necessarily indicative of the amounts the Company would realize in a current market exchange or from future earnings or cash flows.
INCOME TAXES
The Company adopted Financial Accounting Standards Board (“FASB”) Interpretation No. (FIN) 48, “Accounting for Uncertainty in Income Taxes.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires that the Company determine whether the benefits of the Company’s tax positions are more likely than not of being sustained upon audit based on the technical merits of the tax position. The provisions of FIN 48 also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, and disclosure. The Company did not have any unrecognized tax benefits and there was no effect on the financial condition or results of operations as a result of implementing FIN 48. The Company does not have any interest and penalties in the statement of operations for the years ended December 31, 2009 and 2008.
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is computed in accordance with SFAS No. 128, "Earnings per Share". Basic earnings (loss) per share is computed by dividing net income (loss), after deducting preferred stock dividends accumulated during the period, by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period. The outstanding warrants for the years ended December 31, 2009 and 2008 respectively are anti-dilutive and therefore are not included in earnings (loss) per share.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company adopted SFAS No. 123R, "Accounting for Stock-Based Compensation". This statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service.
In addition, a public entity is required to measure the cost of employee services received in exchange for an award of liability instruments based on its current fair value. The fair value of that award has been re-measured subsequently at each reporting date through the settlement date. Changes in fair value during the requisite service period will be recognized as compensation cost over that period.
For the year ended December 30, 2008 and 2009, the Company did not grant any stock options.
NON-EMPLOYEE STOCK BASED COMPENSATION
The cost of stock based compensation awards issued to non-employees for services are recorded at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in Emerging Issues Task Force Issue (“EITF”) 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” (“EITF 96-18”).
COMMON STOCK PURCHASE WARRANTS
The Company accounts for common stock purchase warrants in accordance with the provisions of Emerging Issues Task Force Issue (“EITF”) issue No. 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” (“EITF 00-19”). Based on the provisions of EITF 00-19, the Company classifies as equity any contracts that (i) require physical settlement or net-share settlement, or (ii) gives the company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the company), or (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).
INCOME TAXES
The Company accounts for income taxes using SFAS No. 109, "Accounting for Income Taxes," which requires recognition of deferred tax liabilities and assets for expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded for deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized. Beginning after December 15, 2006. The Company does not expect that this interpretation will have a material impact on its financial position, results of operations, or cash flows.
In May 2007, the FASB issued FASB Staff Position No. FIN 48-1, Definition of Settlement in FASB Interpretation No. 48 (“the FSP”). The FSP provides guidance about how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. Under the FSP, a tax position could be effectively settled on completion of examination by a taxing authority if the entity does not intend to appeal or litigate the result and it is remote that the taxing authority would examine or re-examine the tax position. The Company does not expect that this interpretation will have a material impact on its financial position, results of operations, or cash flows.
NOTE 3 - GOING-CONCERN AND MANAGEMENT'S PLAN/
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, as shown in the accompanying consolidated financial statements, the Company has incurred losses from operations since inception. Management anticipates incurring additional losses in 2010. Further, the Company may incur additional losses thereafter, depending on its ability to generate revenues from the licensing or sale of its technologies and products. The Company's technologies and products have never been utilized on a large-scale commercial basis and there is no assurance that any of its technologies or products will receive market acceptance. As reflected in the accompanying consolidated financial statements, the consolidated financial statements, the Company has operating and liquidity concerns, has incurred an accumulated deficit of approximately $5,839,000 through the period ended December 31, 2009. The Company's operations for the year ended December 31, 2008 and 2009, resulted in a net loss of $193,973 and $-0-, respectively.
Management's plans in this regard include raising additional cash from current and potential stockholders and lenders, making strategic acquisitions and increasing the marketing of its products and services. As a result of the Company's acquisition of 1stAlerts, and the anticipated cash flow from the combined company's operations, the Company believes that it will have sufficient capital to fund its operations. However, until such time as the Company generates sufficient revenues from the sale of its products, the Company will continue to be dependent on raising substantial amounts of additional capital through any one of a combination of debt offerings or equity offerings. The Company has no current arrangements with respect to any additional financing. Consequently, there can be no assurance that any future financing will be available to the Company when needed, and on commercially reasonable terms. The Company's inability to derive sufficient revenues from the sale of its products, or obtain additional financing when needed, would have a material adverse effect on the company, requiring the Company to curtail or cease operations. In addition, any equity financing may involve substantial dilution to the Company's then current stockholders.
Being a development stage company, the Company is subject to all the risks inherent in the establishment of a new enterprise and the marketing and manufacturing of a new product, many of which risks are beyond the control of the Company. All of these factors raise substantial doubt as to the ability of the Company to continue as a going concern.
These consolidated financial statements do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary as a result of the above uncertainty.
NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS
Accounting Standards Codification
In June 2009, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (the “Codification”). This standard replaces SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles, and establishes only two levels of U.S. generally accepted accounting principles (“GAAP”), authoritative and nonauthoritative. The FASB ASC has become the source of authoritative, nongovernmental GAAP, except for rules and interpretive releases of the SEC, which are sources of authoritative GAAP for SEC registrants. All other nongrandfathered, non-SEC accounting literature not included in the Codification will become nonauthoritative. This standard is effective for financial statements for interim or annual reporting periods ending after September 15, 2009. The adoption of the Codification changed the Company’s references to GAAP accounting standards but did not impact the Company’s results of operations, financial position or liquidity.
Participating Securities Granted in Share-Based Transactions
Effective January 1, 2009, the Company adopted a new accounting standard included in ASC 260, Earnings Per Share (formerly FASB Staff Position (“FSP”) Emerging Issues Task Force (“EITF”) 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities). The new guidance clarifies that non-vested share-based payment awards that entitle their holders to receive nonforfeitable dividends or dividend equivalents before vesting should be considered participating securities and included in basic earnings per share. The Company’s adoption of the new accounting standard did not have a material effect on previously issued or current earnings per share.
Business Combinations and Noncontrolling Interests
Effective January 1, 2009, the Company adopted a new accounting standard included in ASC 805, Business Combinations (formerly SFAS No. 141(R), Business Combinations). The new standard applies to all transactions or other events in which an entity obtains control of one or more businesses. Additionally, the new standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement date for all assets acquired and liabilities assumed; and requires the acquirer to disclose additional information needed to evaluate and understand the nature and financial effect of the business combination. The Company’s adoption of the new accounting standard did not have a material effect on the Company’s consolidated financial statements.
Effective January 1, 2009, the Company adopted a new accounting standard included in ASC 810, Consolidations (formerly SFAS 160, Noncontrolling Interests in Consolidated Financial Statements). The new accounting standard establishes accounting and reporting standards for the noncontrolling interest (or minority interests) in a subsidiary and for the deconsolidation of a subsidiary by requiring all noncontrolling interests in subsidiaries be reported in the same way, as equity in the consolidated financial statements. As such, this guidance has eliminated the diversity in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transactions. The Company’s adoption of this new accounting standard did not have a material effect on the Company’s consolidated financial statements.
Fair Value Measurement and Disclosure
Effective January 1, 2009, the Company adopted a new accounting standard included in ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) (formerly FASB FSP No 157-2, Effective Date of FASB Statement No. 157), which delayed the effective date for disclosing all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value on a recurring basis (at least annually). This standard did not have a material impact on the Company’s consolidated financial statements.
In April 2009, the FASB issued new guidance for determining when a transaction is not orderly and for estimating fair value when there has been a significant decrease in the volume and level of activity for an asset or liability. The new guidance, which is now part of ASC 820 (formerly FSP 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly), requires disclosure of the inputs and valuation techniques used, as well as any changes in valuation techniques and inputs used during the period, to measure fair value in interim and annual periods. In addition, the presentation of the fair value hierarchy is required to be presented by major security type as described
in ASC 320, Investments - Debt and Equity Securities. The provisions of the new standard were effective for interim periods ending after June 15, 2009. The adoption of the new standard on April 1, 2009 did not have a material effect on the Company’s consolidated financial statements.
In April 2009, the Company adopted a new accounting standard included in ASC 820, (formerly FSP 107-1 and Accounting Principles Board (“APB”) 28-1, Interim Disclosures about Fair Value of Financial Instruments). The new standard requires disclosures of the fair value of financial instruments for interim reporting periods of publicly traded companies in addition to the annual disclosure required at year-end. The provisions of the new standard were effective for the interim periods ending after June 15, 2009. The Company’s adoption of this new accounting standard did not have a material effect on the Company’s consolidated financial statements.
In August 2009, the FASB issued new guidance relating to the accounting for the fair value measurement of liabilities. The new guidance, which is now part of ASC 820, provides clarification that in certain circumstances in which a quoted price in an active market for the identical liability is not available, a company is required to measure fair value using one or more of the following valuation techniques: the quoted price of the identical liability when traded as an asset, the quoted prices for similar liabilities or similar liabilities when traded as assets, or another valuation technique that is consistent with the principles of fair value measurements. The new guidance clarifies that a company is not required to include an adjustment for restrictions that prevent the transfer of the liability and if an adjustment is applied to the quoted price used in a valuation technique, the result is a Level 2 or 3 fair value measurement. The new guidance is effective for interim and annual periods beginning after August 27, 2009. The Company’s adoption of the new guidance did not have a material effect on the Company’s consolidated financial statements.
Derivative Instruments and Hedging Activities
Effective January 1, 2009, the Company adopted a new accounting standard included in ASC 815, Derivatives and Hedging (SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of SFAS No. 133). The new accounting standard requires enhanced disclosures about an entity’s derivative and hedging activities and is effective for fiscal years and interim periods beginning after November 15, 2008. Since the new accounting standard only required additional disclosure, the adoption did not impact the Company’s consolidated financial statements.
Other-Than-Temporary Impairments
In April 2009, the FASB issued new guidance for the accounting for other-than-temporary impairments. Under the new guidance, which is part of ASC 320, Investments - Debt and Equity Securities (formerly FSP 115-2 and 124-2, Recognition and Presentation of Other-Than-Temporary Impairments), an other-than-temporary impairment is recognized when an entity has the intent to sell a debt security or when it is more likely than not that an entity will be required to sell the debt security before its anticipated recovery in value. The new guidance does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities and is effective for interim and annual reporting periods ending after June 15, 2009. The Company’s adoption of the new guidance did not have a material effect on the Company’s consolidated financial statements.
Subsequent Events
In May 2009, the FASB issued new guidance for subsequent events. The new guidance, which is part of ASC 855, Subsequent Events (formerly SFAS No. 165, Subsequent Events) is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, this guidance sets forth 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, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The new guidance is effective for fiscal years and interim periods ended after June 15, 2009 and will be applied prospectively. The Company’s adoption of the new guidance did not have a material effect on the Company’s consolidated financial statements. The Company evaluated subsequent events through the date the accompanying financial statements were issued.
Accounting Standards Not Yet Effective
Accounting for the Transfers of Financial Assets
In June 2009, the FASB issued new guidance relating to the accounting for transfers of financial assets. The new guidance, which was issued as SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment to SFAS No. 140, was adopted into Codification in December 2009 through the issuance of Accounting Standards Updated (“ASU”) 2009-16. The new standard eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures in order to enhance information reported to users of financial statements by providing greater transparency about transfers of financial assets, including securitization transactions, and an entity’s continuing involvement in and exposure to the risks related to transferred financial assets. The new guidance is effective for fiscal years beginning after November 15, 2009. The Company will adopt the new guidance in 2010 and is evaluating the impact it will have to the Company’s consolidated financial statements.
Accounting for Variable Interest Entities
In June 2009, the FASB issued revised guidance on the accounting for variable interest entities. The revised guidance, which was issued as SFAS No. 167, Amending FASB Interpretation No. 46(R), was adopted into Codification in December 2009 through the issuance of ASU 2009-17. The revised guidance amends FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities, in determining whether an enterprise has a controlling financial interest in a variable interest entity. This determination identifies the primary beneficiary of a variable interest entity as the enterprise that has both the power to direct the activities of a variable interest entity that most significantly impacts the entity’s economic performance, and the obligation to absorb losses or the right to receive benefits of the entity that could potentially be significant to the variable interest entity. The revised guidance requires ongoing reassessments of whether an enterprise is the primary beneficiary and eliminates the quantitative approach previously required for determining the primary beneficiary. The Company does not expect that the provisions of the new guidance will have a material effect on its consolidated financial statements.
Revenue Recognition
In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements. The new standard changes the requirements for establishing separate units of accounting in a multiple element arrangement and requires the allocation of arrangement consideration to each deliverable based on the relative selling price. The selling price for each deliverable is based on vendor-specific objective evidence (“VSOE”) if available, third-party evidence if VSOE is not available, or estimated selling price if neither VSOE or third-party evidence is available. ASU 2009-13 is effective for revenue arrangements entered into in fiscal years beginning on or after June 15, 2010. The Company does not expect that the provisions of the new guidance will have a material effect on its consolidated financial statements.
In October 2009, the FASB issued Accounting Standards Update No. 2009-14, "Certain Revenue Arrangements That Include Software Elements" ("ASU No. 2009-14"). ASU No. 2009-14 amends guidance included within ASC Topic 985-605 to exclude tangible products containing software components and non-software components that function together to deliver the product’s essential functionality. Entities that sell joint hardware and software products that meet this scope exception will be required to follow the guidance of ASU No. 2009-13. ASU No. 2009-14 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption and retrospective application are also permitted. The company is currently evaluating the impact of adopting the provisions of ASU No. 2009-14.
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 consolidated financial statements upon adoption.
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 consolidated financial statements upon adoption.
NOTE 5 - RECLASSIFICATIONS
Certain prior periods' balances have been reclassified to conform to the current period's financial statement presentation. These reclassifications had no impact on previously reported results of operations or stockholders' equity.
In assessing the amount of deferred tax asset to be recognized, management considers whether it is more likely than not that some of the losses will be used in the future. Management expects that they will not have benefit in the future. Accordingly, a fully valuation allowance has been established.
NOTE 6 - COMMON STOCK
LOSS PER COMMON SHARE
Basic loss per common share is computed based upon weighted-average shares outstanding and excludes any potential dilution. Diluted loss per share reflects the potential dilution from the exercise or conversion of all dilutive securities into Common Stock based upon the average market price of common shares outstanding during the period. For the year ended December 31, 2008 and 2009, no effect has been given to outstanding options, warrants, convertible debentures and convertible preferred stock in the diluted computation, as their effect would be anti-dilutive.
NOTE 7. MANAGEMENT AGREEMENTS
Has an agreement with Kyle Gotshalk as an consultant and officer of the company to issue him stock in lieu of cash payments.
NOTE 8. COMMON AND PREFERRED STOCK
As of December 31, 2009, the Company has 175,000,000 shares of common stock authorized and 64,699 issued and outstanding.
The balance of the outstanding common shares as of December 31, 2009; adjusted for the stock split were 64,699.
During the year ended December 31, 2009, 64,699 shares of common stock were issued at par value of $.001 for a total of $6,876 to certain individuals and entities for past consideration. The amount of $6,876 is included in general and administrative expenses.
As of December 31, 2009, the Company has 10,000,000 shares of preferred stock authorized and 1,000,000 issued and outstanding. 900,000 shares of the Preferred Stock are subject to the purchase and rescission agreements executed by Mr. Richardson.
NOTE 9. REVERSE SPLIT AND SYMBOL CHANGE
On April 29, 2008, the Company increased its authorized common stock from 80,000,000 shares to 175,000,000 shares by filing a Certificate of Change pursuant to NRS 78.209.
Effective June 21, 2008, in order to meet a requirement of the Stock Purchase Agreement, as amended, between Airport Road Associates One, LLC (“Airport, LLC”) and East Coast Realty Ventures, LLC (“ECRV, LLC”), as previously reported on Form 8-K filed March 20, 2008, the Board of Directors of the Company has declared a 100 to 1 round lot reverse split of the Company’s Common Stock. In accordance with the reverse split, each shareholder will receive one (1) share of Common Stock for each one hundred (100) shares currently held. No fractional shares shall be issued; all fractional shares shall be rounded up to the next whole share. Any shareholder that should own less than one hundred (100) shares after completion of the reverse split shall be issued a sufficient number of additional shares so that each such shareholder shall own a minimum of one hundred (100) shares. The reverse split was effective as of the opening of trading on June 2, 2008. Additionally, also effective June 2, 2008, the Company’s trading symbol was changed to “PSPN” in conjunction with the reverse split of the Company’s common stock.
On August 11, 2008, the Company changed its name to Cynosure Holdings, Inc. by filing a Certificate of Amendment to Articles of Incorporation.
On August 11, 2008, the members of our Board of Directors were increased to six (6), and Mark T. Johnson and Marc D. Manoff, Esq. were appointed to the Board of Directors pursuant to the increase.
On August 21, 2008, the Company changed its name to Hybid Hospitality, Inc. by filing a Certificate of Amendment to the Articles of Incorporation.
On August 27, 2008, the Company changed its name to Mod Hospitality, Inc. by filing a Certificate of Amendment to the Articles of Incorporation.
Effective September 22, 2008, the Company completed a 1 for 10 reserve split of its common stock and changed its name to Mod Hospitality, Inc. with a new symbol “MODY.”
On October 21, 2008, pursuant to a written consent, the holders of the majority of our voting stock approved us to enter into a share exchange agreement with FLNU and ECV Holdings. Pursuant to the share exchange agreement, FLNU will transfer all of the issued and outstanding common stock of ECV Holdings in exchange for 50,000,000 shares of our newly issued common shares. A copy of the Share Exchange Agreement was filed as exhibit to the Form 8-K filed on October 27, 2008 and incorporated herewith by reference.
In consideration for execution of the rescission agreement 50,000,000 common shares previously issued be returned to the treasury stock of the Company. The preferred shares held by Mr. Richardson have been purchased in a separate transaction. In addition as part of the rescission agreement all assets, property, securities or items of value have been transferred back to the original holders pre-acquisition.
Effective December 16, 2009 there was a 1:1500 reverse split, approved and accepted by shareholders, along with the fore mentioned rescission.
The transactions on March 26, 2008, May 8, 2008, and October 21, 2008 have all been rescinded effective January 24, 2010. All memberships, assets , interests or stock positions have been returned to the appropriate entity or persons.
NOTE 10. INCOME TAXES AND CHANGE IN CONTROL
The Company has approximately $887,625 in gross deferred tax assets as of December 31, 2009, resulting from net operating loss carry forwards. A valuation allowance has been recorded to fully offset these deferred tax assets because the future realization of the related income tax benefits is uncertain. Accordingly, the net provision for income taxes is zero as of December 31, 2009.
As of December 31, 2008, the Company has federal net operating loss carry forwards available to offset future taxable income through 2027 subject to the annual limitations imposed by Section 382 under the Internal Revenue Code due to the change in control. In February 2008, there was a change in control of the Company wherein Section 382 will apply to the net operating loss carryforward starting with the year ended December 31, 2008.
As of December 31, 2008, the difference between the tax provision at the statutory federal income tax rate and the tax provision attributable to loss before income taxes is as follows (in percentages):
Statutory federal income tax rate
-34%
State taxes - net of federal benefits
-5%
Valuation allowance
39%
Income tax rate - net
0%
For the year ended December 31, 2009, the valuation allowance adjustment was zero.
NOTE 11. REVERSE MERGER
On October 21, 2008, we underwent a reverse merger with ECV Holdings, Inc. (“ECV”), a Delaware corporation, pursuant to a share exchange agreement (the “Share Exchange Agreement”) with ECV and Flora Nutrients, Inc., a Nevada corporation and the sole shareholder of ECV (“FLNU”). The closing of the transaction took place on October 21, 2008 (the “Share Exchange Transaction”) and resulted in the acquisition of ECV. Pursuant to the terms of the Share Exchange Agreement, we acquired all of the outstanding common stock of ECV by issuing FLNU an aggregate of 50,000,000 shares representing 99.912% of our common stock outstanding. Since FLNU, the sole shareholder of ECV, will own 99.912% of the shares of our outstanding common stock upon the completion of the Share Exchange Transaction, ECV is the legal acquiree but the accounting acquirer in the reverse merger. Upon the completion of the Share Exchange Transaction, ECV (accounting acquirer, legal acquiree) will succeed to the business that we previously carried on, and will become the registrant. As a result, the historical financial statements presented going forward will be those of ECV (accounting acquirer, legal acquiree).
The Share Exchange Agreement contains customary terms and conditions for a transaction of this type, including representations, warranties and covenants, as well as provisions describing the consideration for the Acquisition, the process of exchanging the consideration and the effect of the acquisition.
As described above, on October 21, 2008, we acquired all of the issued and outstanding common stock of ECV, a Delaware corporation, in accordance with the Share Exchange Agreement. The closing of the transaction took place on October 21, 2008 (the “Closing Date”). On the Closing Date, pursuant to the terms of the Securities Exchange Transaction, we acquired all of the outstanding common stock of ECV from FLNU. In exchange, we issued FLNU 50,000,000 shares, or approximately 99.912% of our common stock outstanding. Since FLNU will own 99.912% of the shares of our outstanding common stock upon the completion of the Share Exchange Transaction, ECV is the legal acquiree but the accounting acquirer in the reverse merger. Upon the completion of the Share Exchange Transaction, ECV (accounting acquirer, legal acquiree) will succeed to the business that we previously carried on, and will become the registrant. As a result, the historical financial statements presented going forward will be those of ECV (accounting acquirer, legal acquiree).
ECV is a corporation formed on March 26, 2008 under the laws of Delaware. On April 4, 2008, ECV entered into a stock for membership interest agreement with East Coast Realty Ventures, LLC (“ECRV”) which owned all of the issued and outstanding capital (the “Membership Interest”) of ECRV Hanover LeaseCo, LLC (the “Hanover”), ECRV Clinton LeaseCo, LLC (the “Clinton”), and ECRV FM LeaseCo, LCC (the “Absecon”). Hanover, Clinton, and Absecon are limited liability companies organized under the law of the State of Delaware. As a result of the stock for membership interest transaction, ECV acquired 100% of the membership interest in Hanover, Clinton and Absecon by issuing Frederic Richardson 100,000 shares of its common stock.
Effective May 8, 2008, ECV entered into a share exchange agreement with Frederic Richardson, and FLNU, a non-reporting small public company listed on the Pink Sheets Grey Market, whereby, Frederic Richardson transferred to FLNU 100% of the issued and outstanding common stock of ECV, in exchange for 28,000,000 shares of common stock of FLNU, which represents 80% of FLNU’s outstanding common stock. As a result of the share exchange transaction, Hanover, Clinton and Absecon became the wholly owned subsidiaries of FLNU.
On October 21, 2008, pursuant to a written consent, the holders of the majority of our voting stock approved us to enter into a share exchange agreement with FLNU and ECV Holdings. Pursuant to the share exchange agreement, FLNU will transfer all of the issued and outstanding common stock of ECV Holdings in exchange for 50,000,000 shares of our newly issued common shares. A copy of the Share Exchange Agreement was filed as exhibit to the Form 8-K filed on October 27, 2008 and incorporated herewith by reference.
Effective December 16, 2009 there was a 1:1500 reverse split, approved and accepted by shareholders, along with the fore mentioned rescission.
The transactions on March 26, 2008, May 8, 2008, and October 21, 2008 have all been rescinded effective January 24, 2010. All memberships, assets , interests or stock positions have been returned to the appropriate entity or persons.
In consideration for execution of the rescission agreement 50,000,000 common shares previously issued be returned to the treasury stock of the Company. The preferred shares held by Mr. Richardson have been purchased in a separate transaction. In addition as part of the rescission agreement all assets, property, securities or items of value have been transferred back to the original holders pre-acquisition.
August 6, 2009, the company rescinded its agreements as mentioned above.
1)
Subsequent to December 31, 2008 through April 13, 2009, the Company issued 3,891, 661 shares of its common stock at par value of $.001. These issuances of common stock increase the outstanding shares of common stock to 10,804,829 shares.
2)
In February 2009, the Company terminated Park Place Hospitality Group’s (“PPHG”) management agreement for the Holiday Inn Express in Hanover, Maryland. The Company retained the management services of Mid-Atlantic Realty Group under the same terms as PPHG, however, the formal agreements have yet to be signed. Mid-Atlantic Realty Group is an entity controlled by the Company’s Chairman and CEO, Mr. Richardson. (See Note 3).
3)
In February 2009, the management of the Company discovered that the Holiday Inn Express in Hanover, Maryland managed by Park Place Hospitality Group was accruing $8,321 per month for personal property taxes on the furniture, fixtures and equipment owned by ECRV Hanover Hospitality Leaseco, LLC as opposed to $8,321 per year. As a result, in accordance with SFAS no. 154, the accompanying consolidated financial statements as of December 31, 2007 and 2006 have been adjusted to reflect an over accrual of $141,457 for personal property taxes.
NOTE 12. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
In 2005, the Company retained the legal services of Weed & Co, LLP. On December 3, 2007, Weed & Co, LLP filed a complaint in Superior Court of the State of California in dispute over payment of legal fees against the Company and other defendants. On March 11, 2008, the other defendants entered into a settlement agreement where Weed & Co, LLP was to be paid $87,500. Weed & Co., LP has the right to re-file the complaint should the other defendants not satisfy this agreement. There is no liability reflected in the accompanying consolidated financial statements for this uncertainty. Weed & Co, LLP exercised its rights and received shares as settlement outlined in the agreement referenced above.
NOTE 13. NOTES PAYABLE
The Company has notes payable with a principal balance of $243,474 plus accrued interest as of December 31, 2009. The notes are due to related parties and have an annual interest rate of 10%. The notes payable continue to accrue interest expenses. The balance as of December 31, 2009 is $333,825.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
The company has hired Larry ODonnell as the company’s auditor.. The company has a balance due to Kevin Conner of $64,000.00 which will be reflected in it’s 2009 10K.
Item 9A. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on management’s evaluation, our chief executive officer and chief financial officer concluded that, as of December 31, 2009, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
(b) Changes in internal control over financial reporting.
We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.
There were no changes in our internal control over financial reporting that occurred during the period covered by this Annual Report on Form 10-K that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
(c) Management’s report on internal control over financial reporting.
We assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework . Based on our assessment using those criteria, we concluded that our internal control over financial reporting was effective as of December 31, 2009.
No Audit of the effectiveness of our internal controls over financial reporting as of December 31, 2009 was performed. As in the past we have relied heavily on the effectiveness of internal controls over financial reporting of our management company and we have made a change in management company for Hanover and Clinton, we will be making significant changes to our internal control. We will:
1.
Insure that each property will design, document, and implement more efficient and rigorous processes at the entity level, as opposed to the management company level
2.
Monthly financial analysis meetings for each entity will require a higher number of board members or senior management team members in attendance. Each evaluation procedures addressing the effectiveness of internal control over financial reporting will be documented as such
3.
Records kept of all meetings established to set the tone of acceptable ethical behavior from the CEO down to every level of employee in each entity
4.
Each entity will be required to adequately produce and provide to every level of staff member appropriate documentation presenting the integrity of the corporation and avenues through which employees can report incidents of unethical behavior; e.g., employee handbooks and whistle blowing policies designed specifically for each entity
5.
Adequate training to all management of each entity on the psychological states that must exist in an individual to participate in fraudulent activities
6.
All criteria set forth by COSO in Internal Control - Integrated Framework will be disseminated amongst management of each entity and training will be given with specific emphasis on risk evaluation of all financial transactions and the reporting of such transactions
7.
If segregation of duties cannot be achieved at each entity due to the size of the entity, procedures, which already are in place to compensate for this lack of separation, will be documented
8.
Our external auditors will be given access to all stages of our design, implementation, and documentation of these steps, with an open platform for suggestions and critique.
Item 9B. Other Information.
Not applicable.
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act.
Identification of Directors and Executive Officers as of December 31, 2009
The following table sets forth the names of all of our directors and executive officers, as of December 31, 2009:
Name
Age
Positions Held and Tenure
Kyle Gotshalk
Director and Chief Executive Officer,
President
Kyle Gotshalk, 34, was elected on January 2, 2009 to serve as an Officer and a Director and on January 3, 2009 to serve as CEO and Vice President of Commerce Online, Inc. Contemporaneous with Commerce Online Inc., Mr. Gotshalk serves as an Officer and Director of VSUS Technologies, Inc. Beginning February 2005 through January 2009, Mr. Gotshalk was the President of Exit Only, Inc. an internet car sales company. Prior to this Mr. Gotshalk served as President of PSPP Holdings Inc. a credit card processing company, President of Top Flight Consulting LLC, an up and coming consulting firm, and as a Manager and Fitness Director at Sports Center Fitness. Mr. Gotshalk graduated with honors in Public Relations/Communication Studies from University of Montana in 1997. Mr. Gotshalk holds a Real Estate License in California and on May 2006 was awarded the Top Producing Agent award for most sales in first year of Real Estate by his Century 21 office.
Former Officer and Directors:
Frederic Richardson, 50, CEO, President and Chairman
Frederic Richardson is an owner of several hotel operations. Mr. Richardson was responsible for raising over $1.5 billion in debt and equity financing for private and public projects since 1985. He has extensive experience in investment banking and real estate investments. Mr. Richardson has served as a chairman and majority shareholder of seven publicly traded companies and has owned and operated two national FHA, VA, Full Eagle Mortgage companies, one of which he took public in 1999. Mr. Richardson is a member of the Building Owners and Managers Association International (BOMA), Apartment Building Association (AOBA), and the Tenant in Common Association. Mr. Richardson received his Bachelor of Arts in Economics from the University of Maryland and an MBA in Finance from American University and is a Chartered Life Underwriter.
Sarah E. Jackson, 42, CFO, Treasurer and Director
Sarah E. Jackson, CPA has extensive real estate accounting experience. She began her real estate accounting career with Lendlease Real Estate Investments, Inc. at that time when it was the largest real estate investment company in the world. While with Lendlease, she was the lead accountant and analyst for a REIT consisting of class AAA office buildings in New York, Chicago, and San Francisco and was responsible for explaining all transactions to Australian market pundits. She was chosen to implement FAS 133 and on the company’s US training committee. Ms. Jackson then moved into the banking industry, where she became Vice President of credit administration for a national bank and heavily involved in risk management. Ms. Jackson has consulted for some of the biggest companies in the real estate and mortgage industries including Fannie Mae and Wells Fargo. Ms. Jackson received a BA in English Literature and Philosophy from Gustavus Adolphus College and a BS and Masters of Accountancy from Denver University.
Andrienne Venson, 55, COO & Director
Adrienne Venson has over 20 years successful Fortune 25 corporate experience in Investor Revenue Assurance, Sales, and Project Management. She is a merger synergy and Six Sigma specialist. She is responsible for oversight of broker and investor processing and equity sourcing. She is the Director of Marketing and promotional communications for hospitality properties and new projects, as well as contract, property and vendor management. She has successfully managed numerous business projects resulted in revenue increases through process re-engineering, system development and implementation. She received a BS in Urban and Regional planning from the University of Illinois.
Linda Russell, 58, CAO & Director
Linda Russell has 25 years experience in the financial management analysis field. While directing financial presentations for business marketing executives in a Fortune 50 company she managed results and projections for over $2 Billion in expense and capital funding, created analyses which fostered expenditures at 4% under budget. Additionally, Ms. Russell managed capitalized equipment supporting 700 marketing managers and negotiated 33% additional equipment for clients. She has also directed financial assurance, budgeting and business planning processes for a $1 Billion national public business while analyzing business cases, developing forecasts, and preparing financial views to assess performance targets in support of earnings objectives. More recently, Ms. Russell has designed and implemented real estate investment solutions and directs investment analysis and due diligence for real estate investments. Ms. Russell received her Master’s degree in Finance from George Washington University and a B.B.A in Actuarial Science from Temple University.
Mark T. Johnson, 40, Public Relations & Director
Mark T. Johnson is a principal of M.J. Advanced Corporate Communications, Inc., a multi-million dollar investor relations firm. Mr. Johnson completed his studies for a Bachelor of Science from Towson University in Finance and Economics and held Series 7, Series 62, Series 63, and Series 24 brokerage licenses. Previously, Mr. Johnson served as a regional manager for Thorne Industries and as a Senior Broker and Vice-President of several regional brokerage firms.
D. Manoff, Esq., 45, General Counsel, Secretary and Director
Marc D. Manoff, Esq. is a principal of The Law Offices of Marc D. Manoff, headquartered outside of Philadelphia, PA. He received his Juris Doctorate from the National Law Center at George Washington University and his Bachelor of Science from Albright College. After becoming partner at two of the larger firms in the Philadelphia region, Mr. Manoff founded The Law Offices of Marc D. Manoff and specializes in entrepreneurial law, where he often wears the dual hats of lawyer and business consultant to entrepreneurs and growing business, providing advice on topics ranging from corporate structure and financing to employment matters. Mr. Manoff currently sits on the boards of several regional companies and serves as general counsel for a number of growing technology companies.
Independent Directors
No member of our Board of Directors qualifies as an “independent director” under the listing requirements of NASDAQ.
As we increase the membership of our Board of Directors, we may add directors who qualified as “independent directors,” establish Board committees on which such independent directors may serve and adopt written Board committee charters, as appropriate, to assist in corporate governance.
Significant Employees
Other than as mentioned above, we have no employees who are not executive officers, but who are expected to make significant contributions to our business.
Involvement in Certain Legal Proceedings
Except as stated above, during the past five years, no director, person nominated to become a director, executive officer, promoter or control person of ours:
(1) was a general partner or executive officer of any business against which any bankruptcy petition was filed, either at the time of the bankruptcy or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
(3) was subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
(4) was found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Audit Committee Financial Expert
The Securities Exchange Commission has adopted rules to implement certain requirements of the Sarbanes-Oxley Act of 2002 pertaining to public company audit committees. One of the rules adopted by the SEC requires a company to disclose whether it has an “audit committee financial expert” serving on its audit committee. Our board of directors has not yet established an audit committee. As such, our board has not yet appointed an audit committee financial expert. At this time, our board of directors believes it would be desirable to have an audit committee, and for the audit committee to have an audit committee financial expert serving on the committee. While informal discussions as to potential candidates have occurred, at this time no formal search process has commenced.
Compliance with Section 16(a) of the Exchange Act
To our knowledge, based solely on a review of such materials as are required by the Securities and Exchange Commission, none of our officers, directors or beneficial holders of more than ten percent of our issued and outstanding shares of Common Stock failed to timely file with the Securities and Exchange Commission any form or report required to be so filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, during the fiscal year ended December 31, 2009.
Code of Ethics
We have not yet adopted a code of ethics policy because we are a development stage company, in the early stages of operations. We intend to adopt a code of ethics policy in the future.
Item 10. Executive Compensation.
Summary Compensation
The following table discloses, for the fiscal years ended December 31, 2008 and 2009, certain compensation paid to our named executive officers, being (i) our former Chief Executive Officer, and (ii) the President of our former parent, Formula Footwear, Inc., which merged into our company as of June 9, 2004. No other officer of ours earned more than $100,000 in annual compensation during the fiscal year ended December 31, 2009.
Name and Principal Position
Year
Salary and
Other Annual
Compensation
($)
Long-Term
Compensation
Securities
Underlying
Options/SARS (#)
Kyle Gotshalk
Chief Executive Officer and Director
$ 0
$ 0
$ 0
$ 0
Option/SAR Grants
The following table provides information on option/SAR grants during the fiscal year ended December 31, 2006 to our named executive officers, being (i) our current Chief Financial Officer, (ii) our former Chief Executive Officer, and (iii) the President of our former parent, Formula Footwear, Inc., which merged into our company as of June 9, 2004.
Name
Number Of
Securities
Underlying
Options/SARS
Granted (#)
Percent Of
Total Options/
SARs Granted
To Employees
In Fiscal
Year
Exercise Or
Base Price
($/SH)
Expiration Date
Kyle Gotshalk
N/A
N/A
N/A
N/A
N/A
N/A
Option/SAR Exercises and Year-End Option/SAR Values
The following table sets forth information with respect to those executive officers listed above, concerning exercise of options during the last fiscal year and unexercised options and SARs held as of the end of the fiscal year:
Name
Shares Acquired on Exercise (#)
Value Realized ($)
Number of Securities Underlying Unexercised Options/SARs at FY-End (#) Exerciseable/Unexercisable
Value of Unexercised In-The-Money Options/SARs at FY-End ($) (1) Exercisable/Unexercisable
Kyle Gotshalk
0/0
$0.00
0/0
$0.00
Long-Term Incentive Awards
We made no long-term incentive awards to our named executive officers in the fiscal year ended December 31, 2009.
Compensation of Directors
There are no standard arrangements pursuant to which our directors are compensated for any services provided as director. No additional amounts are payable to our directors for committee participation or special assignments.
Employment Contracts and Termination of Employment and Change-in-Control Arrangements
We have entered into the no employment Agreements with officers of ours.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
Security Ownership of Certain Beneficial Owners and Management, as of the Date of this Report
The following table sets forth the beneficial ownership of persons who owned more than five (5%) percent of our Common Stock as of December 31, 2009, as well as the share holdings of the current members of management, as of the date hereof:
Name And
Address Of
Beneficial
Owner (1)
Amount And
Nature Of
Beneficial
Ownership
Percent Of
Class (2)
Flora Nutrients,11710 Old Georgetown Rd, Rockville,MD
33,334
49.2%
Stack Holding, LLC
3,334
4.9
All Executive Officers and Directors as a Group (1 person)
0%
____________________
* Represents less than 1% of our outstanding Common Stock.
(1) Percentage of beneficial ownership is based upon the 67,699 shares of our Common Stock which is outstanding as of the date hereof, plus, where applicable, the number of shares that the indicated person or group had a right to acquire within sixty (60) days of that date.
Changes in Control
To the knowledge of our management, there are no present arrangements or pledges of our securities which may result in a change in control of our company.
Item 13. Certain Relationships and Related Transactions, and Director Independence
We will present all possible transactions between us and our officers, directors or 5% stockholders, and our affiliates to the Board of Directors for their consideration and approval. Any such transaction will require approval by a majority of the disinterested directors and such transactions will be on terms no less favorable than those available to disinterested third parties.
Item 14. Principal Accountant Fees and Services
Audit Fees
For our fiscal year ended December 31, 2008 and 2009, we were billed approximately $42,500 and $12,000 for professional services rendered for the audit and review of our financial statements, respectively.
Audit-Related Fees
The aggregate fees billed in each of the fiscal years ended December 31, 2008 and 2009 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our Form 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those two fiscal years were approximately $0 and $0, respectively.
All Other Fees
We did not incur any other fees related to services rendered by our principal accountant for the fiscal year ended December 31, 2008 and 2009.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Item 15. Exhibits, Financial Statement Schedules
a) Documents filed as part of this Annual Report
1. Financial Statements
2. Financial Statement Schedules
3. Exhibits
Exhibit No.
Title of Document
31.1
Certification of Kyle Gotshalk pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Kyle Gotshalk pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Item 9. Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to the Combined Financial Statements
Larry O'Donnell, CPA, P.C.
Telephone (303)745-4545
2228 South Fraser Street
Fax (303)369-9384
Unit 1
e-mail larryodonnelcpa@comcast.net
Aurora, Colorado 80014 www.larryodonnellcpa.com
Report of Independent Registered Public Accounting Firm
To the Board of Directors
Stakool, Incorporated
Canyon Country, California
I have audited the accompanying consolidated balance sheets of Stakool, Incorporated and subsidiaries as of December 31, 2009, and the related consolidated statements of operations, changes in stockholders’ deficiency, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. My responsibility is to express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that I 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. I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Stakool, Incorporated and subsidiaries as of December 31, 2009, and the results of their operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
These consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has operating and liquidity concerns, has incurred an accumulated deficit of approximately $5,839,000 through the period ended December 31, 2009. This condition raises substantial doubt about the Company's ability to continue as a going concern. Management's plans as to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties.
/s/ Larry O’Donnell
Larry O’Donnell, CPA, P.C.
March 25, 2010
See accompanying notes to consolidated financial statements, which are an integral part of the financial statements.
See accompanying notes to consolidated financial statements, which are an integral part of the financial statements.
See accompanying notes to consolidated financial statements, which are an integral part of the financial statements.
See accompanying notes to consolidated financial statements, which are an integral part of the financial statements.
STAKOOL. INC.
F/KA/ MOD HOSPITALITY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2009
_________________________________________________________________________________________
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUTING POLICIES AND BASIS OF PRESENTATION
Nature of Business
On February 12, 2008, East Coast Realty Ventures, LLC (ECRV, LLC) purchased from Airport Road Associates One, LLC ("Airport LLC"), the then controlling shareholder of the issuer, 900,000 shares of Preferred Stock and 25,865,000 shares of Common Stock in a privately negotiated transaction. ECRV, LLC paid $153,750 for the Preferred and Common Stock.
As of February 12, 2008, ECRV, LLC may be deemed to have sole voting power over 132,873,855 shares of Common Stock (which includes the 107,008,855 votes from the Series A Shares) and dispositive power over 81,553,282 shares of Common Stock (which includes shares of Common Stock issuable upon the conversion of the Series A Shares). Airport LLC may be deemed to have shared voting and dispositive power over no shares of Common Stock.
As of February 12, 2008, Frederic Richardson may be deemed to have sole voting and dispositive power over no shares of Common Stock and may be deemed to have shared voting power over 132,873,855 shares of Common Stock (which includes the 107,008,855 votes from the Series A Shares held by Airport LLC) and shared dispositive power over 81,553,282 shares of Common Stock (which includes shares of Common Stock issuable upon the conversion of the Series A Shares held by Airport LLC).
On March 26, 2008, ECV Holdings, Inc. (“ECV”) is a corporation formed under the laws of Delaware. On April 4, 2008, ECV entered into a stock for membership interest agreement with East Coast Realty Ventures, LLC (“ ECRV ”) which owned all of the issued and outstanding capital (the “ Membership Interest ”) of ECRV Hanover LeaseCo, LLC (the “ Hanover ”), ECRV Clinton LeaseCo, LLC (the “ Clinton ”), and ECRV FM LeaseCo, LCC (the “ Absecon ”). Hanover, Clinton, and Absecon are limited liability companies organized under the law of the State of Delaware. As a result of the stock for membership interest transaction, ECV acquired 100% of the membership interest in Hanover, Clinton and Absecon by issuing Frederic Richardson 100,000 shares of its common stock.
Effective May 8, 2008, ECV entered into a share exchange agreement with Frederic Richardson, and FLNU, a non-reporting small public company listed on the Pink Sheets Grey Market, whereby, Frederic Richardson transferred to FLNU 100% of the issued and outstanding common stock of ECV, in exchange for 28,000,000 shares of common stock of FLNU, which represents 80% of FLNU’s outstanding common stock. As a result of the share exchange transaction, Hanover, Clinton and Absecon became the wholly owned subsidiaries of FLNU.
On October 21, 2008 (“the Closing Date”), the Company acquired all of the issued and outstanding common stock of ECV Holdings, Inc., (“ECV”) a Delaware corporation, in accordance with the Share Exchange Agreement. On
the Closing Date, pursuant to the terms of the Securities Exchange Transaction, the Company acquired all of the outstanding common stock of ECV from Flora Nutrients, Inc. (“FLNU”). In exchange, the Company issued FLNU 50,000,000 common stock, or approximately 99.912% of the Company’s common stock outstanding.
The Company conducts its business operations through ECRV Hanover LeaseCo, LLC (“Hanover”), ECRV Clinton LeaseCo, LLC (“Clinton”), and ECRV FM LeaseCo, LCC (“Absecon”).
Hanover was organized as a limited liability company under the laws of the State of Delaware on June 16, 2006. Clinton was organized as a limited liability company under the laws of the State of Delaware on March 08, 2007. Absecon was organized as a limited liability company under the laws of the State of Delaware on May 10, 2007.
Stakool, Inc. f/k/a Mod Hospitality, Inc. f/k/a PSPP Holdings, Inc. (“the Company”) was incorporated in the State of Delaware in 1993. In 1997, the Company changed its Corporate Charter to the State of Nevada. As of December 31, 2008, the Company maintained its Corporate Charter in the State of Nevada.
On September 22, 2008, the Company changed its name to Mod Hospitality, Inc.
On December 16, 2009 the Company changed its name to Stakool, Inc.
The transactions on March 26, 2008, May 8, 2008, and October 21, 2008 have all been rescinded effective January 24, 2010. All memberships, assets , interests or stock positions have been returned to the appropriate entity or persons.
In consideration for execution of the rescission agreement 50,000,000 common shares previously issued be returned to the treasury stock of the Company. The preferred shares held by Mr. Richardson have been purchased in a separate transaction. In addition as part of the rescission agreement all assets, property, securities or items of value have been transferred back to the original holders pre-acquisition.
The company will continue to develop Dream Apartments, TV. Dream Apartments TV is a diverse apartment advertising and search engine company for Apartments and properties in California and Nationwide. We have been working on making the intellectual property of Dream Apts. more suited for 2010. We have also been adding many aspects to the core structure enabling us to be able to roll out our technology into apartment searching and finding properties.
Investments
The Company accounts for investments, where the Company holds from 20% up to 50%, in the common stock, or membership interest, of an entity, using the equity method. The investment is initially recorded at cost and the carrying amount is adjusted to recognize the Company’s proportionate share of the earnings or losses of the investee after the date of acquisition. The amount of the adjustment is included in the determination of net income or loss of the Company in the period of the adjustment. Any dividends received from the investee reduce the carrying value of the investment.
As of December 31, 2008, Dream Apartments TV continued to pursue its planned operations, therefore, current management made the decision to reflect the $58,000 as the fair value of this investment.
BASIS OF PRESENTATION
Management's plans in this regard include raising additional cash from current and potential stockholders and lenders, making strategic acquisitions and increasing the marketing of its products and services. Until the Company generates sufficient revenues from the sale of its products, the Company will continue to be dependent on raising substantial amounts of additional capital through any one of a combination of debt offerings or equity offerings. The Company has no current arrangements with respect to any additional financing. Consequently, there can be no assurance that any future financing will be available to the Company when needed, and on commercially reasonable terms. The Company's inability to derive sufficient revenues from the sale of its products, or obtain additional financing when needed, would have a material adverse effect on the company, requiring the Company to curtail or
cease operations. In addition, any equity financing may involve substantial dilution to the Company's then current stockholders.
Being a development stage company, the Company is subject to all the risks inherent in the establishment of a new enterprise and the marketing and manufacturing of a new product, many of which risks are beyond the control of the Company. All of these factors raise substantial doubt as to the ability of the Company to continue as a going concern.
These consolidated financial statements do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary as a result of the above uncertainty.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation.
BASIS OF PRESENTATION
The condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP"). All material intercompany balances and transactions have been eliminated
Financial Reporting
The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America. Revenues and expenses are reported on the accrual basis, which means that income is recognized as it is earned and expenses are recognized as they are incurred.
Use of Estimates
The Company’s significant estimates include allowance for doubtful accounts and accrued expenses. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While the Company believes that such estimates are fair when considered in conjunction with the financial statements taken as a whole, the actual amounts of such estimates, when known, will vary from these estimates. If actual results significantly differ from the Company’s estimates, the Company’s financial condition and results of operations could be materially impacted.
Cash and Cash Equivalents
Cash and cash equivalents include all interest-bearing deposits or investments with maturities of three and nine months or less.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company maintains cash balances at one financial institution, which is insured by the Federal Deposit
Insurance Corporation (“FDIC”). The FDIC insured institution insures up to $250,000 on account balances. The amounts that are not insured by FDIC limitations are held in short-term securities.
Fair value of financial instruments
The carrying amounts reported in the balance sheet for cash, accounts receivable, accounts payable and accrued expenses, debenture and loans payable approximate their fair market value based on the short-term maturity of these instruments.
Accounts Receivable
The Company extends credit to its customers in the normal course of business. Further, the Company regularly reviews outstanding receivables, and provides estimated losses through an allowance for doubtful accounts. In evaluating the level of established loss reserves, the Company makes judgments regarding its customers’ ability to make required payments, economic events and other factors. As the financial condition of these parties change, circumstances develop or additional information becomes available, adjustments to the allowance for doubtful accounts may be required. The Company also performs ongoing credit evaluations of customers’ financial condition. The Company maintains reserves for potential credit losses, and such losses traditionally have been within its expectations.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company accounts for the impairment of long-lived assets in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of” (“SFAS No. 144”). SFAS No. 144 requires write-downs to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount.
GOODWILL AND OTHER INTANGIBLE ASSETS
In June 2001, the FASB issued Statement No. 142 Goodwill and Other Intangible Assets. This statement addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, Intangible Assets. It addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. This Statement also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements.
Goodwill and intangible assets with indefinite useful lives are not amortized. Intangible assets with finite useful lives are amortized generally on a straight-line basis over the periods benefited, with a weighted average useful life of 15 years.
In performing this assessment, management uses the income approach and the similar transactions method of the market approach to develop the fair value of the acquisition in order to assess its potential impairment of goodwill. The income approach is based on a discounted cash flow model which relies on a number of factors, including operating results, business plans, economic projections and anticipated future cash flows. Rates used to discount future cash flows are dependent upon interest rates and the cost of capital at a point in time. The similar transactions method is a market approach methodology in which the fair value of a business is estimated by analyzing the prices at which companies similar to the subject, which are used as guidelines, have sold in controlling interest transactions (mergers and acquisitions). Target companies are compared to the subject company, and multiples paid in transactions are analyzed and applied to subject company data, resulting in value indications. Comparability can be affected by, among other things, the product or service produced or sold, geographic markets served, competitive position, profitability, growth expectations, size, risk perception, and capital structure. There are inherent uncertainties related to these factors and management’s judgment in applying them to the analysis of goodwill impairment. It is possible that assumptions underlying the impairment analysis will change in such a manner that impairment in value may occur in the future.
REVENUE RECOGNITION
Revenue for video streaming and maintenance services is recognized monthly as services are provided pursuant to the terms of contracts or purchase orders, which have prices that are fixed and determinable. The Company assesses the client’s ability to meet the contract terms, including meeting payment obligations, before entering into the contract. Deferred revenue results from customers who are billed for monitoring in advance of the period in which the services are provided, on a monthly, quarterly or annual basis.
The Company follows Staff Accounting Bulletin 104 (SAB 104), which requires the Company to defer certain installation revenue and expenses, primarily equipment related to, and direct labor incurred. The capitalized costs and deferred revenues related to the installation are then amortized over the life of an average customer relationship, on a straight line basis. If the customer is discontinued prior to the expiration of the original expected life, the unamortized portion of the deferred installation revenue and related capitalized costs are recognized in the period the discontinuation becomes effective. In accordance with EITF 00-21, “Revenue Arrangements with Multiple Deliverables”, the service contracts that include both installation and video streaming are considered a single unit of accounting. The criteria in EITF 00-21 that the Company does not meet for services and installation services to be considered separate units of accounting is that the installation service to customers has no stand alone value. The installation service alone is not functional to customers without the service.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Expenditures for major betterments and additions are capitalized while replacement, maintenance and repairs, which do not extend the lives of the respective assets, are currently charged to expense. Any gain or loss on disposition of assets is recognized currently in the statement of income.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist primarily of cash, accounts payable and accrued expenses, and debt. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these instruments. The estimated fair value is not necessarily indicative of the amounts the Company would realize in a current market exchange or from future earnings or cash flows.
INCOME TAXES
The Company adopted Financial Accounting Standards Board (“FASB”) Interpretation No. (FIN) 48, “Accounting for Uncertainty in Income Taxes.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires that the Company determine whether the benefits of the Company’s tax positions are more likely than not of being sustained upon audit based on the technical merits of the tax position. The provisions of FIN 48 also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, and disclosure. The Company did not have any unrecognized tax benefits and there was no effect on the financial condition or results of operations as a result of implementing FIN 48. The Company does not have any interest and penalties in the statement of operations for the years ended December 31, 2009 and 2008.
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is computed in accordance with SFAS No. 128, "Earnings per Share". Basic earnings (loss) per share is computed by dividing net income (loss), after deducting preferred stock dividends accumulated during the period, by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period. The outstanding warrants for the years ended December 31, 2009 and 2008 respectively are anti-dilutive and therefore are not included in earnings (loss) per share.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company adopted SFAS No. 123R, "Accounting for Stock-Based Compensation". This statement requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service.
In addition, a public entity is required to measure the cost of employee services received in exchange for an award of liability instruments based on its current fair value. The fair value of that award has been re-measured subsequently at each reporting date through the settlement date. Changes in fair value during the requisite service period will be recognized as compensation cost over that period.
For the year ended December 30, 2008 and 2009, the Company did not grant any stock options.
NON-EMPLOYEE STOCK BASED COMPENSATION
The cost of stock based compensation awards issued to non-employees for services are recorded at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in Emerging Issues Task Force Issue (“EITF”) 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” (“EITF 96-18”).
COMMON STOCK PURCHASE WARRANTS
The Company accounts for common stock purchase warrants in accordance with the provisions of Emerging Issues Task Force Issue (“EITF”) issue No. 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” (“EITF 00-19”). Based on the provisions of EITF 00-19, the Company classifies as equity any contracts that (i) require physical settlement or net-share settlement, or (ii) gives the company a choice of net-cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the company), or (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).
INCOME TAXES
The Company accounts for income taxes using SFAS No. 109, "Accounting for Income Taxes," which requires recognition of deferred tax liabilities and assets for expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded for deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized. Beginning after December 15, 2006. The Company does not expect that this interpretation will have a material impact on its financial position, results of operations, or cash flows.
In May 2007, the FASB issued FASB Staff Position No. FIN 48-1, Definition of Settlement in FASB Interpretation No. 48 (“the FSP”). The FSP provides guidance about how an enterprise should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits. Under the FSP, a tax position could be effectively settled on completion of examination by a taxing authority if the entity does not intend to appeal or litigate the result and it is remote that the taxing authority would examine or re-examine the tax position. The Company does not expect that this interpretation will have a material impact on its financial position, results of operations, or cash flows.
NOTE 3 - GOING-CONCERN AND MANAGEMENT'S PLAN/
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, as shown in the accompanying consolidated financial statements, the Company has incurred losses from operations since inception. Management anticipates incurring additional losses in 2010. Further, the Company may incur additional losses thereafter, depending on its ability to generate revenues from the licensing or sale of its technologies and products. The Company's technologies and products have never been utilized on a large-scale commercial basis and there is no assurance that any of its technologies or products will receive market acceptance. As reflected in the accompanying consolidated financial statements, the consolidated financial statements, the Company has operating and liquidity concerns, has incurred an accumulated deficit of approximately $5,839,000 through the period ended December 31, 2009. The Company's operations for the year ended December 31, 2008 and 2009, resulted in a net loss of $193,973 and $-0-, respectively.
Management's plans in this regard include raising additional cash from current and potential stockholders and lenders, making strategic acquisitions and increasing the marketing of its products and services. As a result of the Company's acquisition of 1stAlerts, and the anticipated cash flow from the combined company's operations, the Company believes that it will have sufficient capital to fund its operations. However, until such time as the Company generates sufficient revenues from the sale of its products, the Company will continue to be dependent on raising substantial amounts of additional capital through any one of a combination of debt offerings or equity offerings. The Company has no current arrangements with respect to any additional financing. Consequently, there can be no assurance that any future financing will be available to the Company when needed, and on commercially reasonable terms. The Company's inability to derive sufficient revenues from the sale of its products, or obtain additional financing when needed, would have a material adverse effect on the company, requiring the Company to curtail or cease operations. In addition, any equity financing may involve substantial dilution to the Company's then current stockholders.
Being a development stage company, the Company is subject to all the risks inherent in the establishment of a new enterprise and the marketing and manufacturing of a new product, many of which risks are beyond the control of the Company. All of these factors raise substantial doubt as to the ability of the Company to continue as a going concern.
These consolidated financial statements do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary as a result of the above uncertainty.
NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS
Accounting Standards Codification
In June 2009, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (the “Codification”). This standard replaces SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles, and establishes only two levels of U.S. generally accepted accounting principles (“GAAP”), authoritative and nonauthoritative. The FASB ASC has become the source of authoritative, nongovernmental GAAP, except for rules and interpretive releases of the SEC, which are sources of authoritative GAAP for SEC registrants. All other nongrandfathered, non-SEC accounting literature not included in the Codification will become nonauthoritative. This standard is effective for financial statements for interim or annual reporting periods ending after September 15, 2009. The adoption of the Codification changed the Company’s references to GAAP accounting standards but did not impact the Company’s results of operations, financial position or liquidity.
Participating Securities Granted in Share-Based Transactions
Effective January 1, 2009, the Company adopted a new accounting standard included in ASC 260, Earnings Per Share (formerly FASB Staff Position (“FSP”) Emerging Issues Task Force (“EITF”) 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities). The new guidance clarifies that non-vested share-based payment awards that entitle their holders to receive nonforfeitable dividends or dividend equivalents before vesting should be considered participating securities and included in basic earnings per share. The Company’s adoption of the new accounting standard did not have a material effect on previously issued or current earnings per share.
Business Combinations and Noncontrolling Interests
Effective January 1, 2009, the Company adopted a new accounting standard included in ASC 805, Business Combinations (formerly SFAS No. 141(R), Business Combinations). The new standard applies to all transactions or other events in which an entity obtains control of one or more businesses. Additionally, the new standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement date for all assets acquired and liabilities assumed; and requires the acquirer to disclose additional information needed to evaluate and understand the nature and financial effect of the business combination. The Company’s adoption of the new accounting standard did not have a material effect on the Company’s consolidated financial statements.
Effective January 1, 2009, the Company adopted a new accounting standard included in ASC 810, Consolidations (formerly SFAS 160, Noncontrolling Interests in Consolidated Financial Statements). The new accounting standard establishes accounting and reporting standards for the noncontrolling interest (or minority interests) in a subsidiary and for the deconsolidation of a subsidiary by requiring all noncontrolling interests in subsidiaries be reported in the same way, as equity in the consolidated financial statements. As such, this guidance has eliminated the diversity in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transactions. The Company’s adoption of this new accounting standard did not have a material effect on the Company’s consolidated financial statements.
Fair Value Measurement and Disclosure
Effective January 1, 2009, the Company adopted a new accounting standard included in ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) (formerly FASB FSP No 157-2, Effective Date of FASB Statement No. 157), which delayed the effective date for disclosing all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value on a recurring basis (at least annually). This standard did not have a material impact on the Company’s consolidated financial statements.
In April 2009, the FASB issued new guidance for determining when a transaction is not orderly and for estimating fair value when there has been a significant decrease in the volume and level of activity for an asset or liability. The new guidance, which is now part of ASC 820 (formerly FSP 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly), requires disclosure of the inputs and valuation techniques used, as well as any changes in valuation techniques and inputs used during the period, to measure fair value in interim and annual periods. In addition, the presentation of the fair value hierarchy is required to be presented by major security type as described
in ASC 320, Investments - Debt and Equity Securities. The provisions of the new standard were effective for interim periods ending after June 15, 2009. The adoption of the new standard on April 1, 2009 did not have a material effect on the Company’s consolidated financial statements.
In April 2009, the Company adopted a new accounting standard included in ASC 820, (formerly FSP 107-1 and Accounting Principles Board (“APB”) 28-1, Interim Disclosures about Fair Value of Financial Instruments). The new standard requires disclosures of the fair value of financial instruments for interim reporting periods of publicly traded companies in addition to the annual disclosure required at year-end. The provisions of the new standard were effective for the interim periods ending after June 15, 2009. The Company’s adoption of this new accounting standard did not have a material effect on the Company’s consolidated financial statements.
In August 2009, the FASB issued new guidance relating to the accounting for the fair value measurement of liabilities. The new guidance, which is now part of ASC 820, provides clarification that in certain circumstances in which a quoted price in an active market for the identical liability is not available, a company is required to measure fair value using one or more of the following valuation techniques: the quoted price of the identical liability when traded as an asset, the quoted prices for similar liabilities or similar liabilities when traded as assets, or another valuation technique that is consistent with the principles of fair value measurements. The new guidance clarifies that a company is not required to include an adjustment for restrictions that prevent the transfer of the liability and if an adjustment is applied to the quoted price used in a valuation technique, the result is a Level 2 or 3 fair value measurement. The new guidance is effective for interim and annual periods beginning after August 27, 2009. The Company’s adoption of the new guidance did not have a material effect on the Company’s consolidated financial statements.
Derivative Instruments and Hedging Activities
Effective January 1, 2009, the Company adopted a new accounting standard included in ASC 815, Derivatives and Hedging (SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of SFAS No. 133). The new accounting standard requires enhanced disclosures about an entity’s derivative and hedging activities and is effective for fiscal years and interim periods beginning after November 15, 2008. Since the new accounting standard only required additional disclosure, the adoption did not impact the Company’s consolidated financial statements.
Other-Than-Temporary Impairments
In April 2009, the FASB issued new guidance for the accounting for other-than-temporary impairments. Under the new guidance, which is part of ASC 320, Investments - Debt and Equity Securities (formerly FSP 115-2 and 124-2, Recognition and Presentation of Other-Than-Temporary Impairments), an other-than-temporary impairment is recognized when an entity has the intent to sell a debt security or when it is more likely than not that an entity will be required to sell the debt security before its anticipated recovery in value. The new guidance does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities and is effective for interim and annual reporting periods ending after June 15, 2009. The Company’s adoption of the new guidance did not have a material effect on the Company’s consolidated financial statements.
Subsequent Events
In May 2009, the FASB issued new guidance for subsequent events. The new guidance, which is part of ASC 855, Subsequent Events (formerly SFAS No. 165, Subsequent Events) is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, this guidance sets forth 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, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The new guidance is effective for fiscal years and interim periods ended after June 15, 2009 and will be applied prospectively. The Company’s adoption of the new guidance did not have a material effect on the Company’s consolidated financial statements. The Company evaluated subsequent events through the date the accompanying financial statements were issued.
Accounting Standards Not Yet Effective
Accounting for the Transfers of Financial Assets
In June 2009, the FASB issued new guidance relating to the accounting for transfers of financial assets. The new guidance, which was issued as SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment to SFAS No. 140, was adopted into Codification in December 2009 through the issuance of Accounting Standards Updated (“ASU”) 2009-16. The new standard eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures in order to enhance information reported to users of financial statements by providing greater transparency about transfers of financial assets, including securitization transactions, and an entity’s continuing involvement in and exposure to the risks related to transferred financial assets. The new guidance is effective for fiscal years beginning after November 15, 2009. The Company will adopt the new guidance in 2010 and is evaluating the impact it will have to the Company’s consolidated financial statements.
Accounting for Variable Interest Entities
In June 2009, the FASB issued revised guidance on the accounting for variable interest entities. The revised guidance, which was issued as SFAS No. 167, Amending FASB Interpretation No. 46(R), was adopted into Codification in December 2009 through the issuance of ASU 2009-17. The revised guidance amends FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities, in determining whether an enterprise has a controlling financial interest in a variable interest entity. This determination identifies the primary beneficiary of a variable interest entity as the enterprise that has both the power to direct the activities of a variable interest entity that most significantly impacts the entity’s economic performance, and the obligation to absorb losses or the right to receive benefits of the entity that could potentially be significant to the variable interest entity. The revised guidance requires ongoing reassessments of whether an enterprise is the primary beneficiary and eliminates the quantitative approach previously required for determining the primary beneficiary. The Company does not expect that the provisions of the new guidance will have a material effect on its consolidated financial statements.
Revenue Recognition
In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements. The new standard changes the requirements for establishing separate units of accounting in a multiple element arrangement and requires the allocation of arrangement consideration to each deliverable based on the relative selling price. The selling price for each deliverable is based on vendor-specific objective evidence (“VSOE”) if available, third-party evidence if VSOE is not available, or estimated selling price if neither VSOE or third-party evidence is available. ASU 2009-13 is effective for revenue arrangements entered into in fiscal years beginning on or after June 15, 2010. The Company does not expect that the provisions of the new guidance will have a material effect on its consolidated financial statements.
In October 2009, the FASB issued Accounting Standards Update No. 2009-14, "Certain Revenue Arrangements That Include Software Elements" ("ASU No. 2009-14"). ASU No. 2009-14 amends guidance included within ASC Topic 985-605 to exclude tangible products containing software components and non-software components that function together to deliver the product’s essential functionality. Entities that sell joint hardware and software products that meet this scope exception will be required to follow the guidance of ASU No. 2009-13. ASU No. 2009-14 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption and retrospective application are also permitted. The company is currently evaluating the impact of adopting the provisions of ASU No. 2009-14.
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 consolidated financial statements upon adoption.
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 consolidated financial statements upon adoption.
NOTE 5 - RECLASSIFICATIONS
Certain prior periods' balances have been reclassified to conform to the current period's financial statement presentation. These reclassifications had no impact on previously reported results of operations or stockholders' equity.
In assessing the amount of deferred tax asset to be recognized, management considers whether it is more likely than not that some of the losses will be used in the future. Management expects that they will not have benefit in the future. Accordingly, a fully valuation allowance has been established.
NOTE 6 - COMMON STOCK
LOSS PER COMMON SHARE
Basic loss per common share is computed based upon weighted-average shares outstanding and excludes any potential dilution. Diluted loss per share reflects the potential dilution from the exercise or conversion of all dilutive securities into Common Stock based upon the average market price of common shares outstanding during the period. For the year ended December 31, 2008 and 2009, no effect has been given to outstanding options, warrants, convertible debentures and convertible preferred stock in the diluted computation, as their effect would be anti-dilutive.
NOTE 7. MANAGEMENT AGREEMENTS
Has an agreement with Kyle Gotshalk as an consultant and officer of the company to issue him stock in lieu of cash payments.
NOTE 8. COMMON AND PREFERRED STOCK
As of December 31, 2009, the Company has 175,000,000 shares of common stock authorized and 64,699 issued and outstanding.
The balance of the outstanding common shares as of December 31, 2009; adjusted for the stock split were 64,699.
During the year ended December 31, 2009, 64,699 shares of common stock were issued at par value of $.001 for a total of $6,876 to certain individuals and entities for past consideration. The amount of $6,876 is included in general and administrative expenses.
As of December 31, 2009, the Company has 10,000,000 shares of preferred stock authorized and 1,000,000 issued and outstanding. 900,000 shares of the Preferred Stock are subject to the purchase and rescission agreements executed by Mr. Richardson.
NOTE 9. REVERSE SPLIT AND SYMBOL CHANGE
On April 29, 2008, the Company increased its authorized common stock from 80,000,000 shares to 175,000,000 shares by filing a Certificate of Change pursuant to NRS 78.209.
Effective June 21, 2008, in order to meet a requirement of the Stock Purchase Agreement, as amended, between Airport Road Associates One, LLC (“Airport, LLC”) and East Coast Realty Ventures, LLC (“ECRV, LLC”), as previously reported on Form 8-K filed March 20, 2008, the Board of Directors of the Company has declared a 100 to 1 round lot reverse split of the Company’s Common Stock. In accordance with the reverse split, each shareholder will receive one (1) share of Common Stock for each one hundred (100) shares currently held. No fractional shares shall be issued; all fractional shares shall be rounded up to the next whole share. Any shareholder that should own less than one hundred (100) shares after completion of the reverse split shall be issued a sufficient number of additional shares so that each such shareholder shall own a minimum of one hundred (100) shares. The reverse split was effective as of the opening of trading on June 2, 2008. Additionally, also effective June 2, 2008, the Company’s trading symbol was changed to “PSPN” in conjunction with the reverse split of the Company’s common stock.
On August 11, 2008, the Company changed its name to Cynosure Holdings, Inc. by filing a Certificate of Amendment to Articles of Incorporation.
On August 11, 2008, the members of our Board of Directors were increased to six (6), and Mark T. Johnson and Marc D. Manoff, Esq. were appointed to the Board of Directors pursuant to the increase.
On August 21, 2008, the Company changed its name to Hybid Hospitality, Inc. by filing a Certificate of Amendment to the Articles of Incorporation.
On August 27, 2008, the Company changed its name to Mod Hospitality, Inc. by filing a Certificate of Amendment to the Articles of Incorporation.
Effective September 22, 2008, the Company completed a 1 for 10 reserve split of its common stock and changed its name to Mod Hospitality, Inc. with a new symbol “MODY.”
On October 21, 2008, pursuant to a written consent, the holders of the majority of our voting stock approved us to enter into a share exchange agreement with FLNU and ECV Holdings. Pursuant to the share exchange agreement, FLNU will transfer all of the issued and outstanding common stock of ECV Holdings in exchange for 50,000,000 shares of our newly issued common shares. A copy of the Share Exchange Agreement was filed as exhibit to the Form 8-K filed on October 27, 2008 and incorporated herewith by reference.
In consideration for execution of the rescission agreement 50,000,000 common shares previously issued be returned to the treasury stock of the Company. The preferred shares held by Mr. Richardson have been purchased in a separate transaction. In addition as part of the rescission agreement all assets, property, securities or items of value have been transferred back to the original holders pre-acquisition.
Effective December 16, 2009 there was a 1:1500 reverse split, approved and accepted by shareholders, along with the fore mentioned rescission.
The transactions on March 26, 2008, May 8, 2008, and October 21, 2008 have all been rescinded effective January 24, 2010. All memberships, assets , interests or stock positions have been returned to the appropriate entity or persons.
NOTE 10. INCOME TAXES AND CHANGE IN CONTROL
The Company has approximately $887,625 in gross deferred tax assets as of December 31, 2009, resulting from net operating loss carry forwards. A valuation allowance has been recorded to fully offset these deferred tax assets because the future realization of the related income tax benefits is uncertain. Accordingly, the net provision for income taxes is zero as of December 31, 2009.
As of December 31, 2008, the Company has federal net operating loss carry forwards available to offset future taxable income through 2027 subject to the annual limitations imposed by Section 382 under the Internal Revenue Code due to the change in control. In February 2008, there was a change in control of the Company wherein Section 382 will apply to the net operating loss carryforward starting with the year ended December 31, 2008.
As of December 31, 2008, the difference between the tax provision at the statutory federal income tax rate and the tax provision attributable to loss before income taxes is as follows (in percentages):
Statutory federal income tax rate
-34%
State taxes - net of federal benefits
-5%
Valuation allowance
39%
Income tax rate - net
0%
For the year ended December 31, 2009, the valuation allowance adjustment was zero.
NOTE 11. REVERSE MERGER
On October 21, 2008, we underwent a reverse merger with ECV Holdings, Inc. (“ECV”), a Delaware corporation, pursuant to a share exchange agreement (the “Share Exchange Agreement”) with ECV and Flora Nutrients, Inc., a Nevada corporation and the sole shareholder of ECV (“FLNU”). The closing of the transaction took place on October 21, 2008 (the “Share Exchange Transaction”) and resulted in the acquisition of ECV. Pursuant to the terms of the Share Exchange Agreement, we acquired all of the outstanding common stock of ECV by issuing FLNU an aggregate of 50,000,000 shares representing 99.912% of our common stock outstanding. Since FLNU, the sole shareholder of ECV, will own 99.912% of the shares of our outstanding common stock upon the completion of the Share Exchange Transaction, ECV is the legal acquiree but the accounting acquirer in the reverse merger. Upon the completion of the Share Exchange Transaction, ECV (accounting acquirer, legal acquiree) will succeed to the business that we previously carried on, and will become the registrant. As a result, the historical financial statements presented going forward will be those of ECV (accounting acquirer, legal acquiree).
The Share Exchange Agreement contains customary terms and conditions for a transaction of this type, including representations, warranties and covenants, as well as provisions describing the consideration for the Acquisition, the process of exchanging the consideration and the effect of the acquisition.
As described above, on October 21, 2008, we acquired all of the issued and outstanding common stock of ECV, a Delaware corporation, in accordance with the Share Exchange Agreement. The closing of the transaction took place on October 21, 2008 (the “Closing Date”). On the Closing Date, pursuant to the terms of the Securities Exchange Transaction, we acquired all of the outstanding common stock of ECV from FLNU. In exchange, we issued FLNU 50,000,000 shares, or approximately 99.912% of our common stock outstanding. Since FLNU will own 99.912% of the shares of our outstanding common stock upon the completion of the Share Exchange Transaction, ECV is the legal acquiree but the accounting acquirer in the reverse merger. Upon the completion of the Share Exchange Transaction, ECV (accounting acquirer, legal acquiree) will succeed to the business that we previously carried on, and will become the registrant. As a result, the historical financial statements presented going forward will be those of ECV (accounting acquirer, legal acquiree).
ECV is a corporation formed on March 26, 2008 under the laws of Delaware. On April 4, 2008, ECV entered into a stock for membership interest agreement with East Coast Realty Ventures, LLC (“ECRV”) which owned all of the issued and outstanding capital (the “Membership Interest”) of ECRV Hanover LeaseCo, LLC (the “Hanover”), ECRV Clinton LeaseCo, LLC (the “Clinton”), and ECRV FM LeaseCo, LCC (the “Absecon”). Hanover, Clinton, and Absecon are limited liability companies organized under the law of the State of Delaware. As a result of the stock for membership interest transaction, ECV acquired 100% of the membership interest in Hanover, Clinton and Absecon by issuing Frederic Richardson 100,000 shares of its common stock.
Effective May 8, 2008, ECV entered into a share exchange agreement with Frederic Richardson, and FLNU, a non-reporting small public company listed on the Pink Sheets Grey Market, whereby, Frederic Richardson transferred to FLNU 100% of the issued and outstanding common stock of ECV, in exchange for 28,000,000 shares of common stock of FLNU, which represents 80% of FLNU’s outstanding common stock. As a result of the share exchange transaction, Hanover, Clinton and Absecon became the wholly owned subsidiaries of FLNU.
On October 21, 2008, pursuant to a written consent, the holders of the majority of our voting stock approved us to enter into a share exchange agreement with FLNU and ECV Holdings. Pursuant to the share exchange agreement, FLNU will transfer all of the issued and outstanding common stock of ECV Holdings in exchange for 50,000,000 shares of our newly issued common shares. A copy of the Share Exchange Agreement was filed as exhibit to the Form 8-K filed on October 27, 2008 and incorporated herewith by reference.
Effective December 16, 2009 there was a 1:1500 reverse split, approved and accepted by shareholders, along with the fore mentioned rescission.
The transactions on March 26, 2008, May 8, 2008, and October 21, 2008 have all been rescinded effective January 24, 2010. All memberships, assets , interests or stock positions have been returned to the appropriate entity or persons.
In consideration for execution of the rescission agreement 50,000,000 common shares previously issued be returned to the treasury stock of the Company. The preferred shares held by Mr. Richardson have been purchased in a separate transaction. In addition as part of the rescission agreement all assets, property, securities or items of value have been transferred back to the original holders pre-acquisition.
August 6, 2009, the company rescinded its agreements as mentioned above.
1)
Subsequent to December 31, 2008 through April 13, 2009, the Company issued 3,891, 661 shares of its common stock at par value of $.001. These issuances of common stock increase the outstanding shares of common stock to 10,804,829 shares.
2)
In February 2009, the Company terminated Park Place Hospitality Group’s (“PPHG”) management agreement for the Holiday Inn Express in Hanover, Maryland. The Company retained the management services of Mid-Atlantic Realty Group under the same terms as PPHG, however, the formal agreements have yet to be signed. Mid-Atlantic Realty Group is an entity controlled by the Company’s Chairman and CEO, Mr. Richardson. (See Note 3).
3)
In February 2009, the management of the Company discovered that the Holiday Inn Express in Hanover, Maryland managed by Park Place Hospitality Group was accruing $8,321 per month for personal property taxes on the furniture, fixtures and equipment owned by ECRV Hanover Hospitality Leaseco, LLC as opposed to $8,321 per year. As a result, in accordance with SFAS no. 154, the accompanying consolidated financial statements as of December 31, 2007 and 2006 have been adjusted to reflect an over accrual of $141,457 for personal property taxes.
NOTE 12. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
In 2005, the Company retained the legal services of Weed & Co, LLP. On December 3, 2007, Weed & Co, LLP filed a complaint in Superior Court of the State of California in dispute over payment of legal fees against the Company and other defendants. On March 11, 2008, the other defendants entered into a settlement agreement where Weed & Co, LLP was to be paid $87,500. Weed & Co., LP has the right to re-file the complaint should the other defendants not satisfy this agreement. There is no liability reflected in the accompanying consolidated financial statements for this uncertainty. Weed & Co, LLP exercised its rights and received shares as settlement outlined in the agreement referenced above.
NOTE 13. NOTES PAYABLE
The Company has notes payable with a principal balance of $243,474 plus accrued interest as of December 31, 2009. The notes are due to related parties and have an annual interest rate of 10%. The notes payable continue to accrue interest expenses. The balance as of December 31, 2009 is $333,825.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
The company has hired Larry ODonnell as the company’s auditor.. The company has a balance due to Kevin Conner of $64,000.00 which will be reflected in it’s 2009 10K.
Item 9A.
Item 9A. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on management’s evaluation, our chief executive officer and chief financial officer concluded that, as of December 31, 2009, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
(b) Changes in internal control over financial reporting.
We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.
There were no changes in our internal control over financial reporting that occurred during the period covered by this Annual Report on Form 10-K that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
(c) Management’s report on internal control over financial reporting.
We assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control - Integrated Framework . Based on our assessment using those criteria, we concluded that our internal control over financial reporting was effective as of December 31, 2009.
No Audit of the effectiveness of our internal controls over financial reporting as of December 31, 2009 was performed. As in the past we have relied heavily on the effectiveness of internal controls over financial reporting of our management company and we have made a change in management company for Hanover and Clinton, we will be making significant changes to our internal control. We will:
1.
Insure that each property will design, document, and implement more efficient and rigorous processes at the entity level, as opposed to the management company level
2.
Monthly financial analysis meetings for each entity will require a higher number of board members or senior management team members in attendance. Each evaluation procedures addressing the effectiveness of internal control over financial reporting will be documented as such
3.
Records kept of all meetings established to set the tone of acceptable ethical behavior from the CEO down to every level of employee in each entity
4.
Each entity will be required to adequately produce and provide to every level of staff member appropriate documentation presenting the integrity of the corporation and avenues through which employees can report incidents of unethical behavior; e.g., employee handbooks and whistle blowing policies designed specifically for each entity
5.
Adequate training to all management of each entity on the psychological states that must exist in an individual to participate in fraudulent activities
6.
All criteria set forth by COSO in Internal Control - Integrated Framework will be disseminated amongst management of each entity and training will be given with specific emphasis on risk evaluation of all financial transactions and the reporting of such transactions
7.
If segregation of duties cannot be achieved at each entity due to the size of the entity, procedures, which already are in place to compensate for this lack of separation, will be documented
8.
Our external auditors will be given access to all stages of our design, implementation, and documentation of these steps, with an open platform for suggestions and critique.
Item 9B.
Item 9B. Other Information.
Not applicable.
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act.
Identification of Directors and Executive Officers as of December 31, 2009
The following table sets forth the names of all of our directors and executive officers, as of December 31, 2009:
Name
Age
Positions Held and Tenure
Kyle Gotshalk
Director and Chief Executive Officer,
President
Kyle Gotshalk, 34, was elected on January 2, 2009 to serve as an Officer and a Director and on January 3, 2009 to serve as CEO and Vice President of Commerce Online, Inc. Contemporaneous with Commerce Online Inc., Mr. Gotshalk serves as an Officer and Director of VSUS Technologies, Inc. Beginning February 2005 through January 2009, Mr. Gotshalk was the President of Exit Only, Inc. an internet car sales company. Prior to this Mr. Gotshalk served as President of PSPP Holdings Inc. a credit card processing company, President of Top Flight Consulting LLC, an up and coming consulting firm, and as a Manager and Fitness Director at Sports Center Fitness. Mr. Gotshalk graduated with honors in Public Relations/Communication Studies from University of Montana in 1997. Mr. Gotshalk holds a Real Estate License in California and on May 2006 was awarded the Top Producing Agent award for most sales in first year of Real Estate by his Century 21 office.
Former Officer and Directors:
Frederic Richardson, 50, CEO, President and Chairman
Frederic Richardson is an owner of several hotel operations. Mr. Richardson was responsible for raising over $1.5 billion in debt and equity financing for private and public projects since 1985. He has extensive experience in investment banking and real estate investments. Mr. Richardson has served as a chairman and majority shareholder of seven publicly traded companies and has owned and operated two national FHA, VA, Full Eagle Mortgage companies, one of which he took public in 1999. Mr. Richardson is a member of the Building Owners and Managers Association International (BOMA), Apartment Building Association (AOBA), and the Tenant in Common Association. Mr. Richardson received his Bachelor of Arts in Economics from the University of Maryland and an MBA in Finance from American University and is a Chartered Life Underwriter.
Sarah E. Jackson, 42, CFO, Treasurer and Director
Sarah E. Jackson, CPA has extensive real estate accounting experience. She began her real estate accounting career with Lendlease Real Estate Investments, Inc. at that time when it was the largest real estate investment company in the world. While with Lendlease, she was the lead accountant and analyst for a REIT consisting of class AAA office buildings in New York, Chicago, and San Francisco and was responsible for explaining all transactions to Australian market pundits. She was chosen to implement FAS 133 and on the company’s US training committee. Ms. Jackson then moved into the banking industry, where she became Vice President of credit administration for a national bank and heavily involved in risk management. Ms. Jackson has consulted for some of the biggest companies in the real estate and mortgage industries including Fannie Mae and Wells Fargo. Ms. Jackson received a BA in English Literature and Philosophy from Gustavus Adolphus College and a BS and Masters of Accountancy from Denver University.
Andrienne Venson, 55, COO & Director
Adrienne Venson has over 20 years successful Fortune 25 corporate experience in Investor Revenue Assurance, Sales, and Project Management. She is a merger synergy and Six Sigma specialist. She is responsible for oversight of broker and investor processing and equity sourcing. She is the Director of Marketing and promotional communications for hospitality properties and new projects, as well as contract, property and vendor management. She has successfully managed numerous business projects resulted in revenue increases through process re-engineering, system development and implementation. She received a BS in Urban and Regional planning from the University of Illinois.
Linda Russell, 58, CAO & Director
Linda Russell has 25 years experience in the financial management analysis field. While directing financial presentations for business marketing executives in a Fortune 50 company she managed results and projections for over $2 Billion in expense and capital funding, created analyses which fostered expenditures at 4% under budget. Additionally, Ms. Russell managed capitalized equipment supporting 700 marketing managers and negotiated 33% additional equipment for clients. She has also directed financial assurance, budgeting and business planning processes for a $1 Billion national public business while analyzing business cases, developing forecasts, and preparing financial views to assess performance targets in support of earnings objectives. More recently, Ms. Russell has designed and implemented real estate investment solutions and directs investment analysis and due diligence for real estate investments. Ms. Russell received her Master’s degree in Finance from George Washington University and a B.B.A in Actuarial Science from Temple University.
Mark T. Johnson, 40, Public Relations & Director
Mark T. Johnson is a principal of M.J. Advanced Corporate Communications, Inc., a multi-million dollar investor relations firm. Mr. Johnson completed his studies for a Bachelor of Science from Towson University in Finance and Economics and held Series 7, Series 62, Series 63, and Series 24 brokerage licenses. Previously, Mr. Johnson served as a regional manager for Thorne Industries and as a Senior Broker and Vice-President of several regional brokerage firms.
D. Manoff, Esq., 45, General Counsel, Secretary and Director
Marc D. Manoff, Esq. is a principal of The Law Offices of Marc D. Manoff, headquartered outside of Philadelphia, PA. He received his Juris Doctorate from the National Law Center at George Washington University and his Bachelor of Science from Albright College. After becoming partner at two of the larger firms in the Philadelphia region, Mr. Manoff founded The Law Offices of Marc D. Manoff and specializes in entrepreneurial law, where he often wears the dual hats of lawyer and business consultant to entrepreneurs and growing business, providing advice on topics ranging from corporate structure and financing to employment matters. Mr. Manoff currently sits on the boards of several regional companies and serves as general counsel for a number of growing technology companies.
Independent Directors
No member of our Board of Directors qualifies as an “independent director” under the listing requirements of NASDAQ.
As we increase the membership of our Board of Directors, we may add directors who qualified as “independent directors,” establish Board committees on which such independent directors may serve and adopt written Board committee charters, as appropriate, to assist in corporate governance.
Significant Employees
Other than as mentioned above, we have no employees who are not executive officers, but who are expected to make significant contributions to our business.
Involvement in Certain Legal Proceedings
Except as stated above, during the past five years, no director, person nominated to become a director, executive officer, promoter or control person of ours:
(1) was a general partner or executive officer of any business against which any bankruptcy petition was filed, either at the time of the bankruptcy or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
(3) was subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
(4) was found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
Audit Committee Financial Expert
The Securities Exchange Commission has adopted rules to implement certain requirements of the Sarbanes-Oxley Act of 2002 pertaining to public company audit committees. One of the rules adopted by the SEC requires a company to disclose whether it has an “audit committee financial expert” serving on its audit committee. Our board of directors has not yet established an audit committee. As such, our board has not yet appointed an audit committee financial expert. At this time, our board of directors believes it would be desirable to have an audit committee, and for the audit committee to have an audit committee financial expert serving on the committee. While informal discussions as to potential candidates have occurred, at this time no formal search process has commenced.
Compliance with Section 16(a) of the Exchange Act
To our knowledge, based solely on a review of such materials as are required by the Securities and Exchange Commission, none of our officers, directors or beneficial holders of more than ten percent of our issued and outstanding shares of Common Stock failed to timely file with the Securities and Exchange Commission any form or report required to be so filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, during the fiscal year ended December 31, 2009.
Code of Ethics
We have not yet adopted a code of ethics policy because we are a development stage company, in the early stages of operations. We intend to adopt a code of ethics policy in the future.
Item 10.
Item 10. Executive Compensation.
Summary Compensation
The following table discloses, for the fiscal years ended December 31, 2008 and 2009, certain compensation paid to our named executive officers, being (i) our former Chief Executive Officer, and (ii) the President of our former parent, Formula Footwear, Inc., which merged into our company as of June 9, 2004. No other officer of ours earned more than $100,000 in annual compensation during the fiscal year ended December 31, 2009.
Name and Principal Position
Year
Salary and
Other Annual
Compensation
($)
Long-Term
Compensation
Securities
Underlying
Options/SARS (#)
Kyle Gotshalk
Chief Executive Officer and Director
$ 0
$ 0
$ 0
$ 0
Option/SAR Grants
The following table provides information on option/SAR grants during the fiscal year ended December 31, 2006 to our named executive officers, being (i) our current Chief Financial Officer, (ii) our former Chief Executive Officer, and (iii) the President of our former parent, Formula Footwear, Inc., which merged into our company as of June 9, 2004.
Name
Number Of
Securities
Underlying
Options/SARS
Granted (#)
Percent Of
Total Options/
SARs Granted
To Employees
In Fiscal
Year
Exercise Or
Base Price
($/SH)
Expiration Date
Kyle Gotshalk
N/A
N/A
N/A
N/A
N/A
N/A
Option/SAR Exercises and Year-End Option/SAR Values
The following table sets forth information with respect to those executive officers listed above, concerning exercise of options during the last fiscal year and unexercised options and SARs held as of the end of the fiscal year:
Name
Shares Acquired on Exercise (#)
Value Realized ($)
Number of Securities Underlying Unexercised Options/SARs at FY-End (#) Exerciseable/Unexercisable
Value of Unexercised In-The-Money Options/SARs at FY-End ($) (1) Exercisable/Unexercisable
Kyle Gotshalk
0/0
$0.00
0/0
$0.00
Long-Term Incentive Awards
We made no long-term incentive awards to our named executive officers in the fiscal year ended December 31, 2009.
Compensation of Directors
There are no standard arrangements pursuant to which our directors are compensated for any services provided as director. No additional amounts are payable to our directors for committee participation or special assignments.
Employment Contracts and Termination of Employment and Change-in-Control Arrangements
We have entered into the no employment Agreements with officers of ours.
Item 11.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
Security Ownership of Certain Beneficial Owners and Management, as of the Date of this Report
The following table sets forth the beneficial ownership of persons who owned more than five (5%) percent of our Common Stock as of December 31, 2009, as well as the share holdings of the current members of management, as of the date hereof:
Name And
Address Of
Beneficial
Owner (1)
Amount And
Nature Of
Beneficial
Ownership
Percent Of
Class (2)
Flora Nutrients,11710 Old Georgetown Rd, Rockville,MD
33,334
49.2%
Stack Holding, LLC
3,334
4.9
All Executive Officers and Directors as a Group (1 person)
0%
____________________
* Represents less than 1% of our outstanding Common Stock.
(1) Percentage of beneficial ownership is based upon the 67,699 shares of our Common Stock which is outstanding as of the date hereof, plus, where applicable, the number of shares that the indicated person or group had a right to acquire within sixty (60) days of that date.
Changes in Control
To the knowledge of our management, there are no present arrangements or pledges of our securities which may result in a change in control of our company.
Item 13. Certain Relationships and Related Transactions, and Director Independence
We will present all possible transactions between us and our officers, directors or 5% stockholders, and our affiliates to the Board of Directors for their consideration and approval. Any such transaction will require approval by a majority of the disinterested directors and such transactions will be on terms no less favorable than those available to disinterested third parties.
Item 14. Principal Accountant Fees and Services
Audit Fees
For our fiscal year ended December 31, 2008 and 2009, we were billed approximately $42,500 and $12,000 for professional services rendered for the audit and review of our financial statements, respectively.
Audit-Related Fees
The aggregate fees billed in each of the fiscal years ended December 31, 2008 and 2009 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our Form 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those two fiscal years were approximately $0 and $0, respectively.
All Other Fees
We did not incur any other fees related to services rendered by our principal accountant for the fiscal year ended December 31, 2008 and 2009.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Item 15. Exhibits, Financial Statement Schedules
a) Documents filed as part of this Annual Report
1. Financial Statements
2. Financial Statement Schedules
3. Exhibits
Exhibit No.
Title of Document
31.1
Certification of Kyle Gotshalk pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Kyle Gotshalk pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Item 13. Certain Relationships and Related Transactions, and Director Independence
We will present all possible transactions between us and our officers, directors or 5% stockholders, and our affiliates to the Board of Directors for their consideration and approval. Any such transaction will require approval by a majority of the disinterested directors and such transactions will be on terms no less favorable than those available to disinterested third parties.
Item 14.
Item 14. Principal Accountant Fees and Services
Audit Fees
For our fiscal year ended December 31, 2008 and 2009, we were billed approximately $42,500 and $12,000 for professional services rendered for the audit and review of our financial statements, respectively.
Audit-Related Fees
The aggregate fees billed in each of the fiscal years ended December 31, 2008 and 2009 for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our Form 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those two fiscal years were approximately $0 and $0, respectively.
All Other Fees
We did not incur any other fees related to services rendered by our principal accountant for the fiscal year ended December 31, 2008 and 2009.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Item 15.
Item 15. Exhibits, Financial Statement Schedules
a) Documents filed as part of this Annual Report
1. Financial Statements
2. Financial Statement Schedules
3. Exhibits
Exhibit No.
Title of Document
31.1
Certification of Kyle Gotshalk pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
Certification of Kyle Gotshalk pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.