ITEM 1. BUSINESS
Unless otherwise indicated or the context otherwise requires, all references to the “Company,” “we,” “us” or “our” and similar terms refer to Sydys Corporation.
Business Development
We were incorporated under the laws of the State of Nevada on February 9, 2004. We were formed for the purpose of engaging in the on-line advertising business. We completed a public offering of shares of our common stock in 2005, but did not raise sufficient funds to successfully execute our business plan. Having been unable to execute our business plan, we have exited this business and are, therefore, considered a shell corporation under applicable rules of the Securities and Exchange Commission (the “SEC”) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In that regard, we are actively seeking to complete a business combination with an operating company.
Current Business
At this time, we have no operations, have only nominal assets, and our liabilities consist of accounts payable, accrued expenses and notes payable. Since May 2006, our operations have consisted solely of identifying and completing a business combination with an operating company and compliance with our reporting obligations under federal securities laws.
In February 2015, the Company entered into an Asset Purchase Agreement (“APA”) with the sole proprietor of OverAdMedia (“OAM”) to acquire substantially all of the assets and assume substantially all of the liabilities of the OAM business in exchange for the issuance of 10 million shares of the Company’s common stock, which are to be issued upon the satisfaction of certain requirements contained in the APA (the “Transaction”). The APA requires that the Company’s liabilities not exceed $1,000, other than a $40,000 advance from OAM, at the time of the Transaction. As a condition of the APA, OAM agreed to advance $40,000 to the Company and agreed to allow the Company to issue up to 1,500,000 shares of its common stock in order to reduce the outstanding liabilities to less than $1,000. An additional condition to the close of the Transaction is that the Company become current in its filings under the 1934 Securities and Exchange Act. The issuance of the shares under the APA will result in a change in control of the Company as the OAM principals will control greater than 50% of the issued and outstanding stock of the Company, whereby for accounting purposes, the acquisition will be treated as a recapitalization of OAM.
In February 2015, as part of the requirements under the APA, the Company negotiated settlements of all of the outstanding principal in notes payable of $120,500 plus all accrued interest through the date of closing of the APA (which amounted to $15,381 as of September 30, 2014) and approximately $225,000 for accounts payable and accrued expenses and will issue 1,496,666 shares of the Company’s common stock.
OverAdMedia operates in the digital media and online advertising space and operates out of Seattle, Washington.
Employees and Consultants
We do not have any employees. We utilize the services of various consultants who provide, among other things, corporate secretary and accounting services to the Company. Since we do not have any significant operations, until we complete the acquisition of OverAdMedia, we do not intend to retain any additional personnel.
Research and Development
Since inception, we have not spent any money on research and development activities.
ITEM 1A.
ITEM 2. PROPERTIES
Our principal executive office is located at 7 Orchard Lane, Lebanon, New Jersey 08833. This space is provided by our Sole Director and Executive Officer for a monthly fee of $575. Upon consummation of our acquisition of OverAdMedia, our principal executive offices will be moving to Seattle, Washington.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any material pending legal proceeding, nor are we aware of any proceeding contemplated by any governmental authority involving us.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
Our common stock is currently traded on the Pink Sheets under the symbol “SYYC.” The following table sets forth the range of high and low bid prices per share of our common stock for each of the calendar quarters identified below as reported by Nasdaq. These quotations represent inter-dealer prices, without retail mark-up, markdown or commission, and may not represent actual transactions.
The last price of our common stock as reported by the Pink Sheets on February 17, 2015 was $1.11 per share.
Holders
As of February 17, 2015, the number of stockholders of record of our common stock was 50.
Dividends
We have not paid any cash dividends on our common stock to date, and have no intention of paying such cash dividends in the foreseeable future. The declaration and payment of dividends is subject to the discretion of our board of directors and to certain limitations imposed under Nevada corporate law. The timing, amount and form of dividends, if any, will depend on, among other things, our results of operations, financial condition, cash requirements and other factors deemed relevant by our board of directors.
Securities Authorized for Issuance Under Equity Compensation Plans
For information regarding options that we have issued under equity compensation plans, see “Equity Compensation Plan Information ” in Item 12 below.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not Applicable.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.
This Management’s Discussion and Analysis and other parts of this report contain forward-looking statements that involve risks and uncertainties. All forward-looking statements included in this report are based on information available to us on the date hereof, and except as required by law, we assume no obligation to update any such forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth in the section captioned “Risk Factors” in Item 1A and elsewhere in this report. The following should be read in conjunction with our audited financial statements and the related notes included elsewhere herein.
Overview
We were formed in February 2004 for the purpose of engaging in on-line advertising business. Having been unable to execute our business plan, we have exited this business and are, therefore, considered a shell company under applicable rules of the SEC, promulgated under the Exchange Act. In that regard, we are actively seeking to complete a business combination with an operating company.
We no longer have a bank account, have incurred losses since inception, and have been unable to execute our business plan. We will need to raise funds during the next twelve months to execute our business plan to acquire an operating company. In order to continue operations, we must continue to raise the capital necessary to fund our activities and our long-term viability and growth will ultimately depend upon acquiring a successful operating company, as to which there can be no assurance.
Plan to Acquire an Operating Company
Our current business plan consists solely of identifying and acquiring a suitable operating company and compliance with our reporting obligations under federal securities laws.
In February 2015, the Company entered into an Asset Purchase Agreement (“APA”) with the sole proprietor of OverAdMedia (“OAM”) to acquire substantially all of the assets and assume substantially all of the liabilities of the OAM business in exchange for the issuance of 10 million shares of the Company’s common stock, which are to be issued upon the satisfaction of certain requirements contained in the APA (the “Transaction”). The APA requires that the Company’s liabilities not exceed $1,000, other than a $40,000 advance from OAM, at the time of the Transaction. As a condition of the APA, OAM agreed to advance $40,000 to the Company and agreed to allow the Company to issue up to 1,500,000 shares of its common stock in order to reduce the outstanding liabilities to less than $1,000. An additional condition to the close of the Transaction is that the Company become current in its filings under the 1934 Securities and Exchange Act. The issuance of the shares under the APA will result in a change in control of the Company as the OAM principals will control greater than 50% of the issued and outstanding stock of the Company, whereby for accounting purposes, the acquisition will be treated as a recapitalization of OAM.
In February 2015, as part of the requirements under the APA, the Company negotiated settlements of all of the outstanding principal in notes payable of $120,500 plus all accrued interest through the date of closing of the APA (which amounted to $15,381 as of September 30, 2014) and approximately $225,000 for accounts payable and accrued expenses and will issue 1,496,666 shares of the Company’s common stock.
OverAdMedia operates in the digital media and online advertising space and operates out of Seattle, Washington.
Results of Operations
We currently have no operations capable of generating revenues. Our results of operations consists solely of operating expenses. We incurred a net loss of $67,011 for the year ended September 30, 2013 as compared to a net loss of $94,540 for the year ended September 30, 2012. The decrease in net loss was due primarily to a decrease in accounting and legal fees as we went dormant after the first quarter of fiscal year.
Liquidity and Capital Resources
At September 30, 2013, we had a working capital deficit of $409,106. Since inception, we have funded our operations through public and private offerings of our common stock and the issuance of promissory notes.
On September 9, 2009, Alan Stier, a shareholder of the Company, loaned to us an amount of $3,300 pursuant to a convertible promissory note. The Note accrues interest at an annual rate of 6%. The note is payable in full on the earlier of (1) the completion of a 1:15 reverse split of the Company’s common stock and the completion of an equity financing of the Company’s securities of a minimum amount of $100,000, or (2) one year from the date of the note. The note may be converted, at the lender’s request, at the per share purchase price (subject to adjustments) upon the completion of an equity financing described above. The note has not been repaid and is considered in default.
Between August 2010 and September 30, 2011 we issued promissory notes to three separate stockholders, RMS Advisors, Inc. (“RMS”), Capital Growth Investment Trust (“CGIT”) and FEQ Realty, LLC (“FEQ”) with balances outstanding as of September 30, 2011 of $21,500, $31,200 and $15,500 respectively. All of these notes bear interest at annual rate of 3.25% and are due on demand. No assets or liabilities are pledged nor are there any negative covenants associated with these loans.
During the year ended September 30, 2012, the Company issued promissory notes in the aggregate principal amount of $5,000, $22,000 and $2,000 to RMS, CGIT and FEQ, respectively, and received proceeds in the same amount. All of the notes bear interest at the rate of 3.25% per annum and are due on demand. No assets or liabilities are pledged nor are there any negative covenants associated with these loans.
During the year ended September 30, 2013, the Company issued promissory notes in the aggregate principal amount of $20,000 to CGIT and received proceeds in the same amount. All of the notes bear interest at the rate of 3.25% per annum and are due on demand. No assets or liabilities are pledged nor are there any negative covenants associated with these loans.
We do not currently maintain a line of credit or term loan with any commercial bank or other financial institution. To date, our capital needs have been principally met through the receipt of proceeds from sales of our equity. Unless we acquire an operating company, we do not expect to incur any material capital expenditures during the next twelve months nor do we expect to hire additional employees.
We have no cash resources and as of September 30, 2013 had closed our sole bank account, have incurred losses since inception, and have been unable to execute our business plan. We will need to raise funds during the next twelve months to execute our business plan. Due to these and other factors, our independent auditors have included an explanatory paragraph in their opinion for the year ended September 30, 2013 as to the substantial doubt about our ability to continue as a going concern. In order to continue operations, we must continue to raise the capital necessary to fund our activities and our long-term viability and growth will ultimately depend upon acquiring a successful operating company, as to which there can be no assurance.
As of September 30, 2013, we had cash resources of zero and had closed our only bank account. Our activities consist solely of identifying a suitable operating company to acquire and complying with our obligations under federal securities laws. We believe that our current cash resources will not be sufficient to fund operations for the next twelve months. In the event that we identify a suitable operating company to acquire, we expect that we will need to raise additional capital to complete such a transaction and to satisfy the working capital or operational requirements of any company we acquire. We expect that any additional capital required will be obtained through sales of our debt or equity securities. The sale of additional equity securities will result in additional dilution to our shareholders. In the event we have to issue additional debt, we would incur increased interest expenses and could be subject to covenants that may have the effect of restricting our operations. We have no commitment for any of the additional financing necessary to execute our business plan and we can provide no assurance that such financing will be available in an amount or on terms acceptable to us, if at all. If we are unable to obtain additional funds when they are needed or if such funds cannot be obtained on terms favorable to us, we may not be able to complete the acquisition of an operating company, may not have enough funds to execute the business plan of any company that we do acquire, and in the extreme case, be required to terminate operations and liquidate the Company.
Off-Balance Sheet Arrangements
As of September 30, 2013, we did not have any relationships with unconsolidated entities or financial partners, such as entities often referred to as structured finance or special purpose entities, which had been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.
Critical Accounting Policies and Recent Accounting Pronouncements
For a discussion of our accounting policies and procedures and recent accounting pronouncements, see the footnotes to our financial statements beginning on page.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our financial statements at September 30, 2013 and for each of the two years then ended, and the footnotes related thereto, begin on page of this report.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
An evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934) was carried out by us under the supervision and with the participation of our chief executive officer, who serves as our principal executive officer and principal financial officer. Based upon that evaluation, our chief executive officer concluded that as of September 30, 2013, our disclosure controls and procedures were not effective to ensure (i) that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) that such information is accumulated and communicated to management, including our chief executive officer, in order to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principals. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management, including our chief executive officer, conducted an evaluation of the effectiveness of internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework. Based on its evaluation, our management concluded that our internal control over financial reporting was not effective as of September 30, 2013.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting, which we are not required to provide under applicable SEC rules.
Changes in Internal Control Over Financial Reporting.
There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act ) that occurred during the fiscal quarter ended September 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The following sets forth certain information about each of our directors and executive officers.
Kenneth J. Koock, 48 has served as our Chief Executive Officer, President, Secretary, Chief Financial Officer and as a Director of the Company since May 10, 2006. Since March 2003, Mr. Koock has served as President of Kenneth J. Koock & Assoc., a financial consulting firm which assists public and private companies on business and financial matters. From January 2011 to January 2012, Mr. Koock was a director for Latitude Solutions, Inc., a public company involved in water solutions technologies and security solutions involving wireless video streaming software technology. From February to June 2011, Mr. Koock served as a director of Red Mountain Resources, Inc., a publicly-traded oil and gas exploration company. In April 2010, Mr. Koock was appointed as a director of U.S. Aerospace, a supplier of aircraft components, which deregistered in January 2011. From 1977 until his retirement in March 2003, Mr. Koock held trading and investment positions with M. H. Meyerson, an investment banking firm, most recently serving as Vice Chairman and Director. During his nearly 30 year investment banking and corporate finance career, he has developed broad range of experience in capitalizing public and private companies through various stages of fund raising. Mr. Koock has been a member of the New York Bar Association since 1966, was a member of the Security Traders Association of New York from 1977 to 2003, and holds Series 7, 63 and 55 NASD licenses. Mr. Koock earned a Bachelor of Arts degree from Duke University in 1963 and a Juris Doctor degree from St. Johns Law in 1966.
Audit Committee and Audit Committee Financial Expert
Our board of directors has not created a standing audit committee of the board. Instead, our full board of directors acts as our audit committee.
No member of our board of directors is an “audit committee financial expert.” We currently have no employees. Kenneth J. Koock, our sole executive officer and member of our board of directors, is actively involved in our business. We conduct minimal operations, have limited financial resources and expect that we would have to expend significant financial resources, including obtaining and maintaining directors and officers liability insurance, to attract and retain an individual who qualifies as an “audit committee financial expert,” as that term is defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Act. In light of the foregoing, our board of directors concluded that the benefits of retaining an individual who qualifies as an “audit committee financial expert” would be outweighed by the costs of retaining such a person.
Section 16 Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our officers and directors and persons who own more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock. Such officers, directors and 10% stockholders are also required by applicable SEC rules to furnish us copies of all forms filed with the SEC pursuant to Section 16(a) of the Exchange Act. Based solely on our review of the copies of such forms received by us or written representations from such persons that no other reports were required for such persons, we believe that during the fiscal year ended September 30, 2013, all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% stockholders were satisfied in a timely fashion.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. Our Code of Business Conduct and Ethics is designed to deter wrongdoing and promote: (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (ii) full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in our other public communications; (iii) compliance with applicable governmental laws, rules and regulations; (iv) the prompt internal reporting of violations of our Code of Business Conduct and Ethics to an appropriate person or persons identified in the code; and (v) accountability for adherence to our Code of Business Conduct and Ethics.
Our Code of Business Conduct and Ethics is available without charge upon written request directed to Kenneth Koock, Chief Executive Officer, Sydys Corporation, 7 Orchard Lane, Lebanon, New Jersey 08833.
ITEM 11. EXECUTIVE COMPENSATION
We did not pay any compensation to our executive officers during the fiscal years ended September 30, 2013 or 2012, except that our executive officers were entitled to reimbursement for reasonable business costs and expenses. We have not issued any options or other equity compensation to any of our executive officers, nor do we currently have any contracts or agreements with any of our executive officers.
Director Compensation
The members of our Board of Directors received no compensation for serving on our Board, except that each director was entitled to reimbursement for the reasonable costs and expenses incurred in attending Board meetings.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth, as of February 17, 2015, information with respect to the securities holdings of all persons that the Company, pursuant to filings with the SEC and the Company’s stock transfer records, has reason to believe may be deemed the beneficial owner of more than five percent (5%) of the common stock. The following table also sets forth, as of such date, the beneficial ownership of the common stock by all current officers and directors of the Company, both individually and as a group. Unless otherwise indicated, each person or entity named below has sole voting and investment power with respect to all common stock beneficially owned by that person, subject to the matters set forth in the footnotes to the table below.
(1)
These percentages have been calculated based on 211,201 shares of common stock outstanding as of February 17, 2015.
(2)
Includes 33,334 shares owned by FEQ Farms, LLC, of which FEQ Gas, LLC is the sole manager. FEQ Gas, LLC has sole voting and dispositive control over the shares owned by FEQ Farms, LLC and therefore is deemed to indirectly beneficially own such securities.
(3)
DIT Equity Holdings, LLC is currently managed by RMS Investment Group, who, as the sole manager of DIT Equity Holdings, LLC, has voting and dispositive control over the securities owned by DIT Equity Holdings, LLC and therefore is deemed to beneficially own such securities. Ryan Lee is the President of RMS Investment Group.
(4)
Vicki Appel, the sole trustee of Capital Growth Investment Trust, has sole voting and dispositive power over the securities owned by Capital Growth Investment Trust and therefore is deemed to beneficially own such securities.
Equity Compensation Plan Information
Plan Category
Number of securities
to be issued upon
exercise of outstanding
warrants and rights
(a)
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(c)
Equity Compensation Plans
approved by security holders
Not Applicable
Equity compensation plans not
approved by security holders
Not Applicable
Total
Not Applicable
We do not have any equity compensation plans nor have we ever issued any equity securities to any of our employees or consultants. We did, however, issue securities to Darren Breitkreuz and Alan Stier, former directors of the Company, which is described in more detail in Item 13 below.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Related Party Transactions
On September 9, 2009, Alan Stier, a shareholder of the Company, loaned to us an amount of $3,300 pursuant to a convertible promissory note. The note accrues interest at an annual rate of 6%. The note is payable in full on the earlier of (1) the completion of a 1:15 reverse split of the Company’s common stock and the completion of an equity financing of the Company’s securities of a minimum amount of $100,000, or (2) one year from the date of the note. The note may be converted, at the lender’s request, at the per share purchase price (subject to adjustments) upon the completion of an equity financing described above. To date, the note has not been repaid and is considered in default.
Between August 2010 and September 30, 2011 we issued promissory notes to three separate stockholders, RMS Advisors, Inc. (“RMS”), Capital Growth Investment Trust (“CGIT”) and FEQ Realty, LLC (“FEQ”) with balances outstanding as of September 30, 2011 of $21,500, $31,200 and $15,500 respectively. All of these notes bear interest at annual rate of 3.25% and are due on demand. No assets or liabilities are pledged nor are there any negative covenants associated with these loans.
During the fiscal year ending September 30, 2012, the Company issued promissory notes in the aggregate amount of $2,000, $5,000 and $22,000 to FEQ, RMS and CGIT, respectively. All of the notes bear interest at an annual rate of 3.25% and are due on demand.
During the fiscal year ending September 30, 2013, the Company issued promissory notes in the aggregate amount of $20,000 to CGIT. All of the notes bear interest at an annual rate of 3.25% and are due on demand.
Director Independence
Mr. Koock does not satisfy the definition of “independent” established by NYSE MKT as set forth in Section 803 of the NYSE MKT Company Guide. As of the date of the report, we do not maintain a separately designated audit, compensation or nominating committee.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table presents fees for professional services performed by L J Soldinger Associates, LLC for the fiscal years ended September 30, 2013 and September 30, 2012.
Audit Fees consist of fees billed for professional services rendered for the audit of our financial statements and review of the interim financial statements included in quarterly reports and services that are normally provided by our independent accountants in connection with statutory and regulatory filings or engagements.
Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under “Audit Fees.”
Tax Fees consist of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal and state tax compliance, tax audit defense, customs and duties, and mergers and acquisitions.
All Other Fees consist of fees billed for products and services provided by the principal accountant, other than those services described above.
Audit Committee Pre-Approval Procedures
Our Board of Directors serves as our audit committee. Our Board of Directors approves the engagement of our independent auditors, and meets with our independent auditors to approve the annual scope of accounting services to be performed and the related fee estimates. It also meets with our independent auditors, on a quarterly basis, following completion of their quarterly reviews and annual audit to review the results of their work. During the course of the year, our chairman has the authority to pre-approve requests for services that were not approved in the annual pre-approval process. The chairman reports any interim pre-approvals at the following quarterly meeting. At each of the meetings, management and our independent auditors update the Board of Directors with material changes to any service engagement and related fee estimates as compared to amounts previously approved. During 2013, all audit and non-audit services performed by our independent accountants were pre-approved by the board of directors in accordance with the foregoing procedures.
ITEM 15. EXHIBITS
The following documents are filed as exhibits to this report.
Exhibit No.
Exhibit
3.1
Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form SB-2, Registration No. 333-120893, filed with the Commission on December 1, 2004)
3.2
Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form SB-2, Registration No. 333-120893, filed with the Commission on December 1, 2004)
3.3
Certificate of Change (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on April 23, 2007)
3.4
Amended and Restated Articles of Incorporation (incorporated by reference to Annex A to the Company’s Definitive Proxy Statement filed with the Commission on February 4, 2011)
Form of Promissory Note issued by the Company in November and December 2010 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on February 11, 2011)
10.2
Form of Promissory Note issued by the Company in February and March 2011 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 12, 2011)
14.1
Code of Ethics (incorporated by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-K for the year ended September 30, 2005)
21.1**
Subsidiaries of the Company
31.1**
Certification of Chief Executive Officer and Chief Financial Officer of the Company required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended
32.1**
Certification of Chief Executive Officer and Chief Financial Officer of the Company Pursuant to 18 USC Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
** Filed herewith
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Kenneth J. Koock
Kenneth J. Koock
Chief Executive Officer, Chief Financial Officer and
Director (Principal Executive Officer and Principal Financial and Accounting Officer)
February 17, 2015
SYDYS CORPORATION
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders
Sydys Corporation
We have audited the accompanying balance sheets of Sydys Corporation as of September 30, 2013 and 2012, and the related statements of operations, stockholders’ deficit, and cash flows for each of the years then ended. Sydys’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sydys Corporation as of September 30, 2013 and 2012, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.
SYDYS CORPORATION
Balance Sheets
The accompanying notes are an integral part of these financial statements.
SYDYS CORPORATION
Statements of Operations
The accompanying notes are an integral part of these financial statements.
SYDYS CORPORATION
Statements of Stockholders’ Equity (Deficit)
The accompanying notes are an integral part of these financial statements.
SYDYS CORPORATION
Statements of Cash Flows
The accompanying notes are an integral part of these financial statements.
SYDYS CORPORATION
Notes to Financial Statements
NOTE 1 - DESCRIPTION OF BUSINESS
Sydys Corporation is a Nevada corporation incorporated on February 9, 2004 and based in Lebanon, New Jersey. The Company's fiscal year end is September 30.
The Company was formed for the purpose of engaging in the on-line advertising business. The Company has been unable to execute its business plan, and has exited the online advertising business. The Company is now considered a shell corporation under applicable rules of the Securities Exchange Commission.
On May 10, 2006, the Company's former management team and board of directors resigned and sold all of their shares of common stock to Kenneth Koock, the sole executive officer and director of the Company, which resulted in a change of control.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
Development Stage Enterprise
In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. The amendments in this Update remove the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer in a development stage that in prior years it had been in the development stage.
The amendments also clarify that the guidance in Topic 275, Risks and Uncertainties, is applicable to entities that have not commenced planned principal operations. Finally, the amendments remove paragraph 810-10-15-16. Paragraph 810-10-15-16 states that a development stage entity does not meet the condition in paragraph 810-10-15-14(a) to be a variable interest entity if (1) the entity can demonstrate that the equity invested in the legal entity is sufficient to permit it to finance the activities that it is currently engaged in and (2) the entity’s governing documents and contractual arrangements allow additional equity investments. The amendments in this Update also eliminate an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided to financial statement users by requiring the application of the same consolidation guidance by all reporting entities. The elimination of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity that has an interest in an entity in the development stage. The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to Topic 275, which shall be applied prospectively. For public business entities, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915. The Company adopted ASU No. 2014-10 effective for financial statements considered issued after January 1, 2015.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting year. Actual results could differ from those estimates.
SYDYS CORPORATION
Notes to Financial Statements
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand. The Company considers all highly liquid investments with an original maturity of 90 days or less at the time of purchase to be cash equivalents.
Segment Information
The Company has determined it has one reportable operating segment as defined by the Accounting Standards Codification, “Disclosures about Segments of an Enterprise and Related Information”.
Income Taxes
Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in accordance with the Accounting Standards Codification, “Accounting for Income Taxes”, which requires the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company provides for deferred taxes for the estimated future tax effects attributable to temporary differences and carryforwards when realization is more likely than not.
Loss per Share
Loss per common share is calculated in accordance with the Accounting Standards Codification, “Earnings per Share.” Basic loss per common share is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding. Diluted loss per share is computed similarly to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares had been issued and if the additional common shares were dilutive. Shares associated with stock options are not included because their inclusion would be antidilutive (i.e., reduce the net loss per share).
Share-Based Compensation
The Company follows the provisions of the Accounting Standards Codification, “Share-Based Payment” which requires that compensation cost relating to share-based payment transactions be recognized under fair value accounting and recorded in the financial statements. The cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting of the equity award).
The fair value of the stock option award is estimated on the date of grant using the Black-Scholes option pricing model. Expected volatility is based on an average of historical volatility of common stock prices of the Company or its peer companies where there is a lack of relevant volatility information of the Company for the length of the expected term. The expected term is derived from estimates and represents the period of time that the stock option granted is expected to be outstanding. The Company uses historical data to estimate option exercises and employee terminations within the valuation model. The risk-free rate for the expected term is the yield on the zero-coupon U.S. Treasury security with a term comparable to the expected term of the option. The Company does not include an estimated dividend yield since it has not paid dividends on its common stock historically.
SYDYS CORPORATION
Notes to Financial Statements
NOTE 3 - NOTES PAYABLE
On September 9, 2009, Alan Stier, a shareholder of the Company, loaned to us an amount of $3,300 pursuant to a convertible promissory note. The Note accrues interest at an annual rate of 6%. The note is payable in full on the earlier of (1) the completion of a 1:15 reverse split of the Company’s common stock and the completion of an equity financing of the Company’s securities of a minimum amount of $100,000, or (2) one year from the date of the note. The note may be converted, at the lender’s request, at the per share purchase price (subject to adjustments) upon the completion of an equity financing described above. The note has not been repaid and is considered in default.
Between August 2010 and September 30, 2011 we issued promissory notes to three separate stockholders, RMS Advisors, Inc. (“RMS”), Capital Growth Investment Trust (“CGIT”) and FEQ Realty, LLC (“FEQ”) with balances outstanding as of September 30, 2011 of $21,500, $31,200 and $15,500 respectively. All of these notes bear interest at annual rate of 3.25% and are due on demand. No assets or liabilities are pledged nor are there any negative covenants associated with these loans.
During October 2011, the Company issued promissory notes in the amount of $2,000 to FEQR and $2,000 to RMS. The notes accrue interest at the annual rate of 3.25% and are due upon demand.
On November 30, 2011, CGIT extended the maturity date of four promissory notes from November 30, 2011 or upon demand to until completion of an equity raise or upon demand.
In January 2012, the Company issued a promissory note in the amount of $3,000 to RMS. The note accrues interest at 3.25% per annum and is due on demand.
In May 2012, the Company issued two promissory notes in the aggregate amount of $10,000 to CGIT. Both notes accrue interest at 3.25% per annum and are due on demand.
In August 2012, we issued two promissory notes to CGIT in the aggregate principal amount of $12,000. The notes accrue interest at 3.25% per annum and are due on demand.
In November 2012, we issued one promissory note to CGIT in the principal amount of $14,000. The note accrues interest at 3.25% per annum and is due on demand.
In January and February 2013, we issued two promissory notes to CGIT in the principal amount of $6,000. The notes accrue interest at 3.25% per annum and are due on demand.
None of the notes issued in fiscal year 2012 and 2013 required the Company to pledge any assets or liabilities nor did any of the notes contain any negative covenants.
The weighted average interest rate on the Company’s Notes Payable is 3.3% and the average outstanding balance was approximately $110,000 in the fiscal year ended September 30, 2013.
NOTE 4 - CAPITAL STOCK
Authorized Stock
The Company is authorized to issue 100,000,000 shares of common stock and 20,000,000 shares of preferred stock.
Stock Options
In connection with the resignations of our board members in 2008, all then outstanding options expired in 2008. As a result, the Company had no options outstanding at September 30, 2013 and 2012, respectively.
SYDYS CORPORATION
Notes to Financial Statements
NOTE 5 - INCOME TAXES
Deferred income taxes result from the net tax effects of temporary timing differences between the carrying amounts of assets and liabilities reflected on the financial statements and the amounts recognized for income tax purposes. The tax effects of temporary differences and net operating loss carryforwards that give rise to significant portions of deferred tax assets and liabilities are as follows at September 30:
Income tax benefit (expense) consists of the following at September 30:
As of September 30, 2013, the Company had reported net operating loss (“NOL”) carryforwards for tax purposes amounting to approximately $1,096,000 that may be offset against future taxable income. These NOL carryforwards expire beginning in fiscal 2025 through 2032. However, these carryforwards may be significantly limited due to changes in the ownership of the Company.
Recognition of the benefits of the deferred tax assets will require that the Company generate future taxable income. There can be no assurance that the Company will generate any earnings or any specific level of earning in future years. Therefore, the Company has established a valuation allowance for deferred tax assets (net of liabilities) of approximately $440,400 and $413,500 as of September 30, 2013 and 2012, respectively.
The following table presents the principal reasons for the difference between the Company’s effective tax rates and of United States federal statutory income tax rate of 34% at September 30:
SYDYS CORPORATION
Notes to Financial Statements
NOTE 6 - RELATED PARTY TRANSACTION
For the years ended September 30, 2013 and 2012, the Company incurred rent expense of $6,900 and $6,900, respectively, for office space provided by its sole officer.
For the years ended September 30, 2013 and 2012, the Company issued promissory notes to FEQ Farms LLC, FEQ Realty LLC, and Capital Growth Investment Trust, stockholders of the Company, for advances to the Company to meet its working capital needs. Refer to Note 4 - Notes Payable for additional disclosure.
NOTE 7 - SUPPLEMENTAL CASH FLOW INFORMATION
No amounts were paid for taxes or interest during the years ended September 30, 2013 and 2012.
NOTE 8 - SUBSEQUENT EVENTS NOT DISCLOSED ELSEWHERE
In February 2015, the Company entered into an Asset Purchase Agreement (“APA”) with the sole proprietor of OverAdMedia (“OAM”) to acquire substantially all of the assets and assume substantially all of the liabilities of the OAM business in exchange for the issuance of 10 million shares of the Company’s common stock, which are to be issued upon the satisfaction of certain requirements contained in the APA (the “Transaction”). The APA requires that the Company’s liabilities not exceed $1,000, other than a $40,000 advance from OAM, at the time of the Transaction. As a condition of the APA, OAM agreed to advance $40,000 to the Company and agreed to allow the Company to issue up to 1,500,000 shares of its common stock in order to reduce the outstanding liabilities to less than $1,000. An additional condition to the close of the Transaction is that the Company become current in its filings under the 1934 Securities and Exchange Act. The issuance of the shares under the APA will result in a change in control of the Company as the OAM principals will control greater than 50% of the issued and outstanding stock of the Company, whereby for accounting purposes, the acquisition will be treated as a recapitalization of OAM. Upon the completion of the Transaction, the financial information presented will be that of OAM, and all information regarding historical results and operations of the Company will be those of OAM.
In February 2015, as part of the requirements under the APA, the Company negotiated settlements of all of the outstanding principal in notes payable of $120,500 plus all accrued interest through the date of closing of the APA (which amounted to $15,381 as of September 30, 2014) and approximately $225,000 for accounts payable and accrued expenses and will issue 1,496,666 shares of the Company’s common stock.
EXHIBIT INDEX
Exhibit No.
Exhibit
21.1
Subsidiaries of the Company
31.1
Certification of Chief Executive Officer and Chief Financial Officer of the Company required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
32.1
Certification of Chief Executive Officer and Chief Financial Officer of the Company Pursuant to 18 USC Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
An evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934) was carried out by us under the supervision and with the participation of our chief executive officer, who serves as our principal executive officer and principal financial officer. Based upon that evaluation, our chief executive officer concluded that as of September 30, 2013, our disclosure controls and procedures were not effective to ensure (i) that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) that such information is accumulated and communicated to management, including our chief executive officer, in order to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principals. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management, including our chief executive officer, conducted an evaluation of the effectiveness of internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework. Based on its evaluation, our management concluded that our internal control over financial reporting was not effective as of September 30, 2013.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting, which we are not required to provide under applicable SEC rules.
Changes in Internal Control Over Financial Reporting.
There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act ) that occurred during the fiscal quarter ended September 30, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The following sets forth certain information about each of our directors and executive officers.
Kenneth J. Koock, 48 has served as our Chief Executive Officer, President, Secretary, Chief Financial Officer and as a Director of the Company since May 10, 2006. Since March 2003, Mr. Koock has served as President of Kenneth J. Koock & Assoc., a financial consulting firm which assists public and private companies on business and financial matters. From January 2011 to January 2012, Mr. Koock was a director for Latitude Solutions, Inc., a public company involved in water solutions technologies and security solutions involving wireless video streaming software technology. From February to June 2011, Mr. Koock served as a director of Red Mountain Resources, Inc., a publicly-traded oil and gas exploration company. In April 2010, Mr. Koock was appointed as a director of U.S. Aerospace, a supplier of aircraft components, which deregistered in January 2011. From 1977 until his retirement in March 2003, Mr. Koock held trading and investment positions with M. H. Meyerson, an investment banking firm, most recently serving as Vice Chairman and Director. During his nearly 30 year investment banking and corporate finance career, he has developed broad range of experience in capitalizing public and private companies through various stages of fund raising. Mr. Koock has been a member of the New York Bar Association since 1966, was a member of the Security Traders Association of New York from 1977 to 2003, and holds Series 7, 63 and 55 NASD licenses. Mr. Koock earned a Bachelor of Arts degree from Duke University in 1963 and a Juris Doctor degree from St. Johns Law in 1966.
Audit Committee and Audit Committee Financial Expert
Our board of directors has not created a standing audit committee of the board. Instead, our full board of directors acts as our audit committee.
No member of our board of directors is an “audit committee financial expert.” We currently have no employees. Kenneth J. Koock, our sole executive officer and member of our board of directors, is actively involved in our business. We conduct minimal operations, have limited financial resources and expect that we would have to expend significant financial resources, including obtaining and maintaining directors and officers liability insurance, to attract and retain an individual who qualifies as an “audit committee financial expert,” as that term is defined in Item 407(d)(5)(ii) of Regulation S-K promulgated under the Securities Act. In light of the foregoing, our board of directors concluded that the benefits of retaining an individual who qualifies as an “audit committee financial expert” would be outweighed by the costs of retaining such a person.
Section 16 Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our officers and directors and persons who own more than 10% of our common stock to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock. Such officers, directors and 10% stockholders are also required by applicable SEC rules to furnish us copies of all forms filed with the SEC pursuant to Section 16(a) of the Exchange Act. Based solely on our review of the copies of such forms received by us or written representations from such persons that no other reports were required for such persons, we believe that during the fiscal year ended September 30, 2013, all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% stockholders were satisfied in a timely fashion.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. Our Code of Business Conduct and Ethics is designed to deter wrongdoing and promote: (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; (ii) full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in our other public communications; (iii) compliance with applicable governmental laws, rules and regulations; (iv) the prompt internal reporting of violations of our Code of Business Conduct and Ethics to an appropriate person or persons identified in the code; and (v) accountability for adherence to our Code of Business Conduct and Ethics.
Our Code of Business Conduct and Ethics is available without charge upon written request directed to Kenneth Koock, Chief Executive Officer, Sydys Corporation, 7 Orchard Lane, Lebanon, New Jersey 08833.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
We did not pay any compensation to our executive officers during the fiscal years ended September 30, 2013 or 2012, except that our executive officers were entitled to reimbursement for reasonable business costs and expenses. We have not issued any options or other equity compensation to any of our executive officers, nor do we currently have any contracts or agreements with any of our executive officers.
Director Compensation
The members of our Board of Directors received no compensation for serving on our Board, except that each director was entitled to reimbursement for the reasonable costs and expenses incurred in attending Board meetings.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth, as of February 17, 2015, information with respect to the securities holdings of all persons that the Company, pursuant to filings with the SEC and the Company’s stock transfer records, has reason to believe may be deemed the beneficial owner of more than five percent (5%) of the common stock. The following table also sets forth, as of such date, the beneficial ownership of the common stock by all current officers and directors of the Company, both individually and as a group. Unless otherwise indicated, each person or entity named below has sole voting and investment power with respect to all common stock beneficially owned by that person, subject to the matters set forth in the footnotes to the table below.
(1)
These percentages have been calculated based on 211,201 shares of common stock outstanding as of February 17, 2015.
(2)
Includes 33,334 shares owned by FEQ Farms, LLC, of which FEQ Gas, LLC is the sole manager. FEQ Gas, LLC has sole voting and dispositive control over the shares owned by FEQ Farms, LLC and therefore is deemed to indirectly beneficially own such securities.
(3)
DIT Equity Holdings, LLC is currently managed by RMS Investment Group, who, as the sole manager of DIT Equity Holdings, LLC, has voting and dispositive control over the securities owned by DIT Equity Holdings, LLC and therefore is deemed to beneficially own such securities. Ryan Lee is the President of RMS Investment Group.
(4)
Vicki Appel, the sole trustee of Capital Growth Investment Trust, has sole voting and dispositive power over the securities owned by Capital Growth Investment Trust and therefore is deemed to beneficially own such securities.
Equity Compensation Plan Information
Plan Category
Number of securities
to be issued upon
exercise of outstanding
warrants and rights
(a)
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(c)
Equity Compensation Plans
approved by security holders
Not Applicable
Equity compensation plans not
approved by security holders
Not Applicable
Total
Not Applicable
We do not have any equity compensation plans nor have we ever issued any equity securities to any of our employees or consultants. We did, however, issue securities to Darren Breitkreuz and Alan Stier, former directors of the Company, which is described in more detail in Item 13
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Related Party Transactions
On September 9, 2009, Alan Stier, a shareholder of the Company, loaned to us an amount of $3,300 pursuant to a convertible promissory note. The note accrues interest at an annual rate of 6%. The note is payable in full on the earlier of (1) the completion of a 1:15 reverse split of the Company’s common stock and the completion of an equity financing of the Company’s securities of a minimum amount of $100,000, or (2) one year from the date of the note. The note may be converted, at the lender’s request, at the per share purchase price (subject to adjustments) upon the completion of an equity financing described above. To date, the note has not been repaid and is considered in default.
Between August 2010 and September 30, 2011 we issued promissory notes to three separate stockholders, RMS Advisors, Inc. (“RMS”), Capital Growth Investment Trust (“CGIT”) and FEQ Realty, LLC (“FEQ”) with balances outstanding as of September 30, 2011 of $21,500, $31,200 and $15,500 respectively. All of these notes bear interest at annual rate of 3.25% and are due on demand. No assets or liabilities are pledged nor are there any negative covenants associated with these loans.
During the fiscal year ending September 30, 2012, the Company issued promissory notes in the aggregate amount of $2,000, $5,000 and $22,000 to FEQ, RMS and CGIT, respectively. All of the notes bear interest at an annual rate of 3.25% and are due on demand.
During the fiscal year ending September 30, 2013, the Company issued promissory notes in the aggregate amount of $20,000 to CGIT. All of the notes bear interest at an annual rate of 3.25% and are due on demand.
Director Independence
Mr. Koock does not satisfy the definition of “independent” established by NYSE MKT as set forth in Section 803 of the NYSE MKT Company Guide. As of the date of the report, we do not maintain a separately designated audit, compensation or nominating committee.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table presents fees for professional services performed by L J Soldinger Associates, LLC for the fiscal years ended September 30, 2013 and September 30, 2012.
Audit Fees consist of fees billed for professional services rendered for the audit of our financial statements and review of the interim financial statements included in quarterly reports and services that are normally provided by our independent accountants in connection with statutory and regulatory filings or engagements.
Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements and are not reported under “Audit Fees.”
Tax Fees consist of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal and state tax compliance, tax audit defense, customs and duties, and mergers and acquisitions.
All Other Fees consist of fees billed for products and services provided by the principal accountant, other than those services described above.
Audit Committee Pre-Approval Procedures
Our Board of Directors serves as our audit committee. Our Board of Directors approves the engagement of our independent auditors, and meets with our independent auditors to approve the annual scope of accounting services to be performed and the related fee estimates. It also meets with our independent auditors, on a quarterly basis, following completion of their quarterly reviews and annual audit to review the results of their work. During the course of the year, our chairman has the authority to pre-approve requests for services that were not approved in the annual pre-approval process. The chairman reports any interim pre-approvals at the following quarterly meeting. At each of the meetings, management and our independent auditors update the Board of Directors with material changes to any service engagement and related fee estimates as compared to amounts previously approved. During 2013, all audit and non-audit services performed by our independent accountants were pre-approved by the board of directors in accordance with the foregoing procedures.
ITEM 15.
ITEM 15. EXHIBITS
The following documents are filed as exhibits to this report.
Exhibit No.
Exhibit
3.1
Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form SB-2, Registration No. 333-120893, filed with the Commission on December 1, 2004)
3.2
Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form SB-2, Registration No. 333-120893, filed with the Commission on December 1, 2004)
3.3
Certificate of Change (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the Commission on April 23, 2007)
3.4
Amended and Restated Articles of Incorporation (incorporated by reference to Annex A to the Company’s Definitive Proxy Statement filed with the Commission on February 4, 2011)
Form of Promissory Note issued by the Company in November and December 2010 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on February 11, 2011)
10.2
Form of Promissory Note issued by the Company in February and March 2011 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Commission on May 12, 2011)
14.1
Code of Ethics (incorporated by reference to Exhibit 14.1 to the Company’s Annual Report on Form 10-K for the year ended September 30, 2005)
21.1**
Subsidiaries of the Company
31.1**
Certification of Chief Executive Officer and Chief Financial Officer of the Company required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended
32.1**
Certification of Chief Executive Officer and Chief Financial Officer of the Company Pursuant to 18 USC Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
** Filed herewith
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Kenneth J. Koock
Kenneth J. Koock
Chief Executive Officer, Chief Financial Officer and
Director (Principal Executive Officer and Principal Financial and Accounting Officer)
February 17, 2015
SYDYS CORPORATION
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders
Sydys Corporation
We have audited the accompanying balance sheets of Sydys Corporation as of September 30, 2013 and 2012, and the related statements of operations, stockholders’ deficit, and cash flows for each of the years then ended. Sydys’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sydys Corporation as of September 30, 2013 and 2012, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.
SYDYS CORPORATION
Balance Sheets
The accompanying notes are an integral part of these financial statements.
SYDYS CORPORATION
Statements of Operations
The accompanying notes are an integral part of these financial statements.
SYDYS CORPORATION
Statements of Stockholders’ Equity (Deficit)
The accompanying notes are an integral part of these financial statements.
SYDYS CORPORATION
Statements of Cash Flows
The accompanying notes are an integral part of these financial statements.
SYDYS CORPORATION
Notes to Financial Statements
NOTE 1 - DESCRIPTION OF BUSINESS
Sydys Corporation is a Nevada corporation incorporated on February 9, 2004 and based in Lebanon, New Jersey. The Company's fiscal year end is September 30.
The Company was formed for the purpose of engaging in the on-line advertising business. The Company has been unable to execute its business plan, and has exited the online advertising business. The Company is now considered a shell corporation under applicable rules of the Securities Exchange Commission.
On May 10, 2006, the Company's former management team and board of directors resigned and sold all of their shares of common stock to Kenneth Koock, the sole executive officer and director of the Company, which resulted in a change of control.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
Development Stage Enterprise
In June 2014, the FASB issued ASU No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. The amendments in this Update remove the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer in a development stage that in prior years it had been in the development stage.
The amendments also clarify that the guidance in Topic 275, Risks and Uncertainties, is applicable to entities that have not commenced planned principal operations. Finally, the amendments remove paragraph 810-10-15-16. Paragraph 810-10-15-16 states that a development stage entity does not meet the condition in paragraph 810-10-15-14(a) to be a variable interest entity if (1) the entity can demonstrate that the equity invested in the legal entity is sufficient to permit it to finance the activities that it is currently engaged in and (2) the entity’s governing documents and contractual arrangements allow additional equity investments. The amendments in this Update also eliminate an exception provided to development stage entities in Topic 810, Consolidation, for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The amendments to eliminate that exception simplify GAAP by reducing avoidable complexity in existing accounting literature and improve the relevance of information provided to financial statement users by requiring the application of the same consolidation guidance by all reporting entities. The elimination of the exception may change the consolidation analysis, consolidation decision, and disclosure requirements for a reporting entity that has an interest in an entity in the development stage. The amendments related to the elimination of inception-to-date information and the other remaining disclosure requirements of Topic 915 should be applied retrospectively except for the clarification to Topic 275, which shall be applied prospectively. For public business entities, those amendments are effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early application of each of the amendments is permitted for any annual reporting period or interim period for which the entity’s financial statements have not yet been issued (public business entities) or made available for issuance (other entities). Upon adoption, entities will no longer present or disclose any information required by Topic 915. The Company adopted ASU No. 2014-10 effective for financial statements considered issued after January 1, 2015.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting year. Actual results could differ from those estimates.
SYDYS CORPORATION
Notes to Financial Statements
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand. The Company considers all highly liquid investments with an original maturity of 90 days or less at the time of purchase to be cash equivalents.
Segment Information
The Company has determined it has one reportable operating segment as defined by the Accounting Standards Codification, “Disclosures about Segments of an Enterprise and Related Information”.
Income Taxes
Deferred income taxes are reported for timing differences between items of income or expense reported in the financial statements and those reported for income tax purposes in accordance with the Accounting Standards Codification, “Accounting for Income Taxes”, which requires the use of the asset/liability method of accounting for income taxes. Deferred income taxes and tax benefits are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company provides for deferred taxes for the estimated future tax effects attributable to temporary differences and carryforwards when realization is more likely than not.
Loss per Share
Loss per common share is calculated in accordance with the Accounting Standards Codification, “Earnings per Share.” Basic loss per common share is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding. Diluted loss per share is computed similarly to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares had been issued and if the additional common shares were dilutive. Shares associated with stock options are not included because their inclusion would be antidilutive (i.e., reduce the net loss per share).
Share-Based Compensation
The Company follows the provisions of the Accounting Standards Codification, “Share-Based Payment” which requires that compensation cost relating to share-based payment transactions be recognized under fair value accounting and recorded in the financial statements. The cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting of the equity award).
The fair value of the stock option award is estimated on the date of grant using the Black-Scholes option pricing model. Expected volatility is based on an average of historical volatility of common stock prices of the Company or its peer companies where there is a lack of relevant volatility information of the Company for the length of the expected term. The expected term is derived from estimates and represents the period of time that the stock option granted is expected to be outstanding. The Company uses historical data to estimate option exercises and employee terminations within the valuation model. The risk-free rate for the expected term is the yield on the zero-coupon U.S. Treasury security with a term comparable to the expected term of the option. The Company does not include an estimated dividend yield since it has not paid dividends on its common stock historically.
SYDYS CORPORATION
Notes to Financial Statements
NOTE 3 - NOTES PAYABLE
On September 9, 2009, Alan Stier, a shareholder of the Company, loaned to us an amount of $3,300 pursuant to a convertible promissory note. The Note accrues interest at an annual rate of 6%. The note is payable in full on the earlier of (1) the completion of a 1:15 reverse split of the Company’s common stock and the completion of an equity financing of the Company’s securities of a minimum amount of $100,000, or (2) one year from the date of the note. The note may be converted, at the lender’s request, at the per share purchase price (subject to adjustments) upon the completion of an equity financing described above. The note has not been repaid and is considered in default.
Between August 2010 and September 30, 2011 we issued promissory notes to three separate stockholders, RMS Advisors, Inc. (“RMS”), Capital Growth Investment Trust (“CGIT”) and FEQ Realty, LLC (“FEQ”) with balances outstanding as of September 30, 2011 of $21,500, $31,200 and $15,500 respectively. All of these notes bear interest at annual rate of 3.25% and are due on demand. No assets or liabilities are pledged nor are there any negative covenants associated with these loans.
During October 2011, the Company issued promissory notes in the amount of $2,000 to FEQR and $2,000 to RMS. The notes accrue interest at the annual rate of 3.25% and are due upon demand.
On November 30, 2011, CGIT extended the maturity date of four promissory notes from November 30, 2011 or upon demand to until completion of an equity raise or upon demand.
In January 2012, the Company issued a promissory note in the amount of $3,000 to RMS. The note accrues interest at 3.25% per annum and is due on demand.
In May 2012, the Company issued two promissory notes in the aggregate amount of $10,000 to CGIT. Both notes accrue interest at 3.25% per annum and are due on demand.
In August 2012, we issued two promissory notes to CGIT in the aggregate principal amount of $12,000. The notes accrue interest at 3.25% per annum and are due on demand.
In November 2012, we issued one promissory note to CGIT in the principal amount of $14,000. The note accrues interest at 3.25% per annum and is due on demand.
In January and February 2013, we issued two promissory notes to CGIT in the principal amount of $6,000. The notes accrue interest at 3.25% per annum and are due on demand.
None of the notes issued in fiscal year 2012 and 2013 required the Company to pledge any assets or liabilities nor did any of the notes contain any negative covenants.
The weighted average interest rate on the Company’s Notes Payable is 3.3% and the average outstanding balance was approximately $110,000 in the fiscal year ended September 30, 2013.
NOTE 4 - CAPITAL STOCK
Authorized Stock
The Company is authorized to issue 100,000,000 shares of common stock and 20,000,000 shares of preferred stock.
Stock Options
In connection with the resignations of our board members in 2008, all then outstanding options expired in 2008. As a result, the Company had no options outstanding at September 30, 2013 and 2012, respectively.
SYDYS CORPORATION
Notes to Financial Statements
NOTE 5 - INCOME TAXES
Deferred income taxes result from the net tax effects of temporary timing differences between the carrying amounts of assets and liabilities reflected on the financial statements and the amounts recognized for income tax purposes. The tax effects of temporary differences and net operating loss carryforwards that give rise to significant portions of deferred tax assets and liabilities are as follows at September 30:
Income tax benefit (expense) consists of the following at September 30:
As of September 30, 2013, the Company had reported net operating loss (“NOL”) carryforwards for tax purposes amounting to approximately $1,096,000 that may be offset against future taxable income. These NOL carryforwards expire beginning in fiscal 2025 through 2032. However, these carryforwards may be significantly limited due to changes in the ownership of the Company.
Recognition of the benefits of the deferred tax assets will require that the Company generate future taxable income. There can be no assurance that the Company will generate any earnings or any specific level of earning in future years. Therefore, the Company has established a valuation allowance for deferred tax assets (net of liabilities) of approximately $440,400 and $413,500 as of September 30, 2013 and 2012, respectively.
The following table presents the principal reasons for the difference between the Company’s effective tax rates and of United States federal statutory income tax rate of 34% at September 30:
SYDYS CORPORATION
Notes to Financial Statements
NOTE 6 - RELATED PARTY TRANSACTION
For the years ended September 30, 2013 and 2012, the Company incurred rent expense of $6,900 and $6,900, respectively, for office space provided by its sole officer.
For the years ended September 30, 2013 and 2012, the Company issued promissory notes to FEQ Farms LLC, FEQ Realty LLC, and Capital Growth Investment Trust, stockholders of the Company, for advances to the Company to meet its working capital needs. Refer to Note 4 - Notes Payable for additional disclosure.
NOTE 7 - SUPPLEMENTAL CASH FLOW INFORMATION
No amounts were paid for taxes or interest during the years ended September 30, 2013 and 2012.
NOTE 8 - SUBSEQUENT EVENTS NOT DISCLOSED ELSEWHERE
In February 2015, the Company entered into an Asset Purchase Agreement (“APA”) with the sole proprietor of OverAdMedia (“OAM”) to acquire substantially all of the assets and assume substantially all of the liabilities of the OAM business in exchange for the issuance of 10 million shares of the Company’s common stock, which are to be issued upon the satisfaction of certain requirements contained in the APA (the “Transaction”). The APA requires that the Company’s liabilities not exceed $1,000, other than a $40,000 advance from OAM, at the time of the Transaction. As a condition of the APA, OAM agreed to advance $40,000 to the Company and agreed to allow the Company to issue up to 1,500,000 shares of its common stock in order to reduce the outstanding liabilities to less than $1,000. An additional condition to the close of the Transaction is that the Company become current in its filings under the 1934 Securities and Exchange Act. The issuance of the shares under the APA will result in a change in control of the Company as the OAM principals will control greater than 50% of the issued and outstanding stock of the Company, whereby for accounting purposes, the acquisition will be treated as a recapitalization of OAM. Upon the completion of the Transaction, the financial information presented will be that of OAM, and all information regarding historical results and operations of the Company will be those of OAM.
In February 2015, as part of the requirements under the APA, the Company negotiated settlements of all of the outstanding principal in notes payable of $120,500 plus all accrued interest through the date of closing of the APA (which amounted to $15,381 as of September 30, 2014) and approximately $225,000 for accounts payable and accrued expenses and will issue 1,496,666 shares of the Company’s common stock.
EXHIBIT INDEX
Exhibit No.
Exhibit
21.1
Subsidiaries of the Company
31.1
Certification of Chief Executive Officer and Chief Financial Officer of the Company required by Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
32.1
Certification of Chief Executive Officer and Chief Financial Officer of the Company Pursuant to 18 USC Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.