Item 1. Description of Business
Business Development
Organization
Microsmart Devices, Inc. ("Microsmart," "our Company," "we," "us," and "our" or words of similar import) was organized pursuant to the laws of the State of Nevada on August 18, 1998, under the name "Design by Robin, Inc.," with an authorized capital of $50,000 divided into 50,000,000 shares of common stock, par value of $0.001 per share. We were formed for the primary purpose of engaging in any lawful business, and to design, manufacture and market items of women's and girl's apparel.
On or about June 10, 1998, we publicly offered a minimum of 200,000 and a maximum of 500,000 of our shares of common stock at $0.10 per share pursuant to Rule 504 of Regulation D of the Securities and Exchange Commission. We closed the offering on or about June 3, 1999, selling all 200,000 shares for gross proceeds of $20,000. These proceeds were used to design and manufacture clothing. These operations were unsuccessful and were abandoned in 2000.
Effective May 14, 2001, we changed our name to "Neosphere Technologies, Inc."
On May 24, 2001, we adopted a Plan and Agreement of Reorganization (the "Reorganization Agreement") with Globalnet Technologies, Inc., a Delaware corporation ("Globalnet"), whereby we were to acquire all of the issued and outstanding shares of Globalnet. This Reorganization Agreement was rescinded on or about March 30, 2002. All shares issued under the Reorganization Agreement were delivered for cancellation on or about that date, except for 85,728 shares, which were cancelled on August 8, 2006.
Effective July 5, 2004, we changed our name to "Microsmart Devices, Inc.," and we effected a reverse spilt of our outstanding shares of common stock on a basis of one share for 35, while retaining our authorized capital and par value, with appropriate adjustments in our stated capital and capital surplus accounts. All computations herein take into account this reverse split.
On November 8, 2005, we filed Amended and Restated Articles of Incorporation with the State of Nevada that increased our authorized capital to $110,000 divided into 110,000,000 shares, of which 100,000,000 were shares of $0.001 par value common stock, and of which 10,000,000 were shares of $0.001 par value preferred stock, with the rights, privileges and preferences of the preferred stock to be set by our Board of Directors in accordance with the provisions of the General Corporation Law of the State of Nevada (the "NRS"); we also eliminated personal liability of our directors and executive officers to the fullest extent permitted by the NRS; we allowed directors to effect forward and reverse splits of our common stock without stockholder approval on a pro rata basis so long as any such recapitalization did not require an amendment to our Articles of Incorporation; we opted out of the provisions of NRS 78.378 through 78.3793, inclusive, "Acquisition of Controlling Interest," that we believed may have limited our ability to issue shares of our common or preferred stock because issuances of securities representing more than 20% of the voting power of our outstanding voting securities could, in certain circumstances, be denied voting rights under these provisions; we opted out of the provisions of NRS 78.411 through 78.444, inclusive, "Combinations with Interested Stockholders," for similar reasons, with respect to related party ("affiliate") transactions; and we granted our Board of Directors the authority to change our corporate name to reflect any industry or business in which we engage or that will promote or conform to any principal product, technology or other asset of ours.
These amendments were made in reliance on our legal counsel's advice that they would help us conduct our planned business operations in a more efficient and cost saving manner. The amendments relating to indemnification are customary and merely recited what we can do under the NRS in this respect. The increase in capitalization and the addition of a class of preferred stock was thought necessary to ensure that we had the flexibility to issue shares of various classes, and that we would have a sufficient number of authorized shares for most any prospect. The right of our Board of Directors to make capitalization changes will allow us more flexibility in structuring acquisitions, reorganizations and mergers in a fast, efficient and less costly manner, while the right of our Board of Directors to change our name will simplify the current process of holding a meeting of stockholders and the providing of a proxy or information statement to stockholders, which will also be less costly and time consuming; however, these provisions will limit the required disclosure that would normally be attendant to a vote of security holders on these issues. We have no business or assets, and since any stock issuance for any reasonable consideration or in connection with any potential reorganization, merger or acquisition of assets that we may complete could come within the voting limitations of the applicable sections of the NRS entitled "Acquisition of Controlling Interest" or "Combinations with Interested Stockholders," we believed that these provisions would not be conducive to our planned business operations of seeking to acquire businesses, companies or assets that would be beneficial to us. Further, the sections of the NRS governing "Acquisition of Controlling Interest" apply only to Nevada corporations with more than 200 stockholders of which 100 are Nevada residents. We have approximately 30 stockholders of record and only three of which are Nevada residents; and though there are 30,333 shares held in Cede & Co., we do not believe that the provisions of these sections were applicable to us prior to opting out of these provisions. The sections of the NRS governing "Combinations with Interested Stockholders" cover Nevada corporations that have more than 200 stockholders.
On November 29, 2005, we adopted new Bylaws by resolution of our sole director that cover the types of matters customarily allowed to be included in Bylaws under the NRS. The new Bylaws did not change our annual meeting date or our fiscal year.
Effective August 7, 2006, we declared a dividend of three for one on our outstanding common stock, subject to a mandatory exchange of stock certificates that resulted in a three for one forward split of our outstanding common stock. All computations herein take into account this dividend.
Copies of our Articles of Incorporation, as amended, and our current By-Laws, were filed as Exhibits to our initially filed 10-SB Registration Statement, and are incorporated herein by reference. See Part III, Item 13.
Business
We were originally organized for the primary purpose of engaging in any lawful business; and we currently have no business operations.
Our Company's plan of operation for the next 12 months is to: (i) consider guidelines of industries in which we may have an interest; (ii) adopt a business plan regarding engaging in the business of any selected industry; and (iii) commence such operations through funding and/or the acquisition of a "going concern" that is engaged in any industry selected. Accordingly, we are deemed to be a "blank check," or "shell company," as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), by the Securities and Exchange Commission.
When and if we will select either an industry or business in which to engage in or complete an acquisition of any kind is presently unknown, and will depend upon many factors, including but not limited to, those that are outlined below.
Although we are not currently engaged in any substantive business activity, we have had preliminary discussions with other companies concerning a possible transaction. In our present form, we may be deemed to be a vehicle to acquire or merge with a business or company. Regardless, the commencement of any business opportunity will be preceded by the consideration and adoption of a business plan by our Board of Directors. We do not intend to restrict our search for business opportunities to any particular business or industry, and the areas in which we will seek out business opportunities or acquisitions, reorganizations or mergers may include, but will not be limited to, the fields of high technology, manufacturing, natural resources, service, research and development, communications, transportation, insurance, brokerage, finance and all medically related fields, among others. We recognize that the number of suitable potential business ventures that may be available to us will be extremely limited, and may be restricted, as to acquisitions, reorganizations and mergers, to entities who desire to avoid what such entities may deem to be the adverse factors related to an initial public offering ("IPO") as a method of going public. The most prevalent of these factors include substantial time requirements, legal and accounting costs, the inability to obtain an underwriter who is willing to publicly offer and sell shares, the lack of or the inability to obtain the required financial statements for such an undertaking, limitations on the amount of dilution to public investors in comparison to the stockholders of any such entities, along with other conditions or requirements imposed by various federal and state securities laws, rules and regulations and federal and state agencies that implement such laws, rules and regulations. Amendments to Form 8-K by the Securities and Exchange Commission regarding shell companies and transactions with shell companies require the filing of all information about an acquired company that would have been required to have been filed had any such company filed a Form 10 or 10-SB Registration Statement with the Securities and Exchange Commission, along with required audited, interim and proforma financial statements, within four business days of the closing of any such transaction. These amendments to Form 8-K may eliminate many of the perceived advantages of these types of transactions. These types of transactions are customarily referred to as "reverse mergers" in which the acquired company's shareholders become controlling shareholders in the acquiring company and the acquiring company becomes the successor to the business operations of the acquired company. These regulations also deny the use of Form S-8 for the registration of securities of a shell company, and limit the use of this Form to a reorganized shell company until the expiration of 60 days from when any such entity is no longer considered to be a shell company. This prohibition could further restrict opportunities for us to acquire companies that may already have stock option plans in place that cover numerous employees. In such an instance, there may be no exemption from registration for the issuance of securities in any business combination to these employees, thereby necessitating the filing of a registration statement with the Securities and Exchange Commission to complete any such reorganization, and incurring the time and expense costs that are normally avoided by reverse reorganizations.
Any of these types of transactions, regardless of the particular prospect, would require us to issue a substantial number of shares of our common stock, that could amount to as much as 95% or more of our outstanding voting securities following the completion of any such transaction; accordingly, investments in any such private enterprise, if available, would be much more favorable than any investment in our Company.
Management intends to consider a number of factors prior to making any decision as to whether to participate in any specific business endeavor, none of which may be determinative or provide any assurance of success. These may include, but will not be limited to, as applicable, an analysis of the quality of the particular business or entity's management personnel; the anticipated acceptability of any new products or marketing concepts that any such business or company may have; the merit of any such business' or company's technological changes; the present financial condition, projected growth potential and available technical, financial and managerial resources of any such business or company; working capital, history of operations and future prospects; the nature of present and expected competition; the quality and experience of any such company's management services and the depth of its management; the business' or the company's potential for further research, development or exploration; risk factors specifically related to the business or company's operations; the potential for growth, expansion and profit of the business or company; the perceived public recognition or acceptance of the company or the business' products, services, trademarks and name identification; and numerous other factors which are difficult, if not impossible, to properly or accurately quantify or analyze, let alone describe or identify, without referring to specific objective criteria of an identified business or company.
Furthermore, the results of operations of any specific business or company may not necessarily be indicative of what may occur in the future, by reason of changing market strategies, plant or product expansion, changes in product emphasis, future management personnel and changes in innumerable other factors. Also, in the case of a new business venture or one that is in a research and development mode, the risks will be substantial, and there will be no objective criteria to examine the effectiveness, or the abilities of its management or its business objectives. Additionally, a firm market for its products or services may yet need to be established, and with no past track record, the profitability of any such enterprise will be unproven, and cannot be predicted with any certainty.
Our Management will attempt to meet personally with management and key personnel of the business or company providing any potential business opportunity afforded to us, visit and inspect material facilities, obtain independent analysis or verification of information provided and gathered, check references of management and key personnel and conduct other reasonably prudent measures calculated to ensure a reasonably thorough review of any particular business opportunity; however, due to time constraints of our management, and the lack of available funds for these purposes, these activities may be limited. See the heading "Business Experience," Part III, Item 9.
We are unable to predict the time as to when, and if we may actually participate in any specific business endeavor, although we hope to do so before the end of 2008 based on the results of our preliminary discussions and our observation of the current state of the financial markets that make conventional IPOs much more difficult. Our Company anticipates that proposed business ventures will be made available to us through personal contacts of directors, executive officers and principal stockholders, professional advisors, broker dealers in securities, venture capital personnel, members of the financial community and others who may present unsolicited proposals. In certain cases, we may agree to pay a finder's fee or to otherwise compensate the persons who submit a potential business endeavor in which our Company eventually participates. Such persons may include our directors, executive officers and beneficial owners of our securities or their affiliates. In that event, such fees may become a factor in negotiations regarding any potential venture and, accordingly, may present a conflict of interest for such individuals. Management does not presently intend to acquire or merge with any business enterprise in which any member has a prior ownership interest.
Our Company's director and executive officer has not used any particular consultants, advisors or finders on a regular basis.
Although we currently have no plans to do so, depending on the nature and extent of services rendered, we may compensate members of management in the future for services that they may perform for our Company. Because we currently have extremely limited resources, and because we are unlikely to have any significant resources until we have determined a business or enterprise to engage in or have completed a merger or acquisition, management expects that any such compensation would take the form of an issuance of our common stock to these persons; this would have the effect of further diluting the holdings of our other stockholders. There are presently no agreements or understandings between us and members of management respecting such compensation. Any shares issued to members of our management, persons who may be deemed to be our "promoters" or "founders," or our "affiliates," could be required to be resold under an effective registration statement filed with the Securities and Exchange Commission in accordance with the so-called "Wulff Letter" that is fully discussed under Part II, Item 5, under the heading "Restrictions on Sales of Certain Restricted Securities," and which we believe will be liberally construed to promote its purposes as discussed therein. These provisions could further inhibit our ability to complete the acquisition of any business or complete any merger or reorganization with another entity, where finder's or others who may be subject to the interpretations of the Wulff Letter refuse to provide us with any introductions or to close any such transactions unless they are paid requested fees in cash or unless we agree to file a registration statement with the Securities and Exchange Commission that includes any shares that are issued to them. These expenses could limit potential acquisition candidates, especially those in need of cash resources, and could affect the number of shares that our shareholders retain following any such transaction, by reason of the increased expense.
Substantial fees are often paid in connection with the completion of all types of acquisitions, reorganizations or mergers, ranging from a small amount to as much as $600,000 or more. These fees are usually divided among promoters or founders or finders, after deduction of legal, accounting and other related expenses, and it is not unusual for a portion of these fees to be paid to members of management or to principal stockholders as consideration for their agreement to retire a portion of the shares of common stock owned by them or the loans extended by them to the Company. Management may actively negotiate or otherwise consent to the purchase of all or any portion of their common stock as a condition to, or in connection with, a proposed reorganization, merger or acquisition. It is not anticipated that any such opportunity will be afforded to other stockholders or that such other stockholders will be afforded the opportunity to approve or consent to any particular stock buy-out transaction. In the event that any such fees are paid, they may become a factor in negotiations regarding any potential acquisition or merger by our Company and, accordingly, may also present a conflict of interest for such individuals. We have no present arrangements or understandings respecting any of these types of fees or opportunities. Any of these types of fees that are paid in our common stock could also be subject to the Securities and Exchange Commission's interpretations of the Wulff Letter. All of our shares of common stock that are owned by our former sole director and executive officer, Mark L. Meriwether ("Meriwether"), are the subject of a Registration Agreement (the "Registration Agreement") that we believe conforms with these interpretations of the Wulff Letter, which Meriwether has voluntarily executed on the advice of his legal counsel. See Part II, Item 5, under the heading "Restrictions on Sales of Certain Restricted Securities," and the Registration Agreement which was filed as Exhibit 99 to our Registration Statement on Form 10-SB, in Part III, Item 13. Our shares of common stock owned by our current principal stockholder, Crowther Holdings Ltd., a Turk and Caicos corporation ("Crowther") were purchased from Meriwether and are subject to resale under the Registration Agreement. Also, neither Meriwether nor Crowther will be able to sell his or its shares under Rule 144.
Principal Products or Services and their Markets
None; not applicable.
Distribution Methods of the Products or Services
None; not applicable.
Status of any Publicly Announced New Product or Service
None; not applicable.
Competitive Business Conditions and the Small Business Issuer's Competitive Position in the Industry and Methods of Competition
Management believes that there are literally thousands of blank check or shell companies engaged in endeavors similar to those planned to be engaged in by us; many of these companies have substantial current assets and cash reserves. Competitors also include thousands of other publicly-held companies whose business operations have proven unsuccessful, and whose only viable business opportunity is that of providing a publicly-held vehicle through which a private entity may have access to the public capital markets. There is no reasonable way to predict the competitive position of our Company or any other entity in the strata of these endeavors; however, our Company, having limited assets and cash reserves, will no doubt be at a competitive disadvantage in competing with entities which have recently completed IPO's, have significant cash resources and have recent operating histories when compared with the complete lack of any substantive operations by us for the past several years.
Sources and Availability of Raw Materials and Names of Principal Suppliers
None; not applicable.
Dependence on One or a Few Major Customers
None; not applicable.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements or Labor Contracts, including Duration
None; not applicable.
Need for any Governmental Approval of Principal Products or Services
Because we currently produce no products or services, we are not presently subject to any governmental regulation in this regard, except applicable securities laws, rules and regulations, as outlined above and under the heading below. However, in the event that we engage in any business endeavor or complete any merger or acquisition transaction with an entity that engages in governed activities, we will become subject to all governmental approval requirements to which the business or the merged or acquired entity is subject.
Effect of Existing or Probable Governmental Regulations on the Business
We are subject to the Sarbanes-Oxley Act of 2002. This Act creates a strong and independent accounting oversight board to oversee the conduct of auditors of public companies and strengthens auditor independence. It also requires steps to enhance the direct responsibility of senior members of management for financial reporting and for the quality of financial disclosures made by public companies; establishes clear statutory rules to limit, and to expose to public view, possible conflicts of interest affecting securities analysts; creates guidelines for audit committee members' appointment, compensation and oversight of the work of public companies' auditors; prohibits certain insider trading during pension fund blackout periods; and establishes a federal crime of securities fraud, among other provisions.
Section 14(a) of the Exchange Act requires all companies with securities registered pursuant to Section 12(g) of the Exchange Act to comply with the rules and regulations of the Securities and Exchange Commission regarding proxy solicitations, as outlined in Regulation 14A. Matters submitted to stockholders of our Company at a special or annual meeting thereof or pursuant to a written consent will require our Company to provide our stockholders with the information outlined in Schedules 14A or 14C of Regulation 14; preliminary copies of this information must be submitted to the Securities and Exchange Commission at least 10 days prior to the date that definitive copies of this information are forwarded to our stockholders.
If we are acquired by a non-"reporting issuer" under the Exchange Act, we will be subject to the "back-door registration" requirements of the Securities and Exchange Commission that will require us to file a Current Report on Form 8-K12G3 that will include all information about such non-"reporting issuer" as would have been required to be filed by that entity had it filed a Form 10 or Form 10-SB Registration Statement with the Securities and Exchange Commission. The Securities and Exchange Commission proposed on April 13, 2004, that any acquisition that will result in our Company no longer being a "blank check" or "blind pool" company will require us to include all information about the acquired company as would have been required to be filed by that entity had it filed a Form 10 Registration Statement with the Securities and Exchange Commission. Those requirements are currently a part of Form 8-K of the Securities and Exchange Commission.
Estimate of the Amounts Spent During Each of the Two Last Fiscal Years on Research and Development Activities
None; not applicable.
Cost and Effects of Compliance with Environmental Laws
None; not applicable. However, environmental laws, rules and regulations may have an adverse effect on any business venture viewed by our Company as an attractive acquisition, reorganization or merger candidate, and these factors may further limit the number of potential candidates available to our Company for acquisition, reorganization or merger.
Number of Total Employees and Number of Full Time Employees
None; not applicable.
Reports to Security Holders
You may read and copy any materials that we file with the Securities and Exchange Commission at the Securities and Exchange Commission's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may also find all of the reports and registration statements that we have filed electronically with the SEC, at their internet site: www.sec.gov. At the present time, we file with the Securities and Exchange Commission Annual Reports, Quarterly Reports, Current Reports and reports required by Section 14 of the Exchange Act.
Item 1A.
Item 1A. Risk Factors
In any business venture, there are substantial risks specific to the particular enterprise which cannot be ascertained until a potential acquisition, reorganization or merger candidate has been identified; however, at a minimum, our present and proposed business operations will be highly speculative and be subject to the same types of risks inherent in any new or unproven venture, and will include those types of risk factors outlined below, among others that cannot now be determined.
Extremely Limited Assets; No Source of Revenue.
We have no assets and have had no profitable operations since inception. We will not receive revenues until we select an industry in which to commence business or complete an acquisition, reorganization or merger, at the earliest. We can provide no assurance that any selected or acquired business will produce any material revenues for us or our stockholders or that any such business will operate on a profitable basis.
We are deemed to be a "blank check" or "shell company" until we adopt a business plan and commence principal significant operations.
The limited business operations of ours, as now contemplated, involve those of a blank check or shell company. The only activities to be conducted by our Company are to manage our current limited assets and corporate standing and to seek out and investigate the commencement or the acquisition of any viable business opportunity by purchase and exchange for our securities or pursuant to a reorganization or merger through which our securities will be issued or exchanged.
Discretionary Use of Proceeds; Blank Check or Shell Company.
Because we are not currently engaged in any substantive business activities, as well as management's broad discretion with respect to selecting a business or industry for commencement of operations or completing an acquisition of assets, property or a business, we are deemed to be a blank check or shell company. Although management intends to apply any proceeds that we may receive through the private issuance of stock or debt to a suitable business enterprise, subject to the criteria identified above, such proceeds will not otherwise be designated for any more specific purpose. We can provide no assurance that any use or allocation of such proceeds will allow us to achieve our business objectives. We will comply with Rule 419 of Regulation C of the Securities and Exchange Commission if we issue stock or debt in a public offering, by, among other things, depositing proceeds promptly into an escrow account or trust account that provides that the funds would not be released until we provide the purchaser of any such securities with information regarding the business combination and also receive in writing a confirmation regarding his or her decision to invest.
We are not currently engaged in any substantive business activity, and we have no plans to engage in any such activity in the foreseeable future, except the search for a business or an entity to acquire that may be beneficial to us and our stockholders.
When and if we will complete an acquisition is presently unknown, and will depend upon various factors, including but not limited to, funding and its availability; and if and when any potential acquisition may become available to us on terms acceptable to us.
We Will Seek Out Business Opportunities.
Management will seek out and investigate business opportunities through every reasonably available fashion, including personal contacts, professionals, securities broker dealers, venture capital personnel, members of the financial community and others who may present unsolicited proposals; we may also advertise our availability as a vehicle to bring a company to the public market through a "reverse" reorganization or merger, subject to the limitations on any such advertising that are included in the Securities Act of 1933, as amended (the "Securities Act"), and the General Rules and Regulations of the Securities and Exchange Commission promulgated thereunder.
Absence of Substantive Disclosure Relating to Prospective Acquisitions.
Because we have not yet identified any industry or assets, property or business that we may engage in or acquire, potential investors in our Company will have virtually no substantive information upon which to base a decision of whether to invest in us. Potential investors would have access to significantly more information if we had already identified a potential acquisition, or if the acquisition target had made an offering of its securities directly to the public. We can provide no assurance that any investment in our Company will not ultimately prove to be less favorable than such a direct investment.
Unspecified Industry and Acquired Business; Unascertainable Risks.
To date, we have not identified any particular industry or business in which to concentrate our potential interests. Accordingly, prospective investors currently have no basis to evaluate the comparative risks and merits of investing in any industry or business in which our Company may acquire. To the extent that we may acquire a business in a high risk industry, we will become subject to those risks. Similarly, if we acquire a financially unstable business or a business that is in the early stages of development, we will also become subject to the numerous risks to which those businesses are subject. Although management intends to consider the risks inherent in any industry and business in which we may become involved, there can be no assurance that we will correctly assess such risks.
Uncertain Structure of Acquisition.
Management has had no substantive discussions regarding, and there are no present plans, proposals or arrangements to engage in or acquire any specific business, assets, property or business. Accordingly, it is unclear whether such an acquisition would take the form of a purchase with a funding requirement as a condition precedent to closing, or an exchange of capital stock, a merger or an asset acquisition. However, because our Company has virtually no resources as of the date of this Annual Report, management expects that any such acquisition would take the form of an exchange of capital stock.
Auditor's 'Going Concern' Opinion.
The Independent Auditor's Report issued in connection with our audited financial statements for the calendar years ended December 31, 2008, 2007, and 2006, expressed "substantial doubt about our ability to continue as a going concern," due to our status as a start-up and our lack of profitable operations. See the Index to Financial Statements, Part II, Item 7 of this Annual Report.
Losses Associated With Startup.
We have not had a profitable operating history. We cannot guarantee that we will become profitable.
Federal and State Restrictions on Blank Check or Shell Companies.
Federal Restrictions.
Amendments to Form 8-K by the Securities and Exchange Commission regarding shell companies and transactions with shell companies require the filing of all information about an acquired company that would have been required to have been filed had any such company filed a Form 10 or 10-SB Registration Statement with the Securities and Exchange Commission, along with required audited, interim and proforma financial statements, within four business days of the closing of any such transaction. These regulations also deny the use of Form S-8 for the registration of securities of a shell company, and limit the use of this Form to a reorganized shell company until the expiration of 60 days from when any such entity is no longer considered to be a shell company. This prohibition could further restrict opportunities for us to acquire companies that may already have stock option plans in place that cover numerous employees. In such an instance, there may be no exemption from registration for the issuance of securities in any business combination to these employees, thereby necessitating the filing of a registration statement with the Securities and Exchange Commission to complete any such reorganization, and incurring the time and expense costs normally avoided by reverse reorganizations.
The Wulff Letter, as discussed below under Part II, Item 5, under the heading "Restrictions on Sales of Certain Restricted Securities," can restrict the free tradability of certain shares issued to our promoters or founders or affiliates in any transaction with us to resales pursuant to an effective registration statement filed with the Securities and Exchange Commission. We would expect the definition of these applicable persons to be liberally construed to promote the findings set out in the Wulff Letter. The shares of common stock in our Company owned by Meriwether and Crowther are subject to resale under a Registration Agreement that is discussed below under this heading. Meriwether was our sole director and executive officer, and Crowther is our principal stockholder, who acquired its shares in our Company from Meriwether.
If we publicly offer any securities as a condition to the closing of any acquisition, merger or reorganization while we are a blank check or shell company, we will have to fully comply with Rule 419 of the Securities and Exchange Commission and deposit all funds in escrow pending advice about the proposed transaction to our stockholder fully disclosing all information required by Regulation 14 of the Securities and Exchange Commission and seeking the vote and agreement of investment of those stockholders to whom such securities were offered; if no response is received from these stockholders within 45 days thereafter or if any elect not to invest following advice about the proposed transaction, all funds held in escrow must be promptly returned to any such stockholder. All securities issued in any such offering will likewise be deposited in escrow, pending satisfaction of the foregoing conditions. The foregoing is only a brief summary of Rule 419. We do not anticipate making any public offerings of our securities that would come within the context of an offering described in Rule 419.
All of these laws, rules and regulations could severely restrict us from completing the acquisition of any business or any merger or reorganization for the following reasons, among others:
The time and expense in complying with any of the foregoing could be prohibitive and eliminate the reasons for a reverse reorganization.
Management or others who own or are to receive shares that may be covered by the Wulff Letter may demand registration rights for these shares, and the acquisition candidate may refuse to grant them by reason of the time, cost and expense; or because the filing of any such registration statement may be integrated with planned financing options that could prohibit or interfere with such options or such registration statement.
Demands for cash in lieu of securities could be too high a cost of dilution to the acquisition candidate, especially when taking into account the dilution that results from the shareholdings that are retained by our shareholders.
These costs and expenses, if agreed upon, would no doubt further dilute our shareholders, as any acquisition candidate may not be willing to leave as many shares with our shareholders in any such transaction.
An acquisition candidate may demand that outstanding Wulff Letter shares be cancelled, and the holders of these shares could refuse to do so without just compensation, including our current sole director.
Finders and parties who may introduce acquisition candidates would no doubt be unwilling to introduce any such candidates to us if shares issued to them came within the Wulff Letter interpretations and no registration rights were granted, which would substantially restrict our ability to attract such potential candidates.
State Restrictions.
A total of 36 states prohibit or substantially restrict the registration and sale of blank check or shell companies within their borders. Additionally, 36 states use "merit review powers" to exclude securities offerings from their borders in an effort to screen out offerings of highly dubious quality. See paragraph 8221, NASAA Reports, CCH Topical Law Reports, 1990. We intend to comply fully with all state securities laws, and plan to take the steps necessary to ensure that any future offering of our securities is limited to those states in which such offerings are allowed. However, while we have no substantive business operations and are deemed to a blank check or shell company, these legal restrictions may have a material adverse impact on our ability to raise capital, because potential purchasers of our securities must be residents of states that permit the purchase of such securities. These restrictions may also limit or prohibit stockholders from reselling shares of common stock within the borders of regulating states.
By regulation or policy statement, eight states (Idaho, Maryland, Missouri, Nevada, New Mexico, Pennsylvania, Utah and Washington), some of which are included in the group of 36 states mentioned above, place various restrictions on the sale or resale of equity securities of blank check or shell companies. These restrictions include, but are not limited to, heightened disclosure requirements, exclusion from "manual listing" registration exemptions for secondary trading privileges and outright prohibition of public offerings of such companies.
In most jurisdictions, blank check and shell companies are not eligible for participation in the Small Corporate Offering Registration ("SCOR") program, which permits an issuer to notify the Securities and Exchange Commission of certain offerings registered in such states by filing a Form D under Regulation D of the Securities and Exchange Commission. All states (with the exception of Alabama, Delaware, Florida, Hawaii, Minnesota, Nebraska and New York) have adopted some form of SCOR. States participating in the SCOR program also allow applications for registration of securities by qualification via filing of a Form U-7 with the states' securities commissions. Nevertheless, our Company does not anticipate making any SCOR offering or other public offering in the foreseeable future, even in any jurisdiction where it may be eligible for participation in SCOR, despite our status as a blank check or shell company.
The net effect of the above-referenced laws, rules and regulations will be to place significant restrictions on our ability to register, offer and sell and/or to develop a secondary market for shares of our common stock in virtually every jurisdiction in the United States. These restrictions should cease once and if we acquire a venture by purchase, reorganization or merger, so long as the business operations succeeded to involve sufficient activities of a specific nature.
Management to Devote Insignificant Time to Activities of Our Company.
Members of our management are not required to devote their full time to the affairs of our Company. Because of their time commitments, as well as the fact that we have no business operations, the members of our management currently devote on average one hour a week to the activities of our Company, until such time as we have identified a suitable acquisition target or determined to engage in a particular business or industry and have commenced such operations.
No Market for Common Stock; No Market for Shares.
Our common stock is currently quoted on the OTC Bulletin Board of the NASD under the symbol "MCMV." There is currently no "established trading market" for such shares; and there can be no assurance that such a market will ever develop or be maintained. Any market price for shares of our common stock is likely to be very volatile, and numerous factors beyond our control may have a significant effect. In addition, the stock markets generally have experienced, and continue to experience, extreme price and volume fluctuations which have affected the market price of many small capital companies and which have often been unrelated to the operating performance of these companies. These broad market fluctuations, as well as general economic and political conditions, may adversely affect the market price of our common stock in any market that may develop. Sales of "restricted securities" under Rule 144 or sales of Wulff Letter shares pursuant to registration statements may also have an adverse effect on any market that may develop. See Part II, Item 5.
The shares of our Company owned by Meriwether and Crowther are subject to resale under a Registration Agreement which was filed as Exhibit 99 to our Registration Statement on Form 10-SB, which is incorporated herein by reference, in Part III, Item 13. Also, neither Meriwether nor Crowther will be able to sell his or its shares under Rule 144.
Risks of "Penny Stock."
Our common stock may be deemed to be "penny stock" as that term is defined in Rule 3a51-1 of the Securities and Exchange Commission. Penny stocks are stocks (i) with a price of less than five dollars per share; (ii) that are not traded on a "recognized" national exchange; (iii) whose prices are not quoted on the NASDAQ automated quotation system (NASDAQ- listed stocks must still meet requirement (i) above); or (iv) in issuers with net tangible assets less than $2,000,000 (if the issuer has been in continuous operation for at least three years); or $5,000,000 (if in continuous operation for less than three years); or with average revenues of less than $6,000,000 for the last three years.
Section 15(g) of the Exchange Act and Rule 15g-2 of the Securities and Exchange Commission require broker dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor's account. Potential investors in our common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be "penny stock."
Moreover, Rule 15g-9 of the Securities and Exchange Commission requires broker dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his, her or its financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor, and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor's financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for investors in our common stock to resell their shares to third parties or to otherwise dispose of them.
There Has Been No "Established Trading Market" for Our Common Stock Since Inception.
At such time as we identify a business opportunity or complete a merger or acquisition transaction, if at all, we may attempt to qualify for quotation on either NASDAQ or a national securities exchange. However, at least initially, any trading in our common stock will most likely be conducted on the OTC Bulletin Board of the NASD or in the "pink sheets". Management intends to submit our securities for quotations on a national medium as soon as is reasonably practicable.
Item 2.
Item 2. Description of Property
We have no assets, property or business; our principal executive office address and telephone number, 1035 Park Avenue, Suite 7B, New York 10028-0912 and (646) 827-9352 are provided at no cost.
Item 3.
Item 3. Legal Proceedings
We are not a party to any pending legal proceeding and, to the knowledge of our management; no federal, state or local governmental agency is presently contemplating any proceeding against us. No director, executive officer or affiliate of ours or owner of record or beneficially of more than five percent of our common stock is a party adverse to our Company or has a material interest adverse to us in any proceeding.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to our shareholders during the year ended December 31, 2008.
PART II
Item 5.
Item 5. Market for Common Equity and Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities.
Market Information
There has never been any established trading market for our shares of common stock, though our shares of common stock are nominally quoted on the OTCBB under the symbol "MCMV." No assurance can be given that any market for our common stock will develop or be maintained. For any market that develops for our common stock, the sale of restricted securities (common stock) pursuant to Rule 144 of the Securities and Exchange Commission by members of our management or any other persons to whom any such securities may be issued in the future may have a substantial adverse impact on any such public market, along with sales made pursuant to registration statements filed respecting shares that come within the interpretations of the Wulff Letter or otherwise. See the heading "Recent Sales of Unregistered Securities," below.
A minimum holding period of one year is required for resales under Rule 144, along with other pertinent provisions, including publicly available information concerning our Company; limitations on the volume of restricted securities which can be sold in any 90 day period; the requirement of unsolicited broker's transactions; and the filing of a Notice of Sale on Form 144.
The shares of our common stock owned by Meriwether and Crowther are subject to a Registration Agreement which was filed as Exhibit 99 to our 10-SB Registration Statement, in Part III, Item 13. In accordance with this Registration Agreement, neither Meriwether nor Crowther will be able to sell his or its holdings pursuant to Rule 144 in "routine trading transactions," because his or its public sales, if any, must be made pursuant to an effective registration statement filed with the Securities and Exchange Commission. Any person who acquires any of these securities in a private transaction from Meriwether or Crowther will be subject to the same resale requirements.
Holders
The number of record holders of our common stock as of the date of this Annual Report is approximately 50, not including an indeterminate number who may hold shares in "street name."
Dividends
We have not declared any cash dividends with respect to our common stock, and do not intend to declare dividends in the foreseeable future. The future dividend policy of our Company cannot be ascertained with any certainty, and if and until we determine to engage in any business or we complete any acquisition, reorganization or merger, no such policy will be formulated. There are no material restrictions limiting, or that are likely to limit, our ability to pay dividends on our securities.
Securities Authorized for Issuance under Equity Compensation Plans
Plan Category
Number of Securities to be issued upon exercise of outstanding options, warrants and rights
Weighted-average exercise price of outstanding options, warrants and rights
Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a)
(a)
(b)
(c)
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
Recent Sales of Unregistered Securities
We did not sell or issue any shares of our common stock during the last three years.
Restrictions on Sales of Certain "Restricted Securities"
Generally, restricted securities can be resold under Rule 144 once they have been held for at least one year (subparagraph (d) thereof), provided that the issuer of the securities satisfies the "current public information" requirements (subparagraph (c)) of the Rule; no more than 1% of the outstanding securities of the issuer are sold in any three month period (subparagraph (e)); the seller does not arrange or solicit the solicitation of buyers for the securities in anticipation of or in connection with the sale transactions or does not make any payment to anyone in connection with the sales transactions except the broker dealer who executes the trade or trades in these securities (subparagraph (f)); the shares are sold in "broker's transactions" only (subparagraph (g)); the seller files a Notice on Form 144 with the Securities and Exchange Commission at or prior to the sales transactions (subparagraph (h)); and the seller has a bona fide intent to sell the securities within a reasonable time of the filing. Once two years have lapsed, assuming the holder of the securities is not an "affiliate" of the issuer, unlimited sales can be made without further compliance with the terms and provisions of Rule 144. All restricted securities of our Company have been held for in excess of one year. For information on the limitations on the resale of the shares owned by Meriwether and Crowther, see below.
In January, 2000, Richard K. Wulff, the Chief of the Securities and Exchange Commission's Office of Small Business, wrote a letter to Ken Worm, the Assistant Director of the OTC Compliance Unit of NASD Regulation, Inc. Many members of the securities community have come to refer to that letter as the "Wulff Letter." The full text of the Wulff Letter can be examined in the CCH Federal Securities Law Reporter, 1990-2000 Decisions, Paragraph No. 77,681, issued under the name "NASD Regulation, Inc."
The Wulff Letter was written in response to a request for guidance from Mr. Worm. In his request, Mr. Worm had referred to several situations in which non-affiliate stockholders of blank check or shell companies had sought to treat their shares as free trading or unrestricted securities. As defined in the Wulff Letter, a blank check or shell company is "a development stage company that has no specific business plan or purpose or has indicated its business plan is to engage in a merger or acquisition with an unidentified company or companies, or other entity or person."
Citing the concerns of the United States Congress and the Securities and Exchange Commission over potential fraud and market manipulations involving blank check or shell companies, the Wulff Letter stated that promoters and affiliates of blank check or shell companies, as well as transferees of their securities, are "underwriters" with respect to such securities. Accordingly, transactions in these companies' securities by promoters, affiliates or their transferees do not fall within the scope of the Rule 144 "safe harbor" resales for securities that have been beneficially owned for at least one year and that satisfy informational and certain other requirements of the Rule, or the Section 4(1) exemption from registration for resales under the Securities Act, that exempts sales by persons other than "an issuer, underwriter or a dealer." As a result, it is the position of the Securities and Exchange Commission that these securities may be resold by these persons only pursuant to registration under the Securities Act. According to the Wulff Letter, this restriction would continue to apply even after the blank check or shell company completes a merger or acquisition transaction with an operating entity. We take no position as to whether the Securities and Exchange Commission has the authority to abate the exemption from registration under the Securities Act in Section 4(1), which is a statutory exemption for "routine trading transactions; however, Meriwether and Crowther have agreed not to publicly resell their securities (in any private sale, the purchaser would be required to acknowledge the following restrictions) without registration under the Securities Act; or the receipt of a "no action" letter from the Securities and Exchange Commission indicating that registration is not required and that there is an available exemption from registration under the Securities Act for the resale of these securities; or there is a declaratory judgment by a federal or state court indicating that registration is not required for resale of these securities and that there is an available exemption from registration under the Securities Act for the resale of these securities. Meriwether has no current intention to seek any court order respecting the availability of an exemption under the Securities Act to resell his securities. A copy of the Registration Agreement signed by Meriwether with us was filed as an Exhibit to our Registration Statement on Form 10-SB and is incorporated herein by reference. See Part III, Item 13.
These restrictions will also apply to transferees of Meriwether's securities or any securities of persons who may be deemed to be our promoters or "affiliates," too. We believe that this pronouncement will be liberally construed by the Securities and Exchange Commission to promote the concerns set forth in the Wulff Letter. An "affiliate" includes all directors and executive officers of an issuer, along with 10% stockholders, and includes persons controlling, controlled by or under common control of an issuer; a promoter is generally defined as anyone involved in the formation of an issuer, and that may include finder's and others in similar capacities, who introduce acquisition candidates to us.
Meriwether was sole director and executive officer. On May 11, 2007, 73% of Meriwether's shares were acquired by Crowther in a private transaction, pursuant to the so-called "Section 4-1(1/2)" exemption recognized by the Securities and Exchange Commission as an exemption from registration provisions of Section 5 of the Securities Act for private non-issuer resale of "restricted securities" that meet the criteria of sales of securities that are issued pursuant to Section 4(2) of the Securities Act. Crowther is an "accredited investor" as that term is defined under Rule 144, and had access to all material information about our company at the time that this entity had acquired these securities.
Use of Proceeds of Registered Securities
There were no proceeds received during the calendar year ended December 31, 2008, from the sale of registered securities.
Purchases of Equity Securities by Us and Affiliated Purchasers
There have been no purchases of equity securities by us or any affiliated purchasers during the calendar year ended December 31, 2008.
Item 6.
Item 6. Select Financial Data
Not applicable as the Company is a small business issuer.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
We had no revenues during the two years ended December 31, 2008.
We have generated no profit since inception. We had a net loss of ($42,365) for the year ended December 31, 2008, a net loss of ($52,614) for the year ended December 31, 2007 and cumulative losses of ($219,535) since our inception on August 18, 1998. Primarily all of these losses are the result of legal and accounting expenses.
Liquidity
At December 31, 2008, we had no cash resources. During fiscal 2004, contributions were made by the then principal stockholder in the amount of $1,175, with the aggregate amount of $8,026 having been provided through December 31, 2008. In conjunction with the change in ownership in May 2007 the selling principal stockholder assumed the Company's obligations to him of $44,765 and liabilities of $79,743 to third parities. During 2007 and 2008, the present principal stockholder advanced funds to the Company and paid expenses on behalf of the Company in the amount of $59,855 which is outstanding at December 31, 2008. This unsecured non-interest bearing liability is payable on demand.
While the present principal stockholder is not obligated to continue providing funding to the Company, it has advised us that it will continue to do so during the next 12 months until the Company is able to raise debt or equity funds from financial institutions or accredited investors.
Also, during fiscal 2004, we issued 857,418 shares of our common stock for cash in the amount of $2,500.
Other than maintaining its good corporate standing in the State of Nevada, compromising and settling its debts and seeking the acquisition of assets, properties or businesses that may benefit us and our stockholders, we have not had any material business operations during the two most recent calendar years.
Off-Balance Sheet Arrangements
We have no off balance sheet arrangements.
Forward-looking Statements
Statements made in this Annual Report which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and business of our Company, including, without limitation, (i) our ability to raise capital, and (ii) statements preceded by, followed by or that include the words "may", "would", "could", "should", "expects", "projects", "anticipates", "believes", "estimates", "plans", "intends", "targets" or similar expressions.
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, general economic or industry conditions, nationally and/or in the communities in which we may conduct business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, our ability to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our Company's operations, products, services and prices.
Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable because the Company did not have any market risk sensitive instruments during the two years ended December 31, 2008.
Item 8.
Item 8. Financial Statements.
Page
Report of Independent Registered Public Accounting Firm
Balance Sheets -- December 31, 2008 and 2007
Statements of Operations for the years ended December 31, 2008 and 2007 and from inception [Aug. 18, 1998] through December 31,
Statements of Cash Flows for the years ended December 31, 2008 and 2007 and from inception [Aug. 18, 1998] through December 31,
Statements of Stockholders' Equity/Deficit from inception [Aug. 18, 1998] through December 31, 2008
Notes to Financial Statements
22-26
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Microsmart Devices, Inc.
We have audited the accompanying balance sheets of Microsmart Devices, Inc. [a development stage company] as of December 31, 2008 and 2007, and the related statements of operations, stockholders' deficit, and cash flows for the years ended December 31, 2008 and 2007 and for the period from inception [August 18, 1998] through December 31, 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our 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 has determined that it 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 purposes of expressing an opinion on the effectiveness of the Company's internal controls over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Microsmart Devices, Inc. (a development stage company) as of December 31, 2008 and 2007, and the results of their operations and their cash flows for the years ended December 31, 2008 and 2007 and for the period from inception [August 18, 1998] through December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note E to the financial statements, the Company has accumulated losses, no assets, negative working capital, and is still developing its planned principal operations. These factors raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note E. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/S/ MANTYLA MCREYNOLDS LLC
Mantyla McReynolds, LLC
Salt Lake City, Utah
March 18, 2009
Microsmart Devices Inc.
(A Development Stage Company)
Balance Sheets
Microsmart Devices Inc.
(A Development Stage Company)
Statements of Operations For the Years Ended December 31, 2008 and 2007,
and from Inception (Aug. 18, 1998)
through December 31, 2008
Microsmart Devices Inc.
(A Development Stage Company)
Statements of Cash Flows
For the Years Ended December 31, 2008 and 207, and from Inception (Aug. 18, 1998)
through December 31, 2008
Microsmart Devices Inc.
(A Development Stage Company)
Statements of Stockholders' Equity/(Deficit)
From Inception (Aug. 18, 1998) through December 31, 2008
NOTE A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company Background
The Company was incorporated under the laws of the State of Nevada on August 18, 1998 with the name "Design By Robin, Inc." with authorized common stock of 50,000,000 shares at $0.001 par value. On July 5, 2004, the name was changed to "Microsmart Devices, Inc."
The Company was organized to engage in the business of designing, manufacturing and distributing items of women's and girl's apparel. However, during the year 2000, the Company abandoned its activity and became inactive.
The Company is in the development stage and is developing its planned principal operations.
The financial statements of the Company have been prepared in accordance with U. S. generally accepted accounting principles. The following summarizes the more significant of such policies:
Articles of Incorporation
On November 8, 2005, the Articles of Incorporation were amended and restated to authorize 100,000,000 shares of common stock with a par value of $0.001 per share and 10,000,000 shares of preferred stock with a par value of $0.001.
Cash and Cash Equivalents
Cash is comprised of cash on hand or on deposit in banks. The Company has $0 as of December 31, 2008 and 2007.
Property & Equipment
Property and equipment are stated at cost. Depreciation is provided using the straight-line or declining balance method over the useful lives of the related assets. Expenditures for maintenance and repairs are charged to expense as incurred. There are no depreciable assets as of December 31, 2008 and 2007.
Income Taxes
The Company applies Statement of Financial Accounting Standard (SFAS) No. 109, "Accounting For Income Taxes," which requires the asset and liability method of accounting for income taxes. The asset and liability method requires that the current or deferred tax consequences of all events recognized in the financial statements are measured by applying the provisions of enacted tax laws to determine the amount of taxes payable or refundable currently or in future years. (See Note F below).
Effective January 1, 2007, the Company adopted Interpretation No. 48 (FIN No. 48), "Accounting for Uncertainty in Income Taxes." This interpretation requires recognition and measurement of uncertain income tax positions using a "more-likely-than-not" approach. FIN 48 requires the recognition and measurement of uncertain tax positions taken or expected to be taken in a tax return. The Company elected to classify income tax penalties and interest as general and administrative and interest expense, respectively. See Note F Income Taxes for the impact of the adoption of FIN 48.
Net Loss Per Common Share
Net loss per common share is based on the weighted average number of shares outstanding. As of the year ended December 31, 2008 and 2007, there were no potentially dilutive shares.
Revenue Recognition
The Company recognizes revenue when earned, which will be when services are rendered or products are delivered to customers. There has been no revenue since the company abandoned its apparel operations.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with U. S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Impact of New Accounting Standards
In September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value, establishes a framework for measuring fair value, and requires enhanced disclosures about fair value measurements. SFAS 157 requires companies to disclose the fair value of their financial instruments according to a fair value hierarchy as defined in the standard. Additionally, companies are required to provide enhanced disclosure regarding financial instruments in one of the categories, including a reconciliation of the beginning and ending balances separately for each major category of assets and liabilities. In February 2008, the FASB issued FASB Staff Position (FSP) No. FAS 157-2, which delays by one year the effective date of SFAS No. 157 for certain types of non-financial assets and non-financial liabilities. As a result, SFAS 157 was effective for financial statements issued for fiscal years beginning after November 15, 2007, or the Company's fiscal year beginning January 1, 2008, for financial assets and liabilities carried at fair value on a recurring basis, and on January 1, 2009, for non-recurring non-financial assets and liabilities that are recognized or disclosed at fair value. The Company adopted SFAS No. 157 on January 1, 2008 for financial assets and liabilities carried at fair value on a recurring basis, with no material impact on its consolidated financial statements. The Company is currently determining what impact the application of SFAS 157 on January 1, 2009 for non-recurring non-financial assets and liabilities that are recognized or disclosed at fair value will have on its financial statements.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities -- Including an amendment of FASB Statement No. 115 ("SFAS 159"). SFAS 159 allows entities the option to measure eligible financial instruments at fair value as of specified dates. Such election, which may be applied on an instrument by instrument basis, is typically irrevocable once elected. The Company elected not to measure any additional financial assets or liabilities at fair value at the time SFAS 159 was adopted on January 1, 2008. As a result, implementation of SFAS 159 had no impact on the Company's financial statements.
In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations - Revised," that improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. To accomplish that, this statement establishes principles and requirements how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The changes to current practice resulting from the application of SFAS No. 141(R) are effective for financial statements issued for fiscal years beginning after December 15, 2008. The adoption of SFAS No. 141(R) before December 15, 2008 is prohibited. The Company does not expect the adoption of SFAS No. 141(R) to have an effect on its financial statements. This will affect any business combination entered into after January 1, 2009.
In March 2008, the FASB issued SFAS No. 161,"Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB Statement No. 133". SFAS No. 161 gives financial statement users better information about the reporting entity's hedges by providing for qualitative disclosures about the objectives and strategies for using derivatives, quantitative data about the fair value of and gains and losses on derivative contracts, and details of credit-risk-related contingent features in their hedged positions. The standard is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged, but not required. The Company has no derivative instruments so the adoption of SFAS 161 is not expected to have any impact on the Company's financial statements and it does not intend to adopt this standard early.
NOTE B CAPITAL STOCK
During 1998, the Company issued 214,314 shares of common shares for inventory.
During 1999, the Company completed a private placement offering of 85,728 common shares for $20,000.
During 2001, the Company issued 85,728 shares of common shares for reorganization.
During June 2004, the Company issued 857,418 common shares for $2,500, in a private placement, to an officer of the Company.
On July 5, 2004, the Company completed a reverse common stock split of one share for 35 outstanding shares. This Report has been prepared showing post split shares from inception.
During 2006, the Company cancelled 86,716 shares of common stock as a result of the Company's plan and agreement of reorganization as noted in Note C.
On July 10, 2006, the Company effected a three for one forward split by dividend of its outstanding common stock, with all fractional shares being rounded up to the nearest whole share and such a dividend subject to mandatory exchange of certificates. In accordance with the SEC's SAB Topic 4C, all disclosures of common stock outstanding have been stated in post split shares.
NOTE C PLAN AND AGREEMENT OF REORGANIZATION
On May 24, 2001, the Company entered into a plan and agreement of reorganization with Globalnet Technologies, Inc. in which the Company acquired all the outstanding stock of Globalnet, Inc. (subsidiary). On March 30, 2002, the agreement was retroactively rescinded, by mutual agreement between the parties, and the stock of the subsidiary was returned to the previous owners. The stock of the Company issued under the agreement was returned and canceled, except for 86,716 which was canceled on August 8, 2006.
NOTE D CHANGE IN OWNERSHIP
Effective May 11, 2007, Mark L. Meriwether ("Meriwether"), at that time the principal shareholder of the Company, entered into a Stock Purchase Agreement (the "Agreement") with Crowther Holdings Ltd., a Turks and Caicos company ("Crowther"), pursuant to which, among other things, Meriwether agreed to sell to and Crowther agreed to purchase from Meriwether, 848,391 shares of common stock, par value $0.001 per share ("Common Stock"), of the Company owned of record and beneficially by Meriwether (the "Purchased Shares"). Crowther is an "accredited investor" as such term is defined in Rule 501 of Regulation D promulgated by the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Securities Act"). The aggregate purchase price for the Purchased Shares was $750,000, or approximately $.884 per share. The Purchased Shares represent approximately 73.3% of the 1,157,472 issued and outstanding shares of Common Stock. The purchase and sale of the Purchased Shares took place at a closing (the "Closing") held on May 15, 2007. $600,000 of the $750,000 purchase price for the Purchased Shares was paid at the Closing, $50,000 was paid on or prior to July 31, 2007, $50,000 was paid on or before August 31, 2007 and $50,000 was paid on or prior to October 31, 2007.
At the Closing, Meriwether, Crowther, the Company and Hirshfield Law, as Escrow Agent (the "Escrow Agent"), entered into a Share Escrow and Reset Agreement (the "Escrow Agreement"), pursuant to which, among other things: (i) Meriwether delivered to the Escrow Agent at the Closing a certificate evidencing 150,000 shares of Common Stock owned of record and beneficially by Meriwether that were not included in the Purchased Shares; and (ii) Crowther delivered to the Escrow Agent at the Closing a certificate evidencing 150,000 of the Purchased Shares owned or record and beneficially by Crowther. The 150,000 shares of Common Stock delivered to the Escrow Agent by Crowther would have been forfeited to Meriwether if Crowther had failed to pay the $150,000 deferred portion of the purchase price in full. The Escrow Agreement provides that the 300,000 shares of Common Stock delivered to the Escrow Agent by Crowther and Meriwether shall remain in escrow for the earlier of a period of two years commencing on the date of the Closing or when Meriwether Common Stock has been registered with the Commission for resale in an effective registration statement (the "Reset Period"). The Escrow Agreement also provides that if at any time during the Reset Period the Common Stock of the Company shall be split into a smaller number of shares (a "Reverse Stock Split") such that the shares outstanding before the Reverse Stock Split (the "Pre Split Shares") shall be converted into a smaller number of shares outstanding after the Reverse Stock Split (the "Post Split Shares"), Meriwether shall own, after giving effect to the Reverse Stock Split and the delivery of Reset Shares, a number of Post Split Shares equal to the number of Meriwether's Pre Split Shares then held in escrow by the Escrow Agent.
In connection with the Agreement, a change of control was effected. Crowther now owns approximately 73% of the Company's issued and outstanding voting Common Stock following its acquisition of the 848,391 Purchased Shares at the Closing. After the expiration of the 10-day period referred to in Rule 14F-1 promulgated by the Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), Meriwether, at that time the sole director and officer of the Company, resigned as the sole director and officer of the Company after electing Gregory D. Morgan ("Morgan") to fill those positions, the sole beneficial owner of Crowther, to succeed him as the sole director and officer of the Company. Prior to the Closing, Meriwether owned of record and beneficially 998,391 shares of Common Stock of the Company, which represented approximately 86.3% of the outstanding Common Stock. After giving effect to his sale of the Purchased Shares, Meriwether now owns of record and beneficially 150,000 shares of Common Stock of the Company, which represent approximately 1.3% of the outstanding Common Stock of the Company.
Pursuant to the Agreement, Meriwether assumed all liabilities of the Company as of May 15, 2007. The purchase price for the shares was placed in escrow and all liabilities of the company as of May 15, 2007 were paid by the escrow agent from the purchase price on behalf of Meriwether. The liabilities paid by the escrow agent were comprised of legal and accounting fees and stock transfer agent fees that aggregated $124,508.
NOTE E GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company does not have sufficient working capital for its planned activity, and to service its debt, which raises substantial doubt about its ability to continue as a going concern.
The Company's ability to achieve a level of profitable operations and/or additional financing impacts the Company's ability to continue as it is presently organized. Management continues to develop its planned principal operations and is seeking qualified merger candidates. Should management be unsuccessful in its operating activities, the Company may substantially curtail or terminate its operations.
NOTE F ACCOUNTING FOR INCOME TAXES
For income tax reporting purposes, the Company's net operating loss carryforwards of $219,535, which begin expiring in 2018, subject to Section 382 of the Internal Revenue Code, which places limitations on the amount of taxable income which can be offset by net operating loss carryforwards and other tax attributes after a change in control of a loss corporation. As a result there can be no assurance that some or all of the Company's net operating loss carryforwards and other tax attributes will be available to offset future taxable income and associated tax, if any.
The Company has the following carryforwards available at December 31, 2008:
No provision has been made in the financial statements for income taxes because the Company has accumulated losses from operations since inception. Any deferred tax benefit arising from the operating loss carried forward is offset entirely by a valuation allowance since it is currently not likely that the Company will be significantly profitable in the near future to take advantage of the losses. The valuation allowance increased by $6,355 to $32,930 as of December 31, 2008 from $26,575 as of December 31, 2007.
The tax effects of temporary differences that give rise to significant portions of the deferred tax asset at December 31, 2008 are as follows:
Deferred Tax Asset
Deductible Amount
Rate
Tax
Net Operating Loss
Federal (expires throughout 2028)
219,535
15.00%
$ 32,930
Valuation Allowance
(32,930)
Deferred Tax Asset
$ -
Income tax expense differs from amounts computed by applying the statutory Federal rate to pretax income as follows:
Expected Provision / Benefit (based on statutory rates)
$ (6,355)
Effect of:
Increase / (Decrease) in valuation allowance
6,355
Total actual provision
$ -
The Company adopted the provisions of FIN 48 on January 1, 2007. As a result of this adoption, we have not made any adjustments to deferred tax assets or liabilities. We did not identify any material uncertain tax positions of the Company on returns that have been filed or that will be filed. The Company has not had operations and is carrying a large Net Operating Loss as disclosed above. Since it is not thought that this Net Operating Loss will ever produce a tax benefit, even if examined by taxing authorities and disallowed entirely, there would be no effect on the financial statements.
A reconciliation of our unrecognized tax benefits for 2008 is presented in the table below:
Balance as of January 1, 2008
$ 0
Additions based on tax positions related to the current year
-
Additions based on tax positions related to prior year
-
Reductions for tax positions of prior years
-
Reductions due to expiration of statute of limitations
-
Settlements with taxing authorities
-
Balance as of December 31, 2008
$ 0
The Company has filed income tax returns in the US. All years prior to 2005 are closed by expiration of the statute of limitations. The tax year ended December 31, 2005, will close by expiration of the statute of limitations on April 5, 2009. The years ended December 31, 2006, 2007, and 2008 are open for examination.
NOTE G RELATED PARTY PAYABLE
During the year 2008 and 2007, the majority shareholder loaned funds of $42,691 and $17,164, respectively to the Company to cover operating expenses. A balance of $59,855 is outstanding as of December 31, 2008, is unsecured, non-interest bearing, due and payable on demand.
In connection with the May 11, 2007 Stock Purchase Agreement (see Note D), the selling shareholder assumed the outstanding related party liability of $44,765 and liabilities of $79,743 to third parties. The assumed liabilities of $124,508 were credited to Additional Paid in Capital.
NOTE H CONCENTRATIONS
The Company depends significantly on funding from a shareholder to meet its obligations and maintain its filing status. If funds from the shareholder were no longer available, the Company may experience significant adverse affects including the need to cease operations.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
We had no disagreements on accounting and financial disclosures with our accounting firm during the reporting periods covered by this report.
During our two most recent fiscal years and since then, we have not consulted Mantyla McReynolds, LLC, regarding the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on our financial statements or any other financial presentation whatsoever.
Item 9A(T).
Item 9A(T). Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our President and Secretary/Treasurer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our President and Secretary/Treasurer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (ii) accumulated and communicated to our management, including our President and Secretary/Treasurer, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Management's Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes of accounting principles generally accepted in the United States.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
Our management, with the participation of the President and Secretary/Treasurer, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2008. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control - Integrated Framework. Based on this evaluation, our management, with the participation of the President and Secretary/Treasurer, concluded that, as of December 31, 2008, our internal control over financial reporting was effective.
This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.
Changes in internal control over financial reporting
There have been no changes in internal control over financial reporting.
Item 9B.
Item 9B. Other Information.
None.
PART III
Item 10.
Item 10. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act
Identification of Directors and Executive Officers
Gregory D. Morgan, the President, Secretary and Treasurer of the Company is the only current director and executive officer of the Company, having been appointed to those positions in May 2007 by Mark L. Meriwether, the former sole director and executive officer who served in those positions between June 2004 and May 2007. Mr. Morgan will serve until the next annual meeting of the stockholders or until his successors are elected or appointed and qualified, or his prior resignation or termination.
Business Experience
Mark L. Meriwether, age 48. For the past 18 years, his principal occupation has involved providing services to public and private companies in the areas of corporate restructuring and reorganizations, mergers and funding as an independent contractor. He is currently the CEO, Secretary and Treasurer and a director of Oak Ridge Micro-Energy, Inc., a Colorado corporation (OTCBB: OKME), that is engaged in the development of thin-film lithium batteries, and has held other executive positions with Oak Ridge since 2001. Mr. Meriwether resigned in May, 2007.
Gregory D. Morgan, age 44. Since March 2003, he has owned a successful wine bar and bistro for up to 50 covers and acted as a consultant to various companies and private clients with respect to project finance and wholesale insurance and reinsurance. Between 1989 and 2003, he was an independent futures trader of his own funds on Euronext.Liffe (known until 2002 as the London International Financial Futures and Options Exchange).
Mr. Morgan is not a director of any other company which has a class of securities registered pursuant to Section 12 of the Exchange Act, or subject to the requirements of Section 15(d) of the Exchange Act or any company registered as an investment company under the Investment Company Act of 1940, as amended. Officers serve at the discretion of the Board of Directors.
Significant Employees
We have no employees who are not executive officers, but who are expected to make a significant contribution to the Company's business.
Family Relationships
There are no family relationships between our officers and directors.
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 our Company:
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;
was convicted in a criminal proceeding or named subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
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
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.
Compliance with Section 16(a) of the Exchange Act
On April 12, 2006, Meriwether filed with the Securities and Exchange Commission a Form 3, Initial Statement of Beneficial Ownership, disclosing his ownership of 582,927 shares of our common stock.
On October 12, 2006, Meriwether filed with the Securities and Exchange Commission a Form 4, Statement of Changes in Beneficial Ownership, disclosing the acquisition of an additional 128,364 shares of our common stock, for a total ownership of 711,291 shares of our common stock. Meriwether is required to and will file a Form 4 or Form 5 with the Securities and Exchange Commission within 10 days of the filing of this Annual Report that will reflect the three for one dividend effective August 7, 2006, that was subject to a mandatory exchange of stock certificates that resulted in a three for one forward split of our outstanding common stock, along with reporting various gifts of an aggregate of 12,900 shares of our common stock on or about May 9, 2006.
To the best knowledge of our management, and except as indicated above, all required reports of directors, executive officers and 10% stockholders required to be filed under Section 16(a) of the Exchange Act have been filed and no other reports are presently required to be filed.
Code of Ethics
We have adopted a Code of Ethics, and it filed as Exhibit 14 to our Annual Report for the year ended December 31, 2005. See Part III, Item 13.
Nominating Committee
We have not established a Nominating Committee because, due to our lack of operations and the fact that we only have two directors and executive officers, we believe that we are able to effectively manage the issues normally considered by a Nominating Committee. Following the entry into any business or the completion of any acquisition, merger or reorganization, a further review of this issue will no doubt be necessitated and undertaken by new management.
If we do establish a Nominating Committee, we will disclose this change to our procedures in recommending nominees to our board of directors.
Audit Committee
We do not have an Audit Committee; however, we do not believe that the failure to have an Audit Committee is material, based upon our current operations.
Item 11.
Item 11. Executive Compensation
The following table sets forth the aggregate compensation paid by us for services rendered during the periods indicated:
SUMMARY COMPENSATION TABLE
Name and Principal Position
(a)
Year
(b)
Salary
($)
(c)
Bonus
($)
(d)
Stock Awards
($)
(e)
Option Awards
($)
(f)
Non-Equity Incentive Plan Compensation
($)
(g)
Nonqualified Deferred Compensation
($)
(h)
All Other Compensation
($)
(i)
Total
Earnings
($)
(j)
Mark L. Meriwether
CEO, Sec/Treas & Director
Gregory D.
Morgan
CEO,
Sec/Treas
& Director
12/31/07
12/31/06
12/31/05
12/31/04
12/31/08
12/31/07
No cash compensation, deferred compensation or long-term incentive plan awards were issued or granted to our management during the calendar years ended December 31, 2008, or 2007, or to the date hereof. Further, no member of our management has been granted any option or stock appreciation rights; accordingly, no tables relating to such items have been included within this Item.
Outstanding Equity Awards
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
Option Awards
Stock Awards
Name
Number of Securities Underlying Unexercised Options (#) Exercisable
Number of Securities underlying Unexercised Options (#) Unexercisable
Equity Incentive Plan Awards Number of Securities Underlying Unexercised Unearned Options (#)
Option Exercise Price
($)
Option Expiration Date
Number of Shares or Units of Stock That Have Not Vested (#)
Market Value of Shares or Units of Stock That Have Not Vested
($)
Equity Incentive Plan Awards: Number of Unearned Shares, Vested Units or Other Rights That Have Not Vested (#)
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
N/A
Compensation of Directors
DIRECTOR COMPENSATION
Name
Fees Earned or Paid in Cash ($)
Stock Awards ($)
Option Awards ($)
Non-Equity Incentive Plan Compensation ($)
Nonqualified Deferred Compensation Earnings ($)
All Other Compensation ($)
Total ($)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
N/A
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners
The following tables set forth the share holdings of those persons who were principal shareholders of the Company's common stock as of the date of this Annual Report.
Ownership of Principal Shareholders
Title of Class
Name and Address of Beneficial Owner
Amount and Nature of Beneficial Owner
Percent of Class
Common Stock
Gregory D. Morgan
C/O Peter Hirshfield
1035 Park Avenue-Suite 7B
New York, NY 10028
848,391*
73.3%
TOTALS
848,391
73.3%
* These shares represent 848,391 shares in the name of Crowther. Gregory D. Morgan is the sole beneficial owner of Crowther.
Security Ownership of Management
The following table sets forth the share holdings of our directors and executive officers as of December 31, 2008:
Ownership of Officers and Directors
Title of Class
Name and Address of Beneficial Owner
Amount and Nature of Beneficial Owner
Percent of Class
Common Stock
Gregory D. Morgan
C/O Peter Hirshfield
1035 Park Avenue
Suite 7B
New York, NY 10028
848,391*
73.3%
TOTAL
848,391
73.3%
* These shares represent 848,391 shares in the name of Crowther. Gregory D. Morgan is the sole beneficial owner of Crowther.
Changes in Control
There are no present arrangements or pledges of our securities which may result in a change in control of our Company.
Securities Authorized for Issuance under Equity Compensation Plans
Plan Category
Number of Securities to be issued upon exercise of outstanding options, warrants and rights
Weighted-average exercise price of outstanding options, warrants and rights
Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (a)
(a)
(b)
(c)
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Total
Item 13.
Item 13. Certain Relationships and Related Transactions
Transactions with Related Persons
During the year 2008 and 2007, the majority shareholder loaned funds of $42,691 and $17,164, respectively to the Company to cover operating expenses. A balance of $59,855 is outstanding as of December 31, 2008, is unsecured, non-interest bearing, due and payable on demand.
In connection with the May 11, 2007 Stock Purchase Agreement, the selling shareholder assumed the outstanding related party liability of $44,765 and liabilities of $79,743 to third parties. The assumed liabilities of $ 124,508 were credited to Additional Paid in Capital
Other than the above, there were no material transactions, or series of similar transactions, during our last two calendar years, or any currently proposed transactions, or series of similar transactions, to which we or any of our subsidiaries was or is to be a party, in which the amount involved exceeded $60,000 and in which any director, executive officer, any security holder who is known to us to own of record or beneficially more than 5% of any class of our common stock, or any member of the immediate family of any of the foregoing persons, or any promoter had a material interest.
Parents of the Issuer
We have no parents.
Transactions with Promoters and control persons
There were no material transactions, or series of similar transactions, during our Company's last five fiscal years, or any currently proposed transactions, or series of similar transactions, to which we or any of our subsidiaries was or is to be a party, in which the amount involved exceeded $60,000 and in which any promoter or founder of ours or any member of the immediate family of any of the foregoing persons, had an interest.
Item 14.
Item 14. Principal Accounting Fees and Services
The following is a summary of the fees billed to us by our principal accountants during the fiscal years ended December 31, 2008, and 2007:
Fee Category
Audit Fees
$
18,330
$
11,602
Audit-related Fees
Tax Fees
All Other Fees
Total Fees
$
18,330
$
11,602
Audit Fees - Consists of fees for professional services rendered by our principal accountants for the audit of the Company's annual financial statements and review of the financial statements included in our Forms 10-Q or services that are normally provided by our principal accountants in connection with statutory and regulatory filings or engagements.
Audit-related Fees - Consists of fees for assurance and related services by our principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported under "Audit fees."
Tax Fees - Consists of fees for professional services rendered by our principal accountants for tax compliance, tax advice and tax planning.
All Other Fees - Consists of fees for products and services provided by our principal accountants, other than the services reported under "Audit fees," "Audit-related fees," and "Tax fees" above.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
We have not adopted an Audit Committee; therefore, there is no Audit Committee policy in this regard. However, we do not require approval in advance of the performance of professional services to be provided to us by our principal accountant since all services rendered by our principal accountant are performed pursuant to a written engagement letter between us and the principal accountant.
Item 15.
Item 15. Exhibits
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
MICROSMART DEVICES, INC.
Date:
March 31 , 2009
By:
/s/Gregory D. Morgan
Gregory D. Morgan, Chief Executive Officer and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated:
MICROSMART DEVICES, INC.
Date:
March 31 , 2009
By:
/s/Gregory D. Morgan
Gregory D. Morgan, Chief Executive Officer, Chief Financial Officer and Director
Exhibit 31
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Gregory D. Morgan certify that:
1. I have reviewed the Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (the "Report") of Microsmart Devices, Inc. (the "Registrant");
2. Based on my knowledge, the Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the Report;
3. Based on my knowledge, the financial statements, and other financial information included in the Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in the Report;
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e and 15d-15e) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15f and 15d-15f) for the Registrant and I have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which the Report is being prepared;
b) Designed such internal control over financial reporting , or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statement for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in the Report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by the Report based on such evaluation; and
d) Disclosed in the Report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal controls over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of Registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls over financial reporting.
Dated: March 31, 2009
/s/Gregory D. Morgan
Gregory D. Morgan
Chief Executive Officer and Chief Financial Officer
Exhibit 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (the "Report") of Microsmart Devices, Inc. (the "Registrant"), I, Gregory D. Morgan, Chief Executive Officer and Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Registrant.
Dated: March 31, 2009
/s/Gregory D. Morgan
Gregory D. Morgan
Chief Executive Officer and Chief Financial Officer