Item 1.
Business
We are a holding company with one active and three inactive wholly-owned subsidiaries. Our active subsidiary is Internet Associates International, Inc. (“IAI”). IAI is a website hosting company.
We continue to be receptive to possible acquisition candidates, but have not yet been presented with an opportunity worthy of presenting for Board of Director and/or shareholder approval.
Since July 2004, we have not been actively searching out business opportunities, because Universal Equity Holdings LLC, which purchased approximately 24% of our outstanding stock in July 2004, had been unable to transfer of record the shares that it purchased. Since this could have had a material effect on any shareholder vote which might have been required in connection with a business opportunity, we were waiting until this situation was rectified before resuming an active search for business opportunities.
In July 2007, our largest shareholder, Franklin Frank, and certain companies controlled by Mr. Frank, obtained a judgment against Universal Equity Holdings and its principal. Among other things, the judgment gives to Mr. Frank or his designee title to the shares purchased by Universal Equity Holdings. We expected title to those shares to be transferred of record, which would then allow those shares to be voted. To date, the shares have not been transferred. Once the shares are transferred of record, we expect to resume our search for business opportunities.
Competition. The market for internet products and services is highly competitive. There are no substantial barriers to entry in these markets, and the Company expects that competition will continue to intensify. Internet commerce competes for customers and advertisers with other content providers, advertisers and traditional merchants, as well as with thousands of web sites operated by individuals, the government and educational institutions. As a result, we are no longer focused on acquiring e-commerce related businesses.
Employees. We currently have no employees. Our administrative functions are fulfilled through contractual services.
Item 1A.
Item 1A.
Risk Factors
Our revenues have been decreasing. Our operating subsidiary, IAI, is engaged in providing website hosting to a decreasing number of businesses. If we continue to lose customers through attrition and do not actively seek new customers, AIA will continue to experience decreasing revenues .
We expect to continue to incur net losses and negative cash flows for the foreseeable future, and there can be no assurance that we will ever achieve profitability or generate positive cash flows. We expect to incur significant operating expenses as we search for suitable businesses in which to become involved. If our revenues do not grow as expected, or if our actual expenses exceed our budgeted expenses, there could be a material adverse effect on our business, operating results and financial condition. We may need to raise additional funds through the issuance of equity, equity-related or debt securities.
Our business strategy of growth through business combinations leads to unknown and unquantifiable risks. We are attempting to expand our operations and market presence by entering into business combinations, investments, joint ventures or other strategic alliances with third parties. Any such transaction would be accompanied by risks commonly encountered in such transactions, which could include, among others, the difficulty of assimilating the operations, technology and personnel of the combined companies, the potential for disruption of ongoing business, the inability to retain key technical and managerial personnel, the inability of management to maximize our financial and strategic position through the successful integration of acquired businesses, additional expenses associated with amortization of acquired intangible assets, the maintenance of uniform standards, control and policies and the impairment of relationships with existing employees and customers. There can be no assurance that we will be successful in overcoming these risks or any other problems encountered in connection with such business combinations, investments, joint ventures or other strategic alliances.
Our success depends in large part upon the efforts of the few individuals who serve on our Board and as management, none of whom are full time employees. These individuals may not be able to fulfill their responsibilities adequately on a part time basis, and may not remain with us. The loss of the services of any of our directors and officers could hurt our business. In addition, we are dependant upon funding from our largest shareholder to meet expenses.
Our shares are classified as “penny stock,” which will make it more difficult to sell than exchange-traded stock. Our common stock is subject to the Securities and Exchange Commission rule that imposes special sales practice requirements upon broker-dealers that sell such securities to other than established customers or accredited investors. For purposes of the rule, the phrase “accredited investors” means, in general terms, institutions with assets exceeding $5,000,000 or individuals having a net worth in excess of $1,000,000 or having an annual income that exceeds $200,000 (or that, combined with a spouse’s income, exceeds $300,000). For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. Consequently, the rule may affect the ability of purchasers of our securities to buy or sell in any market that may develop.
In addition, the Securities and Exchange Commission has adopted a number of rules to regulate “penny stocks”. A “penny stock” is any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6 and 15g-7 under the Securities and Exchange Act of 1934, as amended. The rules may further affect the ability of owners of our shares to sell their securities in any market that may develop for them. Shareholders should be aware that, according to the Securities and Exchange Commission Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:
·
control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer;
·
manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
·
“boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;
·
excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and
·
the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.
Concentration of ownership may reduce the control by other shareholders. Our largest shareholder owns almost 50% of our voting stock. As a result, other investors in our common stock may not have much influence on corporate decision-making.
Our issuance of additional shares may have the effect of diluting the interest of shareholders. In connection with any acquisition, we may issue additional shares. Any additional issuances of common stock by us from our authorized but unissued shares will have the effect of diluting the percentage interest of existing shareholders.
We do not anticipate paying dividends to common stockholders in the foreseeable future, which makes investment in our stock speculative or risky. We have not paid dividends on our common stock and do not anticipate paying dividends on our common stock in the foreseeable future. The board of directors has sole authority to declare dividends payable to our stockholders. The fact that we have not and do not plan to pay dividends indicates that we must use all of our funds generated by operations for reinvestment in our operating activities.
It is possible that we may make one or more acquisitions in the international market. Any such acquisitions would expose us to political and economic uncertainties, including, among other things, inflation , governmental instability, transportation, tariffs, export controls, government regulation, currency exchange rate fluctuations, foreign exchange restrictions that limit the repatriation of investments and earnings, changes in taxation, hostilities or confiscation of property. Changes related to these matters could have a material adverse effect on the Company.
We may be subject to delays because of intentional, criminal third party intervention. Though we have taken several precautions to prevent any disruptions from terrorist attacks and hackers, we cannot guarantee that our operations are completely invulnerable. A disruption can occur from numerous sources, including damage to the company property, damage to one of our vendors, suppliers or customers, or damages to third parties such that it restricts the flow of commerce. Disruptions could materially adversely affect our revenues.
Item 2.
Item 2.
Properties
Our executive offices are located at 123 NW 13 Street, Suite 30408, Boca Raton, FL 33432, where we lease approximately 700 square feet of office space. We pay rent of approximately $500 per month.
Item 3.
Item 3.
Legal Proceedings
The company is not a party to any legal proceedings involving any claim against the company.
Item 4.
Item 4.
Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote by security holders during 2008.
PART II
Item 5.
Item 5.
Market for Common Equity and Related Stockholder Matters.
Our common stock is traded in the over-the-counter market under the symbol "SFAD". The following table sets forth the high and low bid, as reported by Stockwatch, for our common stock for the calendar periods indicated.
The average of the bid and ask price of our common stock in the over-the-counter market as of the most recent available date, April 1, 2009 was .0005 per share. The above quotations do not include retail mark-ups, mark-downs or commissions and represents prices between dealers and not necessarily actual transactions. The past performance of our securities is not necessarily indicative of future performance.
Holders of Record
As of February 24, 2009, we believe there were approximately 15,000 shareholders of record of our common stock, including beneficial owners holding shares through nominee name.
Dividend Policy
We have never paid cash dividends on our common stock. Payment of dividends will be within the sole discretion of our Board of Directors and will depend, among other factors, upon earnings, capital requirements and the operating and financial condition of the Company. At the present time, our anticipated financial capital requirements are such that we intend to retain any earnings in order to finance the development of our business.
We currently have no securities authorized for issuance under equity compensation plans.
We have not made any sales of unregistered securities during the period covered by this report.
Item 6.
Item 6.
Selected Financial Data. Information not required.
Item 7.
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
CAUTION REGARDING FORWARD-LOOKING INFORMATION
Certain statements contained in this annual filing, including, without limitation, statements containing the words "believes", "anticipates", "expects" and words of similar import, constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
Such factors include, among others, the following: international, national and local general economic and market conditions: demographic changes; the ability of the Company to sustain, manage or forecast its growth; the ability of the Company to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-KSB and investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2008 & 2007
For the years ended December 31, 2008 and 2007, the Company recorded revenues of $8,914 and $12,117 respectively. The decrease from 2007 to 2008 is due to declining revenues from IAI, our operating subsidiary, as a result of competitive pressures. Our operational costs remained level at $13,200 each year. Because our decrease in revenues, we incurred a gross loss of $4,286 in 2008, compared to a gross loss of $1,083 in 2007.
Our sales and general and administrative expenses remained approximately level, at $85,355 in 2008, compared to $84,610 in 2007. As a result, our operating loss for 2008 increased to $89,641 from $85,693 in 2007.
Because our continuing operation is being funded by loans from our largest shareholder, our interest expense has been increasing, to $202,386 in 2008, from $172,091 in 2007. The shareholder has been allowing interest to accrue, foregoing current payment, because of the limited funds available to the company. Our net loss for 2008 was $292,027, compared to $257,784 in 2007.
LIQUIDITY/WORKING CAPITAL
At December 31, 2008, the company had total assets of $6,155, and a working capital deficit of $1,939,927, compared to a working capital deficit of $1,647,900 as of December 31, 2007. The increase in working capital deficit is the result of the losses we incurred in 2008, which were funded by loans from our largest shareholder.
There can be no assurance that our financial condition will improve. We continue to evaluate our options for raising additional working capital, but in order to do so we must increase our base of business operations. Meanwhile, we are dependant upon funding from our largest shareholders to meet expenses.
NET OPERATING LOSS CARRY-FORWARDS
We have net operating loss carry-forwards of approximately $7,400,000 with the latest expiring $292,000, $295,000, $272,000, $236,000, $418,000 at December 31, 2023, 2022, 2021, 2020 and 2019, respectively. The Company has established a one hundred percent (100%) valuation allowance against this deferred tax asset, as the Company has no history of profitable operations.
GOING CONCERN
We are the subject of a "going concern" audit opinion. Such qualification was issued because we have incurred continuing losses from operations. As of December 31, 2008, we had negative working capital of $1,939,927, which raises substantial doubt about our ability to continue as a going concern.
In addition, there is no assurance that we will be able to successfully raise the funds necessary to fund operations through any means available. Further, there is no assurance that we will be able to successfully grow operations even if we are successful in acquiring the funds necessary, which may have a material impact on our financial position and results of operations. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should we be unable to continue as a going concern.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements.
Item 8.
Item 8.
Financial Statements
Financial statements and supplementary data are set forth on pages through.
Item 9.
Item 9.
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
There have been no disagreements with Accountants on Accounting and Financial Disclosure in 2008.
Item 9A.
Item 9A.
Controls and Procedures.
Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2008 (the “Evaluation Date”). This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, and a conclusion on this evaluation. This evaluation was carried out under the supervision and with the participation of our acting Chief Executive Officer, who is also our acting Chief Financial Officer (“our acting CEO/CFO”). Based upon that evaluation, management concluded that our disclosure controls and procedures were effective.
Disclosure controls and procedures are those controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our acting CEO/CFO, to allow timely decisions regarding required disclosure.
We believe that our financial statements contained in our Annual Report on Form 10-KSB for the year ended December 31, 2008 fairly present our financial condition, results of operations and cash flows in all material respects.
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 such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, for the Company.
Internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of its management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect material misstatements. In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.
A material weakness is a significant deficiency, or combination of significant deficiencies, such that there is a reasonable possibility that a material misstatement of financial statements will not be prevented or detected on a timely basis.
Under the supervision and with the participation of our acting CEO/CFO, management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of the Evaluation Date. The evaluation was conducted based on the criteria set forth in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on its evaluation, management concluded that our internal control over financial reporting was effective as of the Evaluation Date.
This annual report does not include an attestation report of our independent public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management's report in this annual report.
Changes in internal control over financial reporting
As of the Evaluation Date, there were no changes in our internal control over financial reporting that occurred during the fiscal year ended December 31, 2008 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the effectiveness of controls and procedures
Our management, including our acting CEO/CFO, does not expect that our controls and procedures will prevent all potential errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
PART III
Item 10.
Item 10.
Directors, Executive Officers and Corporate Governance
The executive officers and directors of the Company are listed below. Each director was appointed for a term of one year and until their successor is duly elected.
Randi Swatt has served as a Director and acting Chief Executive Officer of the Company since August 13, 2004. Ms. Swatt is Chief Operating Officer of Rapid Portal, Inc., a software development company. Ms. Swatt is also owner and operator of several other businesses involved in marketing and customer support.
Bruce E. Taylor has served as a Director since August 2004. From 1996 to 1999, when the company was sold, Mr. Taylor was President of Telesys, Inc., a consultant to telecommunications companies. Since then, Mr. Taylor has been an independent business consultant, primarily to the telecommunications industry.
Glenn Wistey has been a Director since August 2004. We have lost contact with Mr. Wistey and, as a result, we are considering recommending shareholder action to remove him from the Board.
AUDIT COMMITTEE AND CODE OF ETHICS.
We have not formally appointed an audit committee, and the entire Board of Directors currently serves the function of an audit committee. Because of the small number of persons involved in management of the Company, we do not have an audit committee financial expert serving on our Board. We have not yet adopted a code of ethics applicable to our chief executive officer and chief financial officer, or persons performing those functions, because of the small number of persons involved in management of the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Our directors and executive officers, and beneficial owners of more than ten percent of our stock, are required by Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to report to the SEC their transactions in, and beneficial ownership of, our common stock, including any grants of options to purchase common stock.
None of our directors have yet filed with the SEC the Form 3 required of them as a director.
Item 11.
Item 11.
Executive Compensation
The following table sets forth all compensation paid or earned for services rendered to the Company in all capacities during the years ended December 31, 2008, 2007 and 2006, by our acting Chief Executive Officer (the "Named Officers"). No other executive officer received total annual salary, bonus and other compensation in excess of $100,000 in those periods.
Options Granted and Options Exercised During 2008
The Company did not grant any options during the fiscal year ended December 31, 2008. None of the Company's directors or executive officers own any options to purchase shares of the Company's common stock.
Item 12.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth information with respect to the number of shares of the Company's Common Stock that are beneficially owned by (i) each executive officer of the Company, (ii) each director of the Company and (iii) each shareholder of the Company who owns more than 5% of the Company's Common Stock as of December 31, 2008. An asterisk indicates beneficial ownership of less than 1% of the Company's outstanding stock. Except as otherwise indicated, each of the shareholders listed below has voting and investment power over the shares beneficial owned and the address of each beneficial owner is c/o the Company at 123 NW 13 Street, Suite 30408, Boca Raton, FL 33432. As of December 31, 2008, there were issued and outstanding 932,631,602 shares of the Company's common stock.
-------
(1)
Includes 34,000,000 shares held by LVDB, Inc., a corporation controlled by Franklin Frank, Ms. Deutsch's husband, 34,000,000 shares held by Franklin Frank, 225,000,000 shares beneficially owned by Mr. Frank pending transfer to Mr. Frank or an entity designated by him, 4,000,000 shares by Lenore Hardy, Mr. Frank's sister, and 2,000,000 shares owned by Charles Frank, Mr. Frank's brother. Ms. Deutsch disclaims any beneficial interest in the shares held by her husband.
(2)
This information is presented to the best of our knowledge, since we have not been able to contact Mr. Wistey.
Item 13.
Item 13.
Certain Relationships and Related Transactions, and Director Independence.
Franklin Frank and/or entities controlled by him have lent us money from time to time in order to fund our operations. In addition, Mr. Frank and/or affiliates purchased two notes given by us to former officers for loans to us. The total amount we now owe to Mr. Frank and/or affiliates is $1,715,900 as of December 31, 2008. The loans bear interest at 12% per annum and are payable on demand. During 2008, a total of $202,386 of interest was accrued against the loans. This amount was capitalized as an increase in the loan amount as of December 31, 2008.
Under the definition of director independence found in NASD Rule 4200, Bruce Taylor and Glenn Wistey are independent directors.
Item 14.
Item 14.
Principal Accountant Fees and Services.
AUDIT FEES.
The aggregate fees billed for each of the last two fiscal years for professional services rendered by our independent accountant for the audit of our annual financial statements and review of our financial statements included in our Forms 10-Q were $25,000 in 2007 and $25,000 in 2008.
AUDIT-RELATED FEES.
The aggregate fees billed in each of the last two fiscal years for assurance
and related services by our independent accountant that are reasonably related to the performance of the audit or review of our financial statements, and are not reported above, were $25,000 in 2007 and $25,000 in 2008.
TAX FEES.
The aggregate fees billed in each of the last two fiscal years for professional services rendered by our independent accountant for tax compliance, tax advice, and tax planning were $925 in 2007 and $925 in 2008. These services consisted of the preparation of our tax returns.
PART IV
Item 15.
Item 15.
Exhibits, Financial Statement Schedules
Report of Independent Accountants
Consolidated Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Changes in Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
-
Exhibit Index
31.1
Rule 13a-14(a)/15d-14(a) Certification - acting Chief Executive Officer
31.2
Rule 13a-14(a)/15d-14(a) Certification - acting Chief Financial Officer
Section 1350 Certifications
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
SAFE TECHNOLOGIES INTERNATIONAL, INC.
By:
/s/ RANDI SWATT
Randi Swatt,
acting Chief Executive Officer
Date:
April 9, 2009
.In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By:
/s/ RANDI SWATT
Randi Swatt,
Director,
acting Chief Executive Officer and
acting Chief Financial Officer
(principal executive officer
and principal financial officer)
Date:
April 9, 2009
By:
Bruce E. Taylor,
Director
Date:
SAFE TECHNOLOGIES INTERNATIONAL, INC.
FINANCIAL STATEMENTS
December 31, 2008
SAFE TECHNOLOGIES INTERNATIONAL, INC.
December 31, 2008
Page
Financial Statements
Auditor report
Balance Sheets
Statements of Operations
Statement of Stockholders’ Equity (Deficit)
Statements of Cash Flows
Notes to Financial Statements
-
Baum & Company, P.A.
605 Lincoln Road, Suite 210
Miami Beach, FL 33139
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Safe Technologies International Inc.
We have audited the accompanying consolidated balance sheets of Safe Technologies International Inc. as of December 31, 2008 and 2007, and the related statements of operations, stockholders' deficiency and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Safe Technologies International Inc. as of December 31, 2008 and 2007, and the related consolidated statements results of operations, stockholders’ deficiency and cash flows for the years then ended in conformity with United States generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has experienced recurring losses in 2008 and 2007, and since inception. This raises substantial doubts about the Company’s ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Baum & Company PA
Miami Beach, Florida
April 1, 2008
Safe Technologies International, Inc.
Consolidated Balance Sheets
December 31, 2008 and 2007
The accompanying notes are an integral part of the financial statements
Safe Technologies International, Inc.
Consolidated Statements of Operations
For the twelve months ended December 31, 2008 and 2007
The accompanying notes are an integral part of the financial statements
Safe Technologies International, Inc.
Consolidated Statements of Stockholders' Equity (Deficit)
December 31, 2008
The accompanying notes are an integral part of the financial statements
Safe Technologies International, Inc.
Consolidated Statements of Cash Flows
For the twelve months ended December 31, 2008 and 2007
The accompanying notes are an integral part of the financial statements
Safe Technologies International, Inc.
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
The Company was incorporated under the laws of the State of Delaware on May 21, 1987 as Safe Aid Products, Inc. On February 9, 1998, the Company changed its name to Safe Technologies International, Inc. Safe Technologies International, Inc. (Safe Tech) is a holding company providing Internet website hosting on a limited basis.
a) Principles of consolidation-
The consolidated financial statements include the accounts of Safe Technologies International, Inc. and its subsidiaries, Total Micro Computers, Inc., Connect.ad, Inc., Connect.ad Services, Inc. and Internet Associates International, Inc. All material inter-company transactions and balances have been eliminated in the consolidated financial statements.
b) Use of estimates.-
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States. In preparing the financial statements, management is required to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the balance sheets and statements of operations for the years then ended. Actual results may differ from these estimates. Estimates are used when accounting for allowance for bad debts, collectability of accounts receivable, amounts due to service providers, depreciation, litigation contingencies, among others.
c) Revenue recognition.-
Revenues of Safe Technologies International, Inc. are recognized at the time the services are rendered to customers. Services are rendered when the Company’s representatives receive the customer’s requests and completes the customer’s orders. Quarterly hosting fees are charged in advance, and recognized as earned.
d) Net loss per share, basic.-
Net income per share is computed by dividing the net income by the weighted average number of shares outstanding during the period. Net income per share, diluted, is not presented as no potentially dilutive securities are outstanding.
e) Cash equivalents.-
The Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents, accounts receivable and accounts payable are short-term in nature and the net values at which they are recorded are considered to be reasonable estimates of their fair values. The carrying values of notes payable are deemed to be reasonable estimates of their fair values.
f) Concentration risks-
The Company’s sources of revenue and accounts receivable are comprised primarily of customers in the Internet industry. The Company requires no collateral from its customers.
g) Advertising.-
Advertising costs, which are included in selling, general and administrative expenses, are expensed as costs are incurred.
h) Deferred revenue-
Deferred income arises in the normal course of business from advance payments for services.
Safe Technologies International, Inc.
Notes to Consolidated Financial Statements
i) Fixed assets.-
Fixed assets are recorded at cost. Depreciation is computed on the straight-line method, based on the estimated useful lives of the assets of generally five or ten years. Expenditures for maintenance and repairs are charged to operations as incurred. Fixed assets were fully depreciated for the year ended December 31, 2008
j) Intangible assets-
The Company continually evaluates the carrying value of goodwill and other intangible assets to determine whether there are any impairment losses. If indicators of impairment are present in intangible assets used in operations and future cash flows are not expected to be sufficient to recover the assets’ carrying amount, an impairment loss would be charged to expense in the period identified.
(2) Going Concern.-
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company’s financial position and operating results raise substantial doubt about the Company’s ability to continue as a going concern, as reflected by the net loss of $ 292,027 for the year ended December 31, 2008, $ 257,784 for the year ended December 31, 2007, and the total cumulative loss of approximately $9,402,000. The ability of the Company to continue as a going concern is dependent upon developing sales and obtaining additional capital and financing. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The largest shareholder of the Company has been funding the Company’s operations.
(3) Income Taxes.
Deferred income taxes (benefits) are provided for certain income and expenses which are recognized in different periods for tax and financial reporting purposes. The Company had cumulative net operating loss carry-forwards for income tax purposes at December 31 2008 of approximately $ 7,400,000 with the latest expiring $ 292,000, $ 295,000, $ 272,000, $ 236,000, and $ 418,000 at December 31, 2003, 2022, 2021, 2020, and 2019, respectively. The Company has established a 100% valuation allowance against this deferred tax asset, as the Company has no history of profitable operations.
The differences between Federal income tax rates and the effective income tax rates are:
(4) Stockholders’ Equity.
The Company has authorized 999,999,000 shares of $.00001 par value common stock, with 932,631,602 shares issued and outstanding. Rights and privileges of the preferred stock are to be determined by the Board of Directors prior to issuance.
(5) Commitments and Contingencies.-
The Company rents office space in Boca Raton, Florida under a lease that commenced in October 2005. Currently the leases is month to month which expires October 1, 2009. The total rent as of December 31, 2008 was $5,713. Future lease expenses are approximately $ 500 per month in 2009
Safe Technologies International, Inc.
Notes to Consolidated Financial Statements
(6) Notes and Loans Payable-Related Parties
At December 31, 2008 and December 31, 2007, total short-term debt consisted of the following:
Interest expense was $ 202,386 and $172,091 for the year ended December 31, 2008 and 2007. All the balances were unpaid and accrued. The 2007 accrued interest balances have been added to the principle balances as of January 1, 2008.
(7) Recent Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51.” SFAS No. 160 amends ARB 51 to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It also amends certain of ARB 51’s consolidation procedures for consistency with the requirements of SFAS No. 141(R). SFAS No. 160 is effective for fiscal years beginning December 15, 2008. The Company does not expect that this interpretation will have a material impact on its financial statements.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities ("SFAS 161"), requiring disclosures about derivative instruments, and related hedged items. The Company does not believe that application of this FASB would have a material impact on the consolidated financial statements.
In April 2008, FASB Staff Position No. 142-3, Determination of the Useful Life of Intangible Assets (FSP 142-3) was issued. This revises the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets. The Company does not believe that application of this would have a material impact on the consolidated financial statements.