ITEM 1. BUSINESS
Description of Our Business
Overview
We were incorporated in the State of Delaware as of December 9, 2005 as 43010, Inc to engage in any lawful corporate undertaking, including, but not limited to, locating and negotiating with a business entity for combination in the form of a merger, stock-for-stock exchange or stock-for-assets exchange. On October 7, 2008, pursuant to the terms of a stock purchase agreement, Mr. Greg Halpern purchased a total of 100,000 shares of our common stock from Michael Raleigh for an aggregate of $30,000 in cash. The total of 100,000 shares represents 100% of our issued and outstanding common stock at the time of the transfer. As a result, Mr. Halpern became our sole shareholder. As part of the acquisition, and pursuant to the Stock Purchase Agreement, Michael Raleigh, our then President, CEO, CFO, and Chairman resigned from all the positions he held in the company, and Mr. Halpern was appointed as our President, CEO CFO and Chairman. The current business model was developed by Mr. Halpern in September of 2008 and began when he joined the company on October 7, 2008. In October 2008, we became a development stage company focused on creating an Internet search engine and networking web site.
Our website was beta tested until January 2010 at which time it was updated and is now a consumer active site. We currently have several thousand public and private members in our network utilizing the following operational features: Online Operating System, Conversations (combining chat, text and email), Connect with People, List People, Review People, Start New Groups, Communicate with Group Members, View Groups, Join Groups, Interact with Groups, Web (Search Engine), Build and Customize Profile, View Profiles, Media Drive, Web Drive, File Share, File Preview, Private Internal Network, Alerts, Send Press Releases, Review Press Releases, 1column, 2 column, 3 column, 4 column, Invite People and iPhone Safari version. We are working on and expect the following portions of the web site to be operational by mid-April 2010: Shared Desktop, Audio Video Conferencing. Our website domain name is www.SoAct.net. The following are visual images of our network and iPhone interface.
Now that we have a growing membership, affiliate and reseller programs in place with Globe Newswire, and many name brands such as Priceline, Fandango, Staples, Payless and Turbo Tax, our revenue will begin to accrue in April 2010, the Company’s second quarter.
By the 3rd quarter, we plan to begin generating revenue from low membership fees of between $1 and $8 for members who upgrade to file storage size above the current free two gigabyte space provided to all members. We believe there is a sizable audience of people in the world who are actively working to solve problems, expand their reach or grow their business in a spam free and ad free environment. SoAct.Net aims to bring these people together. As evidenced by our growing number of affiliate and reseller programs, we believe we can generate revenue with green, eco-friendly companies who could find potential value in reaching the type of socially conscious consumers and problem solvers that we believe currently use our network and its substantial resources.
We began our operations on October 8, 2008 when we purchased the Form 10 company from the previous owners. Since that date, we have completed financing to raise initial start-up money for the building of our network and to start our operations.
We have also received three loans from Mr. Greg Halpern, in the amount of $9,500, $15,000 or $16,700 on May 11, May 22, and May 26, 2009, respectively. Each of the loans bears an interest at the primate rate. We have entered into three Credit Line Agreements with Greg Halpern. The first two have been used by the Company for $100,000 each and they will mature and expire in 2011. The third Credit Line Agreement issued by Mr. Halpern in March 2010 is for an additional $500,000. All three agreements accrue interest at the prime rate. The prime rate of interest is the rate of interest that major banks charge their most creditworthy customers. For the purposes of this agreement, we shall determine the prime rate by using the prime rate reported by the Wall Street Journal on the date funds are extended to the Company. Based on the current prime rate, it is estimated that the prime rate shall be 3.25% but that may be subject to adjustment based on market factors and the fluctuation of the prime rate. Although we believe that the $200,000 already used and the $500,000 just issued will be sufficient to cover the additional expense arising from maintenance of our regulatory filings with the SEC, and the development of our network, the Company anticipates pursuing additional financing in 2010 to expand the network functionality and begin aggressively marketing the network to new potential members.
The hosting needs of the company are paid in full until June 24, 2010. This leaves only the cost of operations (which is primarily salary and the expense of being public). This equals all salary abated until the company can afford to pay Greg Halpern, its one employee, after all other expenses of the company are paid and there is a surplus.
Our Product
We have developed a social network for individuals, businesses and organizations. Our network helps people find others who have the similar interests and helps them work together in ways that are more productive.
Endorsed by William Shatner as "a ray of hope amidst all the gloom," and by Ed Asner as "the best place to make a difference," So Act Network (OTCBB:SOAN) is recognized by many socially conscious celebrities and experts young and old as the place to pursue and create social change to improve our world. http://soact.net/celebrities_experts.html. In his book "What Are You Waiting For? So Act Already!" Social Media author Jon Hansen calls So Act "The 60 minutes of Social Networks, where you engage, mobilize and empower people into action." Whatever the mission, cause, product, service, program, cure, or solution, So Act was designed to help everyone expand their sphere of influence and crystallize forward thinking into positive action on a larger scale, while harmoniously merging economic and socially conscious goals. So Act Network membership is free to everyone. To make money the Company provides partnerships, affiliate programs and profit-sharing opportunities for companies and individuals seeking to increase their foothold in the Social Networking space and increase business and customers. The Company recently added an Insurance Network Group -- Cutter and Company, a Traveler Network Group -- Priceline and many retail brands including GoDaddy, Staples, Fandango, Payless Shoes and Turbo Tax. The Company is in development of others for investing, real estate, medical and legal, with plans to eventually have social networks or affiliate groups for most categories of products and services that will offer greater opportunities and benefits for its members.
The Company’s technologies provide a global social network where its members are able to build Communities of Purpose, and accomplish and promote all of their important goals without being subjected to spam or ads, and without having personal information used by marketers. The Network's communication platform improves on the social networking theme by providing businesses and individuals with project building tools, alerting, and secured network file sharing and previewing, all in a personalized, private format that crosses global boundaries to connect like-minded individuals, while allowing an unlimited number of members to simultaneously participate in small, or large, online meetings. The Network search engine includes a "top 10" filtered results, and the press club allows members to share their important news with their followers and the media at the most economically available rates. The So Act Network has a zero-spam communication tool called “Conversations” that combines email, texting and real-time chat with security and archiving in a format that cross-pollinates people and their interests. Conversations empower and mobilize So Act members into action. By cloning the “Conversation” tool, a user can have as many simultaneous conversations going at one time as he or she wants. For example, when such user is having a conference meeting with several likeminded people, such user uses the “Clone” tool to create additional conversation boxes to chat with other friends or family members. The “People” tool archives all the people a user knows, meets and interacts with on the So Act Network. The “Group” tool allows likeminded people to form unique groups focused on specific problems or to promote their businesses, products, services, causes.
Marketing
We currently draw our customer bases from two groups of audiences. The first group is categorized as socially conscious innovators, inventors, scientists, explorers, investors and creative thinkers developing legitimate world-improving solutions. The second group is categorized as socially conscious, social investing, social business, green and eco-friendly companies who can advertise their existing solutions to targeted consumers within our network.
Competition
We are not aware of any other specific web-based companies that closely resemble the business model and features we are developing. Therefore, we see ourselves in a niche market that has very few competitors.
There are other internet search engines and networking sites but they are all much larger and cater to the broader market. We are strictly focused on the person who wants to develop a customized environment free from spam or ads that allows our members to create, build and grow whatever is important to them. Most of our members currently use our Network in addition to the other networks they frequent. Therefore, we do not expect to directly compete with them.
Intellectual Property
We received Registered Trademark No. 3,626,525 on May 26, 2009 from the U.S. Patent and Trademark Office, for the name So Act which is now reflected at our website SoAct.net in the form of a circled R and throughout any of our web based marketing materials whereever our logo appears. Our Search Engine and Network platform contain certain trade secrets, however, the Company has no specific state or federal protections for its trade secrets. To the best of our ability, we intend to keep certain proprietary aspects of our technology as trade secrets that we believe are unique and may provide future market advantages. At this time, we do not plan to seek any other specific Intellectual Property protections. Our intellectual property is not being relied on as a protection against competition.
At this time, we do seek to obtain copyright protection on our name and certain other parts of our website. However, we do not expect to seek patents for our platform or technologies.
Research and Development
Over the last two fiscal years, we have spent approximately 1512 hours on the development of our website, network and business plan and have contributed over 3021 hours to the development of the network platform. We have not spent any time on any research, except for the time we spend showing individuals our Network and asking for feedback which consists of approximately 8 hours per week.
Employees
Greg Halpern is our sole employee. We do not have any other full- or part-time employees although the programming team which is full time through our relationship with Gigablast consists of five individuals. Until such time as we begin generating revenues in the second quarter, we do not anticipate a need to hire additional employees.
We are a publicly reporting company under the Exchange Act and are required to file periodic reports with the Securities and Exchange Commission. The public may read and copy any materials you file with the Commission at the SEC's Public Reference Room at 100 F Street, NE., Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Commission and state the address of that site (http://www.sec.gov). In addition, you can obtain all of the current filings at our internet website at www.soact.net.
Milestones for the Next Twelve Months
Over the next twelve months, we expect to grow our member database substantially and generating significant new revenue. We are continually improving our Network and focusing on marketing what we offer to the world. We expect our financial requirements to increase with those additional expenses funded by loans from Mr. Halpern based on existing lines of credit and we are also considering various private funding opportunities.
In the event that we are not able to obtain additional funding or Mr. Halpern either fails to extend us more financing, declines to loan additional cash, declines to fund the line of credit, declines to defer his salary payments, or seeks repayment of his existing loans, we will no longer be able to continue to operate and will have to cease operations unless we begin to generate sufficient revenue to cover all our costs. Over the next twelve months, our focus is to: (i) upgrade the website to provide more sales opportunities; (ii) generate more revenue potential through adding more affiliate programs of known brands and as a reseller; and (iii) and work to increase the network to one million members.
ITEM 1A.
ITEM 1A. RISK FACTORS
Not applicable for smaller reporting companies.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable for smaller reporting companies.
ITEM 2.
ITEM 2. DESCRIPTION OF PROPERTY.
Office Arrangements and Operational Activities
We do not have a principal business office. We are renting our Texas location, located at 10685-B Hazelcrest Drive, #6572, Houston, TX 77043 from a business service corporation on a month-to-month basis. The office provides us with general office services such as mail, phone, fax, shipping and receiving capabilities. We do not have a lease with the business service corporation. We plan to eventually move our operation to a permanent office in Texas or New Mexico, However, to date, we have not actively searched for an office location. The day-to-day operations are conducted from a mobile RV office which Mr. Halpern utilizes at his own expense to travel the continental United States following the activities of various solution makers and opportunities that could contribute to the expansion of the business. When Mr. Halpern is traveling in his RV, there is no one who is occupying or working out of the principal business office in Houston, Texas.
Our network platform was beta launched on June 30, 2009 and was built at and located in Albuquerque, New Mexico. Gigablast, our third party hosting vendor located in Albuquerque, New Mexico, is responsible for developing and maintaining our Network pursuant to the previously filed Professional Service Agreement. The platform is supported by minimal hardware for 100,000 servers with databases scalable to 200 billion web pages which represents Gigablast total capacity. We currently have no obligation to the New Mexico location to lease servers or space. Upon completion of the development of our platform, we will pay hosting for service to all users of our network on a bandwidth cost basis commensurate with market rates.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
To the best of our knowledge, there are no known or pending litigation proceedings against us.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On October 7, 2008, in accordance with the majority vote of our shareholders in lieu of a special meeting, we appointed Greg Halpern as the chairman of our Board of Directors.
On October 15, 2008, in accordance with the majority vote of our shareholders in lieu of a special meeting, we changed our company name from 43010, Inc. to So Act Network, Inc. by filing an amendment to the Articles of Incorporation with the Delaware Secretary of State. The amendment was attached as Exhibit 3.1 to the current report on Form 8-K filed on October 17, 2008 and is incorporated herewith by reference.
On January 27, 2009, in accordance with a majority vote of our shareholders in lieu of a special meeting, we amended the Articles of Incorporation to provide for an increase in its authorized share capital. The authorized capital stock increased to 250,000,000 common shares at a par value of $0.01 per share, and 10,000,000 preferred shares at a par value of $0.001with class and series designations, voting rights, and relative rights and preferences to be determined by the Board of Directors of the Company from time to time.
PART II
ITEM 5.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market Information
Our shares of common stock are traded on the OTC Bulletin Board under the symbol SOAN.
Holders
As of March 30, 2010, in accordance with our transfer agent records, we had 76 record holders of our Common Stock.
Dividends
To date, we have not declared or paid any dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock, when issued pursuant to this offering. Although we intend to retain our earnings, if any, to finance the exploration and growth of our business, our Board of Directors will have the discretion to declare and pay dividends in the future.
Payment of dividends in the future will depend upon our earnings, capital requirements, and other factors, which our Board of Directors may deem relevant.
Stock Option Grants
To date, we have not granted any stock options.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
Not applicable.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.
Overview
We were incorporated in the State of Delaware as of December 9, 2005 as 43010, Inc to engage in any lawful corporate undertaking, including, but not limited to, locating and negotiating with a business entity for combination in the form of a merger, stock-for-stock exchange or stock-for-assets exchange. On October 7, 2008, pursuant to the terms of a stock purchase agreement, Mr. Greg Halpern purchased a total of 100,000 shares of our common stock from Michael Raleigh for an aggregate of $30,000 in cash. The total of 100,000 shares represents 100% of our issued and outstanding common stock at the time of the transfer. As a result, Mr. Halpern became our sole shareholder. As part of the acquisition, and pursuant to the Stock Purchase Agreement, Michael Raleigh, our then President, CEO, CFO, and Chairman resigned from all the positions he held in the company, and Mr. Halpern was appointed as our President, CEO CFO and Chairman. The current business model was developed by Mr. Halpern in September of 2008 and began when he joined the company on October 7, 2008. In October 2008, we became a development stage company focused on creating an Internet search engine and networking web site.
Our website was beta tested until January 2010 at which time it was updated and is now a consumer active site. We currently have several thousand public and private members in our network utilizing the following operational features: Online Operating System, Conversations (combining chat, text and email), Connect with People, List People, Review People, Start New Groups, Communicate with Group Members, View Groups, Join Groups, Interact with Groups, Web (Search Engine), Build and Customize Profile, View Profiles, Media Drive, Web Drive, File Share, File Preview, Private Internal Network, Alerts, Send Press Releases, Review Press Releases, 1column, 2 column, 3 column, 4 column, Invite People and iPhone Safari version. We are working on and expect the following portions of the web site to be operational by mid-April 2010: Shared Desktop, Audio Video Conferencing. Our website domain name is www.SoAct.net.
Now that we have a growing membership, affiliate and reseller programs in place with Globe Newswire, and many name brands such as Priceline, Fandango, Staples, Payless and Turbo Tax revenue will begin to accrue in April 2010, the Company’s second quarter.
By the 3rd quarter we plan to begin generating revenue from low membership fees of between $1 and $8 for members who upgrade to file storage size above the current free two gigabyte space provided to all members. We believe there is a sizable audience of people in the world who are actively working to solve problems, expand their reach or grow their business in a spam free and ad free environment. SoAct.Net aims to bring these people together. As evidenced by our growing number of affiliate and reseller programs, we believe we can generate revenue with green, eco-friendly companies who could find potential value in reaching the type of socially conscious consumers and problem solvers that we feel currently use our network and its substantial resources.
Plan of Operation
We began our operations on October 8, 2008 when we purchased the Form 10 Company from the previous owners. Since that date, we have completed a financing to raise initial start-up money for the building of our network and to start our operations.
We have also received three loans from Mr. Greg Halpern, in the amount of $9,500, $15,000 or $16,700 on May 11, May 22, and May 26, 2009, respectively. Each of the loans bears an interest at the primate rate. We have entered into three Credit Line Agreements with Greg Halpern. The first two have been used by the Company for $100,000 each and they will mature and expire in 2011. The third Credit Line Agreement issued by Mr. Halpern in March 2010 is for an additional $500,000. All three agreements accrue interest at the prime rate. The prime rate of interest is the rate of interest that major banks charge their most creditworthy customers. For the purposes of this agreement, we shall determine the prime rate by using the prime rate reported by the Wall Street Journal on the date funds are extended to the Company. Based on the current prime rate, it is estimated that the prime rate shall be 3.25% but that may be subject to adjustment based on market factors and the fluctuation of the prime rate. Although we believe that the $200,000 already used and the $500,000 just issued will be sufficient to cover the additional expense arising from maintenance of our regulatory filings with the SEC, and the development of our network, the Company anticipates pursuing additional financing in 2010 to expand the network functionality and begin aggressively marketing the network to new potential members.
The hosting needs of the company are paid in full until June 24, 2010. This leaves only the cost of operations (which is primarily salary and the expense of being public). This equals all salary abated until the company can afford to pay Greg Halpern, its one employee, after all other expenses of the company are paid and there is a surplus.
Over the next twelve months, we expect to grow our member database substantially and generating significant new revenue. We are continually improving our Network and focusing on marketing what we offer to the world. We expect our financial requirements to increase with those additional expenses funded by loans from Mr. Halpern based on existing lines of credit and we are also considering various private funding opportunities.
In the event that we are not able to obtain additional funding or Mr. Halpern either fails to extend us more financing, declines to loan additional cash, declines to fund the line of credit, declines to defer his salary payments, or seeks repayment of his existing loans, we will no longer be able to continue to operate and will have to cease operations unless we begin to generate sufficient revenue to cover all our costs. Over the next twelve months, our focus is to: (i) upgrade the website to provide more sales opportunities; (ii) generate more revenue potential through adding more affiliate programs of known brands and as a reseller; and (iii) and work to increase the network to one million members.
Results of Operations
The following tables set forth key components of our results of operations for the periods indicated, in dollars, and key components of our revenue for the period indicated, in dollars.
For the Fiscal Year Ended December 31, 2009 and for the Fiscal Year Ended December 31, 2008
General and Administrative Expenses: Our general and administrative expenses were $85,842 for the fiscal year of 2009 and $62,210 for the fiscal year of 2008, representing an increase of $23,632 or approximately 38%, as a result of our expenses on advertising which include the cost of public relations activities, and other expenses associated with the operation of the company.
Endorsement Fees: Our endorsement fees were $1,534,882 for the fiscal year of 2009 and $0 for fiscal year 2008, representing an increase of $1,534,882 as a result of the expenses associated with having high profile individuals promote and market our website.
Consulting Fees: Our consulting fees were $287,111 for the fiscal year of 2009 and $0 for fiscal year 2008, representing an increase of $287,111 as a result of the expenses associated with the additional consulting, promotional and marketing services.
Professional Fees: Our professional fees were $87,866 for the fiscal year of 2009 and $11,325 for fiscal year 2008, representing an increase of $76,541, or approximately 676% as a result of the expenses associated with the preparation of our financial statements and regulatory filings required for publicly traded companies.
Website Development: Our website development expenses were $91,854 for the fiscal year of 2009 and $0 for fiscal year 2008, representing an increase of $91,854 as a result of expenses associated with continuous improvements and enhancements made to our website throughout the fiscal year.
Compensation: Our compensation expenses were $216,000 for the fiscal year of 2009 and $43,549 for the fiscal year 2008, representing an increase of $172,451 as a result of our expensing of monthly compensation to Mr. Greg Halpern, our President and CEO, pursuant to an employment agreement which we entered into with Mr. Greg Halpern on October 13, 2008. A copy of the employment agreement was attached as Exhibit 10.1 to the Form 8-K filed on October 17, 2008.
Net Loss: Our net loss for the fiscal year of 2009 was $2,298,552, compared to $117,115 for fiscal year of 2008. The increase in net loss was the result of the substantial increase in our operating expenses.
Liquidity and Capital Resources
We are in the development state with no revenue and have an accumulated deficit of $2,555,372 for the period from December 9, 2005 (inception) to December 31, 2009, and have negative cash flow from operations of $177,428 from inception.
Our financial statements have been presented on the basis that it is a going concern, which contemplates the realization of revenues from our subscriber base and the satisfaction of liabilities in the normal course of business. We have incurred losses from inception. These factors raise substantial doubt about our ability to continue as a going concern.
From our inception through December 31, 2009, our primary source of funds has been the proceeds of private offerings of our common stock and loans from stockholders. Our need to obtain capital from outside investors is expected to continue until we are able to achieve profitable operations, if ever. There is no assurance that management will be successful in fulfilling all or any elements of its plans.
We have received three loans from Mr. Greg Halpern, in the amount of $9,500, $15,000 or $16,700 on May 11, May 22, and May 26, 2009, respectively. During the year ended December 31, 2009, the Company repaid $1,500 in principal to the principal stockholder. Each of these loans are due upon demand and accrue interest at the prime rate. The prime rate of interest is the rate of interest that major banks charge their most creditworthy customers. For the purposes of this agreement, we shall determine the prime rate by using the prime rate reported by the Wall Street Journal on the date funds are extended to the Company. Based on the current prime rate, it is estimated that the prime rate shall be 3.25% but that may be subject to adjustment based on market factors and the fluctuation of the prime rate.
For the fiscal year ended December 31, 2009, we received $41,200 from Mr. Greg Halpern, our principal shareholder. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and due on demand. As of December 31, 2009, we owed $39,700 in principal and $495 in accrued interest.
For the fiscal year ended December 31, 2009, we received $119,500 from Mr. Greg Halpern, our principal shareholder, by way of two lines of credits. Pursuant to the lines of credit agreements, the lines of credits bear an annual interest rate of 3.25% and are due on May 29, 2011 and November 11, 2011. As of December 31, 2009, we still owe $119,500 in principal and accrued interest of $1,176.
We have entered into an Amendment to Gigablast Professional Services Agreement, pursuant to which, Gigablast agrees to reduce our outstanding balance from $34,325.00 to $17,162.50, which represents a 50% discount to the fees arising from the professional services provided by Gigablast in connection with developing the So Act Search Engine and So Act Network and reduce their hourly rate of labor for further development of the So Act Network from $150 per hour to $75 per hour. For the aforementioned considerations received, we grant Gigablast the right to use, for any purpose other than in the field of social action network, all work or intellectual property that Gigablast has developed for the Company under the Gigablast Professional Services Agreement.
However, additional expenses may arise from the maintenance of our regulatory filings and responsibilities which include legal, accounting and electronic filing services. It is anticipated that the cost to maintain these activities will be no less than $76,000 and no more than $108,000. We have entered into a Credit Line Agreement and Line of Credit Note with Greg Halpern who has agreed to establish a revolving line of credit for us with a maximum amount of $100,000 that will mature and expire on November 10, 2011. The Credit Line Agreement shall accrue interest at the prime rate. The prime rate of interest is the rate of interest that major banks charge their most creditworthy customers. For the purposes of this agreement, we shall determine the prime rate by using the prime rate reported by the Wall Street Journal on the date funds are extended to the Company. Based on the current prime rate, it is estimated that the prime rate shall be 3.25% but that may be subject to adjustment based on market factors and the fluctuation of the prime rate.
Recent Accounting Pronouncements
In June 2009, the FASB issued ASC 105 Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles. The FASB Accounting Standards Codification TM (the “Codification”) has become the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with Generally Accepted Accounting Principles (“GAAP”). All existing accounting standard documents are superseded by the Codification and any accounting literature not included in the Codification will not be authoritative. Rules and interpretive releases of the SEC issued under the authority of federal securities laws, however, will continue to be the source of authoritative generally accepted accounting principles for SEC registrants. Effective September 30, 2009, all references made to GAAP in our financial statements will include references to the new Codification. The Codification does not change or alter existing GAAP and, therefore, will not have an impact on our financial position, results of operations or cash flows.
In June 2009, the FASB issued changes to the consolidation guidance applicable to a variable interest entity (VIE). FASB ASC Topic 810 (“ASC 810), "Consolidation," amends the guidance governing the determination of whether an enterprise is the primary beneficiary of a VIE, and is, therefore, required to consolidate an entity, by requiring a qualitative analysis rather than a quantitative analysis. The qualitative analysis will include, among other things, consideration of who has the power to direct the activities of the entity that most significantly impact the entity's economic performance and who has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. This standard also requires continuous reassessments of whether an enterprise is the primary beneficiary of a VIE. ASC 810 also requires enhanced disclosures about an enterprise's involvement with a VIE. ASC 810 is effective as of the beginning of interim and annual reporting periods that begin after November 15, 2009. This will not have an impact on the Company’s financial position, results of operations or cash flows.
In June 2009, the FASB issued Financial Accounting Standards Codification No. 860 - (“ASC 860”) Transfers and Servicing. ASC No. 860 improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor's continuing involvement, if any, in transferred financial assets. ASC 860 is effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. The Company is evaluating the impact the adoption of ASC 860 will have on its financial statements.
Critical Accounting Policies and Estimates
Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to
GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
Use of Estimates: In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates.
Revenue Recognition: Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is assured. We had no revenue for the twelve months ended December 31, 2009 and 2008, respectively.
Stock-Based Compensation:
In December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation - Stock Compensation. Under FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively.
Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 718. FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees defines the measurement date and recognition period for such instruments. In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are subject to certain market risks, including changes in interest rates and currency exchange rates. We have not undertaken any specific actions to limit those exposures.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
F-
ALAN R. SWIFT, CPA, P.A.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of: So Act Network, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheets of So Act Network, Inc. (A Development Stage Company) as of December 31, 2009 and 2008 and the related statements of operations, changes in stockholders' deficiency and cash flows for the years ended December 31, 2009 and 2008 and for the period from December 9, 2005(inception) to December 31, 2009. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its inter nal control over financial reporting. Our audit included consideration or internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits 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 So Act Network, inc. (.A Development Stage Company) as of December 31, 2009 and 2008 and the results of its operations and its cash flows for the years ended December 31, 2009 and 2008 and for the period December 9, 2005 (inception) through to December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company is in the development stage with no operations, has an accumulated deficit of $2,555,372 for the period from December 9, 2005 (Inception) to December 31. 2009, and has a negative cash flow from operations of $177,4128 from inception. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans concerning these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Alan R. Swift CPA, P.A.
Alan R. Swift, CPA, P.A.
Certified Public Accountant and Consultant
Palm Beach Gardens, Florida
March 15, 2010
800 VILLAGE SQUARE CROSSING, SUITE 118, PALM BEACH GARDENS, FL 33410
PHONE (561) 656-0818 FAX (561) 658-0245
www.aswiftcpa.com
See accompanying notes to financial statements.
See accompanying notes to financial statements.
So Act Network, Inc.
(A Development Stage Company)
Statement of Changes in Stockholders' Deficiency
For the Period from December 9, 2005 (Inception) to December 31, 2009
See accompanying notes to financial statements.
See accompanying notes to financial statements.
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009 AND 2008
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
(A) Organization
So Act Network, Inc. Inc. (f/k/a 43010, Inc.) (the “Company”) was incorporated in Delaware on December 9, 2005. The Company is currently in the development stage and plans to create search technologies within an online networking platform.
On October 15, 2008 the Company changed its name to So Act Network, Inc.
(B) Use of Estimates
In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates.
(C) Cash and Cash Equivalents
For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.
(D) Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is provided using the straight-line method over the estimated useful life of three to five years.
(E) Research and Development
The Company has adopted the provisions of FASB Accounting Standards Codification No. 350, Intangibles - Goodwill & Other. Costs incurred in the planning stage of a website are expensed as research and development while costs incurred in the development stage are capitalized and amortized over the life of the asset, estimated to be three years. Expenses subsequent to the launch have been expensed as website development expenses.
(F) Revenue Recognition
The Company recognized revenue on arrangements in accordance with FASB Codification Topic 605, “Revenue Recognition” (“ASC Topic 605”). Under ASC Topic 605, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009 AND 2008
(G) Advertising Costs
Advertising costs are expensed as incurred and include the costs of public relations activities. These costs are included in consulting and general and administrative expenses and totaled $8,731and $867 for the years ended December 31, 2009 and 2008, respectively.
(H) Identifiable Intangible Assets
As of December 31, 2009 and 2008, $275 and $275, respectively of costs related to registering a trademark has been capitalized. It has been determined that the trademark has an indefinite useful life and not subject to amortization. However, the trademark will be reviewed for impairment annually or more frequently if impairment indicators arise.
(I) Loss Per Share
In accordance with accounting guidance now codified as FASB ASC Topic 260, “Earnings per Share,” Basic earnings per share (“EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive. Because of the Company’s net losses, the effects of stock warrants would be anti-dilutive and accordingly, is excluded from the computation of earnings per share. The number of such warrants excluded from the computations of diluted loss per share totaled 500,000 in 2009 and 0 in 2008.
(J) Income Taxes
The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”)Income Taxes. Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009 AND 2008
The net deferred tax liability in the accompanying balance sheets includes the following amounts of deferred tax assets and liabilities:
The provision for income taxes has been computed as follows:
The valuation allowance was established to reduce the deferred tax asset to the amount that will more likely than not be realized. This is necessary due to the Company’s continued operating losses and the uncertainty of the Company’s ability to utilize all of the net operating loss carryforwards before they will expire through the year 2029 and 2008, respectively.
The net change in the valuation allowance for the year ended December 31, 2009 and 2008 was an increase of $176,666 and $22,820, respectively.
The components of income tax expense related to continuing operations are as follows:
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009 AND 2008
(K) Business Segments
The Company operates in one segment and therefore segment information is not presented.
(L) Recent Accounting Pronouncements
In June 2009, the FASB issued ASC 105 Accounting Standards Codification TM and the Hierarchy of Generally Accepted Accounting Principles. The FASB Accounting Standards Codification TM (the “Codification”) has become the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with Generally Accepted Accounting Principles (“GAAP”). All existing accounting standard documents are superseded by the Codification and any accounting literature not included in the Codification will not be authoritative. Rules and interpretive releases of the SEC issued under the authority of federal securities laws, however, will continue to be the source of authoritative generally accepted accounting principles for SEC registrants. Effective September 30, 2009, all references made to GAAP in our financial statements will include references to the new Codification. The Codification does not change or alter existing GAAP and, therefore, will not have an impact on our financial position, results of operations or cash flows.
In June 2009, the FASB issued changes to the consolidation guidance applicable to a variable interest entity (VIE). FASB ASC Topic 810 (“ASC 810), "Consolidation," amends the guidance governing the determination of whether an enterprise is the primary beneficiary of a VIE, and is, therefore, required to consolidate an entity, by requiring a qualitative analysis rather than a quantitative analysis. The qualitative analysis will include, among other things, consideration of who has the power to direct the activities of the entity that most significantly impact the entity's economic performance and who has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. This standard also requires continuous reassessments of whether an enterprise is the primary beneficiary of a VIE. ASC 810 also requires enhanced disclosures about an enterprise's involvement with a VIE. ASC 810 is effective as of the beginning of interim and annual reporting periods that begin after November 15, 2009. This will not have an impact on the Company’s financial position, results of operations or cash flows.
In June 2009, the FASB issued Financial Accounting Standards Codification No. 860 - (“ASC 860”) Transfers and Servicing. ASC No. 860 improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor's continuing involvement, if any, in transferred financial assets. ASC 860 is effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. The Company is evaluating the impact the adoption of ASC 860 will have on its financial statements.
(M) Fair Value of Financial Instruments
The carrying amounts on the Company’s financial instruments including accounts payable accrued expenses, and stockholder loans, approximate fair value due to the relatively short period to maturity for this instrument.
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009 AND 2008
(N) Stock-Based Compensation
In December 2004, the FASB issued FASB Accounting Standards Codification No. 718, Compensation - Stock Compensation. Under FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this statement prospectively.
Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 718. FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees defines the measurement date and recognition period for such instruments. In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.
(O) Reclassification
Certain amounts from prior periods have been reclassified to conform to the current period presentation.
NOTE 2
GOING CONCERN
As reflected in the accompanying financial statements, the Company is in the development stage with no operations, has an accumulated deficit of $2,555,372 for the period from December 9, 2005 (inception) to December 31, 2009, and has negative cash flow from operations of $177,428 from inception. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009 AND 2008
Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.
NOTE 3
NOTE PAYABLE - PRINCIPAL STOCKHOLDER
On May 26, 2009 the Company received $16,700 from a principal stockholder. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 8).
On May 22, 2009 the Company received $15,000 from a principal stockholder. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 8).
On May 11, 2009 the Company received $9,500 from a principal stockholder. During the year ended December 31. 2009, the Company repaid $1,500 in principal to the principal stockholder. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 8).
For the year ended December 31, 2009, the Company owes $39,700 in principal and $495 of accrued interest to the principal stockholder related to these principal stockholder loans (See Note 8).
For the year ended December 31, 2008 the Company received $18,803 from a principal stockholder. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and due on demand. As of December 31, 2008, the Company still owes $3,803 in principal to the principal stockholder and accrued interest of $31. For the year ended December 31, 2009, the principal portion of this principal stockholder loan balance was repaid and the Company still owes accrued interest of $31 (See Note 8).
NOTE 4
LINE OF CREDIT - PRINCIPAL STOCKHOLDER
On November 10, 2009, the Company entered into a two year line of credit agreement with the principal stockholder in the amount of $100,000. The line of credit carries an interest rate of 3.25%. As of December 31, 2009, the principal stockholder has advanced $19,500 to the Company under this line of credit agreement (See Note 8).
On May 28, 2009, the Company entered into a two year line of credit agreement with a principal stockholder in the amount of $100,000. The line of credit carries an interest rate of 3.25%. For the year ended December 31, 2009, the principal stockholder advanced the Company $100,000 under the terms of the line of credit agreement (See Note 8).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009 AND 2008
For the year ended December 31, 2009 the Company owes $1,176 of accrued interest on the lines of credit (See Note 8).
NOTE 5
PROPERTY AND EQUIPMENT
At December 31, 2009 and 2008, respectively, property and equipment is as follows:
Depreciation/amortization expense for year ended December 31, 2009 and 2008 was $13,058 and $127, respectively.
NOTE 6
STOCKHOLDERS’ DEFICIENCY
(A) Common Stock Issued for Cash
On December 31, 2005 the Company issued 100,000 shares of common stock for cash of $100 in exchange for acceptance of the incorporation expenses for the Company ($0.001/share). As a result of the forward split, the 100,000 shares were increased to 400,000 shares ($0.00025/share) (See Note 6(D)).
For the year ended December 31, 2008 the Company issued 473,000 shares of common stock for cash of $118,250 ($0.25/share), of which $67,750 was a subscription receivable. During the month of January 2009, $67,750 of stock subscription receivable was collected. As a result of the forward split, the 473,000 shares were increased to 1,892,000 shares ($0.0625/share). (See Note 6(D)).
On January 2, 2009, the Company entered into stock purchase agreements to issue 20,000 shares of common stock for cash of $5,000 ($0.25/share). As a result of the forward split, the 20,000 shares were increased to 80,000 shares ($0.0625/share) (See Note 6(D)).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009 AND 2008
On January 3, 2009, the Company entered into stock purchase agreements to issue 2,000 shares of common stock for cash of $500 ($0.25/share). As a result of the forward split, the 2,000 shares were increased to 8,000 shares ($0.0625/share) (See Note 6(D)).
On January 3, 2009, the Company entered into stock purchase agreements to issue 2,000 shares of common stock for cash of $500 ($0.25/share). As a result of the forward split, the 2,000 shares were increased to 8,000 shares ($0.0625/share) (See Note 6(D)).
On January 11, 2009, the Company entered into stock purchase agreements to issue 32,000 shares of common stock for cash of $8,000 ($0.25/share). As a result of the forward split, the 32,000 shares were increased to 128,000 shares ($0.0625/share) (See Note 6(D)).
On January 12, 2009, the Company entered into stock purchase agreements to issue 2,000 shares of common stock for cash of $500 ($0.25/share). As a result of the forward split, the 2,000 shares were increased to 8,000 shares ($0.0625/share) (See Note 6(D)).
On January 15, 2009, the Company entered into stock purchase agreements to issue 4,000 shares of common stock for cash of $1,000 ($0.25/share). As a result of the forward split, the 4,000 shares were increased to 16,000 shares ($0.0625/share) (See Note 6(D)).
In February of 2009, the Company paid direct offering costs of $850 related to the securities sold.
(B) Stock Issued for Services
On October 14, 2008, the Company issued 44,900,000 shares of common stock to its founder having a fair value of $44,900 ($0.001/share) in exchange for services provided. As a result of the forward split, the 44,900,000 shares were increased to 179,600,000 shares and its purchase price was similarly adjusted to $0.00025((See Note 6(D) and 8).
On November 24, 2008, the Company issued 4,000 shares of common stock having a fair value of $1,000 ($0.25/share) in exchange for consulting services. As a result of the forward split, the 4,000 shares were increased to 16,000 shares and its purchase price was similarly adjusted to $0.0625/share(See Note 6(D)).
On December 5, 2008, the Company issued 4,000 shares of common stock having a fair value of $1,000 ($0.25/share) in exchange for consulting services. As a result of the forward split, the 4,000 shares were increased to 16,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 6(D)).
On December 20, 2008, the Company issued 4,000 shares of common stock having a fair value of $1,000 ($0.25/share) in exchange for consulting services. As a result of the forward split, the 4,000 shares were increased to 16,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 6(D)).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009 AND 2008
On January 12, 2009, the Company issued 4,000 shares of common stock having a fair value of $1,000 ($0.25/share) in exchange for consulting services. As a result of the forward split, the 4,000 shares were increased to 16,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 6(D)).
On January 14, 2009, the Company issued 20,000 shares of common stock having a fair value of $5,000 ($0.25/share) in exchange for services related to a development services agreement entered on January 19, 2009. As a result of the forward split, the 20,000 shares were increased to 80,000 shares and its purchase price was similarly adjusted to $0.0625/share (See Note 6(D) and Note 7(B)).
On August 25, 2009, the Company issued 50,000 shares of common stock having a fair value of $3,125 ($0.0625/share), based upon the fair value on the date of grant, in exchange for professional services.
On August 31, 2009, the Company issued 885,714 shares of common stock in exchange for services valued at $62,000 related to the development services agreement entered into on January 19, 2009. Based on the most recent fair market value at that time, the shares were valued at $55,357 ($0.0625/share), resulting in the recognition of a gain on the extinguishment of debt of $6,643 (See Note 7(B)).
On September 18, 2009, the Company issued 500,000 shares of common stock as compensation pursuant to the terms of a consulting agreement, having a fair value of $175,000 ($0.35/share) based upon fair value on the date of grant. On November 11, 2009 the Company cancelled the agreement and 300,000 shares of common stock were returned to the Company. As of December 31, 2009, $70,000 is recorded as consulting expense and $105,000 of deferred compensation was reclassed to $0 (See Note 7(B)).
On September 18, 2009, the Company issued 600,000 shares of common stock as compensation pursuant to the terms of a consulting agreement, having a fair value of $210,000 ($0.35/share) based upon fair value on the date of grant. On November 18, 2009, the Company cancelled the agreement and 400,000 shares of common stock were returned to the Company. As of December 31, 2009, $70,000 is recorded as consulting expense and $140,000 of deferred compensation was reclassed to $0 (See Note 7 (B)).
On September 21, 2009, the Company issued 600,000 shares of common stock as compensation pursuant to the terms of a consulting agreement, having a fair value of $210,000 ($0.35/share) based upon fair value on the date of grant. On December 18, 2009 the Company terminated the consulting agreement and 400,000 shares were returned to the Company. As of December 31, 2009, $70,000 is recorded as consulting expense and $140,000 of deferred compensation was reclassed to $0 (See Note 7 (B)).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009 AND 2008
On November 12, 2009, the Company issued 100,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $178,000 ($1.78/share) based upon fair value on the date of grant. As of December 31, 2009, $11,948 is recorded as consulting expense and $166,052 is recorded as deferred compensation (See Note 7(B)).
On November 12, 2009, the Company issued 200,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $400,000 ($2.00/share) based upon fair value on the date of grant. As of December 31, 2009, $22,466 is recorded as consulting expense and $377,534 is recorded as deferred compensation (See Note 7(B)).
On November 16, 2009, the Company issued 100,000 shares of common stock as compensation pursuant to the terms of the consulting agreements, having a fair value of $180,000 ($1.80/share) based upon fair value on the date of grant. As of December 31, 2009, $11,096 is recorded as consulting expense and $168,904 is recorded as deferred compensation (See Note 7 (B)).
On November 18, 2009, the Company issued 30,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $45,000 ($1.50/share) based upon fair value on the date of grant. As of December 31, 2009, $5,301 is recorded as consulting expense and $39,699 is recorded as deferred compensation (See Note 7(B)).
On November 21, 2009, the Company issued 30,000 shares of common stock as compensation pursuant to the terms of the marketing agreement, having a fair value of $53,100 ($1.77/share) based upon fair value on the date of grant. As of December 31, 2009, $53,100 is recorded as deferred compensation (See Note 7(B)).
On December 3, 2009, the Company issued 240,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $468,000 ($1.95/share) based upon fair value on the date of grant. As of December 31, 2009, $468,000 is recorded as consulting expense (See Note 7 (B)).
On December 3, 2009, the Company issued 35,000 shares of common stock as compensation pursuant to the terms of the commission agreement, having a fair value of $68,250 ($1.95/share) based upon fair value on the date of grant. As of December 31, 2009, $68,250 is recorded as consulting expense (See Note 7 (B)).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009 AND 2008
On December 3, 2009, the Company issued 35,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $68,250 ($1.95/share) based upon fair value on the date of grant. As of December 31, 2009, $68,250 is recorded as consulting expense (Note 7 (B)).
On December 3, 2009, the Company issued 10,000 shares of common stock as compensation pursuant to the terms of the commission agreement, having a fair value of $19,500 ($1.95/share) based upon fair value on the date of grant. As of December 31, 2009, $19,500 is recorded as consulting expense (See Note 7(B)).
On December 15, 2009, the Company issued 100,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $200,000 ($2/share) based upon fair value on the date of grant. As of December 31, 2009, $71,111 is recorded as consulting expense and $128,889 is recorded as deferred compensation (See Note 7(B)).
On December 27, 2009, the Company issued 10,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $19,400 ($1.94/share) based upon fair value on the date of grant. As of December 31, 2009, $19,400 is recorded as deferred compensation (See Note 7(B)).
On December 27, 2009, the Company issued 10,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $19,400 ($1.94/share) based upon fair value on the date of grant. As of December 31, 2009, $19,400 is recorded as deferred compensation (See Note 7(B)).
On December 27, 2009, the Company issued 10,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $19,400 ($1.94/share) based upon fair value on the date of grant. As of December 31, 2009, $19,400 is recorded as deferred compensation (See Note 7 (B)).
On December 30, 2009, the Company issued 500,000 shares of common stock as compensation pursuant to the terms of the advertising agreement, having a fair value of $965,000 ($1.93/share) based upon fair value on the date of grant. As of December 31, 2009, $965,000 is recorded as deferred compensation (See Note 7 (B)).
On December 30, 2009, the Company issued 1,000,000 shares of common stock as compensation pursuant to the terms of the advertising agreement, having a fair value of $1,930,000 ($1.93/share) based upon fair value on the date of grant. As of December 31, 2009, $1,930,000 is recorded as deferred compensation (See Note 7(B)).
On December 31, 2009, the Company issued 75,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $144,750 ($1.93/share) based upon fair value on the date of grant. As of December 31, 2009, $144,750 is recorded as deferred compensation (See Note 7 (B)).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009 AND 2008
On December 31, 2009, the Company issued 75,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $144,750 ($1.93/share) based upon fair value on the date of grant. As of December 31, 2009, $144,750 is recorded as deferred compensation (See Note 7(B)).
On December 31, 2009, the Company issued 500,000 shares of common stock as compensation pursuant to the terms of the consulting agreement, having a fair value of $965,000 ($1.93/share) based upon fair value on the date of grant. As of December 31, 2009, $965,000 is recorded as deferred compensation (See Note 7(B)).
During December, 2009, the Company issued 680,000 shares of common stock as compensation pursuant to the terms of the consulting agreements, having a fair value of $1,312,400 ($1.93/share) based upon fair value on the date of grant. As of December 31, 2009, $2,802 is recorded as consulting expense and $1,309,598 is recorded as deferred compensation (See Note 7(B)).
During December, 2009, the Company issued 600,000 shares of common stock as compensation pursuant to the terms of the consulting agreements, having a fair value of $1,170,000 ($1.95/share) based upon fair value on the date of grant. As of December 31, 2009, $34,192 is recorded as consulting expense and $1,135,808 is recorded as deferred compensation (See Note 7(B))
.
(C) Common Stock Warrants
On December 30, 2009 the Company issued 500,000 warrants under a consulting agreement. The Company recognized an expense of $823,077 for the year ended December 31, 2009. The Company recorded the fair value of the warrants based on the fair value of each warrant grant estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 2009, dividend yield of zero, expected volatility of 112.80%; risk-free interest rates of 1.65%, expected life of three years. The warrants vested immediately. The warrants expire in three years from the date of issuance and have an exercise price of $0.52 per share.
The following table summarizes information about warrants for the Company as of December 31, 2009.
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009 AND 2008
(D) Stock Split Effected in the Form of a Stock Dividend
On January 16, 2009, the Company's Board of Directors declared a four-for-one stock split to be effected in the form of a stock dividend. The stock split was distributed on January 16, 2009 to shareholders of record. A total of 136,713,000 shares of common stock were issued. All basic and diluted loss per share and average shares outstanding information has been adjusted to reflect the aforementioned stock dividend.
(E) Amendment to Articles of Incorporation
On January 27, 2009 the Company amended its Articles of Incorporation to provide for an increase in its authorized share capital. The authorized capital stock increased to 250,000,000 common shares at a par value of $0.001 per share, and 10,000,000 preferred shares at a par value of $0.001 with class and series designations, voting rights, and relative rights and preferences to be determined by the Board of Directors of the Company from time to time.
(F) In Kind Contribution
During the fourth quarter of 2008, a former stockholder of the Company paid $4,400 of operating expenses on behalf of the Company.
During the fourth quarter of 2008, the principal stockholder contributed office space with a fair market value of $2,913 (See Note 8).
For the year ended December 31, 2009, the principal stockholder contributed office space with a fair market value of $12,600 (See Note 8).
NOTE 7
COMMITMENTS
(A) Employment Agreement
On October 13, 2008 the Company executed an employment agreement with its President and CEO. The term of the agreement is for ten years. As compensation for services, the President will receive a monthly compensation of $18,000 beginning October 13, 2008. In addition, to the base salary, the employee is entitled to receive a 10% commission of all sales of the Corporation. The agreement also calls for the employee to receive health benefits (See Note 8).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009 AND 2008
(B) Consulting Agreement
On January 19, 2009, the Company entered into a development services agreement to construct social network software for a fee of $150 and $375 an hour. The contract will remain in place until either party desires to cancel. A retainer fee of $20,000 has been paid upon the execution of the agreement and will be used towards the services provided. In addition, on January 14, 2009 the Company issued 20,000 shares in exchange for services valued at $5,000 ($0.25/share). As a result of the forward split, the 20,000 shares were increased to 80,000 shares and its purchase price was similarly adjusted to $0.0625 (See Note 6(B) and Note 6(D)). On May 29, 2009 the Company amended the consulting agreement by reducing the hourly rate to $75 an hour and reducing the outstanding balance due by $17,163. On August 31, 2009, the Company issued 885,714 shares of common stock in exchange for services valued at $62,000 related to the development services agreement entered into on January 19, 2009. Based on the most recent fair market value at that time, the shares were valued at $55,357 ($0.0625/share), resulting in the recognition of a gain on the extinguishment of debt of $6,643 (See Note 6(B)).
On January 20, 2009, the Company entered into a service agreement with a transfer agent to become the Company's transfer agent for the purpose of maintaining stock ownership and transfer records for the Company.
On September 17, 2009, the Company entered into a six month consulting agreement with an unrelated third party to provide public relations services. In exchange for the services provided, on September 18, 2009 the Company issued 500,000 shares of common stock having a fair value of $175,000 ($0.35/share) based upon fair value on the date of grant. The Company has an option to cancel the contract during the first ninety days of the agreement and 200,000 shares will be returned back to the Company. On November 11, 2009 the Company cancelled the agreement and 300,000 shares of common stock were returned to the Company. As of December 31, 2009, $70,000 is recorded as consulting expense and $105,000 of deferred compensation was reclaseed to $0 (See Note 6(B)).
On September 18, 2009, the Company entered into a six month consulting agreement with an unrelated third party to provide public relations services. In exchange for the services provided the Company issued 600,000 shares of common stock having a fair value of $210,000 ($0.35/share) based upon fair value on the date of grant. Shares will be issued on or before December 18, 2009 in six 100,000 increments. The Company has an option to cancel the contract at any time, in such event; the consultant will return a prorated amount of shares based on the months remaining in the consulting agreement. On November 18, 2009 the Company cancelled the agreement and 400,000 shares of common stock were returned to the Company. As of December 31, 2009 $70,000 is recorded as consulting expense and $140,000 of deferred compensation was reclassed to $0(See Note 6(B)).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009 AND 2008
On September 21, 2009, the Company entered into an eight month consulting agreement with an unrelated third party to provide public relations services. In exchange for the services provided, the Company issued 600,000 shares of common stock having a fair value of $210,000 ($0.35/share) based upon fair value on the date of grant. Shares will be issued on or before September 18, 2009, December 18, 2009 and March 18, 2010 in 200,000 increments. The Company has an option to cancel the contract at any time and no additional stock issuances will be due. On December 18, 2009 the Company cancelled the agreement and 400,000 shares of common stock were returned to the Company. As of December 31, 2009, $70,000 is recorded as consulting expense and $140,000 of deferred compensation was reclassed to $0 (See Note 6(B)).
On October 20, 2009, the Company entered into a marketing agreement with an unrelated third party. In exchange for the services provided, on November 21, 2009, the Company issued 30,000 shares of common stock having a fair value $53,100 ($1.77/share) based upon fair value on the date of grant, and compensation of $5,000, of which $2,500 was paid upon the execution of the agreement and the remaining balance due upon completion (See Note 6 (B)).
During the months of November and December 2009, the Company entered into celebrity endorsement agreements for a period of one to two years of service. In total, 1,710,000 shares of common stock were issued having a fair value of $3,285,400 based upon fair value on the respective date of grant. Consulting expense of $87,805 and deferred compensation of $3,197,595 was recorded as of December 31, 2009 (See Note 6(B)).
On December 3, 2009, the Company entered into a commission agreement with an unrelated third party. The company will pay a 10% commission in shares of common stock for every passive endorsement. In exchange for the services provided the Company issued 35,000 shares of common stock having a fair value $68,250 ($1.95/share) based upon fair value on the date of grant (See Note 6 (B)).
On December 3, 2009, the Company entered into a commission agreement with an unrelated third party. The company will pay a 10% commission in shares of common stock for every passive endorsement. In exchange for the services provided the Company issued 240,000 shares of common stock having a fair value $468,000 ($1.95/share) based upon fair value on the date of grant (See Note 6 (B)).
On December 3, 2009, the Company entered into a commission agreement with an unrelated third party. The company will pay a 10% commission in shares of common stock for every passive endorsement. In exchange for the services provided the Company issued 10,000 shares of common stock having a fair value $19,500 ($1.95/share) based upon fair value on the date of grant (See Note 6 (B)).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009 AND 2008
On December 3, 2009, the Company entered into a commission agreement with an unrelated third party. The company will pay a 10% commission in shares of common stock for every passive endorsement. In exchange for the services provided the Company issued 35,000 shares of common stock having a fair value $68,250 ($1.95/share) based upon fair value on the date of grant (See Note 6 (B)).
On December 15, 2009, the Company entered into a consulting agreement with an unrelated third party to provide investor services. The Company will receive a 10% of the gross receipts from the investor relations revenue for a two year period. In exchange for the satisfactory services provided, on December 15, 2009, the Company issued 100,000 shares of common stock having a fair value of $200,000 ($2/share) based upon fair value on the date of grant (See Note 6(B)).
On December 27, 2009, the Company entered into a consulting agreement with an unrelated third party to provide film work. In exchange for the services provided the Company issued 10,000 shares of common stock having a fair value $19,400 ($1.94/share) based upon fair value on the date of grant (See Note 6 (B)).
On December 27, 2009, the Company entered into an endorsement agreement with an unrelated third party to provide film work. In exchange for the services provided the Company issued 10,000 shares of common stock having a fair value $19,400 ($1.94/share) based upon fair value on the date of grant (See Note 6 (B)).
On December 27, 2009, the Company entered into a consulting agreement with an unrelated third party to provide film scripting, editing and production work. . In exchange for the services provided the Company issued 10,000 shares of common stock having a fair value $19,400 ($1.94/share) based upon fair value on the date of grant (See Note 6 (B)).
On December 30, 2009, the Company entered into a marketing agreement with an unrelated third party for a period from January 2010 to December 2010. In exchange for the services provided the Company issued 500,000 shares of common stock having a fair value of $965,000 ($1.93/share) based upon fair value on the date of grant. An additional 1,000,000 shares of common stock having a fair value of $1,930,000 ($1.93/share) based upon fair value on the date of grant, will be issued for an additional sponsorship commitment. The additional 1,000,000 shares will be held in escrow until June 30, 2010, at which point the unrelated party will have 15 days to accept or decline the additional shares (See Note 6 (B)).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009 AND 2008
On December 31, 2009, the Company entered into a consulting agreement with an unrelated third party for a period from December 31, 2009 through March 30, 2011. In exchange for the services provided, the Company issued 75,000 shares of common stock having a fair value of $144,750 ($1.93/sh) based upon fair value on the date of grant, and deliverable in three increments of 25,000 shares of common stock each. The first 25,000 shares will be delivered upon the execution of the agreement and the other two increments will be delivered in six and twelve months upon the successful fulfillment of the agreement (See Note 6(B)).
On December 31, 2009, the Company entered into a consulting agreement with an unrelated third party for a period from December 31, 2009 through March 30, 2011. In exchange for the services provided the Company issued 75,000 shares of common stock having a fair value of $144,750 ($1.93/sh) based upon fair value on the date of grant, and deliverable in three increments of 25,000 each. The first 25,000 shares will be delivered upon the execution of the agreement and the other two will be delivered in six and twelve months upon the successful fulfillment of the agreement (See Note 6(B)).
On December 31, 2009, the Company entered into a consulting agreement with an unrelated third party for a period from December 31, 2009 through December 31, 2010. In exchange for the services provided the Company issued 500,000 shares of common stock having a fair value of $965,000 ($1.93/sh) based upon fair value on the date of grant (See Note 6(B)).
NOTE 8
RELATED PARTY TRANSACTIONS
On November 10, 2009, the Company entered into a two year line of credit agreement with a principal stockholder in the amount of $100,000. The line of credit carries an interest rate at 3.25%. As of December 31, 2009, the principal shareholder has advanced $19,500 to the Company under this line of credit agreement (See Note 4).
On May 28, 2009, the Company entered into a two year line of credit agreement with a principal stockholder in the amount of $100,000. The line of credit carries an interest rate at 3.25%. For the year ended December 31, 2009, the principal shareholder advanced the Company $100,000 under the terms of the line of credit agreement (See Note 4)
.
For the year ended December 31, 2009, the Company owes $1,176 of accrued interest on the lines of credit total of $119,500 (See Note 4).
On May 26, 2009 the Company received $16,700 from a principal stockholder. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 3).
On May 22, 2009 the Company received $15,000 from a principal stockholder. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 3).
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009 AND 2008
On May 11, 2009 the Company received $9,500 from a principal stockholder. During the year ended December 31, 2009, the Company repaid $1,500 in principal to the principal stockholder. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand (See Note 3).
For the year ended December 31, 2009, the Company owes $39,700 in principal and $495 of accrued interest to the principal stockholder related to these principal loans (See Note 3).
On October 14, 2008, the Company issued 44,900,000 shares of common stock to its founder having a fair value of $44,900 ($0.001/share) in exchange for services provided. As a result of the forward split, the 44,900,000 shares were increased to 179,600,000 shares and its purchase price was similarly adjusted to $0.00025 (See Note 6(B) and Note 6(C)).
On October 13, 2008 the Company executed an employment agreement with its President and CEO. The term of the agreement is ten years. As compensation for services, the President will receive a monthly compensation of $18,000 beginning October 13, 2008. In addition, to the base salary, the employee is entitled to receive a 10% commission of all sales of the Corporation. The agreement also calls for the employee to receive health benefits (See Note 7(A)).
For the year ended December 31, 2008 the Company received $18,803 from a principal stockholder. Pursuant to the terms of the loan, the loan is bearing an annual interest rate of 3.25% and is due on demand. As of December 31, 2008, the Company still owes $3,803 in principal to the principal stockholder and accrued interest of $31. For the year ended December 31, 2009, the principal portion of the of this principal stockholder loan balance was repaid and the Company still owes accrued interest of $31 (See Note 3).
During the fourth quarter of 2008, the principal stockholder contributed office space with a fair market value of $2,913 (See Note 6(F)).
For the year ended December 31, 2009, the principal stockholder contributed office space with a fair market value of $12,600 (See Note 6(F)).
NOTE 9
SUBSEQUENT EVENTS
In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through March 15, 2010, the date the financial statements were issued.
On January 11, 2010, the Company entered into a twelve month agreement with an unrelated third party for investor relations press release service for an annual fee for $14,250 and an initial onetime fee of $250.
SO ACT NETWORK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2009 AND 2008
On January 15, 2010, the Company entered into a celebrity endorsement agreement for a period of two years of service in exchange for 100,000 shares of common stock having a fair value of $170,000 based upon fair value on the date of grant.
On February 1, 2010, the Company entered into a twelve month consulting agreement effective February 5, 2010. The agreement can be renewed for up to two additional years for a fee of $500 for the first renewal year and $750 for the second renewal year.
On February 8, 2010, the majority stockholder advanced the Company $6,000 under the line of credit agreement dated November 10, 2009 (See Note 4 and 8).
On February 17, 2010, the Company entered into a twelve month consulting agreement with an unrelated third party effective February 17, 2010. In exchange for the services provided the Company issued 1,000,000 shares of common stock having a fair value of $1,240,000 ($1.24/sh) based upon fair value on the date of grant.
On March 1, 2010, the majority stockholder advanced the Company $150 under the line of credit agreement dated November 10, 2009 (See Note 4 and 8).
On March 3, 2010, the majority stockholder advanced the Company $20,000 under the line of credit agreement dated November 10, 2009 (See Note 4 and 8).
On March 3, 2010, the majority stockholder loaned the Company $50,000 under the line of credit agreement dated November 10, 2009 (See Note 4 and 8). The funds were subsequently used by the Company to reduce its liabilities.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Our accountant is Alan R. Swift, CPA, P.A. Independent Registered Public Accounting Firm. We do not presently intend to change accountants. At no time have there been any disagreements with such accountants regarding any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Management's Annual Report on Internal Control Over Financial Reporting.
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control system was designed to, in general, provide reasonable assurance to the Company’s management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009. The framework used by management in making that assessment was the criteria set forth in the document entitled “ Internal Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our CEO and CFO have determined and concluded that, as of December 31, 2009, the Company’s internal control over financial reporting was effective.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.
Changes in Internal Control over Financial Reporting
No change in our system of internal control over financial reporting occurred during the period covered by this report, fourth quarter of the fiscal year ended December 31, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS: COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Our sole executive officer and director and their respective age as of March 29, 2010 is as follows:
Set forth below is a brief description of the background and business experience of our executive officers and directors for the past five years.
Greg Halpern
Greg Halpern is the founder of So Act Network, Inc. From 1997 to 2001 Mr. Halpern was the CEO of Circle Group Internet, Inc. (CRGQ: OTCBB). From 2002 to 2005, Mr. Halpern was the Chief Executive Officer of Circle Group Holdings Inc. (AMEX: CXN, formerly CRGQ.OB) and continued to be the CEO after it changed its name to Z-Trim Holdings Inc. (AMEX: ZTM) from 2006 - 2007. Circle Group was a venture capital firm for emerging technology companies which provided small business infrastructure, funding and intellectual capital to bring timely life-changing technologies to market through all early phases of the commercialization process. Mr. Halpern’s efforts there were focused on acquiring life improving technologies and bringing these products to the marketplace. In 2003, Mr. Halpern and his wife founded an unincorporated non-profit organization “People for Ultimate Kindness Toward All Living Creatures on Earth” whose purpose is and has been to identify problems on earth and those who are working to solve them. The Ultimate Kindness is a non-profit organization independent from the So Act Nework. The Ultimate Kindness and the So Act Network share no financial interest or otherwise. In 2007, Mr. Halpern resigned from his position at Z-Trim Holdings and took a one (1) year sabbatical from business touring the Continental United States in his RV with his family. Currently, Mr. Halpern serves as the president, Chief Executive Officer and Chief Financial Officer of So Act Network, Inc, and devotes approximately 50 hours each week to the management and operations of So Act Network.
Term of Office
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board
Current Issues and Future Management Expectations
No board audit committee has been formed as of the filing of this Annual Report.
Compliance With Section 16(A) Of The Exchange Act.
Section 16(a) of the Exchange Act requires the Company’s officers and directors, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and are required to furnish copies to the Company. To the best of the Company’s knowledge, any reports required to be filed were timely filed in fiscal year ended December 31, 2009.
Code of Ethics
The Company has adopted a Code of Ethics applicable to its Chief Executive Officer and Chief Financial Officer. This Code of Ethics is filed herewith as an exhibit.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officer during the years ended December 31, 2009, and 2008 in all capacities for the accounts of our executive, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO):
SUMMARY COMPENSATION TABLE
(1)
The salary stated has been accrued and remains unpaid. In addition to the base salary, Mr. Greg Halpern shall be entitled to a monthly commission equal to 10% of all of our sales.
Option Grants Table. There were no individual grants of stock options to purchase our common stock made to the executive officer named in the Summary Compensation Table through December 31, 2009.
Aggregated Option Exercises and Fiscal Year-End Option Value Table. There were no stock options exercised during period ending December 31, 2009 by the executive officer named in the Summary Compensation Table.
Long-Term Incentive Plan (“LTIP”) Awards Table. There were no awards made to a named executive officer in the last completed fiscal year under any LTIP
Compensation of Directors
Directors are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority to fix the compensation of directors. No amounts have been paid to, or accrued to, directors in such capacity.
Employment Agreements
Mr. Greg Halpern, our President, CEO and CFO, entered into an Employment Agreement with us on October 13, 2008. Pursuant to the Employment Agreement, the term of the employment shall be for a period of ten (10) years commencing on October 13, 2008. The term of this Employment Agreement shall automatically be extended for additional terms of one (1) year each unless either party gives prior written notice of non-renewal to the other party no later than sixty (60) days prior to the expiration of the end of the 10 years. Subject to the terms of the Employment Agreement, we shall pay Mr. Halpern eighteen thousand dollars per month as compensation for his services rendered as provided in the Employment Agreement. In addition to the base salary, Mr. Halpern shall be entitled to a monthly commission equal to 10% of all of our sales. The Employment Agreement was attached as Exhibit 10.1 to the Form 8-K filed on October 17, 2008, and is incorporated here within by reference.
Other than Greg Halpern, we do not have any other employees.
We have not had a promoter at any time during our past five fiscal years.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides the names and addresses of each person known to us to own more than 5% of our outstanding shares of common stock as of March 29, 2010 and by the officers and directors, individually and as a group. Except as otherwise indicated, all shares are owned directly.
Stock Option Grants
We have not granted any stock options to our executive officer since our incorporation.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION, AND DIRECTOR INDEPENDENCE
On December 20, 2008, we issued 4,000 shares of common stock to Serena Halpern for the web design services provided to us in late 2008. These shares were issued pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended. After the completion of a 4 for 1 forward split of our common stock on January 16, 2009, the 4,000 shares were increased to 16,000 shares. Serena Halpern is the daughter of Greg Halpern. The services provided were preparation of the Company Logo design which is now a registered Trademark, and all three designs and redesigns of the Company web site including the current version in use by So Act and its members. The Company believes the fee to Ms. Halpern, which consisted of $1,000 paid in restricted stock at $0.25 cents per share is comparable to third party providers of web services of comparable experience and expertise.
During the fourth quarter of 2008, Greg Halpern contributed office space with a fair value of $2,913. On October 14, 2008, we issued 44,900,000 shares of common stock of to Mr. Greg Halpern for his services rendered. The shares were issued as founder’s shares for running the business and beginning its operations. These shares were issued pursuant to an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended. After the completion of a 4 for 1 forward split of our common stock on January 16, 2009, the 44,900,000 shares were increased to 179,600,000 shares.
On October 13, 2008, we executed an employment agreement with Mr. Greg Halpern, our President and CEO. The term of the agreement is ten (10) years. As compensation for services, Mr. Halpern will receive a monthly compensation of $18,000 beginning October 13, 2008. In addition, to the base salary, Mr. Halpern is entitled to receive a 10% commission of all of our sales.
For the year ended December 31, 2009, we received $41,200 from Mr. Greg Halpern, our principal shareholder. During the year ended December 31, 2009, the Company repaid $1,500 to Greg Halpern our principal shareholder. Pursuant to the loan agreement, the loan bears an annual interest rate of 3.25% and is due on demand. As of December 31, 2009, we still owe $39,700 in principal and accrued interest of $495.
For the year ended December 31, 2009, we received $119,500 from Mr. Greg Halpern, our principal shareholder, by way of two lines of credits. Pursuant to the lines of credit agreements, the lines of credits bear an annual interest rate of 3.25% and are due on May 29, 2011 and November 11, 2011. As of December 31, 2009 we still owe $119,500 in principal and accrued interest of $1,176.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
For the Company’s fiscal years ended December 31, 2009 and 2008, we were billed approximately $23,768 and $1,200 for professional services rendered for the audit and review of our financial statements.
Audit Related Fees
There were no fees for audit related services for the years ended December 31, 2009 and 2008.
Tax Fees
For the Company’s fiscal years ended December 31, 2009 and 2008, we were not billed for professional services rendered for tax compliance, tax advice, and tax planning.
All Other Fees
The Company did not incur any other fees related to services rendered by our principal accountant for the fiscal years ended December 31, 2009 and 2008.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit related service, the engagement be:
-approved by our audit committee; or
-entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee's responsibilities to management.
We do not have an audit committee. Our entire board of directors pre-approves all services provided by our independent auditors.
The pre-approval process has just been implemented in response to the new rules. Therefore, our board of directors does not have records of what percentage of the above fees were pre-approved. However, all of the above services and fees were reviewed and approved by the entire board of directors either before or after the respective services were rendered.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
a) Documents filed as part of this Annual Report
1. Consolidated Financial Statements
2. Financial Statement Schedules
3. Exhibits
14.1
Code of Ethics
3.1*
Amendment to the Articles of Incorporation Filed on October 15, 2008 with the Delaware State of Secretary
31.1
Rule 13a-14(a)/ 15d-14(a) Certification of Chief Executive Officer and Chief Financial Officer
32.1
Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
*Filed as Exhibit 3.1 to the Form 8-K filed on October 17, 2009 and incorporated herein by reference.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 29, 2010
By /s/ Greg Halpern
Greg Halpern,
Chief Executive Officer,
Chief Financial Officer (Principal Accounting Officer)
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.
Signature
Title
Date
/s/ Greg Halpern
Chief Executive Officer,
March 29, 2010
Greg Halpern
Chief Financial Officer (Principal Accounting Officer)