UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange
Act of 1934
For the Fiscal Year Ended December 31, 2005
[ ] Transition Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
Commission File Number: 000-31187
BIG FLASH CORPORATION
(Name of small business issuer in its charter)
Delaware 87-0638336
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
19 East 200 South, Suite 1080, Salt Lake City, Utah 84111
(Address of principal executive offices) (Zip Code)
Issuer's telephone no.: (801) 322-3401
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: Common
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
State the issuer's revenues for its most recent fiscal year. $ -0-
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and ask prices of such stock as of a specified date within 60
days. $ -0-
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Class Outstanding as of December 31, 2005
----------------------- ------------------------------------
Common Stock, Par Value 1,500,000
$.00001 par value
DOCUMENTS INCORPORATED BY REFERENCE
A description of "Documents Incorporated by Reference" is contained in Part III,
Item 14.
Transitional Small Business Disclosure Format. Yes [ ] No [X]
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BIG FLASH CORPORATION
TABLE OF CONTENTS
Page
PART I
Item 1. Description of Business ......................................... 3
Item 2. Description of Property.......................................... 10
Item 3. Legal Proceedings................................................ 10
Item 4. Submission of Matter to a Vote of Security Holders............... 10
PART II
Item 5. Market for Common Equity and Related Stockholder Matters......... 10
Item 6. Management's Discussion and Analysis or Plan of Operation........ 15
Item 7. Financial Statements............................................. 15
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure....................................... 15
Item 8A. Controls and Procedures.......................................... 15
Item 8B Other Information................................................ 15
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act............. 15
Item 10. Executive Compensation........................................... 18
Item 11. Security Ownership of Certain Beneficial Owners and Management... 19
Item 12. Certain Relationships and Related Transactions................... 19
Item 13. Exhibits......................................................... 20
Item 14. Principal Accountant Fees and Services........................... 20
Signatures....................................................... 21
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PART I
Item 1. Description of Business
History
Big Flash Corporation was incorporated on July 27, 1999 under the laws of
the State of Delaware, for the purpose of actively seeking potential operating
businesses and/or business opportunities, with the intent to acquire or merge
with such businesses. Following its organization, Big Flash issued a total of
1.5 million shares of its common stock.
On November 16, 1999, we filed a registration statement with the SEC on
Form SB-2 under the Securities Act of 1933, for the purpose of registering for
resale the 1.5 million shares of our common stock then outstanding. The
registration statement was subsequently withdrawn and, on July 28, 2000, we
filed a registration statement on Form 10-SB under the Securities Exchange Act
of 1934. The registration statement became effective automatically 60 days after
filing with the SEC.
Recent Events
On April 10, 2006 Big Flash Corporation entered into an agreement
("Share Exchange Agreement") to acquire, indirectly though a Canadian holding
corporation, all of the issued and outstanding shares of Intelgenx Corp.
("Intelgenx"), a Canadian corporation based in Quebec. Following completion of
the acquisition, Intelgenx will continue its operations as a controlled
subsidiary of Big Flash (the "Intelgenx Acquisition").
Business of Intelgenx
---------------------
Intelgenx is a drug delivery company established in 2003 and headquartered
in Montreal (Quebec), which focuses on the development of oral
controlled-release products for the generic pharmaceutical market as well as
novel buccal delivery systems.
Intelgenx currently has two unique, proprietary platform technologies that
it uses to develop products: a Tri-Layer Tablet technology which allows for the
development of oral controlled release products, and a Quick Release Wafer
technology for the rapid delivery of pharmaceutically active substances to the
oral cavity. Intelgenx's Tri-layer technology is aimed at reducing manufacturing
costs significantly as compared to competing delivery technologies. The wafer
technology allows for the instant delivery of pharmaceuticals to the oral
mucosa.
Intelgenx's business strategy is to develop pharmaceutical products based
on its proprietary drug delivery technologies and license the commercial rights
to competent partner companies once the viability of the product has been
demonstrated.
Terms of Share Exchange Agreement
---------------------------------
Pursuant to the Share Exchange Agreement, the Intelgenx acquisition will be
completed through a series of agreements among Big Flash, its wholly owned
subsidiary 6544631 Canada Inc. ("Exchangeco") and Horst Zerbe, Ingrid Zerbe and
Joel Cohen (the "Principals") and Equity Transfer Services Inc. ("Equity").
Under the Share Exchange Agreement, Exchangeco will acquire all of the issued
and outstanding common shares of Intelgenx in exchange for 10,991,000 Class A
Special Shares of Exchangeco ("Exchangeable Shares"). At closing of the Share
Exchange Agreement, Big Flash, Exchangeco, the Principals and Equity will enter
into an Exchange and Voting Trust Agreement (the "Exchange and Voting Trust
Agreement") pursuant to which 10,991,000 shares of Big Flash common stock (the
"Trust Shares") shall be issued to Equity, as trustee for the Principals, as
security for Big Flash's covenants under the provisions of the Exchangeable
Shares. Big Flash, Exchangeco and Equity will also enter into a support
agreement ("Support Agreement") which will, among other things, set forth the
terms and conditions upon which the Principals may exchange the Exchangeable
Shares for a corresponding number of Big Flash common stock. Big Flash may
satisfy its obligations by instructing the Trustee to deliver one Big Flash
common share for each such Exchangeable Share. Big Flash, Exchangeco, Equity and
the Principals will also enter into an escrow agreement (the "Escrow Agreement")
pursuant to which the Principals shall deposit into escrow with Equity, as
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escrow agent, all of the Exchangeable Shares and any Trust Shares for which the
Exchangeable Shares may be exchanged from time to time, over a term of 3 years
following closing. The Escrow Agreement provides that the Exchangeable Shares
and Trust Shares held in escrow may not be sold, assigned or transferred, except
as expressly permitted under the Escrow Agreement, and shall be released from
escrow at the end of the 3-year term.
The Trustee, as the holder of record of the Trust Shares, shall be entitled
to all of the voting rights, including the right to vote in person or by proxy
the Trust Shares on any matters, questions, proposals or propositions whatsoever
that may properly come before the stockholders of Big Flash or at a meeting of
Big Flash stockholders or in connection with respect to all written consents
sought by Big Flash from its stockholders (the "Voting Rights"). The Voting
Rights shall be and remain vested in and exercised by the Trustee. As further
particularized in the Exchange and Voting Trust Agreement, the Trustee shall
exercise the Voting Rights only on the basis of instructions received from the
Principals entitled to instruct the Trustee as to the voting thereof at the time
at which the stockholders meeting is held or a stockholders' consent is sought.
To the extent that no instructions are received from a Principal with respect to
the Voting Rights to which such Principal is entitled, the Trustee shall not
exercise or permit the exercise of such Voting Rights.
Under the terms of the Exchangeable Shares, the Principals will have the
right to exchange the Exchangeable Shares for a corresponding number of shares
of Big Flash common stock at any time after closing of the transaction. Prior to
the exercise of such exchange rights, Equity will be the owner of record of the
Trust Shares and will retain power to vote the Trust Shares or grant consent in
regard to any and all matters presented for approval by the holders of Big Flash
common stock. Under the terms of the Exchange and Voting Trust Agreement,
Equity, in its capacity as trustee, will act in regard to such matters only in
accordance with instructions given by the Principals, respectively.
In its capacity as trustee, Equity does not have any powers of disposition
over the Trust Shares except as expressly required under the Exchange and Voting
Trust Agreement and the Support Agreement.
All of such Exchangeable Shares and the Trust Shares were issued pursuant
to the exemptions from registration provided under National Instrument 45-106
under Canadian securities laws and will be exempt from registration under the
Securities Act of 1933, as amended, pursuant to Section 4(2) of that Act and
Regulation D - Rule 506 and/or Regulation S promulgated thereunder.
Intelgenx proposes to issue additional common shares and warrants to
investors ("Investors") pursuant to private placements prior to the closing of
the Share Exchange Agreement. On or before the completion of the purchase of the
Intelgenx shares by Exchangeco from the Principals pursuant to the Share
Exchange Agreement, it is contemplated that the Investors will enter into and
complete agreements with Big Flash for the sale of their shares and warrants of
Intelgenx to Big Flash in exchange for an aggregate of up to 3,525,000 common
shares of Big Flash and 100,000 common share purchase warrants of Big Flash.
After giving effect to the proposed issuance of the 10,991,000 shares of
Big Flash common stock in connection with the Intelgenx acquisition and the
3,525,000 shares of Big Flash stock and 100,000 warrants of Big Flash to be
issued to the Investors, the number of Trust Shares that will be issued to
Equity as trustee for the Vendors in the aggregate will constitute 68.7% of the
approximately 16 million shares of Big Flash common stock that will be issued
and outstanding. After giving effect to the issuance of the shares of Big Flash
in connection with the Intelgenx acquisition, Horst Zerbe, Ingrid Zerbe and Joel
Cohen will, pursuant to rights attached to the Exchangeable Shares to be issued
to them under the Share Exchange Agreement, be entitled to acquire and
beneficially own, respectively, 4,709,643, 4,709,643 and 1,571,713 shares of Big
Flash common stock constituting, respectively, 29.4%, 29.4% and 9.8% of the Big
Flash common stock that will be issued and outstanding.
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Prior to the completion of the Intelgenx acquisition and except for the
Share Exchange Agreement and the transactions contemplated thereunder, neither
Intelgenx nor the shareholders of Intelgenx are or have been engaged in any
direct or indirect transaction with Big Flash and the Intelgenx acquisition is
not considered a related party transaction.
Pursuant to the terms of the Support Agreement, the holders of the
Exchangeable Shares will economically benefit to the same extent as direct
shareholders of Big Flash in the event of any dividend or other distribution.
Exchangeco shall on any day ("Redemption Date") to be determined by
Exchangeco's board of directors after the tenth anniversary of the date of the
Intelgenx acquisition, redeem the then outstanding Exchangeable Shares for an
amount per Exchangeable Share (the "Redemption Price") equal to (i) the current
market price of a Big Flash common share on the last business day prior to the
Redemption Date (which may be satisfied in full by Exchangeco causing an
instruction to be given to the Trustee to deliver, in respect of each
Exchangeable Share held by each respective holder thereof, one Big Flash common
share, and obtaining written confirmation of such delivery by the Trustee), plus
(ii) the unpaid dividend amount, if any, on each such Exchangeable Share held by
such holder on any dividend record date which occurred prior to the Redemption
Date.
The Exchangeable Shares may, at any time prior to the Redemption Date, be
exchanged by any of the Principals in exchange for the same number of shares of
Big Flash common stock. The number of shares of Big Flash common stock to be
transferred to the holders of the Exchangeable Shares upon such exchange will be
subject to corresponding adjustment in the event of any Big Flash securities
dividend, forward split, reverse split, or similar event. The holders of the
Exchangeable Shares will also benefit to an identical extent as all other Big
Flash shareholders in the event of a tender offer or other similar transaction.
All Big Flash events related to payment of dividends, redemption or
purchase or any capital distribution in respect of Big Flash common shares or
any shares other than the Exchangeable Shares, redemption or purchase of any
shares other than the Exchangeable Shares, or issuance of any other exchangeable
shares, shall in each case be subject to approval by holders of not less than
66.6% of then-outstanding Exchangeable Shares. In addition, Big Flash must
obtain the same consent prior to any action to reclassify, subdivide, re-divide
or make any similar change to the outstanding shares of Big Flash, or effect an
amalgamation, merger, reorganization or other transaction affecting the Big
Flash shares of common stock.
Current Business Activities
Since our inception, we have engaged in only sporadic business operations
and are deemed a development stage company. Pending the finalization of the
Intelgenx transaction, our only business is to seek out and investigate
potential operating businesses and business opportunities with the goal of
potentially acquiring or merging with one or more of these businesses. No
representation is made, nor is any intended, that we will be able to carry on
future business activities successfully. Further, there can be no assurance that
we will have the ability to acquire or merge with an operating business,
business opportunity or property that will be of material value to us.
Management plans to investigate, research and, if justified, potentially
acquire or merge with one or more businesses or business opportunities.
Management will have broad discretion in its search for and negotiations with
any potential business or business opportunity.
Our principal executive offices are located at 19 East 200 South, Suite
1080, Salt Lake City, Utah 84111, and our telephone number is (801) 322-3401.
-5-
Sources of Business Opportunities
---------------------------------
Management uses various resources in its search for potential business
opportunities including, but not limited to, our officers and directors,
consultants, special advisors, securities broker-dealers, venture capitalists,
members of the financial community and others who may present management with
unsolicited proposals. Because of our lack of capital, we may not be able to
retain, on a fee basis, professional firms specializing in business acquisitions
and reorganizations. Rather, we will most likely have to rely on outside
sources, not otherwise associated with us, that will accept their compensation
only after we have finalized a successful acquisition or merger.
If we elect to engage an independent consultant, we will look only to
consultants that have experience in working with small companies in search of an
appropriate business opportunity. Also, the consultant must have experience in
locating viable merger and/or acquisition candidates and have a proven track
record of finalizing such business consolidations. Further, we would prefer to
engage a consultant that will provide services for only nominal up-front
consideration and is willing to be fully compensated only at the close of a
business consolidation.
We do not intend to limit our search to any specific kind of industry,
business or geographical location. We may investigate and ultimately acquire a
venture that is in its preliminary or development stage, is already in
operation, or in various stages of its corporate existence and development.
Management cannot predict at this time the status or nature of any venture in
which we may participate. A potential venture might need additional capital or
merely desire to have its shares publicly traded. The most likely scenario for a
possible business arrangement would involve the acquisition of or merger with an
operating business that does not need additional capital, but which merely
desires to establish a public trading market for its shares. Management believes
that we could provide a potential public vehicle for a private entity interested
in becoming a publicly held corporation without the time and expense typically
associated with an initial public offering.
Evaluation
----------
Once we identify a particular entity as a potential acquisition or merger
candidate, management will seek to determine whether acquisition or merger is
warranted, or whether further investigation is necessary. Such determination
will generally be based on management's knowledge and experience, or with the
assistance of outside advisors and consultants evaluating the preliminary
information available to them. Management may elect to engage outside
independent consultants to perform preliminary analysis of potential business
opportunities. However, because of our lack of capital we may not have the
necessary funds for a complete and exhaustive investigation of any particular
opportunity.
In evaluating such potential business opportunities, we will consider, to
the extent relevant to the specific opportunity, several factors including:
* potential benefits to us and our stockholders;
* working capital;
* financial requirements and availability of additional financing;
* history of operation, if any;
* nature of present and expected competition;
* quality and experience of management;
* need for further research, development or exploration;
* potential for growth and expansion;
* potential for profits; and
* other factors deemed relevant to the specific opportunity.
-6-
Because we are a reporting company subject to the provisions of the
Securities Exchange Act of 1934, we are required to file certain annual,
periodic and other reports with the SEC. These requirements include the
affirmative duty to file independent audited financial statements annually as
part of our Form 10-KSB. Further, any business or entity that we acquire or
merge with must also have independent audited financial statements for at least
the two most recent fiscal years, or from the date of their inception, if less
than two years. Upon consummation of a merger or acquisition, we are required to
file with the SEC on Form 8-K or other report, audited financial statements of
the business or entity acquired. If such audited financial statements are not
available at the closing of the acquisition or merger, or within time parameters
set forth by various regulations of the SEC, or if the audited financial
statements provided do not conform to the representations made by the business
to be acquired, we may not be able to finalize the transaction. Accordingly, we
intend to consider as potential acquisitions or mergers only those businesses or
entities that can provide the requisite financial statements.
There can be no assurance that following consummation of any acquisition or
merger, the acquired business venture will develop into a going concern or, if
the business is already operating, that it will continue to operate
successfully. Many potential business opportunities available to us may involve
new and untested products, processes or market strategies which may not
ultimately prove successful.
Form of Potential Acquisition or Merger
---------------------------------------
Each separate potential opportunity will be reviewed and, upon the basis of
that review, a suitable legal structure or method of participation will be
chosen. The particular manner in which we participate in a specific business
opportunity will depend upon the nature of that opportunity, the respective
needs and desires of our management and management of the opportunity, and the
relative negotiating strength of the parties involved. Actual participation in a
business venture may take the form of an asset purchase, lease, joint venture,
license, partnership, stock purchase, reorganization, acquisition, merger or
consolidation. We may act directly or indirectly through an interest in a
partnership, corporation, or other form of organization, however, we do not
intend to participate in an opportunity through the purchase of a minority stock
position.
Because we have no assets and a limited operating history, in the event we
successfully acquire or merge with an operating business opportunity, it is
likely that our present stockholders will experience substantial dilution. It is
also probable that there will be a change in control of our company. The owners
of any business opportunity which we acquire or merge with will most likely
acquire control following such transaction. Management has not established any
guidelines as to the amount of control it will offer to prospective business
opportunities, but rather management will attempt to negotiate the best possible
agreement for the benefit of our stockholders.
Presently, management does not intend to borrow funds to compensate any
person, consultant, promoter or affiliate in relation to the consummation of a
potential merger or acquisition. However, if we engage any outside advisor or
consultant in our search for business opportunities, it may be necessary for us
to attempt to raise additional funds. As of the date hereof, we have not made
any arrangements or definitive agreements to use outside advisors or consultants
or to raise any capital. In the event we do need to raise capital, most likely
the only method available to us would be the private sale of our securities.
These possible private sales would most likely have to be to persons known by
our directors or to venture capitalists that would be willing to accept the
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risks associated with investing in a company with no current operation. Because
of our nature as a development stage company, it is unlikely that we could make
a public sale of securities or be able to borrow any significant sum from either
a commercial or private lender. Management will attempt to acquire funds on the
best available terms. However, there can be no assurance that we will be able to
obtain additional funding when and if needed, or that such funding, if
available, can be obtained on reasonable or acceptable terms. Although not
presently anticipated, there is a remote possibility that we could sell
securities to our management or affiliates.
There exists a possibility that the terms of any future acquisition or
merger transaction might include the sale of shares presently held by our
officers and/or directors to parties affiliated with or designated by the
potential business opportunity. Presently, management has no plans to seek or
actively negotiate such terms. However, if this situation does arise, management
is obligated to follow our Articles of Incorporation and all applicable
corporate laws in negotiating such an arrangement. Under this scenario of a
possible sale by officers and directors, it is unlikely that similar terms and
conditions would be offered to all other stockholders or that stockholders would
be given the opportunity to approve such a transaction.
Rights of Stockholders
Management anticipates that prior to consummating any acquisition or
merger, if required by relevant state laws and regulations, we will seek to have
the transaction ratified by stockholders in the appropriate manner. However,
under Delaware law, certain actions that would routinely be taken at a meeting
of stockholders, may be taken by written consent of stockholders having not less
than the minimum number of votes that would be necessary to authorize or take
the action at a meeting of stockholders. Thus, if stockholders holding a
majority of the outstanding shares decide by written consent to consummate an
acquisition or a merger, minority stockholders would not be given the
opportunity to vote on the issue. The board of directors will have the
discretion to consummate an acquisition or merger by written consent if it is
determined to be in our best interest to do so. Regardless of whether an action
to acquire or merge is ratified by written consent or by holding a stockholders'
meeting, we will provide to stockholders complete disclosure documentation
concerning a potential target business opportunity including the appropriate
audited financial statements of the target. This information will be
disseminated by proxy statement in the event a stockholders' meeting is held, or
by an information statement pursuant to Regulation 14C of the Exchange Act if
the action is taken by written consent.
Under Delaware corporate laws, stockholders may be entitled to assert
appraisal or dissenters' rights if we acquire or merge with a business
opportunity. Stockholders will be entitled to dissent from and obtain payment of
the fair value of their shares in the event of consummation of a plan of merger
to which we are a party, if approval by the stockholders is required under
applicable Delaware law. Also, stockholders will be entitled to appraisal rights
if we enter into a share exchange whereby our shares are to be acquired. A
stockholder who is entitled to assert appraisal rights and obtain the fair value
for their shares, may not challenge the corporate action creating this
entitlement, unless the action is unlawful or fraudulent with respect to the
stockholder or the company. A dissenting stockholder shall refrain from voting
their shares in approval of the corporate action. If the proposed action is
approved by the required vote of stockholders, we must give notice to all
stockholders who delivered to us their written notice of dissent.
Competition
Because we have not finalized an acquisition or merger, we are unable to
evaluate the type and extent of our likely competition. We are aware that there
are several other public companies with only nominal assets that are also
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searching for operating businesses and other business opportunities as potential
acquisition or merger candidates. In addition to competing with these other
public companies, we are also in direct competition with many established
venture capital and financial concerns that have significantly greater financial
and personnel resources and technical expertise than us. In view of our limited
financial resources and limited experience, we will be at a significant
competitive disadvantage compared to our competitors.
Employees
As of the date hereof, we do not have any employees and have no plans for
retaining employees until such time as our business warrants the expense, or
until we successfully acquire or merge with an operating business. We may find
it necessary to periodically hire part-time clerical help on an as-needed basis.
Facilities
We currently use as our principal place of business the offices of one of
our directors, Geoff Williams, located in Salt Lake City, Utah. The facilities
are shared with other businesses.
Although we have no written agreement and currently pay no rent for the use
of these facilities, it is contemplated that at such future time as we acquire
or merge with an operating business, we will secure commercial office space from
which we will conduct our business. However, until such time as we complete an
acquisition or merger, the type of business in which we will be engaged and the
type of office and other facilities that will be required, is unknown. We have
no current plans to secure such commercial office space.
Industry Segments
No information is presented regarding industry segments. We are presently a
development stage company seeking a potential acquisition of or merger with a
yet to be identified business opportunity. Reference is made to the statements
of income included herein in response to Part F/S of this Form 10-KSB for a
report of our operating history for the past two fiscal years.
Risk Factors Related to Our Business
We are and may be subject to substantial risks specific to a particular
business or business opportunity, which specific risks cannot be ascertained
until a potential acquisition or merger candidate has been identified. However,
at a minimum, our present and proposed business operations will be highly
speculative and be subject to the same types of risks inherent in any new or
unproven venture, and will include the types of risk factors outlined below.
We have no assets and no source of revenue
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We currently have no assets and have had no revenues for several years. It
is unlikely that we will receive any revenues until we complete an acquisition
or merger. There can be no assurance that any acquired business will produce any
material revenues for us or our stockholders or that any such business will
operate on a profitable basis.
Our auditors have expressed a going concern opinion
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Our independent auditors discuss in their report significant doubt
regarding our ability to continue as a going concern. They include a statement
in the notes to our financial statements as follows:
"The ability of the Company to continue as a going concern is dependent
on the Company obtaining adequate capital to fund operating losses
until it becomes profitable. If the Company is unable to obtain
adequate capital, it could be forced to cease operations."
-9-
If we are not able to secure necessary funding or to consummate a
successful acquisition or merger, our business could fail and our stockholders
could lose their entire investment. You are encouraged to read note 2 to
financial statements included herewith.
Although we have entered into an agreement to acquire Intelgenx, there can
be no assurance that the transaction will be finalized or that the acquisition
of Intelgenx will result in a future successful business venture.
--------------------------------------------------------------------------------
As set forth above, on April 10, 2006 we entered into an agreement to
acquire Intelgenx, a drug delivery that focuses on the development of oral
controlled-release products for the generic pharmaceutical market as well as
novel buccal delivery systems. Management is confident that we will be able to
fulfill the terms and conditions set forth in the agreements related to the
acquisition and that we will consummate the transaction. However, there can be
no assurance that the transaction will be completed or that the acquisition of
Intelgenx will result in a successful operating business for our company. If the
acquisition is not completed, or if our business following the acquisition is
not adequate to provide sufficient capital, we may have to cease operations.
Discretionary use of proceeds
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Except for the Intelgenx transaction, we are not currently engaged in any
substantive business activities other than looking for and investigating
business opportunities. Accordingly, management has broad discretion with
respect to the potential acquisition of any business, assets, property. Although
management intends to apply any proceeds it may receive through the future
issuance of stock or debt to a suitable acquired business, we will have broad
discretion in applying these funds. There can be no assurance that our use or
allocation of such proceeds will allow it to achieve its business objectives.
No substantive disclosure relating to prospective acquisitions
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Except for the information concerning Intelgenx included herein, potential
investors in our securities have no substantive information upon which to base a
decision whether to invest in our securities. Prospective investors currently
have only limited information with which to evaluate the comparative risks and
merits of investing in the industry or business in which we may acquire.
Potential investors would have access to significantly more information if we
had finalized the Intelgenx transaction.
Future acquisition or merger may result in substantial dilution
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We are currently authorized to issued 20 million shares of common stock, of
which 1.5 million shares are outstanding as of the date hereof. The issuance of
additional shares in connection with any acquisition or merger transaction or
the raising of capital may result in substantial dilution of the holdings of
current stockholders.
Management will devote only minimal time to our business
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Presently, our directors have other full time obligations and will devote
only such time to our business as necessary to maintain our viability. Thus,
because of management's other time commitments, together with the fact that we
have no business operations, management anticipates that it will devote only a
minimal amount of time to our activities, at least until such time as we have
identified a suitable acquisition candidate.
-10-
Effective voting control held by directors
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Our directors own in the aggregate approximately 59.2% of our outstanding
voting securities. Only one stockholder owns in excess of 5%. Accordingly, our
current directors will have the ability to elect all of our directors, who in
turn elect all executive officers, without regard to the votes of other
stockholders.
No public market for our common stock
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Management currently anticipates that within 12 months from the filing of
this report, we will apply for listing of our common stock on the OTC Bulletin
Board. However, there is currently no market for our shares and there can be no
assurance that any such market will ever develop or be maintained. Any trading
market that may develop in the future will most likely be very volatile, and
numerous factors beyond our control may have a significant effect on the market.
Only companies that report their current financial information to the SEC may
have their securities included on the OTC Bulletin Board. Therefore, we must
keep current in our filing obligations with the SEC, including our periodic and
annual reports and the financial statements required thereby. In the event that
we become delinquent in our filings or otherwise lose our status as a "reporting
issuer," any future quotation of our shares on the OTC Bulletin Board may be
jeopardized.
Item 2. Description of Property
We do not presently own any property.
Item 3. Legal Proceedings
There are no material pending legal proceedings to which our company, or
any subsidiary thereof, is a party or to which any of our property is subject
and, to the best of our knowledge, no such actions against us are contemplated
or threatened.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of our securities holders during the
fourth quarter of the fiscal year ended December 31, 2005.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
There is not currently, nor has there ever been, a public trading market
for our common stock. We have made an initial application to the NASD to have
our shares quoted on the OTC Bulletin Board. Our application consists of current
corporate information, financial statements and other documents as required by
Rule 15c2-11 of the Securities Exchange Act of 1934.
Inclusion on the OTC Bulletin Board permits price quotations for our shares
to be published by that service. Although we have submitted an application to
the OTC Bulletin Board, we do not anticipate a public trading market in our
shares in the immediate future. Any future secondary trading of our shares may
be subject to certain state imposed restrictions. Except for the application to
the OTC Bulletin Board, there are no plans, proposals, arrangements or
understandings with any person concerning the development of a trading market in
any of our securities. There can be no assurance that our shares will be
accepted for trading on the OTC Bulletin Board or any other recognized trading
market. Also, there can be no assurance that a public trading market will
develop following acceptance by the OTC Bulletin Board or at any other time in
the future or, that if such a market does develop, that it can be sustained.
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The ability of individual stockholders to trade their shares in a
particular state may be subject to various rules and regulations of that state.
A number of states require that an issuer's securities be registered in their
state or appropriately exempted from registration before the securities are
permitted to trade in that state. Presently, we have no plans to register our
securities in any particular state.
It is most unlikely that our securities will be listed on any national or
regional exchange or on The Nasdaq Stock Market. Therefore our shares most
likely will be subject to the provisions of Section 15(g) and Rule 15g-9 of the
Exchange Act, commonly referred to as the "penny stock" rule. Section 15(g) sets
forth certain requirements for broker-dealer transactions in penny stocks and
Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule
3a51-1 of the Exchange Act.
The SEC generally defines penny stock to be any equity security that has a
market price less than $5.00 per share, subject to certain exceptions. Rule
3a51-1 provides that any equity security is considered to be a penny stock
unless that security is:
* registered and traded on a national securities exchange meeting
specified criteria set by the SEC;
* authorized for quotation on The NASDAQ Stock Market;
* issued by a registered investment company;
* excluded from the definition on the basis of price (at least $5.00 per
share) or the issuer's net tangible assets; or
* exempted from the definition by the SEC.
Broker-dealers who sell penny stocks to persons other than established
customers and accredited investors (generally persons with assets in excess of
$1,000,000 or annual income exceeding $200,000, or $300,000 together with their
spouse), are subject to additional sales practice requirements. Broker-dealers
must also make a special suitability determination for the purchase of such
securities and must have received the purchaser's written consent to the
transaction prior to the purchase. Additionally, for any transaction involving a
penny stock, unless exempt, the rules require the delivery, prior to the first
transaction, of a risk disclosure document relating to the penny stock market. A
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, and current quotations for the
securities. Finally, monthly statements must be sent to clients disclosing
recent price information for the penny stocks held in the account and
information on the limited market in penny stocks.
Consequently, these rules may restrict the ability of broker-dealers to
trade and/or maintain a market in our common stock and may affect the ability of
stockholders to sell their shares. These requirements may be considered
cumbersome by broker-dealers and could impact the willingness of a particular
broker-dealer to make a market in our shares, or they could affect the value at
which our shares trade. Classification of the shares as penny stocks increases
the risk of an investment in our shares.
As of December 31, 2005, there were approximately 35 holders of record of
our common stock. Because all of our outstanding shares of common stock were
issued pursuant to exemptions under the 1933 Act, we have considered all
outstanding shares as restricted securities. Corporate records indicate that all
of the issued and outstanding shares were issued in 1999 in private
transactions. We have relied upon the exemption provided by Section 4(2) of the
1933 Act in the private issuance of shares. To the best of our knowledge, no
private placement memorandum was used in relation to the issuance of shares.
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Under Rule 144(k) of the 1933 Act, the requirements of paragraphs (c), (e),
(f), and (h) of Rule 144 do not apply to restricted securities sold for the
account of a person who is not an affiliate of an issuer at the time of the sale
and has not been an affiliate during the preceding three months, provided the
securities have been beneficially owned by the seller for a period of at least
two years prior to their sale. Thus, in reliance on Rule 144(k), we consider
15,800 shares to be free of restriction, unless held by an affiliate or
controlling stockholder. For purposes of this report only, a controlling
stockholder is considered to be a person owning ten percent (10%) or more of our
total outstanding shares, or is otherwise deemed an affiliate. No individual
person owning a portion of the 15,800 shares owns more than five percent (5%) of
the total outstanding shares.
The remaining 1,484,200 shares are considered restricted securities and
presently held by four stockholders. All of these restricted shares are
presently eligible for sale pursuant to the provisions of Rule 144, subject to
the volume and other limitations set forth under that Rule.
Under the provisions of Rule 144 of the Securities Act of 1933, restricted
securities may be sold into the public market, subject to holding period, volume
and other limitations set forth under the Rule. In general, under Rule 144 as
currently in effect, a person (or persons whose shares are aggregated) who has
beneficially owned restricted shares for at least one year, including any person
who may be deemed to be an "affiliate" (as the term "affiliate" is defined under
the Securities Act), is entitled to sell, within any three-month period, an
amount of shares that does not exceed the greater of
* the average weekly trading volume in the common stock, as reported
through the automated quotation system of a registered securities
association, during the four calendar weeks preceding such sale, or
* 1% of the shares then outstanding.
In order for a stockholder to rely on Rule 144, we must have available
adequate current public information with respect to our business and financial
status. A person who is not deemed to be an "affiliate" and has not been an
affiliate for the most recent three months, and who has held restricted shares
for at least two years would be entitled to sell such shares under Rule 144(k)
without regard to the various resale limitations of Rule 144.
Dividend Policy
We have not declared or paid cash dividends or made distributions in the
past on our common stock, and we do not anticipate that we will pay cash
dividends or make distributions in the foreseeable future. We currently intend
to retain and invest future earnings to finance operations.
Item 6. Management's Discussion and Analysis or Plan of Operation
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Form 10-KSB.
We are considered a development stage company with no assets or capital and
with no material operations or income. The costs and expenses associated with
the preparation and filing of this and other reports and other corporate
expenses have been paid for by advances from stockholders. It is anticipated
that we will require only nominal capital to maintain our corporate viability
and necessary funds will most likely be provided by our officers and directors
in the immediate future. However, unless we are able to facilitate an
acquisition of or merger with an operating business or are able to obtain
significant outside financing, there is substantial doubt about our ability to
continue as a going concern.
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In the opinion of management, inflation has not and will not have a
material effect on our operations until such time as we successfully complete an
acquisition or merger. At that time, management will evaluate the possible
effects of inflation related to our business and operations.
Plan of Operation
If we do not consummate the Intelgenx acquisition, during the next 12
months we will actively seek out and investigate possible business opportunities
with the intent to acquire or merge with one or more business ventures. In our
search for business opportunities, management will follow the procedures
outlined in Item 1 above. Because we lack funds, it may be necessary for our
officers and directors to either advance funds to us or to accrue expenses until
such time as a successful business consolidation can be made. Management intends
to hold expenses to a minimum and to obtain services on a contingency basis when
possible. Further, our directors will defer any compensation until such time as
an acquisition or merger can be accomplished and will strive to have the
business opportunity provide their remuneration. However, if engage outside
advisors or consultants in our search for business opportunities, it may be
necessary for us to attempt to raise additional funds. As of the date hereof, we
have not made any arrangements or definitive agreements to use outside advisors
or consultants or to raise any capital. In the event we do need to raise
capital, most likely the only method available to us would be the private sale
of our securities. Because of our nature as a development stage company, it is
unlikely that we could make a public sale of securities or be able to borrow any
significant sum from either a commercial or private lender. There can be no
assurance that we will be able to obtain additional funding when and if needed,
or that such funding, if available, can be obtained on acceptable terms.
We do not intend to use any employees, with the possible exception of
part-time clerical assistance on an as-needed basis. Outside advisors or
consultants will be used only if they can be obtained for minimal cost or on a
deferred payment basis. Management is confident that it will be able to operate
in this manner and to continue its search for business opportunities during the
next twelve months.
Net Operating Loss
We have accumulated approximately $23,012 of net operating loss
carryforwards as of December 31, 2005. This loss carryforward may be offset
against taxable income and income taxes in future years and expires in the year
2025. The use of these losses to reduce future income taxes will depend on the
generation of sufficient taxable income prior to the expiration of the net
operating loss carryforwards. In the event of certain changes in control, there
will be an annual limitation on the amount of net operating loss carryforwards
which can be used. No tax benefit has been reported in the financial statements
for the year ended December 31, 2005 because it has been fully offset by a
valuation reserve. The use of future tax benefit is undeterminable because we
presently have no operations.
Forward-Looking and Cautionary Statements
This report on Form 10-KSB includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, and Section 21E of the
Securities Exchange Act of 1934. These forward-looking statements may relate to
such matters as anticipated financial performance, future revenues or earnings,
business prospects, projected ventures, new products and services, anticipated
market performance and similar matters. When used in this report, the words
"may," "will," expect," anticipate," "continue," "estimate," "project,"
"intend," and similar expressions are intended to identify forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 regarding events, conditions,
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and financial trends that may affect our future plans of operations, business
strategy, operating results, and financial position. We caution readers that a
variety of factors could cause our actual results to differ materially from the
anticipated results or other matters expressed in forward-looking statements.
These risks and uncertainties, many of which are beyond our control, include:
* the sufficiency of existing capital resources and our ability to raise
additional capital to fund cash requirements for future operations;
* uncertainties following any successful acquisition or merger related to
the future rate of growth of our business and acceptance of our
products and/or services;
* volatility of the stock market, particularly within the technology
sector; and
* general economic conditions.
Although we believe the expectations reflected in these forward-looking
statements are reasonable, such expectations cannot guarantee future results,
levels of activity, performance or achievements.
Recent Accounting Pronouncements
--------------------------------
In January 2003, the Financial Accounting Standards Board, or FASB, issued
Interpretation No. 46 ("FIN 46"), Consolidation of Variable Interest Entities,
which addresses the consolidation of business enterprises (variable interest
entities), to which the usual condition of consolidation, a controlling
financial interest, does not apply. FIN 46 requires an entity to assess its
business relationships to determine if they are variable interest entities. As
defined in FIN 46, variable interests are contractual, ownership or other
interests in an entity that change with changes in the entity's net asset value.
Variable interests in an entity may arise from financial instruments, service
contracts, guarantees, leases or other arrangements with the variable interest
entity. An entity that will absorb a majority of the variable interest entity's
expected losses or expected residual returns, as defined in FIN 46, is
considered the primary beneficiary of the variable interest entity. The primary
beneficiary must include the variable interest entity's assets, liabilities and
results of operations in its consolidated financial statements. FIN 46 is
immediately effective for all variable interest entities created after January
31, 2003. For variable interest entities created prior to this date, the
provisions of FIN 46 were originally required to be applied no later than our
first quarter of Fiscal 2004. On October 8, 2003, the FASB issued FASB Staff
Position (FSP) FIN 46-6, Effective Date of FASB Interpretation No. 46,
Consolidation of Variable Interest Entities. The FSP provides a limited deferral
(until the end of our second quarter of 2004) of the effective date of FIN 46
for certain interests of a public entity in a variable interest entity or a
potential variable interest entity. We will continue to evaluate FIN 46, but due
to the complex nature of the analysis required by FIN 46, we have not determined
the impact on our consolidated results of operations or financial position.
In April 2003, the FASB issued Statement of Financial Accounting Standards
(SFAS) SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and
Hedging Activities. SFAS No. 149 amends and clarifies accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS No. 133. In particular, this
Statement clarifies under what circumstances a contract with an initial net
investment meets the characteristic of a derivative and when a derivative
contains a financing component that warrants special reporting in the statement
of cash flows. We adopted this standard for contracts entered into or modified
after June 30, 2003. The adoption of SFAS No. 149 did not have a material impact
on our consolidated results of operations or financial position.
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In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. This Statement
requires certain financial instruments that embody obligations of the issuer and
have characteristics of both liabilities and equity to be classified as
liabilities. We adopted this standard for financial instruments entered into or
modified after May 31, 2003. The adoption of SFAS No. 150 did not have a
material impact on our consolidated results of operations or financial position.
On December 16, 2004 the FASB issued SFAS No. 123(R), Share-Based Payment,
which is an amendment to SFAS No. 123, Accounting for Stock-Based Compensation.
This new standard eliminates the ability to account for share-based compensation
transactions using Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees, and generally requires such
transactions to be accounted for using a fair-value-based method and the
resulting cost recognized in our financial statements. This new standard is
effective for awards that are granted, modified or settled in cash in interim
and annual periods beginning after June 15, 2005. In addition, this new standard
will apply to unvested options granted prior to the effective date. We will
adopt this new standard effective for the fourth fiscal quarter of 2005, and
have not yet determined what impact this standard will have on our financial
position or results of operations.
In November 2004, the FASB issued SFAS No. 151, Inventory Costs - an
amendment of ARB No. 43, Chapter 4. This Statement amends the guidance in ARB
No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal
amounts of idle facility expense, freight, handling costs, and wasted material
(spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that ". . .
under some circumstances, items such as idle facility expense, excessive
spoilage, double freight, and rehandling costs may be so abnormal as to require
treatment as current period charges. . . ." This Statement requires that those
items be recognized as current-period charges regardless of whether they meet
the criterion of "so abnormal." In addition, this Statement requires that
allocation of fixed production overheads to the costs of conversion be based on
the normal capacity of the production facilities. This statement is effective
for inventory costs incurred during fiscal years beginning after June 15, 2005.
Management does not believe the adoption of this Statement will have any
immediate material impact on the company.
In December 2004, the FASB issued SFAS No. 152, Accounting for Real Estate
Time-sharing Transactions, which amends FASB statement No. 66, Accounting for
Sales of Real Estate, to reference the financial accounting and reporting
guidance for real estate time-sharing transactions that is provided in AICPA
Statement of Position (SOP) 04-2, Accounting for Real Estate Time-Sharing
Transactions. This statement also amends FASB Statement No. 67, Accounting for
Costs and Initial Rental Operations of Real Estate Projects, to state that the
guidance for (a) incidental operations and (b) costs incurred to sell real
estate projects does not apply to real estate time-sharing transactions. The
accounting for those operations and costs is subject to the guidance in SOP
04-2. This Statement is effective for financial statements for fiscal years
beginning after June 15, 2005. Management believes the adoption of this
Statement will have no impact on the financial statements of the company.
In December 2004, the FASB issued SFAS No.153, Exchange of Nonmonetary
Assets. This Statement addresses the measurement of exchanges of nonmonetary
assets. The guidance in APB Opinion No. 29, Accounting for Nonmonetary
Transactions, is based on the principle that exchanges of nonmonetary assets
should be measured based on the fair value of the assets exchanged. The guidance
in that Opinion, however, included certain exceptions to that principle. This
Statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges
of similar productive assets and replaces it with a general exception for
exchanges of nonmonetary assets that do not have commercial substance. A
nonmonetrary exchange has commercial substance if the future cash flows of the
entity are expected to change significantly as a result of the exchange. This
Statement is effective for financial statements for fiscal years beginning after
June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges
incurred during fiscal years beginning after the date of this statement is
issued. Management believes the adoption of this Statement will have no impact
on the financial statements of the company.
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Item 7. Financial Statements
Financial statements for the fiscal years ended December 31, 2005 and 2004
have been examined to the extent indicated in their reports by Chisholm,
Bierwolf & Nilson, LLC, independent certified public accountants and have been
prepared in accordance with accounting principles generally accepted in the
United States of America and pursuant to Regulation S-B as promulgated by the
SEC. The aforementioned financial statements are included herein starting with
page F-1.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
We have not had any disagreements with our certified public accountants
with respect to accounting practices or procedures of financial disclosures.
Item 8A. Controls and Procedures
As of the end of the period covered by this annual report, we carried out
an evaluation, under the supervision and with the participation of management,
including our chief executive officer and chief financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934. In designing and evaluating the disclosure controls and
procedures, management recognizes that there are inherent limitations to the
effectiveness of any system of disclosure controls and procedures, including the
possibility of human error and the circumvention or overriding of the controls
and procedures. Accordingly, even effective disclosure controls and procedures
can only provide reasonable assurance of achieving their desired control
objectives. Additionally, in evaluating and implementing possible controls and
procedures, management is required to apply its reasonable judgment.
Based upon the required evaluation, our chief executive officer and chief
financial officer concluded as of December 31, 2005, our disclosure controls and
procedures are effective in timely alerting them to material information
relating to the company required to be disclosed by us in the reports that we
file or submit under the Exchange Act to be recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms. There
have been no significant changes in our internal controls over financial
reporting or in other factors that could significantly affect internal controls
over financial reporting subsequent to the date we carried out our evaluation.
Item 8B. Other Information
Not applicable.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The following table sets forth the names, ages, and offices held by our
directors and executive officers:
Name Age Position
---- --- --------
J. Rockwell Smith 64 Chairman of the Board and Director
Edward F. Cowle 48 President, C.E.O. and Director
Geoff Williams 34 Secretary and Director
-------------------
All directors hold office until the next annual meeting of stockholders and
until their successors have been duly elected and qualified. There are no
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agreements with respect to the election of directors. We have not compensated
our directors for service on the board of directors or any committee thereof,
but directors are entitled to be reimbursed for expenses incurred for attendance
at meetings of the board and any committee of the board. However, due to our
lack of funds, directors will defer their expenses and any compensation until
such time as we can consummate a successful acquisition or merger. As of the
date hereof, no director has accrued any expenses or compensation. Officers are
appointed annually by the board and each executive officer serves at the
discretion of the board. We do not have any standing committees.
None of our directors are currently, nor for the past three years have
been, a director of a "shell" or "blank check" company or other corporation that
is actively pursuing acquisitions or mergers, except as set forth below in their
respective resumes.
No director, officer, affiliate or promoter has, within the past five
years, filed any bankruptcy petition, been convicted in or been the subject of
any pending criminal proceedings, or is any such person the subject or any
order, judgment, or decree involving the violation of any state or federal
securities laws.
Our present directors have other full-time employment or sources of income
and will routinely devote only such time to our business necessary to maintain
our viability. It is estimated that each director will devote less than ten
hours per month to our activities. The directors will, when the situation
requires, review potential business opportunities or actively participate in
negotiations for a potential merger or acquisition on an as- needed-basis.
Currently, there is no arrangement, agreement or understanding between
management and non- management stockholders under which non-management
stockholders may directly or indirectly participate in or influence the
management of our affairs. Present management openly accepts and appreciates any
input or suggestions from stockholders. However, the board of directors is
elected by the stockholders and the stockholders have the ultimate say in who
represents them on the board. There are no agreements or understandings for any
officer or director to resign at the request of another person and none of the
current offers or directors are acting on behalf of, or will act at the
direction of any other person.
The business experience of each of the persons listed above during the past
five years is as follows:
J. Rockwell Smith. Mr. Smith has been a director and Chairman since our
inception in July 1999. From 1977 to 1989, he owned and operated Rocky Smith
Construction, a construction company in Park City, Utah that supervised
construction projects in the resort community. Since 1990, Mr. Smith has been
semi-retired while being active with his private investments and working as a
part-time driver for Park City Transportation Company. Mr. Smith studied
engineering at Seattle University and the University of Washington.
Mr. Smith has been an executive officer and director within the last three
years of the following companies that may also be deemed blank check companies:
o Calypso Financial Services, Inc. (Chairman of the Board and director
from July 1999 to the present).
o Consolidated Travel Systems, Inc. (Vice President and director since
February 2001).
o Eagle's Nest Mining Company, now known as Nanoscience Technologies,
Inc. (director from October 1997 to March 2004).
o Grant Silver, Inc. (principal stockholder until September 1997).
o Green MT. P.S. (Principal stockholder until January 1998), now known as
Generex Biotechnology Corporation.
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o Index Daley Mines, now known as International Digital Technologies
(principal stockholder until June 1998).
o Nava Leisure, U.S.A., Inc., now known as Senesco Technologies, Inc.
(President and director until
January 1999).
The current status of each of these companies is set forth below:
Name of Company Date of Registration Status
--------------- -------------------- ------
Calypso Financial Services, Inc. 11-17-1999 (SB-2) Delinquent in filings with SEC
7-31-2000 (10-SB) Seeking merger and/or acquisition
Consolidated Travel Systems, Inc. 11-9-2001 (10-SB) Active and current with SEC Pending acquisition
by way of merger with Knobias Holdings, Inc.
Eagles Nest Mining Company 5-14-1999 (10-SB) Active and current with SEC Entered into research
and license agreement with New York University in
September 2003 to develop certain technologies
Grant Ventures, Inc. 12-20-2002 (10-SB) Active and current with SEC Completed merger with
Impact Diagnostics, Inc. in July 2004
Green Mt. Labs., Inc. 1-8-2004 (10-SB) Active and current with SEC
Seeking merger and/or acquisition
Index Daley Mines None Current status unknown
Acquired Overlook Health Care Systems
in 1998 and became International Digital
Technologies in 1999
Nava Leisure, U.S.A., Inc. 3-27-1997 (10-SB) Active and current with SEC
(n.k.a. Senesco Technologies, Inc.) Merged with Senesco, in January 1999
and change its domicile to New Jersey in
September 1999
Edward F. Cowle. Mr. Cowle has been President and a Director of Big Flash
since our inception in July 1999. Mr. Cowle has been self employed in financial
public relations from 1994 to the present, assisting public companies with
financial and investment banking activities. From 2000 to December 2003, Mr.
Cowle served as a director of Laser Technology, Inc., a public company listed on
the American Stock Exchange that designs, manufactures and markets of pulse
laser measuring instruments and systems. Mr. Cowle was a principal of LTI
Acquisition Corp., a stockholder group that took Laser Technology private in
December 2003. From 1992 to 1994, Mr. Cowle was a Senior Vice President --
Investments with Paine Webber in New York City and from 1991 to 1992, he was a
Registered Representative with Bear Stearns & Company, also in New York City.
Mr. Cowle graduated from Fairleigh Dickinson University in Madison, New Jersey
in 1978 with a B.A. Degree in English, American Studies. Mr. Cowle also attended
Vermont Law School in South Royalton, Vermont from 1978 to 1979. Mr. Cowle is a
principal stockholder of LTI Acquisition.
Mr. Cowle has been an executive officer and director of the following
companies that may be deemed blank check companies:
o Calypso Financial Services, Inc. (President and director from July 1999
to the present);
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o Eastgate Acquisition Corp., now known as Talavera's Fine Furniture
(Secretary and director from 1999 to 2001 and President from 2001 to
the present); and
o Westgate Acquisitions Corp. (Secretary and director from 1999 to 2001
and President from 2001 to the present).
The current status of each of these companies is set forth below:
Name of Company Date of Registration Status
--------------- -------------------- ------
Calypso Financial Services, Inc. 11-17-1999 (SB-2) Delinquent in filings with SEC
7-31-2000 (10-SB) Seeking merger and/or acquisition
Eastgate Acquisition Corp. 11-29-1999 (SB-2) Not filing reports with SEC
Seeking merger and/or acquisition
Westgate Acquisitions Corp. 11-30-1999 (SB-2) Not filing reports with SEC
Seeking merger and/or acquisition
Geoff Williams. Mr. Williams has been a director of Big Flash since our
inception in July 1999 and was appointed secretary in August 1999. From 1994 to
the present, Mr. Williams has been a representative of Williams Investments
Company, a Salt Lake City, Utah financial consulting firm involved in
facilitating mergers, acquisitions, business consolidations and financings. Mr.
Williams attended the University of Utah and California Institute of the Arts.
Mr. Williams has been an executive officer and director within the last
three years of the following companies that may also be deemed blank check
companies:
o Calypso Financial Services, Inc. (Secretary and director from 1999 to
the present);
o Consolidated Travel Systems, Inc. (Director since August 1999 and
President from February 2001 to the present);
o Eastgate Acquisition Corp., now known as Talavera's Fine Furniture
(Secretary and director from 1999 to the present);
o Grant Ventures, Inc. (Secretary and director from July 2001 to July
2004);
o Green Mt. Labs., Inc., (director since August 2002 and President since
April 2004);
o Ocean Express Lines, Inc. (President and director from February 2000 to
February 2002);
o RAKO Capital Corporation (President and director from February 2001 to
December 2002);
o Silver River Ventures, Inc. (President and director since September
2004); and
o Westgate Acquisitions Corp. (Secretary and director from 1999 to the
present).
The current status of each of these companies is set forth below:
Name of Company Date of Registration Status
--------------- -------------------- ------
Calypso Financial Services, Inc. 11-17-1999 (SB-2) Delinquent in filings with SEC
7-31-2000 (10-SB) Seeking merger and/or acquisition
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Consolidated Travel Systems, Inc. 11-9-2001(10-SB) Active and current with SEC
Pending merger with Knobias Holdings, Inc.
Eastgate Acquisition Corp. 11-29-1999 (SB-2) Not filing reports with SEC
Seeking merger and/or acquisition
Talavera's Fine Furniture None Inactive furniture company
Grant Ventures, Inc. 12-20-2002 (10-SB) Active and current with SEC
Completed merger with Impact
Diagnostics, Inc. in July 2004
Green Mt. Labs., Inc. 1-8-2004 (10-SB) Active and current with SEC
Seeking merger and/or acquisition
Ocean Express Lines, Inc. 7-3-2002 (10-SB) Active and delinquent in filings
(n.k.a. Cementitious Materials, Inc.) with SEC
Acquired Cementitious Material
Technologies, Inc. in November 2003
RAKO Capital Corporation 7-16-1998 (10-SB) Currently delinquent in its periodic report
filings with SEC
Acquired Centra Industries, Inc. in
January 2003 - currently an active
telecommunications infrastructure
company
Silver River Ventures, Inc. 12-13-2005 (10-SB) Active and current with SEC
Seeking merger and/or acquisition
Westgate Acquisitions Corp. 11-30-1999 (SB-2) Not filing reports with SEC
Seeking merger and/or acquisition
Compliance With Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires our directors and executive
officers, and persons who own more than 10% of our common stock, to file with
the SEC initial reports of ownership and reports of changes in ownership of our
common stock and other equity securities. None of these persons have filed
initial reports of ownership and we will endeavor to have these reports prepared
and submitted to the SEC.
Item 10. Executive Compensation
We have not had a bonus, profit sharing, or deferred compensation plan for
the benefit of employees, officers or directors. We have not paid any salaries
or other compensation to officers, directors or employees for the years ended
December 31, 2005 and 2004. Further, we have not entered into an employment
agreement with any of our officers, directors or any other persons and no such
agreements are anticipated in the immediate future. It is intended that our
directors will defer any compensation until such time as an acquisition or
merger can be accomplished and will strive to have the business opportunity
provide their remuneration. As of the date hereof, no person has accrued any
compensation.
-20-
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information, to the best of our knowledge,
as of December 31, 2004, with respect to each person known by us to own
beneficially more than 5% of the outstanding common stock, each director and all
directors and officers as a group.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class(1)
-------------------- -------------------- -----------
J. Rockwell Smith * 4,400 .3 %
54 West 400 South, Suite 220
Salt Lake City, UT 84101
Geoff Williams * 284,200 18.9 %
54 West 400 South, Suite 220
Salt Lake City, UT 84101
Edward F. Cowle * 600,000 40.0 %
300 Park Avenue, Suite 1712
New York, NY 10022
H. Deworth Williams 596,000 39.7 %
54 West 400 South, Suite 220
Salt Lake City, UT 84101
All directors and officers 888,600 59.2 %
a group (3 persons)
------------------------------------
* Director and/or executive officer
Note: Unless otherwise indicated in the footnotes below, we have been
advised that each person above has sole voting power over the
shares indicated above.
(1) Based upon 1.5 million shares of common stock outstanding on December
31, 2005.
Item 12. Certain Relationships and Related Transactions
During the past two fiscal years, there have been no material transactions
between us and any officer, director, nominee for election as director, or any
stockholder owning greater than 5% of our outstanding shares, nor any member of
the above referenced individuals' immediate family.
Our officers and directors are subject to the doctrine of corporate
opportunities only insofar as it applies to business opportunities in which we
have indicated an interest, either through a proposed business plan or by way of
an express statement of interest contained in our minutes. If directors are
presented with business opportunities that may conflict with business interests
identified by us, such opportunities must be promptly disclosed to the board of
directors and made available to us. In the event the board shall reject an
opportunity so presented and only in that event, any of our officers or
directors may avail themselves of such an opportunity. Every effort will be made
to resolve any conflicts that may arise in favor of us. There can be no
assurance, however, that these efforts will be successful.
-21-
In the event of a successful acquisition or merger, a finder's fee, in the
form of cash or securities, may be paid to persons instrumental in facilitating
the transaction. We have not established any criteria or limits for the
determination of a finder's fee, although it is likely that an appropriate fee
will be based upon negotiations by us and the appropriate business opportunity
and the finder. Such fees are estimated to be customarily between 1% and 5% of
the size of the transaction, based upon a sliding scale of the amount involved.
Management cannot at this time make an estimate as to the type or amount of a
potential finder's fee that might be paid, but is expected to be comparable to
consideration normally paid in like transactions. It is unlikely that a finder's
fee will be paid to an affiliate because of the potential conflict of interest
that might result. Any such fee would have to be approved by the stockholders or
a disinterested board of directors.
Item 13. Exhibits
(a) Exhibits
Exhibit No. Exhibit Name
----------- ------------
3.1* Certificate of Incorporation
3.2* By-Laws
4.1* Instrument defining rights of stockholders (See Exhibit No.
3.1, Certificate of Incorporation)
31.1 Certification of C.E.O. Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Principal Accounting Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of C.E.O. Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
32.2 Certification of Principal Accounting Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.1** Share Exchange Agreement by and between Big Flash Corporation,
6544631 Canada Inc., Horst Zerbe, Ingrid Zerbe, Joel Cohen and
Intelgenx Corp. dated April 10, 2006.
----------------
* Previously filed as an Exhibit to the Form 10-SB filed July 28, 2000.
** Previously filed as Exhibit to Form 8-K dated April 10, 2006 and filed
April 13, 2006.
Item 14. Principal Accountant Fees and Services
We do not have an audit committee and as a result our entire board of
directors performs the duties of an audit committee. Our board of directors will
approve in advance the scope and cost of the engagement of an auditor before the
auditor renders audit and non-audit services. As a result, we do not rely on
pre-approval policies and procedures.
We do not have an audit committee and as a result our entire board of
directors performs the duties of an audit committee. Our board of directors will
approve in advance the scope and cost of the engagement of an auditor before the
auditor renders audit and non-audit services. As a result, we do not rely on
pre-approval policies and procedures.
Audit Fees
----------
The aggregate fees billed by our independent auditors, Chisholm, Bierwolf &
Nilson, for professional services rendered for the audit of our annual financial
statements included in our Annual Reports on Form 10-KSB for the years ended
December 31, 2005 and 2004, and for the review of quarterly financial statements
included in our Quarterly Reports on Form 10-QSB for the quarters ended March
31, June 30 and September 30, 2005, were $3,300 for 2005 and $3,220 for 2004.
-22-
Audit Related Fees
------------------
For the years ended December 31, 2005 and 2004, there were no fees billed
for assurance and related services by Chisholm, Bierwolf & Nilson relating to
the performance of the audit of our financial statements which are not reported
under the caption "Audit Fees" above.
Tax Fees
--------
For the years ended December 31, 2005 and 2004, no fees were billed by
Chisholm, Bierwolf & Nilson for tax compliance, tax advice and tax planning.
We do not use Chisholm, Bierwolf & Nilson for financial information system
design and implementation. These services, which include designing or
implementing a system that aggregates source data underlying the financial
statements or generates information that is significant to our financial
statements, are provided internally or by other service providers. We do not
engage Chisholm, Bierwolf & Nilson to provide compliance outsourcing services.
The board of directors has considered the nature and amount of fees billed
by Chisholm, Bierwolf & Nilson and believes that the provision of services for
activities unrelated to the audit is compatible with maintaining Chisholm,
Bierwolf & Nilson's independence.
-23-
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Big Flash Corporation
By: /S/ EDWARD F. COWLE
----------------------------------------
Edward F. Cowle
President and C.E.O.
Dated: April 14, 2006
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/ EDWARD F. COWLE President, C.E.O. and director April 14, 2006
----------------------------------------- (Principal Accounting Officer)
Edward F. Cowle
/S/ J. ROCKWELL SMITH Chairman and Director April 14, 2006
-----------------------------------------
J. Rockwell Smith
/S/ GEOFF WILLIAMS Secretary and Director April 14, 2006
-----------------------------------------
Geoff Williams
-21-
BIG FLASH CORPORATION
(A Development Stage Company)
FINANCIAL STATEMENTS
December 31, 2005
F-1
C O N T E N T S
Report of Independent Registered Public Accounting Firm....................F-3
Balance Sheet..............................................................F-4
Statements of Operations...................................................F-5
Statements of Stockholders' Equity (Deficit)...............................F-6
Statements of Cash Flows...................................................F-8
Notes to the Financial Statements..........................................F-9
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors
Big Flash Corporation
(A Development Stage Company)
Salt Lake City, UT
We have audited the accompanying balance sheet of Big Flash Corporation (a
Development Stage Company) as of December 31, 2005 and the related statements of
operations, stockholders' equity (deficit) and cash flows for the years ended
December 31, 2005 and 2004. These 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 standards of the PCAOB (United
States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. And audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Big Flash Corporation (a
Development Stage Company) as of December 31, 2005 and the results of its
operations and its cash flows for the years ended December 31, 2005 and 2004 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 has sustained recent losses from operations,
has a deficit in working capital and a stockholders' deficit. This raises
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to 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/ Chisholm, Bierwolf & Nilson, LLC
------------------------------------
Bountiful, Utah
February 22, 2006
F-3
BIG FLASH CORPORATION
(A Development Stage Company)
Balance Sheets
ASSETS
December 31,
2005
-----------
CURRENT ASSETS
Cash $ --
-----------
Total Current Assets --
-----------
TOTAL ASSETS $ --
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable $ 350
Due to stockholder 20,149
Accrued interest - stockholder 1,513
-----------
Total Current Liabilities 22,012
-----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock;20,000,000 shares authorized,
at $0.00001 par value, 1,500,000 shares issued
and outstanding 15
Additional paid-in capital 985
Deficit accumulated during the development stage (23,012)
-----------
Total Stockholders' Equity (Deficit) (22,012)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ --
===========
The accompanying notes are an integral part of these financial statements.
F-4
BIG FLASH CORPORATION
(A Development Stage Company)
Statements of Operations
From
Inception on
For the July 27, 1999
Years Ended Through
December 31, December 31,
-------------------------- -----------
2005 2004 2005
----------- ----------- -----------
REVENUES $ -- $ -- $ --
EXPENSES
General and Administrative 9,906 7,545 21,498
----------- ----------- -----------
Total Expenses 9,906 7,545 21,498
----------- ----------- -----------
LOSS FROM OPERATIONS (9,906) (7,545) (21,498)
----------- ----------- -----------
OTHER EXPENSES
Interest Expense (1,217) (297) (1,514)
----------- ----------- -----------
Total Other Expenses (1,217) (297) (1,514)
----------- ----------- -----------
NET LOSS $ (11,123) $ (7,842) $ (23,012)
=========== =========== ===========
BASIC LOSS PER SHARE $ (0.01) $ (0.01)
=========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 1,500,000 1,500,000
=========== ===========
The accompanying notes are an integral part of these financial statements
F-5
BIG FLASH CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
Deficit
Accumulated
Common Stock Additional Stock During the
-------------------- Paid-In Subscription Development
Shares Amount Capital Receivable Stage
----------- ----------- ----------- ----------- -----------
Balance at inception on
July 27, 1999 -- $ -- $ -- $ -- $ --
Common stock issued for
cash on September 8, 1999
at $0.0003 per share 1,500,000 15 485 (500) --
Net loss from inception on
July 27, 1999 through
December 31, 1999 -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 1,500,000 15 485 (500) --
Net loss for the year ended
December 31, 2000 -- -- -- -- (2,503)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2000 1,500,000 15 485 (500) (2,503)
Cash received on stock
subscription receivable -- -- -- 500 --
Net loss for the year ended
December 31, 2001 -- -- -- (1,086)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2001 1,500,000 15 485 -- (3,589)
Net loss for the year ended
December 31, 2002 -- -- -- -- (350)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2002 1,500,000 15 485 -- (3,939)
Net loss for the year ended
December 31, 2003 -- -- -- -- (108)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2003 1,500,000 15 485 -- (4,047)
Net loss for the year ended
December 31, 2004 -- -- -- -- (7,842)
----------- ----------- ----------- ----------- -----------
Balance, Deccember 31, 2004 1,500,000 15 485 -- (11,889)
Services contributed by
shareholder -- -- 500 -- --
Net loss for the year ended
December 31, 2005 -- -- -- -- (11,123)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 2005 1,500,000 $ 15 $ 985 $ -- $ (23,012)
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
F-6
BIG FLASH CORPORATION
(A Development Stage Company)
Statements of Cash Flows
From
For the Inception on
Years Ended July 27, 1999
December 31, Through
-------------------------- December 31,
2005 2004 2005
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (11,123) $ (7,842) $ (23,012)
Adjustments to reconcile net loss to
net cash used by operating activities:
Impairment loss on mining claims -- -- --
Common stock issued for services -- -- --
Contributed services by shareholder 500 -- 500
Changes in operating assets and liabilities
Decrease in prepaid expenses -- -- --
Increase in accounts payable (1,875) 2,224 349
Increase in due to stockholder 12,498 5,618 21,663
----------- ----------- -----------
Net Cash Used by Operating
Activities -- -- (500)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES -- -- --
----------- ----------- -----------
CASH FLOWS FROM FINIANCING ACTIVITIES
Sale of common stock -- -- 500
----------- ----------- -----------
Net Cash Provided by Financing
Activities -- -- 500
----------- ----------- -----------
NET DECREASE IN CASH -- -- --
CASH AT BEGINNING OF PERIOD -- -- --
----------- ----------- -----------
CASH AT END OF PERIOD $ -- $ -- $ --
=========== =========== ===========
SUPPLIMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ -- $ -- $ --
Income Taxes $ -- $ -- $ --
The accompanying notes are an integral part of these financial statements.
F-7
BIG FLASH CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Business and Organization
Big Flash Corporation (The Company) was organized on July 27, 1999,
under the laws of the State of Delaware. Pursuant to Statement of
Financial Accounting Standards No. 7, "Accounting and Reporting by
Development Stage Enterprises," the Company is classified as a
development stage company.
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a December 31
year-end.
b. Revenue Recognition
The Company currently has no source of revenues. Revenue recognition
policies will be determined when principal operations begin.
c. Basic Loss Per Share
The computation of basic loss per share of common stock is based on
the weighted average number of shares outstanding during the period.
For the Years Ended
December 31,
2005 2004
----------- -----------
Loss (numerator) $ (11,123) $ (7,842)
Shares (denominator) 1,500,000 1,500,000
----------- -----------
Per share amount $ (0.01) (0.01)
=========== ===========
d. Provision for Taxes
Deferred taxes are provided on a liability method whereby deferred
tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax
liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of
the deferred tax assets will to be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment.
F-8
BIG FLASH CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
d. Provision for Taxes (Continued)
Net deferred tax assets consist of the following components as of
December 31, 2005 and 2004:
2005 2004
---------------- -----------------
Deferred tax assets:
NOL carryover $ 23,012 $ 11,889
Valuation allowance (23,012) (11,889)
---------------- -----------------
Net deferred tax asset $ -- $ --
================ =================
The income tax provision differs from the amount of income tax
determined by applying the U.S. federal and state income tax rates
of 34% to pretax income from continuing operations for the years
ended December 31, 2005 and 2004 due to the following:
2005 2004
---------------- -----------------
Book Income $ (4,338) $ (2,556)
Valuation allowance 4,338 2,556
---------------- -----------------
$ -- $ --
=============== =================
At December 31, 2005, the Company had net operating loss
carryforwards of approximately $23,012 that may be offset against
future taxable income through 2025. No tax benefit has been reported
in the December 31, 2005 financial statements since the potential
tax benefit is offset by a valuation allowance of the same amount.
Due to the change in ownership provisions of the Tax Reform Act of
1986, net operating loss carry forwards for Federal income tax
reporting purposes are subject to annual limitations. Should a
change in ownership occur, net operating loss carryforwards may be
limited as to use in future years.
e. Cash and Cash Equivalents
For purposes of financial statement presentation, the Company
considers all highly liquid investments with a maturity of three
months or less, from the date of purchase, to be cash equivalents
F-9
BIG FLASH CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
f. Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
g. Newly Issued Accounting Pronouncements
In April 2003, the FASB issued SFAS No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities"
which is effective for contracts entered into or modified after
June 30, 2003 and for hedging relationships designated after June
30, 2003. This statement amends and clarifies financial accounting
for derivative instruments embedded in other contracts
(collectively referred to as derivatives) and hedging activities
under SFAS 133. The adoption of SFAS No. 149 did not have a
material effect on the financial statements of the Company.
In May 2003, the FASB issued Statement of Financial Accounting
Standards No. 150, "Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity" (SFAS 150").
SFAS 150 addresses certain financial instruments that, under
previous guidance, could be accounted for as equity, but now must
be classified as liabilities in statements of financial position.
These financial instruments include: (i) mandatory redeemable
financial instruments, (ii) obligations to repurchase the issuer's
equity shares by transferring assets, and (iii) obligations to
issue a variable number of shares. SFAS 150 is generally effective
for all financial instruments entered into or modified after May
31, 2003, and otherwise effective at the first interim period
beginning after June 15, 2003. The adoption of SFAS 150 did not
have any impact on the Company's financial position or Statement
of Operations.
In January 2003, and revised in December 2003, the FASB issued
FASB Interpretation No. 46, "Consolidation of Variable Interest
Entities" ("FIN 46"). This interpretation of Accounting Research
Bulletin No. 51, "Consolidated Financial Statements," addresses
consolidation by business enterprises of variable interest
entities, which possess certain characteristics. FIN 46 requires
that if a business enterprise has a controlling financial interest
in a variable interest entity, the assets, liabilities, and
results of the activities of the variable interest entity must be
included in the consolidated financial statements with those of
the business enterprise. FIN 46 applies immediately to variable
interest entities created after January 31, 2003 and to variable
interest entities in which an enterprise obtains an interest after
that date. The consolidation requirements apply to older entities
in the first fiscal year or interim period after June 15, 2003.
The adoption of the effective provisions of Interpretation 46 did
not have any impact on the Company's financial position or
statement of operations.
F-10
BIG FLASH CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Newly Issued Accounting Pronouncements (Continued)
In November 2004, the FASB issued FAS 151 "Inventory Costs" This
Statement amends the guidance in ARB No. 43, Chapter 4, "Inventory
Pricing," to clarify the accounting for abnormal amounts of idle
facility expense, freight, handling costs, and wasted material
(spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated
that ". . . under some circumstances, items such as idle facility
expense, excessive spoilage, double freight, and rehandling costs
may be so abnormal as to require treatment as current period
charges. . . ." This Statement requires that those items be
recognized as current-period charges regardless of whether they
meet the criterion of "so abnormal." In addition, this Statement
requires that allocation of fixed production overheads to the
costs of conversion be based on the normal capacity of the
production facilities. This pronouncement is effective for periods
beginning after June 15, 2005. The adoption of this pronouncement
did not have any impact on the Company's financial position or
statement of operations.
In December 2004, the FASB issued FAS 152-"Accounting for Real
Estate Time-Sharing Transactions" This Statement amends FASB
Statement No. 66, Accounting for Sales of Real Estate, to
reference the financial accounting and reporting guidance for real
estate time-sharing transactions that is provided in AICPA
Statement of Position (SOP) 04-2, Accounting for Real Estate
Time-Sharing Transactions. This Statement also amends FASB
Statement No. 67, Accounting for Costs and Initial Rental
Operations of Real Estate Projects, to state that the guidance for
(a) incidental operations and (b) costs incurred to sell real
estate projects does not apply to real estate time-sharing
transactions. The accounting for those operations and costs is
subject to the guidance in SOP 04-2. This Statement is effective
for financial statements for fiscal years beginning after June 15,
2005. The adoption of this pronouncement did not have any impact
on the Company's financial position or statement of operations.
In December 2004, the FASB issued FAS 153-"Exchanges of
Nonmonetary Assets". The guidance in APB Opinion No. 29,
Accounting for Nonmonetary Transactions, is based on the principle
that exchanges of nonmonetary assets should be measured based on
the fair value of the assets exchanged. The guidance in that
Opinion, however, included certain exceptions to that principle.
This Statement amends Opinion 29 to eliminate the exception for
nonmonetary exchanges of similar productive assets and replaces it
with a general exception for exchanges of nonmonetary assets that
do not have commercial substance. A nonmonetary exchange has
commercial substance if the future cash flows of the entity are
expected to change significantly as a result of the exchange. The
provisions of this Statement shall be effective for nonmonetary
asset exchanges occurring in fiscal periods beginning after June
15, 2005. The adoption of this pronouncement did not have any
impact on the Company's financial position or statement of
operations.
In May 2005, the FASB issued FAS 154-"Accounting for Certain
Marketable Securities". This Statement replaces APB Opinion No.
20, Accounting Changes, and FASB Statement No. 3, Reporting
Accounting Changes in Interim Financial Statements, and changes
the requirements for the accounting for and reporting of a change
in accounting principle. This Statement applies to all voluntary
changes in accounting principle. It also applies to changes
F-11
BIG FLASH CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
NOTE 1 -SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Newly Issued Accounting Pronouncements (Continued)
required by an accounting pronouncement in the unusual instance
that the pronouncement does not include specific transition
provisions. When a pronouncement includes specific transition
provisions, those provisions should be followed. This Statement
shall be effective for accounting changes and corrections of
errors made in fiscal years beginning after December 15, 2005. The
adoption of this pronouncement did not have any impact on the
Company's financial position or statement of operations.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles in the United States of America
applicable to a going concern which contemplates the realization
of assets and liquidation of liabilities in the normal course of
business. The Company has not yet established an ongoing source of
revenues sufficient to cover its operating costs and allow it to
continue as a going concern. The ability of the Company to
continue as a going concern is dependent on the Company obtaining
adequate capital to fund operating losses until it becomes
profitable. If the Company is unable to obtain adequate capital,
it could be forced to cease operations.
In order to continue as a going concern, the Company will need,
among other things, additional capital resources. Management's
plans to obtain such resources for the Company include (1)
obtaining capital from management and significant shareholders
sufficient to meet its minimal operating expenses, and (2) seeking
out and completing a merger with an existing operating company.
However, management cannot provide any assurances that the Company
will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is
dependent upon its ability to successfully accomplish the plans
described in the preceding paragraph and eventually secure other
sources of financing and attain profitable operations. The
accompanying financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a
going concern.
NOTE 3 - RELATED PARTY TRANSACTIONS
During the years ended December 31, 2005 and 2004, the Company
incurred various general and administrative expenses. As the
Company has not had the wherewithal to pay these expenses, the
Company has relied on a related party to satisfy its debts. As of
December 31, 2005 and 2004 the Company had an obligation to the
related party, including accrued interest, totaling $21,662 and
$9,165, respectively. This balance is due on demand, and the
Company is accruing interest on the total at 8.0% per annum.
NOTE 4 - SIGNIFICANT EVENT
In November, 2005, the Company entered into a Letter of
Understanding with Intelgenx Corp. ("Intelgenx"), an operating
drug delivery entity headquartered in Quebec, Canada. Later, on
April 10, 2006, the Company entered into a formal Share Exchange
Agreement with Intelgenx. Pursuant to this Agreement, the Company
formed a wholly-owned subsidiary, 6544531 Canada, Inc.
("Exchangeco"). The Share Exchange Agreement stipulates that
F-12
BIG FLASH CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
NOTE 4 - SIGNIFICANT EVENT (Continued)
Exchangeco will receive 10,991,000 common shares of Intelgenx, in
exchange for all of the outstanding common shares of Exchangeco.
Upon consummation of the Agreement, Intelgenx will operate as a
controlled subsidiary of the Company. Management anticipated the
Agreement will be fully consummated during the 2nd quarter of
2006.
F-13