WEB NEWS Comments & Business Outlook
Cybergy Holdings, Inc.
`
Three months ended
Nine months ended
October 2,
September 30,
October 2,
September 30,
Contract revenue
$
1,716,000
$
8,414,000
$
15,328,000
$
25,487,000
Cost of services
691,000
6,713,000
12,060,000
20,885,000
Gross profit
1,025,000
1,701,000
3,268,000
4,602,000
Operating expenses
Selling, general and administrative
2,104,000
1,970,000
6,727,000
5,962,000
Depreciation and amortization
245,000
251,000
742,000
762,000
Total operating expenses
2,349,000
2,221,000
7,469,000
6,724,000
Operating (loss)
(1,324,000
)
(520,000
)
(4,201,000
)
(2,122,000
)
Other (income) expense
Interest expense, net of interest income
746,000
216,000
1,825,000
524,000
Change in fair value of derivative and put liabilities
(10,534,000
)
-
(428,093,000
)
-
Other
2,626,000
(3,000
)
2,968,000
200,000
Total other (income) expense
(7,162,000
)
213,000
(423,300,000
)
724,000
Income (loss) before income taxes
5,838,000
(733,000
)
419,099,000
(2,846,000
)
Income tax (benefit) expense
-
(337,000
)
-
(1,229,000
)
Consolidated net income (loss)
5,838,000
(396,000
)
419,099,000
(1,617,000
)
Net income (loss) attributable to non-controlling interest in joint venture
(2,000
)
(6,000
)
(5,000
)
-
Net income (loss) attributable to Cybergy
$
5,840,000
$
(390,000
)
$
419,104,000
$
(1,617,000
)
Basic earnings (loss) per share of common stock
$
0.23
$
-
$
19.01
$
-
Weighted average number of basic common shares outstanding
25,016,996
-
22,048,312
-
Diluted earnings (loss) per share of common stock
$
(0.01
)
$
-
$
(0.01
)
$
-
Weighted average number of diluted common shares outstanding
659,504,264
-
646,614,189
-
Management Discussion and Analysis
Approximately 2% and 93% of our consolidated revenues, and 0% and 55% of Partners revenues, were due to our contract with the Department of Energy. The revenue and cost of revenues information below is presented for comparison and analysis purposes and because management believes that such information is informative as to the level of our business activity and useful in managing our operations.
Our revenues decreased $6,698,000, or 79.6%, due winding down of the JV and to a lesser degree the delayed ramp up of the new MOTS contract.
Deal Flow
Item 1.01. Entry into a Material Definitive Agreement.
On November 9, 2015 the company closed the merger by paying aggregate consideration of $4,322,287 in cash and the Company's common stock, less a working capital adjustment of $117,898 resulting in a net price of $4,204,389. $3,000,000, in the Company's common stock at an effective price of $0.1017 per share was issued by the Company. This amount was reduced by the working capital adjustment. A cash payment was used to retire a loan held by Binary in the amount of $1,322,287 at closing, which comprised the balance of the purchase price.
Deal Flow
Item 1.01 Entry into a Material Definitive Agreement
The preceding description is qualified in its entirety by reference to the form Purchase Agreement,, a copy of which is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference. The form Purchase Agreement contains the form Note and form Warrant.
See Item 1.01
On September 18, 2015, the Company filed with the State of Nevada an amendment of its Certificate of Designation for its Series C preferred stock, approved by its Board of Directors and the holders of the majority of the shares of Series C preferred stock. Until the first anniversary of the effectiveness of Registration Statement on Form S-1 filed on May 14, 2015, the holders of the Company’s Convertible Preferred Stock will not directly or indirectly, convert, offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of, or announce the intention to otherwise dispose of, any shares of the Company’s convertible preferred stock.
The preceding description is qualified in its entirety by reference to the Amended Certificate of Designation, a copy of which is attached as Exhibit 3.9 to this Current Report on Form 8-K and is incorporated herein by reference.
Deal Flow
CALCULATION OF REGISTRATION FEE
Title of each class of
securities to be registered
Amount to be Registered
Proposed maximum offering price per share
Proposed maximum aggregate offering price
Amount of registration fee
Common Stock underlying Convertible Debentures (1)
86,009,600
$
0.04389
(6)
$
3,774,961
$
438.65
Common stock, underlying Series C Preferred Stock (2)
113,462,990
$
0. 133
(7)
$
15,090,578
$
1,753.53
Common stock, underlying Series C Preferred Stock (3)
13,985,400
$
0.133
(7)
$
1,860,058
$
216.14
Common stock (4)
8,164,356
$
0. 133
(7)
$
1,085,859
$
126.18
Common stock underlying warrants (5)
6,562,020
$
0.0218
(6)
$
143,052
$
16.62
TOTAL
228,184,366
21,954,509
$ 2,551.11
(8)
__________
Comments & Business Outlook
Cybergy Holdings, Inc.
Unaudited Consolidated Condensed Statements of Operations
Three months ended
Six months ended
July 3, 2015
June 30, 2014
July 3, 2015
June 30, 2014
Contract revenue
$ 7,049,000
$ 8,270,000
$ 13,612,000
$ 17,073,000
Cost of services
5,985,000
7,140,000
11,369,000
14,172,000
Gross profit
1,064,000
1,130,000
2,243,000
2,901,000
Operating expenses
Selling, general and administrative
2,422,000
1,667,000
4,623,000
3,992,000
Depreciation and amortization
248,000
253,000
497,000
511,000
Total operating expenses
2,670,000
1,920,000
5,120,000
4,503,000
Operating (loss)
(1,606,000 )
(790,000 )
(2,877,000 )
(1,602,000 )
Other (income) expense
Interest expense, net of interest income
619,000
131,000
1,079,000
308,000
Change in fair value of derivative and put liabilities
(311,121,000 )
-
(417,561,000 )
-
Other
54,000
144,000
342,000
203,000
Total other (income) expense
(310,448,000 )
275,000
(416,140,000 )
511,000
Income (loss) before income taxes
308,842,000
(1,065,000 )
413,263,000
(2,113,000 )
Income tax (benefit) expense
-
(356,000 )
-
(892,000 )
Consolidated net income (loss)
308,842,000
(709,000 )
413,263,000
(1,221,000 )
Net income (loss) attributable to non-controlling interest in joint venture
(1,000 )
17,000
(3,000 )
6,000
Net income (loss) attributable to Cybergy
$ 308,843,000
$ (726,000 )
$ 413,266,000
$ (1,227,000 )
Basic earnings (loss) per share of common stock
$ 14.95
$ -
$ 20.08
$ -
Weighted average number of basic common shares outstanding
20,658,149
-
20,580,104
-
Diluted earnings (loss) per share of common stock
$ -
$ -
$ (0.01)
$ -
Weighted average number of diluted common shares outstanding
649,220,738
-
649,041,758
-
Management Discussion and Analysis
Our revenues decreased $1,221,000, or 14.8%, due primarily to a 25.5% decrease in average billable hours at New West and a $147,000 decrease in billings at Primetrix due to the loss of contracts. The decrease in billable hours was due to: (i) the winding down of New West’s activity associated with the JV contract, (ii) delays in government contract awards and funding, and (iii) the expiration of programs without follow-on contract awards. This decrease in billed hours was offset by a slight increase in average margin dollar per hour. JV revenue decreased $183,000, or 3.5%, due to the winding down of the JV contract.
CFO Trail
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
appointed William "Bill" Gregorak, age 59, to fill the position of Chief Financial Officer and Principal Financial and Accounting Officer of Cybergy and its wholly-owned subsidiaries, effective August 15, 2015.
Mr. Gregorak's most recent position, from 2013 to 2015, was CFO of Colorado-based Ascent Solar Technologies, a NASDAQ-listed manufacturer and marketer of flexible, thin-film photovoltaic (PV) modules for off-grid and specialty applications with operations in the United States, Singapore, and China. Prior to that, he spent five years as Vice President and Chief Financial Officer of Thule Organization Solutions.
Earlier in his career, Mr. Gregorak spent 17 years at Hewlett-Packard including various senior finance and accounting positions and subsequently in the 1990s, as a national sales account manager and software development operations manager.
Mr. Gregorak brings over three decades of managerial and executive-level experience in financial reporting and accounting, IT, and operations management for both public and privately-held corporations with a global reach. This includes serving as CFO for Thule Organization Solutions from 2008 to 2013, a manufacturer and marketer of storage and electronic cases; Vice President and World Wide Controller for Xilinx, a semiconductor manufacturer and marketer; and Vice President, Corporate Controller and IT for Advanced Energy Corporation, a semiconductor equipment maker.
Mr. Gregorak will receive an annual salary of $185,000. He will enter into an employment agreement 90 days after his appointment. He does not have any family relationship with any director, executive officer.
Mr. Gregorak received his Bachelor of Arts in Economics from the University of Washington.
Comments & Business Outlook
Three months ended March
2015
2014
Contract revenue
$
6,563,000
$
8,803,000
Cost of services
5,384,000
7,032,000
Gross profit
1,179,000
1,771,000
Operating expenses
Selling, general and administrative
2,201,000
2,325,000
Depreciation and amortization
249,000
258,000
Total operating expenses
2,450,000
2,583,000
Operating (loss)
(1,271,000
)
(812,000
)
Other (income) expense
Interest expense, net of interest income
460,000
177,000
Change in fair value of derivative and put liabilities
(106,441,000
)
-
Other
288,000
59,000
Total other (income) expense
(105,693,000
)
236,000
Income (loss) before income taxes
104,422,000
(1,048,000
)
Income tax (benefit) expense
-
(536,000
)
Consolidated net income (loss)
104,422,000
(512,000
)
Net income attributable to non-controlling interest in joint venture
(2,000
)
(11,000
)
Net income (loss) attributable to Cybergy
$
104,420,000
$
(523,000
)
Basic earnings (loss) per share of common stock
$
5.09
$
-
Weighted average number of basic common shares outstanding
20,498,591
-
Diluted earnings (loss) per share of common stock
$
0.00
$
-
Weighted average number of diluted common shares outstanding
648,792,461
-
Management Discussion and Analysis
Approximately 92% and 83% of our consolidated revenues, and 72% and 57% of Partners revenues, were due to our contract with the Department of Energy. We consolidate the revenues and related costs of the JV and provide back office accounting and reporting services for the JV. The revenue and cost of revenues information below is presented for comparison and analysis purposes and because management believes that such information is informative as to the level of our business activity and useful in managing our operations.
Deal Flow
CALCULATION OF REGISTRATION FEE
Title of each class of
securities to be registered
Amount to be Registered
Proposed
Proposed
Amount of registration fee
Common Stock underlying Convertible Debentures (1)
72,134,883
$
0.04389
(6)
3,166,000
$
367.89
Common stock, underlying Series C Preferred Stock (2)
108,974,125
$
1.275
(7)
138,942,009
$
16,145.06
Common stock, underlying Series C Preferred Stock (3)
13,985,400
$
1.275
(7)
17,831,385
$
2,072.00
Common stock (4)
7,025,156
$
1.275
(7)
$
8,957,073
$
1,040,81
Common stock underlying warrants (5)
6,562,020
$
0.0218
(6)
$
143,052
$
16.62
TOTAL
169,039,519
$
19,663.38
Investor Alert
Item 8.01 Other Events
On May 8, 2015, the Company and the selling Member of New West agreed to a settlement on the litigation initiated in September 2014 and the arbitration matter. Under the terms of the agreement, the Company has agreed to establish an ESOP for its employees before December 1, 2015. The ESOP will purchase from the Member that amount of Cybergy stock equal to a current market value of $2,565,000 (the “settlement”). The remainder of the Cybergy stock owned by the Member will be canceled. All other amounts owed by the Company to the Member will be discharged and the Put option will be cancelled. The Member also assumes all obligations under the Management Performance Units Plan. The settlement agreement also contains non-financial terms, which are set forth in Exhibit 10.33.
The Company is assessing the financial impact of the settlement. The Company currently has short term debt and accrued interest of approximately $4,309,000 and long term debt of $1,898,000 due to the Member. Upon settlement, these amounts and any additional accrued interest will be removed from the Company’s books and replaced with the debt of the ESOP of $2,565,000. Additionally, the Company currently has a derivative liability accrued of $179,226,000 related to the Put option held by the Member. Any remaining derivative liability will also be eliminated upon the settlement.
The Member currently owns 15,451,258 shares of our Series C preferred stock, convertible into 154,512,580 shares of common stock which represents just less than 24% of our fully diluted common shares. For example, using the closing price of May 11, 2015 to approximate current market value, we would cancel approximately 152,540,000 shares of common equivalents or approximately 23.5% of our fully diluted common shares.
Comments & Business Outlook
ENGLEWOOD, Colo.-- Cybergy Holdings, Inc. (OTCQB: CYBG), today released its 2014 Annual Report which includes the Securities and Exchange Commission (SEC) 10K annual filing along with a letter to shareholders from Mark Gray, Chairman and CEO.
The report shows the company had 2014 audited revenue of $32 million thanks in part to a flurry of new federal and state contract wins over the past two years. Many of these contracts are in clean energy and/or smart grid applications involving member company New West Technologies. Chief among these wins is the $85 million re-compete of the three-year Department of Energy Mission Oriented Technical Support (MOTS) services contract with Allegheny Science & Technology as a teammate.
The report notes four key transactions completed in 2014:
(1) the acquisition of New West Technologies on January 1, 2014;
(2) the acquisition of 100% of BiON Enterprises (now Cybergy Labs) on January 1, 2014;
(3) the completion of a $2.5 million convertible debenture round in September and October 2014;
(4) the acquisition of Mount Knowledge Holdings (OTCQB: MKHD) which had the net effect of Cybergy becoming a publicly traded company.
140% increase in the dollar value of contract wins between 2014 and 2013 and a nearly 300% increase in average contract size over the same period. There were 15 contract wins worth $23.2 million in 2014 versus 24 contract wins worth $9.7 million in 2013.
Ongoing success with the Cybergy Labs SmartFile cybersecurity platform that should lead to the release of the first commercial version of the software in 2015.
Growth in Primetrix, the contracting, compliance, and business growth services division that leads Cybergy’s bid and proposal process. Primetrix drafted over $250 million in winning proposals in a seven year period and boasted win-rates of 44% and 54% in 2013 and 2014, respectively.
In the Annual Report, Mr. Gray explains the major changes undertaken in the past year and why he is so optimistic on the company’s future: “We believe there will continue to be major ongoing needs in both the public and private sectors for clean energy, smart grid security and resiliency, cybersecurity, and the associated technical and advisory services. These are already enormous markets, but their rapid growth is projected in the coming years. We believe we can significantly boost our market share because of our value proposition for these sectors. With customers focused on costs, a real opportunity exists for smaller, price-competitive providers such as Cybergy. Our strategy for future growth is to focus on our existing and potential new customers and our people.”
Reverse Merger Activity
EXPLANATORY NOTE
The Merger of Partners and Mount Knowledge Holdings, Inc. (“MKHD”) resulted in the owners and management of Partners obtaining actual and effective voting and operating control of the combined company. The Merger was treated as a public shell reverse acquisition and therefore treated as a capital transaction in substance, rather than a business combination. The historical financial statements of MKHD before the Merger were replaced with the historical financial statements of Partners before the Merger. As a result of the Merger, Cybergy acquired the business of Partners, and has continued the existing business operations of Partners.
Item 1.01. Entry into a Material Definitive Agreement
As reported in a current report on Form 8-K filed with the SEC on October 1, 2014, Mount Knowledge Holdings, Inc., entered into an Agreement and Plan of Merger (the “Merger Agreement”) on September 30, 2014 with MK Merger Acquisition Sub, Inc., a wholly owned subsidiary of MKHD (“Merger Sub”), Access Alternative Group S.A., and Partners (the “Company”), providing for the merger of Merger Sub with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of MKHD. The Merger Agreement and subsequent events are discussed in more detail in Item 2.01 below, which information is hereby incorporated by reference into this Item 1.01.
Item 2.01. Completion of Acquisition or Disposition of Assets
On September 30, 2014, Mount Knowledge Holdings, Inc. entered into an Agreement and Plan of Merger (the “Merger Agreement”) with MK Merger Acquisition Sub, Inc., a wholly-owned subsidiary of MKHD (“Merger Sub”), Access Alternative Group S.A., and Cybergy Partners, Inc., providing for the merger of Merger Sub with and into the Partners (the “Merger”), with Partners surviving the Merger as a wholly-owned subsidiary of MKHD. Pursuant to the Merger Agreement, the shareholders of Partners and MKHD exchanged shares in the respective companies for 88% and 12% ownership, respectively, of the surviving company. In December 2014, MKHD changed its name to Cybergy Holdings, Inc.
On October 3, 2014 (the “Effective Date”), all of the transactions contemplated by the Merger Agreement were complete, and the Merger became effective upon the filing of the Certificate of Merger with the Secretary of State of the State of Delaware. A Copy of the Certificate of Merger was filed in a Current Report on Form 8-K filed on October 9, 2014 and is attached as Exhibit 3.4 hereto and is hereby incorporated by reference into this Item 2.01.
Cybergy’s post-merger authorized capital stock consists of 3,000,000,000 shares of common stock, $0.0001 par value per share and 300,000,000 shares of preferred stock, par value $0.0001 per share, consisting of 1,000 shares of Series B Convertible Preferred Stock and 250,000,000 shares of Series C Convertible Preferred Stock (“Series C Preferred Stock”). Each share of the Series C Preferred Stock is convertible into 10 shares of our common stock. Prior to the consummation of the transactions contemplated by the Merger Agreement, there were 20,420,229 shares of MKHD common stock issued and outstanding and 242,172,355 of MKHD Series A Preferred Stock, which were converted into Series C Preferred Stock, and the Series A Preferred shares were cancelled. Prior to the Merger, Partners had 3,256,444 shares of common stock outstanding.
At the Effective Time of the Merger:
Each issued and outstanding share of the MKHD Common Stock remained issued and outstanding;
Each issued and outstanding share of MKHD’s Series A Preferred Stock was converted into 0.2 shares of Series C Preferred Stock and the Series A Preferred Stock were cancelled.
Each issued and outstanding share of Partners common stock, par value $0.0001 per share (the “Company Common Stock”), issued and outstanding immediately prior to the Effective Time was converted automatically into 14.20 shares of the Series C Preferred Stock (the “Merger Consideration”), subject to dilution based upon the final amount of convertible debentures issued in conjunction with the Merger. After adjustment for the issuance of the convertible debentures, the final conversion ratio was approximately 12.13.
All convertible debentures issued by Partners were amended, by their terms, and are convertible into Series C Preferred Stock. Cybergy also issued 1,000 shares of Series B Preferred Stock to one of the Company’s director and officer.
On December 5, 2014, Cybergy declared a reverse 1:10 split of its common stock which was effective December 22, 2014. All convertible amounts in any debt or warrant instruments were automatically adjusted.
Senior secured convertible debt
In connection with the Merger, Partners issued $750,000, $1,050,000, and $725,000 of Senior Secured Convertible Debentures on September 30, October 3, and October 24, 2014, respectively. The debentures are convertible at a holder’s option at any time prior to maturity into shares of the Company’s post-merger Series C preferred stock. Each $100,000 of face value is convertible into 227,840 shares of Series C Preferred Stock at $0.4389 per Preferred Share; or the equivalent of $0.04389 per share of Cybergy’s post-merger Common Stock. Additionally, for each $100,000 of face value, the holder also received 227,840 shares of Series C Preferred Stock (“Additional Shares”) for no additional consideration.
Comments & Business Outlook
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year
The Financial Industry Regulatory Association (“FINRA”) reviewed the Notice of Corporate Action filed by Registrant regarding the Reverse Stock Split and reported the change on its Daily List of changes on December 19, 2014, effective at the open of business on December 22, 2014. The Registrant’s trading symbol on the OTC BB market shall be changed from MKHD to MKHDD for a period of 20 business days, in accordance with FINRA’s normal practice.
After the period of 20 business days expires, the Registrant shall change its trading symbol to CYBG.
Auditor trail
Item 4.01 Change in Registrant’s Certifying Accountant.
Effective November 20, 2014, the Board of Directors of the Company dismissed Anton & Chia, LLP (“A&C”) as its independent registered accountant and engaged Mayer Hoffman McCann PC (“MHM”) to serve as its independent registered accounting firm. A&C’s audit reports on the Company’s financial statements for the fiscal years ended December 31, 2013 and 2012 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except that, the audit reports included an explanatory paragraph with respect to the uncertainty as to the Company’s ability to continue as a going concern. During the years ended December 31, 2013 and 2012 and during the subsequent interim period preceding the date of A&C’s dismissal, there were (i) no disagreements with A&C on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, and (ii) no reportable events (as that term is defined in Item 304(a)(1)(v) of Regulation S-K).
CFO Trail
Item 4.01 Change in Registrant’s Certifying Accountant.
Effective November 20, 2014, the Board of Directors of the Company dismissed Anton & Chia, LLP (“A&C”) as its independent registered accountant and engaged Mayer Hoffman McCann PC (“MHM”) to serve as its independent registered accounting firm. A&C’s audit reports on the Company’s financial statements for the fiscal years ended December 31, 2013 and 2012 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except that, the audit reports included an explanatory paragraph with respect to the uncertainty as to the Company’s ability to continue as a going concern. During the years ended December 31, 2013 and 2012 and during the subsequent interim period preceding the date of A&C’s dismissal, there were (i) no disagreements with A&C on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, and (ii) no reportable events (as that term is defined in Item 304(a)(1)(v) of Regulation S-K).
Prior to engaging MHM, the Company did not consult with MHM regarding the application of accounting principles to a specific completed or contemplated transaction, or the type of audit opinion that might be rendered on the Company’s financial statements.
Comments & Business Outlook
Mount Knowledge Holdings, Inc.
Condensed Statement of Operations
(Unaudited)
Three months
Ended
September 30, 2014
Three months
Ended
September 30, 2013
Nine months
Ended
September 30, 2014
Nine months
Ended
September 30, 2013
Revenue
$
-
$
-
$
-
$
-
Cost of goods sold
-
-
-
-
Gross Profit
-
-
-
-
Operating expenses
General and administrative expenses
632,313
69,350
728,665
569,616
Total operating (income) expenses
632,313
(69,350)
728,665
569,616
Loss from operations
(632,313)
(69,350)
(728,665)
(569,616)
Interest expense
(34,493)
(27,700)
(106,034)
(77,755)
Change in FV of derivative liability
(6,353,296)
2,454,659
(6,408,558)
1,299,630
Loss on debt extinguishment
(2,383,308)
-
(2,383,308)
-
Net Income (Loss) from continuing operations
(9,403,410)
2,357,609
(9,626,565)
652,259
Net Income (Loss)
$
(9,403,410)
$
2,357,609
$
(9,626,565)
$
652,259
Net loss per share - basic and diluted
$
0.01
$
0.01
$
0.01
$
(0.00)
Weighted average number of common shares outstanding - basic and diluted
204,202,084
199,996,250
204,202,084
198,219,014
Management Discussion and Analysis
Revenue for the nine months ended September 30, 2014 was $0 compared to revenue for the nine months ended September 30, 2013, due to lack of funding to support sales and marketing efforts.
Deal Flow
Pursuant to authority expressly granted and vested in the Board of Directors of the Corporation by the provisions of the Corporation’s Certificate of Incorporation, as amended, the Board of Directors adopted the following resolution on October 3, 2014 (i) authorizing a series of Corporation’s previously authorized 300,000,000 share of preferred stock, par value $0.0001 per share, designated as Series C Preferred Stock of the Corporation, and (ii) providing for the designations, preferences and relative, participating, optional or other rights, and the qualifications, limitations or restrictions thereof, of 250,000,000 shares of Series C Convertible Stock of the Corporation, as follows:
Designation; Number of Shares; Rank.
(a) There shall be created from the 300,000,000 shares of Preferred Stock authorized to be issued by the Articles of Incorporation (as amended), a series of Preferred Stock designated as “Series C Convertible Preferred Stock” (the “Convertible Preferred Stock”), and the authorized number of shares constituting the Convertible Preferred Stock shall be 250,000,000. Such number of shares may be decreased by resolution of the Board of Directors and by the filing of a certificate of decrease with the Secretary of State of the State of Nevada; provided that no such decrease shall reduce the number of authorized shares of Convertible Preferred Stock to a number less than the number of shares then outstanding.
(b) The Convertible Preferred Stock, upon liquidation, winding-up or dissolution of the Corporation, ranks on a parity, in all respects, with all the Common Stock.
Reverse Merger Activity
Item 1.01 Entry into a Material Definitive Agreement
The Merger Agreement and subsequent events are discussed in more detail in Item 2.01 below, which information is hereby incorporated by reference into this Item 1.01.
The Parent’s authorized capital stock currently consists of 3,000,000,000 shares of common stock, $0.0001 par value per share (the “Parent Common Stock”), and 300,000,000 shares of preferred stock, par value $0.0001 per share, consisting of 1,000 shares of Series B Convertible Preferred Stock and 250,000,000 shares of Series C Convertible Preferred Stock. Each share of the Series C Preferred Stock is convertible into 100 shares of the Parent’s Common Stock. Prior to the consummation of the transactions contemplated by the Merger Agreement, there were 204,202,084 shares of the Parent’s Common Stock issued and outstanding and 242,172,355 of the Series A Preferred Stock, which were converted into Series C Preferred Stock and cancelled. Prior to the Merger, Civergy had 3,202,770 shares of common stock outstanding.
(2) each issued and outstanding share of the Series A Preferred Stock was converted into 0.2 shares of the Series C Preferred Stock.
(3) each share of the Company’s common stock, par value $0.0001 per share (the “Company Common Stock”), issued and outstanding immediately prior to the Effective Time was converted automatically into the right to receive 12.80 shares of the Series C Preferred Stock (the “Merger Consideration”).
After the Merger, the Company and the Financing (described in Item 3.02), the Parent had issued and outstanding 204,202,084 shares of Parent Common Stock, 1,000 shares of Series B Preferred Stock and 56,151,351 shares of Series C Preferred Stock.
The foregoing description of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Merger Agreement incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity Securities
The foregoing description of the Merger Notes does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the form of the Merger Note, which is included in the Securities Purchase Agreement attached as Exhibit 10.1 and is incorporated herein by reference
The Series B Convertible Preferred Stock allows the holders to elect three of the Parent’s Board of Directors and has other rights and preferences that requires the holders to approve certain transactions. Each share of Series B Convertible Series B Preferred Stock converts into one share of the Parent’s Common Stock. Each share of Series C Convertible Preferred Stock converts into 100 shares of the Parent’s Common Stock.
The foregoing description of the Series B Convertible Preferred Stock and Series C Convertible Preferred Stock does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the certificates of designations, which are attached as Exhibit 3.2 and Exhibit 3.3 and is incorporated herein by reference
Reverse Merger Activity
Item 1.01. Entry into a Material Definitive Agreement.
At the Effective Time of the Merger, which shall not be later than October 7, 2014, each share of the Company’s common stock, par value $0.0001 per share (the “Company Common Stock”), issued and outstanding immediately prior to the Effective Time (individually a “Share” and collectively the “Shares”) shall, by virtue of the Merger, be converted automatically into the right to receive 12.80 shares of the Parent’s Series C Preferred Stock (the “Merger Consideration”). All convertible notes issued by the Company shall be amended, by their terms, and shall be convertible into the Parent’s Series C Preferred Stock. Capitalized terms used herein but not otherwise defined have the meaning set forth in the Merger Agreement.
Each issued and outstanding share of the Parent’s Series A Preferred Stock shall be converted into 0.2 shares of the Parent’s Series C Preferred Stock. The Parent shall also issue, at the Effective Time, 1,000 shares of Series B Preferred Stock to one of the Company’s officer for his approval of the Merger, consulting services and other valuable consideration provided in connection with the Merger.
The Company’s Amended and Restated Articles of Incorporation will be amended to establish the Series B Preferred Stock and the Series C Preferred Stock and their respective rights, preferences and powers.
In connection with the Merger, the Company is undertaking a financing (the “Financing”) issuing convertible notes (the “Merger Notes”) which shall be initially convertible into the Company’s common stock at $5.618 (subject to equitable adjustments for stock splits, stock dividends, mergers or consolidations, including the Merger Consideration issued in this Merger) along with additional equity consideration equal to the amount of Company’s common stock issuable through the conversion of the Merger Notes. The Company closed on $750,000 of the Merger Notes on September 29, 2014
At the Effective Time, the authorized capital stock of Parent shall consist of 3,000,000,000 shares of common stock, of which 204,202,084 shares shall be issued and outstanding and 300,000,000 of preferred stock, of which 1,000 shares of the Parent’s Series B Preferred Stock shall be issued and outstanding and 55,177,860 shares of the Parent’s Series C Stock shall be issued and outstanding (excluding shares issued or to be issued in the Financing).
Consummation of the Merger is subject to certain customary conditions. The Merger Agreement contains representations and warranties by each of Parent, Merger Sub and the Company. These representations and warranties were made solely for the benefit of the parties to the Merger Agreement. The foregoing description of the Merger Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Merger Agreement, which is attached as Exhibit 2.1 and is incorporated herein by reference.
On September 29, 2014, the Company issued a press release announcing that the Company had entered into the Merger Agreement. A copy of the Company’s press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Comments & Business Outlook
Mount Knowledge Holdings, Inc.
Condensed Statement of Operations
(Unaudited)
Three months
Three months
Six months
Six months
Ended
Ended
Ended
Ended
June 30, 2014
June 30, 2013
June 30, 2014
June 30, 2013
Revenue
$
-
$
-
$
-
$
-
Cost of goods sold
-
-
-
-
Gross Profit
-
-
-
-
Operating expenses
General and administrative expenses
65,180
39,915
96,352
500,266
Total operating (income) expenses
65,180
39,915
96,352
500,266
Loss from operations
(65,180)
(39,915)
(96,352)
(500,266)
Interest expense
(34,473)
(25,735)
(71,541)
(50,055)
Change in FV of derivative liability
84,082
3,403,417
(55,262)
(1,155,029)
Net Income (Loss) from continuing operations
(15,571)
3,337,767
(223,155)
(1,705,350)
Net Income (Loss)
$
(15,571)
$
3,337,767
$
(223,155)
$
(1,705,350)
Net loss per share - basic and diluted
$
(0.00)
$
0.01
$
(0.00)
$
(0.01)
Weighted average number of common shares
outstanding - basic and diluted
199,996,250
328,851,197
199,996,250
328,851,197
Management Discussion and Analysis
Revenues
Revenue for the three months ended June 30, 2014 was $0 compared to revenue for the three months ended June 30, 2013, due to lack of funding to support sales and marketing efforts.
Comments & Business Outlook
MOUNT KNOWLEDGE HOLDINGS, INC.
(A Development Stage Company)
Condensed Statements of Operations And Other Comprehensive Loss
(Unaudited)
(Stated in US dollars)
Three Months Ended
March 31,
2014
2013
Sales revenue
$
-
$
-
Cost of goods sold
-
-
Gross profit
-
-
Operating expenses
General and administrative expenses
12,685
375,660
Total operating expenses
12,685
375,660
Loss from operations
(12,685)
(375,660)
Interest expense
(37,068)
(23,445)
Change in fair value of derivative liability
(139,344)
-
Gain on debt extinguishment
-
-
Net Loss
$
(189,097)
$
(399,105)
Comprehensive Loss
Net Loss
$
(189,097)
$
(399,105)
Foreign currency translation adjustments
-
-
Comprehensive Loss Attributable To Common Shareholders
$
(189,097)
$
(399,105)
Weighted Average Number of Common Shares Outstanding- Basic and Diluted
199,996,250
195,557,249
Net Loss from Continuing Operations Per Common Share - Basic and Diluted
$
(0.00)
$
(0.00)
Net Loss from Discontinuing Operations Per Common Share - Basic and Diluted
0.00
0.00
Net Loss Per Common Share - Basic and Diluted
(0.00)
(0.00)
Management Discussion and Analysis
Revenues
Revenue for the three months ended March 31, 2014 was $0 compared to revenue for the three months ended March 31, 2013, due to lack of funding to support sales and marketing efforts..
Cost of goods sold was primarily composed of the costs of the Company’s trainers as well as materials and transportation expenses associated with delivering training courses. Cost of goods sold for the three months ended March 31, 2014 was $0, compared to cost of goods sold for the three months ended March 31, 2013 of $0.
Gross profit is calculated by deducting cost of goods sold from revenues and ranges from 0% to 100%, depending on the nature of the specific courses sold and the contract terms negotiated. Gross profit for the three months ended March 31, 2014 was 0% compared to gross profit for the three months ended on March 31, 2013 of 0%.
Comments & Business Outlook
MOUNT KNOWLEDGE HOLDINGS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER COMPREHENSIVE (LOSS)
(Stated in US dollars)
Year Ended
December 31
For The Development Stage Period, From April 1, 2012 To December 31
2013
2012
2013
Sales revenue
$
-
$
-
$
-
Cost of goods sold
-
-
-
Gross profit
-
-
-
Operating expenses
General and administrative expenses
588,103
231,385
689,981
Total operating expenses
588,103
231,385
689,981
Loss from operations
(588,103)
(231,385 )
(689,981)
Interest expense
(108,715)
(89,440)
(178,110)
Change in fair value of derivative liability
1,670,103
2,852,455
3,487,332
Gain on debt extinguishment
-
12,633
12,633
Net Income from continuing operations
973,285
2,544,264
2,631,874
Discontinued operations
Income from discontinued operations
-
5,096
-
Gain on disposal of subsidiary
-
174,736
-
Net Income
973,285
2,724,096
2,631,874
Net loss attributable to non-controlling interest
-
(3,004)
-
Net Income Attributable to Common Shareholders
$
973,285
$
2,727,100
$
2,631,874
Comprehensive Income
Net Income
973,285
2,724,096
2,631,874
Foreign currency translation adjustments
-
(2,167)
(2,167)
Comprehensive Income
973,285
2,721,929
2,629,707
Comprehensive loss attributable to non-controlling interest
-
(3,004)
-
Comprehensive Income Attributable To Common Shareholders
$
621,299
$
2,724,933
$
2,629,707
Weighted Average Number of Common Shares Outstanding- Basic and Diluted
198,666,975
152,788,733
Net Loss from Discontinuing Operations Per Common Share - Basic and Diluted
0.00
0.00
Net Income Per Common Share - Basic and Diluted
0.02
0.02
Management Discussion and Analysis
Results of Operations
The following summary of our results of operations should be read in conjunction with our audited financial statements for the year ended December 31, 2013 which are included herein.
Our operating results for the years ended December 31, 2013 and 2012, respectively are summarized as follows:
Revenues
We had marginal revenues to date, and do not anticipate increasing earning revenues in the immediate future.
Auditor trail
Item 4.01
Changes in Registrant’ s Certifying Accountant
Dismissal of Previous Independent Registered Public Accounting Firm
On August 21, 2013, the Board of Directors of Mount Knowledge Holdings, Inc. (the “Company”) approved the dismissal of MaloneBailey, LLP (“MaloneBailey”) as the Company’s independent auditor, effective immediately.
MaloneBailey’s report on our financial statements as of and for the fiscal year ended December 31, 2011 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles. However, the report of MaloneBailey stated that there is substantial doubt about the Company’s ability to continue as a going concern.
During the fiscal year ended December 31, 2011 through MaloneBailey’s dismissal on August 21, 2013, there were (1) no disagreements with MaloneBailey on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of MaloneBailey, would have caused MaloneBailey to make reference to the subject matter of the disagreements in connection with its reports, and (2) no events of the type listed in paragraphs (A) through (D) of Item 304(a)(1)(v) of Regulation S-K.
We furnished MaloneBailey with a copy of this disclosure on August 21, 2013, providing MaloneBailey with the opportunity to furnish the Company with a letter addressed to the SEC stating whether it agrees with the statements made by us herein in response to Item 304(a) of Regulation S-K and, if not, stating the respect in which it does not agree. A copy of MaloneBailey letter to the SEC is filed as Exhibit 16.1 to this Report.
Engagement of New Independent Registered Public Accounting Firm
On August 21, 2013, the Board of Directors of the Company appointed Anton and Chia, LLP (“A&C”) as our independent auditor.
During the years ended December 31, 2011 and through the date hereof, neither the Company nor anyone acting on its behalf consulted A&C with respect to (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report was provided to the Company or oral advice was provided that A&C concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issues; or (ii) any matter that was the subject of a disagreement or reportable events set forth in Item 304(a)(1)(iv) and (v), respectively, of Regulation S-K.
Acquisition Activity
NEW YORK, NY --(Marketwired - July 25, 2013) - Mount Knowledge Holdings, Inc. (PINKSHEETS : MKHD), a software development and sales company focused on providing technology solutions, announced on March 20, 2013 that it had entered into a Definitive Agreement to acquire Forum Mobile Israel, a Mobile Virtual Network Enabler (MVNE) and value added reseller (VAR) of global best-in-class cloud products and services in a share exchange agreement pursuant to which its shareholders will become the majority owner of MKHD.
The parties have been diligently working on completing all necessary steps to prepare for a capital infusion of up to $3MM to be consummated on or prior to the Closing of this transaction. This includes the recently completed audit of Forum Mobile Israel Ltd. and its subsidiaries. Total consolidated gross revenue for 2012 for Forum Mobile Israel Ltd. was US$21.8MM. In addition, Forum Mobile anticipates reporting solid growth in all of its business lines in 2013.
A summary of the terms and conditions of the proposed transaction, including a copy of the Definitive Agreement between MKHD and Forum Mobile Inc. (FRMB), a Delaware company, which owns one hundred (100%) percent of the ownership interest in Forum Mobile Israel, can be reviewed on Current Form 8K filed with the SEC on March 20, 2013. Although all parties anticipate closing the pending transaction, there can be no guarantee that all of the conditions set forth in the Definitive Agreement will be met and that the transaction will be consummated.
Separately, MKHD's Form 10K for the period ending December 31, 2011, is expected to be filed imminently, which is the first in a series of SEC filings that the Company intends to file in order to become current in its 1934 Act filings with the SEC.
Reverse Merger Activity
NEW YORK, June 19, 2012 (GLOBE NEWSWIRE ) -- Mount Knowledge Holdings, Inc. (OTCBB:MKHD), a software development and sales company, announced that on June 15, 2012, it executed a Letter of Intent (LOI) to merge with Global Convergence Solutions, Inc. (GCS) of New Jersey, a leading pioneer in inter-carrier Operational and Business Support Systems (OSS & BSS) for the worldwide telecommunications marketplace.
Founded in 2006, GCS delivers innovative solutions that address some of the most complex areas of telecommunications carrier operations, to some of the world's most dynamic and largest carriers that include: Earthlink, KDDI, IBasis and Sify.
According to Neal Axelrad, CEO of GCS, "We are thrilled to have the opportunity to explore a combination of MKHD and GCS that will allow us to accelerate our growth and address our ongoing capital needs." He continued, "We believe that this combination provides us with an opportunity to accelerate our strategic initiatives that we believe will revolutionize the global telecommunications market for every carrier."
Jim Beatty, CEO & Chairman of MKHD commented, "Since assuming the leadership role at MKHD, our team has diligently focused their efforts on a strategic acquisition plan designed to add value for our shareholders." He continued, "We are pleased and enthusiastic about the prospect of a merger with GCS. We believe that the combination of their high-growth market niche, cutting-edge technologies and GCS' seasoned management team, form an attractive opportunity for our shareholders."
As a condition of the LOI, both parties agreed to keep confidential certain terms and conditions of the pending transaction, contingent upon further negotiations and execution of a "Definitive Agreement", to be executed on or before July 20, 2012, with a subsequent date of closing (the "Closing Date"), to be mutually agreed to by both parties. To date, the parties have not executed a Definitive Agreement and there is no guarantee or assurance that the parties will execute a Definitive Agreement .
In pursuit of strategic financial and growth opportunities, GCS retained Source Capital Group as its investment banking advisor. Neal Axelrad, "We've known the team at Source Capital for years. They have been instrumental in helping us arrive at this LOI and we look forward to working with them as we move forward in this process."
MKHD has retained Chardan Capital Markets, LLC as its investment banking advisor in the transaction.
CFO Trail
On March 31, 2012,
Daniel A. Carr resigned as Chairman of the Board, President, Chief Executive Officer,
Chief Financial Officer , Treasurer, and Secretary of the Corporation, effective immediately. The resignation of Mr. Carr was not a result of any disagreements relating to the Company’s operations, policies or practices.
Deal Flow
On September 14, 2011 (
the “Closing Date ”), Mount Knowledge Holdings, Inc. (the “Company”) entered into a securities purchase agreement (the “Purchase Agreement”) pursuant to which the Company issued to Deja Vu Ltd., a Turks and Caicos company (the “Purchaser”), a promissory note (the “Note”) in the principal amount of $100,000 (the “Principal Amount”). The Note matures one year from the Closing Date (the “Maturity Date”).
Comments & Business Outlook
MOUNT KNOWLEDGE HOLDINGS, INC.
SUCCESSOR COMPANY
PREDECESSOR COMPANY
SUCCESSOR COMPANY
PREDECESSOR COMPANY
THREE MONTHS ENDED JUNE 30, 2011
THREE MONTHS ENDED JUNE 30, 2010
SIX MONTHS ENDED JUNE 30, 2011
SIX MONTHS ENDED JUNE 30, 2010
Sales revenue
$
534,045
$
484,856
$
974,330
$
813,784
Cost of goods sold
279,980
208,023
520,806
379,087
Gross profit
254,065
276,833
453,524
434,697
Operating expenses:
Selling expenses
16
-
2,735
-
General and administrative expenses
956,489
152,164
1,932,885
375,741
Total operating expenses
956,505
152,164
1,935,620
375,741
Income (loss) from operations
(702,440)
124,669
(1,482,096)
58,956
Other income (expense)
14,391
(43,389)
19,280
(16,374)
Interest income (expense)
(830)
74
(1,124)
76
Income (loss) before non controlling interest and income tax
(688,879)
81,354
(1,463,940)
42,658
Income taxes
-
14,682
-
14,682
Net loss attributable to non-controlling interest
208,443
-
386,464
-
Net income (loss) attributable to common shareholders
$
(480,436)
$
66,672
$
(1,077,476)
$
27,976
Other Comprehensive Income (Loss)
Net income (loss)
$
(688,879)
$
66,672
$
(1,463,940)
$
27,976
Foreign currency translation adjustment
(3,335)
874
(6,803)
445
Total Comprehensive Income (Loss)
$
(692,214)
$
67,546
$
(1,470,743)
$
28,421
Net loss per share- basic and diluted
$
(0.005)
-
(0.01)
-
Weighted average number of common shares outstanding- basic and diluted
99,841,372
-
99,959,962
-
Liquidity Requirements
Management believes that our current cash on hand will not meet our cash requirements for the next 12 months and as such we will need to either raise additional proceeds and/or our officers and/or directors will need to make additional financial commitments to our company, neither of which is guaranteed. We plan to satisfy our future cash requirements, primarily the working capital required to execute on our objectives, including marketing and sales of our product, and to offset legal and accounting fees, through financial commitments from future debt/equity financings, if and when possible.
Management believes that we may generate some sales revenue within the next twelve (12) months, but that these sales revenues will not satisfy our cash requirements during that period. We have no committed source for funds as of this date. No representation is made that any funds will be available when needed. In the event that funds cannot be raised when needed, we may not be able to carry out our business plan, may never achieve sales, and could fail to satisfy our future cash requirements as a result of these uncertainties.
Reverse Merger Activity
On December 31, 2010, Mount Knowledge Holdings, Inc. entered into a Definitive Agreement with Mount Knowledge USA, Inc. and Birch First Advisors, LLC pursuant to which the Company acquired 11,166,690 shares of common stock, par value $0.0001 per share, of MTK USA and 8,888,888 shares of Series A Convertible Preferred Stock, par value $0.0001 per share, of MTK USA. In exchange for the MTK Securities, the Company issued 11,166,690 shares ) of its common stock, par value $0.0001 per share and 8,888,888 shares of its Series A Convertible Preferred Stock, par value $0.0001 per share, together with the Company Common Shares and the Company Series A Shares.
As a result of the transactions contemplated by the Agreement, Birch First now owns a total of 18,591,690 shares of Company Common Stock and 8,888,888 shares of Company Series A Preferred Stock and previously issued warrants to purchase 2,000,000 shares of Company Common Stock.
Comments & Business Outlook
Mount Knowledge Holdings expands its presence in China via a reverse merger transaction with of Language Key .
The acquisition of Language Key extends Mount Knowledge’s market potential and enables it to provide an even more comprehensive language learning solution to a large and loyal customer base. The new entity will combine the Language Key brand with Mount Knowledge’s portfolio of proprietary language software, including the Knowledge Generator™ Real-Time Learning System. In addition, during the restructuring of Language Key, Mount Knowledge and Language Key have partnered to create a cutting-edge Learning Management System (LMS) whereby English language learning and corporate training content will be delivered to organizations on-line while tracking the progress of each staff member. The Management of Language Key customers will have real time data on their individual and departmental achievements, and training programs can now be rolled out across any number of corporate divisions and/or locations. This e-learning platform will allow Language Key to expand its customer base at an even greater rate in an already very fast moving market.
As a result of this closing with Language Key, Mount Knowledge gains an immediate presence in the Asian B2B market and a revenue stream projected to be approximately USD $2,000,000 for Language Key’s fiscal year-end December 31, 2010. Language Key generated approximately (unaudited) USD $1,600,000 in combined revenues from its Hong Kong and China operations for the year-ending December 31, 2009, which will be consolidated in the Mount Knowledge’s financial statements in subsequent filings with the SEC as required.
Liquidity Requirements
We will need to obtain additional financing in order to complete our business plan. We currently do not have any operations and we have no income. We are an early stage company and we have not realized any revenues to date. As of October 31, 2009, we had cash-on-hand in the amount of $0. We have not generated any revenue to date. Given the recent rate at which we use cash in our operations, as well as the likelihood that our cash burn rate will increase once commence operations on the executed MtK License Agreement, we do not have sufficient capital to carry on operations, and we will need to raise at least $500,000 in a private placement offering to meet our financial commitments for at least the next twelve months. There is no assurance that we will be successful in raising these funds or generate these funds from the sales of MtK products. In the event were are successful, there is no assurance that the terms and conditions of these funds will be in the best interest of our company or our shareholders. We do not have any arrangements for financing and we may not be able to find such financing if required. We will need to obtain additional financing to operate our business for the next twelve months, and if we do not, our business will fail. We will raise the capital necessary to fund our business through a private offering of our common stock or units consisting of common stock and stock purchase warrants.
Research
On May 6, 2010 , the Board of Directors of Mount Knowledge Holdings, Inc, approved the execution of a non-binding Letter of Intent with THE LANGUAGE KEY TRAINING LTD, a British Virgin Islands Corporation to purchase the collective total of approximately ninety-five (95%) percent or more of the issued and outstanding shares of Common and Preferred Stock, including Warrants, Options, and/or another issued securities of The Language Key China, Ltd., a Hong Kong Corporation (the “Holding Company”) and its wholly-owned subsidiary in China, The Language Key China Ltd., a China Corporation (the “China Subsidiary”) and The Language Key Training, Ltd., a Hong Kong Corporation, currently an independent corporation owned by the Seller which is to be acquired as a wholly-owned subsidiary of the Holding Company in this proposed transaction (the “HK Subsidiary”), collectively referred to as (the “LK Entities”). The proposed transaction would make all LK Entities wholly-owned and operated subsidiaries of the Company.
Pursuant to the Letter of Intent, the Company has agreed to:
commit to provide a capital investment into the Holding Company in an amount equal to one million (USD $1,000,000) dollars within twelve (12) months from the Closing Date disbursed as follows: have the Holding Company, as its majority shareholder (post transaction), provide Seller compensation at the Closing Date in the form of shares of Series A Convertible Preferred Stock in an amount equal to eight hundred thousand (800,000) shares or such other mutually agreed upon amount of shares in the Holding Company, upon the terms and conditions to be set forth in an executed Purchase Agreement, and the Series A Convertible Preferred Stock Purchase Agreement, made a part thereof.
For the year ending December 31, 2009, Language Key, collectively generated approximately (unaudited) $1,600,000 in combined revenues from its Hong Kong and China operations and is projected to achieve revenues in excess of (unaudited) $2,000,000 for the year ending December 31, 2010.
A definitive purchase agreement is anticipated to be completed on or before June 30, 2010. However, to date no definitive agreement has been entered into by the parties and it is possible that the companies will not finalize such agreement .
