NEVADA
|
22-3387630
|
(STATE
OR OTHER JURISDICTION
|
(IRS
EMPLOYER IDENTIFICATION NO.)
|
OF
INCORPORATION OR ORGANIZATION)
|
|
109
NORTH POST OAK LANE, SUITE 422
|
|
HOUSTON,
TEXAS
|
77024
|
(ADDRESS
OF PRINCIPAL EXECUTIVE OFFICES)
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(ZIP
CODE)
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PAGE
|
||
PART
I
|
||
Item
1. Description of Business
|
4
|
|
Item
2. Description of Property
|
7
|
|
Item
3. Legal Proceedings
|
7
|
|
7
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||
PART
II
|
||
8
|
||
Item
6. Management's Discussion and Analysis or Plan of Operation
|
9
|
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Item
7. Financial Statements
|
17
|
|
17
|
||
Item
8A(T). Controls And Procedures
|
17
|
|
Item
9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
|
20
|
|
21
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||
Item
11. Security Ownership of Certain Beneficial Owners and Management
and
Related Shareholder Matters
|
22
|
|
Item
12. Certain Relationships and Related Transactions
|
24
|
|
Item
13. Exhibits
|
24
|
|
Item
14. Principal Accountant Fees and Services
|
27
|
|
Signatures
|
28
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·
|
The
Company will not assume the financial obligations of the client company
in
any circumstance. In most cases, the financial institution with the
greatest risk has referred the Company to the
transaction.
|
·
|
The
Company requires the client or their investor to provide the client
company with working capital necessary to execute the turnaround
plan.
|
·
|
The
Company requires the client to fully indemnify the Company against
any
actions, with the exception of gross negligence or
malfeasance.
|
·
|
If
the client has officer and director insurance, we require the client
to
add the Company or any of the Company's contractors as insured parties
under the policy.
|
·
|
Should
the Company consider altering any of the policies above, it will
require a
vote of our Board of Directors to waive them and agree to the maximum
amount of risk that the Company will
assume.
|
Bid Price Per Share
|
|||||||
High
|
Low
|
||||||
Three
months ended March 31, 2006
|
$
|
0.170
|
$
|
0.060
|
|||
Three
months ended June 30, 2006
|
0.100
|
0.072
|
|||||
Three
months ended September 30, 2006
|
0.080
|
0.051
|
|||||
Three
months ended December 31, 2006
|
0.060
|
0.010
|
|||||
Three
months ended March 31, 2007
|
$
|
0.070
|
$
|
0.009
|
|||
Three
months ended June 30, 2007
|
0.020
|
0.003
|
|||||
Three
months ended September 30, 2007
|
0.008
|
0.001
|
|||||
Three
months ended December 31, 2007
|
0.006
|
0.001
|
Number or securities
|
||||||||||
remaining available for
|
||||||||||
Number of securities to be
|
future issuance under
|
|||||||||
issued upon exercise of
|
Weighted-average exercise
|
equity compensation plans
|
||||||||
outstanding options, warrants
|
price of outstanding options,
|
(excluding securities
|
||||||||
Plan
category
|
and rights
|
warrants and rights
|
reflected in column (a))
|
|||||||
(a)
|
(b)
|
(c)
|
||||||||
Equity
compensation plans approved by security holders
|
-
|
-
|
1,583,333
|
|||||||
Equity
compensation plans not approved by security holders
|
-
|
-
|
-
|
1.
|
To
approve a change of name of the Company to Turnaround Partners,
Inc;
|
2.
|
To
approve the migration of the Company from a Delaware corporation
to a
Nevada corporation; and
|
3.
|
To
approve an increase of the number of authorized shares of Common
Stock of
the Company from Nine Hundred Million (900,000,000) to Five Billion
(5,000,000,000) shares.
|
Year ended
|
Year ended
|
||||||
December 31, 2007
|
December 31, 2006
|
||||||
Net
cash provided by (used in) operating activities
|
$
|
(1,490,657
|
)
|
$
|
146,119
|
||
Net
cash provided by investing activities
|
677,058
|
599,635
|
|||||
Net
cash used in financing activities
|
84,233
|
68,812
|
1.
|
Deficiencies
in the Company’s Control Environment. The Company’s control environment
did not sufficiently promote effective internal control over financial
reporting throughout the organization. This material weakness exists
because of the aggregate effect of multiple deficiencies in internal
control which affect the Company's control environment, including:
(a) the
lack of an audit committee, (b) the lack of independent financial
expertise on the Board of Directors, and (c) the absence of a
whistleblower hotline. The Company has no current plans, however,
to
establish an audit committee or to enter into a contract with an
independent whistleblower hotline service provider, and accordingly,
expects to continue to lack an audit committee, financial expertise
on the
Board of Directors, and a whistleblower
hotline.
|
2.
|
Deficiencies
in the Company’s Accounting System Controls. The Company failed to perform
certain control procedures designed to ensure that the financial
statement
presentations and related disclosures were complete and in accordance
with
GAAP. These deficiencies include: (a) inadequate review of journal
entries
and wire transfers, (b) the lack of independent review of balance
sheet
account reconciliations and supporting calculations, (c) inadequate
communication between management and the accounting department.
|
Age
|
Positions(S)
|
|||
61
|
Director,
President, Chief Executive Officer
|
|||
Interim
Chief Financial Officer
|
SUMMARY COMPENSATION TABLE
|
|||||||||||||||||||||||||
Name and Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock Awards
($)
|
Option Awards
($)
|
Non-Equity Incentive
Plan Compensation
|
All Other
Compensation ($) (1)
|
Total
($)
|
|||||||||||||||||
Russell
Kidder
|
2007
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||||
President,
CEO and
|
|||||||||||||||||||||||||
Interim
CFO
|
|||||||||||||||||||||||||
Timothy
J Connolly, Former CEO
|
2007
|
$
|
551,000
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
551,000
|
||||||||||
2006
|
$
|
338,500
|
$
|
100,000
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
13,400
|
$
|
451,900
|
|||||||||||
2005
|
$
|
265,000
|
$
|
20,000
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
12,000
|
$
|
297,000
|
|||||||||||
Wm
Chris Mathers,
|
2007
|
$
|
60,000
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
60,000
|
||||||||||
Former
CFO
|
2006
|
$
|
29,500
|
$
|
1,500
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
31,000
|
||||||||||
(1)
- Auto allowance
|
Title
of Class
|
|
Name
and Address of
Beneficial
Owner
|
|
Amount
of
Direct
Ownership
|
|
Amount
&
Nature
of
Indirect
Beneficial
Ownership
|
|
Total
of Direct
and
Beneficial
Ownership
|
|
Percentage
of
Class(1)
|
|
|||||
Common
|
|
|
Viewpoint
Capital, LLC
2470
Evening Twilight Lane
Henderson,
Nevada 89044
|
|
|
300,000,000
|
|
|
—
|
|
|
300,000,000
|
|
|
63.66
|
%
|
Common
|
|
|
Michael
O. Sutton
10806
Briar Branch Lane
Houston,
TX 77024
|
|
|
10,723,600
|
|
|
4,395,445
|
(2)
|
|
15,119,045
|
|
|
3.21
|
%
|
Common
|
|
|
Timothy
J. Connolly
109
N. Post Oak Lane
Suite
422
Houston,
TX 77024
|
|
|
—
|
|
|
13,050,000
|
(3)
|
|
13,050,000
|
|
|
9.99
|
%
|
Common
|
|
|
Jan
Carson Connolly
8602
Pasture View Lane
Houston,
TX 77024
|
|
|
—
|
|
|
13,050,000
|
(4)
|
|
13,050,000
|
|
|
9.99
|
%
|
Common
|
|
|
Gerald
Holland
22
Coult Lane
Old
Lyme, CT 07601
|
|
|
5,113,636
|
|
|
177,740,511
|
(5)
|
|
182,854,147
|
|
|
38.80
|
%
|
Common
|
|
|
Joanna
Saporito
668
W. Saddle River Rd.
Ho-Ho-Kus,
NJ 07423
|
|
|
—
|
|
|
72,421,863
|
(5)
|
|
72,421,863
|
|
|
15.37
|
%
|
Common
|
|
|
Mary-Ellen
Viola
249
Long Hill Drive
Short
Hills, NJ 07078
|
|
|
—
|
|
|
13,050,000
|
(5)
|
|
13,050,000
|
|
|
9.99
|
%
|
Common
|
|
|
David
Kesselbrenner
10
Devonshire Rd.
Livingston,
NJ 07039
|
|
|
—
|
|
|
8,560,816
|
(5)
|
|
8,560,816
|
|
|
1.82
|
%
|
Common
|
|
|
Louis
Kesselbrenner
10
Devonshire Rd.
Livingston,
NJ 07039
|
|
|
—
|
|
|
29,447,378
|
(5)
|
|
29,447,378
|
|
|
6.25
|
%
|
Common
|
|
|
Sarah
Kesselbrenner
10
Devonshire Rd.
Livingston,
NJ 07039
|
|
|
—
|
|
|
29,447,378
|
(5)
|
|
29,447,378
|
|
|
6.25
|
%
|
Common
|
|
|
Joseph
Kesselbrenner
10
Devonshire Rd.
Livingston,
NJ 07039
|
|
|
—
|
|
|
9,216,738
|
(5)
|
|
9,216,738
|
|
|
1.96
|
%
|
Common
|
|
|
YA
Global Investments LP
101
Hudson Street
Suite
3700
Jersey
City, NJ 07302
|
|
|
—
|
|
|
6,120,000
|
(5)
|
|
6,120,000
|
|
|
4.99
|
%
|
Common
|
|
|
Highgate
House Funds, Ltd.
101
Hudson Street
Suite
3700
Jersey
City, NJ 07302
|
|
|
—
|
|
|
6,120,000
|
(5)
|
|
6,120,000
|
|
|
4.99
|
%
|
|
(1)
|
Applicable
percentages of ownership are based on 471,236,054 shares of Common
Stock
on February 14, 2008 for each stockholder. Beneficial ownership
is
determined in accordance within the rules of the SEC and generally
includes voting of investment power with respect to the securities.
Shares
subject to securities exercisable or convertible into shares of
Common
Stock that are currently exercisable or exercisable within sixty
(60) days
of February 14, 2008 are deemed to be beneficially owned by the
person
holding such derivative securities for the purpose of computing
the
percentage of ownership of such persons, but are not treated as
outstanding for the purpose of computing the percentage ownership
of any
other person.
|
|
|
|
|
(2)
|
Includes
4,195,445 shares which may be issued upon conversion of the 6,666
shares
of Series B Preferred Stock beneficially owned by Mr. Sutton and
200,000
shares directly held by his spouse.
|
|
|
|
|
(3)
|
Includes
shares of Common Stock which may be issued upon conversion of 595
shares
of Series D Preferred Stock beneficially owned by Mr. Connolly
and shares
of Common Stock which may be issued upon conversion of 105 shares
of
Series D Preferred Stock beneficially owned by his spouse, subject
to a
9.99% ownership limitation set forth in the amended and restated
Certificate of Designation of Series D Preferred Stock.
|
|
|
|
|
(4)
|
Includes
shares of Common Stock which may be issued upon conversion of 105
shares
of Series D Preferred Stock beneficially owned by Ms. Connolly
and shares
of Common Stock which may be issued upon conversion of 595 shares
of
Series D Preferred Stock beneficially owned by her spouse, subject
to a
9.99% ownership limitation set forth in the amended and restated
Certificate of Designation of Series D Preferred Stock.
|
|
|
|
|
(5)
|
These
shares represent the approximate number of shares underlying convertible
debentures at an assumed price of $0.001 in light of the fact that
the
Company is prohibited from issuing shares of Common Stock at a
price per
share below par. Because the conversion price will fluctuate based
on the
market price of the Company’s stock, the actual number of shares to be
issued upon conversion of the debentures may be lower but cannot
be
higher.
|
|
|
|
Title of Class
|
|
Name and Address of Beneficial Owner
|
|
Amount of
Direct
Ownership
|
|
Amount & Nature
of Beneficial
Ownership
|
|
Total of
Direct and
Beneficial
Ownership
|
|
Percentage
of Class(1)
|
|
||||||||||||||
Common
|
|
|
Russell
Kidder, President,
Chief
Executive Officer and Director
109
North Post Oak Lane
Suite
422
Houston,
TX 77024
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
0
|
%
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Richard
P. McLaughlin, Secretary
109
North Post Oak Lane
Suite
422
Houston,
TX 77024
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
0
|
%
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALL
DIRECTORS AND
EXECUTIVE
OFFICERS AS
A
GROUP (TWO PERSONS)(3)
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
0
|
%
|
|
(1)
|
Applicable
percentages of ownership are based on 471,236,054 shares of Common
Stock
outstanding on February 14, 2008 for each stockholder. Beneficial
ownership is determined in accordance within the rules of the SEC
and
generally includes voting of investment power with respect to the
securities. Shares subject to securities exercisable or convertible
into
shares of Common Stock that are currently exercisable or exercisable
within sixty (60) days of February 14, 2008 are deemed to be beneficially
owned by the person
|
EXHIBIT NO.
|
DESCRIPTION
|
LOCATION
|
||
2.1
|
Agreement
and Plan of Merger, dated as of November 22, 2006, by and between
Emerge
Capital Corp. (the Delaware corporation) and Turnaround Partners,
Inc.
(the Nevada corporation)
|
Incorporated
by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K as
filed with the U.S. Securities and Exchange Commission on January
5,
2007.
|
||
2.2
|
Certificate
of Ownership and Merger of Emerge Capital Corp. with and into Turnaround
Partners, Inc.
|
Incorporated
by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K as
filed with the U.S. Securities and Exchange Commission on January
5,
2007.
|
||
2.3
|
Articles
of Merger of Turnaround Partners, Inc. and Emerge Capital
Corp.
|
Incorporated
by reference to Exhibit 2.3 to the Company’s Current Report on Form 8-K as
filed with the U.S. Securities and Exchange Commission on January
5,
2007.
|
||
3.1
|
Articles
of Incorporation of Turnaround Partners, Inc.
|
Incorporated
by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K as
filed with the U.S. Securities and Exchange Commission on January
5,
2007.
|
||
3.2
|
Bylaws
of Turnaround Partners, Inc.
|
Incorporated
by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K as
filed with the U.S. Securities and Exchange Commission on January
5,
2007.
|
||
4.1
|
2005
Stock Incentive Plan
|
Incorporated
by reference to Appendix A to the Company's Definitive Information
Statement as filed with the U.S. Securities and Exchange Commission
on
December 13, 2005
|
||
4.2
|
Amended
and Restated Certificate of Designation of Series D Preferred
Stock
|
Incorporated
by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K as
filed with the U.S. Securities and Exchange Commission on December
14,
2007.
|
||
10.1
|
Assignment
and Amendment Agreement, dated January 26, 2004, related to the
Secured
Note Payable Agreement dated December 22, 2003, by and between
Stone
Street Asset Management, LLC and NuWave
|
Incorporated
by reference to Exhibit 99.7 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on January
27,
2005.
|
||
10.2
|
Convertible
Debenture, issued on May 6, 2004, by Corporate Strategies, Inc
to Cornell
Capital Partners, LP
|
Incorporated
by reference to Exhibit 10.2 to the Company’s Annual Report on Form 10-KSB
for the year ended December 31, 2005 as filed with the U.S. Securities
and
Exchange Commission on April 17, 2006
|
||
10.3
|
Convertible
Debenture, issued on June 24, 2004, by Corporate Strategies, Inc.
to
iVoice, Inc.
|
Incorporated
by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-KSB
for the year ended December 31, 2005 as filed with the U.S. Securities
and
Exchange Commission on April 17, 2006
|
||
10.4
|
Employment
Agreement, dated September 1, 2004, by and between Corporate Strategies,
Inc. and Timothy J. Connolly
|
Incorporated
by reference to Exhibit 10.4 to the Company’s Annual Report on Form 10-KSB
for the year ended December 31, 2005 as filed with the U.S. Securities
and
Exchange Commission on April 17,
2006
|
10.5
|
Employment
Agreement, dated September 1, 2004, by and between Corporate Strategies,
Inc. and Fred Zeidman
|
Incorporated
by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-KSB
for the year ended December 31, 2005 as filed with the U.S. Securities
and
Exchange Commission on April 17, 2006
|
||
10.6
|
Convertible
Debenture, issued on September 28, 2004, by Corporate Strategies,
Inc. to
Cornell Capital Partners, LP
|
Incorporated
by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-KSB
for the year ended December 31, 2005 as filed with the U.S. Securities
and
Exchange Commission on April 17, 2006
|
||
10.7
|
Termination
Agreement, dated January 26, 2005, related to the Standby Equity
Distribution dated as of May 2004 by and between the Company and
Cornell
Capital Partners, LP
|
Incorporated
by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on January
27,
2005.
|
||
10.8
|
Standby
Equity Distribution Agreement, dated as of January 26, 2005, between
the
Company and Cornell Capital Partners, LP
|
Incorporated
by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on January
27,
2005.
|
||
10.9
|
Registration
Rights Agreement, dated as of January 26, 2005, by and between
the Company
and Cornell Capital Partners, LP
|
Incorporated
by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on January
27,
2005.
|
||
10.10
|
Placement
Agent Agreement, dated as of January 26, 2005, by and among the
Company,
Cornell capital Partners, LP and Newbridge Securities
Corporation
|
Incorporated
by reference to Exhibit 99.4 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on January
27,
2005.
|
||
10.11
|
Termination
Agreement, dated January 26, 2005, related to the Convertible Debenture
issued by the Company and Cornell Capital Partners, LP on December
22,
2003
|
Incorporated
by reference to Exhibit 99.5 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on January
27,
2005.
|
||
10.12
|
Promissory
Note, dated as of January 2, 2005, issued by the Company to Cornell
Capital Partner, LP
|
Incorporated
by reference to Exhibit 99.6 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on January
27,
2005.
|
||
10.13
|
Convertible
Debenture, issued on April 6, 2005, by Corporate Strategies, Inc.
to
Cornell Capital Partners, LP
|
Incorporated
by reference to Exhibit 10.13 to the Company’s Annual Report on Form
10-KSB for the year ended December 31, 2005 as filed with the U.S.
Securities and Exchange Commission on April 17, 2006
|
||
10.14
|
$250,000
Convertible Debenture, dated as of May 5, 2005, issued to Cornell
Capital
Partners, LP
|
Incorporated
by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on May
10,
2005.
|
||
10.15
|
Letter
of Intent, dated June 3, 2005, by and between the Company and Corporate
Strategies, Inc.
|
Incorporated
by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on June
16,
2005.
|
||
10.16
|
$150,000
Convertible Debenture, dated as of July 20, 2005, issued to Cornell
Capital Partners, LP
|
Incorporated
by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on July
28,
2005.
|
||
10.17
|
Merger
Agreement, dated as of August 31, 2005, by and among NuWave Technologies,
Inc., Strategies Acquisition Corp., Corporate Strategies, Inc.
and the
Shareholders listed therein
|
Incorporated
by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K/A
as filed with the U.S. Securities and Exchange Commission on September
8,
2005.
|
||
10.18
|
Services
Agreement, dated October 1, 2005, by and between Timothy J. Connolly
and
Sagamore Holdings, Inc.
|
Incorporated
by reference to Exhibit 10.18 to the Company’s Annual Report on Form
10-KSB for the year ended December 31, 2005 as filed with the U.S.
Securities and Exchange Commission on April 17, 2006
|
||
10.19
|
Stock
Purchase Agreement, dated as of November 11, 2005, by and among
Corporate
Strategies, Inc., Mr. Robert P. Farrell and Mr. Joseph W. Donohue,
Jr.
|
Incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on January
30,
2006.
|
||
10.20
|
Letter,
dated November 18, 2005, from Cornell Capital Partners, LP to modify
certain Debentures
|
Incorporated
by reference to Exhibit 10.21 to the Company’s Annual Report on Form
10-KSB for the year ended December 31, 2005 as filed with the U.S.
Securities and Exchange Commission on April 17, 2006
|
||
10.21
|
Consulting
Agreement, dated December 14, 2005, by and between Timothy J. Connolly
on
behalf of Corporate Strategies, Inc. and Elite Flight Solutions,
Inc.
|
Incorporated
by reference to Exhibit 10.22 to the Company’s Annual Report on Form
10-KSB for the year ended December 31, 2005 as filed with the U.S.
Securities and Exchange Commission on April 17,
2006
|
10.22
|
Convertible
Debenture, issued December 31, 2005, by Elite Flight Solutions,
Inc. to
Corporate Strategies, Inc.
|
Incorporated
by reference to Exhibit 10.23 to the Company’s Annual Report on Form
10-KSB for the year ended December 31, 2005 as filed with the U.S.
Securities and Exchange Commission on April 17, 2006
|
||
10.23
|
Consulting
Agreement, dated January 1, 2006, by and between Timothy J. Connolly
and
Power Technology, Inc.
|
Incorporated
by reference to Exhibit 10.24 to the Company’s Annual Report on Form
10-KSB for the year ended December 31, 2005 as filed with the U.S.
Securities and Exchange Commission on April 17, 2006
|
||
10.24
|
Consulting
Agreement, dated January 1, 2006, by and between Timothy J. Connolly
on
behalf of Corporate Strategies, Inc. and TRAC Financial Group,
Inc.
|
Incorporated
by reference to Exhibit 10.25 to the Company’s Annual Report on Form
10-KSB for the year ended December 31, 2005 as filed with the U.S.
Securities and Exchange Commission on April 17, 2006
|
||
10.25
|
Assumption
Agreement, dated February 7, 2006, by and between Lehigh and Cornell
capital Partners, LP
|
Incorporated
by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on February
15,
2006.
|
||
10.26
|
Stock
Purchase Agreement, dated as of February 3, 2006, by and between
the
Company and Cornell Capital Partners, LP
|
Incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on February
15,
2006.
|
||
10.27
|
Joinder
Agreement, dated as of February 11, 2006, effective as of December
31,
2005, by Elite Flight Solutions, Inc.
|
Incorporated
by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on February
28,
2006.
|
||
10.28
|
Security
Agreement, dated as of February 11, 2006, effective as of December
31,
2005, by and between Elite Flight Solutions, Inc. and Corporate
Strategies, Inc.
|
Incorporated
by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on February
28,
2006.
|
||
10.29
|
Secured
Convertible Debenture, dated as of February 11, 2006, effective
as of
December 31, 2005, issued to Corporate Strategies, Inc.
|
Incorporated
by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on February
28,
2006.
|
||
10.30
|
Registration
Rights Agreement, dated as of February 11, 2006, effective as of
December
31, 2005, by and between Elite Flight Solutions, Inc. and Corporate
Strategies, Inc.
|
Incorporated
by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on February
28,
2006.
|
||
10.31
|
Securities
Purchase Agreement, dated as of February 11, 2006, effective as
of
December 31, 2005, by and between Elite Flight Solutions, Inc.
and
Corporate Strategies, Inc.
|
Incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on February
28,
2006.
|
||
10.32
|
Purchase
Agreement, dated as of September 30, 2006, by and among Emerge
Capital
Corp., Kipling Holdings, Inc. and Timothy J. Connolly
|
Incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on October
6,
2006.
|
||
10.33
|
First
Amendment to Purchase Agreement, dated October 5, 2006, by and
among
Emerge Capital Corp, Kipling Holdings, Inc. and Timothy J.
Connolly
|
Incorporated
by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on October
6,
2006.
|
||
10.34
|
Second
Amendment to Purchase Agreement, effective as of December 31, 2006,
by and
among Emerge Capital Corp, Kipling Holdings, Inc. and Timothy J.
Connolly
|
Incorporated
by reference to Exhibit 10.34 to the Company’s Annual Report on Form
10-KSB for the year ended December 31, 2006 as filed with the U.S.
Securities and Exchange Commission on April 17, 2007
|
||
10.35
|
Letter
Agreement, dated October 9, 2007, by and between Corporate Strategies,
In.
and YA Global Investments, L.P.
|
Incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on October
15,
2007.
|
||
10.36
|
Stock
Purchase Agreement, dated December 5, 2007, by and among Turnaround
Partners, Inc., Mr. Timothy J. Connolly and Viewpoint Capital,
LLC
|
Incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on December
11,
2007.
|
||
16.1
|
Letter
dated November 9, 2005, from Weiser LLP
|
Incorporated
by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K
as filed with the U.S. Securities and Exchange Commission on November
14,
2005, 2005.
|
||
31.1
|
Certification
by Chief Executive Officer pursuant to 15.U.S.C. Section 7241,
as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
Included
herein
|
||
32.1
|
Certification
by Chief Executive Officer pursuant to 18.U.S.C. Section 1350,
as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
Included
herein
|
Date:
September 4, 2008
|
Turnaround
Partners, Inc.
|
|
|
(Registrant)
|
|
|
|
|
|
/s/
Russell Kidder
|
|
|
Russell
Kidder
President,
Chief Executive Officer and Interim CFO
|
/s/
Russell Kidder
|
September
4, 2008
|
|
Name:
Russell Kidder
Titles:
Chief Executive Officer, Interim Chief Financial Officer,
Principal
Executive Officer, Interim Principal Financial and
Accounting
Officer and Director
|
PAGE
|
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
Consolidated
Balance Sheet as of December 31, 2007
|
F-2
|
Consolidated
Statements of Operations for the Years Ended
|
|
December
31, 2007 and 2006
|
F-4
|
Consolidated
Statements of Changes in Shareholders' Deficit
|
|
for
the Years Ended December 31, 2007 and 2006
|
F-6
|
Consolidated
Statements of Cash Flows for the Years Ended
|
|
December
31, 2007 and 2006
|
F-7
|
Notes
to the Consolidated Financial Statements
|
F-9 to F-28
|
ASSETS
|
||||
CURRENT
ASSETS
|
||||
Cash
and cash equivalents
|
$
|
255,961
|
||
Notes
and accounts receivable, net of allowance accounts of
$482,686
|
299,576
|
|||
Investment
in marketable securities
|
510,791
|
|||
Prepaid
expense and deferred financing costs
|
23,208
|
|||
Total
current assets
|
1,089,536
|
|||
NONCURRENT
ASSETS
|
||||
Investment
in real estate partnership and other investments, at cost
|
3,749,859
|
|||
Deferred
debenture costs
|
25,506
|
|||
Total
noncurrent assets
|
3,775,365
|
|||
TOTAL
ASSETS
|
$
|
4,864,901
|
||
LIABILITIES
AND SHAREHOLDERS' DEFICIT
|
||||
CURRENT
LIABILITIES
|
||||
Accounts
payable and accrued liabilities
|
$
|
607,181
|
||
Unearned
income
|
9,167
|
|||
Convertible
debentures
|
1,932,475
|
|||
Notes
payable
|
96,003
|
|||
Series
C Preferred stock including associated paid in capital; liquidation
preference of $337,380, redeemable
at $1,500 per share at Company option, cumulative dividends of $120
per
share per year, non-voting, par value $.01, 1,000 shares authorized,
225
shares issued and outstanding
|
337,380
|
|||
Derivative
liability
|
282,181
|
|||
Total
current liabilities
|
3,264,387
|
|||
Convertible
debentures—net of $1,136,193 discount
|
5,088,807
|
|||
Note
payable
|
110,978
|
|||
Accrued
interest payable
|
903,746
|
|||
Total
liabilities
|
9,367,918
|
|||
COMMITMENTS
AND CONTINGENCIES
|
-
|
SHAREHOLDERS'
DEFICIT
|
||||
Preferred
Stock, par value $.01, 2,000,000 shares authorized:
|
||||
Series
A Convertible Preferred Stock, noncumulative, $.01 par value; 400,000
shares authorized; none issued
|
-
|
|||
Series
B Convertible Preferred Stock, $.01 par value; 100,000 shares authorized;
6,666 shares issued and outstanding; no liquidation or redemption
value
|
67
|
|||
Series
D Convertible Preferred Stock, $.01 par value; 100,000 shares authorized;
700 shares issued and outstanding; no liquidation or redemption
value
|
7
|
|||
Series
E Convertible Preferred Stock, $.001 par value; 1 shares authorized;
1
share issued and outstanding; no liquidation or redemption
value
|
-
|
|||
Common
stock, $.001 par value; 5,000,000,000 shares authorized; 135,236,054
shares issued and outstanding
|
135,235
|
|||
Additional
paid-in capital
|
1,049,994
|
|||
Retained
deficit
|
(5,688,320
|
)
|
||
Total
shareholders' deficit
|
(4,503,017
|
)
|
||
TOTAL
LIABILITIES AND SHAREHOLDERS' DEFICIT
|
$
|
4,864,901
|
2007
|
2006
|
||||||
REVENUE
|
|||||||
Discount
income
|
$
|
-
|
$
|
10,425
|
|||
Consulting
revenue
|
1,356,160
|
963,277
|
|||||
Marketable
securities loss
|
(303,373
|
)
|
(51,093
|
)
|
|||
Fee
income
|
54,650
|
204,610
|
|||||
Total
revenue
|
1,107,437
|
1,127,219
|
|||||
GENERAL
AND ADMINISTRATIVE EXPENSES
|
|||||||
Salaries
and benefits
|
831,214
|
892,286
|
|||||
Advertising
|
69,455
|
120,155
|
|||||
Business
develeopment, travel and entertainment
|
62,828
|
86,685
|
|||||
Rent
|
87,453
|
76,395
|
|||||
Depreciation
and amortization
|
24,041
|
23,874
|
|||||
Professional
fees
|
479,161
|
855,722
|
|||||
Bad
debt
|
524,414
|
243,302
|
|||||
Other
expenses
|
211,048
|
271,995
|
|||||
Allocated
overhead to affiliated entity
|
(243,951
|
)
|
(308,481
|
)
|
|||
Total
general and administrative expenses
|
2,045,663
|
2,261,933
|
|||||
OPERATING
LOSS
|
(938,226
|
)
|
(1,134,714
|
)
|
|||
Other
(income) expense:
|
|||||||
Net
change in fair value of derivative liabilities
|
(141,664
|
)
|
(3,642,080
|
)
|
|||
Income
on debt extinguishment
|
(450,650
|
)
|
(130,563
|
)
|
|||
Merger
expense
|
-
|
140,000
|
|||||
Interest
expense
|
586,508
|
273,802
|
|||||
Interest
expense - derivatives
|
834,572
|
600,071
|
|||||
Interest
Income
|
(17,455
|
)
|
(54,790
|
)
|
|||
Loss
from operations and impairment of investment in real estate
partnership
|
685,136
|
78,095
|
|||||
Other
(income) expense
|
170,302
|
(22,605
|
)
|
||||
Total
other (income) expense
|
1,666,749
|
(2,758,070
|
)
|
||||
Income
(loss) before income tax
|
(2,604,975
|
)
|
1,623,356
|
||||
INCOME
TAX PROVISION
|
|||||||
Current
income tax benefit
|
-
|
-
|
|||||
Deferred
income tax expense (benefit )
|
-
|
-
|
|||||
Total
income tax expense (benefit)
|
-
|
-
|
|||||
INCOME
(LOSS) FROM CONTINUING OPERATIONS
|
(2,604,975
|
)
|
1,623,356
|
2007
|
2006
|
||||||
INCOME
(LOSS) FROM DISCONTINUED OPERATIONS
|
|||||||
Loss
from discontinued operations
|
-
|
(4,688
|
)
|
||||
Gain
on sale of subsidiaries
|
-
|
3,317,406
|
|||||
NET
INCOME (LOSS)
|
(2,604,975
|
)
|
4,936,074
|
||||
Preferred
dividends paid
|
-
|
4,554
|
|||||
INCOME
(LOSS) AVAILABLE TO COMMON SHARES
|
$
|
(2,604,975
|
)
|
$
|
4,931,520
|
||
Basic
income (loss) per share:
|
|||||||
Income
(loss) from continuing operations
|
(0.04
|
)
|
0.06
|
||||
Income
(loss) from discontinued operations
|
-
|
0.13
|
|||||
$
|
(0.04
|
)
|
$
|
0.19
|
|||
Diluted
income (loss) per share:
|
|||||||
Income
(loss) from continuing operations
|
-
|
0.02
|
|||||
Income
(loss) from discontinued operations
|
-
|
0.03
|
|||||
|
$ | - |
$
|
0.05
|
|||
Basic
average shares outstanding
|
63,733,188
|
25,505,662
|
|||||
Diluted
average shares outstanding
|
63,733,188
|
98,411,949
|
Additional
|
||||||||||||||||||||||||||||||||||||||||
Series B Preferred
|
Series C Preferred
|
Series D Preferred
|
Series E Preferred
|
Common Stock
|
Paid-in
|
Retained
|
||||||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Total
|
||||||||||||||||||||||||||||
Balance,
December 31, 2005
|
100,000
|
$
|
1,000
|
536
|
$
|
5
|
-
|
$
|
-
|
-
|
$
|
-
|
22,710,816
|
$
|
22,711
|
$
|
719,638
|
$
|
(4,701,603
|
)
|
$
|
(3,958,249
|
)
|
|||||||||||||||||
Issuance
of common stock:
|
||||||||||||||||||||||||||||||||||||||||
For
services
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
4,800,000
|
4,800
|
287,700
|
-
|
292,500
|
|||||||||||||||||||||||||||
Conversion
of debentures
|
1,936,688
|
1,936
|
62,065
|
64,001
|
||||||||||||||||||||||||||||||||||||
Issuance
of 3,000,000 warrants
|
||||||||||||||||||||||||||||||||||||||||
for
services
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
141,000
|
-
|
141,000
|
|||||||||||||||||||||||||||
Redemption
of preferred stock
|
-
|
-
|
(282
|
)
|
(3
|
)
|
-
|
-
|
-
|
-
|
-
|
-
|
(243,498
|
)
|
-
|
(243,501
|
)
|
|||||||||||||||||||||||
Transfer
preferred stock to
|
-
|
|||||||||||||||||||||||||||||||||||||||
current
liability
|
-
|
-
|
(254
|
)
|
(2
|
)
|
-
|
-
|
-
|
-
|
-
|
-
|
(224,976
|
)
|
(224,978
|
)
|
||||||||||||||||||||||||
Exchange
of series B preferred for
|
||||||||||||||||||||||||||||||||||||||||
series
D preferred
|
(93,334
|
)
|
(933
|
)
|
-
|
-
|
93,334
|
933
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||
Reduction
in series D preferred shares
|
-
|
-
|
-
|
-
|
(92,634
|
)
|
(926
|
)
|
-
|
-
|
-
|
-
|
926
|
-
|
-
|
|||||||||||||||||||||||||
Deemed
distribution to shareholder
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(3,313,264
|
)
|
(3,313,264
|
)
|
|||||||||||||||||||||||||
Net
income
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
4,936,074
|
4,936,074
|
|||||||||||||||||||||||||||
Preferred
dividends paid
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(4,554
|
)
|
(4,554
|
)
|
|||||||||||||||||||||||||
Balance,
December 31, 2006
|
6,666
|
67
|
-
|
-
|
700
|
7
|
-
|
-
|
29,447,504
|
29,447
|
742,855
|
(3,083,345
|
)
|
(2,310,969
|
)
|
|||||||||||||||||||||||||
Issuance
of common stock:
|
||||||||||||||||||||||||||||||||||||||||
For
services
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1,192,307
|
1,192
|
14,308
|
-
|
15,500
|
|||||||||||||||||||||||||||
Conversion
of debentures
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
104,596,247
|
104,596
|
285,673
|
390,269
|
||||||||||||||||||||||||||||
Proceeds
for sale of stock received for Series E preferred stock
|
-
|
-
|
-
|
-
|
-
|
-
|
1
|
-
|
-
|
-
|
7,158
|
-
|
7,158
|
|||||||||||||||||||||||||||
Net
loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(2,604,975
|
)
|
(2,604,975
|
)
|
|||||||||||||||||||||||||
Balance,
December 31, 2007
|
6,666
|
$
|
67
|
-
|
$
|
-
|
700
|
$
|
7
|
1
|
$
|
-
|
135,236,058
|
$
|
135,235
|
1,049,994
|
$
|
(5,688,320
|
)
|
$
|
(4,503,017
|
)
|
Year Ended December 31,
|
|||||||
2007
|
2006
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|||||||
Net
income (loss)
|
$
|
(2,604,975
|
)
|
$
|
4,936,074
|
||
Adjustment
to reconcile net income (loss) to net cash provided by (used in)
operating
activities:
|
|||||||
Depreciation
and amortization
|
24,041
|
23,874
|
|||||
Amortization
of deferred expenses
|
324,918
|
60,638
|
|||||
Bad
debts
|
484,414
|
243,302
|
|||||
Loss
from discontinued operations
|
-
|
4,688
|
|||||
Non-cash
stock issued for services
|
15,500
|
62,077
|
|||||
Non-cash
consulting fees
|
(889,804
|
)
|
-
|
||||
Non-cash
merger expense
|
-
|
140,000
|
|||||
Non-cash
expense for redemption of preferred stock
|
152,834
|
3,072
|
|||||
Non-cash
expenses
|
75,853
|
88,095
|
|||||
Non-cash
interest expense-derivatives
|
860,233
|
600,071
|
|||||
Net
change in fair value of derivative liability
|
(167,325
|
)
|
(3,642,080
|
)
|
|||
Non-cash
debt modification gain
|
(450,250
|
)
|
(130,563
|
)
|
|||
Non-cash
gain on sale of subsidary
|
-
|
(3,317,406
|
)
|
||||
Non-cash
income
|
(289,722
|
)
|
(541,527
|
)
|
|||
Loss
from and impairment of investment in real estate
partnership
|
685,136
|
-
|
|||||
(Increase)
decrease in assets:
|
|||||||
Other
accounts receivable
|
295,216
|
(245,186
|
)
|
||||
Notes
receivable
|
6,415
|
211,142
|
|||||
Prepaid
and other
|
(89,562
|
)
|
102,412
|
||||
Investment
in marketable securities
|
(246,137
|
)
|
391,060
|
||||
Increase
(decrease) in liabilities:
|
|||||||
Accounts
payable
|
(37,623
|
)
|
(8,588
|
)
|
|||
Accrued
liabilities
|
(152,236
|
)
|
241,405
|
||||
Unearned
income
|
76,667
|
717,749
|
|||||
Due
to clients
|
-
|
(19,608
|
)
|
||||
Accrued
interest
|
435,750
|
225,418
|
|||||
Net
cash provided by (used in) operating activities
|
(1,490,657
|
)
|
146,119
|
||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|||||||
Purchases
of fixed assets
|
(3,091
|
)
|
(21,784
|
)
|
|||
Cash
received in purchase and from sale of subsidiary
|
-
|
559,742
|
|||||
Cash
received for sale of investment
|
198,899
|
-
|
|||||
Cash
paid in purchase of subsidiary
|
-
|
(10,000
|
)
|
||||
Investment
purchases
|
-
|
(7,073
|
)
|
||||
Preferental
returns on capital of and distribution from partnership
|
481,250
|
78,750
|
|||||
Net
cash provided by investing activities
|
677,058
|
599,635
|
Year Ended December 31,
|
|||||||
2007
|
2006
|
||||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|||||||
Principal
payments on note payable
|
(84,233
|
)
|
(64,258
|
)
|
|||
Dividends
paid on preferred stock
|
-
|
(4,554
|
)
|
||||
Net
cash used in financing activities
|
(84,233
|
)
|
(68,812
|
)
|
|||
NET
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(897,832
|
)
|
676,942
|
||||
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
1,153,793
|
476,851
|
|||||
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
$
|
255,961
|
$
|
1,153,793
|
|||
SUPPLEMENTAL
INFORMATION
|
|||||||
Interest
paid
|
$
|
50,040
|
$
|
14,689
|
|||
Taxes
paid
|
$
|
-
|
$
|
9,882
|
|||
Decrease
in notes receivable
|
$
|
900,000
|
$
|
-
|
|||
Acquisition
of investment
|
$
|
1,789,804
|
$
|
-
|
|||
Conversion
of convertible debentures and accrued interest:
|
|||||||
Decrease
in debentures and accrued interest
|
$
|
390,265
|
$
|
63,996
|
|||
Increase
in common stock
|
$
|
104,596
|
$
|
1,936
|
|||
Increase
in paid-in-capital
|
$
|
285,673
|
$
|
62,065
|
|||
Sale
of Preferred Stock - Series E
|
|||||||
Increase
in Accounts Receivable
|
$
|
7,158
|
$
|
-
|
|||
Increase
in Paid-in-capital
|
$
|
7,158
|
$
|
-
|
|||
Disposition
of investment
|
|||||||
Purchase
of notes receivable
|
$
|
586,000
|
$
|
-
|
|||
Collection
of affiliate receivable
|
$
|
106,905
|
$
|
-
|
|||
Decrease
in investment exchanged for notes receivable and affiliate
receivable
|
$
|
889,804
|
$
|
-
|
|||
Redemption
of preferred stock
|
$
|
36,000
|
$
|
-
|
|||
Disposition
of furniture and fixtures
|
$
|
48,837
|
$
|
-
|
|||
Exercise
of investment of stock warrants
|
$
|
11,000
|
$
|
-
|
|||
Redemption
and purchase of preferred stock:
|
|||||||
Decrease
in accounts receivable
|
$
|
-
|
$
|
22,500
|
|||
Increase
in notes payable
|
$
|
-
|
$
|
240,000
|
|||
Decrease
in paid-in capital
|
$
|
-
|
$
|
243,498
|
|||
Sale
of subsidiary:
|
|||||||
Assets
sold
|
$
|
-
|
$
|
2,906,001
|
|||
Liabilities
assumed by buyer
|
$
|
-
|
$
|
5,861,821
|
|||
Purchase
of subsidiary:
|
|||||||
Assets
purchased
|
$
|
-
|
$
|
5,081,476
|
|||
Liabilities
assumed
|
$
|
-
|
$
|
3,906,744
|
|||
Deemed
distribution
|
$
|
-
|
$
|
3,313,264
|
|||
Common
stock and warrants issued for services:
|
|||||||
Increase
in prepaids
|
$
|
-
|
$
|
221,423
|
|||
Increase
in common stock
|
$
|
-
|
$
|
3,800
|
|||
Increase
in paid-in-capital
|
$
|
-
|
$
|
279,700
|
· |
The
Company will not assume the financial obligations of the client company
in
any circumstance. In most cases, the financial institution with the
greatest risk has referred the Company to the
transaction.
|
· |
The
Company requires the client or their investor to provide the client
company with working capital necessary to execute the turnaround
plan.
|
· |
The
Company requires the client to fully indemnify the Company against
any
actions, with the exception of gross negligence or
malfeasance.
|
· |
If
the client has officer and director insurance, we require the client
to
add the Company or any of the Company's contractors as insured parties
under the policy.
|
· |
Should
the Company consider altering any of the policies above, it will
require a
vote of our Board of Directors to waive them and agree to the maximum
amount of risk that the Company will
assume.
|
Years
Ended
|
|||||||
December
31,
|
|||||||
2007
|
2006
|
||||||
Income
(loss) from continuing operations
|
$
|
(2,604,975
|
)
|
$
|
1,623,356
|
||
Less
effect of derivatives, preferred stock and convertible
debenture
|
828,766
|
-
|
|||||
Adjusted
income (loss) from continuing operations
|
$
|
(1,776,209
|
)
|
$
|
1,623,356
|
||
Income
(loss) from discontinued operations
|
-
|
(4,688
|
)
|
||||
Gain
on sale of subsidiary
|
-
|
3,317,406
|
|||||
Net
income (loss)
|
$
|
(1,776,209
|
)
|
$
|
4,936,074
|
||
Basic
weighted average shares
|
63,733,188
|
25,505,662
|
|||||
Effect
of dilutive securities:
|
|||||||
Series
B preferred stock
|
-
|
4,195,445
|
|||||
Series
D preferred stock
|
-
|
68,710,842
|
|||||
Diluted
weighted average shares
|
63,733,188
|
98,411,949
|
|||||
Income
(loss) per share:
|
|||||||
Basic:
|
|||||||
Income
(loss) from continuing operations
|
$
|
(0.04
|
)
|
$
|
0.06
|
||
Income
(loss) from discontinued operations
|
-
|
0.13
|
|||||
Net
income (loss)
|
$
|
(0.04
|
)
|
$
|
0.19
|
||
Diluted:
|
|||||||
Income
(loss) from continuing operations
|
$
|
-
|
$
|
0.02
|
|||
Income
(loss) from discontinued operations
|
-
|
0.03
|
|||||
Net
income (loss)
|
$
|
-
|
$
|
0.05
|
(1)
|
A
weighted average year-to-date number of Convertible Debentures to
convert
into 52,502,492 and 51,383,109 shares of common stock were outstanding
during the twelve months ended December 31, 2007 and 2006, respectively,
but were not included in the computation of diluted per share net
income
(loss) for the twelve months ended December 31, 2007 or 2006 because
they
were anti-dilutive. In addition, because they were anti-dilutive,
4,195,445 of Series B preferred stock and 94,665,241 of Series D
preferred
stock were not included in the computation of diluted per share.
In
addition there were 3,000,000 warrants that were not included because
of
their anti-dilutive effect.
|
2007
|
2006
|
||||||
Customer
A
|
63
|
%
|
0
|
%
|
|||
Customer
B
|
9
|
%
|
31
|
%
|
|||
Customer
C
|
0
|
%
|
25
|
%
|
|||
Customer
D
|
9
|
%
|
19
|
%
|
|||
Customer
E
|
19
|
%
|
0
|
%
|
December 31, 2006
|
||||
(unaudited)
|
||||
Net
sales
|
$
|
1,127,219
|
||
Net
income (loss)
|
$
|
1,591,354
|
||
Weighted
average number of common shares outstanding – basic
|
25,505,662
|
|||
Weighted
average number of common shares outstanding – diluted
|
98,411,949
|
|||
Income
per common share – basic
|
$
|
0.19
|
||
Income
per common share – diluted
|
$
|
0.05
|
Summary
of Derivative Values
|
Derivative Liabilities - Value as of:
|
|||
Convertible
Debentures
|
12/31/2007
|
|||
Holland
et. al. Debentures issued 12/22/03
|
$
|
1,284
|
||
Saporito
Debenture issued 1/29/04
|
2,045
|
|||
YA
Global Debentures issued 5/6/04
|
1,881
|
|||
YA
Global Debentures issued 6/24/04
|
3,134
|
|||
YA
Global Debentures issued 9/28/04
|
2,508
|
|||
Viola
Debenture issued 10/12/04
|
202
|
|||
YA
Global Debentures issued 4/6/05
|
2,504
|
|||
Highgate
Debenture issued 12/2/05
|
268,623
|
|||
Total
|
$
|
282,181
|
Year
Ending December 31,
|
Amount
|
|||
2008
|
$
|
475,976
|
||
2009
|
50,973
|
|||
2010
|
6,280,204
|
|||
2011
|
4,802
|
|||
Total
|
$
|
6,811,955
|
Convertible
Note
|
Gain
on
|
Extinguishment
|
|||||
12/31/07
|
12/31/06
|
||||||
Holland
et. al. Debentures issued 12/8/03
|
$
|
133,425
|
$
|
0.00
|
|||
Holland
et. al. Debentures issued 12/22/03
|
213,545
|
0.00
|
|||||
Saporito
Debenture issued 1/29/04
|
103,680
|
0.00
|
|||||
YA
Global Debentures issued 5/5/05
|
0.00
|
36,194
|
|||||
YA
Global Debenture issued 7/20/05
|
0.00
|
58,171
|
|||||
Viola
Debenture issued 10/12/04
|
0.00
|
36,198
|
|||||
Total
|
$
|
450,650
|
$
|
130,563
|
2007
|
2006
|
||||||
Income
(loss) before taxes
|
$
|
(2,604,976
|
)
|
$
|
4,936,074
|
||
Income
tax benefit computed at statutory rates
|
$
|
(885,692
|
)
|
$
|
1,678,265
|
||
Permanent
differences, nondeductible expenses
|
279,288
|
8,390
|
|||||
Increase
in valuation allowance
|
527,936
|
365,207
|
|||||
Net
increase in fair value of derivative liability, net of amortization
and
debt modification gain
|
82,368
|
(1,078,674
|
)
|
||||
Gain
on sale of subsidiary
|
-
|
(1,034,418
|
)
|
||||
Merger
expense
|
-
|
47,600
|
|||||
Net
operating loss allocable to a subsidiary that was sold
|
-
|
1,594
|
|||||
Other
|
(3,900
|
)
|
12,036
|
||||
Tax
(liability) benefit
|
$
|
-
|
$
|
-
|
Net
operating loss
|
$
|
11,312,332
|
||
Valuation
allowance
|
(11,327,878
|
)
|
||
Revised
net operating loss
|
(290,696
|
)
|
||
Bad
debt expense
|
164,113
|
|||
Intangible
asset tax basis difference
|
123,462
|
|||
Unrealized
loss on security transactions
|
8,620
|
|||
Charitable
contributions carried forward
|
10,047
|
|||
Net
deferred tax asset (liability)
|
$
|
-
|
Business
|
Hotel
|
||||||
Services
|
Investment
|
||||||
Year
ended December 31, 2006
|
|||||||
Revenue
|
$
|
1,127,219
|
$
|
-
|
|||
Interest
expense, net of interest income
|
624,089
|
194,494
|
|||||
Income
(loss) before income tax,
|
|||||||
merger
expense and discontinued
|
|||||||
operations
|
(1,269,423
|
)
|
3,032,779
|
||||
Income
from discontinued operations
|
-
|
4,688
|
|||||
Segment
assets
|
1,909,239
|
5,197,536
|
|||||
Additions
to long-term assets
|
28,958
|
5,043,239
|
|||||
Depreciation
and amortization
|
23,874
|
-
|
|||||
Year
ended December 31, 2007
|
|||||||
Revenue
|
$
|
1,107,437
|
$
|
-
|
|||
Interest
expense, net of interest income
|
606,175
|
797,450
|
|||||
Loss
before income tax,
|
|||||||
merger
expense and discontinued
|
|||||||
operations
|
(775,063
|
)
|
(1,829,912
|
)
|
|||
Segment
assets
|
691,273
|
4,173,628
|
|||||
Additions
to long-term assets
|
3,091
|
-
|
|||||
Depreciation
and amortization
|
24,041
|
-
|