/s/ Jewett, Schwartz, Wolfe and Associates
Hollywood, Florida
February 23, 2010
200 South Park Road, Suite 150 • Hollywood, Florida 33021 • Main 954.922.5885 • Fax 954.922.5957 • www.jsw-cpa.com
Member - American Institute of Certified Public Accountants • Florida Institute of Certified Public Accountants
Private Companies Practice Section of the AICPA • Registered with the Public Company Accounting Oversight Board of SEC
To the Board of Directors and Stockholders
CYIOS Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheets of CYIOS Corporation and Subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the years ended December 31, 2008 and 2007. These consolidated financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of CYIOS Corporation and Subsidiaries as of December 31, 2008 and 2007, and the results of its consolidated operations and its cash flows for the years ended December 31, 2008 and 2007 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company’s recurring losses and inability to generate an internal cash flow raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note O. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Baum & Company, PA
Baum & Company, PA
Miami Beach, FL
April 9, 2009
CYIOS Corporation and Subsidiaries
|
|
Consolidated Balance Sheets
|
|
|
|
As of December 31,
|
|
|
|
2009
|
|
|
2008
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
76,448
|
|
|
$
|
27,070
|
|
Accounts Receivable
|
|
|
114,596
|
|
|
|
23,181
|
|
Prepaid and Other Current Assets
|
|
|
101,697
|
|
|
|
16,117
|
|
TOTAL CURRENT ASSETS
|
|
|
292,741
|
|
|
|
66,368
|
|
|
|
|
|
|
|
|
|
|
FIXED ASSETS, NET
|
|
|
2,220
|
|
|
|
3,004
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS
|
|
|
|
|
|
|
|
|
Related Party Loan
|
|
|
234,284
|
|
|
|
262,512
|
|
TOTAL OTHER ASSETS
|
|
|
234,284
|
|
|
|
262,512
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
529,245
|
|
|
$
|
331,884
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Line of Credit
|
|
$
|
71,100
|
|
|
$
|
88,392
|
|
Accounts Payable
|
|
|
4,045
|
|
|
|
46,113
|
|
Accruals and Other Payables
|
|
|
95,476
|
|
|
|
22,447
|
|
TOTAL LIABILITIES
|
|
|
170,621
|
|
|
|
156,952
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Convertible Preferred Stock ($.001 par value, 5,000,000 authorized: 29,713 and 29,713 issued and outstanding)
|
|
|
30
|
|
|
|
30
|
|
Common Stock ($.001 par value, 100,000,000 shares authorized: 30,148,877 and 26,857,210 shares issued and outstanding)
|
|
|
30,149
|
|
|
|
26,857
|
|
Additional Paid-in-Capital
|
|
|
24,199,038
|
|
|
|
24,014,663
|
|
Accumulated Deficit
|
|
|
(23,870,593
|
)
|
|
|
(23,866,618
|
)
|
TOTAL STOCKHOLDERS' EQUITY
|
|
|
358,624
|
|
|
|
174,932
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
529,245
|
|
|
$
|
331,884
|
|
The accompanying notes are an integral part of these consolidated financial statements.
CYIOS Corporation and Subsidiaries
|
|
Consolidated Statement of Operations
|
|
|
|
For the years ended
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
SALES AND COST OF SALES
|
|
|
|
|
|
|
Sales
|
|
$
|
1,881,897
|
|
|
$
|
1,494,872
|
|
Cost of Sales
|
|
|
1,094,786
|
|
|
|
781,909
|
|
Gross Profit
|
|
|
787,111
|
|
|
|
712,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
68,884
|
|
|
|
179,371
|
|
Payroll Expense--Indirect Labor
|
|
|
598,225
|
|
|
|
521,681
|
|
Consulting and Professional Fees Expense
|
|
|
55,909
|
|
|
|
209,792
|
|
Consulting Expense--Stock Compensation
|
|
|
81,208
|
|
|
|
|
|
Depreciation
|
|
|
784
|
|
|
|
784
|
|
TOTAL EXPENSES
|
|
|
805,010
|
|
|
|
911,628
|
|
|
|
|
|
|
|
|
|
|
Net Income/(Loss) from Operations
|
|
|
(17,899
|
)
|
|
|
(198,665
|
)
|
|
|
|
|
|
|
|
|
|
OTHER INCOME/(EXPENSE)
|
|
|
|
|
|
|
|
|
Interest Income
|
|
|
5,121
|
|
|
|
3,042
|
|
Interest Expense
|
|
|
(8,264
|
)
|
|
|
(7,106
|
)
|
NET OTHER INCOME/(EXPENSE)
|
|
|
(3,144
|
)
|
|
|
(4,064
|
)
|
|
|
|
|
|
|
|
|
|
PROVISION FOR INCOME TAXES
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
NET INCOME/(LOSS) FROM CONTINUING OPERATIONS
|
|
|
(21,044
|
)
|
|
|
(202,729
|
)
|
|
|
|
|
|
|
|
|
|
NET INCOME/(LOSS) FROM DISCONTINUED OPERATIONS
|
|
|
17,068
|
|
|
|
256,497
|
|
|
|
|
|
|
|
|
|
|
Net Income/(Loss)
|
|
$
|
(3,976
|
)
|
|
$
|
53,768
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) per share--basic and fully diluted
|
|
|
|
|
|
|
|
|
Continuing Operations
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
Discontinued Operations
|
|
$
|
0.00
|
|
|
$
|
0.01
|
|
Net income/(loss) per share
|
|
$
|
(0.00
|
)
|
|
$
|
0.00
|
|
Weighted average shares outstanding--basic and fully diluted
|
|
|
27,828,635
|
|
|
|
25,802,841
|
|
The accompanying notes are an integral part of these consolidated financial statements.
CYIOS Corporation and Subsidiaries
|
|
Consolidated Statements of Stockholders' Deficit
|
|
|
|
Preferred
|
|
|
Preferred
|
|
|
Common
|
|
|
Common
|
|
|
Stock
|
|
|
Additional
|
|
|
|
|
|
|
Shares
|
|
|
Stock
|
|
|
Shares
|
|
|
Stock
|
|
|
Subscription
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
|
(000's)
|
|
|
$
|
|
|
|
(000's)
|
|
|
$
|
|
|
|
Receivable
|
|
|
Capital
|
|
|
Deficit
|
|
Balances, December 31, 2007
|
|
|
29,713
|
|
|
$
|
30
|
|
|
|
25,354,210
|
|
|
$
|
25,354
|
|
|
$
|
136,000
|
|
|
$
|
23,886,536
|
|
|
$
|
(23,920,386
|
)
|
Shares returned
|
|
|
-
|
|
|
|
-
|
|
|
|
(500,000
|
)
|
|
|
(500
|
)
|
|
|
(82,500
|
)
|
|
|
(74,500
|
)
|
|
|
-
|
|
Payments received for Stock Subscriptions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(48,500
|
)
|
|
|
-
|
|
|
|
-
|
|
Reduction for Uncollectible Stock Receivable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,000
|
)
|
|
|
(5,000
|
)
|
|
|
-
|
|
Shares issued for consulting services
|
|
|
-
|
|
|
|
-
|
|
|
|
2,003,000
|
|
|
|
2,003
|
|
|
|
-
|
|
|
|
207,627
|
|
|
|
-
|
|
Net Income (loss)
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
53,768
|
|
Balances, December 31, 2008
|
|
|
29,713
|
|
|
$
|
30
|
|
|
|
26,857,210
|
|
|
$
|
26,857
|
|
|
$
|
-
|
|
|
$
|
24,014,663
|
|
|
$
|
(23,866,618
|
)
|
Shares issued for consulting services
|
|
|
-
|
|
|
|
-
|
|
|
|
2,366,667
|
|
|
|
2,367
|
|
|
|
-
|
|
|
|
159,300
|
|
|
|
-
|
|
Shares issued to employees
|
|
|
-
|
|
|
|
-
|
|
|
|
125,000
|
|
|
|
125
|
|
|
|
|
|
|
|
5,875
|
|
|
|
-
|
|
Shares sold
|
|
|
-
|
|
|
|
-
|
|
|
|
800,000
|
|
|
|
800
|
|
|
|
-
|
|
|
|
19,200
|
|
|
|
-
|
|
Net Income (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,976
|
)
|
Balances, December 31, 2009
|
|
|
29,713
|
|
|
$
|
30
|
|
|
|
30,148,877
|
|
|
$
|
30,149
|
|
|
$
|
-
|
|
|
$
|
24,199,038
|
|
|
$
|
(23,870,593
|
)
|
The accompanying notes are an integral part of these consolidated financial statements.
CYIOS Corporation and Subsidiaries
|
|
Consolidated Statements of Cash Flows
|
|
|
|
For the years ended
December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net Income/(loss)
|
|
|
|
|
|
|
From Continuing Operations
|
|
$
|
(21,044
|
)
|
|
$
|
(202,729
|
)
|
From Discontinued Operations
|
|
|
17,068
|
|
|
|
256,497
|
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
784
|
|
|
|
784
|
|
Value of Shares Issued for consulting/employee services
|
|
|
167,667
|
|
|
|
209,630
|
|
Reduction in Stock Receivable
|
|
|
-
|
|
|
|
7,500
|
|
Reduction in Liabilities from Discontinued Operations
|
|
|
(17,068
|
)
|
|
|
(256,497
|
)
|
Changes in Assets and Liabilities:
|
|
|
|
|
|
|
|
|
(Increase)/Decrease in Accounts Receivable
|
|
|
(91,415
|
)
|
|
|
23,216
|
|
(Increase)/Decrease in Prepaid and Other Current Assets
|
|
|
(85,579
|
)
|
|
|
(11,217
|
)
|
Increase/(Decrease) in Accruals and Other Payables
|
|
|
73,029
|
|
|
|
(15,073
|
)
|
Increase/(Decrease) in Accounts Payable
|
|
|
(25,000
|
)
|
|
|
21,492
|
|
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
|
|
18,442
|
|
|
|
33,603
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
(Increase)/Decrease in Related Party Loan
|
|
|
28,228
|
|
|
|
(90,106
|
)
|
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
|
|
28,228
|
|
|
|
(90,106
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from Issuance of Common Stock
|
|
|
20,000
|
|
|
|
-
|
|
Proceeds Received from Payments made on Stock Subscription Receivable
|
|
|
-
|
|
|
|
48,500
|
|
Payments on Line of Credit
|
|
|
(17,292
|
)
|
|
|
(10,425
|
)
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
2,708
|
|
|
|
38,075
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
49,378
|
|
|
|
(18,428
|
)
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS:
|
|
|
|
|
|
|
|
|
Beginning of Period
|
|
|
27,070
|
|
|
|
45,498
|
|
|
|
|
|
|
|
|
|
|
End of Period
|
|
$
|
76,448
|
|
|
$
|
27,070
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
CASH PAID DURING THE PERIOD FOR:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
8,264
|
|
|
$
|
7,106
|
|
Taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
NON CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Stock Issued for Prepaid Consulting Services
|
|
$
|
89,833
|
|
|
$
|
-
|
|
Stock Issued for Consulting Services/Employee Bonus
|
|
$
|
77,834
|
|
|
$
|
209,630
|
|
Return of 500,000 shares and reduction in related Stock Receivable
|
|
$
|
-
|
|
|
$
|
75,000
|
|
The accompanying notes are an integral part of these consolidated financial statements.
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity
— China Print, Inc. formerly known as WorldTeq Group International, Inc. merged on September 19, 2005 with CYIOS Corporation of Washington DC. During the merger the company’s former CEO notified the public of his resignation and the assignment of a new CEO and president, Mr. Timothy Carnahan. After the merger, China Print, Inc. changed its name to CYIOS. The consolidated financial statements of CYIOS Corporation (The Company), formerly China Print, Inc. includes its subsidiary by the same name CYIOS Corporation, in addition to CKO, Inc. and WorldTeq Corporation. The Company, through its subsidiary CYIOS Corporation does business as a leading systems integrator and Knowledge Management Solutions provider supporting the United States Army. The company contracts its services for single and multiple year awards to different US Army and US Government agencies. CKO Inc. owns a custom designed online office management product. The company launched this product in November of 2005 to the general public and commercial businesses. WorldTeq Corporation in the past engaged primarily in the long distance service business and during 2009 and 2008 it had no operating activity. In December 2008, the Company filed to dissolve the WorldTeq Corporation.
Consolidation
—The consolidated financial statements include the accounts of the Company and its Subsidiaries, after all eliminations of all intercompany accounts and transactions.
Cash and Cash Equivalents
—For purposes of the Consolidated Statement of Cash Flows, the Company considers liquid investments with an original maturity of three months or less to be cash equivalents.
Management’s Use of Estimates
—The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
—The Company derives revenue primarily from the sale and service of information technology services to the government. In accordance with SEC Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB 104”), revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable, collectability is reasonably assured, contractual obligations have been satisfied and title and risk of loss have been transferred to the customer.
Revenues are recognized based on completion of a project and acceptance by the customer.
Selecting the appropriate revenue recognition method involves judgment based on the contract and can be complex depending upon the structure and terms and conditions of the contract.
Contract claims are unanticipated additional costs incurred but not provided for in the executed contract price that we seek to recover from the customer. Such costs are expensed as incurred. Additional revenue related to contract claims is recognized when the amounts are awarded by the customer.
Comprehensive Income (Loss)
—The Company adopted Financial Accounting Standards Board Statement of Financial Accounting Standards (SFAS) No. 130,
“Reporting Comprehensive Income”
, which establishes standards for the reporting and display of comprehensive income and its components in the consolidated financial statements. There were no items of comprehensive income (loss) applicable to the Company during the periods covered in the consolidated financial statements.
Advertising Costs
—Advertising costs are expensed as incurred. For the years ended December 31, 2009 and 2008, the company incurred $9,784 and $11,983 respectively.
Net Loss per Common Share
—Statement of Financial Accounting Standard (SFAS) No. 128 requires dual presentation of basic and diluted earnings per share (EPS) with a reconciliation of the numerator and denominator of the EPS computations. Basic earnings per share amounts are based on the weighted average shares of common stock outstanding. If applicable, diluted earnings per share would assume the conversion, exercise or issuance of all potential common stock instruments such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share. Accordingly, this presentation has been adopted for the period presented. There were no adjustments required to net loss for the period presented in the computation of diluted earnings per share.
Income Taxes
—Income taxes are provided in accordance with Statement of Financial Accounting Standards (SFAS) No. 109,
“Accounting for Income Taxes.”
A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss-carryforwards.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that, and some portion or the entire deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.
Fair Value of Financial Instruments
—The carrying amounts reported in the consolidated balance sheet for cash, accounts receivable and payables approximate fair value based on the short-term maturity of these instruments.
Accounts Receivable
—Accounts deemed uncollectible are written off in the year they become uncollectible. For the years ended December 31, 2009 and 2008, the following amounts by subsidiary were deemed uncollectible and written off as bad debts. Outstanding Accounts Receivable as of December 31, 2009 was $114,596 and as of December 31, 2008 was $23,181 (CYIOS Subsidiary).
Impairment of Long-Lived Assets
—Using the guidance of Statement of Financial Accounting Standards (SFAS) No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets”
, the Company reviews the carrying value of property, plant, and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition, and other economic factors.
Property and Equipment
—Property and equipment is stated at cost. Depreciation is provided by the straight-line method over the estimated economic life of the property and equipment remaining from five to seven years. New computer equipment assets in the amount of $3,917 were purchased in 2007. These assets will be depreciated of their estimated useful life which the Company has determined to be 5 years. Total depreciation expense for the year ended December 31, 2009 was $784 and for the year ended December 31, 2008 was $784.
Recent Accounting Pronouncements
—In June 2009, the Financial Accounting Standards Board (FASB) issued its final Statement of Financial Accounting Standards (SFAS) No. 168,
“
The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles a Replacement of FASB Statement
No. 162”. SFAS No. 168 made the FASB Accounting Standards Codification (the Codification) the single source of U.S. GAAP used by nongovernmental entities in the preparation of financial statements, except for rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws, which are sources of authoritative accounting guidance for SEC registrants. The Codification is meant to simplify user access to all authoritative accounting guidance by reorganizing U.S. GAAP pronouncements into roughly 90 accounting topics within a consistent structure; its purpose is not to create new accounting and reporting guidance. The Codification supersedes all existing non-SEC accounting and reporting standards and was effective for the Company beginning July 1, 2009. Following SFAS No. 168, the Board will not issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead, it will issue Accounting Standards Updates (ASU). The FASB will not consider ASUs as authoritative in their own right; these updates will serve only to update the Codification, provide background information about the guidance, and provide the bases for conclusions on the change(s) in the Codification.
In August 2009, the FASB issued ASU 2009-05 which includes amendments to Subtopic 820-10, “Fair Value Measurements and Disclosures—Overall”. The update provides clarification that in circumstances, in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the techniques provided for in this update. The amendments in this ASU clarify that a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability and also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. The guidance provided in this ASU is effective for the first reporting period, including interim periods, beginning after issuance. The adoption of this standard did not have a material impact on the Company’s consolidated financial position and results of operations.
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
Recent Accounting Pronouncements (cont’d)
In September 2009, the FASB issued ASU 2009-06, Income Taxes (Topic 740), ”Implementation Guidance on Accounting for Uncertainty in Income Taxes and Disclosure Amendments for Nonpublic Entities”, which provides implementation guidance on accounting for uncertainty in income taxes, as well as eliminates certain disclosure requirements for nonpublic entities. For entities that are currently applying the standards for accounting for uncertainty in income taxes, this update shall be effective for interim and annual periods ending after September 15, 2009. For those entities that have deferred the application of accounting for uncertainty in income taxes in accordance with paragraph
740-10-65-1(e), this update shall be effective upon adoption of those standards. The adoption of this standard is not expected to have an impact on the Company’s consolidated financial position and results of operations since this accounting standard update provides only implementation and disclosure amendments.
In September 2009, the FASB has published ASU No. 2009-12, “Fair Value Measurements and Disclosures (Topic 820) - Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)”. This ASU amends Subtopic 820-10, “Fair Value Measurements and Disclosures – Overall”, to permit a reporting entity to measure the fair value of certain investments on the basis of the net asset value per share of the investment (or its equivalent). This ASU also requires new disclosures, by major category of investments including the attributes of investments within the scope of this amendment to the Codification. The guidance in this Update is effective for interim and annual periods ending after December 15, 2009. Early application is permitted. The adoption of this standard did not have an impact on the Company’s consolidated financial position and results of operations.
In October 2009, the FASB has published ASU 2009-13, “Revenue Recognition (Topic 605)-Multiple Deliverable Revenue Arrangements”, which addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. Specifically, this guidance amends the criteria in Subtopic 605-25, “Revenue Recognition-Multiple-Element Arrangements”, for separating consideration in multiple-deliverable arrangements. This guidance establishes a selling price hierarchy for determining the selling price of a deliverable, which is based on: (a) vendor-specific objective evidence; (b) third-party evidence; or (c) estimates. This guidance also eliminates the residual method of allocation and requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method and also requires expanded disclosures. The guidance in this update is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted. The adoption of this standard is not
expected to have a material impact on the Company’s consolidated financial position and results of operations.
NOTE B—FINANCING FACILITY
During the year ended December 31, 2003 the Company entered into an accounts receivable financing facility for a maximum of $500,000 with an unrelated third party. Collateral for the facility is a first security interest in all corporate assets and a personal guarantee of the Company’s shareholder. The Company pays a 2% fee for each advance and interest accrues on all advances at a floating rate, at the prime rate published in the Wall Street Journal plus 2% (7.25% at December 31, 2009). The Company is advanced 90% of all government contract invoices. The advances are used for general corporate working capital. Residual, or holdback amounts, less fees and interest, are remitted to the Company when payments are received from the government. Substantially all of the Company’s revenue stream and accounts receivables are factored through this facility.
NOTE C—INCOME TAXES
Due to the prior years’ operating losses and the inability to recognize an income tax benefit therefrom, there is no provision for current or deferred federal or state income taxes for the year ended December 31, 2009.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes.
The Company’s total deferred tax asset, calculated using federal and state effective tax rates, as of December 31, 2009 is as follows:
Total Deferred Tax Asset
|
|
$
|
2,264,327
|
|
Valuation Allowance
|
|
|
(2,264,327
|
)
|
Net Deferred Tax Asset
|
|
|
-
|
|
The reconciliation of income taxes computed at the federal statutory income tax rate to total income taxes for the years ended December 31, 2009 and 2008 is as follows:
|
|
2009
|
|
|
2008
|
|
Income tax computed at the federal statutory rate
|
|
|
34
|
%
|
|
|
34
|
%
|
State income tax, net of federal tax benefit
|
|
|
0
|
%
|
|
|
0
|
%
|
Total
|
|
|
34
|
%
|
|
|
34
|
%
|
Valuation allowance
|
|
|
-34
|
%
|
|
|
-34
|
%
|
Total deferred tax asset
|
|
|
0
|
%
|
|
|
0
|
%
|
Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance. The valuation allowance increased (decreased) by $8,160 and $(18,281) in 2009 and 2008, respectively. No tax benefits have been recorded for the nondeductible (tax) expenses (including stock for services) totaling $17,210,808.
As of December 31, 2009, the Company had federal and state net operating loss carryforwards as follows of $6,659,786 which will expire at various times through the year 2029.
NOTE D—CONCENTRATION
The Company is either a prime or sub contractor on contracts with the Information Management Support Center U.S. Army and GOMO/SLD. Loss of these contracts could have a material effect upon the Company’s financial condition and results of operations.
NOTE E—SEGMENT REPORTING
The Company has four reportable segments—CYIOS, CYIOS Group, CKO, and WorldTeq:
Net Sales by Segment
|
|
For the Year Ended December 31, 2009
|
|
|
|
CYIOS
|
|
|
CYIOS Group
|
|
|
CKO
|
|
|
Totals
|
|
Sales, net
|
|
$
|
1,881,897
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,881,897
|
|
Cost of Sales
|
|
|
1,094,786
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,094,786
|
|
Gross Profit
|
|
$
|
787,111
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
787,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(Loss) by Segment
|
|
For the Year Ended December 31, 2009
|
|
|
|
CYIOS
|
|
|
CYIOS Group
|
|
|
CKO
|
|
|
Totals
|
|
Net Operating Profit/(Loss)
|
|
$
|
(13,119
|
)
|
|
$
|
2,331
|
|
|
$
|
(10,256
|
)
|
|
$
|
(21,044
|
)
|
Net (Loss)
|
|
$
|
(13,119
|
)
|
|
$
|
19,399
|
|
|
$
|
(10,256
|
)
|
|
$
|
(3,976
|
)
|
Net Sales by Segment
|
|
For the Year Ended December 31, 2009
|
|
|
|
CYIOS
|
|
|
CYIOS Group
|
|
|
CKO
|
|
|
WorldTeq
|
|
|
Totals
|
|
Sales, net
|
|
$
|
1,494,872
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,494,872
|
|
Cost of Sales
|
|
|
781,909
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
781,909
|
|
Gross Profit
|
|
$
|
712,963
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
712,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(Loss) by Segment
|
|
For the Year Ended December 31, 2009
|
|
|
|
CYIOS
|
|
|
CYIOS Group
|
|
|
CKO
|
|
|
WorldTeq
|
|
|
Totals
|
|
Net Operating Profit/(Loss)
|
|
$
|
(198,072
|
)
|
|
$
|
(20
|
)
|
|
$
|
(4,637
|
)
|
|
$
|
-
|
|
|
$
|
(202,729
|
)
|
Net (Loss)
|
|
$
|
(198,072
|
)
|
|
$
|
(20
|
)
|
|
$
|
(4,637
|
)
|
|
$
|
256,497
|
|
|
$
|
53,768
|
|
The accounting policies used for segment reporting are the same as those described in Note A “Summary of Significant Accounting Policies”;
NOTE F—EQUITY
Common Shares
The Company is authorized to issue 100,000,000 shares of $.001 par value stock and as of December 31, 2009 the Company had 30,148,877 shares outstanding. During 2009 and 2008, the Company issued the following shares of common stock:
During 2009, the Company issued 3,291,667 common shares to investors, employees, and consultants. The shares issued to the employees and consultants were issued from the Company’s 2007 Equity Incentive Plan (see Note H). May 13
th
, 2009, under the consultant agreement with Rockport Financial, warrants were issued and executed for payment of services.
NOTE F—EQUITY (CONT”D)
The shares issued as stock compensation were valued at the fair market value price at date of issuance. The issuance
of the shares and the value is detailed in the following table:
Month/Description of transaction
|
|
Number of shares
|
|
|
Price per share
|
|
|
Total Value
|
|
January 29, 2009
|
|
|
100,000
|
|
|
$
|
0.05
|
|
|
$
|
4,500
|
|
January 29, 2009
|
|
|
550,000
|
|
|
$
|
0.05
|
|
|
$
|
27,500
|
|
February 9, 2009
|
|
|
25,000
|
|
|
$
|
0.06
|
|
|
$
|
1,500
|
|
May 1, 2009*
|
|
|
100,000
|
|
|
$
|
0.14
|
|
|
$
|
14,000
|
|
May 13, 2009
|
|
|
400,000
|
|
|
$
|
0.05
|
|
|
$
|
20,000
|
|
October 5, 2009
|
|
|
1,400,000
|
|
|
$
|
0.07
|
|
|
$
|
98,000
|
|
October 28, 2009
|
|
|
316,667
|
|
|
$
|
0.07
|
|
|
$
|
22,167
|
|
December 17, 2009*
|
|
|
400,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total
|
|
|
3,291,667
|
|
|
|
|
|
|
$
|
187,667
|
|
*These shares were sold in May 2009.
During 2008, the Company issued 2,003,000 free trading common shares to employees and consultants. These shares were issued from the Company’s 2007 Equity Incentive Plan (see Note H). The shares were valued at the fair market value price at date of issuance. The issuance of the shares and the value is detailed in the following table:
Month
|
|
Number of shares
|
|
|
Price per share
|
|
|
Total Value
|
|
January 3, 2008
|
|
|
400,000
|
|
|
$
|
0.23
|
|
|
$
|
92,000
|
|
January 4, 2008
|
|
|
53,000
|
|
|
$
|
0.21
|
|
|
$
|
11,130
|
|
March 12, 2008
|
|
|
250,000
|
|
|
$
|
0.10
|
|
|
$
|
25,000
|
|
May 30, 2008
|
|
|
250,000
|
|
|
$
|
0.10
|
|
|
$
|
25,000
|
|
June 18, 2008
|
|
|
50,000
|
|
|
$
|
0.08
|
|
|
$
|
4,000
|
|
August 25, 2008
|
|
|
250,000
|
|
|
$
|
0.06
|
|
|
$
|
15,000
|
|
October 8, 2008
|
|
|
750,000
|
|
|
$
|
0.05
|
|
|
$
|
37,500
|
|
Total
|
|
|
2,003,000
|
|
|
|
|
|
|
$
|
209,630
|
|
Preferred Shares
The Company is authorized to issue 5,000,000 shares of $.001 par value, non-voting, convertible preferred shares. The preferred shares are convertible to common shares at a 1 to 1 ratio. As of December 31, 2009, the Company had 29,713 preferred shares outstanding. During 2009 and 2008, the Company did not issue any preferred shares of stock.
NOTE G—STOCK OPTIONS AND WARRANTS
On April 21, 2006, the Company’s board of directors approved the 2006 Employee Stock Option Plan (the “2006 Plan”). The 2006 Plan provides for the issuance of a maximum of 3,000,000 shares of common stock in connection with stock options granted thereunder, plus an annual increase to be added on the first nine anniversaries of the effective date of the 2006 Plan, equal to at least (i) 1% of the total number of shares of common stock then outstanding, (ii) 350,000 shares, or (iii) a number of shares determined by the Company’s board of directors prior to such anniversary date. The 2006 Plan has a term of 10 years and may be administered by the Company’s board of directors or by a committee made up of not less than 2 members of appointed by the Company’s board of directors. Participation in the 2006 Plan is limited to employees, officer, directors and consultants of the Company and its subsidiaries. Incentive stock options granted pursuant to the 2006 Plan must have an exercise price per share not less than 100%, and non-qualified stock options not less than 85%, of the fair market value of our common stock on the date of grant. Awards granted pursuant to the 2006 Plan may not have a term exceeding 10 years and will vest upon conditions established by the Company’s board of directors.
NOTE G—STOCK OPTIONS AND WARRANTS (CONT’D)
On April 21, 2006 the Company filed a registration statement on Form S-8 with the SEC registering 3,000,000 shares of common stock for issuance upon exercise of options granted pursuant to the 2006 Plan. As of December 31, 2009, options to acquire 1,812,300 shares of common stock were granted and exercised and there are 1,187,700 shares available for issuance under the 2006 Plan.
On November 12, 2007, the Company’s board of directors approved the 2007 Equity Incentive Plan (the “2007 Plan”). The 2007 Plan provides for the issuance of a maximum of 3,500,000 shares of common stock in connection with awards granted thereunder, which may include stock options, restricted stock awards and stock appreciation rights. The 2007 Plan has a term of 10 years and may be administered by the Company’s board of directors or by a committee appointed by the Company’s board of directors (the “Committee”). Participation in the 2007 Plan is limited to employees, officer, directors and consultants of the Company and its subsidiaries. Incentive stock options granted pursuant to the 2007 Plan must have an exercise price per share not less than 100%, and non-qualified stock options not less than 85%, of the fair market value of the Company’s common stock on the date of grant. Awards granted pursuant to the 2007 Plan may not have a term exceeding 10 years and will vest upon conditions established by the Committee.
On November 29, 2007 the Company filed a registration statement on Form S-8 with the SEC registering 3,500,000 shares of common stock for issuance upon exercise of options granted and exercised pursuant to the 2007 Plan. As of December 31, 2009, options to acquire 2,054,000 shares of common stock were granted and exercised and there are 1,210,700 shares available for issuance under the 2007 Plan.
Outstanding stock options granted as of December 31, 2009 are as follows:
|
|
Stock/Options
|
|
|
Weighted average price per share
|
|
|
Aggregate intrinsic value
|
|
Outstanding at December 31, 2007
|
|
|
2,750,000
|
|
|
|
0.18
|
|
|
|
495,000
|
|
For the year ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2,003,000
|
|
|
|
0.18
|
|
|
|
360,540
|
|
Options forfeited or expired
|
|
|
(335,716
|
)
|
|
|
0.13
|
|
|
|
(43,643
|
)
|
Options forfeited or expired
|
|
|
(400,000
|
)
|
|
|
0.29
|
|
|
|
(116,000
|
)
|
Exercised in 2008
|
|
|
(2,003,000
|
)
|
|
|
0.18
|
|
|
|
(360,540
|
)
|
Outstanding at December 31, 2008
|
|
|
2,014,284
|
|
|
|
0.13
|
|
|
|
261,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
3,291,667
|
|
|
|
0.06
|
|
|
|
197,500
|
|
Options forfeited or expired
|
|
|
(2,014,284
|
)
|
|
|
0.13
|
|
|
|
(261,857
|
)
|
Exercised in 2009
|
|
|
(3,291,667
|
)
|
|
|
0.06
|
|
|
|
(197,500
|
)
|
Outstanding at December 31, 2009
|
|
|
—
|
|
|
|
0.13
|
|
|
|
—
|
|
Securities available for future issuance under the 2007 and 2006 plan are as follows:
Plan Category
|
Number of shares available for issuance
|
Equity compensation approved by security holders
|
—
|
3
|
35,700
|
NOTE G—STOCK OPTIONS AND WARRANTS (CONT’D)
Under the fair value recognition provisions of SFAS No. 123(R), stock-based compensation cost is estimated at the grant date based on the fair value of the award and is recognized as expense over the requisite service period of the award. The Company has awarded stock-based compensation as restricted stock.
All of the options granted in each of the two years ended December 31, 2009 and 2008 were immediately vested upon grant and were immediately exercised upon grant too.
The weighted-average exercise prices for options outstanding at the beginning and end of the two years ended December 31, 2009 did not change. The method used to estimate the fair value of the awards granted under the share-based payment arrangements was the value of the stock at the date the stock option was granted because on this same date the options were exercised. The stock options granted and exercised were immediately vested.
Compensation expense for restricted stock is recognized on the date of the grant at the closing price of the stock on the date of the grant because the options are immediately exercised on that same date
Our statement of operations for the years ended December 31, 2009 and 2008 included stock-based compensation of $167,667 and $209,630, respectively. In 2009, $77,834 of the total $167,667 was expensed and the remaining amount is prepaid expenses in the amount of $89,833 which will be amortized over the next 33 months. In 2008, $193,455 was expensed and the remaining amount was a prepaid amount of $9,375 that was expensed in 2009.
The Company does not have any unrecognized stock-based compensation expense at December 31, 2009.
NOTE H—PENSION PLAN
The Company has a 401(k) plan which is administered by a third-party administrator. Individuals who have been employed for one month and reached the age of 21 years are eligible to participate. Employees may contribute up to the legal amount allowed by law. The Company matches one-half of the employee’s contribution up to a maximum of 4% of the employee’s wages. Employees are vested in the Company’s contribution 25% a year and are fully vested after four years. The Company’s contributions for the years ended December 31, 2009 and 2008 were $13,294 and $28,371 respectively.
NOTE I—COMMITMENTS/LEASES
The Company entered into a lease agreement on July 8, 2005 for office space. The current lease agreement is in effect from August 2009 to August 2010, and at that time is up for renewal. Monthly fees are approximately $1,476. The Company’s estimated future yearly minimum lease obligations are as follows:
Total rent expense for 2009 and 2008 was $17,715 and $18,189 respectively.
NOTE J—RELATED PARTIES
The Company has a Note Receivable with one of its officers and major shareholders. The note is payable on demand and bears 8% interest per annum. The outstanding balance as of December 31, 2009 is $234,284.
Annual payments including principal and interest are as follows:
Year ended
|
|
Interest and principal payments
|
|
2010
|
|
$
|
38,220
|
|
2011
|
|
|
38,220
|
|
2012
|
|
|
38,220
|
|
2013
|
|
|
38,220
|
|
2014
|
|
|
38,220
|
|
2015 and thereafter
|
|
|
130,564
|
|
Total principal and interest payments
|
|
$
|
321,664
|
|
NOTE K—LINE OF CREDIT
Two of the Company’s subsidiaries have lines of credit with Bank of America. The line of credit for CKO is 10.75% interest and the line of credit for China Print, Inc. is 14.75%. The outstanding balances of the line of credit by Subsidiary as of December 31, 2009 are as follows:
CKO
|
|
$
|
44,729
|
|
CYIOS Group
|
|
|
26,371
|
|
|
|
$
|
71,100
|
|
NOTE L—LIABILITIES OF DISCONTINUED OPERATIONS
The original amount of the accounts payables and other payables from discontinued operations was $441,670. The amount written off in 2007 was $185,173 and the amount written off in 2008 was the $256,497.
Our basis for writing off the payables balance into income in 2008 and 2007 was based upon management’s estimation and determination that these particular amounts had fallen into one of three categories:
|
1.
|
Some of the outstanding accounts payable had already been paid off by one of the other subsidiaries, but were never actually written off the books of the subsidiary (Worldteq) until now. The officers and managers of the company prior to the merger in 2005 provided the new officers and management with records that were incomplete. After careful review, management has concluded that some accounts outstanding had actually been paid, but not cleared off the books of the subsidiary (Worldteq).
|
|
2.
|
Using reasonable estimates, management determined that amounts under $1,000 were immaterial and exceeded the statute of limitations for the State of Delaware could be written-off as of December 31, 2008 and 2007.
|
|
3.
|
The officers and management of the company prior to the merger in 2005 calculated accruals based on estimates for expenses for services that were never rendered to the company.
|
In 2009, Management wrote off an additional $17,068 in accounts payable that also pertained to amounts owed by WorldTeq Corporation to various vendors. These amounts have been sitting on the books since 2003 and 2004 and no attempt has been made by the vendors to collect these amounts. Management believes that like the other outstanding payables, these amounts were already paid and not written off the books prior to the merger in 2005.
The Income from Discontinued Operations was $17,068 and $202,729 for the years ended December 31, 2009 and 2008, respectively.
The Company absorbed WorldTeq Corporation (a Delaware corporation) as a result of the merger in 2005. Since that time the Company has carried the debts of WorldTeq Corporation. Since the merger, management has determined that many of the debts outstanding had been satisfied by other subsidiaries and many other debts exceeded the State of Delaware’s rules regarding the statute of limitations for collection of outstanding debts. According to Delaware code, title 6, section 2437A, the statute of limitations for debts classified as general written contracts is 3 years. The Company has carried the debts for over 3 years. Moreover, the Company plans to dissolve Worldteq since it has had no operations since 2005, the Company does not intend to continue operations in this subsidiary or business segment, and the CEO of Worldteq passed away. Since the merger in 2005, no attempt on the part of the creditors have been made to collect these debts, so based on management’s estimate we have determined it reasonable to write them off over 2008 and 2007 as we have abandoned operations in this business segment and the Company has closed out and dissolved WorldTeq as of December 31, 2009.
NOTE M—NET INCOME/ (LOSS) PER COMMON SHARE
The Company’s reconciliation of the numerators and denominators of the basic and fully diluted income per shares is as follows for the years ended December 31, 2009 and 2008 are as follows:
|
|
For the 12 months ended December 31, 2009
|
|
|
For the 12 Months Ended December 31, 2008
|
|
|
|
Income
|
|
|
Shares
|
|
|
Per-Share
|
|
|
Income
|
|
|
Shares
|
|
|
Per-Share
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
Net Income/(Loss)
|
|
$
|
(3,976
|
)
|
|
|
|
|
|
|
|
$
|
53,768
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders
|
|
|
(3,976
|
)
|
|
|
27,798,922
|
|
|
$
|
(0.00
|
)
|
|
|
53,768
|
|
|
|
25,744,896
|
|
|
$
|
0.00
|
|
Effect of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock
|
|
|
|
|
|
|
29,713
|
|
|
|
|
|
|
|
|
|
|
|
29,713
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income/(Loss)
|
|
|
(3,976
|
)
|
|
|
27,828,635
|
|
|
$
|
(0.00
|
)
|
|
|
53,768
|
|
|
|
25,774,609
|
|
|
$
|
0.00
|
|
Unaudited Consolidated Financial Statements
In the opinion of management, the accompanying unaudited consolidated financial statements included in this Form S-1 reflect all adjustments necessary for a fair presentation of the results of operations for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.
CYIOS Corporation and Subsidiaries
|
|
Consolidated Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2010--(unaudited)
|
|
|
2009--(audited)
|
|
ASSETS
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
Cash and Cash Equivalents
|
|
$
|
31,961
|
|
|
$
|
76,448
|
|
Accounts Receivable
|
|
|
169,160
|
|
|
|
114,596
|
|
Prepaid and Other Current Assets
|
|
|
112,837
|
|
|
|
101,697
|
|
TOTAL CURRENT ASSETS
|
|
|
313,958
|
|
|
|
292,741
|
|
|
|
|
|
|
|
|
|
|
FIXED ASSETS, NET
|
|
|
2,024
|
|
|
|
2,220
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS
|
|
|
|
|
|
|
|
|
Related Party Loan
|
|
|
234,284
|
|
|
|
234,284
|
|
TOTAL OTHER ASSETS
|
|
|
234,284
|
|
|
|
234,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
550,266
|
|
|
$
|
529,245
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Line of Credit
|
|
$
|
66,273
|
|
|
$
|
71,100
|
|
Convertible Note Payable
|
|
|
50,000
|
|
|
|
-
|
|
Accruals and Other Payables
|
|
|
101,800
|
|
|
|
99,521
|
|
TOTAL LIABILITIES
|
|
|
218,073
|
|
|
|
170,621
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Convertible Preferred Stock ($.001 par value, 5,000,000 authorized:29,713 and 29,713 issued and outstanding)
|
|
|
30
|
|
|
|
30
|
|
Common Stock ($.001 par value, 100,000,000 shares authorized:35,698,877 and 30,148,877 shares issued and outstanding)
|
|
|
35,699
|
|
|
|
30,149
|
|
Additional Paid-in-Capital
|
|
|
24,567,488
|
|
|
|
24,199,038
|
|
Accumulated Deficit
|
|
|
(24,271,024
|
)
|
|
|
(23,870,593
|
)
|
TOTAL STOCKHOLDERS' EQUITY
|
|
|
332,193
|
|
|
|
358,624
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
$
|
550,266
|
|
|
$
|
529,245
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements
CYIOS Corporation and Subsidiaries
|
|
Consolidated Statement of Operations--(unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
SALES AND COST OF SALES
|
|
|
|
|
|
|
Sales
|
|
$
|
446,276
|
|
|
$
|
374,923
|
|
Cost of Sales
|
|
|
266,299
|
|
|
|
218,508
|
|
Gross Profit
|
|
|
179,977
|
|
|
|
156,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
28,254
|
|
|
|
17,869
|
|
Payroll Expense--Indirect Labor
|
|
|
158,070
|
|
|
|
110,933
|
|
Consulting and Professional Fees Expense
|
|
|
28,380
|
|
|
|
5,156
|
|
Payroll Expense--Stock Compensation
|
|
|
350,000
|
|
|
|
6,000
|
|
Consulting Expense--Stock Compensation
|
|
|
14,167
|
|
|
|
27,500
|
|
Depreciation
|
|
|
196
|
|
|
|
196
|
|
TOTAL EXPENSES
|
|
|
579,067
|
|
|
|
167,654
|
|
|
|
|
|
|
|
|
|
|
Net Income/(Loss) from Operations
|
|
|
(399,090
|
)
|
|
|
(11,239
|
)
|
|
|
|
|
|
|
|
|
|
OTHER INCOME/(EXPENSE)
|
|
|
|
|
|
|
|
|
Interest Income
|
|
|
1,307
|
|
|
|
1,266
|
|
Interest Expense
|
|
|
(2,647
|
)
|
|
|
(4,864
|
)
|
NET OTHER INCOME/(EXPENSE)
|
|
|
(1,340
|
)
|
|
|
(3,598
|
)
|
|
|
|
|
|
|
|
|
|
PROVISION FOR INCOME TAXES
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
NET INCOME/(LOSS) FROM CONTINUING OPERATIONS
|
|
|
(400,430
|
)
|
|
|
(14,837
|
)
|
|
|
|
|
|
|
|
|
|
Net Income/(Loss)
|
|
$
|
(400,430
|
)
|
|
$
|
(14,837
|
)
|
|
|
|
|
|
|
|
|
|
Net income/(loss) per share--basic and fully diluted
|
|
|
|
|
|
|
|
|
Net income/(loss) per share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
Weighted average shares outstanding--basic and fully diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
The accompanying notes are an integral part of these unaudited consolidated financial statements
CYIOS Corporation and Subsidiaries
|
|
Consolidated Statement of Stockholders' Equity—(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
|
Preferred
|
|
|
Common
|
|
|
Common
|
|
|
Additional
|
|
|
|
|
|
|
Shares
|
|
|
Stock
|
|
|
Shares
|
|
|
Stock
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
|
(000's)
|
|
|
$
|
|
|
|
(000's)
|
|
|
$
|
|
|
|
Capital
|
|
|
Deficit
|
|
Balances, December 31, 2008
|
|
|
29,713
|
|
|
$
|
30
|
|
|
|
26,857,210
|
|
|
$
|
26,857
|
|
|
$
|
24,014,663
|
|
|
$
|
(23,866,618
|
)
|
Shares issued for consulting services
|
|
|
-
|
|
|
|
-
|
|
|
|
2,366,667
|
|
|
|
2,367
|
|
|
|
159,300
|
|
|
|
-
|
|
Shares issued to employees
|
|
|
-
|
|
|
|
-
|
|
|
|
125,000
|
|
|
|
125
|
|
|
|
5,875
|
|
|
|
-
|
|
Shares sold
|
|
|
-
|
|
|
|
-
|
|
|
|
800,000
|
|
|
|
800
|
|
|
|
19,200
|
|
|
|
-
|
|
Net Income (loss)
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,976
|
)
|
Balances, December 31, 2009
|
|
|
29,713
|
|
|
$
|
30
|
|
|
|
30,148,877
|
|
|
$
|
30,149
|
|
|
$
|
24,199,038
|
|
|
$
|
(23,870,594
|
)
|
Shares issued for consulting services
|
|
|
-
|
|
|
|
-
|
|
|
|
550,000
|
|
|
|
550
|
|
|
|
23,450
|
|
|
|
-
|
|
Shares issued to executive officer as a bonus
|
|
|
-
|
|
|
|
-
|
|
|
|
5,000,000
|
|
|
|
5,000
|
|
|
|
345,000
|
|
|
|
-
|
|
Net Income (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(400,430
|
)
|
Balances, March 31, 2010
|
|
|
29,713
|
|
|
$
|
30
|
|
|
|
35,698,877
|
|
|
$
|
35,699
|
|
|
$
|
24,567,488
|
|
|
$
|
(24,271,024
|
)
|
The accompanying notes are an integral part of these unaudited consolidated financial statements
CYIOS Corporation and Subsidiaries
|
|
Consolidated Statements of Cash Flows—(unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net Income/(loss)
|
|
|
|
|
|
|
From Continuing Operations
|
|
$
|
(400,430
|
)
|
|
$
|
(14,837
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in)operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
196
|
|
|
|
196
|
|
Value of Shares Issued for consulting/employee services
|
|
|
356,000
|
|
|
|
33,500
|
|
Changes in Assets and Liabilities:
|
|
|
|
|
|
|
|
|
(Increase)/Decrease in Accounts Receivable
|
|
|
(54,564
|
)
|
|
|
(104,055
|
)
|
(Increase)/Decrease in Prepaid and Other Current Assets
|
|
|
6,859
|
|
|
|
(14,390
|
)
|
Increase/(Decrease) in Accruals and Other Payables
|
|
|
6,324
|
|
|
|
49,524
|
|
Increase/(Decrease) in Accounts Payable
|
|
|
(4,045
|
)
|
|
|
9,605
|
|
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
|
|
(89,660
|
)
|
|
|
(40,457
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
(Increase)/Decrease in Related Party Loan
|
|
|
-
|
|
|
|
20,218
|
|
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
|
|
-
|
|
|
|
20,218
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from Issuance of Common Stock
|
|
|
-
|
|
|
|
-
|
|
Proceeds Received from Payments made on Stock Subscription Receivable
|
|
|
-
|
|
|
|
-
|
|
Proceeds from Issuance of Convertible Note Payable
|
|
|
50,000
|
|
|
|
-
|
|
Principal Payments Made on line of Credit
|
|
|
(4,827
|
)
|
|
|
-
|
|
Proceeds Received from Draw on Line of Credit
|
|
|
-
|
|
|
|
401
|
|
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
|
|
45,173
|
|
|
|
401
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND
CASH EQUIVALENTS
|
|
|
(44,487
|
)
|
|
|
(19,838
|
)
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS:
|
|
|
|
|
|
|
|
|
Beginning of Period
|
|
|
76,448
|
|
|
|
27,070
|
|
|
|
|
|
|
|
|
|
|
End of Period
|
|
$
|
31,961
|
|
|
$
|
7,232
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
CASH PAID DURING THE PERIOD FOR:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
2,647
|
|
|
$
|
4,864
|
|
Taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
NON CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Stock Issued for Prepaid Consulting Services
|
|
$
|
18,000
|
|
|
$
|
27,500
|
|
Stock Issued for Consulting Services/Employee Bonus
|
|
$
|
356,000
|
|
|
$
|
6,000
|
|
The accompanying notes are an integral part of these unaudited consolidated financial statements
CYIOS CORPORATION. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2010
(Unaudited)
NOTE A - ORGANIZATION, OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The interim consolidated financial statements and summarized notes included herein were prepared in accordance with accounting principles generally accepted in the United States of America for interim consolidated financial information, pursuant to rules and regulations of the Securities and Exchange Commission. Because certain information and notes normally included in complete consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America were condensed or omitted pursuant to such rules and regulations, it is suggested that these consolidated financial statements be read in conjunction with the Consolidated Financial Statements and the Notes thereto, included in CYIOS Corporations 10-K filed April 15, 2009. These interim consolidated financial statements and notes hereto reflect all adjustments that are, in the opinion of management, necessary for a fair statement of results for the interim periods presented. Such financial results should not be construed as necessarily indicative of future results
USE OF ESTIMATES
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS
All highly liquid investments purchased with an original maturity of three months or less are considered to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments, including cash, receivables and other current assets, are carried at amounts that approximate fair value. Accounts payable, loans and notes payable and other liabilities are carried at amounts that approximate fair value.
PROPERTY AND EQUIPMENT
The Company provides for depreciation of equipment using accelerated and straight-line methods based on estimated useful lives of five to seven years. Depreciation expense was $196 and $196 respectively for the three months ended March 31, 2010 and 2009.
REVENUE RECOGNITION/CONTRACTS
The Company derives revenue primarily from the sale and service of information technology services to the government. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable, collectability is reasonably assured, contractual obligations have been satisfied and title and risk of loss have been transferred to the customer.
Revenue from the contracts is recognized using the specific performance method. Revenue on fixed-price contracts pursuant to which a client pays the Company a specified amount to provide only a particular service for a stated time period, or so-called fee-for-service arrangement, is recognized as amounts become billable, assuming all other criteria for revenue recognition are met. The Company bids on governmental contracts which are generally long-term for a fixed-price per contract. Once the company wins a contract and begins the project, the company bills on a monthly basis for the labor hours worked at the agreed upon price per hour—based on the contract. The company then recognizes the revenue on those actual hours that have been billed to the customer.
NET INCOME/ (LOSS) PER COMMON SHARE
The Company‘s current earnings per share (EPS) are shown in dual presentation of basic and diluted earnings per share (EPS) with a reconciliation of the numerator and denominator of the EPS computations. Basic earnings per share amounts are based on the weighted average shares of common stock outstanding. If applicable, diluted earnings per share would assume the conversion, exercise or issuance of all potential common stock instruments such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share. Accordingly, this presentation has been adopted for the period presented. There were no adjustments required to net loss for the period presented in the computation of diluted earnings per share.
ADVERTISING COSTS
Advertising costs are expensed as incurred. For the three months ended March 31, 2010 and 2009, the company incurred advertising expense of $3,254 and $2,684 respectively.
INCOME TAXES
We account for income taxes using the asset and liability method, which results in recognizing income tax expense based on the amount of income taxes payable or refundable for the current year. Additionally, we evaluate regularly the tax positions taken or expected to be taken resulting from financial statement recognition of certain items. Based on our evaluation, we have concluded that there are no significant uncertain tax positions.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews the carrying value of property, plant, and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition, and other economic factors.
RECENT ACCOUNTING PRONOUNCEMENTS
Fair Value Measurements:
In January 2010, the FASB issued ASU 2010-06 which is intended to improve disclosures about fair value measurements. The guidance requires entities to disclose significant transfers in and out of fair value hierarchy levels, the reasons for the transfers and to present information about purchases, sales, issuances and settlements separately in the reconciliation of fair value measurements using significant unobservable inputs (Level 3). Additionally, the guidance clarifies that a reporting entity should provide fair value measurements for each class of assets and liabilities and disclose the inputs and valuation techniques used for fair value measurements using significant other observable inputs (Level 2) and significant unobservable inputs (Level 3). The Company has applied the new disclosure requirements as of January 1, 2010, except for the disclosures about purchases, sales, issuances and settlements in the Level 3 reconciliation, which will be effective for interim and annual periods beginning after December 15, 2010. The adoption of this guidance has not had and is not expected to have a material impact on the Company’s consolidated financial statements.
Subsequent Events:
In February 2010, the FASB issued ASU 2010-09 which requires that an SEC filer, as defined, evaluate subsequent events through the date that the financial statements are issued. The update also removed the requirement for an SEC filer to disclose the date through which subsequent events have been evaluated in originally issued and revised financial statements. The adoption of this guidance on January 1, 2010 did not have a material effect on the Company’s consolidated financial statements.
Other ASUs not effective until after March 31, 2010, are not expected to have a significant effect on the Company’s consolidated financial position or results of operations.
ACCOUNTS RECEIVABLE
Accounts deemed uncollectible are written off in the year they become uncollectible. As of March 31, 2010, the Accounts Receivable balance was $169,160 and the amount deemed uncollectible was $0.
PREFERRED STOCK
As of March 31, 2010, the outstanding preferred stock is 29,713.
COMMON STOCK
The following table recaps the capital account transactions occurring during the 1
st
quarter of 2010:
Month/Description of transaction
|
|
Number of shares
|
|
|
Price per share
|
|
|
Total Value
|
|
|
|
|
|
|
|
|
|
|
|
March--Stock issued to Executive Officer as bonus
|
|
|
5,000,000
|
|
|
$
|
0.07
|
|
|
$
|
350,000
|
|
March--Stock issued for Consulting Services
|
|
|
100,000
|
|
|
$
|
0.06
|
|
|
$
|
6,000
|
|
March--Stock issued for Consulting Services
|
|
|
450,000
|
|
|
$
|
0.04
|
|
|
$
|
18,000
|
|
Total
|
|
|
5,550,000
|
|
|
|
|
|
|
$
|
374,000
|
|
STOCK-BASED COMPENSATION
Stock-based compensation cost is estimated at the grant date based on the fair value of the award and is recognized as expense over the requisite service period of the award. The Company has awarded stock-based compensation both as restricted stock and stock options. Any stock options granted were immediately exercised upon grant.
STOCK OPTIONS AND WARRANTS
On April 21, 2006, the Company’s board of directors approved the 2006 Employee Stock Option Plan (the “2006 Plan”). The 2006 Plan provides for the issuance of a maximum of 3,000,000 shares of common stock in connection with stock options granted thereunder, plus an annual increase to be added on the first nine anniversaries of the effective date of the 2006 Plan, equal to at least (i) 1% of the total number of shares of common stock then outstanding, (ii) 350,000 shares, or (iii) a number of shares determined by the Company’s board of directors prior to such anniversary date. The 2006 Plan has a term of 10 years and may be administered by the Company’s board of directors or by a committee made up of not less than 2 members of appointed by the Company’s board of directors.
Participation in the 2006 Plan is limited to employees, officer, directors and consultants of the Company and its subsidiaries. Incentive stock options granted pursuant to the 2006 Plan must have an exercise price per share not less than 100%, and non-qualified stock options not less than 85%, of the fair market value of our common stock on the date of grant. Awards granted pursuant to the 2006 Plan may not have a term exceeding 10 years and will vest upon conditions established by the Company’s board of directors.
On April 21, 2006 the Company filed a registration statement on Form S-8 with the SEC registering 3,000,000 shares of common stock for issuance upon exercise of options granted pursuant to the 2006 Plan. As of December 31, 2007, options to acquire 1,812,300 shares of common stock were granted and exercised and there are 1,187,700 shares available for issuance under the 2006 Plan.
On November 12, 2007, the Company’s board of directors approved the 2007 Equity Incentive Plan (the “2007 Plan”). The 2007 Plan provides for the issuance of a maximum of 3,500,000 shares of common stock in connection with awards granted thereunder, which may include stock options, restricted stock awards and stock appreciation rights. The 2007 Plan has a term of 10 years and may be administered by the Company’s board of directors or by a committee appointed by the Company’s board of directors (the “Committee”). Participation in the 2007 Plan is limited to employees, officer, directors and consultants of the Company and its subsidiaries.
Incentive stock options granted pursuant to the 2007 Plan must have an exercise price per share not less than 100%, and non-qualified stock options not less than 85%, of the fair market value of the Company’s common
stock on the date of grant. Awards granted pursuant to the 2007 Plan may not have a term exceeding 10 years and will vest upon conditions established by the Committee.
On November 29, 2006 the Company filed a registration statement on Form S-8 with the SEC registering 3,500,000 shares of common stock for issuance upon exercise of options granted and exercised pursuant to the 2007 Plan. As of December 31, 2007, options to acquire 2,054,000 shares of common stock were granted and exercised and there are 1,446,000 shares available for issuance under the 2007 Plan.
Outstanding stock options and warrants as of March 31, 2010 are as follows:
|
|
Stock/Options
|
|
|
Weighted average price per share
|
|
|
Aggregate intrinsic value
|
|
Outstanding at December 31, 2008
|
|
|
2,014,284
|
|
|
|
0.13
|
|
|
|
261,857
|
|
For the year ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
3,291,667
|
|
|
|
0.06
|
|
|
|
197,500
|
|
Options forfeited or expired
|
|
|
(2,014,284
|
)
|
|
|
0.13
|
|
|
|
(261,857
|
)
|
Exercised in 2009
|
|
|
(3,291,667
|
)
|
|
|
0.06
|
|
|
|
(197,500
|
)
|
Outstanding at December 31, 2009
|
|
|
-
|
|
|
|
0.13
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period ended March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exercised in the first quarter 2010
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding at March 31, 2010
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
NOTE B—INCOME TAXES
Due to the prior years’ operating losses and the inability to recognize an income tax benefit, there is no provision for current or deferred federal or state income taxes for the year ended December 31, 2009.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes.
The Company’s total deferred tax asset, calculated using federal and state effective tax rates, as of December 31, 2009 is as follows:
Total Deferred Tax Asset
|
|
$
|
2,264,327
|
|
Valuation Allowance
|
|
|
(2,264,327
|
)
|
Net Deferred Tax Asset
|
|
|
-
|
|
The reconciliation of income taxes computed at the federal statutory income tax rate to total income taxes for the year ended December 31, 2009 is as follows:
|
|
2009
|
|
|
2008
|
|
Income tax computed at the federal statutory rate
|
|
|
34
|
%
|
|
|
34
|
%
|
State income tax, net of federal tax benefit
|
|
|
0
|
%
|
|
|
0
|
%
|
Total
|
|
|
34
|
%
|
|
|
34
|
%
|
Valuation allowance
|
|
|
-34
|
%
|
|
|
-34
|
%
|
Total deferred tax asset
|
|
|
0
|
%
|
|
|
0
|
%
|
Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance. The valuation allowance increased (decreased) by $1,352 and $(18,281) in 2009 and 2008, respectively. No tax benefits have been recorded for the nondeductible (tax) expenses (including stock for services) totaling $17,210,808.
As of December 31, 2009, the Company had federal and state net operating loss carryforwards as follows of $6,659,786 which will expire at various times through the year 2029.
NOTE C—CONCENTRATION
The Company is either a prime or sub contractor on contracts with L-3 Communications, SERCO, TMS, Information Management Support Center (IMCEN) and GOMO/SLD. Loss of these contracts could have a material effect upon the Company’s financial condition and results of operations.
NOTE D—SEGMENT REPORTING
Net sales and Profit/ (Loss) by Segment for the three months ended March 31, 2010 and 2009 are broken down as follows:
Net Sales by Segment
|
|
For the 3 months ended March 31, 2010
|
|
|
|
CYIOS
|
|
|
CYIOS Group
|
|
|
CKO
|
|
|
Totals
|
|
Sales, net
|
|
$
|
446,276
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
446,276
|
|
Cost of Sales
|
|
|
266,299
|
|
|
|
-
|
|
|
|
-
|
|
|
|
266,299
|
|
Gross Profit
|
|
$
|
179,977
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
179,977
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(Loss) by Segment
|
|
For the 3 months ended March 31, 2010
|
|
|
|
CYIOS
|
|
|
CYIOS Group
|
|
|
CKO
|
|
|
Totals
|
|
Net (Loss)
|
|
$
|
(398,723
|
)
|
|
$
|
-
|
|
|
$
|
(1,707
|
)
|
|
$
|
(400,430
|
)
|
NOTE D—SEGMENT REPORTING (CONT’D)
Net Sales by Segment
|
|
For the Three Months Ended March 31, 2009
|
|
|
|
CYIOS
|
|
|
CYIOS Group
|
|
|
CKO
|
|
|
Totals
|
|
Sales, net
|
|
$
|
374,923
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
374,923
|
|
Cost of Sales
|
|
|
218,508
|
|
|
|
-
|
|
|
|
-
|
|
|
|
218,508
|
|
Gross Profit
|
|
$
|
156,415
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
156,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(Loss) by Segment
|
|
For the Three Months Ended March 31, 2009
|
|
|
|
CYIOS
|
|
|
CYIOS Group
|
|
|
CKO
|
|
|
Totals
|
|
Net (Loss)
|
|
$
|
(9,999
|
)
|
|
$
|
(349
|
)
|
|
$
|
(4,489
|
)
|
|
$
|
(14,837
|
)
|
NOTE E—PENSION PLAN
The Company has a 401(k) plan which is administered by a third-party administrator. Individuals who have been employed for one month and reached the age of 21 years are eligible to participate. Employees may contribute up to the legal amount allowed by law. The Company matches one quarter of the employee’s contribution up to a maximum of 4% of the employee’s wages. Employees are vested in the Company’s contribution 25% a year and are fully vested after four years. The Company’s contributions for the three months ended March 31, 2010 and 2009 were $3,234 and $1,597 respectively.
NOTE F—COMMITMENTS/LEASES
The Company entered into a lease agreement on July 8, 2005 for office space. The current lease agreement is in effect from August 2009 to August 2010, and at that time is up for renewal. Monthly fees are $1,040.
Total rent expense for the three months ended March 31, 2010 and 2009 was $4,395 and $4,433, respectively.
NOTE G—RELATED PARTIES
The Company has a Note Receivable with one of its officers and major shareholders. The note is payable on demand and bears 8% interest per annum. The outstanding balance as of March 31, 2010 is $234,284.
Annual payments including principal and interest are as follows:
Year-ended
|
|
Interest
|
|
|
Principal
|
|
2010
|
|
$
|
16,702
|
|
|
$
|
11,996
|
|
2011
|
|
$
|
16,958
|
|
|
|
17,153
|
|
2012
|
|
$
|
15,534
|
|
|
|
18,576
|
|
2013
|
|
$
|
13,992
|
|
|
|
20,118
|
|
2014
|
|
$
|
12,322
|
|
|
|
21,788
|
|
2015 and thereafter
|
|
$
|
31,310
|
|
|
|
144,653
|
|
Total principal and interest payments
|
|
$
|
106,817
|
|
|
$
|
234,284
|
|
The above Related Party Loan is secured by 8,000,000 shares of stock owned by the related party.
NOTE H—NET INCOME/ (LOSS) PER COMMON SHARE
The Company’s reconciliation of the numerators and denominators of the basic and fully diluted income per shares is as follows for the three months ended March 31, 2010 and 2009 are as follows:
|
|
For the 3 months ended March 31, 2010
|
|
|
For the 3 Months Ended March 31, 2009
|
|
|
|
Income
|
|
|
Shares
|
|
|
Per-Share
|
|
|
Income
|
|
|
Shares
|
|
|
Per-Share
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income/(Loss)
|
|
$
|
(400,430
|
)
|
|
|
|
|
|
|
|
$
|
(14,837
|
)
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to common stockholders
|
|
|
(400,430
|
)
|
|
|
30,356,274
|
|
|
$
|
(0.01
|
)
|
|
|
(14,837
|
)
|
|
|
27,011,526
|
|
|
$
|
0.00
|
|
Effect of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock
|
|
|
|
|
|
|
29,713
|
|
|
|
|
|
|
|
|
|
|
|
29,713
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income/(Loss)
|
|
|
(400,430
|
)
|
|
|
30,385,987
|
|
|
$
|
(0.01
|
)
|
|
|
(14,837
|
)
|
|
|
27,041,239
|
|
|
$
|
0.00
|
|
NOTE I—LINE OF CREDIT
Two of the Company’s subsidiaries have lines of credit with Bank of America. The line of credit for CKO is 10.75% interest and the line of credit for CYIOS Group is 14.75%. The outstanding balances of the line of credit by Subsidiary as of March 31, 2010 are as follows:
CKO
|
|
$
|
43,400
|
|
CYIOS Group
|
|
|
22,873
|
|
|
|
$
|
66,273
|
|
NOTE J—PREPAIDS
On September 29, 2009, the company issued 1,400,000 shares of common stock to a consulting firm for services to be rendered through September 15, 2011. The Company measured the value of the stock given for services at the date given, September 28, 2009 (measurement/grant date). The total value of the services has been estimated to be $98,000 which is based on a fair market value per share of $.07 on September 15, 2011. The total amount charged to expenses for the 3 months ending March 31, 2010 were $8,166.66.
On March 31, 2010, the company issued 450,000 shares of common stock to a consulting firm for services to be rendered through July 2010. The Company measured the value of the stock given for services at the date given, March 31, 2010 (measurement/grant date). The total value of the services has been estimated to be $18,000 which is based on a fair market value per share of $.04 on March 31, 2010. The total amount charged to expenses for the 3 months ending March 31, 2010 was $0.
NOTE K—CONVERTIBLE NOTE PAYABLE
On January 5, 2010, the company received proceeds from a Note Payable (“Note”) due to an outside party in the amount of $50,000. The Note with an interest rate of 8% is due in full in September 2010 and has the option to be converted into shares of CYIOS stock if the company does not pay the Note in full plus interest by the due date.
ITEM
2: Outside back Cover page - Prospectus
___________________________________________________
CYIOS CORPORATION
3,500,000 Shares
Common Stock
PROSPECTUS
You should rely only on the information contained in this document or that we have referred you to. We have not authorized anyone to provide you with information that is different. This prospectus is not an offer to sell common stock and is not soliciting an offer to buy common stock in any state where the offer or sale is not permitted.
Until ___________, 2010 all dealers that effect transactions in these securities, whether or not participating in the offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
________, 2010
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PART
II
:
INFORMATION NOT REQUIRED IN PROSPECTUS
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES LIABILITIES
The Nevada General Corporation Law requires us to indemnify officers and directors for any expenses incurred by any officer or director in connection with any actions or proceedings, whether civil, criminal, administrative, or investigative, brought against such officer or director because of his or her status as an officer or director, to the extent that the director or officer has been successful on the merits or otherwise in defense of the action or proceeding. The Nevada General Corporation Law permits a corporation to indemnify an officer or director, even in the absence of an agreement to do so, for expenses incurred in connection with any action or proceeding if such officer or director acted in good faith and in a manner in which he or she reasonably believed to be in or not opposed to the best interests of the corporation and such indemnification is authorized by the stockholders, by a quorum of disinterested directors, by independent legal counsel in a written opinion authorized by a majority vote of a quorum of directors consisting of disinterested directors, or by independent legal counsel in a written opinion if a quorum of disinterested directors cannot be obtained.
The Nevada General Corporation Law prohibits indemnification of a director or officer if a final adjudication establishes that the officer's or director's acts or omissions involved intentional misconduct, fraud, or a knowing violation of the law and were material to the cause of action. Despite the foregoing limitations on indemnification, the Nevada General Corporation Law may permit an officer or director to apply to the court for approval of indemnification even if the officer or director is adjudged to have committed intentional misconduct, fraud, or a knowing violation of the law.
The Nevada General Corporation Law also provides that indemnification of directors is not permitted for the unlawful payment of distributions, except for those directors registering their dissent to the payment of the distribution.
Insofar as indemnification for liabilities arising under the Securities Act may be provided to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
ITEM
13 - Other Expenses of Issuance and Distribution.
The following table sets forth the expenses in connection with the issuance and distribution of the securities being registered hereby. All such expenses will be borne by the registrant.
Securities and Exchange Commission registration fee
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$
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14.97
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Legal fees and expenses (1)
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$
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10,000
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Accounting fees and expenses
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$
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--
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Miscellaneous (1)
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$
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--
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Total (1)
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$
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10,014.97
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(1) Estimated
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ITEM
14 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our officers and directors are indemnified as provided by the Nevada Revised Statutes.
Under the Nevada Revised Statutes, director immunity from liability to a company or its stockholders for monetary liabilities applies automatically unless it is specifically limited by a company's Articles of Incorporation. Our Articles of Incorporation do not specifically limit the directors’ immunity. Excepted from that immunity are: (a) a willful failure to deal fairly with us or our stockholders in connection with a matter in which the director has a material conflict of interest; (b) a violation of criminal law, unless the director had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe that his or her conduct was unlawful; (c) a transaction from which the director derived an improper personal profit; and (d) willful misconduct.
Our Bylaws provide that we will indemnify our directors to the fullest extent not prohibited by Nevada law; provided, however, that we may modify the extent of such indemnification by individual contracts with our directors and officers; and, provided, further, that we shall not be required to indemnify any director or officer in connection with any proceeding, or part thereof, initiated by such person unless such indemnification: (a) is expressly required to be made by law, (b) the proceeding was authorized by the board of directors, (c) is provided by us, in our sole discretion, pursuant to the powers vested us under Nevada law, or (d) is required to be made pursuant to our Bylaws.
Our Bylaws provide that we will advance to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was our director or officer, or is or was serving at the request of us as a director or executive officer of another company, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefore, all expenses incurred by any director or officer in connection with such proceeding upon receipt of an undertaking by or on behalf of such person to repay said amounts if it should be determined ultimately that such person is not entitled to be indemnified under our Bylaws or otherwise.
ITEM
15 - Recent Sales of Unregistered Securities.
In 2009, 800,000 shares were sold to an individual investor, any other shares issued in 2009 were issued to consultants and employees for services rendered. In 2010, 100,000 shares were given to Auctus as payment for the origination fee for the DEFA.
ITEM
16 - Exhibits and Financial Statement Schedules.
(a) Exhibits:
The following exhibits are filed or referenced as part of this registration statement:
Exhibit
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Description of Exhibit
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Certificate of Incorporation
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By-laws
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Opinion of Counsel
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Drawdown Equity Financing Agreement
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Registration Rights Agreement
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23.2
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Consent of Counsel (included in Exhibit 5.1)
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Consent of Independent Registered Certified Public Accountants
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The undersigned registrant hereby undertakes to:
a.
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The undersigned registrant hereby undertakes:
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1.
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To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
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i.
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To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
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ii.
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To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement.
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iii.
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To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
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Provided however, That:
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A.
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Paragraphs (a)(1)(i) and (a)(1)(ii) of this section do not apply if the registration statement is on Form S-8, and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement; and
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B.
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Paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) of this section do not apply if the registration statement is on Form S-3 or Form F-3 and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
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2.
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That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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3.
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To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
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4.
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If the registrant is a foreign private issuer, to file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A. of Form 20-F at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Act need not be furnished, provided that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (a)(4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. Notwithstanding the foregoing, with respect to registration statements on Form F-3, a post-effective amendment need not be filed to include financial statements and information required by Section 10(a)(3) of the Act or Rule 3-19 of this chapter if such financial statements and information are contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Form F-3.
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5.
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That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:
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i.
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If the registrant is relying on Rule 430B:
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a.
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Each prospectus filed by the registrant pursuant to Rule 424(b)(3)shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
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b.
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Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or
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ii.
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If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
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6.
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That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
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i.
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Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
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ii.
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Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
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iii.
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The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
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iv.
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Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
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b.
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The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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c.
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Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
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Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned; thereunto duly authorized, in Washington, D.C., on July 13, 2010.
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CYIOS CORPORATION
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By:
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/s/ Timothy Carnahan
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Timothy Carnahan
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President, Chief Executive Officer &
Principal Financial Officer
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Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates stated.
Signature
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Title
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Date
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/s/ Timothy Carnahan
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President, Chief Executive Officer &
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July 13, 2010
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Timothy Carnahan
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Principal Financial Officer
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