UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2008
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o
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
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For the Transition Period From
to
Commission File Number 000-52320
SENTISEARCH, INC.
(Exact name of small business issuer as specified in its charter)
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Delaware
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20-5655648
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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1217 South Flagler Drive, 3
rd
Floor
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West Palm Beach, FL
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33401
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(Address of principal executive office)
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(Zip Code)
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(561) 653-3284
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes
o
No
þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
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Smaller reporting company
þ
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Indicate by checkmark whether the registrant is a shell company (as defined by Rule 12b-2 of the
Exchange Act). Yes
o
No
þ
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date: As of May 7, 2008, the Company had outstanding 7,694,542 shares of
Common Stock.
TABLE OF CONTENTS
SENTISEARCH, INC.
FORM 10-Q
-i-
PART I- FINANCIAL INFORMATION
Item 1. Financial Statements
SentiSearch, Inc.
(A Development Stage Company)
Balance Sheets
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March 31,
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December 31,
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(unaudited)
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2007
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ASSETS
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Current Assets
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Cash and Cash Equivalents
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$
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5,604
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$
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42,500
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Security Deposit
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1,390
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Total Current Assets
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6,994
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42,500
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Other Assets
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License and Patent Costs
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482,507
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482,507
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Less: Accumulated Amortization
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(381,418
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)
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(370,244
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)
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101,089
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112,263
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Total Assets
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$
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108,083
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$
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154,763
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LIABILITIES AND STOCKHOLDERS (DEFICIENCY) EQUITY
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Current Liabilities
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Accounts Payable and Accrued Expenses
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$
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199,554
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$
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122,042
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Due to Related Party
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28,970
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Total Current Liabilities
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228,524
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122,042
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Notes Payable Related Party
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180,000
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180,000
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Total Liabilities
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408,524
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302,042
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Stockholders (Deficiency) Equity
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Common Stock $0.0001 par value, 8,000,000 shares
authorized, 7,694,542 shares outstanding
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769
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769
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Additional Paid in Capital
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1,011,123
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1,000,055
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Deficit Accumulated During Development Stage
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(1,312,333
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)
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(1,148,103
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)
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Total Stockholders (Deficiency) Equity
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(300,441
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)
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(147,279
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)
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Total Liabilities and Stockholders (Deficiency) Equity
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$
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108,083
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$
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154,763
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See notes to financial statements.
1
SentiSearch, Inc.
(A Development Stage Company)
Statements of Operations (unaudited)
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For the period
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April 10, 2000
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(Commencement
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For the three months ended
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of Business)
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Ended March 31,
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to March 31,
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2008
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2007
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2008
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Revenues
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$
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$
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$
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Direct costs
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Income after direct costs
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Operating expenses:
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General and administrative
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148,920
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36,148
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916,377
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Amortization of license and patent costs
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11,174
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8,183
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381,418
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160,094
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44,331
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1,297,795
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Other expense:
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Interest and financing expense
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4,136
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14,538
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4,136
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14,538
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Net loss before provision for income taxes
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(164,230
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)
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(44,331
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)
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(1,312,333
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)
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Income taxes
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Net loss
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$
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(164,230
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)
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$
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(44,331
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)
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$
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(1,312,333
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)
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Basic and diluted loss per share
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$
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(0.02
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)
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$
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(0.01
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)
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Weighted average shares outstanding
basic and dilutive
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7,694,542
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7,694,542
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See notes to financial statements.
2
SentiSearch, Inc.
(A Development Stage Company)
Statements of Changes in Stockholders Equity (deficiency)
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Additional
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Common Stock
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Subscription
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Paid-in
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Accumulated
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Shares
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Amount
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Receivable
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Capital
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Deficit
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Total
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Balance
April 10, 2000 (Commencement of Business)
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$
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$
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$
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|
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$
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$
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|
Net loss
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(47,763
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)
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|
(47,763
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)
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Balance December 31, 2000
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(47,763
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)
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|
(47,763
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)
|
Net loss
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|
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|
|
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|
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(63,169
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)
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(63,169
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)
|
Balance December 31, 2001
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(110,932
|
)
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(110,932
|
)
|
Net loss
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|
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|
|
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|
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|
|
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(65,936
|
)
|
|
|
(65,936
|
)
|
Balance December 31, 2002
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(176,868
|
)
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(176,868
|
)
|
Net loss
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|
|
|
|
|
|
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|
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(77,083
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)
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|
(77,083
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)
|
Balance December 31, 2003
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(253,951
|
)
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|
(253,951
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)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(109,169
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)
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|
|
(109,169
|
)
|
Balance December 31, 2004
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(363,120
|
)
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|
|
(363,120
|
)
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
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|
Net loss
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
(60,870
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)
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|
|
(60,870
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)
|
Balance December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
(423,990
|
)
|
|
|
(423,990
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)
|
Net loss
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
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(320,747
|
)
|
|
|
(320,747
|
)
|
Balance October 2, 2006
|
|
|
|
|
|
|
|
|
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|
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(744,737
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)
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|
|
(744,737
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)
|
Issuance of common
stock October 3,
2006
|
|
|
7,694,542
|
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|
|
769
|
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|
(769
|
)
|
|
|
|
|
|
|
|
|
|
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|
Additional
contribution of
capital October
10, 2006
|
|
|
|
|
|
|
|
|
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|
769
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|
249,231
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|
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|
250,000
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|
Contribution to
capital of License
costs and
assumption of
liability October
10, 2006
|
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|
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|
|
|
|
|
|
|
|
|
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|
749,334
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|
|
|
|
|
|
|
749,334
|
|
Net loss
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(116,822
|
)
|
|
|
(116,822
|
)
|
Balance December 31, 2006
|
|
|
7,694,542
|
|
|
|
769
|
|
|
|
|
|
|
|
998,565
|
|
|
|
(861,559
|
)
|
|
|
137,775
|
|
Stock-based
compensation
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,490
|
|
|
|
|
|
|
|
1,490
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(286,544
|
)
|
|
|
(286,544
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2007
|
|
|
7,694,542
|
|
|
|
769
|
|
|
|
|
|
|
|
1,000,055
|
|
|
|
(1,148,103
|
)
|
|
|
(147,279
|
)
|
Stock-based
compensation
expense (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,068
|
|
|
|
|
|
|
|
11,068
|
|
Net loss (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(164,230
|
)
|
|
|
(164,230
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2008 (unaudited)
|
|
|
7,694,542
|
|
|
$
|
769
|
|
|
$
|
|
|
|
$
|
1,011,123
|
|
|
$
|
(1,312,333
|
)
|
|
$
|
(300,441
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to financial statements.
3
SentiSearch, Inc.
(A Development Stage Company)
Statements of Cash Flows (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period
|
|
|
|
|
|
|
|
|
|
|
|
April 10, 2000
|
|
|
|
|
|
|
|
|
|
|
|
(Commencement
|
|
|
|
For the
|
|
|
of Business)
|
|
|
|
Three months ended
|
|
|
Through
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(164,230
|
)
|
|
$
|
(44,331
|
)
|
|
$
|
(1,312,333
|
)
|
Stock-based compensation expense
|
|
|
11,068
|
|
|
|
|
|
|
|
12,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in Miscellaneous Receivable
|
|
|
|
|
|
|
(10,000
|
)
|
|
|
|
|
Amortization of license and patent costs
|
|
|
11,174
|
|
|
|
8,183
|
|
|
|
381,418
|
|
Security deposits
|
|
|
(1,390
|
)
|
|
|
|
|
|
|
(1,390
|
)
|
Increase in accounts payable and accrued expenses
|
|
|
77,512
|
|
|
|
(13,697
|
)
|
|
|
508,263
|
|
Due to related party
|
|
|
28,970
|
|
|
|
|
|
|
|
28,970
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(36,896
|
)
|
|
|
(59,845
|
)
|
|
|
(382,514
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of patents
|
|
|
|
|
|
|
|
|
|
|
(41,882
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used by investing activities
|
|
|
|
|
|
|
|
|
|
|
(41,882
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from notes payable related parties
|
|
|
|
|
|
|
|
|
|
|
180,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of stock
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
|
|
|
|
|
|
|
|
430,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(36,896
|
)
|
|
|
(59,845
|
)
|
|
|
5,604
|
|
Cash and cash equivalents beginning of period
|
|
|
42,500
|
|
|
|
67,893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents end of period
|
|
$
|
5,604
|
|
|
$
|
8,048
|
|
|
$
|
5,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumption of liability by Sentigen Holding Corp.
|
|
$
|
|
|
|
$
|
|
|
|
$
|
308,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock of Sentigen Holding Corp. issued for license costs
|
|
$
|
|
|
|
$
|
|
|
|
$
|
440,625
|
|
|
|
|
|
|
|
|
|
|
|
See notes to financial statements.
4
Notes to Financial Statements
1. Organization and Nature of Operations
SentiSearch, Inc. (we, SentiSearch, and the Company) was a wholly-owned subsidiary of
Sentigen Holding Corp. (Sentigen) until the December 1, 2006 spin-off, discussed below. We are
a development stage company and have a limited operating history. We were incorporated in the
State of Delaware on October 3, 2006 to hold the olfaction intellectual property assets of Sentigen
Holding Corp. and its subsidiaries.
On October 10, 2006, in connection with its merger with Invitrogen Corporation, Sentigen separated
its olfaction intellectual property assets from the businesses being acquired by Invitrogen
Corporation. The distribution of SentiSearch shares to the shareholders of Sentigen, commonly
referred to as a spin-off, took place immediately prior to the consummation of the merger. In
connection with the distribution, on October 10, 2006, we entered into a distribution agreement
with Sentigen, pursuant to which Sentigen contributed $250,000 to our capital. Also on October 10,
2006, we entered into a contribution agreement with Sentigen, pursuant to which Sentigen
transferred to us all of its olfaction intellectual property. The olfaction intellectual property
assets primarily consist of an exclusive license agreement with The Trustees of Columbia University
in the City of New York (Columbia), dated April 10, 2000 (the Columbia License), and certain
patent applications titled Nucleic Acids and Proteins of Insect or 83b odorant receptor genes and
uses thereof.
During July 2007, we were issued two patents in the United States, during November 2007, we were issued one patent in Australia and during April 2008, we were issued one patent in Mexico. Three of these patents were issued directly to us and the other
patent was issued under the Columbia License. All of the issued patents cover nucleic acid molecules
which encode insect odorant receptor proteins, including numerous variations on insect odorant
receptor coding sequence. The patents cover any nucleic acid molecule as long as the protein it
encodes contains a short segment of amino acids, linked together.
While we believe our technology capabilities in the olfaction area are substantial, up to this
point, we have incurred substantial operating losses. There have been no revenues from operations
to date. Although we have an exclusive license agreement with Columbia, only one patent has been
issued under the License Agreement and we cannot provide any assurance that our additional patent
applications will be successful. We intend to continually review the commercial validity of our
olfaction technology in order to make the appropriate decisions as to the best way to allocate our
limited resources.
2. Basis of Presentation
The financial statements for the period April 10, 2000 (Commencement of Business) to March 31, 2008
differ from the results of operations, financial condition and cash flows that would have been
achieved had we been operated independently during the periods from April 10, 2000 through March
31, 2008. Our business was operated within Sentigen Holding Corp. as part of its broader corporate
organization rather than as a stand-alone company. Our historical financial statements do not
reflect the expense of certain corporate functions that we would have needed to perform if we were
not a wholly-owned subsidiary.
We are a development stage company as defined in Financial Accounting Standard Board (FASB)
Statement No. 7, Accounting and Reporting by Development Stage Enterprises. Our planned
principal operations have not yet commenced. We intend to establish a new business. We have not
generated any revenues from operations and have no assurance of any future revenues. All losses
accumulated since commencement of our business have been considered as part of our development
stage activities.
5
3. Summary of Significant Accounting Policies
|
a.
|
|
Interim Period
The accompanying interim financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America for interim financial
information, the instructions to Form 10-Q and Article 8 of Regulation S-X. In the opinion of
management, the interim financial statements have been prepared on the same basis as the annual
financial statements and reflect all adjustments, which include only normal recurring adjustments,
necessary to present fairly the financial position as of March 31, 2008, the results of operations,
changes in stockholders equity and cash flows for the three months ended March 31, 2008. The
results for the three months ended March 31, 2008 are not necessarily indicative of the results to
be expected for any subsequent quarter or the entire fiscal year ending December 31, 2008.
|
|
|
|
|
Certain information and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of America have been
condensed or omitted pursuant to the Securities and Exchange Commissions (SEC) rules and
regulations.
|
|
|
|
|
These unaudited financial statements should be read in conjunction with the Companys audited
financial statements and notes thereto for the year ended December 31, 2007 as included in the
Companys report on Form 10-KSB. There have been no changes in significant accounting policies
since December 31, 2007.
|
|
|
b.
|
|
Cash and Cash Equivalents
Cash and cash equivalents include liquid investments with
maturities of three months or less at the time of purchase.
|
|
|
c.
|
|
License Costs
The costs of intangible assets that are purchased from others for use in
research and development activities and that have alternative future uses (in research and
development projects or otherwise) are accounted for in accordance with FASB Statement No.
142, Goodwill and Other Intangible Assets. The amortization of those intangible assets
used in research and development activities is a research and development cost. However,
the costs of intangibles that are purchased from others for a particular research and
development project and that have no alternative future uses (in other research and
development projects or otherwise) and therefore no separate economic values are research
and development costs at the time the costs are incurred. We determined that the licensing
costs arising from our exclusive licensing agreement with The Trustees of Columbia
University have alternative future uses. These costs have been capitalized and are being
amortized on a straight-line basis through April 2010 (see Note 6).
|
|
|
d.
|
|
Impairment
Intangible and long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of the assets may not
be fully recoverable. A review for impairment includes comparing the carrying value of an
asset to an estimate of the undiscounted net future cash inflows over the life of the asset
or fair market value. An asset is considered to be impaired when the carrying value exceeds
the calculation of the undiscounted net future cash inflows or fair market value. An
impairment loss is defined as the amount of the excess of the carrying value over the fair
market value of the asset. We believe that none of our intangible and long-lived assets are
impaired as of March 31, 2008.
|
|
|
e.
|
|
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the dates of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ from those
estimates.
|
|
|
f.
|
|
Income Taxes
Certain income and expense items are accounted for differently for
financial reporting and income tax purposes. Deferred tax assets and liabilities are
determined based on the difference between the financial statement and income tax basis of
assets and liabilities and the tax effect of net operating loss and tax credit
carry-forwards applying the enacted statutory tax rates in effect for the year in which the
differences are expected to reverse. Valuation allowances are established if it is
determined to be more likely than not that deferred tax assets will not be recovered.
|
|
|
g.
|
|
Loss Per Share
The accompanying financial statements include loss per share calculated
as required by FASB Statement No. 128 Earnings Per Share on a pro-forma basis as if we
were a separate entity from the period April 10, 2000 (commencement of business) until
October 3, 2006 (our date of incorporation). Basic loss per share is calculated by dividing
net loss by the weighted average number of shares of common stock outstanding. Diluted loss
per share include the effects of securities convertible into common stock, consisting of
stock options, to the extent such conversion would be dilutive. FASB Statement No. 128
prohibits adjusting the denominator of diluted Earnings Per Share for additional potential
common shares when a net loss from continuing operations is reported. The assumed
exercise of common stock equivalents was not utilized for three months ended March 31, 2008 since the effect would be anti-dilutive.
|
6
|
h.
|
|
Fair Value of Financial Instruments
The carrying value of cash and cash equivalents
and accounts payable and accrued expenses approximates fair value because of the short-term
maturity of those instruments. The carrying amount of the Companys notes payable
approximate fair value because the effective yield of such instruments, which includes the
effects of contractual interest rates taken together with any discounts, is consistent with
current market rates of interest for instruments of comparable credit risk.
|
|
|
|
|
On January 1, 2008, the Company adopted Statement of Financial Accounting Standards No. 157, Fair
Value Measurements (FAS 157). There was no impact on the Companys financial position, results of
operation or cash flows as of March 31, 2008 and for the three months then ended as a result of FAS
157.
|
|
|
|
|
On January 1, 2008, the Company adopted Statement of Financial Accounting Standards No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities (FAS 159). There was no impact
on the Companys financial position, results of operation or cash flows as of March 31, 2008 and
for the three months then ended as a result of FAS 159.
|
|
|
i.
|
|
Stock-Based Compensation
Effective January 1, 2006, the Company adopted SFAS 123R,
Share-Based Payment (SFAS 123R). This statement is a revision of SFAS 123, and supersedes
APB Opinion No. 25, and its related implementation guidance. SFAS 123R addresses all forms
of share-based payment (SBP) awards including shares issued under employee stock purchase
plans, stock options, restricted stock and stock appreciation rights. Under SFAS 123R, SBP
awards result in a cost that is measured at fair value on the awards grant date, based on
the estimated number of awards that are expected to vest and will result in a charge to
operations. As the Company did not issue any employee share-based payments prior to January
1, 2006, there was no unrecognized compensation costs in any prior periods.
|
|
|
|
|
Stock-based compensation expense recognized in the Companys statements of operations for the
three months ended March 31, 2008 includes compensation expense for the share-based payment awards
granted subsequent to December 31, 2005, based upon the grant date fair value estimated in
accordance with the provisions of SFAS 123R. The Company recognizes compensation expense for
stock option awards on a straight-line basis over the requisite service period of the award.
As stock-based compensation expense recognized in the three months ended March 31, 2008 is based
upon awards ultimately expected to vest, it has been reduced for estimated forfeitures. SFAS
123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in
subsequent periods if actual forfeitures differ from those estimates.
|
|
|
|
|
The expected term of stock options represents the average period the stock options are
expected to remain outstanding and is based on the expected term calculated using the
approach prescribed by SAB 107 for plain vanilla options. The Company used this approach as
it did not have sufficient historical information to develop reasonable expectations about
future exercise patterns and post-vesting employment termination behavior. The expected stock
price volatility for the Companys stock options for the year ended December 31, 2007 was
determined by examining the historical volatilities for industry peers for periods that meet
or exceed the expected term of the options, using an average of the historical volatilities
of the Companys industry peers as the Company did not have sufficient trading history for
the Companys common stock. The Company will continue to analyze the historical stock price
volatility and expected term assumption as more historical data for the Companys common
stock becomes available. The risk-free interest rate assumption is based on the U.S. Treasury
instruments whose term was consistent with the expected term of the Companys stock options.
The expected dividend assumption is based on the Companys history and expectation of
dividend payouts.
|
|
|
|
|
The Company accounts for its
issuances of stock-based compensation to non-employees for services using the measurement date guidelines enumerated in SFAS 123R and EITF 96-18. Accordingly, the value of any awards that were vested and non forfeitable at their date of issuance were measured based on the fair value of the equity instruments at the date of issuance. The non-vested portion of awards that are subject to the future performance of the counterparty are adjusted at each
reporting date to their fair values based upon the then current market value of the Companys stock and other assumptions that management
believes are reasonable. The Company believes that the fair value of the stock options
issued to non-employees is more reliably measurable then the fair value of the services rendered. The fair value of the stock options granted was calculated using the Black-Scholes
option pricing model as prescribed by SFAS 123R.
|
7
4. Notes Payable
On June 21, 2007, we entered into demand promissory notes in favor of each of Mr. Frederick R.
Adler, Mr. Joseph K. Pagano, D.H. Blair Investment Banking Corp. and Mr. Samuel A. Rozzi (together,
the Lenders), providing for loans to us in the principal amount of $50,000, $50,000, $50,000 and
$30,000, respectively, for an aggregate amount of $180,000. The promissory notes accrue interest at
Citibank N.A.s reported prime rate plus 3%, which is due and payable at the time the principal
amount of each respective promissory note becomes due. The promissory notes have a maturity date of
June 22, 2009. Each Lender may demand the payment of all of the outstanding principal and interest
of his or its respective promissory note at any time prior to the
maturity date. At the time of the loan transaction, each of the
Lenders was a beneficial owner of a significant number of shares of our common stock. In addition, Mr. Pagano is our
Chief Executive Officer and the Chairman of the Board of Directors, and Mr. Adler is a member of
the Board of Directors. As of March 31, 2008, Accounts Payable and Accrued Expenses include accrued interest of the promissory notes of $14,538.
5. Exclusive License Agreement
On April 10, 2000, Sentigen Biosciences, Inc. (Sentigen Biosciences), a wholly-owned subsidiary
of Sentigen Holding
8
Corp. (Sentigen), entered into a license agreement with The Trustees of Columbia University in
the City of New York (Columbia) for an exclusive worldwide right to Columbias patent
applications and other proprietary rights in the areas of insect chemosensation and olfaction (the
Columbia License).
In consideration of the Columbia License, Columbia was issued 75,000 shares of Sentigen common
stock and will receive royalties of 1% of the net sales of any licensed products or services. The
Columbia License had certain minimum funding requirements, all of which have been satisfied.
On October 10, 2006, we entered into a contribution agreement with Sentigen pursuant to which
Sentigen transferred to us all of its olfaction intellectual property, including the Columbia
License. On October 17, 2006, Columbia consented to the assignment of the Columbia License from
Sentigen Biosciences to SentiSearch subject to certain conditions, all of which have already been
satisfied to the extent currently required.
The value of this license agreement is recorded as license costs, net of accumulated amortization
on the accompanying balance sheet. The original value of the license costs reflects the closing
share price of Sentigen Holding Corp.s common stock on April 10, 2000. The value of the license
costs, net of amortization as of March 31, 2008 and March 31, 2007 was $68,182 and $100,909,
respectively.
Intangible and long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be fully recoverable. A
review of our olfaction technology was performed by Charter Capital Advisers, Inc. in August 2006
which concluded that the estimated range of fair value was $120,000 to $190,000. An impairment
loss of $122,996 was recognized as amortization expense in August 2006 as the amount of the excess
of the carrying value over the fair market value of the asset.
The license costs are being amortized on a straight line basis through April 2010. The following
table details the expected amortization costs of the license over the next two years:
|
|
|
|
|
|
|
Expected
|
|
|
|
amortization
|
|
For the years ended:
|
|
expense
|
|
2008
|
|
|
24,545
|
|
2009
|
|
|
32,727
|
|
2010
|
|
|
10,910
|
|
|
|
|
|
Total
|
|
$
|
68,182
|
|
|
|
|
|
6. Patent Costs
During July 2007, we were issued two patents in the United States, during November 2007, we were
issued a patent in Australia and during April 2008, we were issued a patent in Mexico. One of the U.S. patents and the Australia and Mexico patents were issued
directly to us and the other U.S. patent was issued under the Columbia License. All of the issued
patents cover nucleic acid molecules which encode insect odorant receptor proteins, including
numerous variations on insect odorant receptor coding sequence. The patents cover any nucleic acid
molecule as long as the protein it encodes contains a short segment of amino acids, linked
together.
The original value of the patent costs, mainly consisting of legal fees in the amount of $41,882,
is recorded as patent costs, net of accumulated amortization on the accompanying balance sheet.
The value of the patent costs, net of amortization as of March 31, 2008 was $32,907.
The patent costs are being amortized on a straight line basis through April 2010, the remaining
term of the license costs (see Note 6). The following table details the expected amortization
costs of the patent:
|
|
|
|
|
|
|
Expected
|
|
|
|
amortization
|
|
For the years ended:
|
|
expense
|
|
2008
|
|
|
12,600
|
|
2009
|
|
|
15,230
|
|
2010
|
|
|
5,077
|
|
|
|
|
|
Total
|
|
$
|
32,907
|
|
|
|
|
|
7. Share-Based Payments
9
Non-Employee Stock-Based Compensation
On March 27, 2008, the Company granted options to purchase 425,000 shares of its common stock at an
exercise price of $.19 per share with a term of ten years to three individuals providing consulting services to the Company. The fair value of
the underlying common stock at the date of grant was $.0699 per share. The options vest as
follows: 158,334 immediately, 133,333 on the first anniversary of the grant date and 133,333 on the second
anniversary of the grant date. Of the 425,000 options granted,
169,542 are exercisable subject to stockholder approval of an
amendment to the Companys charter to increase the number of shares of authorized
common stock. Assumptions related to the estimated fair value of these stock options on their date
of grant, which the Company estimated using the Black-Scholes option pricing model, are as follows:
risk-free interest rate of 3.56%; expected dividend yield of zero percent; expected option life of
ten years; and expected volatility of 17.36%. The aggregate grant date fair value of the award
amounted to $29,708. The Company recorded $11,068 of consulting expense during the three months
ended March 31, 2008 with respect to these awards.
10
Total compensation expense recognized for the three months ended March 31, 2008 amounted to
$11,068. The stock-based compensation expense will fluctuate as the fair market value of the
common stock fluctuates. The weighted-average grant date fair value of options granted during the
three months ended March 31, 2008 amounted to $0.0699 per share. Total unamortized compensation
expense related to unvested stock options at March 31, 2008 amounted to $18,640 and is expected to
be recognized over a weighted average period of approximately 10 years.
8. Recently Issued Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141R, Business Combination (SFAS 141R), which
establishes principles and requirements for how the acquirer of a business recognizes and measures
in its financial statements the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree. SFAS 141R also provides guidance for recognizing and
measuring goodwill acquired in a business combination and determines what information to disclose
to enable users of the financial statements to evaluate the nature and financial effects of the
11
business combination. SFAS 141R applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. We do not expect the adoption of SFAS 141R will have a material impact on
our financial conditions or results of operations.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interest in Consolidated Financial
Statements an amendment of ARB No. 51 (SFAS 160) which establishes accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in
the consolidated entity that should be reported as equity in the consolidated financial statements.
SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on
or after December 15, 2008. We do not expect the adoption of SFAS 160 will have a material impact
on our financial conditions or results of operations.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities an amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 gives financial
statement users better information about the reporting entitys hedges by providing for qualitative
disclosures about the objectives and strategies for using derivatives, quantitative data about the
fair value of and gains and losses on derivative contracts, and details of credit-risk-related
contingent features in their hedged positions. SFAS 161 is effective for financial statements
issued for fiscal years beginning after November 15, 2008 and interim periods within those years.
We do not expect the adoption of SFAS 161 will have a material impact on our financial condition or
results of operations.
Management
does not believe that any other recently issued, but not yet effective accounting
pronouncements, if adopted, would have a material effect on the accompanying financial statements.
9. Commitments and Contingencies
On February 25, 2008, the Company entered into a sublease for office space in West Palm
Beach, Florida. The lease requires six monthly payments of approximately $1,480, including
state sales tax, through August 2008.
10. Related Party Transactions
During the three months ended March 31, 2008, the
Companys Chief Executive Officer and Chairman made interest-free demand loans to the Company in the
aggregate of $28,970. The loans are pursuant to a Revolving Credit Note dated as of March 10, 2008,
which matures on March 10, 2009. During April 2008, Mr. Pagano made additional loans under the
Revolving Credit Note in the aggregate amount of $77,944. The total aggregate amount of $106,914 outstanding under the Revolving Credit
Note on May 9, 2008, was applied to Mr. Paganos participation in the Companys financing that closed on May 9, 2008. See Note 11 for additional information on the financing.
Please refer to Note 5 regarding additional related party transactions.
11. Subsequent Events
In
April 2008, the Company was issued one patent. The patent was
issued directly to the Company in Mexico. The
patent covers nucleic acid molecules which encode insect odorant receptor proteins, including
numerous variations on insect odorant receptor coding sequence. The patent covers any nucleic acid
molecule as long as the protein it encodes contains a short segment of amino acids, linked
together.
As of
May 9, 2008, the Company closed on a $750,000 financing, consisting of cash
in the amount of $563,986 and the conversion of $186,013 of indebtedness. Participants in
the financing subscribed for an aggregate of 3,947,368 shares of common stock, based on the closing
price of $0.19 per share of our common stock on the closing date. Prior to the issuance of any shares of
common stock pursuant to the financing, we are required to receive the approval of our stockholders
to amend our Certificate of Incorporation to increase the number of authorized shares of common
stock (Stockholder Approval). No shares will be issued, and no subscribing person will be deemed
to own any shares, until such time as Stockholder Approval has been received. In the event that
Stockholder Approval is not received, the subscription amount for the shares will not be returned
but instead will automatically be converted into a subscription for debt to be issued at that time.
The debt, if issued, will be unsecured, mature in one year from the date of issuance, and bear interest (which
will accrue and be payable at maturity) at a rate equal to ten percent (10%) per annum.
Eleven of our largest
stockholders (each holding 50,000 or more shares of our common stock)
subscribed in the financing, including, Mr. Pagano, our Chairman and Chief Executive Officer, and Mr.
Adler, a director.
12
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Forward-looking Information
The following discussion should be read in conjunction with our Consolidated Financial
Statements and Notes thereto, included elsewhere within this report. This Quarterly Report on Form
10-Q contains forward-looking statements within the meaning of Section 21E of the Exchange Act,
including statements using terminology such as can, may, believe, designed to, expect,
intend to, plan, anticipate, estimate, potential or continue, or the negative thereof
or other comparable terminology regarding beliefs, plans, expectations or intentions regarding the
future. You should read statements that contain these words carefully because they:
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discuss our future expectations;
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contain projections of our future results of operations or of our financial condition; and
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state other forward-looking information.
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We believe it is important to communicate our expectations. However, forward-looking statements
involve risks and uncertainties and our actual results and the timing of certain events could
differ materially from those discussed in forward-looking statements as a result of certain
factors, including those set forth under our Annual Report on Form
10-KSB for the year ended December 31, 2007. All
forward-looking statements and risk factors included in this document are made as of the date
hereof, based on information available to us as of the date thereof, and we assume no obligations
to update any forward-looking statement or risk factor, unless we are required to do so by law.
Introduction
SentiSearch, Inc. (SentiSearch or we or us or the Company) is a Delaware corporation
that was incorporated on October 3, 2006. We were previously a wholly-owned subsidiary of Sentigen
Holding Corp. (Sentigen) and were incorporated solely for the purposes of holding the olfaction
intellectual property assets of Sentigen and its then subsidiary, Sentigen Biosciences, Inc.
(Sentigen Biosciences). Prior to the merger between Sentigen and Invitrogen Corporation
(Invitrogen) that was consummated on December 1, 2006, Sentigen separated its olfaction
intellectual property assets from the businesses to be acquired by Invitrogen. This separation was
accomplished through the contribution of Sentigens olfaction intellectual property assets to us on
October 10, 2006 and the subsequent spin-off in which Sentigen distributed 100% of its ownership
interest in us to its then stockholders on December 1, 2006. As a result of this spin-off, we
became a public, stand-alone company.
The olfaction intellectual property assets that we hold primarily consist of an exclusive
worldwide license issued by The Trustees of Columbia University in the City of New York
(Columbia), as described in more detail below (the Columbia License), and certain patent
applications titled Nucleic Acids and Proteins of Insect or 83b odorant receptor genes and uses
thereof. The olfaction intellectual property assets are also referred to herein as our olfaction
intellectual property.
The Columbia License provides us with worldwide rights to certain of Columbias patent
applications and other rights in the areas of insect chemosensation and olfaction. The Columbia
License gives us an exclusive license to develop, manufacture, have made, import, use, sell,
distribute, rent or lease (i) any product or service the development, manufacture, use, sale,
distribution, rental or lease of which is covered by a claim of a patent licensed to us under the
Columbia License or (ii) any product or service that involves the know-how, confidential
information and physical materials conveyed by Columbia to us relating to the patents licensed from
Columbia (collectively, the Licensed Products/Services). In addition to certain funding
requirements by Sentigen, all of which were satisfied, in consideration of the Columbia License,
Columbia was issued 75,000 shares of Sentigen common stock and will receive royalties of 1% of the
net sales of any Licensed Products/Services.
In addition to the Columbia License, we have certain patent applications relating to nucleic
acids and proteins of insect or 83b odorant receptor genes and their uses. These patent
applications relate to the isolation of a gene that appears to be ubiquitous among insects. This
gene has been identified in various species of insects, including many that have a profound effect
on agricultural production and human health. The identification of this gene, and the protein that
it expresses, may enable the development of high-throughput screening methods to discover compounds
that attract insects to a particular site (and away from one where their presence is undesirable),
or develop materials that are distasteful to the insects sense of smell, thereby making
agricultural products, for example, undesirable to them.
While we believe our technology capabilities in the olfaction area are substantial, up to this
point, we have incurred substantial operating losses. There were no revenues from operations for
the three months ended March 31, 2008. As of March 31,
2008, we held two patents directly with
another patent being issued under our License Agreement. In April
2008, we were issued an additional patent in Mexico that is directly
held by us. We cannot provide any assurance that our
additional patent applications will be successful. We intend to continually review the commercial
validity of our olfaction technology
13
in order to make the appropriate decisions as to the best way to allocate our limited resources.
Critical Accounting Policies and Use of Estimates
The SEC defines critical accounting policies as those that are, in managements view,
important to the portrayal of our financial condition and results of operations and demanding of
managements judgment. Our critical accounting policies include impairment of intangibles.
Our intangible assets consist of license costs of $482,507 as of the three-months ended March
31, 2008, as compared with $440,625 as of the three-months ended March 31, 2007 and are the result
of the Columbia License and certain patents. The value of the Columbia License reflects the
closing share price of Sentigens common stock on April 10, 2000 (the closing date of the Columbia
License) multiplied by the 75,000 shares of Sentigen common stock issued to Columbia University
less accumulated amortization. The value of the license is subject to an amortization period of 10
years. Management reviews the value of the license for impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be fully recoverable. A review
for impairment was conducted by an outside firm that concluded the fair market value of the
olfaction technology was between $120,000 and $190,000 as of August 2006. The license is considered
to be impaired when the carrying value exceeds the calculation of the undiscounted net future cash
inflows or fair market value. An impairment loss of $122,996 was recognized as amortization expense
in August 2006 by Sentigen. We believe no further impairment loss is necessary as of March 31,
2008.
Results of Operation
General
We are a development stage company as defined in Financial Accounting Standard Board (FASB)
Statement No. 7, Accounting and Reporting by Development Stage Enterprises. Our planned principal
operations have not yet commenced and we have one employee. We intend to establish a new business.
We have not generated any revenues from operations and have no assurance of any future revenues.
All losses accumulated since commencement of our business have been considered as part of our
development stage activities.
Prior to the spin-off on December 1, 2006, our business was operated within Sentigen as part
of its broader corporate organization rather than as a stand-alone company. Historically, Sentigen
performed certain corporate functions for us. Our historical financial statements included herein
do not reflect the expense of certain corporate functions we would have needed to perform if we
were not a wholly-owned subsidiary. Following the spin-off, Sentigen no longer provided assistance
to us and we are responsible for the additional costs associated with being an independent public
company, including costs related to corporate governance, quoted securities and investor relations
issues. Therefore, you should not make any assumptions regarding our future performance based on
our financial statements.
Our financial statements were prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities. Funding during the first quarter of
2008 was received through $28,970 in loans made to us by Mr. Pagano, our Chief Executive
Officer. On May 9, 2008, we closed on a $750,000 financing with
certain of our largest stockholders, including our Chief Executive Officer and Chairman and another member of our board of directors. On June 21, 2007, certain of our
officers, directors and shareholders loaned us an aggregate of $180,000. See
-Liquidity and
Capital Resources
below for a discussion of our financing and loans
.
We believe that our limited
financial resources, inclusive of the foregoing amounts, are sufficient to fund operations and
capital requirements for the next twelve months. We may, however, need substantial amounts of
additional financing to commercialize the research programs undertaken by us, which financing may
not be available on favorable terms, or at all.
Product Research and Development
We intend to continually review the commercial validity of the olfaction technology, in order
to make the appropriate decisions as to the best way to allocate our limited resources. We
currently do not have any research and development grant applications outstanding nor can we
predict whether we will receive any research and development funding during the next twelve (12)
months. We are unable at this time to predict a level of spending, if any, for product research and
development activities during the next twelve (12) months, all of which will be dependent upon the
implementation of our business plan. Our executive officer and board
of directors have and intend to continue to seek
opportunities with non-profit agencies and with potential commercial partners to leverage our
olfaction intellectual property for the development of control agents for biting insects, in
particular, insect vectors of malaria and other diseases.
Operating and Other Expenses
For the three months ended March 31, 2008, general and
administrative costs were $148,658 and primarily included
professional audit fees and legal fees and travel and lodging expenses. For the three-months ended March
31, 2007, general and administrative costs were $36,148 and primarily
included approximately $36,000 of professional audit fees and legal
fees. The comparative increase of $112,510 during the first quarter
of 2008 is primarily due to our increased operating activities with
respect to our patents, commercialization efforts for our olfaction
intellectual property and financing activities.
Amortization expense includes the amortization of our license costs. For the three-months ended
March 31, 2008 and 2007, amortization expense was $11,174 and
$8,183, respectively. The remaining
licensing costs are being amortized on a straight line basis through April 2010.
14
Interest expense reflects the cost of our promissory notes issued on June 21, 2007. As of the
three-months ended March 31, 2008 and March 31, 2007,
accrued interest on the promissory notes amounted to $14,538, and $0, respectively.
Liquidity and Capital Resources
We have incurred operating losses since inception. As of March 31, 2008, we had $5,604 in
cash and cash equivalents, compared to $8,048 at March 31, 2007. Our working capital deficit at
March 31, 2008 was $221,530, compared to working capital deficit of $79,542 at December 31, 2007,
an increase of $143,117 or 179%, mainly attributable to expenses related to our relocation. Net
cash used in operating activities for the three-months ended March 31, 2008 was $36,896, compared
to $59,845 for the three months ended March 31, 2007, a decrease of $22,949 or 38%, mainly
attributable to a decrease in cash available.
During the three months ended March 31, 2008, Mr. Pagano, our Chief Executive Officer and
Chairman of our Board of Directors, made interest-free loans to us in the aggregate amount of
$28,970, which were used to finance our operating activities. The loans are pursuant to a
Revolving Credit Note dated as of March 10, 2008. The Revolving Credit Note matures on March 10,
2009 and Mr. Pagano may demand the payment of all of the outstanding principal amount of all
borrowings under the Revolving Credit Note at any time prior to the maturity date. Upon the
occurrence of certain specified events, the entire outstanding
balance of the borrowings under the Revolving Credit Note
automatically becomes immediately due and payable. During April 2008, Mr. Pagano made additional
loans under the Revolving Credit Note in the aggregate amount of $77,944. The total aggregate amount of $106,914 on May 9, 2008
was applied to Mr. Paganos subscription in the
financing discussed below. As of the date hereof, there are no borrowings outstanding under the
Revolving Credit Note.
As of May 9, 2008, we closed on a $750,000 financing, as previously disclosed, consisting of cash
in the amount of $563,986 and the conversion of $186,013 of indebtedness. Participants in
the financing subscribed for an aggregate of 3,947,368 shares of common stock, based on the closing
price of $0.19 per share of our common stock on the closing date. Prior to the issuance of any shares of
common stock pursuant to the financing, we are required to receive the approval of our stockholders
to amend our Certificate of Incorporation to increase the number of authorized shares of common
stock (Stockholder Approval). No shares will be issued, and no subscribing person will be deemed
to own any shares, until such time as Stockholder Approval has been received. In the event that
Stockholder Approval is not received, the subscription amount for the shares will not be returned
but instead will automatically be converted into a subscription for debt to be issued at that time.
The debt, if issued, will be unsecured, mature in one year from the date of issuance, and bear interest (which
will accrue and be payable at maturity) at a rate equal to ten percent (10%) per annum.
Eleven of our largest stockholders (each holding 50,000 or more shares of our common stock)
subscribed in the financing, including, Mr. Pagano, our Chairman and Chief Executive Officer, and Mr.
Adler, a director.
We expect that the funds raised in the financing will be used for general working capital purposes,
including the funding of research and development efforts and the pursuit
of a joint venture or other form of collaboration with another entity or entities. The funds may
also be used to repay the aggregate amount outstanding under the loans previously extended to us in June 2007 by certain of our directors and major
stockholders, to the extent these loans are not applied to our
anticipated additional capital raise. We are presently targeting to raise an
additional $100,000 $200,000 from the
subscribers who participated in the May 9, 2008 closing. Our ability to obtain financing and
realize revenue depends upon the status of future business prospects, as well as conditions
prevailing in the capital markets. These factors, among others, raise doubt about our ability to
continue as a going concern should we be unable to realize revenues from our olfaction technology
or raise sufficient additional funds in the future. It is possible that any such additional
financing may be dilutive to current stockholders and the terms of any debt financings could
contain restrictive covenants limiting our ability to do certain things, including paying
dividends.
On June 21, 2007, we issued a demand promissory note in favor of each of Mr. Frederick R.
Adler, Mr. Joseph K. Pagano, D.H. Blair Investment Banking Corp. and Mr. Samuel A. Rozzi (together,
the Lenders), evidencing loans extended to us in the principal amount of $50,000, $50,000,
$50,000 and $30,000, respectively, by the Lenders, for an aggregate amount of $180,000. The
promissory notes accrue interest at Citibank N.A.s reported prime rate plus 3%, which is due and
payable at the time the principal amount of each respective promissory note becomes due. The
promissory notes have a maturity date of June 22, 2009. Each Lender may demand the payment of all
of the outstanding principal and interest of his or its respective promissory note at any time
prior to the maturity date. At the time of the loan transaction, each of the Lenders was the
beneficial owner of a significant number of shares of our common stock. In addition, Mr. Pagano is our
Chief Executive Officer and the Chairman of our Board of Directors, and Mr. Adler is a member of
our Board of Directors. On May 9, 2008, in connection with the
financing discussed above, (i) $24,675 of the outstanding amount of Mr. Paganos promissory
note was applied to the subscriptions made by Mr. Pagano and a trust for the benefit of
his son; and (ii) $54,425, the entire outstanding amount of D.H. Blair Investment Banking Corp.s promissory note,
including principal and accrued interest, was applied to the subscriptions made
by each of three affiliates of D.H. Blair Investment Banking Corp. As of the date hereof, an aggregate amount of
$117,119 is outstanding under the promissory notes.
As discussed above, we believe that our financial resources presently are sufficient to fund
operations and capital requirements for the next twelve months. We may need additional amounts of
financing in order to more to fully realize the possible research programs to be undertaken by us,
which financing may not be available on favorable terms, or at all.
Off-Balance-Sheet Arrangements
As of March 31, 2008, we did not have any off-balance-sheet arrangements, as defined in Item
303(a)(4) of Regulation S-K.
Inflation
Periods of high inflation could have a material adverse impact on us to the extent that
increased borrowing costs for floating rate
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debt may not be offset by increases in cash flow. At March 31, 2008, we had $180,000 in floating
rate debt outstanding. There was no significant impact on our operations as a result of inflation
during the three-month period ended March 31, 2008.
Recent Accounting Pronouncements
In September 2006, the FASB issued Statement of Financial Accounting Standard No. 157, Fair
Value Measurements (SFAS 157). The purpose of SFAS 157 is to provide users of financial
statements with better information about the extent to which fair value is used to measure
recognized assets and liabilities, the inputs used to develop the measurements, and the effect of
certain of the measurements on earnings for the period. SFAS 157 also provides guidance on the
definition of fair value, the methods used to measure fair value, and the expanded disclosures
about fair value measurements. SFAS 157 changes the definition of fair value to be the price that
would be received to sell an asset or paid to transfer a liability, an exit price, as opposed to
the price that would be paid to acquire the asset or received to assume the liability, an entry
price. SFAS 157 is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods with those fiscal years (e.g. January 1, 2008, for calendar
year-end entities). We do not expect the adoption of SFAS 157 will have a material impact on our
financial condition or results of operations.
In February 2007 the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities (SFAS 159), which permits entities to choose to measure many financial
instruments and certain other items at fair value which are not currently required to be measured
at fair value. SFAS 159 is effective for financial statements issued for fiscal years beginning
after November 15, 2007, and interim periods for those fiscal years. We do not expect the adoption
of SFAS 159 will have a material impact on our financial condition or results of operations.
In December 2007, the FASB issued SFAS No. 141R, Business Combination (SFAS 141R), which
establishes principles and requirements for how the acquirer of a business recognizes and measures
in its financial statements the identifiable assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree. SFAS 141R also provides guidance for recognizing and
measuring goodwill acquired in a business combination and determines what information to disclose
to enable users of the financial statements to evaluate the nature and financial effects of the
business combination. SFAS 141R applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. We do not expect the adoption of SFAS 141R will have a material impact on
our financial condition or results of operations.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interest in Consolidated
Financial Statements an amendment of ARB No. 51 (SFAS 160) which establishes accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of
a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest
in the consolidated entity that should be reported as equity in the consolidated financial
statements. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. We do not expect the adoption of SFAS 160 will have a
material impact on our financial condition or results of operations.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activitiesan amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 gives financial
statement users better information about the reporting entitys hedges by providing for qualitative
disclosures about the objectives and strategies for using derivatives, quantitative data about the
fair value of and gains and losses on derivative contracts, and details of credit-risk-related
contingent features in their hedged positions. SFAS 161 is effective for financial statements
issued for fiscal years beginning after November 15, 2008 and interim periods within those years.
We do not expect the adoption of SFAS 161 will have a material impact on our financial condition or
results of operations.
Management does not believe that any other recently issued, but not yet effective accounting
pronouncements, if adopted, would have a material effect on the accompanying financials statements.
Item 3 Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures.
As of March 31, 2008, Joseph K. Pagano, who is our Chief Executive Officer, Secretary and
Treasurer, carried out an evaluation of the effectiveness of our disclosure controls and procedures
(as defined by Rule 13a-15(e) or Rule 15d-15(e)of the Exchange Act) thereunder. Based upon that
evaluation, Mr. Pagano concluded that our disclosure controls and procedures were effective, as of
the date of their evaluation, for the purposes of recording, processing, summarizing and timely
reporting material information required to be disclosed in reports filed by us under the Exchange
Act.
During the three-months ended March 31, 2008, there were no changes in our internal control
over financial reporting that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
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PART II- OTHER INFORMATION
Item 5. Other Information.
During the three months ended March 31, 2008, Mr. Pagano, our Chief Executive Officer and
Chairman of our Board of Directors, made interest-free loans to us in the aggregate amount of
$28,970, which were used to finance our operating activities. The loans are pursuant to a
Revolving Credit Note dated as of March 10, 2008. The Revolving Credit Note
matures on March 10, 2009 and Mr. Pagano may demand the payment of all of the outstanding principal
amount of all borrowings under the Revolving Credit Note at any time prior to the maturity date.
Upon the occurrence of certain specified events, the entire outstanding balance of the borrowings under the Revolving Credit Note automatically becomes immediately due and payable. During April 2008, Mr. Pagano made
additional loans under the Revolving Credit Note in the aggregate
amount of $77,944. The total aggregate amount of $106,914 was applied to Mr.
Paganos subscription in the financing discussed herein. As of the date hereof, there are no
borrowings outstanding under the Revolving Credit Note.
Item 6. Exhibits
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Exhibit
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Description
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10.1
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Revolving Credit Note, dated as of March 10, 2008
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31
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Certification of Chief Executive Officer pursuant to Rule 13a-14
and Rule 15d-14(a), promulgated under the Securities and Exchange
Act of 1934, as amended.
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32
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Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
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SENTISEARCH, INC.
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Date: May 15, 2008
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/s/ Joseph K. Pagano
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Joseph K. Pagano
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Chief Executive Officer
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EXHIBIT INDEX
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Exhibit
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Description
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10.1
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Revolving Credit Note, dated as of March 10, 2008
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31
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Certification of Chief Executive Officer pursuant to Rule 13a-14
and Rule 15d-14(a), promulgated under the Securities and Exchange
Act of 1934, as amended.
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Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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