U.S. Rare Earths, Inc.
CALYPSO MEDIA SERVICES GROUP, INC (Form: 10-K, Received: 04/15/2010 17:15:48)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

(Mark(

(Check One)
 

x

Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

 

For the Fiscal Year Ended December 31, 2009

 

o

 

Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

 

For the transition period from ______________ to ______________

 

Commission File Number: 000-31199

 

CALYPSO MEDIA SERVICES GROUP, INC.

(Exact name of registrant as specified in its charter)

 

 

Nevada

87-0638338

 

(State or other jurisdiction of

(I.R.S. Employer

 

incorporation or organization)

Identification No.)

 

12 North Washington Street, Montoursville, Pennsylvania 17754

(Address of principal executive offices) (Zip Code)

 

Registrant's telephone number, including area code:

(570) 368-7633

 

Securities registered pursuant to Section 12(b) of the Act:

None

 

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.00001 par value

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 

Yes o

 

No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

 

Yes o

 

No x

 

Indicate  Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the SeSecurities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was requwas required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes x

No o

 

 

Indicate  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained, herein, a and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorpoi  incorporatedd by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

 

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).                                                                             Yes o No o

 

Indicate  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

 

Large accelerated filer

o

Accelerated filer

o

 

Non-accelerated filer

o

Smaller reporting company

x

 

(Do not check if a smaller reporting company)

 

IndicateIIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

State the

State the aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of June 30, 2009, the last business day of the registrant’s most recently completed second fiscal quarter: $1,975,000 based on 79% of the 5,000,000 common shares at a price of $0.50 per share.

 

Note. —If a determination as to whether a particular person or entity is an affiliate cannot be made without involving unreasonable effort and expense, the aggregate market value of the common stock held by non-affiliates may be calculated on the basis of assumptions reasonable under the circumstances, provided that the assumptions are set forth in this Form.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practical date. 5,000,000 shares of Common Stock April 15, 2010

 

DOCUMENTS INCORPORATED BY REFERENCE

 

 

 

A description of "Documents Incorporated by Reference" is contained in Part IV, Item 15.

 

 

 

 

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CALYPSO MEDIA SERVICES GROUP, INC.

 

TABLE OF CONTENTS

 

 

Page

PART I

 

Item 1.

Business

3

 

Item 1A.

Risk Factors

6

 

Item 1B.

Unresolved Staff Comments

10

 

Item 2.

Properties

10

 

Item 3.

Legal Proceedings

11

 

Item 4.

Removed and reserved by the SEC

11

 

PART II

 

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

 

Purchases of Equity Securities

11

 

Item 6.

Selected Financial Data

12

 

Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

12

 

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

14

 

Item 8.

Financial Statements and Supplementary Data

14

 

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

14

 

Item 9A(T).

Controls and Procedures

15

 

Item 9B

Other Information

18

 

PART III

 

Item 10.

Directors, Executive Officers and Corporate Governance

18

 

Item 11.

Executive Compensation

20

 

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

 

Matters

21

 

Item 13.

Certain Relationships and Related Transactions and Director Independence

21

 

Item 14.

Principal Accounting Fees and Services

22

 

PART IV

 

Item 15.

Exhibits, Financial Statement Schedules.

23

 

 

Signatures

39

 

 

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EXPLANATORY NOTE

 

This Annual Report on Form 10-K for the year ended December 31, 2009 of Calypso Media Services Group, Inc. includes the re-audited financial statements for the year ended December 31, 2008. The previously issued financial statements for the fiscal year  ending December 31, 2008 were audited by Moore and Associates, Chartered, whose registration with the Public Company Accounting Oversight Board was revoked in August of 2009.

____________________________

 

 

PART I

 

Item 1.

Business.

 

Business Development

 

 

History

 

We incorporated on July 27, 1999 in the State of Delaware as Calypso Financial Services, Inc. Our original purpose was to actively seek potential operating businesses and/or business opportunities, with the intent to acquire or merge with such businesses. Following our organization, we issued a total of 1.5 million shares of our common stock.

 

On December 31, 2007, we completed the acquisition of Media Depot, Inc., a Nevada corporation, changed our corporate domicile to the State of Nevada and changed our name to Calypso Media Services Group, Inc. As a result of the acquisition, Media Depot became our wholly owned subsidiary engaged in offering a full line of advertising services to manufacturers, distributors and dealers across the United States and Canada.

 

Our principal executive offices are located at 12 North Washington Street, Montoursville, Pennsylvania 17754, telephone number (570) 368-7633. We also maintain a satellite office in Lonoke, Arkansas, telephone number, (501) 676-0233. Our website can be accessed at www.CalypsoAdvertising[dot]com .

 

Current Business Activities

 

Media Depot is a national agency specializing in co-op advertising offering an array of services ranging from buying and planning media in radio, TV, cable, print or outdoor advertising, to creating print ads and producing electronic commercials. Media Depot was founded in March 2005 by combining its operations with Media Max, Inc., a privately held corporation operating since 1998. In August 2007, Media Depot acquired all of the assets, properties, goods, inventories, contracts and other intangible assets of Media Max, which then became a subsidiary of Media Depot. Both companies offer a full line of advertising services to manufacturers, distributors and dealers. Unless otherwise indicated, references herein to Media Depot will include the operations of Media Max.

 

Our objective is to offer quality advertising services at a reduced cost to clients. A typical media agency will bill clients for creative expense. However, Media Depot provides these services at no cost, which we consider a primary selling tool when soliciting clients. In seeking prospective clients, we first identify targeted manufacturer clients, establish corporate relationships that lead to distributors/dealers, and then implement ad campaigns for segmented client groups. Our target markets are manufacturers that use a co-op advertising strategy with their distributor/dealer network. Media Depot offers a cohesive ad campaign for the manufacturer as well as advertising buying power for the distributor/dealer that they otherwise would not have. Media Depot aggressively negotiates rates for the benefit of clients resulting in increased exposure for the client’s advertising campaign.

 

Media Depot also offers, through an arrangement with Rovion, “ InPerson Moving Media ,” a unique way to deliver video characters on a web site with a personalized message to viewers. InPerson Moving Media runs video clips of actors, spokespersons or company representatives that draw a visual connection with customers visiting web sites. This allows the client’s web site to get personal by delivering content in a way that truly speaks to their customers.

 

Media Depot is experienced with many local and regional markets in the United States. Its media buyers have in the aggregate over 30 years of experience in the advertising arena. Media Depot offers an array of services as outlined below:

 

 

Media & Marketing

 

Media buying & planning

 

Radio

 

Network TV

 

Cable

 

Newspaper

 

Magazine

 

Direct mail

 

Outdoor

 

Market research

Co-Op management

 

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Graphic Design

 

Logo design

 

Point of purchase

 

Display design

 

Outdoor advertising

 

Printed materials

 

Newspaper ads

 

Magazine ads

 

Business cards

 

Door hangers

 

Direct mail

 

Brochures

 

Postcards

 

Inserts

 

Video

 

Television scripts

 

Television storyboards

 

Television production

 

Radio

 

Radio scripts

 

Professional voices

 

Radio production

 

Interactive Media

 

Web site consulting

 

Web site design

 

Custom graphics

 

Web Hosting

 

Certain costs are directly attributable to each advertising campaign including creative, planning and verification of ads placed. These costs represent approximately 10% of a campaign's budget. Most agencies bill clients for creative expense, but Media Depot provides creative services at no cost. We believe this an important selling tool when soliciting clients.

 

Our overall strategy is to first identify targeted manufacturer clients, establish corporate relationships that lead to distributors/dealers, and then implement ad campaigns for segmented client groups that benefit from pricing leverage. Our target markets are manufacturers that utilize a Co-Op advertising strategy with their distributor/dealer network. We offer a cohesive ad campaign for the manufacturer as well as advertising buying power for the distributor/dealer that they otherwise would not have.

 

A typical advertising agency generates a 15% agency fee and does not generally negotiate rates for the benefit of the client. Media Depot compares rate card costs with the client's past invoices, reviews circulation/subscriber numbers, and then contacts the media offering what our buyers feel is a competitive price for the client's ads. We aggressively negotiate rates for the benefit of the client that equates to increased exposure for the client’s advertising campaign. Because we are not necessarily tied to any single media, the media will bid for a customer's advertising budgets.

 

Services

 

We are a full-service advertising agency offering media planning and placement for clients throughout the United States and Canada. In addition to traditional media, we offer Search Engine Marketing campaigns that utilize optimized landing pages, trackable phone numbers and automatic email response. We also specialize in Co-Op advertising campaigns for manufacturers and dealers.

 

We aggressively negotiate media rates that will deliver more ads per dollar spent for the client, which results in what we believe to be a competitive advantage. We also handle all aspects of creating, buying and planning media in radio, TV, cable, print and outdoor advertising.

 

Through an agreement with Rovion, we offer “ InPerson Moving Media ,” a unique way to deliver video characters on web sites with a personalized message to anyone who visits a website. This product runs video clips of actors, spokespeople or company representatives, that can draw a visual connection with customers visiting web sites. Learning what a company does online is no longer about reading content, but about viewing and listening. Moving Media adds a personal touch to a client’s web site by delivering content that truly speaks to their customers.

 

 

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Trademarks and Copyrights

 

We do not typically own trademarks or copyrights on properties on which our services and products are based. These rights are owned or controlled by the creator of the property or by the entity which licenses its intellectual property rights, such as a motion picture or television producer.

 

Markets and Competition

 

Media Depot operates in a highly competitive marketplace. Principal competitors include Interpublic Group, Catalina Marketing Group, Omnicom Group Inc. and other local and national advertising agencies. We also compete with various local companies in each regional market. We believe the principal competitive factors affecting our business are development of client marketing and promotional strategies, unique consumer insights, creative execution, licenses, selection, price and service quality. We must compete with companies that have far more extensive sales and development staffs and significantly greater financial resources.

 

Management believes that we are competitive in our offered services and the marketing and promotional strategies we develop. We also use bulk buying of advertising time and space so that we can offer reduced rates to clients. Further, by not charging for creative expenses, clients realize additional savings. We believe that the Moving Media product is unique to the marketplace and gives us an advantage when competing for on-line advertising business.

 

Creative Expertise

 

Some Media Depot clients require that we provide certain creative services to produce ads. Media Depot employs experienced graphic design persons to create ads for the required media as a client demands. We also employ creative writing and in-house production personnel as needed.

 

Government Regulation

 

 

Our business may be subject to certain government regulations and agencies, such as truth in  

advertising and legal disclaimers for certain advertisements, in addition to certain consumer advocacy groups.

 

Employees

 

Media Depot presently has 14 full time employees, three part-time employees and one consultant. We anticipate that during the next 12 months, we will add approximately 10 employees, including a chief operating officer. Media Depot’s employees are not members of any union, nor have they entered into any collective bargaining agreements, nor is it anticipated in the near future. We believe that our relationship with employees is good.   

 

Facilities

 

Our principal offices, located at 12 North Washington Street, Montoursville, Pennsylvania, consist of 4,000 sq. ft. of office space. The offices are leased from the Hoff Family Limited Partnership that is controlled by Rose Hoff, the wife of Matthew Hoff, a principal stockholder. Lease payments are $1,500 per month and renews monthly.

 

We also maintain a satellite office in Lonoke, Arkansas, which consists of 2,000 sq. ft. of office space. The offices are leased for $916 per month and renews monthly. The facilities are owned by the J.S. Parnell Trust, of which our C.E.O. Michael D. Parnell is trustee.

 

Employee Stock Plan

 

Pursuant to our employee stock plan, eight employees are entitled to receive a total of 134,000 shares of our common stock. An aggregate of 180,000 shares are authorized to be issued under the plan. All issued shares will remain in trust and ownership will not vest with the individual employee until certain employment criteria have been met. Each employee must execute an employment agreement with Media Depot and continuously remain an employee for the time period indicated below.

 

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Time Period

Percent of Shares Vested

 

 

12 months from the date employment agreement is signed

25%

 

24 months from the date employment agreement is signed

25%

 

36 months from the date employment agreement is signed

25%

 

48 months from the date employment agreement is signed

25%

 

Upon an employee fulfilling each time period of employment, we will deliver to the employee a stock certificate for that number of common shares indicated above. In the event an employee does not enter into an employment agreement or fails to fulfill any of the applicable time periods of employment, those shares of common stock not so earned by and vested with the employee will be delivered to the company and canceled.

 

The plan shares are being issued pursuant to an exemption from registration under the Securities Act. We have included an aggregate of 30,000 shares previously issued under the plan in a registration statement that became effective on December 29, 2008. These shares may be sold or transferred by the holders without restriction. The balance of the shares are considered restricted securities and may be sold or transferred only pursuant to a registration statement or an appropriate exemption from registration.

 

Industry Segments

 

No information is presented as to industry segments. We are presently engaged in the principal business of offering a full line of advertising services through our national advertising agency. Reference is made to the statements of operations contained in the financial statements included herewith for a statement of our revenues and operating loss for the past two fiscal years.

 

Item 1A.

Risk Factors.

 

An investment in our common stock involves significant risks, and should not be made by anyone who cannot afford to lose his or her entire investment. Prospective investors should consider carefully the following risk factors, together with all other information contained in this report, before deciding to invest in our common stock. If any of the following events or risks actually occur, our business, operating results and financial condition would likely suffer materially and you could lose all or part of your investment.

 

Risks Relating to Our Business

 

The success of our future operations depends on our ability to generate revenues from new and existing clients, which may be subject to many factors.

 

Media Depot, together with its subsidiary Media Max, has operated since 1998. Our ability to generate profits in the future depends on many factors, including the following:   

 

 

our ability to maintain Media Depot’s current client base and to secure new clients in the future;

 

 

our ability to develop new advertising marketing strategies to offer existing and future clients;

 

 

our ability to compete with existing and new entities that offer the same or similar services and products as Media Depot;

 

 

the costs of maintaining and expanding operations; and

 

 

our ability to attract and retain a qualified work force.

 

We cannot assure you that we will achieve or maintain any of the foregoing factors or realize profitable operations in future.

 

Future operating results are difficult to predict.

 

We may experience significant quarter-to-quarter fluctuations in revenues and net income (loss). The advertising business tends to include larger promotions in the summer and during the winter holiday season. Advertising budgets for existing and new clients vary year-to-year, influencing their advertising schedules. Thus, we believe that quarter-to-quarter comparisons of historical operating results will not be a good indication of future performance. It is likely that in some future quarter, operating results may fall below the expectations of securities analysts and investors, which could have negative impact on the price of our common stock.

 

 

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Media Depot relies on the continued development of new and competitive promotional programs and advertising campaigns.

 

A significant portion of our revenues come from promotional programs and advertising campaigns developed for clients. We must continually develop and market new and competitive promotional programs and advertising campaigns that will be competitive with other companies offering the same or similar services and products. There can be no assurance that Media Depot or our clients will be able to secure necessary licenses for additional entertainment properties on which to base promotional programs or that, if secured, such licenses will result in successful campaigns.

 

If some clients experience financial distress, their weakened financial position could negatively affect our own financial position and results.

 

We have a diverse client base and, at any given time, one or more clients may experience financial distress, file for bankruptcy protection or go out of business. If a substantial client experiences financial difficulty, it could delay or jeopardize the collection of accounts receivable, result in significant reductions in services provided by us and may have a material adverse effect on our financial position, results of operations and liquidity.

 

Media Depot receives approximately 38% of its revenue from its three largest clients and the loss of one or more of these clients could adversely impact results of operations and financial condition.

 

Our clients generally are able to reduce advertising and marketing spending or cancel projects at any time for any reason. It is possible that clients could reduce spending in comparison with historical patterns, or they could reduce future spending. Media Depot’s three largest clients account for approximately 38% of total revenues. A significant reduction in advertising and marketing spending by its largest clients, or the loss of one or more of these clients, if not replaced by new client accounts or an increase in business from existing clients, would adversely affect revenues. This could have a material adverse effect on our results of operations and financial condition.

 

Our business may be vulnerable to potential lawsuits regarding ad content or system failure.

 

Because Media Depot facilitates the placement of advertisements in print and/or on-line publications, potential claims may be asserted for negligence, defamation or personal injury, or for reasons based on other theories, due to the nature of the advertisements’ content. Current technology does not contemplate the review of classified ad content processed on websites for libelous or other statements that might give rise to possible liability. This role has been fulfilled historically by each publication and we expect the publications will continue to monitor their ads. Although we anticipate obtaining general and professional liability insurance, such coverage may not cover potential claims or may not be adequate to indemnify us fully. Any imposition of liability or legal defense expenses that are not covered by insurance or that are in excess of our insurance coverage could place a strain on our available cash resources, could seriously jeopardize the success of our business plan and could materially and adversely affect our financial position, results of operations and cash flows.

 

The advertising industry is highly competitive and if we are unable to compete successfully, our results of operations could be negatively and severely affected.

 

The advertising and media industry is highly competitive and marked by several competitors of various size and resources. A significant capital base is not necessarily required to enter into the business making it relatively easy for new competitors to enter the market. Our principal competitors and potential competitors include Interpublic Group, Catalina Marketing Group, Omnicom Group Inc. and other local and national advertising agencies. Our services must compete with other agencies and providers of creative or media services in order to maintain existing client relationships and to win new clients. A client’s perception of the quality of our creative work, our reputation and the reputations of the agencies with which we work, are important factors in determining our competitive position. An agency’s ability to serve clients, particularly large international clients, on a broad geographic basis is also an important competitive consideration. Because an agency’s principal asset is its people, freedom of entry into the business is almost unlimited and a small agency is, on occasion, able to take all or some portion of a client’s account from a much larger competitor. Many existing and potential competitors have greater financial resources, larger market share, and larger production and creative capability, which may enable them to establish a stronger competitive position than we have. If we fail to address competitive developments quickly and effectively, we will not be able to grow our business or remain a viable entity.

 

 

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If we fail to keep up with changes affecting marketing trends, technology and the markets that we serve, we will become less competitive, which would adversely affect future financial performance.

 

In order to remain competitive, we must respond on a timely and cost-efficient basis to changes in advertising and marketing trends, technology, industry standards and procedures and customer preferences. We need to continuously develop new strategies, advertising and marketing campaigns, technologies and services to address new developments in advertising. In some cases these changes may be significant and the cost to comply with these changes substantial. We cannot assure you that we will be able to adapt to any changes in the future or that we will have the financial resources to keep up with changes in the marketplace. Also, the cost of adapting to changes may have a material and adverse effect on our operating results.

 

Our future success depends on retaining existing key employees and hiring and assimilating new key employees.

 

In order to achieve success, we must retain Media Depot’s key employees, including its executive officers, creative staff and research and media personnel. We must also be able to attract new personnel as needed. Although we currently have employment agreements with our C.E.O. and Business Manager, each individual may be able to terminate his agreement at any time. Presently, no other employment contracts exist. Our ability to attract and retain key personnel is influenced by a variety of factors, including compensation we pay, which could be adversely affected by our financial or market performance. It would be difficult for us to replace any one of these individuals. In addition, as we grow we may need to hire additional key personnel. We may not be able to identify and attract high quality employees or successfully assimilate new employees into our existing management structure.

 

Government regulations and consumer advocates may limit the scope of the content of our services, which could affect our ability to meet clients’ needs.

 

Government agencies and consumer advocacy groups may, directly or indirectly from time to time, affect or attempt to affect the scope, content and manner of presentation of advertising, marketing and corporate communications services, whether through regulations or other governmental actions. There has been an increasing tendency on the part of advertisers and consumer groups to challenge advertising through legislation, regulations, courts or otherwise. These actions may be premised on the grounds that the advertising is false and deceptive or injurious to public welfare. Any such limitations on the scope of the content of services provided could affect our ability to meet clients’ needs. In addition, there has been an increasing tendency on the part of businesses to resort to the judicial system to challenge advertising practices. We cannot assure investors in our stock that such claims by businesses or governmental agencies will not have a material adverse effect on our results of operations and financial condition in the future.

 

Our business could be adversely affected by negative economic developments in the advertising industry and/or the economy in general.

 

Media Depot depends on the perceived demand for advertising in the business community, which can be adversely affected by declines in the businesses of clients and prospective clients and/or downturns in the general economy. Accordingly, the success of our business is susceptible to downturns in not only the business of our clients, but also in the economy in general. Any significant downturn in the advertising market or in general economic conditions would likely hurt our business and operating results.

 

We may not be able to manage future growth effectively, which could adversely affect our operations and financial performance.

 

The ability to manage and operate our business as we execute our development and growth strategy will require effective planning. Significant rapid growth and/or possible future acquisitions could strain management and internal resources that could adversely affect financial performance. We anticipate that future growth or acquisitions could place a significant strain on personnel, management systems, infrastructure and other resources. Our ability to manage future growth effectively will also require attracting, training, motivating, retaining and managing new employees and continuing to update and improve operational, financial and management controls and procedures. If we do not manage growth effectively, our operations could be adversely affected resulting in slower growth and a failure to achieve or sustain profitability.

 

 

There are risks associated with possible future acquisitions.

 

We have reserved 5.0 million shares of our common stock for use in potential future acquisitions of other businesses, entities or assets related to the Media Depot’s business. If presented with an appropriate

 

 

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opportunity, we may make an acquisition of one or more complementary companies or businesses. There can be no assurance that the anticipated benefits of any future acquisition will be realized. In the event we make a future acquisition, we could have difficulty in assimilating that business’ personnel and operations. In addition, key personnel of an acquired business may decide not to work for us. If we make other types of acquisitions, we could have difficulty in assimilating the acquired technology or products into our operations. These difficulties could disrupt our ongoing business, distract management and employees and increase expenses. Also, future acquisitions would most likely result in potentially dilutive issuances of our common stock, the incurrence of debt, contingent liabilities and/or amortization expenses related to goodwill and other intangible assets, which could adversely affect our results of operations and financial condition.

 

Being a public company involves increased administrative costs, which could result in lower net income and make it more difficult for us to attract and retain key personnel.

 

As a public company, we incur significant legal, accounting and other expenses that Media Depot did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002 as well as new rules subsequently implemented by the SEC, have required changes in corporate governance practices of public companies. We expect that these new rules and regulations will increase our legal and financial compliance costs and make some activities more time consuming. For example, in connection with being a public company, we may have to create new board committees, implement additional internal controls and disclose controls and procedures, retain a financial printer, adopt an insider trading policy and incur costs relating to preparing and distributing periodic public reports. These new rules and regulations could also make it more difficult for us to attract and retain qualified executive officers and members of our board of directors, particularly to serve on our audit committee.

 

Risks Relating to Ownership of Our Common Stock

 

There is a limited public trading market for our common stock and there is no assurance that a market will be maintained.

 

There is currently a limited public trading market for our common stock on the OTC Bulletin Board under the ticker symbol “CALY.” We cannot give any assurance that an active trading market will develop or be sustained. If an active trading market for our common stock does not develop, it would be difficult, if not impossible, for stockholders to liquidate their shares. Also, the trading price for our shares may be highly volatile and subject to significant fluctuations in response to variations in our quarterly operating results and other factors. These price fluctuations may adversely affect the liquidity of our shares, as well as the price that holders may realize for their shares upon any future sale.

 

Trading in our shares is subject to price volatility and numerous other factors.

 

Trading of our shares on the OTC Bulletin Board is likely to be volatile and subject to numerous factors that can affect price, many of which are beyond our control. There can be no assurance that an active trading market will be achieved or maintained. Accordingly, it could be difficult for holders of our common stock to liquidate their shares. Some of the factors that may influence the price of our shares are:

 

 

our failure to achieve and maintain profitability;

 

 

changes in earnings estimates and recommendations by financial analysts;

 

 

actual or anticipated variations in our quarterly and annual results of operations;

 

 

changes in market valuations of similar companies;

 

 

announcements by us or our competitors of significant contracts, new products or services, acquisitions, commercial relationships, joint ventures or capital commitments;

 

 

the loss of significant clients or customers;

 

 

the loss of significant partnering relationships; and

 

 

general market, political and economic conditions.

 

In the past, following periods of extreme volatility in the market price of a company's securities, securities class action litigation has often been instituted. A securities class action suit against us could result

 

 

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in substantial costs and divert our management's time and attention, which would otherwise be used to benefit our business.

 

 

Effective voting control of our company is held by directors and certain principal stockholders.

 

Approximately 96% of our outstanding shares are held by directors and a small number of principal stockholders. These persons have the ability to exert significant control in matters requiring stockholder vote and may have interests that conflict with other stockholders. As a result, a relatively small number of stockholders acting together, have the ability to control all matters requiring stockholder approval, including the election of directors and approval of acquisitions, mergers and other significant corporate transactions. This concentration of ownership may have the effect of delaying, preventing or deterring a change in control of our company. It could also deprive our stockholders of an opportunity to receive a premium for their shares as part of a sale of our company and it may affect the market price of our common stock.

 

We do not expect to pay dividends in the foreseeable future, which could make our stock less attractive to potential investors.

 

We anticipate retaining any future earnings and other cash resources for operation and business development and do not intend to declare or pay any cash dividends in the foreseeable future. Any future payment of cash dividends will be at the discretion of our board of directors after taking into account many factors, including operating results, financial condition and capital requirements. Corporations that pay dividends may be viewed as a better investment than corporations that do not.

 

Trading of our shares may be subject to certain "penny stock” regulations, which could have a negative effect on the price of our shares in the public market.

 

Public trading of our common stock on the OTC Bulletin Board is likely subject to certain regulations commonly referred to as penny stock rules. A penny stock is generally defined to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. If our stock is deemed to be a penny stock, trading in the shares will be subject to additional sales practice requirements on broker-dealers. These may require a broker-dealer to make a special suitability determination for purchasers of penny stocks and to receive the purchaser's prior written consent to the transaction. A broker-dealer may also be required to deliver to a prospective purchaser of a penny stock, prior to the first transaction, a risk disclosure document relating to the penny stock market.

 

Consequently, penny stock rules may restrict the ability of broker-dealers to trade and/or maintain a market in our common stock and may affect the ability of stockholders to sell their shares. These requirements may be considered cumbersome by broker-dealers and could impact the willingness of a particular broker-dealer to make a market in our shares, or they could affect the price at which our shares trade. Also, many prospective investors may not want to get involved with the additional administrative requirements, which may have a material adverse effect on the trading of our shares.

 

Future sales or the potential for sale of a substantial number of shares of our common stock could cause our market value to decline.

 

Of the 5.0 million shares of common stock outstanding, approximately 4.7 million shares are considered restricted securities and may be sold only pursuant to a registration statement or the availability of an appropriate exemption from registration. Sales of a substantial number of these restricted shares in the public markets, or the perception that these sales may occur, could cause the market price of our common stock to decline and materially impair our ability to raise capital through the sale of additional equity securities.

 

We have identified material weaknesses in our internal procedures and controls over financial

reporting.   

 

As of December 31, 2009, management identified certain material weaknesses in our internal procedures and controls over financial reporting. Accordingly, we have put in place a remediation plan to strengthen and improve our internal controls and address the material weaknesses identified. If these remedial measures are insufficient to address these weaknesses or are not implemented effectively, material misstatements in our interim or annual financial statements may occur in the future. This may cause future interim or annual reports to be delayed or become delinquent, which would have a negative impact on our company and the public market for our stock .

 

Item 1B.

Unresolved Staff Comments.

 

 

This item is not required for a smaller reporting company.

 

Item 2.

Property.

 

We do not presently own any real property. Our principal offices are located in leased facilities located at 12 North Washington Street, Montoursville, Pennsylvania. The facilities consist of 4,000 sq. ft. of office space and are leased from a related party at the rate of $1,500 per month and renews monthly. We also lease an office in Lonoke, Arkansas, which consists of 2,000 sq. ft. of office space. The offices are leased from a related party at the rate of $916 per month and renews monthly.

 

 

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Item 3.

Legal Proceedings.

 

There are no material pending legal proceedings to which the company or any subsidiary is a party, or to which any property is subject and, to the best of our knowledge, no such action against us is contemplated or threatened.

 

Item 4.

Removed and Reserved.

 

 

Item removed and reserved by the SEC.

 

PART II

 

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

Our common stock became eligible for trading on the OTC Bulletin Board during the second quarter of 2009. There is currently a limited public trading market for our common stock trading under the OTCBB ticker symbol: “CALY.” There has only been sporadic trades and, accordingly, no trading history is being presented. The last reported trade was at $0.50 per share. As of the date hereof there are approximately 61 stockholders of record of our common stock.

 

Inclusion on the OTCBB permits price quotations for our shares to be published by that service. Any future secondary trading of our shares may be subject to certain state imposed restrictions. Except for our application to the OTCBB, there are no plans, proposals, arrangements or understandings with any person concerning the development of a trading market in any of our securities. Also, there can be no assurance that an active public trading market in our shares will develop or, that if such a market does develop, that it can be sustained.

 

The ability of individual stockholders to trade their shares in a particular state may be subject to various rules and regulations of that state. A number of states require that an issuer's securities be registered in their state or appropriately exempted from registration before the securities are permitted to trade in that state. Presently, we have no plans to register our securities in any particular state.

 

Recent Issuance of Securities

 

Upon the closing the Media Depot on December 31, 2007, we issued 3.5 million shares of our authorized, but previously unissued common stock to 15 persons pursuant to the terms of the merger agreement. These shares were issued in consideration for the exchange of the recipients’ Media Depot securities and were issued pursuant to an exemption from registration under the Securities Act of 1933 provided by Section 4(2) of that Act.

 

Penny Stock Rule

 

It is unlikely that our securities will be listed on any national or regional exchange or The Nasdaq Stock Market in the foreseeable future. Therefore our shares most likely will be subject to the provisions of Section 15(g) and Rule 15g-9 of the Exchange Act, commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for broker-dealer transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.

 

The SEC generally defines a penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be a penny stock unless that security is:

 

 

registered and traded on a national securities exchange meeting specified criteria set by the SEC;

 

 

authorized for quotation on The Nasdaq Stock Market;

 

 

issued by a registered investment company;

 

 

excluded from the definition on the basis of price (at least $5.00 per share) or the issuer's net tangible assets; or

 

 

exempted from the definition by the SEC.

 

 

-11-

A broker-dealer who sells penny stocks to a person other than an established customer or accredited investor is subject to additional sales practice requirements. An accredited investor is generally defined as a person with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse.

 

For transactions covered by these rules, a broker-dealer must make a special suitability determination for the purchase of such securities and must receive the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, a monthly statement must be sent to the client disclosing recent price information for the penny stocks held in the account and information on the limited market in penny stocks. Consequently, these rules may restrict the ability of broker-dealers to trade and/or maintain a market in our common stock and may affect the ability of stockholders to sell their shares.

 

These requirements may be considered cumbersome by broker-dealers and could impact the willingness of a particular broker-dealer to make a market in our shares, or they could affect the value at which our shares trade. Classification of the shares as penny stocks increases the risk of an investment in our shares.

 

Rule 144

 

We have registered a total of 269,800 shares of our outstanding common stock for resale under the registration statement declared effective December 29, 2008. The balance of 4,730,200 shares are deemed to be “restricted securities” as defined by Rule 144 under the Securities Act. Rule 144 is the common means for a stockholder to resell restricted securities and for affiliates to sell their securities, either restricted on no restricted (control) shares. Rule 144 was amended by the SEC, effective February 15, 2008.

 

Under the amended Rule 144, an affiliate of a company filing reports under the Exchange Act who has held their shares for more than six months, may sell in any three-month period an amount of shares that does not exceed the greater of:

 

 

the average weekly trading volume in the common stock, as reported through the automated quotation system of a registered securities association, during the four calendar weeks preceding such sale, or

 

 

1% of the shares then outstanding.

 

Sales by affiliates under Rule 144 are also subject to certain requirements as to the manner of sale, filing appropriate notice and the availability of current public information about the issuer.

 

A non-affiliate stockholder of a reporting company who has held their shares for more than six months, may make unlimited resales under Rule 144, provided only that the issuer has available current public information about itself. After a one-year holding period, a non-affiliate may make unlimited sales with no other requirements or limitations.

 

Holders of restricted shares of our common stock are eligible to avail themselves to sell their shares under the provisions of Rule 144, provided they comply with the selling and volume limitations of that Rule. We cannot predict the effect any future sales under Rule 144 may have on the market price of our common stock, if a market for our shares develops, but such sales may have a substantial depressing effect on such market price.

 

Dividends Policy

 

We have never declared cash dividends on our common stock, nor do we anticipate paying any dividends on our common stock in the foreseeable future.

 

Item 6.

Selected Financial Data.

 

 

This item is not required for a smaller reporting company.

 

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Form 10-K.

 

 

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Forward Looking and Cautionary Statements

 

This report contains forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will” “should," “expect," "intend," "plan," anticipate," "believe," "estimate," "predict," "potential," "continue," or similar terms, variations of such terms or the negative of such terms. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including those risks discussed elsewhere in this report. Although forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment, actual results could differ materially from those anticipated in such statements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Results of Operations

 

The following table sets forth the percentage relationship to total revenues of principal items contained in our consolidated statements of operations for the two most recent fiscal years ended December 31, 2009 and 2008. It should be noted that percentages discussed throughout this analysis are stated on an approximate basis.

 

 

Fiscal Years Ended

 

December 31,

 

2009_______2008

 

Total revenues

100%

100%

 

Cost of goods sold

74%

74%

 

Gross margin

26%

26%

 

Total operating expenses

27%

27%

 

Loss from operations

(1%)

(1%)

 

Other income (expenses)

0%

0%

 

Loss before income taxes

(1%)

(1%)

 

Income tax expense (benefit)

(0%)

(0%)

 

Net loss

(1%)

(1%)

 

 

For the years ended December 31, 2009 and 2008.

 

Total revenues for the year ended December 31, 2009 were $3,105,470 compared to $3,581,638 for 2008. This 13% decrease is attributed to decreased advertising revenue as a result of general weakness in advertising spending. Cost of goods sold decreased 14% from $2,653,007 in 2008 to $2,288,496 in 2009, primarily attributed to a change in media mix for clients. As a percentage of revenues, cost of goods sold was constant from 74% in 2008 to 74% in 2009, consistent with the decrease in revenues in 2009. General and administrative expenses decreased 13% to $817,312 in 2009 from $938,885 in 2008, primarily attributed to decreased professional costs. The net loss for 2009 was $21,199 compared to $18,244 in 2008.

 

Liquidity and Capital Resources

 

At December 31, 2009, we had total current assets of $526,897, compared to $655,644 at December 31, 2008. This decrease is attributed to the decrease in cash from $239,143 at December 31, 2008 to $175,570 at December 31, 2009, due to lower margins resulting from change in media mix for clients, and the decrease in accounts receivable from $416,501 at December 31, 2008 to $351,327 at December 31, 2009. The decrease in accounts receivable is attributed to decreased advertising revenue as a result of general weakness in advertising spending. Working capital at December 31, 2009 was $434,618 compared to $458,892 at December 31, 2008. The decrease in working capital was also due to the decreases in cash and accounts receivable in 2009 and was partially offset by the decrease in accounts payable from $196,752 at December 31, 2008 to $92,279 at December 31, 2009. At December 31, 2009 we had total assets of $593,052 and stockholders’ equity of $500,774, compared to total assets of $718,725 and stockholders' equity of $521,973 at December 31, 2008.

 

Cash decreased $63,573 from $239,143 at December 31, 2008 to $175,570 at December 31, 2009. Net cash provided by operating activities was $306,742 for the year ended December 31, 2008 compared to net cash used by operating activities of $37,407 for 2009. This is attributed primarily to the net loss recognized in 2009 and the decrease in accounts payable of $104,473 for the year.

 

 


Inflation

 

In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future. Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.

 

Off-balance Sheet Arrangements

 

 

We have no off-balance sheet arrangements.

 

 

 

Recent Accounting Pronouncements

 

In May 2009, the Financial Accounting Standards Board (“ FASB ”) issued SFAS 165 (ASC 855-10) entitled “ Subsequent Events ”. Companies are now required to disclose the date through which subsequent events have been evaluated by management. Public entities (as defined) must conduct the evaluation as of the date the financial statements are issued, and provide disclosure that such date was used for this evaluation. SFAS 165 (ASC 855-10) provides that financial statements are considered “issued” when they are widely distributed for general use and reliance in a form and format that complies with GAAP. SFAS 165 (ASC 855-10) is effective for interim and annual periods ending after June 15, 2009 and must be applied prospectively. The adoption of SFAS 165 (ASC 855-10) during the year ended December 31, 2009 did not have a significant effect on our financial statements as of that date.

 

In June 2009, the FASB issued SFAS 168, “ The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles ”. (“SFAS 168” pr ASC 105-10) SFAS 168 (ASC 105-10) establishes the Codification as the sole source of authoritative accounting principles recognized by the FASB to be applied by all nongovernmental entities in the preparation of financial statements in conformity with GAAP. SFAS 168 (ASC 105-10) was prospectively effective for financial statements issued for fiscal years ending on or after September 15, 2009 and interim periods within those fiscal years. The adoption of SFAS 168 (ASC 105-10) on July 1, 2009 did not impact our results of operations or financial condition. The Codification did not change GAAP, however, it did change the way GAAP is organized and presented. As a result, these changes impact how companies reference GAAP in their financial statements and in their significant accounting policies.

 

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk.

 

 

This item is not required for a smaller reporting company.

 

Item 8.

Financial Statements and Supplementary Data.

 

Consolidated financial statements for the fiscal years ended December 31, 2009 and 2008 have been examined to the extent indicated in the report by GPH CPAs, PC, independent certified public accountants and have been prepared in accordance with accounting principles generally accepted in the United States of America and pursuant to regulations promulgated by the SEC. The aforementioned financial statements are included herein under Item 15.

 

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

On August 7, 2009, we dismissed Moore & Associates Chartered as our independent registered public accountants. None of the reports of Moore & Associates on our financial statements for either of the past two years contained an adverse opinion or disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope or accounting principles. During the two most recent fiscal years, there were no disagreements with Moore and Associates, whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to Moore and Associates, Chartered's satisfaction, would have caused it to make reference to the subject matter of the disagreement in connection with its report on the registrant's financial statements.

 

On August 27, 2009, the PCAOB issued PCAOB Release No. 105-2009-006 revoking the registration of Moore & Associates, Chartered and barring Michael J. Moore, CPA, from being an associated person of a registered public accounting firm. The PCAOB imposed these sanctions on the basis of its findings concerning the alleged violations of Moore & Associates and Michael J. Moore of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, PCAOB rules and auditing standards in

 

 

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auditing the financial statements of three issuer clients from 2006 to 2008, PCAOB rules and quality controls standards, and noncooperation with a Board investigation. A copy of the PCAOB Release can be accessed at the PCAOB website at http://www.pcaobus[dot]org.

 

On August 7, 2009, we engaged the accounting firm of Seale and Beers, CPAs as our new independent registered public accounting firm. Our board of directors approved the dismissal of Moore & Associates Chartered and the engagement of Seale and Beers, CPAs. During the two most recent fiscal years and the interim periods preceding the engagement, we did not consult Seale and Beers regarding any of the matters set forth in Item 304(a)(2)(i) or (ii) of Regulation S-B.

 

On September 22, 2009, we dismissed Seale and Beers, CPAs as our independent certifying accountants pursuant to the unanimous consent of our board of directors. We initially retained Seale and Beers on August 7, 2009, but the firm did not performed any auditing or accounting services nor has it issued any audit or other reports on our financial statements. Accordingly, since we retained Seale and Beers, we had no disagreements with the firm, whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to Seale and Beers’ satisfaction, would have caused it to make reference to the subject matter of the disagreement in connection with its report on our financial statements.

 

On September 22, 2009, we engaged GBH CPAs, PC, as our new independent registered public accountants. Our board of directors unanimously approved the engagement of GBH CPAs, PC. During the two most recent fiscal years and the interim periods preceding the engagement, we have not consulted GBH CPAs, PC regarding any of the matters set forth in Item 304(a)(2)(i) or (ii) of Regulation S-B.

 

Item 9A(T).

Controls and Procedures.

 

 

Evaluation of Disclosures and Procedures

 

As of the end of the period covered by this annual report, our chief executive officer, also acting as principal financial officer, carried out an evaluation of the effectiveness of “disclosure controls and procedures,” as defined in the Securities Exchange Act of 1934, Rules 13a-15(e) and 15-d-15(e). Based upon that evaluation, it was concluded that as of December 31, 2009, our disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is:

 

(i) recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms; and

 

(ii) accumulated and communicated to management, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Management’s Annual Report on Internal Control Over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting for our company. Our control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principals. Our internal control over financial reporting includes those policies and procedures that:

 

 

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of our assets;

 

 

provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures are being made only with proper authorizations of management and directors; and

 

 

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of company assets that could have a material effect on the financial statements.

 

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

 

 

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Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management, including our chief executive officer, also acting as chief financial officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2009. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control Over Financial Reporting – Guidance for Smaller Public Companies.

 

As of December 31, 2009, our principal officers identified material weaknesses in our internal control over financial reporting. A material weakness is a significant deficiency (within the meaning of Public Company Accounting Oversight Board Auditing Standard No. 5), or combination of significant deficiencies, that results in there being more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by employees in the normal course of their assigned functions. Each material weakness is discussed below.

 

1. Inadequate and ineffective controls over the corporate financial statement close process

As a result of ineffective procedures and controls, our December 31, 2008 year-end financial statements were issued with a material misstatement which resulted in a material restatement that has been reflected in our restated consolidated financial statements for the year ended December 31, 2008. The ineffective procedures and controls occurred within our accounting process and involved account reconciliations, period cut-off procedures and manual journal entries that were not properly prepared and/or reviewed and approved. The Company intends to continue to rely on consulting professionals as needed until a permanent accounting and finance team is appointed. These weaknesses resulted in the material restatement identified by our accounting staff and/or our independent registered public accounting firm.

2. Inadequate and ineffective controls over the recognition of cost of revenue

We did not have adequate controls to ensure that cost of revenue was recorded in accordance with generally accepted accounting principles. Specifically, we noted the following with respect to our accounting for cost of revenue transactions:

 

 

 

our sales and operations teams did not communicate to our accounting staff all of the information necessary to record accurately our cost of revenue;

 

 

 

we did not have adequate procedures in place to validate the completeness and accuracy of the information that was provided to our accounting team by our sales and operations teams;

 

 

 

we did not make a complete assessment of our cost of revenue transactins, and did not utilize documentation necessary to support the Company's accounting conclusions.

 

These material weaknesses led to the restatement of our consolidated financial results for previously issued 2008 consolidated financial statements that are included in this Annual Report on Form 10-K. As a result of the material weaknesses described above, our management has determined that, as of December 31, 2009, we did not maintain effective internal control over financial reporting based on the COSO criteria.

 

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

 

 

 

 

 

 

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        Changes in Internal Control over Financial Reporting

 

During the period covered by this report, there was no significant change in our internal controls over financial reporting or in other factors that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Remediation plans

Management plans to put in place the following measures to strengthen internal controls over financial reporting and address the material weaknesses described above. Our remediation efforts involve numerous business and accounting process improvements. The improvements are generally designed to: enhance the number of persons within the corporate accounting group with the technical experience to properly evaluate and account for accounting transactions, as well as to provide appropriate managerial oversight to our accounting staff,  improve the timeliness and access to information that is required by the accounting team in order to make appropriate assessments of transactions in accordance with generally accepted accounting principles.

The remediation plans that we plan to undertake, include the following measures:

Plans with respect to accounting personnel

 

 

 

Appoint a permanent Chief Financial Officer and enhance the number and quality of the composition of our corporate finance team. This will include the Company conducting an assessment of the current skill set to support the staffing of a finance group with the requisite expertise. We will review the composition of our team of salaried accounting professionals, in terms of skills, technical expertise and overall experience level.

 

 

 

Until such time as the review and hiring of salaried accounting professionals is finalized, we have engaged outside professionals to assist us in finalizing our accounting and related SEC reporting for the periods included in this Annual Report on Form 10-K. The Company plans to continue to rely on outside professionals as needed until a permanent staff is deployed.

Plans with respect to organization-wide personnel

 

 

 

Provide training to our sales, operations and accounting teams with respect to certain corporate governance and public company matters. The training will include guidelines and procedures to ensure that relevant information is promptly and completely communicated to the accounting team, or other senior management representatives, as appropriate. The training will also educate our sales, operations and accounting teams with respect to revenue recognition implications of certain activities, including discussions or other communications between our personnel and customers.

 

 

 

Develop procedures whereby the consistent application of our policies for cost of revenue recognition are understood and are able to be applied.

 

 

 

Develop enhanced procedures with respect to the review of facts, assumptions and other related information that has been reviewed or considered when reaching accounting conclusions. These procedures will be further enhanced by improved documentation, review and approvals of material facts and assumptions by management within the accounting function, and outside of the accounting function when deemed appropriate or necessary.

 

 

 

 

 

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          Plans with respect to organization-wide processes and information systems

 

 

 

Review our information systems to assess which processes can be further automated including, as appropriate, the configuration of our information systems to allow for tracking of certain information that is not routinely captured currently. The accounting processes will be reviewed, and expanded as deemed necessary, to review and assess non-accounting information that is captured in our enterprise wide information systems, as certain of this information can assist the evaluation and documentation of accounting conclusions.

 

 

 

Redesign our key accounting processes with respect to our accounting team management’s oversight and review of accounting records, source documentation and related assumptions that form the basis for conclusions.

 

        If the remedial measures described above are insufficient to address any of the identified material weaknesses or are not implemented effectively, or additional deficiencies arise in the future, material misstatements in our interim or annual financial statements may occur in the future and we may continue to be delinquent in our filings. We are currently working to improve our internal processes and implement enhanced controls, as discussed above, to address the material weaknesses in our internal control over financial reporting and to remedy the ineffectiveness of our disclosure controls and procedures. While this implementation phase is underway, we are relying on extensive manual procedures including the use of qualified external consultants and incremental management oversight and reviews, to assist us with meeting the objectives otherwise fulfilled by an effective internal control. Despite our efforts to continually improve our control procedures and environment, we can not provide assurance that our remediation measures will be completed or become effective by any given date after 2009. Among other things, any unremediated material weaknesses could result in material post-closing adjustments in future financial statements and in the Company’s inability to file future financial statements with the SEC in a timely manner. Furthermore, any such unremediated material weaknesses could have the effects described in “Item 1A. Risk Factors”- Our Audit Committee, management and independent auditors have identified material weaknesses in our internal procedures and controls, and we may be unable to develop, implement and maintain appropriate procedures and controls in future periods” in Part I of this Annual Report on Form 10-K.

 

Item 9B.

Other Information.

 

 

Not applicable.

 

 

PART III

 

Item 10.

Directors, Executive Officers and Corporate Governance.

 

 

Our executive officers and directors are as follows:

 

 

Name

Age

Position

 

Michael D. Parnell

51

Chief Executive Officer and Director

 

Timothy Young

44

Director

 

Phyllis Park

51

Secretary

___________________________

 

All directors serve for one-year terms until their successors are elected or they are re-elected at the annual stockholders' meeting. Officers hold their positions at the pleasure of the board of directors, absent any employment agreement, of which none currently exists or is contemplated.

 

There is no arrangement, agreement or understanding between any of the directors or officers and any other person pursuant to which any director or officer was or is to be selected as a director or officer. Also, there is no arrangement, agreement or understanding between management and non-management stockholders under which non-management stockholders may directly or indirectly participate in or influence the management of our affairs.

 

 

The business experience of each of the persons listed above during the past five years is as follows:

 

Michael D. Parnell was appointed as a directors and Chief Executive Officer on December 31, 2007 following the acquisition of Media Depot. Mr. Parnell is a graduate of the University of Arkansas with a degree in Agricultural Economics. In 2002, Mr. Parnell joined J.I.T. Distribution as President and was responsible for marketing, licensing and branding a variety of odor control products through retail distribution chains. In 2004, Mr. Parnell joined GWA, a national advertising agency as a National Account Director, directing Co-Op advertising for 23 markets across the United States. In 2005, Mr. Parnell joined

 

 

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Media Depot as National Account Director and was responsible for securing new clients and maintaining existing client relationships.

 

On January 21, 2000, Mr. Parnell, entered into a judgment with the SEC against Mr. Parnell and Ammonia Hold, Inc., of which he was a major stockholder and one-time President. Without admitting or denying the SEC’s allegations, Mr. Parnell and Ammonia Hold consented to the entry of a judgment permanently enjoining them from violation Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Mr. Parnell also agreed to pay a $25,000 civil penalty.

 

This action arose from the SEC’s allegation that Ammonia Hold and Mr. Parnell violated the registration requirements of the Securities Act in the issuance and sale of stock to a public relations firm. The SEC further alleged that Ammonia Hold and Mr. Parnell improperly reported the proceeds from the sale of stock as licensing revenues instead as an infusion of capital.

 

Timothy Young was appointed as a director following the acquisition of Media Depot. Mr. Young is a graduate of Pepperdine University with a degree in Communications. He has worked in media sales management and revenue generation, specific to the Internet and television, for the past 15 years with a focused on revenue forecasting, sales training, and concept selling. In 2002, Mr. Young joined Time Warner Cable Inc. as Regional Vice President, responsible for over $200 million in revenue and 250 sales and marketing personnel. In 2007, Mr. Young joined Rovion Inc., a leading provider of on-line media solutions for web publishers, advertisers, media organizations and business users as President. In 2010 Mr. Young joined HyperSolar, Inc., a start-up company that develops solar concentrator technology, as Chief Executive Officer.

 

Phyllis Park was appointed as our corporate Secretary on January 8, 2008. Prior to joining the Company, Ms. Park handled all the accounting functions for Media Depot since its inception in 2004 including payroll, receivables and payables, costing spreadsheets and maintaining all financials records. Prior to 2004, she work in a similar position with a private company, J.I.T. Packaging, LLC, which she joined in 2001, where she was responsible for all clerical and accounting duties for the Company.

 

Key Personnel

 

Our future success depends in large part on the continued services of senior management and key personnel.  In particular, we are highly dependent on the services of Matthew J. Hoff and Michael D. Parnell. Mr. Hoff is the founder of both Media Max and Media Depot and currently serves as Business Manager. Mr. Parnell currently serves as President and Chief Executive Officer. Both Mr. Hoff and Mr. Parnell will be instrumental in the growth of the Company through acquisitions and strategic partnerships.

 

Except as set otherwise set forth herein, during the past five years, none of our officers, directors, promoters or control persons has had any of the following events occur:

 

•    any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer, either at the time of the bankruptcy or within two years prior to that time;

 

•   any conviction in a criminal proceeding or being subject to a pending criminal proceeding, excluding traffic violations and other minor offenses;

 

•   being subject to any order, judgment or decree, not substantially reversed, suspended or vacated, of any court of competent jurisdiction, permanently enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking business; and

 

•    being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

 

Committees of the Board of Directors

 

None of our directors are deemed to be independent directors. Currently we do not have any standing committees of the board of directors. Until formal committees are established, our board of directors will

 

 

-19-

perform some of the functions associated with a nominating committee and a compensation committee, including reviewing all forms of compensation provided to our executive officers, directors, consultants and employees, including stock compensation. The board will also perform the functions of an audit committee until we establish a formal committee.

 

Compliance With Section 16(a) of the Exchange Act

 

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of our common stock, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. We believe that no reports were filed during the fiscal year 2009.

 

Code of Ethics

 

We have adopted a Code of Ethics and Business Conduct that applies to our directors and employees, including our principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions. In addition, we intend to promptly disclose (i) the nature of any amendment to the policy that applies to these persons, and (ii) the nature of any waiver, including an implicit waiver, from a provision of the policy that is granted to one of these specified individuals, the name of such person who is granted the waiver and the date of the waiver on our website in the future.

 

A written copy of the Code will be provided upon request at no charge by writing to our Principal Financial Officer, c/o Calypso Media Services Group, Inc., 12 North Washington Street, Montoursville, Pennsylvania 17754.

 

Item 11.

Executive Compensation.

 

Prior to our acquisition of Media Depot in December 2007, we did not have a bonus, profit sharing, or deferred compensation plan for the benefit of employees, officers or directors.

 

In 2009, we did not have a bonus, profit sharing, or deferred compensation plan for the benefit of employees, officers or directors.

 

In 2009, the Company paid compensation of $ 78,000 to Matthew J. Hoff, its Business Manager. In 2008, Mr. Hoff earned $70,800. In 2009, the Company paid compensation of $ 78,000 to Michael D. Parnell, its President and CEO. In 2008, Mr. Parnell earned $67,166

Following the Media Depot acquisition, we assumed the employment agreements of Messrs. Hoff and Parnell. Each agreement is for a term of three years commencing January 1, 2007 and were renewed for an additional three years on January 1, 2010

 

Pursuant to the renewed agreements, Mr. Hoff is employed as the company’s business manager and Mr. Parnell as the Chief Executive Officer. Each employee will receive an annual salary of $96,000, in 2010, $110,000 in 2011 and $125,000 in 2012. Each employee is entitled to six weeks annual vacation and benefits generally extended to executive employees including health and hospitalization insurance for the employee and his family. Also, we may pay each employee an annual incentive bonus, the terms of which will be determined and approved by the board of directors.

 

 

Name and Principal

Other

Total

 

Position _____ Year ____ Salary ________ Compensation ____ Compensation

 

 

Michael D. Parnell

2009

$78,000

$      --

$78,000

 

(C.E.O)

2008

$67,166

$

--

$67,166

 

2007

$62,666

$

--

$62,666

 

 

Matthew J. Hoff

2009

$78,000

$      --

               

$78,000

 

(Business Manager)

2008

$70,800

$

--

$70,800

 

2007

$62,700

$

--

$62,700

 

 

 

 

-20-

 

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table sets forth certain information as of April 15, 2010 with respect to the beneficial ownership of our common stock:

 

 

each stockholder believed to be the beneficial owner of more than 5% of our common stock;

 

 

by each of our directors and executive officers; and

 

 

all of our directors and executive officers as a group.

 

For purposes of the following table, a person is deemed to be the beneficial owner of any shares of common stock (i) over which the person has or shares, directly or indirectly, voting or investment power, or (ii) of which the person has a right to acquire beneficial ownership at any time within 60 days after the date of this report. “Voting power” is the power to vote or direct the voting of shares and “investment power” includes the power to dispose or direct the disposition of shares. The address of each person listed below, unless otherwise indicated, is c/o Calypso Media Services Group, Inc., 12 North Washington Street, Montoursville, Pennsylvania 17754. The number of shares outstanding is 5.0 million shares.

 

Name and Address

Amount and Nature of

Percent

of Beneficial Owner

Beneficial Ownership (1)

of Class (2)

 

5% Beneficial Owners :

Matthew J. Hoff

1,035,000 (3)

20.7 %

 

91 Faircrest Road

 

Montoursville, PA 17754

Greg Welteroth

1,000,000

20.0 %

 

356 Laurens Road

 

Montoursville, PA 17754

Edward F. Cowle

600,000

12.0 %

 

20 West 64 th Street

 

New York, NY 10023

H. Deworth Williams

596,000

11.9 %

 

19 East 200 South, Suite 1080

 

Salt Lake City, Utah 84111

Leonard E. Neilson

250,000

5.0 %

 

8160 South Highland Drive, Suite 104

 

Salt Lake City, Utah 84093

 

Directors and Executive Officers :

 

Michael D. Parnell

1,035,000 (4)

20.7 %

 

c/o Media Depot, Inc.

 

12 North Washington Street

 

Montoursville, PA 17754

Timothy Young

15,000

.003 %

 

All directors and executive officers

1,050,000 (4)

21.0 %

as a group (2 persons)

_____________________________

 

(1)  Unless otherwise indicated, the named person will be the record and beneficially owner of the shares indicated.

 

(2)  Percentage ownership is based on 5.0 million shares of common stock outstanding as of April 15, 2010.

 

 

(3)

Includes 750,000 shares in the name of the Hoff Family Trust of which Rose Hoff is the trustee.

 

(4)  Includes 1,035,000 shares in the name of the Michael D. Parnell Living Trust, of which Mr. Parnell is the trustee.

 

Item 13.

Certain Relationships and Related Transactions, and Director Independence.

 

Media Depot has entered into an acquisition agreement with two of its principals, Matthew J. Hoff and Michael D. Parnell, as an incentive to locate and acquire new businesses associated with the advertising industry. This would include, but not be limited to businesses such as advertising agencies, printing and public relations firms. The agreement provides that if Media Depot makes an acquisition through the efforts of for Messrs. Hoff and Parnell, they will be entitled to a fee of 10% of the value of the acquisition. Payment of the fee may be in cash or in shares of our common stock. We have assumed the agreement

 

 

-21-

following the acquisition of Media Depot. No prospective acquisitions have been identified as of the date hereof and there can be no assurance that any acquisition will be made in the future.

 

Media Depot’s principal offices in Montoursville, Pennsylvania are leased from the Hoff Family Limited Partnership that is controlled by Matthew Hoff, a founder of Media Depot and a principal stockholder of Calypso. This agreement was entered into before we acquired Media Depot and has been continued following the acquisition. Lease payments are $1,500 per month and renews monthly.

 

Our Lonoke, Arkansas offices are leased from the J.S. Parnell Trust, of which our C.E.O. Michael D. Parnell is trustee. This agreement was entered into before we acquired Media Depot and has been continued following the acquisition. Lease payments are $916 per month and renews monthly.

 

Except as set forth above, we have not entered into any other material transactions with any officer, director, nominee for election as director, or any stockholder owning greater than five percent (5%) of our outstanding shares, nor any member of the above referenced individuals' immediate family.

 

None of our directors are deemed to be independent directors. We do not have a compensation, audit or nominating committee, rather these functions are carried out by the board as a whole.

 

Item 14.

Principal Accounting Fees and Services.

 

We do not have an audit committee and therefore our entire board of directors performs the duties of an audit committee. Our board of directors will approve in advance the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. As a result, we do not rely on pre-approval policies and procedures.

 

 

Audit Fees

 

The aggregate fees billed by our former independent auditors, Moore & Associates, Chartered, for professional services rendered for the audit of our annual financial statements included in our annual report for the year ended December 31, 2008 and for the review of quarterly financial statements included in our quarterly reports during 2008, were $13,300. Moore & Associates also billed $2,500 for the review of our quarterly financial statements include in our quarterly reports during 2009. Our other former independent auditors Seal and Beers, CPAs did not bill us for services in 2009.

 

GBH CPAs, PC, our new auditors as of September 2009, billed us $28,000 for the audits of our annual financial statements included in this annual report for the years ended December 31, 2009 and 2008 and for the review of quarterly financial statements included in our quarterly report for September 30, 2009.

 

 

Audit Related Fees

 

For the year ended December 31, 2009 and 2008, there were no fees billed for assurance and related services by our former auditors, Moore & Associates and Seale and Beers, or our current auditors GBH CPAs, PC relating to the performance of the audit of our financial statements which are not reported under the caption "Audit Fees" above.

 

 

Tax Fees

 

For the years ended December 31, 2009 and 2008, no fees were billed by our former auditors, Moore & Associates and Seale and Beers, or our current auditors GBH CPAs, PC, for tax compliance, tax advice and tax planning.

 

We do not use GBH CPAs, PC for financial information system design and implementation. These services, which include designing or implementing a system that aggregates source data underlying the financial statements or generates information that is significant to our financial statements, are provided internally or by other service providers. We do not engage GBH CPAs, PC to provide compliance outsourcing services.

 

The board of directors has considered the nature and amount of fees billed by GBH CPAs, PC and believes that the provision of services for activities unrelated to the audit is compatible with maintaining GBH CPAs, PC’s independence.

 

PART 1V

 

 

-22-

Item 15.

Exhibits, Financial Statement Schedules

 

 

(a)

Exhibits

 

Exhibit No.

Exhibit Name

 

 

2.1*

Agreement and Plan of Merger with Media Depot, Inc. and Calypso Acquisitions, Inc. [Included as Appendix C to 14C Information Statement filed with SEC on December 10, 2007]

 

2.2*

Merger Agreement (Change of Domicile) [Included as Appendix B to 14C Information Statement filed with SEC on December 10, 2007]

 

3.1*

Articles of Incorporation (Nevada – change of domicile) [Included as Appendix A to 14C Information Statement filed with SEC on December 10, 2007]

 

3.2*

By-Laws [Filed as Exhibit to the Form 10-SB registration statement filed with SEC on July 28, 2000]

 

4.1*

Instrument defining security holder rights [Filed as Exhibit to Form SB-2 Registration Statement filed with SEC on November 17, 1999]

 

10.1*

Employment Contract of Matthew J. Hoff [Filed as Exhibit to Form 8-K Current Notice filed with SEC on January 4, 2008]

 

10.2*

Employment Contract of Michael D. Parnell [Filed as Exhibit to Form 8-K Current Notice filed with SEC on January 4, 2008]

 

10.3*

Incentive Acquisition Agreement [Filed as Exhibit to Form 8-K Current Notice filed with SEC on January 4, 2008]

 

10.4

Employment Contract of Matthew J. Hoff as of January 1, 2010

 

10.5

Employment Contract of Michael D. Parnell as of January 1, 2010

 

21.1*

Subsidiaries [Filed as Exhibit to Form 8-K Current Notice filed with SEC on January 4, 2008]

 

31.1

Certification of C.E.O. and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

32.1

Certification of C.E.O. and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

99.1*

Form of lock-up / leak-out agreement (included in initial Form S-1 registration statement filed with SEC on September 3, 2008)

________________

 

*

Previously filed as indicated.

 

-23-

 

 

 

 

 

CALYPSO MEDIA SERVICES GROUP, INC.

 

CONSOLIDATED FINANCIAL STATEMENTS

 

December 31, 2009 and 2008

 

 

 

 

 

 

 

 

 

-24-

 

 

 

 

C O N T E N T S

 

Report of Independent Registered Public Accounting Firm

26

 

Consolidated Balance Sheets

27

 

Consolidated Statements of Operations

28

 

Consolidated Statements of Stockholders’ Equity

29

 

Consolidated Statements of Cash Flows

30

 

Notes to the Consolidated Financial Statements

31

 

 

 

-25-

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Stockholders

Calypso Media Services Group, Inc.

Montoursville, Pennsylvania

 

We have audited the accompanying consolidated balance sheets of Calypso Media Services Group, Inc. (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated 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 audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, audits of its internal control over financial reporting. Our audits 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Calypso Media Services Group, Inc. as of December 31, 2009 and 2008 and the consolidated results of their operations and their consolidated cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The 2008 consolidated financial statements have been restated for the correction of an error. See Note 4 to the consolidated financial statements describing the restatement.

 

/s/ GBH CPAs, PC

www.gbhcpas[dot]com

Houston, Texas

April 15, 2010

 

 

-26-

CALYPSO MEDIA SERVICES GROUP, INC.

Consolidated Balance Sheets

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

 

 

2009

 

2008

CURRENT ASSETS

 

 

 

(Restated)

 

 

 

 

 

 

 

 

 

Cash

$

175,570

 

$

239,143

 

Accounts receivable, net

 

351,327

 

 

416,501

 

 

 

 

 

 

 

 

 

 

Total Current Assets

 

526,897

 

 

655,644

 

 

 

 

 

 

 

 

FIXED ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Office equipment

 

208,571

 

 

182,405

 

Leasehold improvements

 

25,754

 

 

25,754

 

Accumulated depreciation

 

(168,169)

 

 

(145,078)

 

 

 

 

 

 

 

 

 

 

Total Fixed Assets

 

66,156

 

 

63,081

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

$

593,053

 

$

718,725

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

92,279

 

$

196,752

 

 

 

 

 

 

 

 

 

 

Total Current Liabilities

 

92,279

 

 

196,752

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock; 20,000,000 shares authorized,

 

 

 

 

 

 

at $0.00001 par value, 5,000,000 shares

 

50

 

 

50

 

issued and outstanding, respectively

 

 

 

 

 

 

Additional paid-in capital

 

19,920

 

 

19,920

 

Retained earnings

 

480,804

 

 

502,003

 

 

 

 

 

 

 

 

 

 

Total Stockholders' Equity

 

500,774

 

 

521,973

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

593,053

 

$

718,725

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

 

-27-

 

CALYPSO MEDIA SERVICES GROUP, INC.

Consolidated Statements of Operations

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

Year Ended

 

 

 

December 31,

 

December 31,

 

 

 

2009

 

2008

 

 

 

 

 

 

(Restated)

ADVERTISING REVENUES

$

3,105,470

 

$

3,581,638

 

 

 

 

 

 

 

 

COST OF REVENUES

 

2,288,496

 

 

2,653,007

 

 

 

 

 

 

 

 

GROSS PROFIT

 

816,974

 

 

928,631

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

817,737

 

 

938,885

 

Depreciation expense

 

23,091

 

 

16,782

 

 

 

 

 

 

 

 

 

 

Total Operating Expenses

 

840,828

 

 

955,667

 

 

 

 

 

 

 

 

 

 

Loss from Operations

 

(23,854)

 

 

(27,036)

 

 

 

 

 

 

 

 

OTHER INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

2,655

 

 

4,932

 

 

 

 

 

 

 

 

 

 

Total Other Income

 

2,655

 

 

4,932

 

 

 

 

 

 

 

 

LOSS BEFORE INCOME TAXES

 

(21,199)

 

 

(22,104)

INCOME TAX BENEFIT

 

-

 

 

(3,860)

 

 

 

 

 

 

 

 

 

 

Net Loss

$

(21,199)

 

$

(18,244)

 

 

 

 

 

 

 

 

PER SHARE DATA:

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC AND DILUTED LOSS

 

 

 

 

 

PER SHARE

$

(0.00)

 

$

(0.00)

 

 

 

 

 

 

 

 

BASIC AND DILUTED WEIGHTED AVERAGE

 

 

 

 

 

NUMBER OF SHARES OUTSTANDING

 

5,000,000

 

 

5,000,000

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

 

 

 

-28-

 

CALYPSO MEDIA SERVICES GROUP, INC.

Consolidated Statements of Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Common Stock

 

Paid-in

 

Retained

 

 

 

 

Shares

 

Amount

 

Capital

 

Earnings

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2007

 

 

5,000,000

 

$

50

 

$

19,920

 

$

520,247

 

$

540,217

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the year ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2008 (restated)

 

 

-

 

 

-

 

 

-

 

 

(18,244)

 

 

(18,244)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2008

 

 

5,000,000

 

 

50

 

 

19,920

 

 

502,003

 

 

521,973

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss for the year ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2009

 

 

-

 

 

-

 

 

-

 

 

(21,199)

 

 

(21,199)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2009

 

 

5,000,000

 

$

50

 

$

19,920

 

$

480,804

 

$

500,774

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-29-

 

 

CALYPSO MEDIA SERVICES GROUP, INC.

Consolidated Statements of Cash Flows

 

 

 

 

 

 

 

 

 

 

 

Year Ended

 

Year Ended

 

 

 

December 31,

 

December 31,

 

 

 

2009

 

2008

OPERATING ACTIVITIES

 

 

 

(Restated)

 

 

 

 

 

 

 

 

 

Net loss

$

(21,199)

 

$

(18,244)

 

Adjustments to Reconcile Net Loss to Net Cash

 

 

 

 

 

 

Provided (Used) by Operating Activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

23,091

 

 

16,782

 

Changes in Operating Assets and Liabilities:

 

 

 

 

 

 

 

Decrease in accounts receivable

 

65,174

 

 

163,467

 

 

Decrease in prepaid expenses

 

-

 

 

2,498

 

 

Decrease in income taxes payable

 

-

 

 

(3,860)

 

 

Increase (decrease) in accounts payable

 

(104,473)

 

 

146,099

 

 

 

 

 

 

 

 

 

 

Net Cash Provided (Used) By

 

 

 

 

 

 

 

Operating Activities

 

(37,407)

 

 

306,742

 

 

 

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of fixed assets

 

(26,166)

 

 

(36,939)

 

 

 

 

 

 

 

 

 

 

Net Cash Used By

 

 

 

 

 

 

 

Investing Activities

 

(26,166)

 

 

(36,939)

 

 

 

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Repayment of shareholder loans

 

-

 

 

(62,200)

 

 

 

 

 

 

 

 

 

 

Net Cash Used By

 

-

 

 

(62,200)

 

 

Financing Activities

 

 

 

 

 

 

 

 

 

 

 

 

 

INCREASE (DECREASE) IN CASH

 

(63,573)

 

 

207,603

 

 

 

 

 

 

 

 

CASH AT BEGINNING OF YEAR

 

239,143

 

 

31,540

 

 

 

 

 

 

 

 

CASH AT END OF YEAR

$

175,570

 

$

239,143

 

 

 

 

 

 

 

 

Supplemental Cash Flow Disclosures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

Interest expense

$

-

 

$

-

 

 

Income taxes

$

-

 

$

-

 

 

 

 

 

 

 

 

 

Non Cash Financing Activities:

 

 

 

 

 

 

 

None

$

-

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

-30-

CALYPSO MEDIA SERVICES GROUP, INC.

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

 

 

NOTE 1 - NATURE OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

 

a. Organization and Business Activities

 

Calypso Media Services Group, Inc. (the Company) was incorporated under the laws of the State of Delaware on July 27, 1999. The Company’s principal business objective is that of offering a full line of advertising services to manufacturers, distributors and dealers across the United States and Canada. The Company specializes in co-op advertising and offers services ranging from buying and planning media in radio, TV, cable, print or outdoor advertising, to creating print ads and producing electronic commercials.

 

b. Accounting Basis

 

The basis is accounting principles generally accepted in the United States of America. The Company has adopted a December 31 fiscal year end. The financial statements present the consolidated operations of Calypso Media Services Group, Inc., Media Depot, Inc. and Media Max, Inc. on a consolidated basis from January 1, 2001 All significant intercompany transactions and balances have been eliminated.

 

 

c. Property and Equipment

 

Property and equipment are stated at cost. Depreciation is computed principally on the straight-line method over the estimated useful lives of the assets. The useful lives of the Company’s property and equipment ranges from 5 to 7 years.  During fiscal years 2009 and 2008, depreciation expense was $23,091, and $16,782, respectively.

 

d. Cash and Cash Equivalents

 

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

 

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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

f. Revenue Recognition

 

The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.

 

g. Accounts Receivable

 

The Company’s accounts receivable are net of the allowance for estimated doubtful accounts. The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, historical experience, and other currently available evidence. The allowance totaled $104,056 as of December 31, 2009 and 2008.

 

 

-31-

CALYPSO MEDIA SERVICES GROUP, INC.

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

 

 

NOTE 1 -

NATURE OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

 

h. Concentrations of Risk

 

The Company’s bank accounts are held by insured institutions. The funds are insured up to $250,000. At December 31, 2009, the Company’s bank deposits did not exceed the insured amounts.

 

The Company's three largest clients account for approximately 50% and 40% of total revenues for the years ended December 31, 2009 and 2008, respectively. A significant reduction in advertising and marketing spending by its largest clients, or the loss of one or more of these clients, if not replaced by new client accounts or an increase in business from existing clients, would adversely affect revenues. This could have a material adverse effect on our results of operations and financial condition.

 

i. Earnings (Loss) Per Share

 

The computation of basic net income (loss) per share of common stock is based on the weighted average number of shares outstanding during the year. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity securities. There are no such common stock equivalents outstanding as of December 31, 2009 and 2008.

 

j. Income Taxes

 

The Company provides for income taxes under ASC 740, Accounting for Income Taxes. ASC 740 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. The Company’s predecessor operated as an entity exempt from Federal and State income taxes.

 

ASC 740 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

 

-32-

CALYPSO MEDIA SERVICES GROUP, INC.

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

 

 

NOTE 1 -

NATURE OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

 

j. Income Taxes

 

The income tax provision differs from the amount of income tax (benefit) determined by applying the U.S. federal and state income tax rates to pretax income (loss) from continuing operations for the years ended December 31, 2009 and 2008. The components of income tax expense (benefit) are as follows:

 

 

 

2009

 

2008

Income tax expense (benefit) at statutory rate

$

(2,613)

 

$

(3,860)

Change in valuation allowance

 

2,613

 

 

--

 

 

 

 

 

 

Income tax expense (benefit)

$

-

 

$

(3,860)

 

 

Deferred tax assets and the valuation account are as follows:

 

 

 

2009

 

2008

Net operating loss carryforwards

$

21,082

 

$

18,469

Valuation allowance

 

(21,082)

 

 

(18,469)

Net deferred tax asset

$

-

 

$

-

 

i. Income Taxes

 

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.

 

k. Stock-based compensation.

 

Pursuant to our employee stock plan, eight employees are entitled to receive a total of 134,000 shares of our common stock. An aggregate of 180,000 shares are authorized to be issued under the plan. All issued shares will remain in trust and ownership will not vest with the individual employee until certain employment criteria have been met. Each employee must execute an employment agreement with the Company and continuously remain an employee for the time period indicated below.

 

 

Time Period

Percent of Shares Vested

 

12 months from the date employment agreement is signed

25%

 

24 months from the date employment agreement is signed

25%

 

36 months from the date employment agreement is signed

25%

 

48 months from the date employment agreement is signed

25%

 

Upon an employee fulfilling each time period of employment, we will deliver to the employee a stock certificate for that percentage of common shares indicated above. In the event an employee does not enter into an employment agreement or fails to fulfill any of the applicable time periods of employment, those

 

 

-33-

CALYPSO MEDIA SERVICES GROUP, INC.

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

 

shares of common stock not so earned by and vested with the employee will be delivered to the company and canceled.

NOTE 1 -

NATURE OF ORGANIZATION  AND SIGNIFICANT ACCOUNTING POLICIES (continued)

 

k. Stock-based compensation.

 

The plan shares are being issued pursuant to an exemption from registration under the Securities Act. We have included an aggregate of 30,000 shares previously issued under the plan in a registration statement that became effective on December 29, 2008. These shares may be sold or transferred by the holders without restriction. The balance of the shares is considered restricted securities and may be sold or transferred only pursuant to a registration statement or an appropriate exemption from registration. Except for the 30,000 shares previously issued, the Company has not issued any shares under the plan or other share-based payments to its employees.

 

l. Impairment of Long-Lived Assets

 

The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.

 

m. Impact of Recent Accounting Pronouncements

 

In May 2009, the FASB issued SFAS 165 (ASC 855-10) entitled “Subsequent Events”. Companies are now required to disclose the date through which subsequent events have been evaluated by management. Public entities (as defined) must conduct the evaluation as of the date the financial statements are issued, and provide disclosure that such date was used for this evaluation. SFAS 165 (ASC 855-10) provides that financial statements are considered “issued” when they are widely distributed for general use and reliance in a form and format that complies with GAAP. SFAS 165 (ASC 855-10) is effective for interim and annual periods ending after June 15, 2009 and must be applied prospectively. The adoption of SFAS 165 (ASC 855-10) during the quarter ended September 30, 2009 did not have a significant effect on the Company’s financial statements as of that date or for the quarter or year-to-date period then ended.

 

In June 2009, the FASB issued SFAS 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. (“SFAS 168” pr ASC 105-10) SFAS 168 (ASC 105-10) establishes the Codification as the sole source of authoritative accounting principles recognized by the FASB to be applied by all nongovernmental entities in the preparation of financial statements in conformity with GAAP. SFAS 168 (ASC 105-10) was prospectively effective for financial statements issued for fiscal years ending on or after September 15, 2009 and interim periods within those fiscal years. The adoption of SFAS 168 (ASC 105-10) on July 1, 2009 did not impact the Company’s results of operations or financial condition. The Codification did not change GAAP, however, it did change the way GAAP is organized and presented. As a result, these changes impact how companies reference GAAP in their financial statements and in their significant accounting policies. The Company implemented the Codification in this Report by providing references to the Codification topics alongside references to the corresponding historical standards.

 

 

-34-

CALYPSO MEDIA SERVICES GROUP, INC.

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

 

 

 

 

NOTE 1 -

NATURE OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

 

m. Impact of Recent Accounting Pronouncements (continued)

 

With the exception of the pronouncements noted above, no other accounting standards or interpretations issued or recently adopted are expected to have a material impact on the Company’s financial position, operations or cash flows.

 

NOTE 2 -

SIGNIFICANT EVENTS

 

Calypso has reserved an additional 5.0 million shares of its authorized but unissued common stock for possible future issuance in connection with potential acquisitions of other businesses, entities or assets related to the business of the Company. However, there is no present commitment or definitive agreement to issue any of these shares and no assurances can be given that any future acquisitions will be finalized.

 

NOTE 3 -

SUBSEQUENT EVENTS

 

In accordance with SFAS 165 (ASC 855-10) The Company’s management reviewed all material events through April 15, 2010 and there are no material subsequent events to report.

 

NOTE 4 – RESTATEMENT OF FINANCIALS STATEMENTS

 

On August 27, 2009 the Company was informed that the Public Company Accounting Oversight Board ("PCAOB") revoked the registration of Moore & Associates who was serving as the Company’s independent registered public accounting firm. The revocation was a result of Moore’s violation of PCAOB rules and auditing standards. This revocation of Moore’s registration required the Company to have the financial statements previously issued reaudited for the fiscal years ended December 31, 2008.

 

This reaudit produced material differences from the previously filed versions. These misstatements are the result of the Company failing to accrue various marketing (cost of revenues) and general & administrative expenses prior to the fiscal year end at December 31, 2008. This resulted in the Company understating cost of revenues and total expenses as well as accounts payable at December 31, 2008. The reallocation of expense between periods also affected the Company’s tax obligation. The Company reclassified certain expenses that were classified as operating expenses into cost of revenues thus affecting the previously reported gross profit. The Company also reclassified capitalized fixed assets between classes and adjusted a deferred income tax payable.

 

Included in this filing are the restated 2008 fiscal year consolidated financial statements. For comparative purposes, the table below presents the previously reported and restated balance sheet and statement of operations.

 

 

 

 

-35-

CALYPSO MEDIA SERVICES GROUP, INC.

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

 

 

 

 

NOTE 4 – RESTATEMENT OF FINANCIALS STATEMENTS (CONTINUED)

 

Consolidated Balance Sheets

ASSETS

 

 

 

 

 

 

As Previously Reported December 31,

 

As Restated December 31,

 

Net

 

 

 

2008

 

2008

 

Change

CURRENT ASSETS

 

655,644

 

 

655,644

 

 

-

FIXED ASSETS

 

 

 

 

 

 

 

 

 

Office equipment

 

25,754

 

 

182,405

 

 

(156,651)

 

Leasehold improvements

 

182,405

 

 

25,754

 

 

156,651

 

Accumulated depreciation

 

(145,078)

 

 

(145,078)

 

 

-

 

 

Total Fixed Assets

 

63,081

 

 

63,081

 

 

-

 

 

TOTAL ASSETS

$

718,725

 

$

718,725

 

$

-

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

99,633

 

$

196,752

 

$

(97,119)

 

Deferred income taxes payable

 

33,116

 

 

-

 

 

33,116

 

 

Total Current Liabilities

 

132,749

 

 

196,752

 

 

(64,003)

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

Common stock; 20,000,000 shares authorized,

 

 

 

 

 

 

 

 

 

at $0.00001 par value, 5,000,000 shares

 

 

 

 

 

 

 

issued and outstanding, respectively

 

50

 

 

50

 

 

 

 

Additional paid-in capital

 

19,920

 

 

19,920

 

 

-

 

Retained earnings

 

566,006

 

 

502,003

 

 

64,003

 

 

Total Stockholders' Equity

 

585,976

 

 

521,973

 

 

64,003

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

718,725

 

$

718,725

 

$

-

 

 

 

 

 

 

-36-

CALYPSO MEDIA SERVICES GROUP, INC.

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

 

 

 

 

 

NOTE 4 – RESTATEMENT OF FINANCIALS STATEMENTS (CONTINUED)

 

Consolidated Statements of Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As Previously Reported

Year Ended

 

As Restated Year Ended

 

 

 

 

 

December 31,

 

December 31,

 

Net

 

 

 

2008

 

2008

 

Change

 

 

 

 

 

(Restated)

 

 

ADVERTISING REVENUES

$

3,581,638

 

$

3,581,638

 

$

-

COST OF REVENUE

 

1,194,212

 

 

2,653,007

 

 

1,458,795

GROSS PROFIT

 

2,387,426

 

 

928,631

 

 

(1,458,795)

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

General and administrative

 

2,300,560

 

 

938,885

 

 

(1,361,675)

 

Depreciation expense

 

16,782

 

 

16,782

 

 

-

 

 

Total Operating Expenses

 

2,317,342

 

 

955,667

 

 

(1,361,675)

 

 

Income (Loss) from Operations

 

70,084

 

 

(27,036)

 

 

(97,120)

OTHER INCOME

 

 

 

 

 

 

 

 

 

Interest income

 

4,931

 

 

4,932

 

 

1

 

 

Total Other Income

 

4,931

 

 

4,932

 

 

1

(LOSS) BEFORE INCOME TAXES

 

75,015

 

 

(22,104)

 

 

(97,119)

INCOME TAX (BENEFIT)

 

29,256

 

 

(3,860)

 

 

(33,116)

 

 

Net Income (Loss)

$

45,759

 

$

(18,244)

 

$

(64,003)

PER SHARE DATA:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC AND DILUTED INCOME (LOSS)

 

 

 

 

 

 

 

 

PER SHARE

$

0.01

 

$

(0.00)

 

$

(0.01)

 

 

 

 

 

 

 

 

 

 

 

BASIC AND DILUTED WEIGHTED AVERAGE

 

 

 

 

 

 

 

 

NUMBER OF SHARES OUTSTANDING

 

5,000,000

 

 

5,000,000

 

 

-

 

 

 

 

 

-37-

CALYPSO MEDIA SERVICES GROUP, INC.

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

 

 

NOTE 5 COMMITMENTS AND CONTINGENCIES

 

The Company has entered into an acquisition agreement with two of its principals, Matthew J. Hoff and Michael D. Parnell, as an incentive to locate and acquire new businesses associated with the advertising industry. This would include, but not be limited to businesses such as advertising agencies, printing and public relations firms. The agreement provides that if the Company makes an acquisition through the efforts of for Messrs. Hoff and Parnell, they will be entitled to a fee of 10% of the value of the acquisition. Payment of the fee may be in cash or in shares of our common stock. We have assumed the agreement following the acquisition of Media Depot. No prospective acquisitions have been identified as of the date hereof and there can be no assurance that any acquisition will be made in the future.

The Company’s principal offices in Montoursville, Pennsylvania are leased from the Hoff Family Limited Partnership that is controlled by Matthew Hoff, a founder of Media Depot and a principal stockholder of Calypso. This agreement was entered into before we acquired Media Depot and has been continued following the acquisition. Lease payments are $1,500 per month and renews monthly.
 
Our Lonoke, Arkansas offices are leased from the J.S. Parnell Trust, of which our C.E.O. Michael D. Parnell is trustee. This agreement was entered into before we acquired Media Depot and has been continued following the acquisition. Lease payments are $916 per month and renews monthly .

Litigation

The Company is party to various legal actions arising in the ordinary course of business. Matters that are probable of unfavorable outcomes to the Company and which can be reasonably estimated are accrued. Such accruals are based on information known about the matters, the Company’s estimates of the outcomes of such matters and its experience in contesting, litigating and settling similar matters. None of the actions are believed by management to involve future amounts that would be material to our financial position or results of operations after consideration of recorded accruals although actual amounts could differ materially from management’s estimate that are reasonably possible to occur will not have a material adverse affect on the Company’s financial position or results of operations. There is no litigation or contingencies that require accrual or disclosure as of December 31, 2009.

 

 

 

 

 

 

 

-38-

CALYPSO MEDIA SERVICES GROUP, INC.

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Calypso Media Services Group, Inc.

 

 

 

By:

/S/

MICHAEL D. PARNELL_____

Michael D. Parnell

 

Chief Executive Officer

 

Principal Financial Officer

 

Principal Accounting Officer

 

 

Dated:

April 15, 2010

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

 

Signature

Title

Date

 

        

 

April 15, 2010

/S/

MICHAEL D. PARNELL

Chief Executive Officer and director

 

Michael D. Parnell

(Principal Accounting Officer)

 

(Principal Financial Officer)

 

 

 

April 15, 2010

/S/

TIMOTHY YOUNG

Director

 

Timothy Young

 

 

 

 

-39-

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (“Agreement”) made this 1st day of January 2010 by and between Calypso Media Services Group and its subsidiaries, a Nevada corporation with offices at 12 North Washington Street, Montoursville, PA 17754 (the “Company” or “Party” ) and Matthew J. Hoff of Montoursville, PA ( “Employee” or “Party” ). Company and Employee collectively referred to herein as Parties.

 

WHEREAS , Employee and Company desire to memorialize their understandings with respect to the employment of Employee .

 

NOW THEREFORE, IN VIEW OF THE FOREGOING; AND IN FURTHER CONSIDERATION OF THE MUTUAL PROMISES HEREINAFTER SET FORTH, THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS:

 

Article 1.

EMPLOYMENT .

Company agrees to employ Employee and Employee agrees to serve Company , during the term of employment described in Article 2 which may be extended pursuant to the terms described therein.

 

Article 2.

TERM .

This Agreement shall continue for a period of three (3) years (“Term”) from the date of this Agreement and shall be automatically renewed and extended, unless on or before 90 days prior to the conclusion of the Term or any extended term, Company or Employee gives written notice to the other of intention not to extend the Term, which will otherwise be automatically extended for further periods of one (1) year each. Company shall endeavor to provide notification to Employee that the Term has been so extended, but the failure to provide such notice shall not limit the rights of the parties under this section.

 

Article 3.

DUTIES, POSITION AND DEFINITIONS .

 

FULL TIME . Employee shall devote his/her full business time and best efforts to the business and affairs of Company and shall not be otherwise gainfully employed, except that Employee may have other business investments and participate in other business ventures which may, from time to time, require minor portions of Employee ’s time, but which shall not interfere or be inconsistent with Employee ’s duties hereunder and except that Employee may devote a reasonable amount of time to attending to investments and the like.

 

POSITION . Employee shall serve as Company's Business Manager.

 

DUTIES - GENERAL DESCRIPTION . Employee has extensive experience as a manager in the Company's industry. Based upon this experience, Employee shall perform various services for the Company as are customary in the industry and as directed from time to time by Company’s Board of Directors, and as set forth in Exhibit “1” .

 

 

1

© C. Giannetto, Esq. 2001

 


LOCATION . Employee shall be based in Pennsylvania.

 

TERRITORY . Employee’s geographic area of responsibilities shall be as determined by Company’s business.

 

Article 4.

COMPENSATION .

During the Term hereof, Company shall pay to Employee on a bi-weekly basis or per the regular pay period of Company an annual salary of:

 

Year 1: Ninety Six Thousand Dollars ($96,000.00) USD

Year 2: One Hundred Ten Thousand Dollars ($110,000.00) USD

Year 3: One Hundred Twenty Five Thousand Dollars ($125,000.00) USD

 

Year 4 and thereafter: Negotiated

Performance bonuses may be paid from time to time based upon agreed objectives.

 

Article 4a.

SEVERANCE .

In the event the Company is acquired by another person or entity, merged or liquidated, whereby the current management and/or shareholders of the Company are no longer in control, the Company agrees to immediately pay to Employee, at his discretion, the sum of $500,000 in cash or $500,000 in Calypso Media Services Group, Inc. common shares or combination thereof. The closing price of $.50 (Fifty Cents) per share will be used in calculating the number of “SEVERANCE” shares referenced in this Article (4a.).                 

 

Article 5.

REIMBURSEMENT OF EXPENSES .

Employee is authorized to incur reasonable expenses for promoting the business of Company , limited to travel, entertainment and like expenses. All expenses shall be itemized on a standard Company form along with proof of the expenses furnished to Company's Treasurer/CFO/COO and Employee shall upon such itemization, proof and approval by Employee's Treasurer/CFO/COO, be reimbursed by the Company within two (2) weeks after submittal by Employee .

 

Article 6.

VACATIONS .

Employee shall be entitled each year to a paid vacation of not in excess of six ( 6 ) weeks. Any past vacation accruals not used during the calendar year earned shall be forfeited.

 

Article 7.

BENEFITS .

Employee shall be entitled to the benefits listed on the Article 20 , Schedule of Benefits herein and to such other fringe benefits as Company may generally extend to executive employees of Company , including health and hospitalization for Employee and his family. Employee’s health and hospitalization insurance will be provided by Blue Cross and Blue Shield.

 

Article 8.

BONUS .

Employee shall be paid an annual Bonus, as approved by the Company's Board of Directors as set forth herein in Article 21 , Incentive Programs .

 

Article 9.

TERMINATION .

Except as set forth below, Employee's employment hereunder may only be terminated by Company for just cause. Just cause shall include Employee's unexplained absence for a period of five (5) days excluding absence resulting from injury or illness; Employee's failure to diligently perform the duties described herein and other responsibilities from time to time assigned by Company to Employee within the scope

 

 

2

 

Initials: __________

Initials: __________

 


of his work; any breach by Employee under the terms of this Agreement that is not cured within fourteen (14) days after notice; any act by Employee of dishonesty, disloyalty or bad faith or any material action or series of actions which are contrary to the interest of the Company , that is not cured within fourteen (14) days after notice. Company may terminate this Agreement (and be relieved of all further liability hereunder) at any time after Employee shall be absent from his employment, without explanation, for a continuous period of more than ten days (10) or for a non-continuous period of thirty (30) days during any three (3) year period during the Term, excluding that created by injury or illness.

 

Article 10.

WARRANTY, REPRESENTATION AND INDEMNIFICATION .

Employee represents he is not presently a party to any prior agreement or understanding with a former employer or with any other person or business or any other legal restriction or obligation which would in any manner prohibit, impede, or hinder Employee’s employment with or performance of Employee’s duties in the course of employment by Company . Employee agrees that if the Company becomes party to any legal action resulting from a breach of this provision, Employee shall indemnify the Company for any and all costs of defending such action, including attorneys’ fees.

 

Article 11.

ENFORCEABLILITY .

The provisions of the Agreement shall be enforceable notwithstanding the existence of any claim or cause of action of Employee against the Company whether predicated on this Agreement or otherwise.

 

Article 12.

WAIVER .

The failure of either party to require the performance of any term or condition of this Agreement, or the waiver by either party of any breach of the Agreement shall not prevent a subsequent enforcement of any such term or any other term nor be deemed to be a waiver of any subsequent enforcement.

 

Article 13.

ASSIGNMENT .

Employee recognizes the Company is contracting for his/her personal services and therefore Employee shall not assign any of his duties, and any attempted or purported assignment shall be null and void. Notwithstanding the foregoing Employee may delegate certain of his responsibilities to subordinates employed by the Company , provided Employee shall have overall responsibility for the performance of such subordinates.

 

Article 14.

GOVERNING LAW .

The Agreement shall be governed by and construed in accordance with, the laws of the State of Pennsylvania and the parties agree to be personally bound by the decisions, rulings and/or judgments issued by the courts of the State of Pennsylvania.

 

Article 15.

ENTIRE AGREEMENT and NOTICES .

This Agreement contains the entire agreement of the parties relating to the subject matter hereof. This Agreement may be modified only by an instrument in writing signed by both Parties. Any notice to be given under this Agreement shall be sufficient if it is in writing and is sent by certified mail to Employee at his/her residence address as the same appears on the books and records of the Company or to the

 

 

3

 

Initials: __________

Initials: __________

 


Company at its principal office, attention of the Board of Directors, or otherwise as directed by the Company , from time to time.

 

Article 16.

ARBITRATION .

Any disputes under this Agreement shall be settled by arbitration before the American Arbitration Association in Harrisburg, Pennsylvania, in accordance with the Commercial Rules then existing. Any judgment and/or award issued by such American Arbitration Association shall be binding upon the parties hereto and may be entered in any court of competent jurisdiction.

 

Article 17.

SCHEDULE OF BENEFITS .

 

Group Health Insurance provided by Blue Cross and Blue Shield for Employee and immediate family. - Paid by the Company

 

401 K Plan when established (with employer and/or employer contributions per company policy)

 

Article 18.

INCENTIVE PROGRAMS .

In addition to the compensation of Employee in Article 4 , Company shall pay Employee a bonus in accordance with the following:

 

Article 19.

BUSINESS PLAN and PRO FORMAS .

Attached hereto and made as part hereof as Exhibit 2 are a 3 Year Business Plan and Pro Formas for Company . In order for Employee to be eligible for the Incentive Program in Article 25 above, Company must meet the Pro Forma results set forth is said Exhibit, plus or minus ten (10%) percent.

 

Article 20.

SUPERCEDURE .

This Agreement shall supercede any and all prior agreements between Employee and Company . Further, in the event of a conflict between this Agreement and the current Company – Employee Handbook now in effect, this Agreement shall control.

 

IN WITNESS WHEREOF , the undersigned have hereunto set their hands as of the date first above written.

 

 

COMPANY : Calypso Media Services Group

 

 

 

By: _______________________________________________________

 

Timothy Young

 

 

Its:

Director

 

 

EMPLOYEE :

 

 

___________________________________________________________

 

Matthew J. Hoff

 

 

4

 

Initials: __________

Initials: __________

 


EXHIBIT 1

 

Media Depot  

 

Job Description

 

Job Title:

Business Manager

Department:

Reports To:

FLSA Status:

Prepared By:

Prepared Date:

Approved By:

Approved Date:

 

Summary: Manages and directs the organization toward its primary objectives, based on profit and return on capital, by performing the following duties personally or through subordinate managers.

 

Essential Duties and Responsibilities: include the following. Other duties may be assigned.

 

Plans, coordinates, and controls the daily operation of the organization through the organization's managers.

Establishes current and long-range goals, objectives, plans and policies, subject to approval by the Board of Directors.

 

Dispenses advice, guidance, direction, and authorization to carry out major plans, standards and procedures, consistent with established policies and Board approval.

 

Meets with organization's other executives to ensure that operations are being executed in accordance with the organization's policies.

 

Oversees the adequacy and soundness of the organization's financial structure.

 

Reviews operating results of the organization, compares them to established objectives, and takes steps to ensure that appropriate measures are taken to correct unsatisfactory results.

 

Plans and directs all investigations and negotiations pertaining to mergers, joint ventures, the acquisition of businesses, or the sale of major assets with approval of the Board of Directors.

 

Establishes and maintains an effective system of communications throughout the organization.

 

Represents the organization with major customers, shareholders, the financial community, and the public.

 

 

 

 

5

 

Initials: __________

Initials: __________

 


 

Supervisory Responsibilities:

 

Directly supervises sales staff . Carries out supervisory responsibilities in accordance with the organization's policies and applicable laws. Responsibilities include interviewing, hiring, and training employees; planning, assigning, and directing work; appraising performance; rewarding and disciplining employees; addressing complaints and resolving problems.

 

Qualifications: To perform this job successfully, an individual must be able to perform each essential duty satisfactorily. The requirements listed below are representative of the knowledge, skill, and/or ability required. Reasonable accommodations may be made to enable individuals with disabilities to perform the essential functions.

 

Education and/or Experience:

 

Four to 10 years related experience and/or training; or equivalent combination of education and experience.

 

Language Skills:

 

Ability to read, analyze and interpret general business periodicals, professional journals, technical procedures, or governmental regulations. Ability to write reports, business correspondence, and procedure manuals. Ability to effectively present information and respond to questions from groups of managers, clients, customers, and the general public.

 

Mathematical Skills:

 

Ability to work with mathematical concepts such as probability and statistical inference, and fundamentals of plane and solid geometry and trigonometry. Ability to apply concepts such as fractions, percentages, ratios, and proportions to practical situations.

 

Reasoning Ability:

 

Ability to define problems, collect data, establish facts, and draw valid conclusions. Ability to interpret an extensive variety of technical instructions in mathematical or diagram form and deal with several abstract and concrete variables.

 

 

 

 

 

6

 

Initials: __________

Initials: __________

 


EXHIBIT 2

 

3 YEAR BUSINESS PLAN and PRO FORMAS

 

TO BE DETERMINED.

 

 

7

 

Initials: __________

Initials: __________

 

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (“Agreement”) made this 1st day of January 2010 by and between Calypso Media Services Group and its subsidiaries, a Nevada corporation with offices at 12 North Washington Street, Montoursville, PA 17754 (the “Company” or “Party” ) and Michael D. Parnell of Little Rock, AR ( “Employee” or “Party” ). Company and Employee collectively referred to herein as Parties.

 

WHEREAS , Employee and Company desire to memorialize their understandings with respect to the employment of Employee .

 

NOW THEREFORE, IN VIEW OF THE FOREGOING; AND IN FURTHER CONSIDERATION OF THE MUTUAL PROMISES HEREINAFTER SET FORTH, THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS:

 

Article 1.

EMPLOYMENT .

Company agrees to employ Employee and Employee agrees to serve Company , during the term of employment described in Article 2 which may be extended pursuant to the terms described therein.

 

Article 2.

TERM .

This Agreement shall conti