Notes to the Consolidated Financial Statements
NOTE 1 – Significant Accounting Policies and Procedures
Organization
Nyxio Technologies Corporation (“the Company”) was incorporated under the name of Drayton Harbor Resources, Inc., in the State of Nevada on June 8, 2006. On January 22, 2009, the Company changes its name to LED Power Group, Inc. (“LED”) as a result of its Agreement and Plan of Merger with LED Power Group, Inc. a Nevada corporation (“LPI”). On June 14, 2011, the Company changed its name to Nyxio Technologies Corporation (“NTC”) in anticipation of the acquisition of Nyxio Technologies, Inc. (“NTI”). On July 5, 2011, NTI merged with NTC whereby NTC represents the legal acquirer and NTI the accounting acquirer. Pursuant to Accounting Stands Codification Topic 840, the transaction was treated as a reverse acquisition. As such, in the presentation of the consolidated financial statements, the historical activity of NTI has come forward with an adjustment to equity to carryforward the historical equity of NTC. Pursuant to the merger agreement, NTC issued 22,500,000 shares of its common stock in exchange for 100% of the outstanding shares of NTI which were 100. Upon closing of the reverse acquisition, the Company is now listed on the Over-the-Counter Bulletin Board under the symbol NYXO.
The Company utilizes its wholly-owned subsidiary, NTI for the execution of its business plan, which is to deliver high-quality, cutting-edge products to the consumer electronics industry by consolidating key hardware into more efficient devices. NTI’s primary product is the VioSphere Smart TV, a flat screen TV with a fully integrated personal computer. The Company focuses on identify gaps in the consumer electronics market and then developing creative products to fill those voids, including Tablet PC’s, Smart TV’s, all-in-one PCs and mobile media viewers.
Principles of Consolidation
The financial statements as of December 31, 2011 and for the year then ended include Nyxio Technologies Corporation (“NTC”) and its wholly owned subsidiary, Nyxio Technologies, Inc. (“NTI”). The financial statements for the period of July 8, 2010 (inception) to December 31, 2010 are that of Nyxio Technologies, Inc. (“NTI”). On July 5, 2011, the Company completed its reverse acquisition with LED Power Group whereby Nyxio Technologies, Inc. was the accounting acquirer and surviving entity. All significant inter-company transactions and balances have been eliminated. NTC and its subsidiary are collectively referred to herein as the “Company”.
Basis of presentation
The Company is in the development stage in accordance with Accounting Standards Codification (“ASC”) Topic No. 915.
Cash and cash equivalents
The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At December 31, 2011 and December 31, 2010, the Company had no cash equivalents.
Accounts receivable
Accounts receivable is reported at the customers’ outstanding balances less any allowance for doubtful accounts. Interest is not accrued on overdue accounts receivable.
An allowance for doubtful accounts on accounts receivable is charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based on historical write-off percentages and information collected from individual customers. Accounts receivable are charged off against the allowance when collectability is determined to be permanently impaired.
Inventory
Inventories are stated at the lower of cost or market. Cost is determined on a standard cost basis that approximates the first-in, first-out (FIFO) method. Market is determined based on net realizable value. Appropriate consideration is given to obsolescence, excessive levels, deterioration, and other factors in evaluating net realizable value. As of December 31, 2011 and December 31, 2010, finished goods inventory was $154,456 and $9,893, respectively.
Nyxio Technologies Corporation
(Formerly LED Power Group, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
Fixed Assets
Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are
retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate. The estimated useful lives for significant property and equipment categories are as follows:
Equipment 3-5 years
Furniture 7 years
The Company reviews the carrying value of property, plant, and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition, and other economic factors. Based on this assessment there were no impairments needed as of December 31, 2011 or 2010. Depreciation expense for the year ended December 31, 2011, for the period from July 8, 2010 (inception) to December 31, 2010, was $5,903 and $1,940, respectively.
Revenue recognition
The Company recognizes revenue in accordance with ASC subtopic 605-10 (formerly SEC Staff Accounting Bulletin No. 104 and 13A, “Revenue Recognition”) net of expected cancellations and allowances. As of December 31, 2011 and 2010, the Company evaluated evidence of cancellation in order to make a reliable estimate and determined there were no material cancellations during the years and therefore no allowances has been made.
The Company's revenues, which do not require any significant production, modification or customization for the Company's targeted customers and do not have multiple elements, are recognized when (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred; (iii) the Company's fee is fixed and determinable; and (iv) collectability is probable.
Substantially all of the Company's revenues are derived from the sales of Smart TV and Tablet PC technology and products. The Company's clients are charged for these products on a per transaction basis. Pricing varies depending on the product sold. Revenue is recognized in the period in which the products are sold.
Loss per share
The Company reports earnings (loss) per share in accordance with ASC Topic 260-10, "Earnings per Share." Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares available. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Diluted earnings (loss) per share has not been presented since the effect of the assumed exercise or conversion of stock options, warrants, and debt to purchase common shares, would have an anti-dilutive effect. At December 31, 2011 and December 31, 2010 the Company had no potential common shares that have been excluded from the computation of diluted net loss per share.
Income taxes
The Company follows ASC subtopic 740-10 for recording the provision for income taxes. ASC 740-10 requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.
Nyxio Technologies Corporation
(Formerly LED Power Group, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
Fair Value of Financial Instruments
The Company has financial instruments whereby the fair value of the financial instruments could be different from that recorded on a historical basis in the accompanying balance sheets. The Company's financial instruments consist of cash, receivables, accounts payable, accrued liabilities, and notes payable. The carrying amounts of the Company's financial instruments approximate their fair values as of December 31, 2011 and 2010 due to their short-term nature.
Long-lived assets
The Company accounts for its long-lived assets in accordance with ASC Topic 360-10-05, “Accounting for the Impairment or Disposal of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the historical cost or carrying value of an asset may no longer be appropriate. The Company assesses recoverability of the carrying value of an asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and its fair value or disposable value. For the six-months ended December 31, 2011, and the year ended December 31, 2011, the Company determined that none of its long-term assets were impaired.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affects 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.
Advertising
The Company expenses advertising costs as incurred. The Company’s advertising expenses were $16,100 for the year ended December 31, 2011, and $5,707 for the period from July 8, 2010 (inception) to December 31, 2010.
Research and development
Research and development costs are expensed as incurred. During the year ended December 31, 2011, for the period from July 8, 2010 (inception) to December 31, 2010, research and development costs were $25,123 and $0, respectively.
Concentration of Business and Credit Risk
The Company has no significant off-balance sheet risk such as foreign exchange contracts, option contracts or other foreign hedging arrangements. The Company’s financial instruments that are exposed to concentration of credit risks consist primarily of cash. The Company maintains its cash in bank accounts which, may at times, exceed federally-insured limits.
Financial instruments which potentially subject the Company to concentrations of business risk consist principally of availability of suppliers. As of December 31, 2011, the Company was dependent on approximately two vendors for 85% of product supply.
Share-Based Compensation
The Company accounts for stock-based payments to employees in accordance with ASC 718, “Stock Compensation” (“ASC 718”). Stock-based payments to employees include grants of stock, grants of stock options and issuance of warrants that are recognized in the consolidated statement of operations based on their fair values at the date of grant.
The Company accounts for stock-based payments to non-employees in accordance with ASC 718 and Topic 505-50, “Equity-Based Payments to Non-Employees.” Stock-based payments to non-employees include grants of stock, grants of stock options and issuances of warrants that are recognized in the consolidated statement of operations based on the value of the vested portion of the award over the requisite service period as measured at its then-current fair value as of each financial reporting date. The Company calculates the fair value of option grants and warrant issuances utilizing the Black-Scholes pricing model. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. ASC 718 requires forfeitures to be estimated at the time stock options are granted and warrants are issued to employees and non-employees, and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered stock option or warrant. The Company estimates forfeiture rates for all unvested awards when calculating the expense for the period. In estimating the forfeiture rate, the Company monitors both stock option and warrant exercises as well as employee termination patterns.
The resulting stock-based compensation expense for both employee and non-employee awards is generally recognized on a straight-line basis over the requisite service period of the award.
For the year ended December 31, 2011 and the period from July 8, 2010 (inception) to December 31, 2010, the Company recorded share-based compensation expense related to warrants granted in connection with its July 5, 2011 merger to its CEO of $3,967,500 and $0, respectively.
Nyxio Technologies Corporation
(Formerly LED Power Group, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
Recent accounting pronouncements
In May 2011, the FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”. The amendments result in common fair value measurement and disclosure requirements in U.S. generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRSs), and do not require additional fair value measurements and are not intended to establish valuation standards or affect valuation practices. The amendments in this update are effective during interim and annual periods beginning after December 15, 2011. Adoption of the new requirement is not expected to have an effect on the Company’s financial position, results of operations or cash flow.
In June 2011, the FASB issued Accounting Standards Update No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”. In this update, FASB eliminated the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments require that all non-owner changes in equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments in this update are effective for fiscal years, and interim periods within these years, beginning after December 15, 2011. Adoption of the new requirement is not expected to have an effect on the Company’s financial position, results of operations or cash flow.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not or are not believed by management to have a material impact on the Company's present or future financial statements
International Financial Reporting Standards:
In November 2008, the Securities and Exchange Commission (“SEC”) issued for comment a proposed roadmap regarding potential use of financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. Under the proposed roadmap, the Company would be required to prepare financial statements in accordance with IFRS in fiscal year 2014, including comparative information also prepared under IFRS for fiscal 2013 and 2012. The Company is currently assessing the potential impact of IFRS on its financial statements and will continue to follow the proposed roadmap for future developments.
Year-end
The Company has adopted December 31, as its fiscal year end.
NOTE 2 - Going concern
These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. The Company has not yet achieved profitable operations and since its inception (July 8, 2010 through December 31, 2011 the Company had accumulated losses of $5,095,876 and a working capital deficit of $314,264. Management expects to incur further losses in the development of its business, all of which raises substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.
The Company expects to continue to incur substantial losses as it executes its business plan and does not expect to attain profitability in the near future. Since its inception, the Company has funded operations through short-term borrowings and equity investments in order to meet its strategic objectives. The Company's future operations are dependent upon external funding and its ability to execute its business plan, realize sales and control expenses. Management believes that sufficient funding will be available from additional borrowings and private placements to meet its business objectives, including anticipated cash needs for working capital, for a reasonable period of time. However, there can be no assurance that the Company will be able to obtain sufficient funds to continue the development of its business operation, or if obtained, upon terms favorable to the Company.
Nyxio Technologies Corporation
(Formerly LED Power Group, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
NOTE 3 - Accounts receivable
Accounts receivable consist of the following:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
Trade accounts receivable
|
|
$
|
386
|
|
|
$
|
2,002
|
|
Due from related party
|
|
|
22,838
|
|
|
|
20,538
|
|
Less: Allowance for doubtful accounts
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
23,224
|
|
|
$
|
22,540
|
|
As of December 31, 2011 and December 31, 2010, respectively, the Company had not established an allowance for doubtful accounts.
NOTE 4 - Property and equipment
The following is a summary of property and equipment:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
Furniture and fixtures
|
|
$
|
11,612
|
|
|
$
|
6,765
|
|
Software
|
|
|
11,945
|
|
|
|
681
|
|
Computers and equipment
|
|
|
22,249
|
|
|
|
8,837
|
|
Less: accumulated depreciation
|
|
|
7,882
|
|
|
|
1,980
|
|
|
|
$
|
37,924
|
|
|
$
|
14,303
|
|
Depreciation for the year ended December 31, 2011 and the period from inception (July 8, 2010) to December 31, 2010 was $5,903 and $1,980, respectively.
NOTE 5 - Related party transactions
All intercompany transactions have been eliminated in consolidation. All intercompany balances do not bear interest.
Related party receivable
At the Company’s inception (July 8, 2010) the sole officer and shareholder contributed all the assets and liabilities distributed to him from his former limited liability company which was dissolved on July 2, 2010. At the date of contribution, the fair value of the liabilities contributed exceeded that of the assets by $54,438, which has been recorded as a related party receivable.
The contributed assets and liabilities, including the amount due from the related party are as follows:
Assets:
|
|
|
|
Cash
|
|
$
|
5,984
|
|
Inventory
|
|
|
7,877
|
|
Fixed assets, at fair value
|
|
|
12,863
|
|
Due from related party
|
|
|
54,438
|
|
Deposits held
|
|
|
2,965
|
|
Total assets contributed
|
|
$
|
84,127
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
Accrued liabilities
|
|
$
|
500
|
|
Note payable
|
|
|
83,627
|
|
Total liabilities contributed
|
|
$
|
84,127
|
|
On July 8, 2010 (inception) the Company issued 100 shares of its common stock to its sole officer as founder’s shares in exchange for cash of $100. During the period from inception (July 8, 2010) and December 31, 2010, the Company’s sole officer donated his services valued at $28,500 which was recorded as a reduction on the amount due from him. In addition, the officer made cash payments totaling $5,400 as further reductions in his related party receivable due to the Company.
During the year ended December 31, 2011, the aforementioned officer donated additional services valued at $10,375 which has been recorded as a reduction in the officers’ receivable balance. Additionally, the Company advanced $14,516 to the officer for personal expenses and received repayment in the amount of $1,841.
As of December 31, 2011 and December 31, 2010, the amounts due from the officer totaled $22,838 and $20,538, respectively.
Nyxio Technologies Corporation
(Formerly LED Power Group, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
Merger warrants
In connection with the Company July 5, 2011 merger activities, the Company issued a warrant to purchase up to 37,500,000 shares of the Company’s common stock at an exercise price of $0.01 per share to its chief executive officer and majority shareholder. The warrant has a term of twenty-four months expiring on July 1, 2013 and is subject to performance conditions. The performance conditions allow for the warrant to be exercisable in four increments of 9,375,000 for each $1,000,000 of cumulative realized revenue over the twenty-four month term. As of December 31, 2011, performance conditions have not been met therefore, no portion of the warrant is exercisable. On the date of grant, the estimated fair value of each warrant share using the Black-Scholes model is $0.42 per share utilizing a strike price of $0.01, volatility of 177%, and a risk-free rate of 4.40%. The Company estimated the number of shares that would become exercisable throughout the twenty-four month term based on historical activity and pro forma projections to be 9,375,000 resulting in an estimated fair value of $3,967,500 which has been recorded as compensation as of December 31, 2011.
Employment/Consulting commitments
One June 1, 2011, the Company entered into an Employment Agreement with its chief executive officer. The initial term of the agreement covers a three-year period commencing on June 1, 2011 and required annual compensation payment of $24,000. On January 1, 2012, the original agreement was amended to provide for an increase in annual compensation from the original $24,000 to $48,000 per year.
On June 1, 2011, the Company issued a Consulting Agreement to its chief financial officer. Pursuant to the agreement, annual consulting fees of $24,000 will be paid per annum for the term of the agreement which was to expire on March 1, 2014. In September 2011, the Company replaced the consulting agreement with an offer of employment with annual compensation of $30,041. Employment is considered “at-will” and therefore can be terminated at any time by either party.
Note payable to a related party
During the year ended December 31, 2011, the Company’s chief financial officer paid certain liabilities totaling $10,578 on behalf of the Company. In October 2011, the Company issued a promissory note for the value of the payment which bears interest at a rate of 8% per annum and matures on June 30, 2012. As of December 31, 2011 the principal balance of the note was $10,578 and accrued interest was $253.
NOTE 6 - Notes payable
Chamisa Technology, LLC
On July 8, 2010, the Company’s chief executive officer and majority shareholder contributed a note payable in the amount of $83,627 which originated from his previously dissolved limited liability company. The note balance contributed represented cash advances of $81,595 and previously accrued interest of $2,032. During the period from
inception (July 8, 2010) through December 31, 2010, the Company received additional advances of $64,491 and $18,000 during the year ended December 31, 2011. No formal agreement pertaining to the advances had previously been documented, however pursuant to a verbal agreement between the parties, the balance was due on demand and bears interest at a rate of 12% per annum. March 5, 2012, the Company formalized and acknowledged its liability to Chamisa Technology, LLC in the form of a promissory note. The promissory note is unsecured bears interest at a rate of 12% per annum, and matures on August 31, 2012. Pursuant to the new promissory note, the Company is required to make monthly principal and interest payments through maturity. As of December 31, 2011 and 2010, the unpaid principal balance together with accrued interest totaled $195,232 and $185,418, respectively.
Coach Capital LLC
On June 30, 2011, we issued a promissory note in the amount of $111,000 to Coach Capital, LLC. The note is unsecured, due on demand and bears interest at a rate of 10% per annum. In the event of default, the interest rate will immediately escalate to 30% per annum. As of December 31, 2011, the unpaid principal balance together with accrued interest totaled $116,669.
NOTE 7 – Commitments
Lease agreements
In June 2011, the Company entered into a two-year lease agreement for additional office space commencing July 1, 2011 and expiring June 30, 2013. Pursuant to the terms of the agreement, the new monthly lease amount is $4,175, an increase of $1.210 from the previous lease amount of $2,965. In addition, the Company has paid a security deposit in the amount of $4,175 and is obligated to pay monthly lease payments of $4,175.
Nyxio Technologies Corporation
(Formerly LED Power Group, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
NOTE 7 – Commitments (con't)
Lease agreements (cont'd)
At December 31, 2011, the Company has recorded rent expense of $42,958 and future minimum lease payments are as follows:
2012
|
|
$
|
50,100
|
|
2013
|
|
|
20,050
|
|
Total
|
|
$
|
70,150
|
|
NOTE 8- Income taxes
Deferred income tax assets and liabilities are computed annually for differences between financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities.
The effective tax rate on the net loss before income taxes differs from the U.S. statutory rate as follows:
|
|
2011
|
|
2010
|
U.S. Statutory rate
|
|
|
34
|
|
%
|
|
|
34
|
|
%
|
Valuation allowance
|
|
|
(34
|
)
|
%
|
|
|
(34
|
)
|
%
|
Effective tax rate
|
|
|
-
|
|
|
|
|
-
|
|
|
The significant components of deferred tax assets and liabilities are as follows:
|
|
December 31,
|
|
December 31,
|
|
|
2011
|
|
2010
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
1,024,539
|
|
|
$
|
103,837
|
|
Share-based compensation
|
|
|
3,967,500
|
|
|
|
-
|
|
Total deferred tax assets
|
|
|
4,992,039
|
|
|
|
103,837
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Depreciation differences
|
|
|
(29,523
|
)
|
|
|
(19,631
|
)
|
Net deferred tax assets
|
|
|
4,962,516
|
|
|
|
84,206
|
|
Less valuation allowance
|
|
|
(4,962,516
|
)
|
|
|
(84,206
|
)
|
Deferred tax asset – net of valuation allowance
|
|
$
|
-
|
|
|
$
|
-
|
|
The net change in the valuation for 2011 was $4,878,310
The Company has a net operating loss carryover of approximately $1,128,376 available to offset future income for income tax reporting purposes, which will expire in various years through 2031, if not previously utilized. However, the Company’s ability to use the carryover net operating loss may be substantially limited or eliminated pursuant to Internal Revenue Code Section 382.
We adopted the provisions of FIN 48, Accounting for Uncertainty in Income Taxes. We had no material unrecognized income tax assets or liabilities for year ended December 31, 2011 or for the period from inception (July 8, 2010) through December 31, 2010.
Our policy regarding income tax interest and penalties is to expense those items as general and administrative expense but to identify them for tax purposes. During the periods ended December 31, 2011 and December 31, 2010, there were no income tax, or related interest and penalty items in the income statement, or as a liability on the balance sheet. We file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. We are subject to U.S. federal or state income tax examination by tax authorities for years beginning at our inception of July 8, 2010 through current. We are not currently involved in any income tax examinations.
Nyxio Technologies Corporation
(Formerly LED Power Group, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
NOTE 9 - Fair value measurement
The Company adopted ASC Topic 820-10 at the beginning of 2009 to measure the fair value of certain of its financial assets required to be measured on a recurring basis. The adoption of ASC Topic 820-10 did not impact the Company’s financial condition or results of operations. ASC Topic 820-10 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs
(Level 3 measurements). ASC Topic 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability. The three levels of the fair value hierarchy under ASC Topic 820-10 are described below:
Level I
– Valuations based on quoted prices in active markets for identical assets or liabilities that an entity has the ability to access.
Level II
– Valuations based on quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable data for substantially the full term of the assets or liabilities.
Level III
– Valuations based on inputs that are supportable by little or no market activity and that are significant to the fair value of the asset or liability.
The following table presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis as of December 31, 2011:
|
|
Level I
|
|
|
Level II
|
|
|
Level III
|
|
|
Fair Value
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
1,341
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
1,341
|
|
Trade receivables
|
|
|
-
|
|
|
|
386
|
|
|
|
|
|
|
|
520
|
|
Inventory
|
|
|
-
|
|
|
|
154,456
|
|
|
|
-
|
|
|
|
154,456
|
|
Prepaid and deposits
|
|
|
-
|
|
|
|
23,411
|
|
|
|
-
|
|
|
|
23,411
|
|
Note receivable – related
|
|
|
-
|
|
|
|
22,838
|
|
|
|
-
|
|
|
|
22,838
|
|
Accounts payable
|
|
|
-
|
|
|
|
(172,473
|
)
|
|
|
-
|
|
|
|
(172,473
|
)
|
Accrued expenses
|
|
|
-
|
|
|
|
(34,912
|
)
|
|
|
-
|
|
|
|
(34,912
|
)
|
Notes payable
|
|
|
-
|
|
|
|
(305,137
|
)
|
|
|
-
|
|
|
|
(305,137
|
)
|
|
|
$
|
1,341
|
|
|
$
|
(311,431
|
)
|
|
$
|
-
|
|
|
$
|
(310,090
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis as of December 31, 2010:
|
|
Level I
|
|
|
Level II
|
|
|
Level III
|
|
|
Fair Value
|
|
December 31, 2010,
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
2,626
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
2,626
|
|
Trade receivable
|
|
|
-
|
|
|
|
2,002
|
|
|
|
-
|
|
|
|
2,002
|
|
Inventory
|
|
|
-
|
|
|
|
9,893
|
|
|
|
-
|
|
|
|
9,893
|
|
Prepaid and deposits
|
|
|
-
|
|
|
|
2,965
|
|
|
|
-
|
|
|
|
2,965
|
|
Note receivable
|
|
|
-
|
|
|
|
20,538
|
|
|
|
-
|
|
|
|
20,538
|
|
Accrued expenses
|
|
|
-
|
|
|
|
(7,947
|
)
|
|
|
-
|
|
|
|
(7,947
|
)
|
Notes payable
|
|
|
-
|
|
|
|
(148,118
|
)
|
|
|
-
|
|
|
|
(148,118
|
)
|
|
|
$
|
2,626
|
|
|
$
|
(120,667
|
)
|
|
$
|
-
|
|
|
$
|
(118,041
|
)
|
NOTE 10 – Shareholders’ equity
Recapitalization
Effective June 14, 2011, the Company effectuated a 1-for-1.65 reverse stock split together with a corresponding reduction from 200,000,000 to 121,212,122 in the number of authorized shares of the common stock, with a par value of $0.001.
Effective November 2, 2009, the Company amended its articles of incorporation to increase its authorized capital to 200,000,000 shares of common stock.
On August 10, 2009, the Company reverse split its issued common shares on the basis of one new share for one hundred old shares, and reduced its authorized capital from 600,000,000 to 6,000,000 shares of common stock.
On January 16, 2009, the Company forward split its issued common shares on the basis of two and one half new shares for one old share.
Nyxio Technologies Corporation
(Formerly LED Power Group, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
NOTE 10 – Shareholders’ equity (Cont'd)
On January 4, 2008, the Company forward split its issued common shares on the basis of four new shares for one old share. The Company increased its authorized share capital from 150 million to 600 million shares.
The number of shares referred to in these financial statements has been restated to give retroactive effect on all stock splits.
Common stock issuances
On January 12, 2009, the Company issued 225,000 shares of its common stock to Trussnet Capital Partners (Cayman) Ltd. for all of the issued and outstanding shares of LED Power Group, Inc. pursuant to a merger agreement and underlying assignment agreement. Under the terms of the agreements, the Company has acquired the license to exclusive rights of certain intellectual property in relation to the production of LED products. The shares were valued at fair market on the day of the agreements, being $0.92 per share. Effective August 23, 2010, 225,000 shares that had been issued to Trussnet in connection to the license agreement returned to treasury and cancelled.
On September 24, 2009, the Company issued 1,000,000 shares of common stock in exchange for cash proceeds of $10,000 or $0.01 per share.
On December 10, 2009, the Company issued an additional 23,904,015 shares of common stock pursuant to conversion of $227,515 in demand notes payable and $11,525 in accrued interest.
On April 1, 2011, the Company issued 452,312 shares of common stock pursuant to the conversion of $19,000 in advances, $188,374 in demand notes payable and $16,520 in accrued interest. The Company erroneously issued 29,588 shares of common stock in excess of the 452,312 shares of common stock in relation to the conversion of the debt. These shares were returned to treasury and cancelled on August 5, 2011.
During the year ended December 31, 2011, the Company sold 1,555,000 shares of its common stock for cash proceeds totaling $777,500. As of December 31, 2011, the shares are unissued.
During the year ended December 31, 2011, the Company sold 2,100,000 shares of its common stock for cash proceeds totaling $210,000. As of December 31, 2011, the shares are unissued.
NOTE 11 – Options and warrants
Merger warrants
In connection with the Company July 5, 2011 merger activities, the Company issued a warrant to purchase up to 37,500,000 shares of the Company’s common stock at an exercise price of $0.01 per share to its chief executive officer and majority shareholder. The warrant has a term of twenty-four months expiring on July 1, 2013 and is subject to performance conditions. The performance conditions allow for the warrant to be exercisable in four increments of 9,375,000 for each $1,000,000 of cumulative realized revenue over the twenty-four month term. As of December 31, 2011, performance conditions have not been met therefore, no portion of the warrant is exercisable. On the date of grant, the estimated fair value of each warrant shareusing the Black-Scholes model is $0.42 per share utilizing a strike price of $0.01, volatility of 177%, and a risk-free rate of 4.40%. The Company estimated the number of shares that would become exercisable throughout the twenty-four month term based on historical activity and pro forma projections to be 9,375,000 resulting in an estimated fair value of $3,967,500 which has been recorded as compensation as of December 31, 2011.
NOTE 12- Subsequent events
In January 2012, the Company sold 1,000,000 shares of its common stock for cash proceeds totaling $100,000.
On February 16, 2012, the Company issued a “Convertible Promissory Note” in the amount of $200,000 to IGC USA LLC. The note bears interest at a rate of 6% per annum, is convertible into shares of the Company’s common stock at a 45% discount to 10-day average trading price and matures on February 16, 2013. In addition, if the Company sells more than 5% of the total outstanding shares of common stock for an amount below the effective conversion price, the note holders’ conversion price will immediately be re-set to equal that of the sales price.
On February 21, 2012, the Company entered into a “Securities Purchase Agreement” with Socius CG II, Ltd., a Bermuda exempted company. Under the terms and conditions of the purchase agreement, the Company has the right, in its sole discretion, over a term of two years from the date of closing, to demand through separate tranche notices that Socius purchase up to a total of $5 million of redeemable Series "A" Preferred Stock at a price of $10,000 per share. In addition, the Company has agreed to issue a warrant equal to 35% of each tranche amount. The warrant is fully
Nyxio Technologies Corporation
(Formerly LED Power Group, Inc.)
(a Development Stage Company)
Notes to the Consolidated Financial Statements
NOTE 12- Subsequent events (Cont'd)
exercisable, and shall be automatically exercised, at an initial exercise price of $0.157. Further, the Company has also agreed to provide “Additional Investment Shares” whereby the investor is obligated, to purchase shares of the Company’s common stock equal in dollar amount, to 100% of each tranche amount at a price per share equal to the closing bid price on the most recently completed trading day prior to the tranche notice. Pursuant to the agreement, the Company is required to pay a $250,000 non-refundable commitment fee.
On February 28, 2012, the Board of Directors adopted the 2012 Equity Incentive Plan and reserved 4,500,000 shares of the Company’s common stock for issuance thereunder to officers, directors, employees, consultants and other service providers of the Company. The Plan was approved by the Company’s shareholders on March 22, 2012.
On March 23, 2012, the Company amended its articles of incorporation to authorize the issuance of up to 1,500 shares of $0.01 par value preferred stock which may be issued in one or more series, with such rights, preferences, privileges and restrictions as shall be fixed by the Company’s Board of Directors from time to time.
On March 23, 2012, the Nevada Secretary of State accepted the Company’s filing of a Certificate of Designation for Series "A" Preferred Stock. The Certificate of Designation authorizes a series of preferred stock designated as “Series A Preferred Stock” and authorizes the issuance of 1,100 shares.
In accordance with ASC 855, management evaluated all activity of the Company through the date of filing, (the issue date of the financial statements) and concluded that no other subsequent events have occurred that would require recognition or disclosure in the financial statements.