UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[ x ] ANNUAL REPORT UNDER PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER, 2006
OR
[ ] 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: 000-52228
QUIKBYTE SOFTWARE, INC.
(Exact name of small business issuer as specified in its charter)
Colorado 33-0344842
-------- ----------
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
7609 Ralston Road Arvada, Colorado 80002
(Address of principal executive offices)
(303) 422-8127
--------------
(Issuer's telephone number)
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT: NONE
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
Common Stock, $0.0001 Par Value
(Title of Class)
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act.
YES NO X
------ ------
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES X NO
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. X
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). YES X NO
Issuer's revenues for its most recent fiscal year: $0
As of March 16, 2007, 14,602,451 shares of the registrant's Common Stock were
outstanding. The aggregate market value of the voting common equity held by
non-affiliates (based on the closing bid price of $0.023 as reported on March
16, 2006 by the NASD Over-the-Counter Bulletin Board) was approximately
$163,226.
DOCUMENTS INCORPORATED BY REFERENCE: None
Transitional Small Business Disclosure Format (Check One):
Yes No X
TABLE OF CONTENTS
Item Number and Caption Page
PART I
Item 1. Description of Business..........................................................1
Item 2. Description of Property..........................................................7
Item 3. Legal Proceedings................................................................7
Item 4. Submission of Matters to a Vote of Security Holders..............................7
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.........................8
Item 6. Management's Discussion and Analysis or Plan of Operations.......................9
Item 7. Financial Statements............................................................13
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure........................................................14
Item 8A. Controls and Procedures.........................................................14
Item 8B. Other Information...............................................................14
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act...........................14
Item 10. Executive Compensation...........................................................17
Item 11. Security Ownership of Certain Beneficial Owners and Management...................18
Item 12. Transactions with Related Persons, Promoters and Certain Control Persons.........19
Item 13. Exhibits and Reports on Form 8-K.................................................19
Item 14. Principal Accountant Fees and Services...........................................19
Signature.........................................................................................21
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Summary
QuikByte Software, Inc. ("we", "us", "our", "QuikByte" or the "Company") is
a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of
1934, as amended) and plans to seek a target company with which to merge or to
complete a business combination. In any transaction, we will be the surviving
entity, and our stockholders will retain a percentage ownership interest in the
post-transaction company. The amount of the retained equity ownership by our
stockholders will be negotiated by our management and the target company. We
currently have no relevant operating business, revenues from operations or
assets.
We will not restrict our search to any specific business, industry or
geographic location, and we may participate in a business venture of virtually
any kind or nature. This discussion of our plan for acquiring an operating
business is purposefully general, and it is not meant to be restrictive of the
virtually unlimited discretion to search for and enter into potential business
opportunities. We anticipate that we will be able to participate in only one
potential business venture because of our nominal assets and limited financial
resources.
Business History
We were incorporated under the laws of the State of Colorado on January 26,
1989, to develop and market computer software. We completed our initial public
offering of securities on October 11, 1989, in which we sold a total of
30,000,000 Units, each Unit consisting of one share of Common Stock, one Class A
Common Stock Purchase Warrant and one Class B Common Stock Purchase Warrant, to
approximately 200 public investors. We received proceeds, net of commissions and
expenses of the offering, of $220,378 from the sale of the Units. The Class A
Warrants were exercisable to purchase one share of Common Stock at $0.02 through
April 10, 1992. The Class B Warrants were exercisable to purchase one share of
Common Stock at $0.02 through October 10, 1992.
A total of 3,550,000 Class A Warrants were exercised for net cash of
$69,851 in 1990. An additional exercise of 6,150,000 warrants was made in 1991
for $122,385 in net proceeds. The issuance of 6,150,000 shares of Common Stock
issued pursuant to the exercise of warrants in 1991 may be considered
unregistered since the registration statement registering the Common Stock
underlying the warrants had expired and was no longer effective at the time. As
such, the issuance may have given rise to certain rescission rights, which
rescission rights have since expired due to the passage of time.
In 1991, we completed a private offering of 2,149,012 shares of Common
Stock for net proceeds of $121,835.
We were engaged in the development, marketing and sales of computer
software programs, i.e. compilers and compiler related software, as described
below. At December 31, 1990, we had completed development of our first principal
product, a compiler for the Pascal programming language, which we called
QuikByte Pascal. At the time of our initial public offering commenced in
September 1989, our management had identified five elements which remained to be
completed prior to releasing the product to market, and estimated that we would
be in a position to begin marketing and selling QuikByte Pascal within four
months following receipt of funding upon completion of the public offering. We
anticipated that completion of the product would require two months for final
testing and product completion and an additional two months for introduction of
the product to market. However, delays were encountered and we did not meet
these target dates. On a number of occasions after the initial public offering,
we set completion dates into 1992, which we again failed to meet. Ultimately, we
ran out of capital and were unable to remain in operation. We have been dormant
since 1992 and have written off our software efforts as obsolete.
During 2006, we had no business operations, no revenues and only nominal
assets to pay the costs to bring us current in our reporting obligations under
the Securities Exchange Act, as amended ("Exchange Act") and obtain a quotation
for our common stock on the Over-the-Counter Bulletin Board. We filed a Form
8-A12G in September 2006 to register our common stock under Section 12(g) of the
Exchange Act. In December 2006, our common stock began quotation on the
Over-the-Counter Bulletin Board ("OTC BB").
1
We have not been involved in any bankruptcy, receivership or similar
proceedings.
During 2005, we determined that certain debt being carried on the books of
the Company totaling $308,031 and relating to 1991 and earlier was no longer
payable due to the passage of the statutes of limitations and, as such, this
debt was written off.
Pending Change of Control Transaction
On March 2, 2007, QuikByte and KI Equity entered into the Purchase
Agreement under which QuikByte will sell to KI Equity, and KI Equity will
purchase from QuikByte, 60,000,000 shares of QuikByte's Common Stock, on a
post-Reverse Split basis ("Shares") for a purchase price of $600,000 ("Purchase
Price"), or $0.01 per share. The issuance of the Shares is intended to be exempt
from registration under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to Section 4(2) thereof and such other available exemptions. As
such, the Shares may not be offered or sold in the United States unless they are
registered under the Securities Act, or an exemption from the registration
requirements of the Securities Act is available. No registration statement
covering the Shares has been or is expected to be filed with the United States
Securities and Exchange Commission ("SEC" or "Commission") or with any state
securities commission in connection with the issuance of the Shares. However, as
a condition to the Closing, QuikByte will grant certain demand and piggyback
registration rights to KI Equity with respect to the Shares. The registration
rights agreement covering the foregoing registration rights will be executed by
QuikByte and KI Equity at the Closing.
In connection with the Purchase Agreement, and as a condition to the
Closing, Bruno Koch, J.B. Heidebrecht and Mark Nixon, each of whom were former
executive officers and directors of QuikByte for all or a portion of the period
commencing January 26, 1989 and ending on or about December 31, 1991
(collectively, the "Former Principals") will agree to terminate any and all
agreements and contracts with QuikByte and irrevocably release QuikByte from any
and all debts, liabilities and obligations, pursuant to the terms and conditions
of a certain settlement agreement ("Settlement Agreement") to be executed prior
to the Closing. QuikByte will pay the Former Principals, at the Closing, an
aggregate cash payment of $30,000. The Former Principals have also agreed to
cancel, and return to QuikByte, an aggregate of 2,450,000 shares of common
stock, on a post-Reverse Split basis.
In connection with the Purchase Agreement, and as a condition to the
Closing, Ponce Acquisition, LLC ("Ponce") will agree to cancel, and return to
QuikByte, an aggregate of 7,450,000 shares of common stock, on a post-Reverse
Split basis.
Immediately following the issuance of the Shares to KI Equity under the
Purchase Agreement, and following the share cancellations by the Former
Principals and Ponce, KI Equity will own 60,000,000 shares of common stock, or
approximately 92.7% of the total 64,702,451 shares of common stock outstanding,
after giving effect to the Reverse Split, subject to the round up for fractional
shares in connection with the Reverse Split.
The Registration Rights Agreement and the Settlement Agreement will be
included as exhibits in a Current Report to be filed with the SEC by QuikByte
following the Closing.
The completion of the transactions contemplated under the Purchase
Agreement are also subject to the satisfaction of certain other contingencies
including, without limitation, (i) the payment of all of QuikByte's liabilities
and obligations at Closing from the proceeds of the Purchase Price (including
the consideration payable to the Former Principals under the Settlement
Agreement), (ii) the cancellation of all contracts involving QuikByte, (iii) the
filing of QuikByte's Annual Report on Form 10-KSB for the year ended December
31, 2006, (iv) compliance with regulatory requirements, (v) the continued
quotation of QuikByte's common stock on the OTC BB, (vi) delivery of certain
legal opinions from QuikByte's counsel, (vii) the delivery of various closing
documents, (viii) the resignation of QuikByte's existing officers as of the
Closing, and (ix) the filing with the SEC, and the mailing to QuikByte's
stockholders, of this Information Statement announcing the proposed change of
control pursuant to the Purchase Agreement.
2
Effective as of the Closing, QuikByte's existing officers will resign, and
QuikByte's existing directors will appoint Kevin R. Keating as the Chief
Executive Officer, Chief Financial Officer, President, Secretary and Treasurer.
In addition, effective as of the Closing, QuikByte's existing directors will
appoint Kevin R. Keating, Margie Blackwell and Jeff Andrews (collectively, the
"New Directors") to act as directors of QuikByte, each effective as of the
Closing. Biographical information on the New Directors is described in more
detail below.
The Purchase Agreement requires, as a condition to Closing, that this
Information Statement be filed with the SEC and mailed to its stockholders.
Following the Closing, and effective on the tenth (10th) day after this Schedule
14(f)-1 Information Statement ("Information Statement") is filed with the SEC
and distributed to QuikByte's stockholders, the current directors of QuikByte
will resign. At the time such resignations become effective, there will be a
change of control of QuikByte.
The parties expect the closing of the transactions under the Purchase
Agreement to occur on or about March 15, 2007. However, there can be no
assurances that the transactions under the Purchase Agreement will be completed.
The Purchase Agreement may be terminated as follows: (i) by mutual written
consent, (ii) by either party if the purchase transaction is not consummated by
March 15, 2007, (iii) by either party if the purchase transaction is prohibited
by issuance of an order, decree or ruling, and (iv) by either party if the other
is in material breach of any representation, warranty, covenant or agreement.
The current directors of QuikByte have approved the Purchase Agreement and
the transactions contemplated thereunder, the Settlement Agreement and the
Registration Rights Agreement.
Change in Authorized Stock; Reverse Stock Split
On March 2, 2007, QuikByte amended its Articles of Incorporation to reduce
its authorized capital stock. The amendment reduced the authorized common stock
from 500,000,000 shares, with a par value of $0.0001 per share, to 250,000,000
shares, with a par value of $0.0001 per share. The amendment also reduced the
authorized preferred stock from 100,000,000 shares, with a par value of $0.0001
per share, to 10,000,000 shares, with a par value of $0.0001 per share.
The amendment also provided for a 1-for-20 reverse stock split ("Reverse
Split") of QuikByte's common stock outstanding on March 16, 2007. Subject to
compliance with Rule 10b-17 promulgated under the Securities Exchange Act of
1934, as amended, every 20 shares of QuikByte's common stock shall
automatically, without any action on the part of the holder thereof or QuikByte,
be combined into and shall become one (1) fully paid and non-assessable share of
QuikByte's common stock. No fractional shares of common stock or scrip
certificate therefor will be issued to the holders of the shares of common stock
by reason of the foregoing Reverse Split. Any fractions resulting from the
Reverse Split computation will be rounded up to the next whole share.
Immediately prior to the Reverse Split, QuikByte had 292,049,012 shares of its
common stock outstanding. Immediately following the Reverse Split, QuikByte has
approximately 14,602,451 shares of common stock outstanding, subject to the
round up for fractional shares in connection with the Reverse Split. The total
number of shares of common stock that QuikByte shall have the authority to issue
shall remain 250,000,000 shares after the Reverse Split.
Employees
We currently have no employees. Our President has agreed to allocate a
portion of his time to our business activities, primarily maintaining our status
a reporting company under the Exchange Act and seeking a business combination
with a private operating company, without compensation.
3
Risk Factors
An investment in our common stock involves investment risks and the
possibility of the loss of an investor's entire investment. A prospective
investor should evaluate all information about us and the risk factors discussed
below in relation to his financial circumstances before investing in us.
1. No Current Operating Business. We currently have no relevant
operating business, revenues from operations or assets. Our business plan is to
seek a merger or business combination with an operating business. We face all of
the risks inherent in the investigation, acquisition, or involvement in a new
business opportunity. An investor's purchase of any of our securities must be
regarded as placing funds at a high risk in a new or "start-up" venture with all
of the unforeseen costs, expenses, problems, and difficulties to which such
ventures are subject.
2. No Assurance of Success or Profitability. There is no assurance that
we will acquire a suitable and favorable business opportunity in a reverse
merger transaction. In addition, even if we become involved in a business
opportunity, there is no assurance that the business we acquire will generate
revenues or profits, or that the value of our common stock will increase as a
result of the acquired business opportunity.
3. Possible Business - Not Identified and Highly Risky. We have not
identified and have no commitments to enter into or acquire a specific business
opportunity and therefore we can disclose the risks and hazards of a business or
opportunity that we acquire only in a general manner, and cannot disclose the
risks and hazards of any specific business or other opportunity that we may
enter into. An investor can expect a potential business opportunity to be quite
risky. Our acquisition of or participation in a business opportunity could
result in a total loss to our investors and stockholders if the target business
is unsuccessful. Further, any investment in us may continue to be highly
illiquid.
4. Type of Business Acquired. The type of business that may be acquired
is not identified. Therefore, our investors and stockholders have to rely on our
management to determine which target business to pursue. There are no
controlling parameters of the business to be acquired. Thus, ultimately an
investment will depend on the target business and therefore investors in us will
be subject to all the risks that would be associated with that selected
business. Our management may have the right to approve and authorize a reverse
merger transaction with a target company without obtaining the vote of the
majority of our stockholders.
5. Impracticability of Exhaustive Investigation. We have limited funds
and lack full-time management which will likely make it impracticable to conduct
a complete and exhaustive investigation and analysis of a business opportunity
before we commit our limited capital and other resources to acquire a target
business. Management decisions, therefore, likely will be made without detailed
feasibility studies, independent analysis, market surveys, and the like which,
if we had more funds available to us, would be desirable. We will be
particularly dependent in making decisions upon information provided by the
promoter, owner, sponsor, or others associated with the business opportunity
seeking to be acquired by us.
6. Lack of Diversification. Because of our limited financial resources,
it is unlikely that we will be able to diversify our acquisitions or operations.
The inability to diversify our activities into more than one area will subject
our investors and stockholders to economic fluctuations within a particular
business or industry and therefore increase the risks associated with the
investment. We only intend to acquire a single business opportunity and thus
your investment will lack diversification.
7. Maintenance of Reporting Company Status. We will require audited
financial statements from target companies that we propose to acquire. No
assurance can be given, however, that the post-transaction company will,
following the closing of the reverse merger transaction, be able to continue to
meet the reporting requirements under the Exchange Act including, without
limitation, the timely preparation of reviewed and audited financial statements.
We, at the time of acquisition, will be subject to the reporting provisions of
the Exchange Act, and thus will be required to furnish certain information about
significant acquisitions, including audited financial statements for any
business that the shell company acquires. In cases where we have completed a
reverse merger transaction and reviewed and audited financial statements cannot
subsequently be obtained, the continued ability of the post-transaction company
to remain a reporting company and publicly trading will be in jeopardy and may
significantly reduce the value of your investment.
4
8. Investment Company Regulation. We do not intend to become classified
as an "investment company" under the Investment Company Act of 1940 (the
"Investment Act"). We believe that we will not become subject to regulation
under the Investment Act because (i) we will not be engaged in the business of
investing or trading in securities, and (ii) any acquisition undertaken will
result in the target company obtaining a majority interest in us. Should there
be a requirement to register as an investment company, it would cause
significant registration and compliance costs. Any violation of the Investment
Act will subject us to materially adverse consequences. Should the SEC find that
we are subject to the Investment Act, and order registration under the
Investment Act, we would resist such finding and take steps to avoid such
registration. Irrespective of whether the SEC or we were to prevail in such
dispute about whether or not we are an investment company, however, the damages
and delays would be costly.
9. Other Regulation. Any acquisition made by us may be of a business
that is subject to regulation or licensing by federal, state, or local
authorities. Foreign companies may also be considered, and be subject to similar
business regulations as are applicable in the United States and also may be
subject to limitations on ownership by foreign persons and entities. Compliance
with such regulations and licensing can be expected to be a time-consuming,
expensive process and may limit our other investment opportunities. We intend to
pursue potential business opportunities in foreign countries, including China,
and as such, such opportunities will be subject to foreign country laws and
regulations affecting foreign investment, business operations, currency
exchange, repatriation of profits, and taxation, which will increase the risk of
your investment.
10. Dependence upon Management. We will be heavily dependent upon the
skills, talents, and abilities of our management to implement our business plan.
Our management may devote limited time to our affairs, which may be inadequate
for our business, and may delay the acquisition of any business opportunity
considered. Furthermore, management has little experience in seeking,
investigating, and acquiring businesses and will depend upon its limited
business knowledge in making decisions regarding our acquisition of a business
opportunity. Because investors will not be able to evaluate the merits of
possible business acquisitions by us, they should critically assess the
information concerning the management.
11. Dependence upon Outside Advisors. To supplement the business
experience of management, we may be required to employ accountants, technical
experts, appraisers, attorneys, or other consultants or advisors. Some of these
outside advisors may be our affiliates or their affiliated entities. The
selection of any such advisors will be made by our management without any input
from stockholders.
12. Conflicts of Interest. Our management has other business interests
to which they will devote primary attention. As a result, conflicts of interest
may arise that can be resolved only through the exercise by them of their
judgment as may be consistent with their fiduciary duties. Our management will
try to resolve conflicts to the best advantage of all concerned.
13. Need for Additional Financing. In all likelihood we will need
additional funds to take advantage of any available acquisition business
opportunity. Even if we were to obtain sufficient funds to acquire an interest
in a business opportunity, we may not have sufficient capital to fully exploit
the opportunity. Our ultimate success will depend upon our ability to raise
additional capital at the time of the acquisition and thereafter. When
additional capital may be needed, there can be no assurance that funds will be
available from any source or, if available, that they can be obtained on
acceptable terms.
14. Borrowing Transactions. There is a possibility that any acquisition
of a business opportunity by us will require borrowing against the assets of the
business opportunity to be acquired, or against the projected future revenues or
profits of the business opportunity. This leverage could increase our exposure
to larger losses. There is no assurance that any business opportunity acquired
through borrowing and leverage will generate sufficient revenues to cover the
related debt and expenses.
15. No Foreseeable Dividends. We do not intend to pay any dividends.
We do not foresee making any cash distributions in the manner of a dividend
or otherwise.
5
16. Loss of Control by Present Management and Stockholders. It is
likely that any acquisition of an operating company will result in a change in
control of the then current directors, officers and the stockholders. Therefore,
our management prior to the acquisition will be changed to those of the target
company and its stockholders, who will then control the combined company. At
that time, our stockholders will be at investment risk for the decisions about
the business by persons that they may not know or have any ability to influence
through a board seat or by the voting mechanism of stockholders.
17. Dilutive Effects of Issuing Additional Common Stock. In any reverse
merger transaction, for tax reasons and management reasons, the owners of the
target company will be issued a large number of shares of common stock and/or
preferred stock which will dilute the ownership interest of our current
stockholders. In addition, at the time of the reverse merger, it will be likely
that there will be additional authorized but unissued shares that may be later
issued by the then new management for any purpose without the consent or vote of
the stockholders. The acquisition issuance and additional issuances that may
occur will dilute the interests of our stockholders after any reverse merger
transaction.
18. Thinly-traded Public Market. Our securities will be very thinly
traded, and the price if traded may not reflect the value of the company.
Moreover, we just completed a reverse split of the shares which may not reflect
the value of the company either. In connection with a reverse merger
transaction, we have to undertake a further reverse split of our shares. There
can be no assurance that there will be an active market for our shares either
now or after we complete the reverse merger. The market liquidity will be
dependant on the perception of the operating business and any steps that its
management might take to bring the company to the awareness of investors. There
can be no assurance given that there will be any awareness generated.
Consequently investors may not be able to liquidate their investment or
liquidate it at a price that reflects the value of the business. If a more
active market should develop, the price may be highly volatile. Because there
may be a low price for our securities, many brokerage firms may not be willing
to effect transactions in the securities. Even if an investor finds a broker
willing to effect a transaction in the securities, the combination of brokerage
commissions, transfer fees, taxes, if any, and any other selling costs may
exceed the selling price. Further, many lending institutions will not permit the
use of such securities as collateral for any loans. Our shares are currently
quoted on the OTC BB. Management intends to strongly consider undertaking a
business transaction with a private operating company which will allow our
shares to be quoted and traded on the NASDAQ Global Market, NASDAQ Capital
Market or a national exchange. However, there can be no assurance that, upon a
business combination, we will qualify our shares for quotation or listing on
NASDAQ or a national exchange, or be able to maintain the criteria necessary to
insure continued quotation or listing.
19. Possible Rule 144 Sales. The majority of our shares currently
outstanding are "restricted securities" within the meaning of Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"). As restricted shares,
these shares may be resold only pursuant to an effective registration statement
or under the requirements of Rule 144 or other applicable exemption from
registration under the Act and as required under applicable state securities
laws. Rule 144 provides in essence that a person who has held restricted
securities for a period of one year may, under certain conditions, sell every
three months, in brokerage transactions, a number of shares that does not exceed
the greater of 1.0% of a company's outstanding common stock or the average
weekly trading volume during the four calendar weeks prior to the sale. There is
no limit on the amount of restricted securities that may be sold by a
non-affiliate after the restricted securities have been held by the owner for a
period of two years. Current stockholders who own 10% or more of our shares will
likely be deemed an affiliate until 90 days after a reverse merger is completed
with a target company. After such 90-day period, and assuming said shares have
been held for more than two years, these stockholders may be able to sell their
shares without volume restrictions. A sale under Rule 144 or under any other
exemption from the Act, if available, or pursuant to subsequent registrations of
our shares, may have a depressive effect upon the price of our shares in any
market that may develop.
6
ITEM 2. DESCRIPTION OF PROPERTY.
Our mailing address is 7609 Ralston Road, Arvada, CO 80002 which is the
office of our legal counsel. This address is provided to us on a rent free basis
and it is anticipated that this arrangement will remain until such time as we
successfully consummate a reverse merger or business combination. Management
believes that this address arrangement will meet our needs for the foreseeable
future. No office space is needed.
We do not own any real or personal property nor do we have any plans to
acquire any real or personal property in the future. We do not own any
significant business operating assets. We do not maintain any policy of
insurance to insure any property or business operations.
ITEM 3. LEGAL PROCEEDINGS.
We are not aware of any pending or threatened legal proceedings in which we
are involved.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On February 20, 2007, at a special meeting of our stockholders, the holders
of a majority of our outstanding shares of common stock approved the following
matters:
1. The election of Reed Clayson, Redgie Green and Wesley F. Whiting to the
board of directors to hold office until the next annual meeting of shareholders
and qualification of their respective successors.
2. Ratification of the appointment of Jaspers + Hall, P.C. as Independent
Registered Accounting Firm for the annual period ending December 31, 2006.
3. The change of the Company's name to a name to be determined by the Board
of Directors.
4. Authorization of a reverse split of the Company's common stock on a
basis of up to two hundred for one, with fractional shares will be rounded up to
the next whole share.
5. Authorization of a reduction of the authorized share capital to
250,000,000 shares of Common Stock and authorization of 2,000,000 shares of
Preferred Stock with such rights and privileges of which shall be determined by
the Board of Directors.
Pursuant to the foregoing stockholder approvals, on March 2, 2007, QuikByte
amended its Articles of Incorporation to reduce its authorized capital stock.
The amendment reduced the authorized common stock from 500,000,000 shares, with
a par value of $0.0001 per share, to 250,000,000 shares, with a par value of
$0.0001 per share. The amendment also reduced the authorized preferred stock
from 100,000,000 shares, with a par value of $0.0001 per share, to 10,000,000
shares, with a par value of $0.0001 per share.
The amendment also provided for a 1-for-20 reverse stock split ("Reverse
Split") of QuikByte's common stock outstanding on March 16, 2007. Subject to
compliance with Rule 10b-17 promulgated under the Securities Exchange Act of
1934, as amended, every 20 shares of QuikByte's common stock shall
automatically, without any action on the part of the holder thereof or QuikByte,
be combined into and shall become one (1) fully paid and non-assessable share of
QuikByte's common stock. No fractional shares of common stock or scrip
certificate therefor will be issued to the holders of the shares of common stock
by reason of the foregoing Reverse Split. Any fractions resulting from the
Reverse Split computation will be rounded up to the next whole share. The total
number of shares of common stock that QuikByte shall have the authority to issue
shall remain 250,000,000 shares after the Reverse Split.
7
PART II
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
ISSUER PURCHASES OF EQUITY SECURITIES.
Our common stock began quotation, on an unpriced basis, on the OTC BB in
December 2006. Our common stock is traded from time to time on the
over-the-counter market, and priced quotations may be found in NASD's OTC BB.
Shares of our common stock were traded under the symbol QKBY until March 16,
2007, when the symbol was changed to QBYT.
Our common stock trades only sporadically and has experienced in the past,
and is expected to experience in the future, significant price and volume
volatility. Since our shares were initially quoted on an unpriced basis, there
is no available information on the high and low bid quotation for our stock on
the Over-the-Counter Bulletin Board during December 2006.
There were no quotations issued in QuikByte common stock for the past 2
years, 2006 or 2005.
As of March 16, 2007, 14,602,451 shares of our common stock outstanding,
after giving effect to the 1-for-20 reverse stock split. There were
approximately 227 holders of record of our common stock at March 16, 2007 and an
indeterminate number of additional shareholders through nominee or street name
accounts with brokers. Our transfer agent is Executive Registrar & Transfer,
Inc., Denver, CO.
We have neither paid nor declared cash distributions or dividends, and we
do not intend to pay cash dividends on our common stock in the foreseeable
future. We currently intend to retain all earnings, if and when generated, to
finance our operations. The declaration of cash dividends in the future will be
determined by the board of directors based upon our earnings, financial
condition, capital requirements and other relevant factors.
Penny Stock
Our securities are subject to the SEC's "penny stock" rules. The penny
stock rules may affect the ability of owners of our shares to sell them. There
may be a limited market for penny stocks due to the regulatory burdens on
broker-dealers. The market among dealers may not be active. Investments in penny
stocks often are unable to sell stock back to the dealer that sold them the
stock. The mark-ups or commissions charged by the broker-dealers might be
greater than any profit an investor may make. Because of large spreads that
market makers quote, investors may be unable to sell the stock immediately back
to the dealer at the same price the dealer sold the stock to the investor.
Our securities are also subject to the SEC's rule that imposes special
sales practice requirements upon broker-dealers that sell such securities to
other than established customers or accredited investors. For purposes of the
rule, the phrase "accredited investor" means, in general terms, institutions
with assets exceeding $5,000,000 or individuals having net worth in excess of
$1,000,000 or having an annual income that exceeds $200,000 (or that, combined
with a spouse's income, exceeds $300,000). For transactions covered by the rule,
the broker-dealer must make a special suitability determination for the
purchaser and receive the purchaser's written agreement to the transaction prior
to the sale. Consequently, the rule may affect the ability of purchasers of our
securities to buy or sell in any market.
Recent Sales of Unregistered Securities.
Effective January 31, 2007, we issued 150,000,000 shares of our common
stock (on a pre-Reverse Split basis) to Ponce Acquisition, LLC ("Ponce") for
$15,000, or $0.0001 per share. The proceeds from this issuance were used to pay
a portion of the costs to bring us current in our reporting obligations under
the Exchange Act. Michael A. Littman, who is our legal counsel, is the managing
member of Ponce.
8
In connection with the above stock issuance, we did not pay any
underwriting discounts or commissions. None of the sales of securities described
or referred to above was registered under the Securities Act of 1933, as amended
(the "Securities Act"). Each of the purchasers fell into one or more of the
categories that follow: an existing shareholder, a creditor, a current or former
officer or director, a service provider, or an accredited investor with whom we
or an affiliate of ours had a prior business relationship. As a result, no
general solicitation or advertising was used in connection with the sales. In
making the sales without registration under the Securities Act, we relied upon
one or more of the exemptions from registration including those contained in
Sections 4(2) of the Securities Act.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Forward-Looking Statements
The following discussion may contain certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Such statements are intended to be
covered by the safe harbors created by such provisions. These statements include
the plans and objectives of management for future growth of the Company,
including plans and objectives related to the consummation of acquisitions and
future private and public issuances of the Company's equity and debt securities.
The forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond the control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements are reasonable, any of the
assumptions could be inaccurate and, therefore, there can be no assurance that
the forward-looking statements included in this Form 10-KSB will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved.
The words "we," "us" and "our" refer to the Company. The words or phrases
"would be," "will allow," "intends to," "will likely result," "are expected to,"
"will continue," "is anticipated," "estimate," "project," or similar expressions
are intended to identify "forward-looking statements." Actual results could
differ materially from those projected in the forward looking statements as a
result of a number of risks and uncertainties, including but not limited to: (a)
limited amount of resources devoted to achieving our business plan; (b) our
failure to implement our business plan within the time period we originally
planned to accomplish; (c) because we are seeking to merge with an operating
business which has not yet been identified, you will be unable to determine
whether we will ever become profitable; and (d) other risks that are discussed
in this Form 10-KSB or included in our previous filings with the Securities and
Exchange Commission.
Plan of Operations
General Business Plan
Our plan of operation is to seek a target company with which to merge or to
complete a business combination. In any transaction, we will be the surviving
entity, and our stockholders will retain a percentage ownership interest in the
post-transaction company. The amount of the retained equity ownership by our
stockholders will be negotiated by our management and the target company. We may
also be required to pay cash and/or equity fees to third parties that advise us
in connection with the merger or business combination, commonly refereed to as a
reverse merger. These third party advisors may include certain affiliates of
ours and their affiliated entities.
9
Typically in connection with the reverse merger transaction involving us
and the target company, there will be a capital funding event for the target
business on a combined basis either at the time of the reverse merger or shortly
thereafter. This may be a private placement by either us or the target company,
if the funding event is contingent on the closing of the reverse merger. If the
funding event is after the reverse merger, it will likely be a public offering
or private placement of our securities. It will often be the case that the
liquidity opportunity for our existing stockholders will be tied to the ability
of the old and new investors of the target enterprise to have liquidity in the
market for their financial investment. Therefore, our stockholders may have to
continue to hold their investment or may face competition in being able to sell
their shares in the post-transaction business in the public market, which may
depress the price for such a volume of securities.
We will not restrict our search to any specific business, industry or
geographic location, and we may participate in a business venture of virtually
any kind or nature. This discussion of our plan for acquiring an operating
business is purposefully general, and it is not meant to be restrictive of the
virtually unlimited discretion to search for and enter into potential business
opportunities. We anticipate that we will be able to participate in only one
potential business venture because of our nominal assets and limited financial
resources.
We may seek a business opportunity with entities which have recently
commenced operations, or that desire to utilize the public marketplace in order
to raise additional capital in order to expand into new products or markets, to
develop a new product or service, or for other corporate purposes. We may
acquire assets and establish wholly owned subsidiaries in various businesses or
acquire existing businesses as subsidiaries.
We expect that the selection of a business opportunity will be complex and
risky. Due to general economic conditions, rapid technological advances being
made in some industries and shortages of available capital, we believe that
there are numerous potential targets with either sound business ideas or
operations seeking the benefits of a shell company that has complied with the
federal reporting requirements for public companies and is publicly trading.
Such benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for incentive
stock options or similar benefits to key employees, providing liquidity (subject
to restrictions of applicable statutes) for all stockholders and other factors.
Potentially, available business opportunities may occur in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex. We have, and will continue to have, limited
capital with which to provide the owners of business opportunities with any
significant cash or other assets. We will, however, be able to offer owners of
target candidates the opportunity to acquire a controlling ownership interest in
an issuer who has complied with the reporting requirements under federal
securities laws without incurring the cost and time required to conduct an
initial public offering.
The analysis of new business opportunities will be undertaken by, or under
the supervision of, our management who will likely engage outside advisors to
assist us in this analysis. Some of these outside advisors may be affiliates of
ours or their affiliated entities. We intend to concentrate on identifying
preliminary prospective business opportunities which may be brought to our
attention through present associations of our officers and directors, or by our
advisors. In analyzing prospective business opportunities, we will consider such
matters as (i) available technical, financial and managerial resources; (ii)
working capital and other financial requirements; (iii) history of operations,
if any and prospects for the future; (iv) nature of present and expected
competition; (v) quality, experience and depth of management services; (vi)
potential for further research, development or exploration; (vii) specific risk
factors not now foreseeable but that may be anticipated to impact the proposed
activities of the company; (viii) potential for growth or expansion; (ix)
potential for profit; (x) public recognition and acceptance of products,
services or trades; (xi) name identification; and (xii) other factors that we
consider relevant. As part of our investigation of the business opportunity, we
or our advisors expect to meet personally with or interview management and key
personnel.
We may also have to compensate certain advisors, finders and investment
banking firms for services rendered in connection with the identification of
target operating companies and the negotiation and completion of the
transaction. Due to our limited resources, it is expect that all or a portion of
this compensation will be in the form of our common stock or from cash provided
by the target company or the funding event. Additional issuance of our common
stock will have a further dilutive effect on the percentage of shares held our
stockholders.
10
We will not acquire or merge with any company for which audited financial
statements cannot be obtained prior to closing of the proposed transaction.
Acquisition Opportunities
In implementing a structure for a particular business acquisition, we may
become a party to a merger, consolidation, reorganization, joint venture, or
licensing agreement with another company or entity. We may also acquire stock or
assets of an existing business. Our management may have the right to approve and
authorize a reverse merger transaction with a target company without obtaining
the vote of the majority of our stockholders. Further, upon consummation of a
reverse merger transaction, it is probable that our present management and
stockholders will no longer be in control of us. In addition, our management, as
part of the terms of the reverse merger transaction, may resign and may be
replaced by new directors without a vote of our stockholders. Any and all sales
of shares of our common stock may only be made in compliance with the securities
laws of the United States and any applicable state.
It is anticipated that certain securities issued by us in connection with
the reverse merger would be issued in reliance upon exemptions from registration
under application federal and state securities laws. In some circumstances, as a
negotiated element of the reverse merger transaction, we will be asked to agree
to register all or a part of such securities immediately after the transaction
is consummated or at specified times thereafter. In such a case, we will attempt
to negotiate the registration of some or all of our current outstanding shares
which are restricted, but there is no guarantee that this will be accomplished
or, if accomplished, that the registration rights identical. If such
registration occurs, it will be undertaken by the surviving entity after it has
successfully consummated a reverse merger and is no longer considered an
inactive company. The issuance of substantial additional securities by us in
connection with the reverse merger and their potential sale into any trading
market which may develop in our securities may have a depressive effect on the
value of our securities in the future. There is no assurance that such a trading
market will develop.
While the actual terms of a reverse merger transaction cannot be predicted,
it is expected that the parties to any business transaction will find it
desirable to avoid the creation of a taxable event and thereby structure the
business transaction in a so-called "tax-free" reorganization under Sections
368(a)(1) or 351 of the Internal Revenue Code (the "Code"). In order to obtain
tax-free treatment under the Code, it may be necessary for the owners of the
acquired business to own 80 percent or more of the voting stock of the surviving
entity. In such event, the equity interest retained by our current stockholders
would be less than 20 percent of the issued and outstanding shares of the
surviving entity. This would result in significant dilution in the equity
interests of our stockholders.
In addition to the tax considerations discussed above, it is likely that in
any reverse merger, and depending upon, among other things, the target company's
assets and liabilities, the equity interests of our stockholders after the
transaction will be a small percentage of the post-transaction company. The
percentage ownership may be subject to significant reduction in the event we
acquire a target company with significant assets and expectations of growth.
We will participate in a business opportunity only after the negotiation
and execution of appropriate written agreements. Although the terms of the
acquisition agreements cannot be predicted, generally such agreements will (i)
require specific representations and warranties by all of the parties; (ii)
specify certain events of default and remedies therefor; (iii) detail the terms
of closing and the conditions which must be satisfied by each of the parties
prior to and after closing; (iv) outline the manner of bearing costs, including
costs associated with our attorneys and accountants; (v) set forth
indemnification provisions; and (vi) include miscellaneous other terms.
As stated above, we will not acquire or merge with any entity which cannot
provide independent audited financial statements at the time of closing of the
proposed transaction. Included in these requirements is the affirmative duty to
file independent audited financial statements as part of a Current Report on
Form 8-K, required to be filed with the SEC upon consummation of a merger or
acquisition, as well as audited financial statements included in an Annual
Report on Form 10-K (or Form 10-KSB, as applicable). If such audited financial
statements are not available at closing, or within time parameters necessary to
insure compliance with the reporting requirements under federal securities laws,
or if the audited financial statements provided do not conform to the
representations made by the business to be acquired, we will not close the
transaction. However, there is no guarantee of the continued ability of the
post-transaction company to remain a reporting company and publicly trading
after closing.
11
Competition
We are an insignificant participant among the firms which engage in the
reverse merger of shell companies into an operating business. There are many
established venture capital and financial concerns that have significantly
greater financial and personnel resources and technical expertise than we have.
In view of our limited financial resources and limited management availability,
we will continue to be at a significant competitive disadvantage compared to our
competitors. As a result, we may not be able to find suitable target companies
with which to complete a reverse merger transaction.
Results of Operations
We had no revenues or operations in years ended December 31, 2006 and 2005.
We generated a net loss of ($439,285) for the year ended December 31, 2006 and
net income of $308,031 for the year ended December 31, 2005. Net loss per share
for the year ended December 31, 2006 was ($0.003), and net income per share for
the year ended December 31, 2005 was $0.002. Losses should be expected to
continue until we complete a business combination with a profitable business, of
which there can be no assurance.
We incurred no expenses in the year ended December 31, 2005. During the
year ended December 31, 2005, we determined that certain debt being carried on
our books totaling $308,031 and relating to 1991 and earlier was no longer
payable due to the passage of the statutes of limitations and, as such, this
debt was written off resulting in the recognition of other income of $308,381.
During the year ended December 31, 2006, we incurred $439,285 in expenses
related primarily to the professional and consulting fees to bring us current in
our reporting obligations under the Exchange Act and obtain a quotation for our
common stock on the OTC BB.
Liquidity and Capital Resources
As of December 31, 2006, we had no assets or working capital. We are
reliant upon advances from stockholders or loans to pay any expenses incurred.
We had no commitments from any person for advances or loans.
We cannot predict to what extent our current lack of liquidity and capital
resources will impair our ability to consummate a business transaction or
whether we will incur further operating losses through any business entity which
we may eventually acquire. There is no assurance that we can continue as a going
concern without substantial funding, either through private placements of our
shares or loans from stockholders or others, for which there is no source.
Effective January 24, 2007, we issued a promissory note in the amount of
$434,385 to Michael A. Littman, Esq. to evidence amounts we owe to him for legal
services and cost advances in connection with our efforts to bring us current in
our reporting obligations under the Exchange Act.
Effective January 31, 2007, we issued 150,000,000 shares of our common
stock (on a pre-Reverse Split basis) to Ponce Acquisition, LLC ("Ponce") for
$15,000, or $0.0001 per share. The proceeds from this issuance were used to pay
a portion of the costs to bring us current in our reporting obligations under
the Exchange Act. Michael A. Littman, who is our legal counsel, is the managing
member of Ponce.
We estimate it will require $25,000 to $50,000 to cover legal, accounting,
transfer and miscellaneous costs of being a reporting company during 2007. As
such, we will have a cash shortfall for 2007 of between $25,000 to $50,000, for
which we have no source except stockholder loans or contributions, none of which
have been committed. Lack of existing capital may be prevent us from completing
a business combination or result in our inability to remain complaint with the
reporting requirements under the Exchange Act. Irrespective of whether our cash
assets prove to be inadequate to meet our operational needs, we may seek to
compensate service providers by the issuance of stock in lieu of cash.
12
Going Concern
We currently have no source of operating revenue, and have only limited
working capital with which to pursue our business plan, which contemplates the
completion of a business combination with an operating company. The amount of
capital required to sustain operations until the successful completion of a
business combination is subject to future events and uncertainties. It may be
necessary for us to secure additional working capital through loans or sales of
common stock, and there can be no assurance that such funding will be available
in the future. These conditions raise substantial doubt about our ability to
continue as a going concern. Our auditor has issued a "going concern"
qualification as part of his opinion in the Audit Report for the year ended
December 31, 2006.
Critical Accounting Policies
The preparation of financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States
requires estimates and assumptions that affect the reported amounts of assets
and liabilities, revenues and expenses and related disclosures of contingent
assets and liabilities in the financial statements and accompanying notes. The
SEC has defined a company's critical accounting policies as the ones that are
most important to the portrayal of the company's financial condition and results
of operations, and which require the company to make its most difficult and
subjective judgments, often as a result of the need to make estimates of matters
that are inherently uncertain. We believe that our estimates and assumptions are
reasonable under the circumstances; however, actual results may vary from these
estimates and assumptions. We have identified the following critical accounting
policies that affect the more significant judgments and estimates used in the
preparation of the financial statements. For further discussion of the Company's
significant and critical accounting policies, refer to Note 2 - "Summary of
Significant Accounting Policies" to the Financial Statements contained in Item 7
of this document.
Off Balance Sheet Arrangements
We are not currently party to any off balance sheet arrangement as that
term is defined in Item 303(c)(2) of Regulation SB.
ITEM 7. FINANCIAL STATEMENTS
The following financial statements required by this item are filed herewith
following the signature page to this report, and are hereby incorporated by this
reference:
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm F-1
Balance Sheet as of December 31, 2005 and 2006 F-2
Statement of Operations for the years ended December 31, 2005 and 2006 F-3
and for the period from January 26, 1989 (Inception) through
December 31, 2006
Statement of Stockholders' Equity for the period from January F-4
26, 1989 (Inception) through December 31, 2006
Statement of Cash Flows for the years ended December 31, 2005 and 2006 F-5
and for the period from January 26, 1989 (Inception) through December
31, 2006
Notes to Financial Statements F-6 to F-11
13
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no disagreements with Jaspers + Hall P.C., 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
the satisfaction of Jaspers + Hall P.C., would have caused it to make reference
to the subject matter of the disagreement(s) in connection with its report.
ITEM 8A. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, we conducted an
evaluation, under the supervision and with the participation of the Chief
Executive Officer and Chief Financial Officer, of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act
of 1934, as amended ("Exchange Act"). Based on this evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures are effective to ensure that information required to be
disclosed by us in reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in SEC rules and forms. There was no change in our internal control over
financial reporting during our most recently completed fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
ITEM 8B. OTHER INFORMATION
None.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names, positions and ages of current
executive officers and directors of QuikByte. All directors serve until the next
annual meeting of stockholders or until their successors are elected and
qualified. Officers are elected by the board of directors and their terms of
office are, except to the extent governed by employment contract, at the
discretion of the board of directors. There is no family relationship between
any director or executive officer.
Name Age Position
------------------------------------------ ------------ ---------------------------------------------
Reed Clayson 76 President, Secretary and Director
Redgie Green 53 Director
Wesley F. Whiting 73 Director
Reed Clayson, age 76, has been Secretary and Director of QuikByte since
2003 and President since May 2006. Mr. Clayson has undergraduate degrees in
physics and journalism, from Utah State University (USU) in 1953 and 1963,
respectively. He is a former Ph.D. candidate (physics) at University of
California Los Angles (UCLA) in parallel with full-time employment and has done
graduate work in English and physics at USU. Mr. Clayson has completed
successful proposals/grant applications, often followed by project direction or
support, for U.S. Department of Interior, National Science Foundation, DOE INEEL
Laboratory, U.S. Department of Defense, U.S. Veterans Administration, U.S.
Environmental Protection Agency, U.S. Department of Justice, state and local
agencies, and some major commercial firms. In addition to QuikByte, he has been
an officer and director in Evergreen Associates, Inc. (2000-2004), Resource
Science, Inc. (2003-2006) and Synfuels Engineering Development, Inc.
(1981-Present).
14
Redgie Green, age 53, has been Director of QuikByte since February 2007.
Mr. Green has also been Secretary and Director of Sun River Energy, Inc. since
1998. Mr. Green had been co-owner and operator of Green's B&R Enterprises, a
wholesale donut baker from 1983 to 2006. He has also been an active investor in
small capital and high-technology adventures since 1987. Mr. Green was a
director of Colorado Gold & Silver, Inc. in 2000. He was a director for Houston
Operating Company in late 2003 until December 2004. He recently served as a
director for Mountains West Exploration, Inc. in 2005. He is a Director of
Cavion Technologies, Inc. (2006), Aspeon, Inc. (2006), and Captech Financial
Group, Inc. (2006). He served as a director of Baymark Technologies, Inc.
2005-2006.
Wesley F. Whiting, age 73, has been a Director of QuikByte since February
2007. Mr. Whiting was President, Director and Secretary of Berge Exploration,
Inc. (1978-88), President, Vice President and Director of NELX, Inc.
(1994-1998), Vice President and Director of Intermountain Methane Corporation
(1988-1991) and President of Westwind Production, Inc. (1997-1998). He was a
Director of Kimbell deCar Corporation from 1998 until 2000, and he has been
President and a Director of Dynadapt System, Inc. since 1998. He was a Director
of Colorado Gold & Silver, Inc. from 1999 to 2000. He was President and Director
of Business Exchange Holding Corp. from 2000 to 2002 and Acquisition Lending,
Inc. from 2000 to 2002. He was Director and Vice President of Utilitec, Inc.
from 1999 to 2002, and has been Vice President and Director of Agro Science,
Inc. since 2001. He was President and Director of Premium Enterprises, Inc. from
October 2002 to December 31, 2002. He is Vice President and Director of
Evergreen Associates, Inc. and Resource Science, Inc. He was appointed Director
and Secretary of BSA SatelLINK, Inc. in 2002. He was President and Director of
Fayber Group, Inc. from 2003 to 2005 when he resigned. He has been a Director
and Secretary of Jagged Edge Mountain Gear, Inc. since 2005. He has also been
Director of Life USA, Inc. since 2003. He served as a director of Baymark
Technologies, Inc. from 2005 to 2006. He is a director of Cavion Technologies,
Inc. (2006) and Aspeon, Inc. (2006). He has been President and Director of
Captech Financial Group, Inc. since 2006.
Audit Committee and Audit Committee Financial Expert
QuikByte is not a "listed company" under SEC rules and is therefore not
required to have an audit committee comprised of independent directors. QuikByte
does not currently have an audit committee, however, for certain purposes of the
rules and regulations of the SEC and in accordance with the Sarbanes-Oxley Act
of 2002, QuikByte's board of directors is deemed to be its audit committee and
as such functions as an audit committee and performs some of the same functions
as an audit committee including: (1) selection and oversight of QuikByte's
independent accountant; (2) establishing procedures for the receipt, retention
and treatment of complaints regarding accounting, internal controls and auditing
matters; and (3) engaging outside advisors. QuikByte's board of directors has
determined that its members do not include a person who is an "audit committee
financial expert" within the meaning of the rules and regulations of the SEC.
The board of directors has determined that each of its members is able to read
and understand fundamental financial statements and has substantial business
experience that results in that member's financial sophistication. Accordingly,
the board of directors believes that each of its members have the sufficient
knowledge and experience necessary to fulfill the duties and obligations that an
audit committee would have.
15
Code of Ethics
A code of ethics relates to written standards that are reasonably designed
to deter wrongdoing and to promote:
o Honest and ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional
relationships;
o Full, fair, accurate, timely and understandable disclosure in reports and
documents that are filed with, or submitted to, the SEC and in other public
communications made by an issuer;
o Compliance with applicable governmental laws, rules and regulations;
o The prompt internal reporting of violations of the code to an appropriate
person or persons identified in the code; and
o Accountability for adherence to the code.
Due to the limited scope of QuikByte's current operations, QuikByte has not
adopted a corporate code of ethics that applies to its executive officers.
Conflicts of Interest
Certain conflicts of interest exist and may continue to exist between
QuikByte and its officers and directors due to the fact that each has other
business interests to which they devote their primary attention. Each officer
and director may continue to do so notwithstanding the fact that management time
should be devoted to the business of QuikByte.
Certain conflicts of interest may exist between QuikByte and its
management, and conflicts may develop in the future. QuikByte has not
established policies or procedures for the resolution of current or potential
conflicts of interest between QuikByte, its officers and directors or affiliated
entities. There can be no assurance that management will resolve all conflicts
of interest in favor of QuikByte, and conflicts of interest may arise that can
be resolved only through the exercise by management their best judgment as may
be consistent with their fiduciary duties. Management will try to resolve
conflicts to the best advantage of all concerned.
Board Meetings; Nominating and Compensation Committees
The Board of Directors took a number of actions by written consent of all
of the directors during the fiscal year ended December 31, 2006. Such actions by
the written consent of all directors are, according to Colorado corporate law
and QuikByte's by-laws, as valid and effective as if they had been passed at a
meeting of the directors duly called and held. QuikByte's directors and officers
do not receive remuneration from QuikByte unless approved by the Board of
Directors or pursuant to an employment contract. No compensation has been paid
to QuikByte's directors for attendance at any meetings during the last fiscal
year.
QuikByte does not have standing nominating or compensation committees, or
committees performing similar functions. QuikByte's board of directors believes
that it is not necessary to have a compensation committee at this time because
the functions of such committee are adequately performed by the board of
directors. The board of directors also is of the view that it is appropriate for
QuikByte not to have a standing nominating committee because the board of
directors has performed and will perform adequately the functions of a
nominating committee. QuikByte is not a "listed company" under SEC rules and is
therefore not required to have a compensation committee or a nominating
committee.
16
Shareholder Communications
There has not been any defined policy or procedure requirements for
stockholders to submit recommendations or nomination for directors. The board of
directors does not believe that a defined policy with regard to the
consideration of candidates recommended by stockholders is necessary at this
time because it believes that, given the limited scope of QuikByte's operations,
a specific nominating policy would be premature and of little assistance until
QuikByte's business operations are at a more advanced level. There are no
specific, minimum qualifications that the board of directors believes must be
met by a candidate recommended by the board of directors. Currently, the entire
board of directors decides on nominees, on the recommendation of any member of
the board of directors followed by the board's review of the candidates' resumes
and interview of candidates. Based on the information gathered, the board of
directors then makes a decision on whether to recommend the candidates as
nominees for director. QuikByte does not pay any fee to any third party or
parties to identify or evaluate or assist in identifying or evaluating potential
nominee.
QuikByte does not have any restrictions on shareholder nominations under
its certificate of incorporation or by-laws. The only restrictions are those
applicable generally under Colorado law and the federal proxy rules. The board
of directors will consider suggestions from individual shareholders, subject to
evaluation of the person's merits. Stockholders may communicate nominee
suggestions directly to the board of directors, accompanied by biographical
details and a statement of support for the nominees. The suggested nominee must
also provide a statement of consent to being considered for nomination. There
are no formal criteria for nominees.
Because the management and directors of QuikByte are the same persons, the
Board of Directors has determined not to adopt a formal methodology for
communications from shareholders on the belief that any communication would be
brought to the board of directors' attention by virtue of the co-extensive
capacities served by Messrs. Clayson, Green and Whiting.
Indemnification
Under Colorado law and pursuant to our articles of incorporation and
bylaws, QuikByte may indemnify its officers and directors for various expenses
and damages resulting from their acting in these capacities. Insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended, may be permitted to QuikByte's officers or directors pursuant to the
foregoing provisions, QuikByte has been informed that, in the opinion of the
SEC, this indemnification is against public policy as expressed in the
Securities Act, and is therefore unenforceable.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
QuikByte's directors and executive officers, and persons who beneficially own
more than 10% of a registered class of QuikByte's equity securities, to file
reports of beneficial ownership and changes in beneficial ownership of
QuikByte's securities with the SEC on Forms 3 (Initial Statement of Beneficial
Ownership), 4 (Statement of Changes of Beneficial Ownership of Securities) and 5
(Annual Statement of Beneficial Ownership of Securities). Directors, executive
officers and beneficial owners of more than 10% of QuikByte's common stock are
required by SEC regulations to furnish QuikByte with copies of all Section 16(a)
forms that they file. Except as otherwise set forth herein, based solely on
review of the copies of such forms furnished to QuikByte, or written
representations that no reports were required, QuikByte believes that for the
fiscal year ended December 31, 2006 beneficial owners complied with the Section
16(a) filing requirements applicable to them in that each officer, director and
beneficial owner of 10% or more of QuikByte's securities filed a Form 3 with the
SEC.
ITEM 10. EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
QuikByte currently is a shell company with nominal assets, no employees and
no active business operations. QuikByte's business plans are to seek a private
operating company with which to merge or to complete a business combination in a
reverse merger transaction. As such, QuikByte has no formal compensation program
for its executive officers, directors or employees.
17
QuikByte is not a "listed company" under SEC rules and is therefore not
required to have a compensation committee. Accordingly, QuikByte has no
compensation committee.
During the last two fiscal years, QuikByte has not provided any salary,
bonus, annual or long-term equity or non-equity based incentive programs, health
benefits, life insurance, tax-qualified savings plans, special employee benefits
or perquisites, supplemental life insurance benefits, pension or other
retirement benefits or any type of nonqualified deferred compensation programs
for its executive officers or employees.
QuikByte adopted the 1989 stock option plan, and there are no stock options
outstanding as of the date of this filing.
Summary Compensation Table
The following table summarizes the total compensation paid to or earned by
each of QuikByte's named executive officers who served as executive officers
during all or a portion of the years ended December 31, 2005 and 2006.
--------------- ------- -------- -------- ---------- ---------- ----------- ----------- ----------------- -----------------
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
--------------- ------- -------- -------- ---------- ---------- ----------- ----------- ----------------- -----------------
Non- Non-
equity qualified
Incentive Deferred
Name and Stock Option Plan Compen- All Other Total
Principal Salary Bonus Awards Awards Compen- sation Compensation Compensation
Position sation Earnings
Year ($) ($) ($) ($) ($) ($) ($) ($)
--------------- ------- -------- -------- ---------- ---------- ----------- ----------- ----------------- -----------------
Reed Clayson 2006 $0 $0 $0 $0 $0 $0 $0 $0
(Pres. and 2005 $0 $0 $0 $0 $0 $0 $0 $0
Secretary)
--------------- ------- -------- -------- ---------- ---------- ----------- ----------- ----------------- -----------------
QuikByte paid no perquisites or other personal benefits for its executive
officers during 2005 and 2006.
Employment and Other Agreements
QuikByte has no employment agreements or other agreements with any of its
executive officers or employees.
Compensation of Directors
During 2006, Reed Clayson was the sole executive officer and director of
QuikByte and did not receive separate compensation for his service as a
director. However, upon completion of the transactions contemplated under the
Purchase Agreement, Reed Clayson will receive $5,000 for his services as a
director of QuikByte.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding QuikByte's
common stock beneficially owned on March 16, 2007, after giving effect to the
Reverse Split, for (i) each shareholder QuikByte knows to be the beneficial
owner of 5% or more of its outstanding common stock, (ii) each of QuikByte's
executive officers and directors, and (iii) all executive officers and directors
as a group. In general, a person is deemed to be a "beneficial owner" of a
security if that person has or shares the power to vote or direct the voting of
such security, or the power to dispose or to direct the disposition of such
security. A person is also deemed to be a beneficial owner of any securities of
which the person has the right to acquire beneficial ownership within 60 days.
To the best of QuikByte's knowledge, all persons named have sole voting and
investment power with respect to such shares, except as otherwise noted. Except
as set forth in this Information Statement, there are not any pending or
anticipated arrangements that may cause a change in control of QuikByte. At
March 16, 2007, 14,602,451 shares of QuikByte's common stock were outstanding,
after giving effect to the Reverse Split.
18
Number of Shares
Name Beneficially Owned Percent of Shares
---- ------------------ -----------------
Reed Clayson 0 0%
11158 W. 68th Way
Arvada, CO 80004
Ponce Acquisition LLC 7,500,000 51.4%
c/o Michael A. Littman, Managing Member
7609 Ralston Road
Arvada, CO 80002
Mark R. Nixon 1,075,000 7.4%
2506 Topanga Skyline Dr.
Topanga, CA 90290
J.B.Heidebrecht 1,150,000 7.9%
3621 Garnet St., #1
Torrance, CA 90503
Wesley F. Whiting 0 0%
Suite 210 E, 10200 W. 44th Ave.
Wheat Ridge, CO 80033
Redgie Green 0 0%
16538 W. 76th Dr.
Arvada, CO 80007
All Executive Officers and Directors as a group 0 0%
(1) Shares are beneficially owned by Michael A. Littman who has sole voting and
dispositive control.
ITEM 12. TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL
PERSONS
Michael A. Littman is the managing member of Ponce Acquisition, LLC, the
majority stockholder of QuikByte. Mr. Littman has also performed legal services
for, and made cost advances on behalf of, QuikByte. Such services were rendered
in connection with bringing QuikByte current in its reporting obligations under
the Exchange Act and obtaining a quotation for QuikByte's common stock on the
Over-the-Counter Bulletin Board. On January 24, 2007, QuikByte issued its
promissory note to Mr. Littman in the principal amount of $434,385 to evidence
these legal fees and cost advances. This note will be paid from the proceeds of
the Purchase Price for the Shares pursuant to the terms of the Purchase
Agreement.
Effective January 31, 2007, we issued 150,000,000 shares of our common
stock (on a pre-Reverse Split basis) to Ponce Acquisition, LLC ("Ponce") for
$15,000, or $0.0001 per share. Ponce acquired control of QuikByte as a result of
this issuance. The proceeds from this issuance were used to pay expenses for our
reporting obligations under the Exchange Act. Michael A. Littman, who is our
legal counsel, is the managing member of Ponce.
Other than the above transactions or otherwise set forth in this report or
in any reports filed by QuikByte with the SEC, QuikByte has not entered into any
material transactions with any director, executive officer, and nominee for
director, beneficial owner of five percent or more of its common stock, or
family members of such persons. QuikByte is not a subsidiary of any company.
19
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit Number Description
-------------------- --------------------------------------------------------------------------------
2.1 Securities Purchase Agreement by and among QuikByte Software, Inc. and KI
Equity Partners V, LLC dated March 2, 2007 (incorporated by reference from
Exhibit 2.1 of Form 8-K dated March 2, 2007 and filed with the SEC on March
6, 2007)
3.1 Articles of Incorporation (incorporated by reference from Exhibit 3.1 of
Registration Statement No. 33-28465-LA)
3.2 Bylaws (incorporated by reference from Exhibit 3.2 of Registration Statement
No.33-28465-LA)
3.3 Amendment to Articles of Incorporation filed March 2, 2007 (incorporated by
reference from Exhibit 3.3 of Form 8-K dated March 2, 2007 and filed with the
SEC on March 6, 2007)
31 Section 302 Certification of Reed Clayson*
32 Section 1350 Certification of Reed Clayson*
* Filed with this Annual Report
(b) Reports on Form 8-K
No Current Reports on Form 8-K were filed by the Company during the fourth
quarter of 2006.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
(1) AUDIT FEES
The aggregate fees billed for the years ended December 31, 2005 and 2006
for professional services rendered by the principal accountant for the audit of
the Company's annual financial statements and review of financial statements
included in the Company's Form 10-KSB (17 CFR 249.308a) or 10-QSB (17 CFR
249.308b) or services that are normally provided by the accountant in connection
with statutory and regulatory filings or engagements for such period were
$7,900.
(2) AUDIT-RELATED FEES
There were no fees billed for the years ended December 31, 2005 and 2006
for assurance and related services by the principal accountant that are
reasonably related to the performance of the audit or review of the Company's
financial statements.
(3) TAX FEES
There were no fees billed for the years ended December 31, 2005 and 2006
for professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning.
(4) ALL OTHER FEES
There were no other fees billed for the years ended December 31, 2005 and
2006 for products and services provided by the principal accountant, other than
the services reported above.
All audit work was performed by the auditors' full time employees.
PRE-APPROVAL POLICIES AND PROCEDURES
Before the accountant is engaged by the Company to render audit or
non-audit services, the engagement is approved by the Company's the board of
directors acting as the audit committee.
20
QUIKBYTE SOFTWARE, INC.
(A Development Stage Enterprise)
FINANCIAL STATEMENTS
December 31, 2006
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm F-1
Balance Sheet as of December 31, 2005 and 2006 F-2
Statement of Operations for the years ended December 31, 2005 and 2006 F-3
and for the period from January 26, 1989 (Inception) through
December 31, 2006
Statement of Stockholders' Equity for the period from January F-4
26, 1989(Inception) through December 31, 2006.
Statement of Cash Flows for the years ended December 31, 2005 and 2006 F-5
and for the period from January 26, 1989 (Inception) through December
31, 2006
Notes to Financial Statements F-6 to F-11
JASPERS + HALL, PC
CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------------------------------------
9175 E. Kenyon Avenue, Suite 100
Denver, CO 80237
303-796-0099
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Quikbyte Software, Inc.
Arvada, Colorado
We have audited the accompanying balance sheet of Quikbyte Software, Inc. (A
Development Stage Company) as of December 31, 2006 and 2005 and the related
statement of operations, stockholders' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with 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
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Quikbyte Software, Inc. (A
Development Stage Company) as of December 31, 2006 and 2005, and the results of
their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles of the United States.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1, condition exist which
raised substantial doubt about the Company's ability to continue as a going
concern unless it is able to generate sufficient cash flows to meet its
obligations and sustain its operations. Management's plans in regard to these
matters are also described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ Jaspers + Hall, PC
Denver, Colorado
March 12, 2007
F-1
QUIKBYTE SOFTWARE, INC.
(A Development Stage Company)
Balance Sheets
December 31,
Audited
2006 2005
--------------- --------------
ASSETS
Current Assets:
Cash $ - $ -
--------------- --------------
Total Current Assets - -
--------------- --------------
TOTAL ASSETS $ - $ -
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses $ 471,785 $ 32,500
--------------- --------------
Total Current Liabilities 471,785 32,500
--------------- --------------
Stockholders' Equity (Deficit):
Preferred stock, $.0001 par value, 100,000,000 shares - -
authorized, none issued and outstanding
Common stock, $.0001 par value, 500,000,000 shares 14,205 14,205
authorized, 142,049,012 shares issued and outstanding
Additional Paid-In Capital 717,171 717,171
Deficit accumulated during the development stage (1,203,161) (763,876)
--------------- --------------
Total Stockholders' Equity (Deficit) (471,785) (32,500)
--------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ - $ -
=============== ==============
The accompanying notes are an integral part of these financial statements
F-2
QUIKBYTE SOFTWARE, INC.
(A Development Stage company)
Statements of Operations
For the Year Ended December 31,
January 26, 1989
(Inception) to
December 31,
2006 2005 2006
----------------- ---------------- ----------------
Revenue:
$ - $ - $ 269
----------------- ---------------- ----------------
Total Income - - 269
----------------- ---------------- ----------------
Operating Expenses:
Consulting and Professional fees 434,385 - 481,885
Depreciation and amortization - - 53,516
Research and development - - 470,932
General and administrative 4,900 - 503,234
----------------- ---------------- ----------------
Total Expenses 439,285 - 1,509,567
----------------- ---------------- ----------------
Other Expenses/Income:
Interest Income - - 8,024
Write-off old debts - 308,031 308,031
Interest Expense - - (9,918)
----------------- ---------------- ----------------
Net Profit (Loss) $ (439,285) $ 308,031 $ (1,203,161)
----------------- ---------------- ----------------
Per Share Information:
Weighted average number
of common shares outstanding 142,049,012 142,049,012
----------------- ----------------
Basic and diluted net loss per share $ (0.003) $ 0.002
================= ================
The accompanying note are an integral part of these financial statements.
F-3
QUIKBYTE SOFTWARE, INC.
(A Development Stage Company)
Statements of Stockholders' Equity (Deficit)
COMMON STOCK Additional Total
Paid-In Accumulated Stockholders'
# of Shares Amount Capital Deficit Equity
----------- ------ ---------- ------------- -----------
Balance - January 26, 1989 - $ - $ - $ - $ -
Issuance of stock to founders 55,500,000 5,550 (5,550) - -
Issuance of stock for cash 65,500,000 6,550 249,470 - 256,020
Issuance of stock for services 3,000,000 300 14,700 - 15,000
Issuance of stock for warrants - - 100 - 100
Net Loss for Period - - - (74,393) (74,393)
----------- --------- ---------- ------------- -----------
Balance - December 31, 1989 124,000,000 12,400 258,720 (74,393) 196,727
----------- --------- ---------- ------------- -----------
Issuance of stock for employment 4,400,000 440 98,560 - 99,000
Warrants exercised 3,550,000 355 69,851 - 70,206
Net Loss for Year - - - (424,063) (424,063)
----------- --------- ---------- ------------- -----------
Balance - December 31, 1990 131,950,000 13,195 427,131 (498,456) (58,130)
----------- --------- ---------- ------------- -----------
Warrants exercised 6,150,000 615 122,385 - 123,000
Issuance of stock for employment 1,800,000 180 45,820 - 46,000
Issuance of stock for cash 2,149,012 215 121,835 - 122,050
Net Loss for Year - - - (531,532) (531,532)
----------- --------- ---------- ------------- -----------
Balance - December 31, 1991 142,049,012 14,205 717,171 (1,029,988) (298,612)
----------- --------- ---------- ------------- -----------
Net Loss for Year - - - (763) (763)
----------- --------- ---------- ------------- -----------
Balance - December 31, 1992 142,049,012 14,205 717,171 (1,030,751) (299,375)
----------- --------- ---------- ------------- -----------
Net Loss for Year - - - (763) (763)
----------- --------- ---------- ------------- -----------
Balance - December 31, 1993 142,049,012 14,205 717,171 (1,031,514) (300,138)
Net Loss for Year - - - (763) (763)
----------- --------- ---------- ------------- -----------
Balance - December 31, 1994 142,049,012 14,205 717,171 (1,032,277) (300,901)
----------- --------- ---------- ------------- -----------
Net Loss for Year - - - (763) (763)
----------- --------- ---------- ------------- -----------
Balance - December 31, 1995 142,049,012 14,205 717,171 (1,033,040) (301,664)
----------- --------- ---------- ------------- -----------
Net Loss for Year - - - (763) (763)
----------- --------- ---------- ------------- -----------
Balance - December 31, 1996 142,049,012 14,205 717,171 (1,033,803) (302,427)
----------- --------- ---------- ------------- -----------
Net Loss for Year - - - (763) (763)
----------- --------- ---------- ------------- -----------
Balance - December 31, 1997 142,049,012 14,205 717,171 (1,034,566) (303,190)
----------- --------- ---------- ------------- -----------
Net Loss for Year - - - (763) (763)
----------- --------- ---------- ------------- -----------
Balance - December 31, 1998 142,049,012 14,205 717,171 (1,035,329) (303,953)
----------- --------- ---------- ------------- -----------
Net Loss for Year - - - (763) (763)
----------- --------- ---------- ------------- -----------
Balance - December 31, 1999 142,049,012 14,205 717,171 (1,036,092) (304,716)
----------- --------- ---------- ------------- -----------
Net Loss for Year - - - (763) (763)
----------- --------- ---------- ------------- -----------
Balance - December 31, 2000 142,049,012 14,205 717,171 (1,036,855) (305,479)
----------- --------- ---------- ------------- -----------
Net Loss for Year - - - (20,763) (20,763)
----------- --------- ---------- ------------- -----------
Balance - December 31, 2001 142,049,012 14,205 717,171 (1,057,618) (326,242)
----------- --------- ---------- ------------- -----------
Net Loss for Year - - - (12,763) (12,763)
----------- --------- ---------- ------------- -----------
Balance - December 31, 2002 142,049,012 14,205 717,171 (1,070,381) (339,005)
----------- --------- ---------- ------------- -----------
Net Loss for Year - - - (763) (763)
----------- --------- ---------- ------------- -----------
Balance - December 31, 2003 142,049,012 14,205 717,171 (1,071,144) (339,768)
----------- --------- ---------- ------------- -----------
Net Loss for Year - - - (763) (763)
----------- --------- ---------- ------------- -----------
Balance - December 31, 2004 142,049,012 14,205 717,171 (1,071,907) (340,531)
----------- --------- ---------- ------------- -----------
Net Profit for Year - - - 308,031 308,031
----------- --------- ---------- ------------- -----------
Balance - December 31, 2005 142,049,012 14,205 717,171 (763,876) (32,500)
----------- --------- ---------- ------------- -----------
Net Loss for Year - - - (439,285) (439,285)
----------- --------- ---------- ------------- -----------
Balance - December 31, 2006 142,049,012 $ 14,205 $ 717,171 $ (1,203,161) $ (471,785)
=========== ========= ========== ============= ===========
The accompanying notes are an integral part of these financial statements.
F-4
QUIKBYTE SOFTWARE, INC.
(A Development Stage Company)
Statements of Cash Flows
For the Year Ended December 31,
Indirect Method
January 26, 1989
(Inception) to
December 31,
2006 2005 2006
-------------- -------------- -------------
Cash Flows from Operating Activities:
Net Profit (Loss) $ (439,285) $ 308,031 $(1,203,161)
Stock issued for services - - 160,100
Depreciation and amortization - - 53,516
Write down of computer software - - 173,358
Adjustments to reconcile net loss to net cash used
by operating activities
Increase (Decrease) in accounts payable and accrued expenses 439,285 (51,803) 471,785
Increase (Decrease) in interest payable - (9,918) -
(Decrease) in salaries payable - (236,773) -
-------------- -------------- -------------
Net Cash Used by Operating Activities - 9,537 (344,402)
-------------- -------------- -------------
Cash Flows from Investing Activities:
Purchase of property and equipment - - (52,516)
Organizational costs - - (1,000)
Increase in computer software - - (173,359)
-------------- -------------- -------------
Net Cash used in Investing Activities (226,875)
-------------
Cash Flows from Financing Activities:
Proceeds from notes payable - - 9,537
Write off old Notes Payable - (9,537) (9,537)
Proceeds from stock issuance - - 571,277
-------------- -------------- -------------
Net Cash Provided by Financing Activities - (9,537) 571,277
-------------- -------------- -------------
Net Increase in Cash & Cash Equivalents - - -
Beginning Cash & Cash Equivalents - - -
-------------- -------------- -------------
Ending Cash & Cash Equivalents $ - $ - $ -
============== ============== =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for Interest $ - $ - $ -
============== ============== =============
Cash paid for Income Taxes $ - $ - $ -
============== ============== =============
NON-CASH TRANSACTION
Debt forgiveness $ - $ 308,031 $ 308,031
============== ============== =============
The accompanying notes are an integral part of these financial statements.
F-5
Quikbyte Software, Inc.
(A Development Stage Company)
Notes To Financial Statements
December 31, 2006
Note 1 - General:
Nature of Business
QuikByte Software, Inc. (the Company) was incorporated on January 26,
1989 under the laws of the State of Colorado, for the purpose of
developing and marketing computer software. The Company was primarily
engaged in developing Internet commerce solutions and products for
businesses and consumers, and raising equity funding. The Company
ceased operations in 1992 and has since remained inactive.
Going Concern
The accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States,
which contemplates continuation of the Company as a going concern. The
Company has no assets and current liabilities exceed current assets by
$471,785 as of December 31, 2006. Also the Company has suffered losses
of $1,203,161 during the development stage.
The future success of the Company is likely dependent on its ability to
attain additional capital to develop its proposed products and
ultimately, upon its ability to attain future profitable operations.
There can be no assurance that the Company will be successful in
obtaining such financing, or that it will attain positive cash flow
from operations.
Note 2 - Summary of Significant Accounting Policies:
Basis of Presentation - Development Stage Company
The Company has not earned significant revenue from limited principal
operations. Accordingly, the Company's activities have been accounted
for as those of a "Development Stage Enterprise" as set forth in
Financial Accounting Standards Board Statement No. 7 ("SFAS 7"). Among
the disclosures required by SFAS 7 are that the Company's financial
statements be identified as those of a development stage company, and
that the statements of operations, stockholders' equity (deficit) and
cash flows disclose activity since the date of the Company's inception.
Basis of Accounting
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with accounting principles generally
accepted in the United States.
Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management
to make estimates and assumptions that affect certain reported amounts
and disclosures. Accordingly, actual results could differ from those
estimates.
F-6
Quikbyte Software, Inc.
(A Development Stage Company)
Notes To Financial Statements
December 31, 2006
Note 2 - Summary of Significant Accounting Policies: Continued
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considered all
cash and other highly liquid investments with initial maturities of
three months or less to be cash equivalents. At December 31, 2006 the
Company had a $0 cash balance.
Net loss per share
Net loss per share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding for the period.
Other Comprehensive Income
The Company has no material components of other comprehensive income
(loss) and accordingly, net loss is equal to comprehensive loss in all
periods.
Federal Income Taxes
The Company accounts for income taxes under SFAS No 109, which requires
the asset and liability approach to accounting for income taxes. Under
this approach, deferred income taxes are determined based upon
differences between the financial statement and tax bases of the
Company's assets and liabilities and operating loss carryforwards using
enacted tax rates in effect for the years in which the differences are
expected to reverse. Deferred tax assets are recognized if it is more
likely than not that the future tax benefit will be realized.
Note 3 - Income Taxes:
Significant components of the Company's deferred tax liabilities and
assets at December 31, 2006 are as follows:
200
Deferred tax assets:
Net operating loss carryforwards 1,203,161
Valuation allowance for deferred tax assets (1,203,161)
----------
Net deferred tax assets $ 0
=============
At December 31, 2006, the Company had net operating loss carryforwards
of approximately $1,203,161 respectively for federal income tax
purposes. These carryforwards if not utilized to offset taxable income
begin to expire in 2015. Utilization of the net operating loss may be
subject to substantial annual limitation due to the ownership change
limitations provided by the Internal Revenue Code and similar state
provisions. The annual limitation could result in the expiration of the
net operating loss before utilization.
F-7
Quikbyte Software, Inc.
(A Development Stage Company)
Notes To Financial Statements
December 31, 2006
Note 4 - Capital Stock Transactions:
The Company has authorized 100,000,000 shares of Preferred Stock at
$.0001 par value, none have been issued. The Company has authorized
500,000,000 shares of Common Stock at $.0001 par value, there were
142,049,012 shares of Common Stock outstanding at December 31, 2006. No
shares of Common Stock were issued in 2006. See Note 6 - Subsequent
Events.
Note 5 - Financial Accounting Developments:
Recently Issued Accounting Pronouncements
In December 2004, the FASB issued SFAS No. 123R (revised 2004)
"Share-Based Payment" which amends FASB Statement No. 123 and will be
effective for public companies for interim or annual periods beginning
June 15, 2005. The new statement will require entities to expense
employee stock options and other share-based payments. The new standard
may be adopted in one of three ways - the modified prospective
transition method, a variation of the modified transition method or the
modified retrospective transition method. The Company is to evaluate
how it will adopt the standard and the evaluation the effect that the
adoption of SFAS 123R will have on the financial position and results
of operations.
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an
amendment of ARB No. 43, Chapter 4." The statement amends the guidance
in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting
for abnormal amounts of idle facility expense, freight, handling costs
and wasted material (spoilage). Paragraph 5 of ARB No. 43, Chapter 4
previously stated that "under some circumstances, items such as idle
facility expense, excessive spoilage, double freight and rehandling
costs may be so abnormal as to require treatment as current period
charges". SFAS No. 151 requires that those items be recognized as
current-period charges regardless of whether they meet the criterion of
"so abnormal". In addition, this statement requires that allocation of
fixed production overhead to the costs of conversion be based on the
prospectively and are effective for inventory costs incurred during
fiscal years beginning after June 15, 2005, with earlier application
permitted for inventory costs incurred during fiscal years beginning
after the date this Statement is issued. The adoption of SFAS No. 151
does not have an impact on the Company's financial position and results
of operations.
In December 2004, the FASB issued SFAS No. 153, Exchange of
Non-monetary Assets, an amendment of APB Opinion No. 29. The guidance
in APB opinion No. 29, Accounting for Non-monetary Transactions, is
based on the principle that exchange of non-monetary assets should be
measured on the fair value of the assets exchanges. The guidance in
that Opinion, however, included certain exceptions to that principle.
This Statement amends Opinion 29 to eliminate the exception for
non-monetary exchanges of similar productive assets that do not have
commercial substance. A non-monetary has commercial substance if the
future cash flows of the entity are expected to change significantly as
a result of the exchange. SFAS No. 153 is effective for non-monetary
exchanges occurring in fiscal periods beginning June 15, 2005. The
adoption of SFAS No. 153 is not expected to have an impact on the
Company's financial position and results of operations.
F-8
Quikbyte Software, Inc.
(A Development Stage Company)
Notes To Financial Statements
December 31, 2006
Note 5 - Financial Accounting Developments (Cont):
In March 2005, the FASB issued FASB Interpretation No. 47, "Accounting
for Conditional Asset Retirement Obligations" ("FIN 47"). FIN 47
provides guidance relating to the identification of and financial
reporting for legal obligations to perform an asset retirement
activity. The Interpretation requires recognition of a liability for
the fair value of a conditional asset retirement obligation when
incurred if the liability's fair value can be reasonably estimated. FIN
47 also defines when an entity would have sufficient information to
reasonably estimate the fair value of an asset retirement obligation.
The provision is effective no later than the end of fiscal years ending
after December 15, 2005. The Company will adopt FIN 47 beginning the
first quarter of fiscal year 2006 and does not believe the adoption
will have a material impact on its consolidated financial position or
results of operations or cash flows.
In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and
Error Corrections" ("SFAS 154") which replaces Accounting Principles
Board Opinions No. 20 "Accounting Changes" and SFAS No. 3, "Reporting
Accounting Changes in Interim Financial Statements-An Amendment of APB
Opinion No. 28." SFAS 154 provides guidance on the accounting for and
reporting of accounting changes and error corrections. It establishes
retrospective application, or the latest practicable date, as the
required method for reporting a change in accounting principle and the
reporting of a correction of an error. SFAS 154 is effective for
accounting changes and a correction of errors made in fiscal years
beginning after December 15, 2005 and is required to be adopted by the
Company in the first quarter of 2006. The Company is currently
evaluating the effect that the adoption of SFAS 154 will have on its
results of operations and financial condition but does not expect it to
have a material impact.
In June 2005, the Emerging Issues Task Force, or EITF, reached a
consensus on Issue 05-6, Determining the Amortization Period for
Leasehold Improvements, which requires that leasehold improvements
acquired in a business combination purchased subsequent to the
inception of a lease be amortized over the lesser of the useful life of
the assets or a term that includes renewals that are reasonably assured
at the date of the business combination or purchase. EITF 05-6 is
effective for periods beginning after July 1, 2005. We do not expect
the provisions of this consensus to have a material impact on the
financial position, results of operations or cash flows.
In February 2006 the amendment to FASB Statement No 133, Accounting for
Derivative Instruments and Hedging Activities, and No. 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities was issued as SFAS 155, Accounting for Certain Hybrid
Financial Instruments.
This Statement permits fair value remeasurement for any hybrid
financial instrument that contains an embedded derivative that
otherwise would require bifurcation. Clarifies which interest-only
strips and principal-only strips are not subject to the requirements of
Statement 133, establishes a requirement to evaluate interest in
securitized financial assets to identify interests that are
freestanding derivatives or that are hybrid financial instruments that
contain an embedded derivative requiring bifurcation. Clarifies that
concentrations of credit risk in the form of subordination are not
embedded derivatives and amends Statement 140 to eliminate the
prohibition on a qualifying special-purpose entity from holding a
derivative financial instrument that pertains to a beneficial interest
other than another derivative financial instrument.
This Statement is effective for all financial instruments acquired or
issued after the beginning of our first fiscal year that begins after
September 15, 2006.
F-9
Quikbyte Software, Inc.
(A Development Stage Company)
Notes To Financial Statements
December 31, 2006
Note 5 - Financial Accounting Developments (Cont):
The fair value election provided for in paragraph 4(c) of this
Statement may also be applied upon adoption of this Statement for
hybrid financial instruments that had been bifurcated under paragraph
12 of Statement 133 prior to the adoption of this Statement. Earlier
adoption is permitted as of the beginning of our fiscal year, provided
we have not yet issued financial statements, including financial
statements for any interim period, for that fiscal year. Provisions of
this Statement may be applied to instruments that we hold at the date
of adoption on an instrument-by-instrument basis. The Company is
currently reviewing the effects of adoption of this Statement but it is
not expected to have a material impact on our financial statement
In March 2006 the amendment to FASB Statement No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities, with respect to the accounting for separately recognized
servicing assets and servicing liabilities was issued as SFAS 156,
Accounting for Servicing of Financial Assets.
This Statement requires an entity to recognize a servicing asset or
servicing liability each time it undertakes an obligation to service a
financial asset by entering into a servicing contract in certain
situations, requires all separately recognized servicing assets and
servicing liabilities to be initially measured at fair value, if
practicable and permits and entity to choose either the amortization
method or the fair value measurement method for each class of
separately recognized servicing assets and servicing liabilities. At
its initial adoption, permits a one-time reclassification of
available-for-sale securities to trading securities by entities with
recognized servicing rights, without calling into question the
treatment of other available-for-sale securities under Statement 115,
provided that the available-for-sale securities are identified in some
manner as offsetting the entity's exposure to changes in fair value of
servicing assets or servicing liabilities that a servicer elects to
subsequently measure at fair value. Requires separate presentation of
servicing assets and servicing liabilities subsequently measured at
fair value in the statement of financial position and additional
disclosures for all separately recognized servicing assets and
servicing liabilities. .Adoption of this Statement is required as of
the beginning of the first fiscal year that begins after September 15,
2006. The adoption of this statement is not expected to have a material
impact on our financial statement.
Note 6 - Subsequent Events:
Effective January 24, 2007, the Company issued a promissory note in the
amount of $434,385 to Michael A. Littman, Esq. to evidence amounts the
Company owes to him for legal services and cost advances made on behalf
of the Company in connection with the Company's efforts to bring it
current in its reporting obligations under the Exchange Act
Effective January 31, 2007, the Company issued 150,000,000 shares of
its common stock (on a pre-Reverse Split basis) to Ponce Acquisition,
LLC ("Ponce") for $15,000, or $0.0001 per share. The proceeds from this
issuance were used to pay a portion of the costs to bring the Company
current in its reporting obligations under the Exchange Act. Michael A.
Littman, Esq., who is the Company's legal counsel, is the managing
member of Ponce.
F-10
Quikbyte Software, Inc.
(A Development Stage Company)
Notes To Financial Statements
December 31, 2006
Note 6 - Subsequent Events (cont):
On March 2, 2007, the Company amended its Articles of Incorporation to
reduce its authorized capital stock. The amendment reduced the
authorized common stock from 500,000,000 shares, with a par value of
$0.0001 per share, to 250,000,000 shares, with a par value of $0.0001
per share. The amendment also reduced the authorized preferred stock
from 100,000,000 shares, with a par value of $0.0001 per share, to
10,000,000 shares, with a par value of $0.0001 per share.
The amendment also provided for a 1-for-20 reverse stock split
("Reverse Split") of the Company's common stock outstanding on March
16, 2007. No fractional shares of common stock or scrip certificate
therefor were issued to the holders of the shares of common stock by
reason of the foregoing Reverse Split. Any fractions resulting from
the Reverse Split computation will be rounded up to the next whole
share. The total number of shares of common stock that the Company is
authorized to issue remains 250,000,000 shares after the Reverse
Split.
On March 2, 2007, the Company entered into the Purchase Agreement under
which the Company has agreed to sell to a third party purchaser
60,000,000 shares of the Company's Common Stock, on a post-Reverse
Split basis ("Shares") for a purchase price of $600,000 ("Purchase
Price"), or $0.01 per share. The Company has agreed to certain demand
and piggyback registration rights to the purchaser with respect to the
Shares.
In connection with the Purchase Agreement, and as a condition to the
Closing, certain former executive officers and directors of the Company
for all or a portion of the period commencing January 26, 1989 and
ending on or about December 31, 1991 are to terminate any and all
agreements and contracts with the Company and irrevocably release the
Company from any and all debts, liabilities and obligations, pursuant
to the terms and conditions of a certain settlement agreement
("Settlement Agreement") to be executed prior to the Closing. The
Company will pay the Former Principals, at the Closing, an aggregate
cash payment of $30,000. The Former Principals have also agreed to
cancel, and return to the Company, an aggregate of 2,450,000 shares of
common stock, on a post-Reverse Split basis.
In connection with the Purchase Agreement, and as a condition to the
Closing, Ponce Acquisition, LLC ("Ponce") will agree to cancel, and
return to the Company, an aggregate of 7,450,000 shares of common
stock, on a post-Reverse Split basis.
The transactions contemplated under the Purchase Agreement are expected
to be completed on or before March 15, 2007. However, there is no
assurance that the transactions under the Purchase Agreement will be
completed.
F-11
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
QUIKBYTE SOFTWARE, INC.
Date: March 16, 2007 By: /s/ Reed Clayson
----------------
Reed Clayson
President
In accordance with the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on March 14, 2007.
Signatures Title
/s/ Reed Clayson President (Principal Executive Officer),
---------------------
Secretary (Principal Financial and Accounting
Officer) and Director
/s/ Redgie Green Director
/s/ Wesley F. Whiting Director
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