10-K 1 form10k.htm LEAP TECHNOLOGY, INC 10K 12-31-2009 form10k.htm
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________

FORM 10-K
(Mark One)
T  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended December 31, 2009

£  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to __________________

Commission file number: 0-566
LE@P TECHNOLOGY, INC.
(Name of small business issuer in its charter)

DELAWARE
65-0769296
(State or other jurisdiction of Incorporation or organization)
(I.R.S. Employer Identification No.)
   
5601 N. DIXIE HIGHWAY
  
SUITE 411
  
FORT  LAUDERDALE, FLORIDA
33334
(Address of principal executive offices)
(Zip Code)


Registrant’s telephone number:
(954)771-1772
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Class A Common Stock, par value $.01

Indicate by check mark if the registrant is a well-know seasoned issuer, as defined in Rule 405 of the Securities Act.Yes £ No T

Indicate by check whether the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  Yes £ No  T

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   T       No £

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

Indicate by check mark if  disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405) is not contained herein, and will not 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-K or any amendment to this Form 10-K.   Yes T  No £

Indicate by check mark whether the registrant is a large accelerated filer, and accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  Check one:

Large accelerated filer
£
Accelerated filer
£
Non-accelerated filer
£
Smaller reporting company  
T

Indicate by checkmark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes £ No T

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter was $99,898.  Reference is made to the response to Item 5 of this Annual Report.
 
 
 
 

The number of shares of Class A Common Stock of the issuer outstanding as of March 29, 2010 was 65,195,909.  The number of shares of Class B Common Stock of the issuer outstanding as of March 29, 2010 was 25,000.

The number of shares of Series B Preferred Stock of the issuer and outstanding as of March 29, 2010 was 2,170.


DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).


Certain portions of the issuer Proxy Statement for its Annual Meeting of Stockholders pursuant to Regulation 14A of the Securities Exchange Act of 1934, which will be filed with the Commission subsequent to the date hereof, are incorporated by reference into Part III of this Form 10-K.

 
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Le@P Technology, Inc.
FORM 10-K INDEX

10-K - YEAR END REPORT
PAGE
     
PART I
  
     
ITEM 1.
5
     
ITEM 1A.
5
     
ITEM 2.
5
     
ITEM 3.
6
     
PART II
  
     
ITEM 5.
6
     
ITEM 7.
7
     
ITEM 7A.
9
     
ITEM 8.
10
     
ITEM 9.
10
     
ITEM 9A.
10
     
ITEM 9B.
  
     
PART III
  
     
ITEM 10.
11
     
ITEM 11.
11
     
ITEM 12.
11
     
ITEM 13.
11
     
ITEM 14.
11
     
PART IV
  
     
ITEM 15.
11
     
SIGNATURES  
EX-31.1 – CERTIFICATION
  
EX-32.1 - CERTIFICATION  
 
 
3

FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report on Form 10-K, other than purely historical information, including estimates, projections, statements relating to the business plans, objectives and expected operating results of Le@P Technology, Inc., and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause the actual results to differ materially from these forward-looking statements.  Le@P Technology, Inc. undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

 
4

PART I

 
ITEM 1.
BUSINESS

History of Le@P Technology, Inc.

The Company was organized in March 1997 under the laws of the State of Delaware under the name “Seal Holdings Corporation”.  In June 1997, the Company effected a reincorporation merger pursuant to which Seal Fleet, Inc., a Nevada corporation and the predecessor to the Company (“Seal Fleet”), was merged into the Company.  Seal Fleet was originally incorporated in November 1969 under the name “First National Corporation”.  On April 2, 1999 the Company changed its name to “OH, Inc.” and on July 5, 2000, again changed its name to “Le@P Technology, Inc.”  When used in this report, the terms “Le@P” and the “Company” refer to Le@P Technology, Inc, its predecessors described above and their respective subsidiaries.

Development of Business since January 1, 2008

The current and prevailing environment in the U.S. economy and credit markets have not allowed the Company to obtain the financing required to consummate an acquisition, and on May 22, 2009, the Board of Directors determined to cease for the foreseeable future investigating or seeking to consummate further investment and acquisition opportunities.

Notwithstanding the cessation of its activities in pursuing and seeking to consummate acquisition or investment opportunities, the Company may from time to time consider investment or acquisition opportunities which otherwise come to the attention of the Board.  The ability of the Company to pursue and ultimately consummate any such investment or acquisition opportunities will be dependent upon, among other things, the Company’s ability to obtain financing for such activities.

Employees

Le@P currently has one part-time employee.

 
ITEM 1A.

As a smaller reporting company, the Company is not required to provide the information of this item.

 
ITEM 2.
PROPERTIES

Le@P is leasing corporate offices located in Ft. Lauderdale, Florida from an unrelated party.  The lease was effective April 1, 2007, and provides for a term of one year, subject to two one-year extension options.  The Company exercised the second one-year extension option on April 1, 2009, and has monthly rental payments of approximately $4,400.

Investment in Real Property

The Company owns real property in Broward County, Florida (the “Real Property”) that was purchased from Bay Colony Associates, Ltd. (“Bay Colony”), an entity wholly-owned by an affiliate of its majority shareholder, M. Lee Pearce, M.D. (together with his affiliates, the “Majority Shareholder”) in exchange for a mortgage and note payable in the amount of $562,500.  The purchase price was based upon an independent third-party appraisal.  The long-term note and mortgage on the real property was replaced with a new long term-note with principal of the same amount on March 17, 2006 and then again on January 15, 2010.  The note bears interest at the rate of 7% per annum.  Both principal and interest are due on the extended maturity date of January 8, 2011.

The Real Property is zoned light industrial and consists of approximately one and one-third acres.  The Company leases the property to unrelated parties and recognized $43,400 and $26,550 in rental income under the leases for the years 2009 and 2008, respectively.

 
5

ITEM 3.
LEGAL PROCEEDINGS

From time to time, the Company is party to business disputes arising in the normal course of its business operations.  The Company’s management believes that none of these actions, standing alone, or in the aggregate, is currently material to the Company’s operations or financial condition.

As of December 31, 2009, the Company is not involved in any material claims or lawsuits.

PART II

ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

The Company’s Class A Common Stock is traded on the OTC Bulletin Board (“OTCBB”), under the symbol LPTC.  The following table sets forth the range of high and low bid prices per share of the Company’s Class A Common Stock for each of the quarters during the years ended December 31, 2008 and 2009, as reported on the OTCBB system.  The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

PRICE PERIOD
  
HIGH
    
LOW
  
             
2008
            
First Quarter
   $ .25     $ .10  
Second Quarter
     .12       .11  
Third Quarter
     .12       .06  
Fourth Quarter
     .10       .05  
                 
2009
                
First Quarter
   $ .00     $ .00  
Second Quarter
     .15       .026  
Third Quarter
     .04       .0352  
Fourth Quarter
     .04       .03  


There is no public market for the Class B Common Stock or the Series B Preferred Stock, all of which are issued to entities beneficially owned by the Majority Stockholder.

Holders

The Company has 641 Class A Common stockholders of record as of March 29, 2010.

The Company has 1 Class B Common stockholder of record as of March 29, 2010.  The Company has 1 Series B Preferred stockholder of record as of March 29, 2010.

Dividends

The Company has not paid dividends on our common stock in fiscal 2009 or fiscal 2008.  The payment of cash dividends will depend upon our earnings, financial requirements and other relevant factors.  Payments of dividends on the Company’s Class A Common Stock may only be paid after the payment of current and accumulated dividends on the Company’s Series B Preferred Stock.  As of December 31, 2009, dividends of $2,236,500 were accumulated on the Series B Preferred Stock.  Management does not presently intend to pay cash dividends.

Equity Compensation Plan Information

The following table sets forth summary information regarding options granted and outstanding under equity compensation plans approved and not approved by the Company’s stockholders.  As of December 31, 2009, options to purchase 52,500 shares of Class A Common Stock were exercisable.

 
6
 
Plan Category
  
Number of securities to be issued upon exercise of outstanding options, warrants and rights
    
Weighted average exercise price of outstanding options, warrants and rights
    
Number of securities remaining available for future issuance
  
Equity compensation plans approved by security holders
     52,500     $ 3.00       10,047,500  
Equity compensation plans not approved by security holders
     -       -       -  
TOTAL
     52,500     $ 3.00       10,047,500  


Unregistered Sales and Repurchases by Company

During the year ended December 31, 2009, there were no equity securities sold by the Company that were not registered under the Securities Act of 1933, as amended.  During the fourth quarter of 2009, there were no repurchases of securities by the Company.

ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our consolidated financial statements and related notes contained in Item 8 of this report Form 10-K:

Business Strategy

On November 1, 2006, the Company appointed Dr. Donald J. Ciappenelli as the Chief Executive Officer of the Company and Chairman of its Board of Directors.  In the latter part of 2006 and throughout 2007 and 2008, the Company vigorously attempted to pursue its strategy of acquiring and commercializing synergistic technologies to develop advanced products, and decided to open an office in Massachusetts to maximize the Company’s opportunities to find and develop new technologies and start-up companies that fit its business model for rapid growth in important markets.   The current and prevailing environment in the U.S. economy and credit markets did not allow the Company to obtain the financing required to consummate an acquisition, and on May 22, 2009, the Board of Directors determined to cease for the foreseeable future investigating or seeking to consummate further investment and acquisition opportunities, and Dr. Ciappenelli agreed to terminate his employment as the Company’s Chief Executive Officer.  On November 2, 2009, he resigned as the Company’s Chairman of the Board.

Notwithstanding the cessation of its activities in pursuing and seeking to consummate acquisition or investment opportunities, the Company may from time to time consider investment or acquisition opportunities which otherwise come to the attention of the Board.  The ability of the Company to pursue and ultimately consummate any such investment or acquisition opportunities will be dependent upon, among other things, the Company’s ability to obtain financing for such activities.

Company Liquidity and Cash Requirements

The Company has exhausted its liquid cash resources.  The Company’s cash and cash equivalents, aggregating to $15,090 as of December 31, 2009, will not be sufficient to cover the current levels of operating expenses.  Therefore, the Company entirely depends upon continued working capital advances from its Majority Shareholder.  The Company’s condensed consolidated financial statements for the twelve months ended December 31, 2009 have been prepared on a going-concern basis, which contemplates the realization of assets and liabilities in the normal course of business.  The Company’s audited financial statements as of December 31, 2008 included a “going concern” qualification, and the Company’s 2009 audited financial statement continue in effect this going concern qualification.  The Company is continuing to pursue additional funding or investment, and will also actively seek to further reduce operating expenses.

 
7

Because the Company expects to exhaust its cash resources in 2010, and does not have any active business operations to generate cash flow to fund its operations, the Company will need to raise additional cash or cease operations and liquidate.  There can be no assurance that the Company will be successful in raising additional cash or avoiding a liquidation.  The worldwide markets for debt and equity remain unfavorable and depressed, which has complicated and continues to hinder the Company’s efforts to obtain financing.  The Company has requested that the Majority Shareholder provide additional financing for the Company’s current operations. On June 15, 2009 the Company received a working capital loan from the Majority Shareholder in the amount of $25,000, and on September 1, 2009 the Company received a second working capital loan of $55,000.  Both loans are unsecured and evidenced by promissory notes which accrue interest at the prime rate.  Interest and principal are due in one lump sum on the maturity date of January 8, 2011.  Subsequent to December 31, 2009, the Company received two additional working capital loans.   On February 22, 2010 the Company received a working capital loan from the Majority Shareholder in the amount of $15,000, and on March 3, 2010 the Company received a second working capital loan of $130,000.  Both loans are unsecured and evidenced by promissory notes which accrue interest at the prime rate.  Interest and principal are due in one lump sum on the maturity date of January 8, 2011 for the $15,000 loan and January 8, 2012 for the $130,000 loan.

The Majority Shareholder has no commitment or obligation to provide such additional financing.  If the Majority Shareholder, in its discretion, provides such financing, there is no assurance that the Majority Shareholder will continue to do so in the future or regarding the terms of any such financing that the Majority Shareholder may elect to provide to the Company.  The Company’s efforts to obtain financing may require significant costs and expenditures, and if the Company succeeds in obtaining financing, the financing terms could result in substantial dilution of existing equity positions and increased interest expense.

Our auditors have issued a “going concern” opinion on our audited financial statements.  This means that there is substantial doubt that we can continue as an on-going business for the next year unless we can succeed in obtaining additional financing to pay our bills.  The Company has no operating revenues and its strategy of seeking to acquire a start up business is not designed to generate any such revenues in the near future.

The Company’s continued existence, therefore, depends entirely upon obtaining additional financing in the form of debt or equity for which it has no present commitments.  If the Company does not succeed in raising additional financing, it will be forced to cease operations, terminate its reporting as a public company and ultimately, liquidate or dissolve, resulting in the loss of equity investments in the Company.

Changes in Financial Condition and Results of Operations

The discussion below describes the Company’s material changes in financial condition as of December 31, 2009 compared with December 31, 2008 and its material changes in results of operations when comparing the year ended December 31, 2009 to the year ended December 31, 2008.   All amounts in the discussion below are approximate.

Financial Condition at December 31, 2009 Compared to December 31, 2008

The Company’s total assets decreased to $559,000 as of December 31, 2009 compared to $914,000 as of December 31, 2008.  The decrease is primarily due to the Company’s operating expenses of approximately $398,000 during 2009.  The Company’s remaining cash assets will not be adequate to fund its operations through the end of 2010.

The Company’s total liabilities increased to approximately $866,000 as of December 31, 2009 compared to $776,000 as of December 31, 2008.  This increase in liabilities primarily reflects an increase of $80,000 in long term notes payable and an increase of $40,000 in accrued interest payable.

 
8

Results of Operations for the Year Ended December 31, 2009 (“fiscal 2009”) Compared to the Year Ended December 31, 2008 (“fiscal 2008”)

The Company’s operating expenses for fiscal 2009 were $398,000 compared to $1,395,000 for fiscal 2008, a decrease of approximately $997,000 or 71.5%.  The Company’s operating expenses in 2008 included expenditures (primarily, professional fees) associated with pursuing acquisition opportunities of approximately $235,000. The Company expensed these amounts before the current and prevailing environment in the US economy and credit markets made the Company unable to obtain the financing required to consummate an acquisition, and the decrease in expenses in 2009 reflects the cessation of those activities in light of the present continuing negative market conditions.   The decrease in operating expenses primarily reflects the decrease in salaries and benefits of $648,000 due to the resignation of the Vice-President in December 2008, and the voluntary termination of the Chief Executive Officer in May 2009.  In addition, professional fees decreased by approximately $312,000 and other operating expenses decrease by approximately $55,000.

The Company’s net loss for fiscal 2009 was $393,000 compared to a net loss of $1,382,000 for fiscal 2008.  The Company’s net loss for fiscal 2009 primarily reflects operating expenses of $398,293 (including a write-down to share based compensation of $51,728 as a result of the Chief Executive Officer’s departure in May 2009).

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and the disclosure of contingencies.  Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be materially different from those estimates.  The following policies are those that we consider to be the most critical.  See Note 1, “Summary of Significant Accounting Policies,” for further description of these and all other accounting policies.

Accounting for the Impairment or Disposal of Long-Lived Assets

The Company reviews the carrying value of amortizable long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to the undiscounted future net cash flows expected to be generated by the asset. If facts and circumstances indicate that the carrying value of an asset or groups of assets, as applicable, is impaired, the long-lived asset or groups of long-lived assets are written down to their estimated fair value.

Recent Accounting Pronouncements

See Note 1, “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements for a discussion of recent accounting pronouncements and their effect, if any, on the Company.

Off-Balance Sheet Arrangements

As of December 31, 2009, the Company did not have any material off-balance sheet arrangements that have or are reasonably likely to have a material effect on the current or future financial condition, results of operations, liquidity, or capital resources.

Note that this MD & A discussion contains forward-looking statements that involve risks and uncertainties.  Please see the section entitled “Forward-Looking Statements” on page 4 for important information to consider when evaluating such statements and related notes included in Item 8.

ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a smaller reporting company, the Company is not required to provide the information of this item.

 
9

ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The accompanying consolidated financial statements of the Company and report of independent registered public accounting firm required by this item are filed herewith as Exhibit F and are incorporated herein by this reference.

ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A(T).
CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

(a)The Company maintains a system of disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act).   As required by Rule 13a-15(b) under the Exchange Act, management of the Company, under the direction of the Company’s Acting Principal Executive Officer and Acting Principal Financial Officer, reviewed and performed an evaluation of the effectiveness of design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2009.  Based on that review and evaluation, the Acting Principal Executive Officer and Acting Principal Financial Officer, along with the management of the Company, have determined that as of December 31, 2009, the disclosure controls and procedures are effective.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of those internal controls.  As defined by the SEC, internal control over financial reporting is a process designed by our Acting Principal Executive Officer and Acting Principal Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements in accordance with U.S. generally accepted accounting principles.

Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2009.  In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.  Based on our assessment and those criteria, we have concluded that our internal control over financial reporting was effective as of December 31, 2009.  This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting or in other factors identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the fourth quarter ended December 31, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.
OTHER INFORMATION

None.

 
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PART III

ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Given that the Company is not presently engaged in active operations and has only one part time executive officer, the Company has not yet adopted a Code of Ethics applicable to its officers, including its principal executive officer, principal financial officer, principal accounting officer or controller and any other persons performing similar functions.  Except as provided above, the items required by Part III, Item 10 are incorporated herein by reference from the Company’s Proxy Statement for its 2010 Annual Meeting of Shareholders.

ITEM 11.
EXECUTIVE COMPENSATION

The items required by Part III, Item 11 are incorporated herein by reference from the Company’s Proxy Statement for its 2010 Annual Meeting of Shareholders.

ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The items required by Part III, Item 12 are incorporated herein by reference from the Company’s Proxy Statement for its 2010 Annual Meeting of Shareholders.

ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTORS INDEPENDENCE

The items required by Part III, Item 13 are incorporated herein by reference from the Company’s Proxy Statement for its 2010 Annual Meeting of Shareholders.

ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES

The items required by Part III, Item 14 are incorporated herein by reference from the Company’s Proxy Statement for its 2010 Annual Meeting of Shareholders.

PART IV

ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)(1)
Financial Statements

 
Reference is made to the Index set forth on Page F-1 of this Annual Report on Form 10-K.

(a)(2)
Financial Statement Schedules

All schedules have been omitted because they are inapplicable or the information is provided in the consolidated financial statements, including the notes thereto.

(a)(3)
Exhibits

 
11
 
EXHIBIT
DESCRIPTION
   
3.1.1
Certificate of Incorporation of Le@P Technology, Inc., filed March 20, 1997 with the Delaware Secretary of State (incorporated by reference to Appendix B to the Company’s Definitive Proxy Statement for the Annual Meeting of Stockholders, as filed with the Securities Exchange Commission (the “SEC”) April 11, 1997).
   
3.1.2
Certificate of Ownership and Merger of Seal Holdings Corporation filed with the Delaware Secretary of State on June 13, 1997 (incorporated by reference to Exhibit 3.1.2 to the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2005, as filed with the SEC on March 27, 2006).
   
3.1.3
Certificate of Preferred Stock Designation of Le@P Technology, Inc. filed with the Delaware Secretary of State on March 23, 1999 (incorporated by reference to Exhibit 3.3 to the Company’s Current Report on Form 8-K, as filed with the SEC on April 19, 1999).
   
3.1.4
Certificate of Amendment to Certificate of Incorporation of Le@P Technology, Inc. filed June 21, 1999 with the Delaware Secretary of State (incorporated by reference to Exhibit 3.1.3 to the Company’s Annual Report on Form 10-KSB for the year ended December 31, 1999, as filed with the SEC on March 30, 2000).
   
3.1.5
Certificate of Designation, Preferences, Rights and Limitations of 10% Cumulative Non-Voting Series B Preferred Stock of Le@P Technology, Inc. filed with the Delaware Secretary of State on November 15, 1999 (incorporated by reference to Exhibit 4 to the Company’s Quarterly Report on Form 10-QSB for the quarter ended September 30, 1999, as filed with the SEC on November 15, 1999).
   
3.1.6
Certificate of Amendment to Certificate of Incorporation of Le@P Technology, Inc. filed July 5, 2000 with the Delaware Secretary of State (incorporated by reference to Exhibit 3 to the Company’s Quarterly Report on Form 10-QSB for the quarter ended June 30, 2000, as filed with the SEC on August 14, 2000).
   
3.2
Bylaws of Le@P Technology, Inc.(incorporated by reference to Appendix C to the Company’s Proxy Statement for the Annual Meeting of Shareholders of Le@P Fleet, Inc. held May 14, 1997, as filed with the SEC on April 11, 1997).
   
10.1
Funding Arrangement by M. Lee Pearce, M.D. (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on October 15, 1999).
   
10.2
Subscription Agreement dated March 30, 2000 with M. Lee Pearce, M.D. (incorporated by reference to Exhibit 10.2 in the Company’s Annual Report on From 10-KSB for the fiscal year ended December 31, 2000, as filed with the SEC on March 30, 2001).
   
10.3
1999 Long Term Incentive Plan (incorporated by reference to Exhibit B to the Company’s Definitive Proxy Statement for its Annual Meeting of Stockholders as filed with the SEC on June 4, 1999).
   
10.4
1998 Incentive Option Plan (incorporated by reference to Exhibit A to the Company’s Definitive Proxy Statement for its Annual Meeting of Stockholders as filed with the SEC on June 8, 1998).
   
10.5
1997 Incentive Option Plan (incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement for its Annual Meeting of Shareholders as filed with the SEC on April 11, 1997).

 
12
 
10.6
Amended 1996 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company’s Form 10-Q for the quarter ended March 31, 1997 as filed with the SEC on May 15, 1997).
   
10.7
Promissory Note dated September 28, 2001, in the principal amount of $712,500, executed by Parkson Property LLC (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K as filed with the SEC on October 18, 2001).
   
10.8
Promissory Note dated November 5, 2002, in the principal amount of $1,755,710, issued to the M. Lee Pearce 1998 Irrevocable Trust, replacing certain promissory notes issued in 2001 and 2002 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-QSB for the quarter ended September 30, 2002, as filed with the SEC on November 14, 2002).
   
10.9
Promissory Note dated January 30, 2003, in the principal amount of $65,000 issued to the M. Lee Pearce 1998 Irrevocable Trust (incorporated by reference to Exhibit 10.18 in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002 as filed with the SEC on March 31, 2003).
   
10.10
Promissory Note dated March 14, 2003, in the principal amount of $75,000 issued to the M. Lee Pearce 1998 Irrevocable Trust (incorporated by reference to Exhibit 10.19 in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002, as filed with the SEC on March 31, 2003).
   
10.11
Promissory Note dated April 23, 2003, in the principal amount of $55,000 issued to the M. Lee Pearce 1998 Irrevocable Trust (incorporated by reference to Exhibit 10.1 in the Company’s Quarterly Report on Form 10-QSB for the quarter ended March 31, 2003, as filed with the SEC on May 15, 2003).
   
10.12
Written Consent to Action dated May 6, 2003 extending the due date of a note to January 15, 2005 (incorporated by reference to Exhibit 10.2 in the Company’s Quarterly Report on Form 10-QSB for the quarter ended March 31, 2003, as filed with the SEC on May 15, 2003).
   
10.13
Promissory Note dated June 30, 2003, in the principal amount of $71,000 issued to the M. Lee Pearce 1998 Irrevocable Trust (incorporated by reference to Exhibit 10.1 in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 as filed with the SEC on August 8, 2003).
   
10.14
Promissory Note dated July 24, 2003, in the principal amount of $80,000 issued to the M. Lee Pearce 1998 Irrevocable Trust (incorporated by reference to Exhibit 10.2 in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 as filed with the SEC on August 8, 2003).
   
10.15
Promissory Note dated November 3, 2003, in the principal amount of $37,000 issued to M. Lee Pearce, M.D. (incorporated by reference to Exhibit 10.22 in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003, as filed with the SEC on March 22, 2004).
   
10.16
Promissory Note dated December 8, 2003, in the principal amount of $30,000 issued to M. Lee Pearce, M.D. (incorporated by reference to Exhibit 10.23 in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003, as filed with the SEC on March 22, 2004).
   
10.17
Promissory Note dated December 29, 2003, in the principal amount of $25,000 issued to M. Lee Pearce, M.D. (incorporated by reference to Exhibit 10.24 in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003, as filed with the SEC on March 22, 2004).
   
10.18
Promissory Note dated March 11, 2004, in the principal amount of $2,295,464 issued to the M. Lee Pearce 1998 Irrevocable Trust (incorporated by reference to Exhibit 10.25 in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003 as filed with the SEC on March 22, 2004).

 
13
 
10.19
Promissory Note dated March 11, 2004, in the principal amount of $93,022 issued to M. Lee Pearce, M.D.(incorporated by reference to Exhibit 10.26 in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003 as filed with the SEC on March 22, 2004).
   
10.20
Promissory Note dated March 12, 2004, in the principal amount of $38,000 issued to M. Lee Pearce M.D. (incorporated by reference to Exhibit 10.27 in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2003 as filed with the SEC on March 22, 2004).
   
10.21
Promissory Note dated April 14, 2004, in the principal amount of $126,000 issued to M. Lee Pearce, M.D.(incorporated by reference to Exhibit 10.28  in the Company’s Quarterly Report on Form 10-QSB for the quarter ended March 31, 2004, as filed with the SEC on May 12, 2004).
   
10.22
Promissory Note dated July 6, 2004, in the principal amount of $23,000 issued to M. Lee Pearce, M.D. (incorporated by reference to Exhibit 10.1 in the Company’s Quarterly Report on Form 10-QSB for the quarter ended June 30, 2004, as filed with the SEC on August 13, 2004).
   
10.23
Promissory Note dated August 6, 2004, in the principal amount of $35,000 issued to M. Lee Pearce, M.D. (incorporated by reference to Exhibit 10.1 in the Company’s Quarterly Report on Form 10-QSB for the quarter ended September 30, 2004, as filed with the SEC on November 15, 2004).
   
10.24
Promissory Note dated October 11, 2004, in the principal amount of $140,000 issued to M. Lee Pearce, M.D. (incorporated by reference to Exhibit 10.2 in the Company’s Quarterly Report on Form 10-QSB for the quarter ended September 30, 2004, as filed with the SEC on November 15, 2004).
   
10.25
Promissory Note dated November 18, 2004, in the principal amount of $29,000 issued to M. Lee Pearce, M.D. (incorporated by reference to Exhibit 10.32 in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004, as filed with the SEC on March 30, 2005).
   
10.26
Promissory Note dated December 2, 2004, in the principal amount of $35,000 issued to M. Lee Pearce, M.D. (incorporated by reference to Exhibit 10.33 in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004, as filed with the SEC on March 30, 2005).
   
10.27
Stock Exchange and Merger Agreement dated as of January 7, 2005 among Healthology, Inc., iVillage, Inc., Virtue Acquisition Corporation and certain stockholders of Healthology, Inc., including the Company (incorporated by reference to Exhibit 10.34 in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004, as filed with the SEC on March 30, 2005).
   
10.28
Stock Purchase Agreement dated as of January 7, 2005 between the Company and Steven Haimowitz (incorporated by reference to Exhibit 10.35 in the Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004, as filed with the SEC on March 30, 2005).
   
10.29
Exchange and Termination Agreement dated March 17, 2006, effective as of March 15, 2006, between Le@P Technology, Inc. and the M. Lee Pearce 2005 Irrevocable Trust (incorporated by reference to Exhibit 10.1 in the Company’s Current Report on Form 8-K as filed with the SEC on March 21, 2006).
   
10.30
Fairness Opinion dated March 15, 2006 issued by Stenton Leigh Valuation Group, Inc. on March 16, 2006 (incorporated by reference to Exhibit 10.2 in the Company’s Current Report on Form 8-K as filed with the SEC on March 21, 2006).

 
14
 
10.31
Promissory Note dated March 17, 2006 in the principal amount of $562,500 executed by Parkson Property, LLC in favor of Bay Colony Associates, Ltd. (incorporated by reference to Exhibit 10.3 in the Company’s Current Report on Form 8-K as filed with the SEC on March 21, 2006).
   
10.32
Employment Agreement, dated as of November 1, 2006 by and between Le@P Technology, Inc. and Dr. Donald J. Ciappenelli (incorporated by reference to Exhibit 10.1 in the Company’s Current Report on Form 8-K as filed with the SEC on November 3, 2006)
   
10.33
Employment Agreement, dated as of March 5, 2007 by and between Le@P Technology, Inc. and Dr. Howard Benjamin. (incorporated by reference to Exhibit 10.33 in the Company’s Form 10 KSB as filed with the SEC on March 30, 2007)
   
10.34
Renewal Promissory Note dated as of October 24, 2007 in the principal amount of $562,500 executed by Parkson, LLC in favor of Bay Colony Associates, Ltd. (incorporated by reference to Exhibit 10.1 in the Company’s Current Report on Form 8-K as filed with the SEC on October 25, 2007).
   
10.35
Promissory Note dated June 15, 2009 in the principal amount of $25,000 in favor of M. Lee Pearce Living Trust (incorporated by reference to Exhibit 10.27 in the Company’s Form 10 Q as filed on August 22, 2009).
   
10.36
Promissory Note dated September 1, 2009 in the principal amount of $55,000 in favor of M. Lee Pearce Living Trust (incorporated by reference to Exhibit 10.28 in the Company’s Form 10 Q as filed on November 12, 2009).
   
Subsidiaries of the Registrant.
   
Certification of the Acting Principal Financial Officer  to Section 302 of the Sarbanes-Oxley Act of 2002.*
   
Certification of the Acting Principal Financial Officer Report pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
Certification  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 
(b)
Filed herewith

Report of  Form 8-K filed on May 26, 2009, relating to an event dated May 22, 2009.  Pursuant to Item 5.02 of such Report, the Registrant reported the resignation of the Registrant’s President and Chief Executive Officer.

Report of  Form 8-K filed on  November 3, 2009, relating to an event dated November 2, 2009.  Pursuant to Item 5.02 of such Report, the Registrant reported the resignation of the Registrant’s Chairman of the Board.

Report of Form 8-K filed on January 19, 2010, relating to an event dated January 15, 2010.  Pursuant to Item 1.01 of such Report, the Registrant reported the renewal of a promissory note to Bay Colony Associates, Ltd.

21
Subsidiaries of the Registrant.

31.1
Certification of the Acting Principal Financial Officer  to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2
Certification of the Acting Principal Financial Officer Report pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32
Certification  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 
15

SIGNATURES

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


 
LE@P TECHNOLOGY, INC.
     
 
By:
/s/Timothy Lincoln
   
Timothy Lincoln,
   
Acting Principal Executive Officer
     
     
 
By:
/s/ Mary E. Thomas
   
Mary E. Thomas,
   
Acting Principal Financial Officer


Dated:   March 29, 2010

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

SIGNATURE
TITLE
DATE
     
/s/ Timothy Lincoln
Acting Principal Executive Officer and Director
March 29, 2010
Timothy Lincoln
    
     
/s/ Mary E. Thomas
Acting Principal Financial Officer and Director
March 29, 2010
Mary E. Thomas
    
     
/s/ Jerome Fields, M.D.
Director
March 29, 2010
Jerome Fields, M.D.
    

 
16

“Exhibit F”

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Le@P Technology, Inc. and Subsidiaries
PAGE
   
Report of Independent Registered Public Accounting Firm
F-2
   
Consolidated Balance Sheets as of December 31, 2009 and 2008
F-3, F-4
   
Consolidated Statements of Operations for the years ended December 31, 2009 and 2008
F-5
   
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2009 and 2008
F-6
   
Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008
F-7
   
Notes to Consolidated Financial Statements
F-8 – F-16

 
F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Le@P Technology, Inc.

We have audited the accompanying consolidated balance sheets of Le@P Technology, Inc. and Subsidiaries, a Delaware corporation, as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board of the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included the consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by the 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Le@P Technology, Inc. and Subsidiaries as of December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying consolidated financial statements, the Company has significant net losses and cash flow deficiencies. Those conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding those matters are described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.


/s/ Berenfeld, Spritzer, Shechter & Sheer, LLP
Certified Public Accountants
Fort Lauderdale, Florida

March 29, 2010

 
F-2

Le@P Technology, Inc. and Subsidiaries

Consolidated Balance Sheets

   
December 31,
  
   
2009
   
2008
 
Assets
            
Current assets:
            
Cash and cash equivalents
   $ 15,090     $ 359,032  
Accounts receivable
     3,706       478  
Prepaid expenses and other current assets
     7,845       8,087  
Total current assets
     26,641       367,597  
                 
                 
Property and equipment, net
     512,837       514,196  
Other assets
     19,185       31,842  
Total assets
   $ 558,663     $ 913,635  

See notes to consolidated financial statements.

 
F-3

Le@P Technology, Inc. and Subsidiaries

Consolidated Balance Sheets

   
December 31,
  
   
2009
   
2008
 
Liabilities and stockholders’ equity
            
Current liabilities:
            
Accounts payable
   $ 12,542     $ 11,288  
Accrued professional fees
     55,250       58,204  
Accrued compensation and related liabilities
     5,460       33,889  
Total current liabilities
     73,252       103,381  
                 
Long-term notes payable to related party
     642,500       562,500  
                 
Long-term accrued interest payable to related party
     150,449       110,034  
                 
Total liabilities
     866,201       775,915  
                 
Commitments and contingencies
                
                 
Stockholders’ equity (deficiency):
                
Preferred stock, par value $0.001 per share.  Authorized 25,000,000 shares.  Issued and outstanding 2,170 shares at December 31, 2009 and 2008.
     2,170,000       2,170,000  
Class A common stock, $0.01 par value 149,975,000 shares authorized and 65,280,759 shares issued at December 31, 2009 and December 31, 2008.
     652,808       652,808  
Class B common stock, $0.01 par value per share.  Authorized, issued and outstanding 25,000 shares at December 31, 2009 and 2008.
     250       250  
Additional paid-in capital
     35,981,387       36,033,115  
Accumulated deficit
     (39,062,523 )     (38,668,993 )
Treasury stock, at cost, 84,850 shares at December 31, 2009 and 2008
     (49,460 )     (49,460 )
                 
Total stockholders’ equity  (deficiency)
     (307,538 )     137,720  
Total liabilities and stockholders’ equity (deficiency)
   $ 558,663     $ 913,635  

See notes to consolidated financial statements.

 
F-4

Le@P Technology, Inc. and Subsidiaries

Consolidated Statements of Operations

   
Years ended December 31,
  
   
2009
   
2008
 
Revenue
   $ –     $ –  
                 
General and administrative expenses:
                
Salaries and benefits
     184,204       831,857  
Share-based compensation expense
     (51,728 )     (69,498 )
Professional fees
     117,095       428,914  
Other
     148,722       203,375  
                 
Total general and administrative expenses
     398,293       1,394,648  
                 
Other income (expenses):
                
Interest expense
     (40,415 )     (39,483 )
Interest income
     1,778       23,524  
Rental income
     43,400       26,550  
Other income
     -       2,332  
                 
Total other income (expenses)
     4,763       12,923  
                 
Loss before income taxes
     (393,530 )     (1,381,725 )
                 
Provision for income taxes
     -       -  
                 
Net loss
     (393,530 )     (1,381,725 )
                 
Dividends undeclared on cumulative preferred stock
     217,000       217,000  
                 
Net loss attributable to common stockholders
   $ (610,530 )     (1,598,7255 )
                 
Basic and diluted net loss per share:
                
Net loss per common share:
   $ (0.01 )   $ (0.02 )
Net loss attributable to common stockholders
   $ (0.01 )   $ (0.02 )
                 
                 
Basic weighted average shares outstanding
     65,305,759       65,305,759  
Diluted weighted average shares outstanding
     65,305,759       65,305,759  

See notes to consolidated financial statements.

 
F-5

Le@P Technology, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity

   
Preferred Stock
    
Class A and Class B
Common Stock
    
Additional Paid-in
    
Accumulated
    
Treasury
    
Total
  
   
Shares
    
Amount
    
Shares
    
Par Value
    
Capital
    
Deficit
    
Stock
        
Balance at December 31, 2007
     2,170     $ 2,170,000       65,305,759     $ 653,058     $ 36,102,613     $ (37,287,268 )   $ (49,460 )   $ 1,588,943  
                                                                 
Net loss
     -       -       -       -       -       (1,381,725 )     -       (1,381,725 )
                                                                 
Share-based compensation on stock options
                                     164,322                       164,322  
                                                                 
Forfeited stock options reduction to share-based compensation
                                     (233,820 )                     (233,820 )
                                                                 
Balance at December 31, 2008
     2,170       2,170,000       65,305,759       653,058       36,033,115       (38,668,993 )     (49,460 )     137,720  
                                                                 
Net loss
                                             (393,530 )             (393,540 )
                                                                 
Forfeited stock options reduction to share-based compensation
                                     (51,728 )                     (51,728 )
                                                                 
Balance at December 31, 2009
     2,170     $ 2,170,000       65,305,759     $ 653,058     $ 35,981,387     $ (39,062,523 )   $ (49,460 )   $ (307,538 )

See notes to consolidated financial statements

 
F-6

Le@P Technology, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

   
Years ended December 31,
  
   
2009
   
2008
 
Cash flows from operating activities:
            
Net loss
   $ (393,530 )   $ (1,381,725 )
Adjustments to reconcile net loss to net cash used in operating activities:
                
Depreciation
     1,359       1,359  
Share-based compensation expense
     (51,728 )     (69,498 )
Changes in operating assets and liabilities:
                
Accounts receivable
     (3,228 )     6,361  
Prepaid expenses and other current assets
     242       (591 )
Other assets
     12,657       (8,000 )
Accounts payable and other accrued expenses
     1,253       (631 )
Accrued professional fees
     (2,954 )     8,028  
Accrued compensation and related liabilities
     (28,429 )     (23,984 )
Accrued interest payable to related party
     40,416       39,483  
Net cash used in operating activities
     (423,942 )     (1,429,198 )
                 
Cash flows from investing activities:
                
Net cash provided by investing activities
     -       -  
                 
Cash flows from financing activities:
                
Proceeds from related party
     80,000       -  
Net cash provided by financing activities
     80,000       -  
                 
                 
Net decrease in cash and cash equivalents
     (343,942 )     (1,429,198 )
Cash and cash equivalents at beginning of year
     359,032       1,788,230  
Cash and cash equivalents at end of year
   $ 15,090     $ 359,032  

See notes to consolidated financial statements.

 
F-7

Le@P Technology, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

1.  The Company

Le@P Technology, Inc. and Subsidiaries (“Le@P” or the “Company”), formerly known as Seal Holdings Corporation and Subsidiaries, is a holding company that was formerly pursuing a strategy of acquiring and commercializing synergistic technologies to develop advanced products.  On May 22, 2009, the Board of Directors determined to cease for the foreseeable future investigating or consummating further investment and acquisition opportunities, and Dr. Donald J. Ciappenelli agreed to terminate his employment as the Chief Executive Officer.  Timothy C. Lincoln, Class B Director, was appointed Acting Principal Executive Officer upon Dr. Ciappenelli’s termination.

Notwithstanding the cessation of investment or acquisition activity, the Company may from time to time consider investment or acquisition opportunities which otherwise come to the attention of the Board.  The ability of the Company to pursue or ultimately consummate any such investment or acquisition opportunities will be dependent upon, among other things, its ability to obtain financing for such activities.

2.  Summary of Significant Accounting Policies

Consolidation

The accompanying consolidated financial statements (the “financial statements”) include the accounts of Le@P Technology, Inc. and its wholly-owned subsidiaries (see exhibit 21).  All significant intercompany accounts and transactions are eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Cash and Cash Equivalents

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

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets which range from 3-9 years.

Fair value of financial instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to the short-term maturities of these assets and liabilities. The fair market value of other financial instruments is provided by the use of quoted market prices and other appropriate valuation techniques, based on information available at year-end.  Notes payable to related parties are not arm’s-length transactions.

Impairment of long-lived assets and long-lived assets to be disposed of

The Company reviews the carrying value of amortizable long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to the undiscounted future net cash flows expected to be generated by the asset. If facts and circumstances indicate that the carrying value of an asset or groups of assets, as applicable, is impaired, the long-lived asset or groups of long-lived assets are written down to their estimated fair value.  No asset impairment occurred during the years ended December 31, 2009 and 2008.

 
F-8

Loss per share

Basic earnings per share amounts are computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted earnings per share amounts are computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents, and stock options outstanding during the period. Potential shares of common stock issuable under options or other share equivalents and their effects on the loss were excluded from the diluted calculations because the effect was anti-dilutive.

Concentration of credit risk

The Company maintains cash balances at a high credit quality financial institution which exceeds the federally insured amounts.  F.D.I.C. deposit insurance of $250,000 as of  December 31, 2009 per depositor.  As of December 31, 2009 and 2008, zero and approximately $89,000, respectively, exceeded the federally insured amount.

Stock Based Compensation

The Company applies ASC Topic 718, “Share-Based Payments” which requires the measurement of the cost of services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. Compensation cost is recognized when the event occurs. For the years ended December 31, 2009 and 2008, the Company did not grant any stock options.

The Company uses the Black-Scholes option pricing model as our method of valuation for stock-based awards. Stock-based compensation expense is based on the value of the portion of the stock-based award that will vest during the period, adjusted for the forfeitures. Our determination of the fair value of stock-based awards on the date of grant using an option pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the expected life of the award, expected stock price volatility over the term of the award and historical and projected exercise behaviors. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual or updated results differ from our current estimates, such amounts will be recorded in the period estimates are revised. The Black-Scholes option pricing model requires the input of highly subjective assumptions, and other reasonable assumptions could provide differing results.

Income Taxes

Deferred income taxes are provided based on the provisions of ASC 740, “Accounting for Income Taxes”, to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company did not have any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months. The tax years that remain subject to examination by major taxing jurisdictions are those for the years ended December 31, 2008, 2007 and 2006.

The Company classifies interest and penalties arising from underpayment of income taxes in the consolidated statements of operations as general and administrative expenses.  As of December 31, 2009, the Company had no accrued interest or penalties related to uncertain tax provisions.

Reclassification

Certain reclassifications of amounts previously reported have been made to the accompanying consolidated financial statements in order to maintain consistency and comparability between periods presented.

 
F-9

Recently Issued Accounting Pronouncements

Adoption of New Accounting Standards

Accounting Standards Codification

In June 2009, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (the “Codification”). This standard replaces SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles, and establishes only two levels of U.S. generally accepted accounting principles (“GAAP”), authoritative and nonauthoritative. The FASB ASC has become the source of authoritative, nongovernmental GAAP, except for rules and interpretive releases of the SEC, which are sources of authoritative GAAP for SEC registrants. All other nongrandfathered, non-SEC accounting literature not included in the Codification will become nonauthoritative. This standard is effective for financial statements for interim or annual reporting periods ending after September 15, 2009. The adoption of the Codification changed the Company’s references to GAAP accounting standards but did not impact the Company’s results of operations, financial position or liquidity.

Participating Securities Granted in Share-Based Transactions
Effective January 1, 2009, the Company adopted a new accounting standard included in ASC 260, Earnings Per Share (formerly FASB Staff Position (“FSP”) Emerging Issues Task Force (“EITF”) 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities). The new guidance clarifies that non-vested share-based payment awards that entitle their holders to receive nonforfeitable dividends or dividend equivalents before vesting should be considered participating securities and included in basic earnings per share. The Company’s adoption of the new accounting standard did not have a material effect on previously issued or current earnings per share.

Business Combinations
Effective January 1, 2009, the Company adopted a new accounting standard included in ASC 805, Business Combinations (formerly SFAS No. 141(R), Business Combinations). The new standard applies to all transactions or other events in which an entity obtains control of one or more businesses. Additionally, the new standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement date for all assets acquired and liabilities assumed; and requires the acquirer to disclose additional information needed to evaluate and understand the nature and financial effect of the business combination. The Company’s adoption of the new accounting standard did not have a material effect on the Company’s consolidated financial statements.

Effective January 1, 2009, the Company adopted a new accounting standard included in ASC 810, Consolidations (formerly SFAS 160, Noncontrolling Interests in Consolidated Financial Statements). The new accounting standard establishes accounting and reporting standards for the noncontrolling interest (or minority interests) in a subsidiary and for the deconsolidation of a subsidiary by requiring all noncontrolling interests in subsidiaries be reported in the same way, as equity in the consolidated financial statements. As such, this guidance has eliminated the diversity in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transactions. The Company’s adoption of this new accounting standard did not have a material effect on the Company’s consolidated financial statements.

Fair Value Measurement and Disclosure
Effective January 1, 2009, the Company adopted a new accounting standard included in ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) (formerly FASB FSP No 157-2, Effective Date of FASB Statement No. 157), which delayed the effective date for disclosing all non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value on a recurring basis (at least annually). This standard did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued new guidance for determining when a transaction is not orderly and for estimating fair value when there has been a significant decrease in the volume and level of activity for an asset or liability. The new guidance, which is now part of ASC 820 (formerly FSP 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly), requires disclosure of the inputs and valuation techniques used, as well as any changes in valuation techniques and inputs used during the period, to measure fair value in interim and annual periods. In addition, the presentation of the fair value hierarchy is required to be presented by major security type as described in ASC 320, Investments — Debt and Equity Securities. The provisions of the new standard were effective for interim periods ending after June 15, 2009. The adoption of the new standard on April 1, 2009 did not have a material effect on the Company’s consolidated financial statements.

 
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In April 2009, the Company adopted a new accounting standard included in ASC 820, (formerly FSP 107-1 and Accounting Principles Board (“APB”) 28-1, Interim Disclosures about Fair Value of Financial Instruments). The new standard requires disclosures of the fair value of financial instruments for interim reporting periods of publicly traded companies in addition to the annual disclosure required at year-end. The provisions of the new standard were effective for the interim periods ending after June 15, 2009. The Company’s adoption of this new accounting standard did not have a material effect on the Company’s consolidated financial statements.

In August 2009, the FASB issued new guidance relating to the accounting for the fair value measurement of liabilities. The new guidance, which is now part of ASC 820, provides clarification that in certain circumstances in which a quoted price in an active market for the identical liability is not available, a company is required to measure fair value using one or more of the following valuation techniques: the quoted price of the identical liability when traded as an asset, the quoted prices for similar liabilities or similar liabilities when traded as assets, or another valuation technique that is consistent with the principles of fair value measurements. The new guidance clarifies that a company is not required to include an adjustment for restrictions that prevent the transfer of the liability and if an adjustment is applied to the quoted price used in a valuation technique, the result is a Level 2 or 3 fair value measurement. The new guidance is effective for interim and annual periods beginning after August 27, 2009. The Company’s adoption of the new guidance did not have a material effect on the Company’s consolidated financial statements.

Derivative Instruments and Hedging Activities
Effective January 1, 2009, the Company adopted a new accounting standard included in ASC 815, Derivatives and Hedging (SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of SFAS No. 133). The new accounting standard requires enhanced disclosures about an entity’s derivative and hedging activities and is effective for fiscal years and interim periods beginning after November 15, 2008. Since the new accounting standard only required additional disclosure, the adoption did not impact the Company’s consolidated financial statements.

Other-Than-Temporary Impairments
In April 2009, the FASB issued new guidance for the accounting for other-than-temporary impairments. Under the new guidance, which is part of ASC 320, Investments — Debt and Equity Securities (formerly FSP 115-2 and 124-2, Recognition and Presentation of Other-Than-Temporary Impairments), an other-than-temporary impairment is recognized when an entity has the intent to sell a debt security or when it is more likely than not that an entity will be required to sell the debt security before its anticipated recovery in value. The new guidance does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities and is effective for interim and annual reporting periods ending after June 15, 2009. The Company’s adoption of the new guidance did not have a material effect on the Company’s consolidated financial statements.

Subsequent Events
In May 2009, the FASB issued new guidance for subsequent events. The new guidance, which is part of ASC 855, Subsequent Events (formerly SFAS No. 165, Subsequent Events) is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, this guidance sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The new guidance is effective for fiscal years and interim periods ended after June 15, 2009 and will be applied prospectively. The Company’s adoption of the new guidance did not have a material effect on the Company’s consolidated financial statements.

 
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Accounting Standards Not Yet Effective

Accounting for the Transfers of Financial Assets
In June 2009, the FASB issued new guidance relating to the accounting for transfers of financial assets. The new guidance, which was issued as SFAS No. 166, Accounting for Transfers of Financial Assets, an amendment to SFAS No. 140, was adopted into Codification in December 2009 through the issuance of Accounting Standards Updated (“ASU”) 2009-16. The new standard eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures in order to enhance information reported to users of financial statements by providing greater transparency about transfers of financial assets, including securitization transactions, and an entity’s continuing involvement in and exposure to the risks related to transferred financial assets. The new guidance is effective for fiscal years beginning after November 15, 2009. The Company will adopt the new guidance in 2010 and is evaluating the impact it will have to the Company’s consolidated financial statements.

Accounting for Variable Interest Entities
In June 2009, the FASB issued revised guidance on the accounting for variable interest entities. The revised guidance, which was issued as SFAS No. 167, Amending FASB Interpretation No. 46(R), was adopted into Codification in December 2009 through the issuance of ASU 2009-17. The revised guidance amends FASB Interpretation No. 46(R), Consolidation of Variable Interest Entities, in determining whether an enterprise has a controlling financial interest in a variable interest entity. This determination identifies the primary beneficiary of a variable interest entity as the enterprise that has both the power to direct the activities of a variable interest entity that most significantly impacts the entity’s economic performance, and the obligation to absorb losses or the right to receive benefits of the entity that could potentially be significant to the variable interest entity. The revised guidance requires ongoing reassessments of whether an enterprise is the primary beneficiary and eliminates the quantitative approach previously required for determining the primary beneficiary. The Company does not expect that the provisions of the new guidance will have a material effect on its consolidated financial statements.

Revenue Recognition
In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements. The new standard changes the requirements for establishing separate units of accounting in a multiple element arrangement and requires the allocation of arrangement consideration to each deliverable based on the relative selling price. The selling price for each deliverable is based on vendor-specific objective evidence (“VSOE”) if available, third-party evidence if VSOE is not available, or estimated selling price if neither VSOE or third-party evidence is available. ASU 2009-13 is effective for revenue arrangements entered into in fiscal years beginning on or after June 15, 2010. The Company does not expect that the provisions of the new guidance will have a material effect on its consolidated financial statements.

In October 2009, the FASB issued Accounting Standards Update No. 2009-14, "Certain Revenue Arrangements That Include Software Elements" ("ASU No. 2009-14"). ASU No. 2009-14 amends guidance included within ASC Topic 985-605 to exclude tangible products containing software components and non-software components that function together to deliver the product’s essential functionality.  Entities that sell joint hardware and software products that meet this scope exception will be required to follow the guidance of ASU No. 2009-13.  ASU No. 2009-14 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010.  Early adoption and retrospective application are also permitted.  The company is currently evaluating the impact of adopting the provisions of ASU No. 2009-14.

3.  Operating Losses and Cash Flow Deficiencies

The Company has experienced operating losses and deficiencies in operating cash flows.  Until the Company has operations or other revenue generating activities to be self-sufficient, the Company will remain dependent upon other sources of capital.  In the past, such capital has come from the Company’s Majority Stockholder and the proceeds from the Healthology and iVillage stock sales.

The Company has exhausted its liquid cash resources.  The Company’s cash and cash equivalents, aggregating to $15,090 as of December 31, 2009, will not be sufficient to cover the current levels of operating expenses through the next twelve months. The Company has requested that the Majority Shareholder provide additional financing for the Company’s current operations.

 
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The Majority Shareholder has no commitment or obligation to provide such additional financing.  If the Majority Shareholder, in its discretion, provides such financing, there is no assurance that the Majority Shareholder will continue to do so in the future or regarding the terms of any such financing that the Majority Shareholder may elect to provide to the Company.  The Company’s efforts to obtain financing may require significant costs and expenditures, and if the Company succeeds in obtaining financing, the financing terms could result in substantial dilution of existing equity positions and increased interest expense.

4.  Property and Equipment

Property and equipment consists of the following:

   
December 31,
  
   
2009
    
2008
  
Land
   $ 510,000     $ 510,000  
Leasehold improvements
     17,842       17,842  
Equipment and software
     16,340       16,340  
Furniture and fixtures
     59,433       59,433  
      603,615       603,615  
Less accumulated depreciation
     90,778       89,419  
    $ 512,837     $ 514,196  

Depreciation expense for the years ended December 31, 2009 and 2008 was $1,359 and $1,359, respectively.

5.  Commitments and Contingencies

Legal Proceedings

From time to time, the Company is party to business disputes arising in the normal course of its business operations.  The Company’s management believes that none of these actions, standing alone, or in the aggregate, is currently material to the Company’s operations or financial condition.

Employment Agreements

Pursuant to an Employment Agreement dated October 31, 2006 (the “Ciappenelli Employment Agreement”), effective November 1, 2006, Dr. Donald J. Ciappenelli became the Chief Executive Officer of the Company and was appointed as the Chairman of the Board of Directors of the Company.  Dr. Ciappenelli agreed to terminate his employment on May 22, 2009, and on November 2, 2009 he resigned as the Company’s Chairman of the Board.

Effective March 5, 2007, Dr. Howard Benjamin became the Company’s Vice President of Research and Development pursuant to an employment agreement executed March 16, 2007 (the “Benjamin Employment agreement”).  On December 8, 2008, Dr. Benjamin resigned from the Company with an effective date of January 2, 2009.

6.  Related Party Transactions

The Company owns real property in Broward County, Florida that was purchased from Bay Colony Associates, Ltd. (“Bay Colony”), an entity wholly-owned by the Majority Stockholder in exchange for a mortgage and note payable in the amount of $562,500.  The purchase price was based upon an independent third-party appraisal.  The long-term note and mortgage on the real property has been replaced twice with a new long term-note with principal of the same amount on March 17, 2006 and January 15, 2010.  The notes bear interest at the rate of 7% per annum.  Both principal and interest is due on the extended maturity date of January 8, 2011.

 
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The land is zoned light industrial and consists of approximately one and one-third acres.   The Company entered into a three year lease of the property with an unrelated party effective October 1, 2007.  The Company recognized  $43,400 and $26,550 in rental income under the lease for the years 2009 and 2008, respectively.  The Company has no plans to sell or develop the property.

The interest expense included in the accompanying financial statements relates to interest charged on the indebtedness due to the Majority Stockholder.

On June 15, 2009 the Company received a working capital loan from the Majority Shareholder in the amount of $25,000, and on September 1, 2009 the Company received a second working capital loan of $55,000.  Both loans are unsecured and evidenced by promissory notes which accrue interest at the prime rate.  Interest and principal are due in one lump sum on the maturity date of January 8, 2011.   Subsequent to December 31, 2009, the Company received two additional working capital loans.  On February 22, 2010 the Company received a working capital loan from the Majority Shareholder in the amount of $15,000, and on March 3, 2010 the Company received a second working capital loan of $130,000.  Both loans are unsecured and evidenced by promissory notes which accrue interest at the prime rate.  Interest and principal are due in one lump sum on the maturity date of January 8, 2011 for the $15,000 loan and January 8, 2012 for the $130,000 loan.

7.  Stock Based Compensation

Options may be granted to Company employees, directors and consultants under various stock option plans.  All options granted under the plans through December 31, 2007 have been at prices which have been equal to or greater than the fair market value of the Company’s common stock at the date of grant.  At December 31, 2009, the Company had reserved 10,047,500 shares of Class A common stock for possible future issuance under its stock option plans.

The Company recognizes compensation expense for the Company’s share-based payment awards on a straight-line basis using a separate vesting tranche for each stock option issued.  The Company determined the grant-date fair value of share-based payment awards using the Black-Scholes pricing model.

The Company granted no options to purchase shares of the Company’s Class A Common Stock during the years ended December 31, 2009 and 2008.  During the year ended December 31, 2009 and 2008, the Company recorded approximately ($52,000) and ($69,000), respectively, in compensation expense, related to the share-based payment awards.  The negative balance in the year ended December 31, 2008 was due to the forfeiture of 455,492 non-vested options totaling $233,820 of compensation expense) due to the resignation of Dr. Benjamin on December 8, 2008.  The negative balance in the year ended December 31, 2009 was due to the forfeiture of non-vested options totaling $51,728 of compensation expense due to the departure of Dr. Ciappenelli on May 22, 2009.

The fair value of stock based awards was estimated using the Black-Sholes model, on the date of grant with the following weighted average assumptions.

Dividend yield
     0 %     0 %
Expected volatility
     134 %     134 %
Risk free interest rate
     4.56 %     4.56 %
Expected life
  
10 years
    
10 years
  

The Company’s computation of the expected volatility for the years ended December 31, 2009 and 2008 is based primarily upon historical volatility and the expected term of the option. The expected term is based on the historical exercise experience under the share-based plans of the underlying award and represents the period of time the share-

based awards are expected to be outstanding. The interest rate is based on the U.S. Treasury yield in effect at the time of grant for a period commensurate with the estimated expected life.

 
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Option activity under the Company’s plans is summarized below:

   
2009
    
2008
  
   
Shares
    
Weighted Average Exercise Price
    
Weighted Average Remaining Life
    
Shares
    
Weighted Average Exercise Price
    
Weighted Average Remaining Life
  
Outstanding at beginning of year
     3,055,596     $ 0.18       7.8       3,511,088     $ 0.26       8.7  
Options granted
     -       -       -       -       -       -  
Options expired or forfeited
     (3,003,096 )   $ 0.14       7.0       (455,492 )   $ 0.80       7.9  
Outstanding at end of year
     52,500     $ 3.00       .2       3,055,596     $ 0.18       7.8  
Options exercisable at year-end
     52,500     $ 3.00       .2       2,130,480     $ 0.26       7.8  
Shares available for future grant
     10,047,500                       7,044,404                  


The following table summarizes information about stock options outstanding and exercisable at December 31, 2009:

Exercise Price
    
Options Outstanding
    
Weighted Average Remaining Life
    
Options Exercisable
  
$ 3.00       52,500       .2       52,500  
          52,500               52,500  


8.  Preferred Stock

The Certificate of Incorporation of the Company, as amended, authorizes the issuance of 25,000,000 shares of Preferred Stock, $.001 par value of which 2,500 shares have been designated as Series B 10% Cumulative Preferred Stock, $.001 par value, (the “Series B Preferred Stock”).  The Series B Preferred Stock is nonvoting and nonconvertible.  Dividends on the Series B Preferred Stock are cumulative and accrue at a rate of 10% per annum on the preferred stock’s stated value of $1,000 per share and must be paid before any dividends may be paid on any other class of common or preferred stock.  No other class of common or preferred stock may be redeemed or repurchased nor may the Series B Preferred Stock be altered or modified without the approval of the holders of the Series B Preferred Stock.  Effective November 15, 1999, the Company issued 2,170 shares of the Series B Preferred Stock to the Majority Shareholder in exchange for $2,170,000, which had previously been contributed to the Company.  At December 31, 2009 and 2008, respectively dividends of $2,236,500 and $2,019,500 were accumulated on the Series B Preferred Stock.  Such amount will be accrued and charged to retained earnings, if any, or additional paid-in capital when declared by the Company’s Board of Directors.

 
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9.  Class B Common Stock

The Company has 25,000 shares of Class B Common Stock outstanding.  Such shares are held by an affiliate of the Company’s Majority Stockholder and enable the holder to elect a majority of the Board of Directors of the Company; otherwise the Class B Common Stock is identical to the Company’s Class A Common Stock.

10.  Income Taxes

Significant components of the Company’s net deferred income taxes are as follows:

   
For the Years ended December 31,
  
   
2009
    
2008
  
Deferred tax assets:
            
Net operating loss carryforwards
   $ 4,100,290     $ 3,935,533  
Accruals
     58,504       56,106  
Stock –based compensation
     151,480       170,945  
Other
     -       4,723  
Deferred tax assets
     4,314,909       4,167,307  
Less valuation allowance
     4,314,909       (4,167,307 )
Net deferred tax assets
   $ –     $ –  


A reconciliation of the U.S. statutory federal income tax rate to the effective income tax rate (benefit) follows:

   
For the Years ended December 31,
  
   
2009
    
2008
  
U.S. Federal Statutory rate
     34.00 %     34.00 %
State income taxes, net of federal benefit
     3.63       3.63  
Change in valuation allowance
     (37.63 )     (37.63 )
      0.00 %     0.00 %


In assessing the ability to realize a portion of the deferred tax assets, management considers whether it is more than likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities and projected future taxable income in making the assessment. After consideration of the evidence, both positive and negative, management has determined that a $4,314,909 valuation allowance at December 31, 2009 is necessary to reduce the deferred tax assets to the amount that will more likely than not be realized. The change in the valuation allowance for the current year is $147,602. At December 31, 2009, the Company has available net operating loss carryforwards for federal income tax purposes of approximately $10,458,000 expiring at various times through 2027.

11.  Valuation and Qualifying Accounts

A summary of the activity in the Company’s valuation and qualifying accounts is as follows:

Description
  
Balance at Beginning of Period
    
Charged to Costs and Expenses
    
Write-off’s
    
Other Changes
    
Balance at End of Period
  
Deferred tax asset valuation allowance
                              
                               
Year ended December 31, 2009
   $ 4,167,307       147,602       -       -     $ 4,314,909  
Year ended December 31, 2008
   $ 3,605,424       561,883       -       -     $ 4,167,307  

 
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12.  Subsequent Events

On February 22, 2010 the Company received a working capital loan from the Majority Shareholder in the amount of $15,000, and on March 3, 2010 the Company received a second working capital loan of $130,000.  Both loans are unsecured and evidenced by promissory notes which accrue interest at the prime rate.  Interest and principal are due in one lump sum on the maturity date of January 8, 2011 for the $15,000 loan and January 8, 2012 for the $130,000 loan.
 
 
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