10QSB/A 1 qa033106.htm 10-QSB/A ENDED MARCH 31, 2006

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Amendment No. 1 to

FORM 10-QSB/A

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2006

 

Commission File Number 033-19411-C

 

TETRIDYN SOLUTIONS, INC

(Exact name of small business issuer as specified in its charter)

 

Nevada

 

20-5081381

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

1651 Alvin Ricken Drive, Pocatello, ID 83201

(Address of principal executive offices)

 

(208) 232-4200

(Issuer’s telephone number)

 

n/a

(Former name, former address and former fiscal year, if changed since last report)

 

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 o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). NO x YES o

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of May 17, 2006, issuer had 20,009,350 outstanding shares of common stock, no par value.

 

Transitional Small Business Disclosure Format (check one): YES o NO x

 

 



 

 

Explanatory Note

 

We are filing this amendment on Form 10-QSB/A to restate our unaudited condensed consolidated financial statements for the three months ended March 31, 2006, as described in Note 2 of the Notes to the Unaudited Condensed Consolidated Financial Statements. While performing its audit of our financial statements for the year ended December 31, 2006, Webb & Company advised us that it believed that the shares paid to a consultant for services related to the 2006 reverse acquisition needed to be valued at the time of the reverse acquisition rather than at the time of the agreement due to contingencies in the agreement based upon completion of the reverse acquisition. The restatement caused the general and administrative expense for the three months ended March 31, 2006, to be increased by $360,000, resulting in the net loss for the same three-month period being increased by $360,000. We are also filing amendments to our quarterly reports on Form 10-QSB for the quarters ended June 30 and September 30, 2006, to correct this error.

 

Unless otherwise indicated, this report speaks only as of the date that the original report was filed. No attempt has been made in this Form 10-QSB/A to update other disclosures presented in the original report on Form 10-QSB, except as required to reflect the effects of the restatement. This Form 10-QSB/A does not reflect events occurring after the filing of the original Form 10-QSB or modify or update those disclosures, including the exhibits to the Form 10-QSB affected by subsequent events; however, this Form 10-QSB/A includes as Exhibits 31.01 and 32.01 new certifications by our principal executive officer and principal financial officer as required by Rule 12b-15 promulgated under the Securities Exchange Act of 1934, as amended. Accordingly, this Form 10-QSB/A should be read in conjunction with our filings made with the Securities and Exchange Commission subsequent to the filing of the original Form 10-QSB, including any amendments to those filings. The following items have been amended as a result of the restatement:

 

Part I – Item 1 – Financial Statements

Part I – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

Part I – Item 3 – Controls and Procedures

 

2

 



 

 

TABLE OF CONTENTS

 

Page

 

PART I – FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements.

4

 

 

 

Condensed Consolidated Balance Sheets (Unaudited)

4

 

 

 

Condensed Consolidated Statements of Operations (Unaudited)

5

 

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

6

 

 

 

Condensed Consolidated Statements of Stockholders’ Deficit (Unaudited)

7

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

8

 

 

Item 2.

Management’s Discussion and Analysis or Plan of Operation.

13

 

 

Item 3.

Controls and Procedures.

16

 

PART II – OTHER INFORMATION

 

 

Item 1.

Legal Proceedings.

17

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

17

 

 

Item 6.

Exhibits

17

 

 

Signature

 

18

 

3

 



 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

CREATIVE VENDING CORP. AND SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

March 31,

 

December 31,

 

2006

 

2005

 

(Restated -

 

 

 

See Note 2)

 

 

Assets

 

 

 

Current Assets

 

 

 

Cash

$         122,325 

 

$         108,311 

Accounts receivable, less allowance for doubtful accounts of $0 and $8,500

80 

 

2,219 

Inventory

263 

 

263 

Total Current Assets

122,668 

 

110,793 

Property and Equipment

180,821 

 

179,000 

Less: Accumulated depreciation

(135,470)

 

(126,493)

Net Property and Equipment

45,351 

 

52,507 

Total Assets

$         168,019 

 

$         163,300 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

Current Liabilities

 

 

 

Trade accounts payable

$         100,078 

 

$          94,325 

Accounts payable to related parties

 

5,947 

Accrued liabilities

73,789 

 

72,411 

Deferred revenue

13,912 

 

15,677 

Notes payable, current portion

398,574 

 

590,359 

Notes payable to related parties, current portion

77,751 

 

93,001 

Capital lease obligations, current portion

11,639 

 

17,636 

Total Current Liabilities

675,743 

 

889,356 

Long-Term Liabilities

 

 

 

Notes payable, net of current portion

180,161 

 

246,886 

Series A non-voting redeemable preferred stock - no par value; no shares and 250,000 shares authorized,    respectively; no shares and 219,512 shares outstanding, respectively

 

696,110 

Total Long-Term Liabilities

180,161 

 

942,996 

Stockholders’ Deficit

 

 

 

Series B convertible preferred stock - no par value; no shares and 5,000,000 shares authorized,       respectively; no shares and 249,020 shares outstanding

 

291,350 

Common stock - $0.001 par value and no par value, respectively; 200,000,000 shares authorized;       20,009,350 shares and 15,152,903 shares outstanding, respectively

2,144,439 

 

291,124 

Deficit accumulated during the development stage

(2,832,324)

 

(2,251,526)

Total Stockholders’ Deficit

(687,885)

 

(1,669,052)

Total Liabilities and Stockholders’ Deficit

$         168,019 

 

$         163,300 

 

 

 

 

See the accompanying notes to condensed consolidated financial statements.

 

 

4

 



 

 

 

CREATIVE VENDING CORP. AND SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

For the Period from

 

 

 

 

October 3, 2000

 

For the Three Months Ended

(Date of Inception)

 

March 31,

through

 

2006

 

2005

March 31, 2006

 

(Restated -

 

 

(Restated -

 

See Note 2)

 

 

See Note 2)

Revenue

$       31,440 

 

$      89,877 

 

$        857,498 

Cost of Revenue

17,290 

 

44,752 

 

341,626 

Gross Profit

14,150 

 

45,125 

 

515,872 

Operating Expenses

 

 

 

 

 

General and administrative

467,034 

 

27,516 

 

2,589,904 

Selling and marketing

54,735 

 

26,402 

 

171,197 

Research and development

45,182 

 

43,646 

 

322,717 

Total Operating Expenses

566,951 

 

97,564 

 

3,083,818 

Interest Expense

27,997 

 

12,047 

 

291,878 

Employment Grant Income

 

 

27,500 

 

 

 

 

 

 

Net Loss

$   (580,798)

 

$    (64,486)

 

$    (2,832,324)

 

 

 

 

 

 

Basic and Diluted Loss

 

 

 

 

 

Per Common Share

$         (0.04)

 

$       (0.01)

 

 

 

 

 

 

 

 

Basic and Diluted Weighted-

 

 

 

 

 

Average Common Shares

 

 

 

 

 

Outstanding

16,016,271 

 

10,367,957 

 

 

 

 

 

 

 

 

See the accompanying notes to condensed consolidated financial statements.

 

 

 

 

 

 

 

 

5

 



 

 

CREATIVE VENDING CORP. AND SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

For the Period from

 

 

 

October 3, 2000

 

For the Three Months Ended

(Date of Inception)

 

March 31,

through

 

2006

 

2005

March 31, 2006

 

(Restated -

 

 

(Restated -

 

See Note 2)

 

 

See Note 2)

Cash Flows from Operating Activities

 

 

 

 

 

Net Loss

$              (580,798)

 

$                (64,486)

 

$             (2,832,324)

Adjustments to reconcile net loss to net cash used in

 

 

 

 

 

operating activities:

 

 

 

 

 

Depreciation

8,977 

 

 

135,470 

Expenses paid by shareholder

 

 

40,814 

Interest expense from accretion of Series A preferred stock

12,164 

 

15,000 

 

222,174 

Series B preferred stock issued for services

330 

 

 

7,430 

Common stock issued for services

444,005 

 

 

573,061 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

2,139 

 

(2,008)

 

7,564 

Inventory

 

5,904 

 

5,976 

Accounts payable and accrued liabilities

5,753 

 

15,165 

 

149,589 

Deferred revenue

(1,765)

 

 

51,412 

Other

(766)

 

1,500 

 

5,762 

Net Cash Used in Operating Activities

(109,961)

 

(28,925)

 

(1,633,072)

Cash Flows from Investing Activities

 

 

 

 

 

Purchase of property and equipment

(1,821)

 

(276)

 

(8,483)

Net Cash Used in Investing Activities

(1,821)

 

(276)

 

(8,483)

Cash Flows from Financing Activities

 

 

 

 

 

Change in bank overdraft

 

(12,671)

 

Proceeds from borrowing under notes payable

 

34,268 

 

1,059,594 

Principal payments on notes payable

(8,510)

 

 

(120,397)

Proceeds from notes payable to related parties

 

9,663 

 

64,818 

Principal payments on notes payable to related parties

(21,197)

 

 

(59,686)

Principal payments on capital lease obligations

(5,997)

 

(1,836)

 

(160,699)

Proceeds from issuance of common stock

 

 

63,400 

Proceeds from issuance of Series A redeemable preferred stock

 

 

486,100 

Proceeds from issuance of Series B preferred stock

161,500 

 

 

430,750 

Net Cash Provided by Financing Activities

125,796 

 

29,424 

 

1,763,880 

Net Increase in Cash

14,014 

 

223 

 

122,325 

Cash at Beginning of Period

108,311 

 

 

Cash at End of Period

$               122,325 

 

$                      223 

 

$                 122,325 

 

 

 

 

 

 

Schedule of Noncash Investing and Financing Activities:

 

 

 

 

 

Conversion of note payable into Series B preferred stock

$               252,356 

 

$                           - 

 

 

Conversion of Series B preferred stock into common stock

705,536 

 

 

 

Conversion of Series A redeemable preferred stock into

 

 

 

 

 

common stock

708,274 

 

 

 

Common stock issued in exchange for liabilities of Creative

 

 

 

 

 

Vending Corp.

4,500 

 

 

 

See the accompanying notes to condensed consolidated financial statements.

 

 

 

 

6

 



 

 

 

CREATIVE VENDING CORP. AND SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLDIATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(Unaudited)

For the Period from October 3, 2000 (Date of Inception) through December 31, 2004, for the

Year Ended December 31, 2005 and for the Three Months Ended March 31, 2006

Series B
Preferred Stock

Common Stock
Deficit
Accumulated
During the
Development
Total
Stockholders'
Shares
Amount
Shares
Amount
(Restated -
See Note 2)

Stage
(Restated -
See Note 2)

Deficit
(Restated -
See Note 2)

Balance, October 3, 2000                            
  (Date of Inception)    -   $ -    -   $ -   $ -   $ -  
Issuance for cash, July 2002,  
  $0.004 per share    -    -    2,073,591    4,000    -    4,000  
Issuance for intellectual property, October  
  2002, $0.00 per share    -    -    82,944    -    -    -  
Issuance for cash, July 2004, $0.015 per share    -    -    8,211,422    59,400    -    59,400  
Issuance for cash, August through December  
  2004, $1.00 per share    85,000   $ 85,000    -   $ -   $ -   $ 85,000  
Net loss for the period from inception    -    -    -    -    (1,617,435 )  (1,617,435 )

Balance, December 31, 2004    85,000    85,000    10,367,957    63,400    (1,617,435 )  (1,469,035 )
Issuance to employees and advisors for services,  
  $0.10 per share, May through November 2005    -    -    2,711,355    129,056    -    129,056  
Issuance for cash at $1.00 per share, and 3,250  
  shares and $2,250 cash issued to placement  
  agent, June through December 2005    189,750    184,250    -    -    -    184,250  
Issuance to a director for services, $1.00 per  
  share, August 2005    2,000    2,000    -    -    -    2,000  
Issuance for marketing and consulting services,  
  $0.88 per share, August through November 2005    5,765    5,100    -    -    -    5,100  
Issuance for conversion of notes payable to  
  related parties, August 2005, $0.10 per share    -    -    2,073,591    98,668    -    98,668  
Issuance for conversion of note payable, December  
  2005, $1.00 per share    15,000    15,000    -    -    -    15,000  
Net loss    -    -    -    -    (634,091 )  (634,091 )

Balance, December 31, 2005    297,515    291,350    15,152,903    291,124    (2,251,526 )  (1,669,052 )
Issuance for conversion of note payable and related   
  accrued interest, March 2006, $1.01 per share,    250,000    252,356    -    -    -    252,356  
Issuance for cash, March 2006, $1.00 per share    161,500    161,500    -    -    -    161,500  
Issuance for legal services, March 2006, $0.66 per share    495    330    -    -    -    330  
Conversion of Series B preferred stock into common   
  stock, March 2006, $0.48 per share    (709,510 )  (705,536 )  1,471,234    705,536    -    -  
Issuance to employees for services, March 2006,  
  $0.48 per share    -    -    91,248    44,005    -    44,005  
Conversion of Series A redeemable preferred stock,  
  March 2006, $1.56 per share    -    -    455,178    708,274    -    708,274  
Issuance for services to a consultant, March 2006,  
  $.48 per share    -    -    829,437    400,000    -    400,000  
Issuance in acquisition of Creative Vending Corp.,  
  March 2006, $(0.00) per share    -    -    2,009,350    (4,500 )  -    (4,500 )
Net loss    -    -    -    -    (580,798 )  (580,798 )

Balance, March 31, 2006    -   $ -    20,009,350   $ 2,144,439   $ (2,832,324 ) $ (687,885 )

See the accompanying notes to condensed consolidated financial statements.

 

7

 



 

 

CREATIVE VENDING CORP. AND SUBSIDIARY

(A Development Stage Company)

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1 – Organization and Summary of Significant Accounting Policies

 

Nature of Business – TetriDyn Solutions, Inc. (“TetriDyn”) is a development stage company that develops and markets wireless technology and proprietary software, provides software consulting services, and resells third-party software focused in the healthcare industry.

 

Reorganization – On March 22, 2006, Creative Vending Corp. (“Creative”) completed a stock exchange agreement with TetriDyn. Under the terms of the agreement, Creative acquired all of the outstanding TetriDyn common stock from the TetriDyn shareholders in exchange for the issuance of 17,170,563 shares of common stock. Creative also issued 829,437 shares to a finder for services rendered in connection with the agreement. The members of the board of directors of TetriDyn and its management became the board of directors and management of Creative.

 

Due to the TetriDyn shareholders controlling TetriDyn before and after the completion of the agreement, TetriDyn was considered the accounting acquirer. The transaction was therefore recognized as a 1-to-2.07 stock split of the common stock of TetriDyn and the reverse acquisition of Creative by TetriDyn, which acquisition was valued as a nonmonetary exchange. TetriDyn assumed $4,500 of liabilities of Creative in exchange for the constructive issuance of the 2,009,350 shares of common stock of Creative that remained outstanding. Creative did not meet the definition of a business under Emerging Issues Task Force Issue 98-3, Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business; accordingly, the common stock constructively issued to the Creative shareholders was recorded at the value of the liabilities assumed and no goodwill was recognized. Creative is in the process of changing its domicile to Nevada and changing its name to TetriDyn Solutions, Inc.

 

The accompanying condensed consolidated financial statements are those of TetriDyn for all periods prior to the reorganization and have been restated for the effects of the stock split for all periods presented.

 

Condensed Consolidated Financial Statements – The accompanying consolidated financial statements are condensed and do not include all disclosures normally required by generally accepted accounting principles. These consolidated financial statements should be read in conjunction with TetriDyn’s annual financial statements included in the Company’s Current Report on Form 8-K dated March 22, 2006. In particular, the Company’s organization, nature of operations, and significant accounting principles were presented in Note 1 to the financial statements included in that report. In the opinion of management, all adjustments necessary for a fair presentation have been included in the accompanying condensed consolidated financial statements and consist of only normal recurring adjustments. The results of operations presented in the accompanying condensed consolidated financial statements for the three months ended March 31, 2006, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2006.

 

Principles of Consolidation - The accompanying unaudited condensed consolidated financial statements include the accounts and transactions of TetriDyn Solutions, Inc. on a reorganized basis as discussed above and include the accounts and transactions of Creative Vending Corp. from the date of its acquisition on March 22, 2006. Intercompany accounts and transactions have been eliminated in consolidation. Creative Vending Corp. and its wholly-owned subsidiary, TetriDyn Solutions, Inc., are referred to herein as “the Company.”

 

 

8

 



 

 

CREATIVE VENDING CORP. AND SUBSIDIARY

(A Development Stage Company)

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

Business ConditionThe Company is in the development stage and has yet to generate any significant revenues from its technology solutions. During the year ended December 31, 2005, and the three months ended March 31, 2006, the Company suffered losses of $634,091 and $220,798, respectively. During the year ended December 31, 2005, and the three months ended March 31, 2006, the Company used $300,739 and $109,961 of cash in its operating activities, respectively. At March 31, 2006, the Company had a working capital deficiency of $553,075 and a capital deficiency of $687,885. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management is attempting to obtain debt and equity financing for use in its operations. In addition, management is trying to expand the Company’s sales and obtain profitable operations. Realization of profitable operations or proceeds from the financing is not assured. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

 

Stock-Based Compensation - On July 19, 2004, the Company adopted the 2004 Stock Option Plan for employees, officers, directors, and consultants of the Company, under which 3,000,000 shares of common stock were authorized for issuance. Through December 31, 2005, the Company had granted 1,307,565 stock options under the plan that had been exercised and had granted 44,005 stock options that were outstanding at December 31, 2005, and that were exercised during January 2006. As a result of the reorganization of TetriDyn into Creative on March 22, 2006, the 2004 Stock Option Plan was terminated, and at March 31, 2006, the Company did not have a stock-based employee compensation plan in place.

 

Effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards, or SFAS, No. 123R, Share-Based Payment (“SFAS 123R”), for its stock-based compensation plan. The Company previously accounted for the plan under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and related interpretations and disclosure requirements established by SFAS No. 123, Accounting for Stock-based Compensation (“SFAS 123”) as amended by SFAS No. 148, Accounting for Stock Based Compensation—Transition and Disclosure.

 

Under APB 25, no compensation expense was recognized during the three months ended March 31, 2005, as the Company had not issued any stock options or awards at March 31, 2005. Under SFAS 123R, all stock-based compensation is measured at the grant date, based on the fair value of the option or award, and is recognized as an expense over the requisite service, which is typically through the date the options or awards vest. When SFAS 123R was adopted on January 1, 2006, all stock options previously granted and that were outstanding at December 31, 2005, were fully vested and therefore no compensation expense was recognized during the three months ended March 31, 2006.

 

The Company adopted SFAS 123R using the modified prospective method. Under this method, for all stock-based options and awards granted prior to January 1, 2006, that remain outstanding as of that date, compensation cost is recognized for the unvested portion over the remaining requisite service period, using the grant-date fair value measured under the original provisions of SFAS 123 for pro forma and disclosure purposes. Furthermore, compensation costs will also be recognized for any awards issued, modified, repurchased, or cancelled after January 1, 2006.

 

 

9

 



 

 

CREATIVE VENDING CORP. AND SUBSIDIARY

(A Development Stage Company)

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

Net Loss Per Common Share - Basic loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding. Diluted loss per common share is computed by dividing net loss by the weighted-average number of common shares and dilutive potential common share equivalents outstanding. At March 31, 2005, the Company had outstanding 219,512 shares of Series A convertible, redeemable preferred stock and 249,020 shares of Series B convertible preferred stock that were excluded from the calculation of diluted loss per common share as their effects would have been antidilutive. There were no potential common share equivalents outstanding at March 31, 2006.

 

Note 2 - Restatement

 

The unaudited condensed consolidated financial statements for the three months ended March 31, 2006, have been restated. While performing its audit of the Company’s financial statements for the year ended December 31, 2006, Webb & Company advised the Company that it believed that the shares paid to a consultant for services related to the 2006 reverse acquisition needed to be valued at the time of the reverse acquisition rather than at the time of the agreement due to contingencies in the agreement based upon completion of the reverse acquisition. The restatement caused the general and administrative expense for the three months ended March 31, 2006, to be increased by $360,000, resulting in the net loss for the same three-month period being increased by $360,000.

 

The following table sets forth the effects of the restatement on certain line items within the Company’s previously reported balance sheet:

 

 

March 31, 2006

 

 

As previously

 

 

 

 

 

 

reported

 

Adjustments

 

As restated

Common stock - $0.001 par value and no par value, respectively; 200,000,000 shares authorized; 20,009,350 shares and 15,152,903 shares outstanding, respectively

 

$ 1,784,439 

 

$  360,000 

 

$ 2,144,439 

 

 

 

 

 

 

 

Deficit accumulated during the development stage

 

(2,472,324)

 

(360,000)

 

(2,832,324)

 

 

 

10

 



 

 

CREATIVE VENDING CORP. AND SUBSIDIARY

(A Development Stage Company)

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

The following table sets forth the effects of the restatement on certain line items within the Company’s previously reported statement of operations:

 

Three Months Ended
March 31, 2006

For the Period from October 3, 2000
(Date of Inception) through
March 31, 2006

As
previously
reported

Adjust
ments

As
restated

As
previously
reported

Adjust-
ments

As
restated

General and                            
  administrative expenses   $ 107,034   $ 360,000   $ 467,034   $ 2,229,904   $ 360,000   $ 2,589,904  
Total operating expenses    206,951    360,000    566,951    2,723,818    360,000    3,083,818  
Net loss    (220,798 )  (360,000 )  (580,798 )  (2,472,324 )  (360,000 )  (2,832,324 )
Basic and  
  diluted loss per  
  common share    (0.01 )  (0.03 )  (0.04 )

 

 

The following table sets forth the effects of the restatement on certain line items within the Company’s previously reported statements of cash flows:

 

Three Months Ended
March 31, 2006

For the Period from October 3, 2000
(Date of Inception) through
March 31, 2006

As
previously
reported

Adjust-
ments

As
restated

As
previously
reported

Adjust-
ments

As
restated

Net loss     $ (220,798 ) $ (360,000 ) $ (580,798 ) $ (2,472,324 ) $ (360,000 ) $ (2,832,324 )
Common stock issued  
  for services    84,005    360,000    444,005    213,061    360,000    573,061  

 

 

The following table sets forth the effects of the restatement on certain line items within the Company’s previously reported statements of stockholders’ deficit:

 

Common Stock
Amount

Deficit Accumulated During the
Development Stage

Total Stockholders' Deficit
As
prev'ly
reported

Adjust-
ments

As
restated

As
prev'ly
reported

Adjust-
ments

As
restated

As
prev'ly
reported

Adjust-
ments

As
restated

Issuance for services to a                                        
  consultant, March 2006   $ 40,000   $ 360,000   $ 400,000   $ -   $ -    -   $ 40,000   $ 360,000   $ 400,000  
Net loss    -    -    -    (220,798 )  (360,000 )  (580,798 )  (220,798 )  (360,000 )  (580,798 )
Balance, March 31, 2006    1,784,439    360,000    2,144,439    (2,472,324 )  (360,000 )  (2,832,324 )  (687,885 )  -    (687,885 )

 

 

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CREATIVE VENDING CORP. AND SUBSIDIARY

(A Development Stage Company)

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

Note 3 – Stockholders’ Equity

 

Series B Convertible Preferred Stock – During March 2006, a $250,000 note payable and $2,356 of related accrued interest were converted into 250,000 shares of Series B preferred stock at $1.00 per share. During March 2006, the Company issued 495 shares of Series B preferred stock in payment of $330 of legal services, or $0.67 per share. During February and March 2006, the Company issued 161,500 shares of Series B preferred stock for $161,500 of cash in a private placement offering at $1.00 per share.

 

Common Stock – On March 22, 2006, the holders of the Series B preferred stock converted all of the 709,510 outstanding shares of Series B preferred stock into 1,471,234 shares of common stock. The Series B preferred stock was carried at $705,536. The conversion into common stock was at $0.48 per share. No beneficial conversion option was recognized at the date of the conversion.

 

On March 22, 2006, the holders of the Series A redeemable preferred stock converted their 219,512 shares of Series A redeemable preferred stock into 455,178 shares of common stock. The Series A redeemable preferred stock had a carrying value at the date of conversion of $708,274, which resulted in a conversion into common stock at $1.56 per share.

 

On March 22, 2006, the Company issued 829,437 shares of common stock to a finder for services rendered to Creative in connection with the acquisition of TetriDyn. The services primarily related to Creative, the acquired shell company. Management has determined that the value of the services rendered to TetriDyn in connection with the acquisition of Creative were $40,000. Accordingly, the Company valued the issuance of the common shares at $40,000, or $0.05 per share.

 

During January 2006, the Company issued 91,248 shares of common stock to employees for services, which shares were valued at $44,005, or $0.48 per share.

 

Note 4 – Related-party Transactions

 

The Company had amounts due to shareholders for funds loaned to the Company and for Company expenditures covered by the shareholders. The balances due to shareholders at March 31, 2006, and December 31, 2005, were $77,751 and $93,001, respectively. The notes payable bear interest at 6% per annum and are payable on demand.

 

Note 5 - Subsequent Events

 

On April 17, 2006, the Company entered into a sales contract to provide 12 months of information technology management and process development software and services to a regional hospital with an option for renewal after the 12-month period.

 

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

 

The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and notes to our financial statements, included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors discussed elsewhere in this report.

 

Certain information included herein contains statements that may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, such as statements relating to our anticipated revenues, gross margin and operating results, future performance and operations, plans for future expansion, capital spending, sources of liquidity and financing sources. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future, and accordingly, such results may differ from those expressed in any forward-looking statements made herein. These risks and uncertainties include, but are not limited to, those relating to our liquidity requirements, the continued growth of the mobility software industry, the success of our product-development, marketing, and sales activities, vigorous competition in the software industry, dependence on existing management, leverage and debt service (including sensitivity to fluctuations in interest rates), domestic or global economic conditions, the inherent uncertainty and costs of prolonged arbitration or litigation, and changes in federal or state tax laws or the administration of such laws.

 

Overview

 

We are a Florida corporation incorporated in 1987 and did not have any business activities from 1989 until after we completed a stock exchange with TetriDyn Solutions, Inc. in March 2006. Since that time, our core business is providing software consulting services, developing our wireless technology and products, and reselling third-party software focused in the healthcare industry.

 

The objectives of our software are to integrate technology and data and to increase professional or worker productivity through the use of customized data input screens and wireless technologies. We have developed and are offering on a limited basis our AeroMD EMR software product. AeroMD EMR, which focuses on the healthcare industry, is a turnkey software product that provides medical practitioners with the ability to create, store, and access mobile electronic medical records. AeroMD EMR provides (i) high efficiency encryption and rapid secure wireless transmission of data, (ii) customized medical specialization specific on-screen input forms, and (iii) integration of stored data with third-party technologies. In addition, we are in the process of designing and developing our DBFusion software product, which is intended to provide integration of data from multiple locations and sources.

 

Accounting Policies

 

Our unaudited condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America and require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. Management’s estimates and assumptions may also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates upon subsequent resolution of identified matters.

 

 

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Revenue Recognition

 

Our AeroMD EMR software is provided as turnkey software that has been customized for specific medical specializations. We typically install the software at the customer’s location for a fee and charge the customer a monthly license fee, based on the number of operating workstations, under a one- or two-year usage agreement. The customer is entitled to all systems upgrades during the one- or two-year license. We also sell installation and post-contract telephone support service contracts on an hourly basis. We do not provide any rights of return or warranties on our AeroMD EMR software.

 

Revenue from software licenses and related installation and support services is recognized when earned and realizable, which is when persuasive evidence of an arrangement exists, services, if requested by the customers, have been rendered and are determinable, and collectibility is reasonably assured. Amounts billed to customers prior to these criteria being met are deferred. Revenue from the sale of software is recognized when delivered to the customer or upon installation of the software if an installation contract exists. Revenue from post-contract telephone support service contracts is recognized as the services are provided, determined on an hourly basis. Revenue applicable to multiple-element fee arrangements is divided among the software, the installation, and post-contract support service contracts using vendor-specific objective evidence of fair value. Fair value is evidenced by the prices charged when the software and the services are sold as separate products or arrangements.

 

Description of Expenses

 

General and administrative expenses consist primarily of professional fees, salaries, and related costs for accounting, administration, finance, human resources, information systems, and legal personnel.

 

Selling and marketing expenses consist primarily of advertising, promotional activities, trade shows, travel, and personnel-related expenses.

 

Research and development expenses consist of payroll and related costs for software engineers, management personnel, and the costs of materials used by these employees in the development of new or enhanced product offerings.

 

In accordance with Financial Accounting Standards Board SFAS No. 86, Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed, development costs incurred in the research and development of new software products to be sold, leased, or otherwise marketed are expensed as incurred until technological feasibility in the form of a working model has been established. Internally-generated capitalizable software development costs have not been material to date. We have charged our software development cost to research and development expense in our statements of operations.

 

Property and equipment are recorded at cost. Maintenance, repairs, and renewals that neither materially add to the value of the property nor appreciably prolong its life are charged to expense as incurred. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets. Gains or losses on dispositions of property and equipment are included in the results of operations when realized.

 

 

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Results of Operations

 

Comparison of Three Months Ended March 31, 2006 and 2005

 

Revenues

 

Our revenue was $31,440 for the three months ended March 31, 2006, compared to $89,877 for the three months ended March 31, 2005, representing a decrease of $58,437, or 65%. The decrease in revenues was due to the redirection from selling third-party software with high overhead to implementing a new market plan for our proprietary software in which monthly fees are charged over a one- or two-year license rather than initially at installation.

 

Cost of Revenue

 

Our cost of revenue was $17,290 for the three months ended March 31, 2006, compared to $44,752 for the three months ended March 31, 2005, representing a decrease of $27,462, or 61%. The gross margin percentage on revenue was 45% for the three months ended March 31, 2006, and 50% for the three months ended March 31, 2005. The reduced cost of revenue was due to the redirection from selling third-party software with high overhead to implementing a new market plan in which monthly fees are charged over a one- or two-year license rather than initially at installation. We expect the gross margin percentage will increase once the marketing plan has had the time to be fully implemented.

 

Although the net changes and percent changes with respect to our revenues and our cost of revenue for the three months ended March 31, 2006 and 2005, are summarized above, the trends contained therein are limited and should not be viewed as a definitive indication of our future results.

 

Operating Expenses

 

General and Administrative—General and administrative expenses, including noncash compensation expense, were $467,034 for the three months ended March 31, 2006, compared to $27,516 for the three months ended March 31, 2005, representing an increase of $439,518, or 1,597%. The increase in our general and administrative expenses from the three months ended March 31, 2006, as compared to the three months ended March 31, 2005, reflects the expenses including legal, accounting, administration, and other consulting fees incurred in the first quarter of 2006 directly related to the reverse acquisition of TetriDyn Solutions, Inc.

 

Selling and Marketing—Selling and marketing expenses, including noncash compensation expense, were $54,735 for the three months ended March 31, 2006, compared to $26,402 for the three months ended March 31, 2006, representing an increase of $28,333, or 107.3%. The increase in our selling and marketing expenses from the three months ended March 31, 2006, as compared to the three months ended March 31, 2005, reflects our focus on implementing our new marketing strategy, including increased advertising and customer contact.

 

Research and Development Expenses—Research and development expenses were $45,182 for the three months ended March 31, 2006, compared to $43,646 for the three months ended March 31, 2005, representing an increase of $1,536, or 3.5%. The increase in research and development expenses was not material.

 

 

15

 



 

 

Interest expense was $27,997 for the three months ended March 31, 2006, as compared to $12,047 for the three months ended March 31, 2005, an increase of $15,950, or 132.4%. The increase in interest expense related primarily to an additional loan and increased interest rates.

 

Liquidity and Capital Resources

 

At March 31, 2006, our principal sources of liquidity consisted of $122,325 of cash, as compared to $108,311 of cash December 31, 2005. In addition, our stockholders’ deficit was $687,885 at March 31, 2006, compared to stockholders’ deficit of $1,669,052 at December 31, 2005, a decrease in the deficit of $981,167. The increase in value reflects the conversion of TetriDyn Solutions’ pre-acquisition Series A redeemable preferred stock to common stock and the conversion of a $250,000 loan to common stock.

 

Our operations used net cash of $109,961 during the three months ended March 31, 2006, as compared to $28,925 of net cash used during the three months ended March 31, 2005. The $81,036 increase in the net cash used by our operating activities primarily resulted from acquisition expenses and increased expenditures for advertising and marketing.

 

Investing activities for the three months ended March 31, 2006, used $1,821 of net cash, as compared to $276 of net cash used during the three months ended March 31, 2005. The increase in net cash used related primarily to the purchase of additional computer equipment in support of increased marketing activity in 2006.

 

Financing activities provided $125,796 during the three months ended March 31, 2006, compared to providing net cash of $29,424 during the three months ended March 31, 2005. The increase of $96,372 of net cash provided in financing activities primarily resulted from increased investment activity in 2006.

 

Contractual Cash Obligations and Commercial Commitments

 

The following table presents our contractual cash obligations and commercial commitments as of March 31, 2006. We have no other significant contractual obligations or commercial commitments either on or off balance sheet as of this date:

 

 

Payments Due by Period

Contractual Cash Obligations

     Total    

 

< 1 Year

 

1-3 Years

 

 

 

 

 

 

Long-term Debt

$844,265

 

$664,104

 

$180,161

Capital Lease Obligations

    11,639

 

    11,639

 

             -

Total

$855,904

 

$675,743

 

$180,161

 

 

ITEM 3. CONTROLS AND PROCEDURES

 

Restatement of Previously Issued Financial Statements

We had previously carried out an evaluation of the effectiveness of the design and operation of the disclosure controls and procedures and had previously concluded that such disclosure controls and procedures were effective. Subsequent to our original 10-QSB filing, we have restated our condensed consolidated financial statements for the three months ended March 31, 2006, as discussed in Note 2 to the unaudited condensed consolidated financial statements included within Part I, Item 1 of this report.

 

 

16

 



 

 

As a result, we have reassessed our evaluation, under the supervision and with the participation of our management, including the chief executive officer and the chief financial officer, of the effectiveness of the design and operation of the disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon our reassessed evaluation, management, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report (March 31, 2006).

 

In an effort to remediate the material weakness in our internal control over financial reporting described above, management has subsequently implemented a revised process to recognize stock value tied to an agreement at the time all contingencies associated with an agreement have been met. Accordingly, management believes this process has remediated the material weakness discussed above.

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are, from time to time, a party to legal proceedings arising out of our business. We believe that there are no proceedings pending or threatened against us which, if determined adversely, would have a material adverse effect on our business, financial condition, and results of operations or liquidity.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Unregistered sales of securities during the quarter ended March 31, 2006, were previously reported on Form 8-K.

 

ITEM 6. EXHIBITS

 

The following exhibits are filed as a part of this report:

 

Exhibit Number*

 

 

Title of Document

 

 

Location

 

 

 

 

 

Item 31

 

Rule 13a-14(a)/15d-14(a) Certifications

 

 

31.01

 

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13a-14

 

Attached

Item 32

 

Section 1350 Certifications

 

 

32.01

 

Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer and Chief Financial Officer)

 

Attached

_______________

*

All exhibits are numbered with the number preceding the decimal indicating the applicable SEC reference number in Item 601 and the number following the decimal indicating the sequence of the particular document.

 

 

17

 



 

 

SIGNATURE

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

TETRIDYN SOLUTIONS, INC.

 

(Registrant)

 

 

Date: June 14, 2007

By: /s/ David W. Hempstead

David W. Hempstead, President, Chief Executive Officer, and Chief Financial Officer

 

18