xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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oTRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Nevada
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000-52296
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20-2414965
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(State or other jurisdiction of incorporation or organization)
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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2711 Centerville Rd
Wilmington, DE
19800
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(Address of principal executive offices) (Zip Code)
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Large Accelerated Filer
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o
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Accelerated Filer
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o
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Non-Accelerated Filer
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o(Do not check if smaller reporting company)
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Smaller reporting company
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x
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Part I.
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Financial Information
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Item 1.
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Financial Statements
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3
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Condensed Consolidated Balance Sheets as of March 31, 2012 (unaudited) and December 31, 2011
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3
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Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2012 and 2011 and the three months ended March 31, 2012 and 2011
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4
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Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Deficiency for the period from December 7, 2005 (inception) to March 31, 2012
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5
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Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2012 and 2011 and the period from December 7, 2005 (inception) to March 31, 2012
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6
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Notes to Unaudited Condensed Consolidated Financial Statements
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7
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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14
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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20
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Item 4.
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Controls and Procedures
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20
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Part II.
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Other Information
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Item 1.
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Legal Proceedings
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20
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Item 1A.
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Risk Factors
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21
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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21
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Item 3.
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Defaults Upon Senior Securities
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21
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Item 4.
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Mine Safety Disclosures
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21
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Item 5.
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Other Information
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21
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Item 6.
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Exhibits
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21
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Item 1.
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Financial Statements.
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March 31, 2012
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December 31, 2011
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|||||||
(Unaudited)
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||||||||
Assets
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||||||||
Current Assets
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||||||||
Cash
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$ | - | $ | 1,822 | ||||
Restricted cash
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- | 507 | ||||||
Prepaid expenses and other current assets
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- | 22,626 | ||||||
Total Current Assets
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- | 24,955 | ||||||
Property and equipment, net
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- | 10,000 | ||||||
Total Assets
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$ | - | $ | 34,955 | ||||
Liabilities and Stockholders' Deficit
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||||||||
Current Liabilities
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||||||||
Accounts payable and accrued liabilities
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$ | 4,100,108 | $ | 7,015,226 | ||||
Notes payable, less unamortized debt discounts of $0 and $125,072, respectively
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2,854,822 | 4,188,313 | ||||||
Note payable due to purchaser of Airline Intelligence Systems, Inc.
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100,000 | - | ||||||
Loans payable to controlling stockholder
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1,032,774 | 1,032,774 | ||||||
Total Current Liabilities
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8,087,704 | 12,236,313 | ||||||
Long term portion of note payable
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105,000 | 105,000 | ||||||
Total Liabilities
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8,192,704 | 12,341,313 | ||||||
Stockholders' Deficiency
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||||||||
Preferred shares, $0.001 par value (Authorized 20,000,000):
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||||||||
Series B (Designated: 2,400,000): Issued 2,329,905
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2,330 | 2,330 | ||||||
Series C (Designated: 1): Issued March 31, 2012: 1 and December 31, 2011: 1
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- | - | ||||||
Common shares, $0.001 par value (Authorized: 300,000,000) Issued: March 31, 2012:
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||||||||
263,779,942 and December 31 2011: 166,266,955
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263,780 | 166,267 | ||||||
Additional paid in capital
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59,419,328 | 59,444,465 | ||||||
Subscription advances (receivables), net
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617,701 | 617,701 | ||||||
Deficit accumulated during the development stage
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(68,495,843 | ) | (72,537,121 | ) | ||||
Total Stockholders' Deficiency
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(8,192,704 | ) | (12,306,358 | ) | ||||
Total Liabilities and Stockholders' Deficiency
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$ | - | $ | 34,955 |
AISYSTEMS, INC. ( A development stage company)
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CONSOLIDATED STATEMENTS OF OPERATIONS
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||||||||
(Expressed in US Dollars)
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||||||||
(Unaudited)
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||||||||
Three Months Ended March 31, 2012
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Three Months Ended March 31, 2011
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Revenues
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$ | - | $ | - | ||||
Expenses:
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||||||||
Stock-based compensation
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- | 226,075 | ||||||
Other general and administrative
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100,971 | 150,000 | ||||||
Interest expense (including accretion of debt discounts of $125,072 and $0, respectively)
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222,971 | 151,831 | ||||||
Total Expenses
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323,942 | 527,906 | ||||||
Loss from continuing operations
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(323,942 | ) | (527,906 | ) | ||||
Discontinued Operations:
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||||||||
Gain on divestiture of Airline Intelligence Systems Inc. ("AIS")
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4,387,414 | - | ||||||
Loss from operations of AIS
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(22,194 | ) | (1,081,890 | ) | ||||
Net
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4,365,220 | (1,081,890 | ) | |||||
Net income (loss)
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$ | 4,041,278 | $ | (1,609,796 | ) | |||
Net income (loss) per share attributable to common stockholders
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||||||||
Loss from continuing operations
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$ | (0.00 | ) | $ | (0.00 | ) | ||
Income (loss) from discontinued operations
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0.02 | 0.01 | ||||||
Net income (loss)
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$ | 0.02 | $ | (0.01 | ) | |||
Number of weighted average common shares outstanding basic and diluted
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201,121,924 | 151,120,449 |
AISYSTEMS, INC. ( A development stage company)
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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
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For the Three Months Ended March 31, 2012
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(Expressed in US Dollars)
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(Unaudited)
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Series B Preferred Stock, $0.001 par
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Series C Preferred Stock, $0.001 par
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Common Stock, $0.001 par
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Additional Paid in Capital
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Subscription Advances (Receivables)
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Deficit accumulated during the development stage
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Total
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Shares
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Par
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Shares
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Par
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Shares
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Par
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Balance at December 31, 2011
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2,329,905 | $ | 2,330 | 1 | $ | - | 166,266,955 | $ | 166,267 | $ | 59,444,465 | $ | 617,701 | $ | (72,537,121 | ) | (12,306,358 | ) | ||||||||||||||||||||||
Shares issued for $0.000715 during the period from debt conversion
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- | - | - | - | 8,041,959 | 8,042 | (2,292 | ) | - | - | 5,750 | |||||||||||||||||||||||||||||
Shares issued for $0.000522 during the period from debt conversion
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- | - | - | - | 8,041,959 | 8,042 | (3,866 | ) | - | - | 4,176 | |||||||||||||||||||||||||||||
Shares issued for $0.000684 during the period from debt conversion
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- | - | - | - | 8,000,000 | 8,000 | (2,528 | ) | - | - | 5,472 | |||||||||||||||||||||||||||||
Shares issued for $0.000638 during the period from debt conversion
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- | - | - | - | 9,247,649 | 9,248 | (3,348 | ) | - | - | 5,900 | |||||||||||||||||||||||||||||
Shares issued for $0.000677 during the period from debt conversion
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- | - | - | - | 9,497,785 | 9,498 | (3,068 | ) | - | - | 6,430 | |||||||||||||||||||||||||||||
Shares issued for $0.000735 during the period from debt conversion
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- | - | - | - | 9,455,783 | 9,456 | (2,506 | ) | - | - | 6,950 | |||||||||||||||||||||||||||||
Shares issued for $0.000580 during the period from debt conversion
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- | - | - | - | 9,482,758 | 9,483 | (3,983 | ) | - | - | 5,500 | |||||||||||||||||||||||||||||
Shares issued for $0.000638 during the period from debt conversion
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- | - | - | - | 11,363,637 | 11,364 | (4,114 | ) | - | - | 7,250 | |||||||||||||||||||||||||||||
Shares issued for $0.000677 during the period from debt conversion
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- | - | - | - | 11,890,695 | 11,891 | (3,841 | ) | - | - | 8,050 | |||||||||||||||||||||||||||||
Shares issued for $0.001353 during the period from debt conversion
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- | - | - | - | 12,490,762 | 12,491 | 4,409 | - | - | 16,900 | ||||||||||||||||||||||||||||||
Net Income
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- | - | - | - | - | - | - | - | 4,041,278 | 4,041,278 | ||||||||||||||||||||||||||||||
Balance at March 31, 2012
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2,329,905 | $ | 2,330 | 1 | $ | - | 263,779,942 | $ | 263,780 | $ | 59,419,328 | $ | 617,701 | $ | (68,495,843 | ) | $ | (8,192,704 | ) |
AISYSTEMS, INC. ( A development stage company)
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CONSOLIDATED STATEMENTS OF CASH FLOW
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(Expressed in US Dollars)
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||||||||
(Unaudited)
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||||||||
Three Months Ended March 31, 2012
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Three Months Ended March 31, 2011
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Cash flows from operating activities;
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||||||||
Net income (loss)
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$ | 4,041,278 | $ | (1,609,796 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities:
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||||||||
Gain on divestiture of Airline Intelligence Systems, Inc.
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(4,387,414 | ) | - | |||||
Depreciation and amortization
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- | 26,797 | ||||||
Accretion of debt discounts on notes
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125,072 | - | ||||||
Stock-based compensation
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- | 226,075 | ||||||
Shares issued for services to be received
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370,500 | |||||||
Conversion of debt for issuance of stock
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- | (494,000 | ) | |||||
Deferred lease obligation
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- | (9,527 | ) | |||||
Interest expense on loan payable to controlling shareholder
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- | 9,725 | ||||||
Changes in operating assets and liabilities:
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||||||||
Prepaid expenses and other current assets
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- | (12,878 | ) | |||||
Accounts payable and accrued liabilities
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218,735 | 438,667 | ||||||
Net cash used in operating activities
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(2,329 | ) | (1,054,437 | ) | ||||
Cash flows from investing activities:
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- | - | ||||||
Cash flows from financing activities:
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||||||||
Proceeds from shares issued and subscription advances
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- | 1,062,348 | ||||||
Proceeds from (repayment of) notes payable to stockholders
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- | 52,599 | ||||||
Net cash provided by financing activities
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- | 1,114,947 | ||||||
Net increase (decrease) in cash
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(2,329 | ) | 60,510 | |||||
Cash, beginning of period
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2,329 | 11,461 | ||||||
Cash end of period
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$ | - | $ | 71,971 | ||||
Supplemental cash flow information:
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||||||||
Interest paid
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$ | - | $ | - | ||||
Income tax paid
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$ | - | $ | - | ||||
Non-cash investing and financing activities:
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Conversion of debt into common stock
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$ | 72,376 | $ | - |
1.
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Organization
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2.
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Going concern and management’s plans
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3.
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Interim Financial Statements
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4.
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Notes Payable
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March 31, 2012
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December 31, 2011
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|||||||
Convertible promissory note due to accredited investor entity, interest rate of 10% per annum, is due on March 5, 2012 and is convertible in whole or in part into Company common stock at a Variable Conversion price equal to 58% of the market price (defined as the average of the lowest three closing prices for the common stock during the ten trading day period ending on the latest complete trading day prior to the conversion date. Reflected net of unamortized debt discount related to beneficial conversion feature aggregating $0 and $96,470, respectively, past due and in default.
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$ | 273,416 | $ | 345,792 | ||||
Convertible promissory note due to accredited investor entity, interest at a rate of 10% per annum (22% default rate), is due on March 5, 2012 and is convertible in whole or in part into Company common stock at a Variable Conversion price equal to 58% of the market price (defined as the average of the lowest three closing prices for the common stock during the ten trading day period ending on the latest complete trading day prior to the conversion date. Reflected net of unamortized debt discount related to beneficial conversion feature aggregating $0 and $28,602, respectively, past due and in default.
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121,398 | 121,398 |
Promissory notes issued between October 2008 and September 2011 due to various investors, interest ranging from 5% to 8% per annum (default rate ranging from 12% to 22%), maturity dates ranging from August 2009 to September 2010, past due and in default (including $1,200,000 payable to Dynamic, the Company’s controlling stockholder.
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2,334,936 | 3,596,051 | ||||||
Total
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$ | 2,854,822 | $ | 4,188,313 |
5.
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Stockholders’ Deficiency
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Subscription advances (receivables), net, consists of:
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||||||||
Three Months Ended
March 31, 2012
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Year Ended
December 31, 2011
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Subscription receivables at $0.10 per share
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$ | (85,858 | ) | $ | (85,858 | ) | ||
Subscription receivables at $0.16 per share
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(15,676 | ) | (15,676 | ) | ||||
Subscription receivables at $0.20 per share
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(40,000 | ) | (40,000 | ) | ||||
Total subscription receivables
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(141,534 | ) | (141,534 | ) | ||||
Subscription advances without issuance of common stock
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||||||||
(6,530,408 total shares committed to be issued at December 31, 2011)
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759,235 | 759,235 | ||||||
Net
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$ | 617,701 | $ | 617,701 |
6.
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Income Taxes
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7.
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Stock Option Plans
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Shares under option
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Weighted Average
Exercise Price
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Average Remaining Contractual Life (Years)
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Weighted Average Grant Date Fair Value
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|||||||||||||
Outstanding at December 31, 2011
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16,216,286
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$
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0.11
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7.73
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$
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1.15
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||||||||||
Exercisable at December 31, 2011
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15,506,286
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$
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0.11
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7.82
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$
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1.20
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||||||||||
Granted
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-
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$
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-
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-
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$
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-
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||||||||||
Exercised
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-
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$
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-
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-
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$
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-
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||||||||||
Cancelled / Forfeited
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(13,043,068
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)
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$
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0.12
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8.99
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$
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0.03
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|||||||||
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||||||||||||||||
Outstanding at March 31, 2012
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3,173,218
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$
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0.07
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1.28
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$
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5.95
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||||||||||
Exercisable at March 31, 2012
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9,317,976
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$
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0.07
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1.28
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$
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5.95
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8.
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Discontinued Operations |
Fair value of promissory note payable to Rocmar on March 13, 2012
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$ | (100,000 | ) | |
Assets (liabilities) of AIS at March 13, 2012:
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||||
Cash
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2,329 | |||
Prepaid expenses and other current assets
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22,626 | |||
Property and equipment, net
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10,000 | |||
Accounts payable and accrued liabilities
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(3,141,254 | ) | ||
Notes payable
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(1,381,115 | ) | ||
Net
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(4,487,414 | ) | ||
Gain on divestiture of AIS
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$ | 4,387,414 |
Three months Ended March 31,
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||||||||
2012
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2011
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|||||||
Revenue:
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$ | - | $ | - | ||||
Expenses:
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||||||||
Salaries and benefits
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- | 506,548 | ||||||
Outside services
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- | 335,673 | ||||||
Other general and administrative expenses
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- | 140,653 | ||||||
Interest expense
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22,194 | 53,346 | ||||||
Other expense
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- | 45,670 | ||||||
Total expenses
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- | 1,081,890 | ||||||
Loss from operations of AIS
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$ | (22,194 | ) | $ | (1,081,890 | ) |
9.
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Subsequent Events |
Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk.
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Item 4.
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Controls and Procedures.
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Item 1.
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Legal Proceedings.
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds.
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Item 3.
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Defaults Upon Senior Securities.
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Item 4.
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Mine Safety Disclosures.
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Item 5.
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Other Information.
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Item 6.
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Exhibits.
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Exhibit Number
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Description
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31.1
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Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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32.1
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Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101.INS
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XBRL Instance Document *
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101.SCH
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XBRL Taxonomy Extension Schema Document *
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document *
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document *
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document *
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document *
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*
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Filed or furnished herewith.
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In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed.
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AI SYSTEMS INC.
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Date: May 21, 2012
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By:
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/s/ David Haines
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David Haines
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Chief Executive Officer
(Duly Authorized Officer, Principal Executive Officer and Principal Financial Officer)
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1.
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I have reviewed this Form 10-Q of AISystems, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding there liability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involved management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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AISYSTEMS, INC.
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/s/ David Haines
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David Haines
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President, Chief Executive Officer and Chief Financial Officer
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(principal executive officer and principal financial officer)
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1.
|
Such quarterly report of Form 10-Q for the quarter ending March 31, 2012, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
|
The information contained in such quarterly report of Form 10-Q for the quarter ending March 31, 2012, fairly represents in all material respects, the financial condition and results of operations of AISystems, Inc.
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Date: May 21, 2012
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AISYSTEMS, INC.
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/s/ David Haines
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|
David Haines
|
|
President, Chief Executive Officer and Chief Financial Officer
|
|
(principal executive officer and principal financial officer)
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Organization
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3 Months Ended | ||
---|---|---|---|
Mar. 31, 2012
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|||
Organization, Consolidation and Presentation Of Financial Statements [Abstract] | |||
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block] |
AISystems, Inc. (the “Company”) was incorporated in Nevada on February 22, 2005 under the name Wolf Resources Inc. On March 19, 2010, the Company acquired Airline Intelligence Systems Inc. (“AIS”), a development stage company based in the state of Washington which focused on software development for the airline industry.
On September 7, 2011, Dynamic Intelligence Inc. (“Dynamic”) provided the Company with a Notice of Non-Renewal, pursuant to an Intellectual Property Agreement (the “Agreement”) entered into by the parties on December 9, 2005. Due to Dynamic’s Notice of Non-Renewal, the Agreement ceased on December 9, 2011.
On March 13, 2012, the Company divested AIS pursuant to a Stock Transfer Agreement (the “STA”) with Rocmar Farms Limited (“Rocmar”). Accordingly, the operations of AIS for the periods presented have been reported as discontinued operations. See Note 8, “Discontinued Operations”.
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