The accompanying notes are an integral part of these unaudited pro forma consolidated financial statements.
CYTTA CORP. AND SUBSIDIARY
CYTTA CORP. AND SUBSIDIARY
CYTTA CORP. AND SUBSIDIARY
CYTTA CORP. AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
ORGANIZATION
Ophthalmic International, Inc. (“Ophthalmic”) was incorporated in March 1997 in the state of Nevada. Ophthalmic had been a wholly-owned subsidiary of Coronado Industries, Inc. until January 26, 2007, when Ophthalmic was purchased from Coronado Industries, Inc. for cash and other consideration.
CYTTA Corp. (“CYTTA”) was incorporated on May 30, 2006 under the laws of the State of Nevada. It is located in Vancouver, British Columbia, Canada. The accounting and reporting policies of CYTTA conform to accounting principles generally accepted in the United States of America. CYTTA's fiscal year end is September 30.
On December 5, 2008, CYTTA acquired Ophthalmic pursuant to an Agreement of Share Exchange and Plan of Reorganization (the “Agreement”) with Ophthalmic. Pursuant to the Agreement, CYTTA agreed to issue an aggregate of 56,000,000 shares of its restricted common stock to all of the shareholders of Ophthalmic in exchange for all the issued and outstanding shares of common stock of Ophthalmic.
The exchange of shares has been accounted for as a reverse acquisition in the form of a recapitalization, with Ophthalmic as the “accounting acquirer” and the surviving entity. After the acquisition, Ophthalmic retained the “legal acquirer” name of CYTTA Corp. (the “Company”) and the fiscal year end of September 30. Operations after the acquisition will be based in Fountain Hills, Arizona where the Company intends to manufacture and market a patented Vacuum Fixation Device and patented suction rings to major medical supply companies and health care providers throughout the world.
GOING CONCERN
The Company’s pro forma consolidated financial statements are presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not made an operating profit since 1996. Further, the Company has a pro forma working capital deficit of $(583,554) and a pro forma negative net worth of $(12,923,942) as of September 30, 2008.
The pro forma consolidated financial statements do not include any adjustments to reflect the possible future effects of the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the uncertainty of the Company’s ability to continue as a going concern.
CYTTA CORP. AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
STOCKHOLDERS’ EQUITY
The accumulated deficit for Ophthalmic had been previously reported with Coronado Industries, Inc. on a consolidated basis through September 30, 3006. Due to the integral nature of accounting for the consolidated companies, assumptions have been made to calculate the amount of the accumulated deficit attributable to Ophthalmic as a stand-alone company. The calculations were performed by reviewing the reported income statements for Coronado Industries, Inc. from 1996 to 2006. The yearly net losses that would be attributable to Ophthalmic were determined by taking the consolidated loss of Coronado Industries, Inc. and adding back for any clinic losses, 20% of Ophthalmic's Chairman’s salary, legal and professional fees, promotion, media and marketing expenses, sale of a clinic, and certain rent expenses that would have been associated with Coronado Industries, Inc. only. The difference would be the loss attributable to Ophthalmic. See Note 8 below for details of the calculations.
NOTE 2 – EQUITY
On December 4, 2008, CYTTA completed a 4-for-1 forward stock split which brought the shares outstanding of CYTTA from 6,050,000 to 24,200,000.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRO FORMA PRESENTATION
The unaudited pro forma consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America.
The historical financial information has been adjusted to give effect to pro forma events that are related and/or directly attributable to the acquisition and are expected to have a continuing impact on the combined results. Accordingly, the adjustments presented on the pro forma consolidated financial statements have been identified and presented in accordance with their timing to provide relevant information for an accurate understanding of the combined company upon finalizing the transaction.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial position, results of operations, cash flows and changes in stockholders’ equity (deficit) of the Company and its wholly-owned subsidiary. All material intercompany transactions, accounts and balances have been eliminated.
CYTTA CORP. AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
FOREIGN CURRENCY TRANSACTIONS
CYTTA’s functional currency before the date of the acquisition was the Canadian Dollar. The Company’s reporting currency is the U.S. Dollar. All transactions initiated in Canadian Dollars are translated to U.S. Dollars in accordance with SFAS No. 52, “Foreign Currency Translation,” as follows:
| (i) | Monetary assets and liabilities at the rate of exchange in effect at the balance sheet date; |
| (ii) | Equity at historical rates; and |
| (iii) | Revenue and expense items at the average rate of exchange prevailing during the period. |
Adjustments arising from such translations are deferred until realization and are included as a separate component of stockholders’ equity (deficit) as a component of comprehensive income or loss. Therefore, translation adjustments are not included in determining net income (loss) but reported as other comprehensive income.
For foreign currency transactions, the Company translates these amounts to the Company’s functional currency at the exchange rate effective on the invoice date. If the exchange rate changes between the time of purchase and the time actual payment is made, a foreign exchange transaction gain or loss results which is included in determining net income for the period.
No significant realized exchange gains or losses were recorded from inception May 30, 2006 to September 30, 2008.
CYTTA CORP. AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
COMPREHENSIVE INCOME (LOSS)
SFAS No. 130, “Reporting Comprehensive Income,” establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. From inception May 30, 2006 to September 30, 2008, the Company had no items of other comprehensive income. Therefore, net loss equals comprehensive loss from inception May 30, 2006 to September 30, 2008.
STOCK-BASED COMPENSATION
The Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), “Share-Based Payment,” which establishes accounting for equity instruments exchanged for employee services. Under the provisions of SFAS 123(R), stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employees’ requisite service period (generally the vesting period of the equity grant). The Company accounts for share-based payments to non-employees in accordance with SFAS 123 (as originally issued) and Emerging Issues Task force Issue No 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.”
REVENUE RECOGNITION
The Company recognizes revenue based on guidance provided in Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition,” and in accordance with Emerging Issues Task Force (“EITF”) Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables.” The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, our price is fixed or determinable, and collectibles is reasonably assured. We recognize revenue on our standard products when title passes to the customer upon shipment. The standard products do not have customer acceptance criteria. The Company has standard rights of return that are accounted for as a warranty provision under SFAS No. 5, “Accounting for Contingencies.” The Company does not have any price protection agreements or other post shipment obligations. For custom equipment where customer acceptance is part of the sales agreement, revenue will be recognized when the customer has accepted the product. In case where custom equipment does not have customer acceptance as part of the sales agreement, revenue will be recognized upon shipment, as long as the system meets the specifications as agreed upon with the customer. Certain transactions may have multiple deliverables, with the deliverables clearly defined. To the extent that the secondary deliverables are other than perfunctory, the Company will recognize the revenue on each deliverable, if separable, or on the completion of all deliverables, if not separable.
CYTTA CORP. AND SUBSIDIARY
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
LOSS PER SHARE
Basic loss per share includes no dilution and is computed by dividing loss to common stockholders by the weighted average number of common shares outstanding for the period.
NOTE 4 – PRO FORMA ADJUSTMENTS
The following unaudited pro forma adjustments are included in the accompanying unaudited pro forma consolidated balance sheet at September 30, 2008 and the unaudited pro forma consolidated statement of operations for the year then ended, to reflect the combination of CYTTA Corp. and Ophthalmic International, Inc.
| A. | To record the issuance of stock for 100% of the outstanding shares of Ophthalmic. |
| B. | To record 4-for-1 stock split by CYTTA. |
| C. | To eliminate common stock. |
| D. | There is no income tax provision for September 30, 2008 due to the carryover of operating losses. |
NOTE 5 – PROPERTY & EQUIPMENT
