UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER [33-22142]
MIDNIGHT HOLDINGS GROUP, INC.
f/k/a REDOX TECHNOLOGY CORPORATION
(Exact name of small business issuer as specified in its charter)
DELAWARE 55-0681106
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3872 ROCHESTER ROAD, TROY, MICHIGAN 48083
(Address of principal executive offices)
(248) 743-0154
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 [ ] No [ X ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
CLASS OUTSTANDING AS OF SEPTEMBER 30, 2005
Common Stock, $0.00005 par value [85,627,061]
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [ X ]
TABLE OF CONTENTS
HEADING PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.......................................................... 1
Balance Sheets - September 30, 2005 and December 31, 2004............... 1
Statements of Expenses -Nine months ended September 30, 2005
and 2004 and the period from inception on April 9, 1993
through September 30, 2005............................................... 2
Statements of Cash Flows - Three and Nine months ended September 30, 2005
and 2004 and the period from inception on April 9, 1993 through
September 30, 2005....................................................... 3
Notes to Financial Statements ........................................... 5
Item 2. Management's Discussion and Analysis or Plan of Operations.................... 6
Item 3. Controls and Procedures....................................................... 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................................. 8
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds................... 8
Item 3. Defaults Upon Senior Securities............................................... 8
Item 4. Submission of Matters to a Vote of Securities Holders......................... 8
Item 5. Other Information............................................................. 8
Item 6. Exhibits and Reports on Form 8-K.............................................. 8
Signatures.................................................................... 9
PART I
ITEM 1. FINANCIAL STATEMENTS
MIDNIGHT HOLDINGS GROUP, INC.
f/k/a REDOX TECHNOLOGY CORPORATION
(A Development Stage Company)
BALANCE SHEETS
(unaudited)
September 30, 2005 December 31, 2004
ASSETS ------------------ -----------------
Cash $ 111 $ 219
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES
Accounts payable $ 263,227 $ 220,915
Accrued expenses 847,827 329,580
Due to related party 15,000 15,000
Convertible notes payable, net of unamortized discount of
$152,082 and $281,525, respectively 347,918 218,475
Derivative liabilities 292,712 228,350
Accrued debt non-compliance costs 1,250,000 214,285
----------- -----------
Total Liabilities 3,016,684 $ 1,226,605
----------- -----------
Commitments and contingency -- --
STOCKHOLDERS' DEFICIT
Convertible preferred stock, $.001 par, 10,000,000
shares authorized, none issued and outstanding -- --
Common stock, $.00005 par, 100,000,000,000 shares
authorized, 85,627,061 shares outstanding 4,281 4,281
Additional paid in capital 6,211,784 6,211,784
Deficit accumulated during the development stage (9,232,638) (7,442,451)
----------- -----------
Total Stockholders' Deficit (3,016,573) (1,226,386)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 111 $ 219
=========== ===========
MIDNIGHT HOLDINGS GROUP, INC.
f/k/a REDOX TECHNOLOGY CORPORATION
(A Development Stage Company)
STATEMENTS OF EXPENSES
Three and Nine Months Ended September 30, 2005, and 2004, and
the Period from April 9, 1993 (Inception) Through September 30, 2005
(unaudited)
Inception
Three Months Nine Months Through
(Restated) (Restated) September 30,
2005 2004 2005 2004 2005
------------ ------------ ------------ ------------ ------------
General & administrative
paid in cash $ 172,385 $ 260,622 $ 560,667 $ 504,857 $ 2,863,906
paid in stock -- -- -- 478,468 4,225,233
warrants -- -- -- -- 3,698
Impairment expense -- -- -- -- 161,923
Research & development -- -- -- -- 150,965
Interest expense 46,890 33,967 129,443 100,640 468,060
Depreciation -- -- -- -- 53,959
(Gain)/loss on derivatives (871,067) (23,924) 64,362 10,400 54,894
Debt non-compliance
Costs -- -- 1,035,715 -- 1,250,000
------------ ------------ ------------ ------------ ------------
Net income/(loss) $ 651,792 $ (270,665) $ (1,790,187) $ (1,094,365) $ (9,232,638)
============ ============ ============ ============ ============
Basic and diluted net
income/(loss)
per common share $ .01 $ (.00) $ (.02) $ (.01)
Weighted average common
shares outstanding 85,627,061 81,446,629 85,627,061 79,274,209
MIDNIGHT HOLDINGS GROUP, INC.
f/k/a REDOX TECHNOLOGY CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2005, and 2004, and
the Period from April 9, 1993 (Inception) Through September 30, 2005
(unaudited)
Inception
Through
(Restated) September 30,
2005 2004 2005
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,790,187) $(1,094,365) $(9,232,638)
Adjustments to reconcile net loss to
cash used in operating activities:
Stock issued for lawsuit -- -- 127,500
Stock issued for patent -- -- 1,500
Stock issued for services -- 478,468 3,896,568
Warrant expense -- -- 3,698
Depreciation -- -- 53,959
Impairment expense -- -- 161,923
Amortization of discount 129,443 39,711 205,736
Loss on derivatives 64,362 10,400 54,894
Change in:
Accounts payable 42,312 19,861 263,227
Accrued expenses 518,247 84,748 957,331
Debt non-compliance costs 1,035,715 -- 1,250,000
Accrued interest on note payable to founder -- 60,930 196,570
----------- ----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (108) (400,247) (2,059,732)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets -- -- (65,882)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Sales of common stock -- -- 120,350
Contributions to capital
by founder -- 20,500 20,500
Proceeds from note payable
to related party -- -- 1,589,875
Advances by related party -- -- 15,000
Net proceeds from note payable -- 380,000 380,000
----------- ----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES -- 400,500 2,125,725
----------- ----------- -----------
NET CHANGE IN CASH (108) 253 111
CASH AT BEGINNING OF PERIOD 219 -- --
----------- ----------- -----------
CASH AT END OF PERIOD $ 111 $ 253 $ 111
=========== =========== ===========
NON-CASH ACTIVITIES:
Paid in capital converted
into note to founder $ -- $ -- $ 1,591,831
Note to founder exchanged
for common stock -- -- 1,146,467
Stock for accrued expense -- 43,749 43,749
Debt forgiven by founder -- 705,733 705,733
Discount on debt -- 380,000 380,000
Stock issued for licenses -- 150,000 150,000
MIDNIGHT HOLDINGS GROUP, INC.
f/k/a REDOX TECHNOLOGY CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Midnight Holdings
Group, Inc. ("Midnight") (formerly Redox Technology Corporation ("Redox")), have
been prepared in accordance with accounting principles generally accepted in the
United States of America and the rules of the Securities and Exchange Commission
("SEC"), and should be read in conjunction with the audited financial statements
and notes thereto contained in Midnight's Annual Report filed with the SEC on
Form 10-KSB. In the opinion of management, all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of financial position
and the results of operations for the interim periods presented have been
reflected herein. The results of operations for interim periods are not
necessarily indicative of the results to be expected for the full year. Notes to
the financial statements which would substantially duplicate the disclosure
contained in the audited financial statements for 2004 as reported in the 10-KSB
have been omitted.
Note 2 - DERIVATIVE LIABILITIES
Derivative Changes in Derivative
Liabilities Derivative Liabilities
12/31/04 Liabilities 9/30/05
----------- ----------- -----------
Net proceeds of the Notes $ 500,000 $ -- $ 500,000
Less: Unamortized discount (281,525) 129,443 (152,082)
----------- ----------- -----------
Carring value of notes 218,475 129,443 347,918
Derivative liabilities 228,350 64,362 292,712
Accrued debt
non-compliance costs 214,285 1,035,715 1,250,000
----------- ----------- -----------
Book Value $ 661,110 $ 1,229,520 $ 1,890,630
=========== =========== ===========
NOTE 3 - LICENSE AGREEMENTS
During the nine months ended September 30, 2005, Midnight continued to accrue
minimum royalty fees under the Screen Media and Haynes Enterprises license
agreements. $375,000 of the $500,000 owed for 2005 was accrued at September 30,
2005.
NOTE 4 - RESTATEMENT
There were misstatements in the originally prepared September 30, 2004
financials due to improper accounting related to derivative liabilities and
beneficial conversion feature accounting. The convertible notes and warrants
issued in the second quarter of 2004 were originally accounted for under the
beneficial conversion feature rules. It was discovered in 2006 that the notes
and the warrants qualified for derivative accounting. The adjustments below
reflect the correction of the original accounting.
For the three months ended September 30, 2004:
Previously Increase
Stated (Decrease) Restated
------------ ------------ ------------
Statement of Expenses:
General & administrative
paid in cash $ 135,622 $ 125,000 $ 260,622
Interest expense 62,500 (28,533) 33,967
Gain on derivatives -- (23,924) (23,924)
------------ ------------ ------------
Net loss $ (198,122) $ (72,543) $ (270,665)
============ ============ ============
Basic and diluted net loss
per common share $ (.00) $ (.00) $ (.00)
Weighted average common
shares outstanding 81,446,629 -- 81,446,629
For the nine months ended September 30, 2004:
Previously Increase
Stated (Decrease) Restated
------------ ------------ ------------
Statement of Expenses:
General & administrative
paid in cash $ 379,857 $ 125,000 $ 504,857
paid in stock 478,468 -- 478,468
Interest expense 185,929 (85,289) 100,640
Loss on derivatives -- 10,400 10,400
------------ ------------ ------------
Net loss $ (1,044,254) $ (50,111) $ (1,094,365)
============ ============ ============
Basic and diluted net loss
per common share $ (.01) $ (.00) $ (.01)
Weighted average common
shares outstanding 79,274,209 -- 79,274,209
NOTE 5 - SUBSEQUENT EVENTS
On December 30, 2005 Redox signed a Share Exchange and Reorganization Agreement
with Midnight Auto Holdings,Inc., whereby Midnight shareholders exchanged all of
the outstanding and issued capital stock of Midnight for 374,144,130 shares of
Redox common stock representing 80% of the outstanding common stock of Redox
after giving effect to the transaction. The transaction was accounted for as a
reverse acquisition. Redox changed its name to Midnight Holdings Group, Inc. as
a result of the merger.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
THIS QUARTERLY REPORT ON FORM 10-QSB AND THE DOCUMENTS INCORPORATED HEREIN
CONTAIN "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS
INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE
THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY, OR INDUSTRY
RESULTS, TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. WHEN USED
IN THIS QUARTERLY REPORT, STATEMENTS THAT ARE NOT STATEMENTS OF CURRENT OR
HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING
THE FOREGOING, THE WORDS "PLAN", "INTEND", "MAY," "WILL," "EXPECT," "BELIEVE",
"COULD," "ANTICIPATE," "ESTIMATE," OR "CONTINUE" OR SIMILAR EXPRESSIONS OR OTHER
VARIATIONS OR COMPARABLE TERMINOLOGY ARE INTENDED TO IDENTIFY SUCH
FORWARD-LOOKING STATEMENTS. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON
THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. EXCEPT
AS REQUIRED BY LAW, THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE ANY
FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE
EVENTS OR OTHERWISE.
ANY REFERENCE TO "REDOX", THE "COMPANY"," WE", "US", "OUR" OR THE "REGISTRANT"
REDOX TECHNOLOGY CORPORATION AND ITS SUBSIDIARIES AS OF SEPTEMBER 30, 2005. THE
FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS FORM 10-QSB.
GENERAL
The Company is continuing its efforts to acquire a target business, including
identifying and evaluating prospective acquisition candidates, selecting the
target business and structuring, negotiating and consummating the business
combination. The Company has no particular acquisitions in mind and has not
entered into any negotiations regarding such acquisitions. None of the Company's
officers, directors, promoters or affiliates has engaged in any discussions with
any representative of any other company regarding the possibility of an
acquisition or merger between the Company and such other company as of the date
of this Form 10-QSB.
The Company has, and will continue to have, no capital with which to provide the
owners of the business opportunities with any significant cash or other assets.
However, management believes the Company will be able to offer owners of
acquisition candidates the opportunity to acquire a controlling ownership
interest in a publicly registered company without incurring the cost and time
required to conduct an initial public offering. The owners of business
opportunities will, however, incur significant legal and accounting costs in
connection with the acquisition of a business opportunity, including the costs
of preparing Form 8-Ks, 10-Ks or 10-KSBs, 10-Qs or 10-QSBs, agreements and
related reports and documents. The Securities Exchange Act of 1934, as amended
(the "Exchange Act") requires that any merger or acquisition candidate comply
with all applicable reporting requirements, which include providing audited
financial statements to be included within the numerous filings relevant to
complying with the Exchange Act.
The Company did not have any operating income for the nine months ended
September 30, 2005. For the nine months ended September 30, 2005, the Company
recognized a net loss of $1,790,187 and for the period from inception through
September 30, 2005, the Company recognized a net loss of $9,232,638.
LIQUIDITY AND CAPITAL RESOURCES
The Company is in the development stage. At September 30, 2005 the Company had
no capital resources
and will rely upon the issuance of debt or equity to fund administrative
expenses pending acquisition of an operating company.
The Company will carry out its plan of business as discussed above. The Company
cannot predict to what extent its liquidity and capital resources will be
diminished prior to the consummation of a business combination or whether its
capital will be further depleted by operating losses (if any) of the business
entity which the Company may eventually acquire.
RESULTS OF OPERATIONS
During the nine months ended September 30, 2005, the Company has engaged in no
significant operations other than administrative activities. No revenue was
received by the Company during this period.
For the current fiscal year, the Company anticipates incurring a loss as a
result of administrative expenses, and expenses associated with locating and
evaluating acquisition candidates. The Company anticipates that until a business
combination is competed with an acquisition candidate, it will not generate
revenues other than interest income, and may continue to operate at a loss after
completing a business combination, depending on the performance o the acquired
business.
NEED FOR ADDITIONAL FINANCING
The Company believes that it will have to raise funds from a private offering of
debt or equity securities in order to accomplish the goal of completing a
combination. There is no assurance, however, that the Company will obtain such
funding.
CRITICAL ACCOUNTING POLICIES
Our financial statements and related public financial information are based on
the application of accounting principles generally accepted in the United States
("GAAP"). GAAP requires the use of estimates; assumptions, judgments and
subjective interpretations of accounting principles that have an impact on the
assets, liabilities, revenue and expense amounts reported. These estimates can
also affect supplemental information contained in our external disclosures
including information regarding contingencies, risk and financial condition. We
believe our use if estimates and underlying accounting assumptions adhere to
GAAP and are consistently and conservatively applied. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. Actual results may differ materially from
these estimates under different assumptions or conditions. We continue to
monitor significant estimates made during the preparation of our financial
statements.
Our financial statements include substantial non-operating gains or losses
resulting from required quarterly reevaulation under GAAP of our outstanding
derivative instruments. Generally accepted accounting principles in the United
States requires that we report the value of certain derivative instruments we
have issued as current liabilities on our balance sheet and report changes in
the value of these derivatives as non-operating gains or losses on our statement
of operations. The value of the derivatives is required to be recalculated (and
resulting non-operating gains or losses reflected in our statement of operations
and resulting adjustments to the associated liability amounts reflected on our
balance sheet) on a quarterly basis, and is based on the market value of our
common stock. Due to the nature of the required calculations and the larger
number of shares of our common stock involved in such
calculations, changes in our common stock price may result in significant
changes in the value of the derivatives and resulting gains and losses on our
statement of operations.
ITEM 3. CONTROLS AND PROCEDURES.
As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of management,
including our Chief Executive Officer and principal accounting officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934. Based upon that evaluation, our chief executive officer
and principal financial officer concluded that our disclosure controls and
procedures were not effective to enable us to record, process, summarize and
report information required to be included in our periodic filings with the
Securities and Exchange Commission within the required time period and in that
some of the accounting entries relating to debt and equity instruments required
adjustment upon review by our external accountants. We intend to take measures
to remedy this situation by increasing the accounting staff, engaging
independent auditors to provide us with accounting advice and implementing
internal procedures including the distribution of documents. These deficiencies
have been reported to our Board of Directors and we intend to improve and
strengthen our controls and procedures.
PART II
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which we are a party
or to which any of our property is subject and, to the best of our knowledge, no
such actions against us are contemplated or threatened.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 31.1 Certification of Chief Executive Officer Pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.2 Certification of Principal Accounting Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1 Certification of Chief Executive Officer Pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Exhibit 32.2 Certification of Principal Accounting Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
None.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MIDNIGHT HOLDINGS GROUP, INC.
f/k/a REDOX TECHNOLOGY CORPORATION
Date: June 28, 2006 By: /s/ Nicholas A. Cocco
----------------------------------------
Nicholas A. Cocco
President, Chief Executive Officer and Director
Date: June 28, 2006 By: /s/ Richard Kohl
----------------------------------------
Richard Kohl
Executive Vice President, Secretary, Chief
Financial Officer
(Principal Accounting Officer)