UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number: 000-53104
INFOSPI, INC.
(Exact name of registrant as specified in its charter)
NEVADA 51-0668045
(State or Incorporation) (I.R.S. Employer Id. No.)
6968 La Jolla Blvd. Ste. 208, La Jolla, CA 92037 (858) 531-5723
(Address of principal executive offices) Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value per share
(Title of Class)
Indicate by check mark if InfoSpi, Inc. (InfoSpi) is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act of 1933. Yes [ ] No [X]
Indicate by check mark if InfoSpi is not required to file reports pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes [ ] No
[X]
Indicate by check mark whether InfoSpi (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that InfoSpi was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of InfoSpi's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether InfoSpi is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer [ ] Non-accelerated filer [ ]
Accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether InfoSpi is a shell company (as defined in Rule
12b-2 of the Exchange Act): Yes [X] No [ ]
The aggregate market value of InfoSpi's common stock held by non-affiliates of
InfoSpi as of the last business day of InfoSpi's most recently completed second
fiscal quarter (June 30, 2008) was approximately $0.00 (based on lack of any
trade or posted price reported by OTC-BB on or prior to June 30, 2008). For this
purpose, all of InfoSpi's officers and directors and their affiliates were
assumed to be affiliates of InfoSpi.
There were 5,567,324 shares of InfoSpi's common stock outstanding as of March 9,
2009.
DOCUMENTS INCORPORATED BY REFERENCE: None.
INFOSPI, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2008
INDEX
PART I
Item 1 Business 1
Item 1A Risk Factors 4
Item 2 Properties 10
Item 3 Legal Proceedings 10
Item 4 Submission of Matters to a Vote of Security Holders 10
PART II
Item 5 Market for Common Equity, Related Stockholder Matters, and
Issuer Purchases of Equity Securities 10
Item 6 Selected Financial Data 12
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operation 12
Item 7A Quantitative and Qualitative Disclosure About Market Risk 13
Item 8 Financial Statements and Supplementary Data 14
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 24
Item 9A Controls and Procedures 24
Item 9B Other Information 24
PART III
Item 10 Directors, Executive Officers, and Corporate Governance 24
Item 11 Executive Compensation 25
Item 12 Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 26
Item 13 Certain Relationships and Related Transactions and Director
Independence 26
Item 14 Principal Accounting Fees and Services 26
PART IV
Item 15 Exhibits and Financial Statement Schedules 27
SIGNATURES 27
ii
PART I
ITEM 1. DESCRIPTION OF BUSINESS
FORWARD-LOOKING STATEMENTS
OUR DISCLOSURE AND ANALYSIS IN THIS ANNUAL REPORT ON FORM 10-K CONTAINS
SOME FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS GIVE OUR CURRENT
EXPECTATIONS OR FORECASTS OF FUTURE EVENTS. YOU CAN IDENTIFY THESE STATEMENTS
SINCE THEY DO NOT RELATE STRICTLY TO HISTORICAL OR CURRENT FACTS. SUCH
STATEMENTS MAY INCLUDE WORDS SUCH AS "ANTICIPATE," "ESTIMATE," "EXPECT,"
"PROJECT," "INTEND," "PLAN," "BELIEVE," "HOPE" AND OTHER WORDS AND TERMS OF
SIMILAR MEANING. IN PARTICULAR, THESE INCLUDE, AMONG OTHERS, STATEMENTS RELATING
TO BUSINESS PLAN AND OUR INTENTION TO SEEK A BUSINESS COMBINATION OR LICENSE
ARRANGEMENT WITH AN OPERATING ENTITY, THE IMPACT OF NEW ACCOUNTING
PRONOUNCEMENTS, AND OTHER STATEMENTS REGARDING MATTERS THAT ARE NOT HISTORICAL
FACTS OR STATEMENTS OF CURRENT CONDITION.
THERE ARE IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS.
WE UNDERTAKE NO OBLIGATION (AND EXPRESSLY DISCLAIM ANY SUCH OBLIGATION) TO
PUBLICLY UPDATE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE, EXCEPT AS REQUIRED BY LAW. YOU ARE
ADVISED, HOWEVER, TO REVIEW ANY FURTHER DISCLOSURES WE MAKE ON RELATED SUBJECTS
IN OUR FILINGS WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE
"SEC"), ALL OF WHICH ARE AVAILABLE IN THE SEC EDGAR DATABASE AT WWW.SEC.GOV AND
FROM US.
BACKGROUND AND PREDECESSOR
InfoSpi, Inc. ("the Company" or "the Issuer" or "InfoSpi") was organized
under the laws of the State of Nevada on December 31, 2007 as part of the
implementation of the Chapter 11 plan of reorganization of Arrin Systems, Inc.
("Arrin"). Arrin filed for Chapter 11 Bankruptcy in April 2007 in the U.S.
Bankruptcy Court for the Southern District of California. Arrin's plan of
reorganization was confirmed by the Court on December 12, 2007 and became
effective on December 30, 2007. The plan of reorganization provided for the
establishment of the Issuer and the sale to the Issuer of Arrin's proprietary
software (used in the employee background screening industry) in exchange for
567,324 shares of InfoSpi's common stock which were distributed to Arrin's
general unsecured creditors. The shares were distributed pursuant to section
1145 of the Bankruptcy code and are exempt from the registration requirements of
Section 5 of the Securities Act of 1933 and any state or local law requiring
registration for an offer or sale of securities.
DESCRIPTION OF CURRENT BUSINESS
InfoSpi's original business was to hold, develop and market software that
automates various business processes in the employee background screening
industry. Specifically, the InfoSpi software (On-Line(TM) and HireHelper(TM))
automates aspects of obtaining and archiving large databases of background
information from suppliers, of searching these large databases for information
pertaining to a specific individual, and of packaging search results from
several large databases into a single report covering one or more individuals.
The type of background information contemplated by the software is that used by
employers in evaluating potential employees. The rights in the aforementioned
software are the Company's only asset.
On January 22, 2008 management determined that the Company lacks the
resources to further develop the software and agreed to seek a licensing
agreement or a merger or an acquisition with a larger, better capitalized entity
which will bring greater value to our shareholders. Therefore, as of the date
hereof, the Company can be defined as a "shell" company, an entity which is
generally described as having no or nominal operations and with no or nominal
assets. As a shell company, our purpose at this time, described more fully
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below, is to negotiate a business agreement or combination with a larger entity
which will bring greater value to our shareholders. We hope to consummate this
business combination with an entity engaged in a related business and thus
capable of utilizing the software currently owned by the Company, however we
will not limit our search for a business combination target to only businesses
engaged in the sale of background information.
Management of the Issuer believes that InfoSpi's software can be profitably
licensed or sold to others or, alternatively, the Company as a whole may be sold
to others. Potential users or buyers include employers interested in bringing
background searches in house, other information providers who are now
competitors of the Debtor, or an unrelated business which seeks the benefits of
our shareholder base or status as a reporting issuer. Management believes that
such an agreement or sale can provide an additional source of recovery for
Arrin's creditors, our shareholders. We will not limit our search for a business
combination target to the background screening industry, but rather will be
guided by the desire to bring greater value to our shareholders.
We will not restrict our search to any specific business or geographical
location. Potential business partners might be found within the background
screening industry, within the more general data solutions industry, or even
outside the data solutions industry. This discussion of the proposed business is
purposefully general and is not meant to be restrictive of our discretion to
search for and enter into potential business opportunities. Management
anticipates that it may be able to participate in only one potential business
venture because a business partner might require exclusivity. This lack of
diversification should be considered a substantial risk to our shareholders
because it will not permit us to offset potential losses from one venture
against gains from another.
We may seek a business opportunity with entities which have recently
commenced operations, or which wish to expand into new products or markets, to
develop a new product, or to utilize the public marketplace in order to raise
additional capital.
We anticipate that the selection of a business opportunity in which to
participate will be complex and extremely risky. Due to general economic
conditions, rapid changes in the business environment, and shortages of
available capital, management believes that there are numerous firms seeking the
benefits of an issuer who has complied with the 1934 Act.
It is our present intent to continue to comply with all of the reporting
requirements under the 1934 Act. The officers and directors of the Company, have
agreed to provide the necessary funds, without interest, for the Company to
comply with the 1934 Act reporting requirements, provided that they are officers
and directors of the Company when the obligation is incurred.
It is anticipated that we will incur nominal expenses in the implementation
of the business plan described herein. Because we have no capital with which to
pay these anticipated expenses, present management of the Company will pay these
charges with their personal funds, as interest free loans to the Company or as
capital contributions. However, if loans, the only opportunity which management
has to have these loans repaid will be from a prospective licensee or merger or
acquisition candidate.
ACQUISITION OF OPPORTUNITIES
In implementing a structure for a particular business venture, we may
become a party to a merger, consolidation, reorganization, joint venture, or
licensing agreement with another corporation or entity. We may also acquire
stock or assets of an existing business. On the consummation of an agreement, it
is probable that the present management and shareholders of the Company will no
longer be in control of the Company. In addition, and especially if there is a
business combination, our directors may, as part of the terms of the acquisition
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or merger, resign and be replaced by new directors without a vote of our
shareholders or may sell their stock in the Company.
It is anticipated that any securities issued by our Company in any such
reorganization would be issued in reliance upon exemption from registration
under applicable federal and state securities laws. It is anticipated that it
will also be a method of taking a private company public known as a "back door"
1934 Act registration procedure.
We will participate in a business opportunity only after the negotiation
and execution of appropriate written agreements. Although the terms of such
agreements cannot be predicted, generally such agreements will require some
specific representations and warranties by all of the parties thereto, will
specify certain events of default, will detail the terms of closing and the
conditions which must be satisfied by each of the parties prior to and after
such closing, will outline the manner of verifying revenue and bearing costs,
including costs associated with the Company's attorneys and accountants, will
set forth remedies on default and will include miscellaneous other terms.
Our present intent is that we will not enter into a licensing agreement
with an entity that will not agree to future independent audits of, at a
minimum, that portion of their books covering income and expenses related to the
licensed technology; nor will we enter into an agreement to acquire or merge
with any entity which cannot provide independent audited financial statements at
the time of closing of the proposed transaction and supply other information
that is normally disclosed in filings with the Securities and Exchange
Commission. We are subject to all of the reporting requirements included in the
1934 Act. These rules are intended to protect investors by deterring fraud and
abuse in the securities markets through the use of shell companies. Included in
these requirements is the affirmative duty of the Company to file independent
audited financial statements as part of its Form 8-K to be filed with the
Securities and Exchange Commission upon consummation of a merger or acquisition,
as well as the Company's audited financial statements included in its annual
report on Form 10-KSB. In addition, in the filing of the Form 8-K that we file
to report an event that causes us to cease being a shell company, we are
required to include that information that is normally reported by a company in
its original Form 10 or Form 10-SB.
ACCOUNTING IN THE EVENT OF A BUSINESS COMBINATION
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards "SFAS" No. 141, "Business Combinations" and SFAS
No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires business
combinations initiated after June 30, 2001 to be accounted for using the
purchase method of accounting, and broadens the criteria for recording
intangible assets separate from goodwill. Recorded goodwill and intangibles will
be evaluated against these new criteria and may result in certain intangibles
being subsumed into goodwill, or alternatively, amounts initially recorded as
goodwill may be separately identified and recognized apart from goodwill. SFAS
No. 142 requires the use of a non-amortization approach to account for purchased
goodwill and certain intangibles. Under a non-amortization approach, goodwill
and certain intangibles is more than its fair value. Goodwill is the excess of
the acquisition costs of the acquired entity over the fair value of the
identifiable net assets acquired. The Company is required to test goodwill and
intangible assets that are determined to have an indefinite life for impairments
at least annually. The provisions of SFAS No. 142 require the completion of an
annual impairment test with any impairment recognized in current earnings. The
provisions of SFAS No. 141 and SFAS No. 142 may be applicable to any business
combination that we may enter into in the future.
We have also been informed that most business combinations will be
accounted for as a reverse acquisition with us being the surviving registrant.
As a result of any business combination, if the acquired entity's shareholders
will exercise control over us, the transaction will be deemed to be a capital
transaction where we are treated as a non-business entity. Therefore, the
3
accounting for the business combination is identical to that resulting from a
reverse merger, except no goodwill or other intangible assets will be recorded.
For accounting purposes, the acquired entity will be treated as the accounting
acquirer and, accordingly, will be presented as the continuing entity.
REPORTING ISSUER STATUS
The Company chose to become a reporting company on a voluntary basis
because one attraction of the Company as a merger partner or acquisition vehicle
will be its status as a public company. In addition, we became a reporting
company to enhance investor protection and to provide information if a trading
market commences. Only those companies that report their current financial
information to the Securities and Exchange Commission, banking, or insurance
regulators are permitted to be quoted on the OTC Bulletin Board System.
Based upon our proposed future business activities, it is possible that we
may be deemed a "blank check" company (see "Risk Factors"). The Securities and
Exchange Commission definition of such a company is a development stage company
that has no specific business plan or purpose, or has indicated that its
business plan is to engage in a merger or acquisition with an unidentified
company or companies, or other entity or person, and is issuing "penny stock."
A "penny stock" security is any equity security other than a security (i)
that is a reported security (ii) that is issued by an investment company (iii)
that is a put or call issued by the Option Clearing Corporation (iv) that has a
price of $5.00 or more (except for purposes of Rule 419 of the Securities Act of
1933, as amended) (v) that is registered on a national securities exchange (vi)
that is authorized for quotation on the NASDAQ Stock Market, unless other
provisions of the defining rule are not satisfied, or (vii) that is issued by an
issuer with (a) net tangible assets in excess of $2,000,000, if in continuous
operation for more than three years or $5,000,000 if in operation for less than
three years or (b) average revenue of at least $6,000,000 for the last three
years.
ITEM 1A. RISK FACTORS
Our business is subject to numerous risk factors, including the following:
1. We have had little operating history and no revenues or earnings from
operations.
We have no assets other than our intellectual property. We will, in all
likelihood, sustain operating expenses without corresponding revenues, at least
until the consummation of a business combination. This may result in us
incurring a net operating loss that will increase continuously until we can
consummate a business combination with a profitable business entity. There is no
assurance that we can identify such a business entity and consummate such an
agreement or combination.
Our auditor's going concern opinion and the notation in the financial
statements indicate that we do not have significant cash or other material
assets and that we are relying on advances from stockholders, officers and
directors to meet our limited operating expenses. We may become insolvent if we
are unable to pay our debts in the ordinary course of business as they become
due.
2. Our proposed plan of operation is speculative.
The success of our proposed plan of operation will depend to a great extent
on the operations, financial condition and management of the business
opportunity which we identify, if any is identified. While management intends to
seek business agreement(s) or combination(s) with entities having established
operating histories, there can be no assurance that we will be successful in
locating candidates meeting such criteria. In the event we complete a business
4
agreement or combination, of which there can be no assurance, the success of our
operations may be dependent upon management of the successor firm or venture
partner firm and numerous other factors beyond our control.
3. We face intense competition in the software sales industry.
We are and will continue to be an insignificant participant in the business
of providing software to the background screening industry. A large number of
established and well-financed entities, many of which are more proven or famous
than ours, provide software that can be used to procure, archive, package, and
distribute data. Much of this software can be customized or adapted to various
kinds of business operation including the business operation of background
screening. Many such entities have significantly greater financial resources,
technical expertise and managerial capabilities than we have. Consequently, we
will be at a competitive disadvantage in identifying opportunities to sell our
software. Moreover, we will also compete with numerous other small start-up
software companies as well as individuals employed to customize or adapt
existing data processing software to the background check industry.
4. We face intense competition for business combination opportunities.
We are and will continue to be an insignificant participant in the business
of seeking mergers with, joint ventures with and acquisitions of small private
and public entities. A large number of established and well-financed entities,
including venture capital firms, are active in mergers and acquisitions of
companies that may be our desirable target candidates. Nearly all such entities
have significantly greater financial resources, technical expertise and
managerial capabilities than we have and, consequently, we will be at a
competitive disadvantage in identifying possible business opportunities and
successfully completing a business combination. Moreover, we will also compete
in seeking merger or acquisition candidates with numerous other small public
companies.
5. We have no agreements for a business combination or licensing transaction
and have established no standards for such transactions.
We have no arrangement, agreement or understanding with respect to entering
into a software sales agreement or engaging in a merger with, joint venture with
or acquisition of, a private or public entity. There can be no assurance that we
will be successful in identifying and evaluating suitable business opportunities
or in concluding a business transaction. Management has not identified any
particular business for our evaluation. There is no assurance that we will be
able to negotiate either a software sales and/or support agreement, or a
business combination on terms favorable to us. We have not established a
specific length of operating history or a specified level of earnings, assets,
net worth or other criteria which we will require a target business opportunity
to have achieved, and without which we would not consider a business transaction
in any form with such business opportunity. Accordingly, we may enter into a
sales agreement or a business combination with a business having no significant
operating history, losses, limited potential or no potential for earnings,
limited assets, negative net worth or other negative characteristics.
6. Our success is dependent on management that has other full time employment,
has limited experience and will only devote limited time (part time) to
working for the Company, all of which makes our future even more uncertain.
Hal Hartley is the President and Chief Executive Officer of the Issuer, and
William Willard is the Secretary and Treasurer of the Issuer. Both Mr. Hartley
and Mr. Willard will serve without pay while maintaining other employment. Mr.
Hartley served as president and CEO of Arrin and oversaw the development of
InfoSpi's software. Although Mr. Hartley has considerable business and marketing
experience, he has no experience in the field of software marketing and sales.
Mr. Willard had no previous affiliation with Arrin. He too has considerable
5
business and marketing experience including experience in corporate
reorganizations but no experience in software sales. Notwithstanding the limited
experience and availability of management, loss of the services of either
officer would adversely affect development of our business and its likelihood of
continuing in operation.
7. The reporting requirements under federal securities law may delay or
prevent us from making certain acquisitions.
Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended,
(the "1934 Act"), require companies subject thereto to provide certain
information about significant acquisitions, including certified financial
statements for the company acquired, covering one, two, or three years,
depending on the relative size of the acquisition. The time and additional costs
that may be incurred by some target entities to prepare such statements may
significantly delay or essentially preclude consummation of an otherwise
desirable acquisition by the Company. Acquisition prospects that do not have or
are unable to obtain the required audited statements may not be appropriate for
acquisition so long as the reporting requirements of the 1934 Act are
applicable.
In addition to the audited financial statements, in the filing of the Form
8-K that we file to report an event that causes us to cease being a shell
company, we will be required to include that information that is normally
reported by a company in a Form 10 or Form 10-SB. The time and additional costs
that may be incurred by some target entities to prepare and disclose such
information may significantly delay or essentially preclude consummation of an
otherwise desirable acquisition by the Company.
8. An acquisition could create a situation wherein we would be required to
register under The Investment Company Act of 1940 and thus be required to
incur substantial additional costs and expenses.
Although we will be subject to regulation under the 1934 Act, management
believes the Company will not be subject to regulation under the Investment
Company Act of 1940, insofar as we will not be engaged in the business of
investing or trading in securities. In the event we engage in a business
combination that results in us holding passive investment interests in a number
of entities, we could be subject to regulation under the Investment Company Act
of 1940. In such event, we would be required to register as an investment
company and could be expected to incur significant registration and compliance
costs. We have obtained no formal determination from the Securities and Exchange
Commission as to the status of our Company under the Investment Company Act of
1940 and, consequently, any violation of such Act would subject us to material
adverse consequences.
9. A merger, acquisition, or licensing agreement would most likely be
exclusive, resulting in a lack of diversification.
Management anticipates that it may be able to participate in only one
potential business venture because a business partner might require exclusivity.
This lack of diversification should be considered a substantial risk to our
shareholders because it will not permit us to offset potential losses from one
venture against gains from another.
10. Our present management most likely will not remain after we complete a
business combination or will have little power to influence the
development of our technology if we complete an exclusive software
licensing agreement.
An exclusive software licensing agreement will, in all likelihood, result
in management of the licensee determining the timing and funding of their
development of our sales. If an exclusive license is granted our management will
have little to do except monitor any income which may flow from the license. If
a non-exclusive license is granted they may continue to seek additional
licensees. A business combination involving the issuance of our Common Stock
6
will, in all likelihood, result in shareholders of a private company obtaining a
controlling interest in us. Any such business combination may require our
management to sell or transfer all or a portion of the Company's Common Stock
held by them, and/or resign as members of the Board of Directors. The resulting
change in our control could result in removal of one or both present officers
and directors and a corresponding reduction in or elimination of their
participation in our future affairs.
11. If we do any business combination, each shareholder will most likely hold a
substantially lesser percentage ownership in the Company.
If we enter a business combination with a private concern, that, in all
likelihood, would result in the Company issuing securities to shareholders of
any such private company. The issuance of our previously authorized and unissued
Common Stock would result in reduction in percentage of shares owned by our
present and prospective shareholders and may result in a change in our control
or in our management. However, if we enter a sales licensing agreement with a
public or private concern, we would not expect current shareholders to
experience a reduction in percentage interest in the Company.
12. As a shell company, we face substantial additional adverse business and
legal consequences if we enter a business combination.
We may enter into a business combination with an entity that desires to
establish a public trading market for its shares. A business opportunity may
attempt to avoid what it deems to be adverse consequences of undertaking its own
public offering by seeking a business combination with us. Such consequences may
include, but are not limited to, time delays of the registration process,
significant expenses to be incurred in such an offering, loss of voting control
to public shareholders and the inability or unwillingness to comply with various
federal and state laws enacted for the protection of investors.
On June 29, 2005, the Securities and Exchange Commission adopted final
rules amending the Form S-8 and the Form 8-K for shell companies like us. The
amendments expand the definition of a shell company to be broader than a company
with no or nominal operations/assets or assets consisting of cash and cash
equivalents. The amendments prohibit the use of a Form S-8 (a form used by a
corporation to register securities issued to an employee, director, officer,
consultant or advisor), under certain circumstances, and revise the Form 8-K to
require a shell company to include current Form 10 or Form 10-SB information,
including audited financial statements, in the filing on Form 8-K that the shell
company files to report the acquisition of the business opportunity. This
initial filing must be made within four days of the acquisition. The Form 8-K
filing may be reviewed by the Securities and Exchange Commission and the
prospects of certain disclosures or review or the lack of the ability to issue
securities using a Form S-8 may delay the consummation of a business combination
because of the target entity's inability to comply with various federal and
state laws enacted for the protection of investors or the unwillingness to
assume the significant costs of compliance.
13. The requirement of audited financial statements may disqualify some
business opportunities seeking a business combination with us.
Our management believes that any potential business combination opportunity
must provide audited financial statements for review, for the protection of all
parties to the business combination. One or more attractive business
opportunities may choose to forego the possibility of a business combination
with us, rather than incur the expenses associated with preparing audited
financial statements.
14. Our officers and directors are the principal shareholders and will be able
to approve all corporate actions without shareholder consent and will
control our Company.
7
Our principal shareholder, William R. Willard, currently owns approximately
72% of our Common Stock. He will have significant influence over all matters
requiring approval by our shareholders, but not requiring the approval of the
minority shareholders. In addition, he is now an officer and director. Because
he is the majority shareholder, he will be able to elect all of the members of
our board of directors, allowing him to exercise significant control of our
affairs and management. In addition, he may transact most corporate matters
requiring shareholder approval by written consent, without a duly-noticed and
duly-held meeting of shareholders.
15. Our Common Stock may never be publicly traded and you may have no ability
to sell the shares.
There is no established public trading market for our shares of Common
Stock. The shares were granted the trading symbol "ISPI" on the OTC Bulletin
Board in April of 2008, however no trades have been reported. There can be no
assurance that a market for our Common Stock will be established or that, if
established, a market will be sustained. Therefore, if you purchase our Common
Stock you may be unable to sell the shares. Accordingly, you should be able to
bear the financial risk of losing your entire investment.
The OTC Bulletin Board is a market maker or dealer-driven system offering
quotation and trading reporting capabilities - a regulated quotation service -
that displays real-time quotes, last-sale prices, and volume information in OTC
equity securities. The OTC Bulletin Board securities are not listed and traded
on the floor of an organized national or regional stock exchange. Instead, OTC
Bulletin Board securities transactions are conducted through a telephone and
computer network connecting market makers or dealers in stocks.
16. If our Common Stock does not meet blue sky resale requirements, certain
shareholders may be unable to resell our Common Stock.
The resale of Common Stock must meet the blue sky resale requirements in
the states in which the proposed purchasers reside. If we are unable to qualify
the Common Stock and there is no exemption from qualification in certain states,
the holders of the Common Stock or the purchasers of the Common Stock may be
unable to sell them.
17. Our shareholders may face significant restrictions on the resale of our
Common Stock due to state "blue sky" laws or if we are determined to be a
"blank check" company.
There are state regulations that may adversely affect the transferability
of our Common Stock. We have not registered our Common Stock for resale under
the securities or "blue sky" laws of any state. We may seek qualification or
advise our shareholders of the availability of an exemption. We are under no
obligation to register or qualify our Common Stock in any state or to advise the
shareholders of any exemptions.
Current shareholders, and persons who desire to purchase the Common Stock
in any trading market that may develop in the future, should be aware that there
might be significant state restrictions upon the ability of new investors to
purchase the Common Stock.
Blue sky laws, regulations, orders, or interpretations place limitations on
offerings or sales of securities by "blank check" companies or in "blind-pool"
offerings, or if such securities represent "cheap stock" previously issued to
promoters or others. Our majority shareholder, because he received stock at a
price of $.001 for each share, may be deemed to hold "cheap stock." These
limitations typically provide, in the form of one or more of the following
limitations, that such securities are:
(a) Not eligible for sale under exemption provisions permitting sales
without registration to accredited investors or qualified purchasers;
8
(b) Not eligible for the transaction exemption from registration for
non-issuer transactions by a registered broker-dealer;
(c) Not eligible for registration under the simplified small corporate
offering registration (SCOR) form available in many states;
(d) Not eligible for the "solicitations of interest" exception to
securities registration requirements available in many states;
(e) Not permitted to be registered or exempted from registration, and thus
not permitted to be sold in the state under any circumstances.
Virtually all 50 states have adopted one or more of these limitations, or
other limitations or restrictions affecting the sale or resale of stock of blank
check companies or securities sold in "blind pool" offerings or "cheap stock"
issued to promoters or others. Specific limitations on such offerings have been
adopted in:
Alaska Nevada Tennessee
Arkansas New Mexico Texas
California Ohio Utah
Delaware Oklahoma Vermont
Florida Oregon Washington
Georgia Pennsylvania
Idaho Rhode Island
Indiana South Carolina
Nebraska South Dakota
Any secondary trading market which may develop, may only be conducted in
those jurisdictions where an applicable exemption is available or where the
shares have been registered.
We do not have any legal opinions as it relates to whether we are a blind
pool or blank-check company. The Securities and Exchange Commission have adopted
a rule (Rule 419) which defines a blank-check company as (i) a development stage
company, that is (ii) offering penny stock, as defined by Rule 3a51-1, and (iii)
that has no specific business plan or purpose or has indicated that its business
plan is to engage in a merger or acquisition with an unidentified company or
companies. Certain jurisdictions may have definitions that are more restrictive
than Rule 419. We have been informed that the Securities and Exchange Commission
has cautioned that "it will scrutinize registered offerings for attempts to
create the appearance that the registrant... has a specific business plan, in an
effort to avoid the application of Rule 419." Provisions of Rule 419 apply to
every registration statement filed under the Securities Act of 1933, as amended,
relating to an offering by a blank-check company. We have never filed a
registration statement under the Securities Act of 1933, as amended.
If we are later determined to be a so-called "blank check" company, our
shareholders will be required to file a registration statement under the
Securities Act of 1933, as amended, prior to the resale of the Common Stock,
unless there exists a transactional or security exemption for such sale under
the Securities Act of 1933, as amended or under Title 11 of the U.S. Code.
Current shareholders and persons who desire to purchase the Common Stock in any
trading market that may develop in the future, should be aware that we are under
no obligation to register the shares on behalf of our shareholders under the
Securities Act of 1933, as amended.
The Company's officers, directors and majority shareholders have expressed
their intentions not to engage in any transactions with respect to the Company's
Common Stock except in connection with or following a business combination
resulting in us no longer being defined as a blank check issuer. Any
transactions in our Common Stock by said shareholders will require compliance
with the registration requirements under the Securities Act of 1933, as amended.
9
18. Our Common Stock may be subject to significant restriction on resale due to
federal penny stock restrictions.
The Securities and Exchange Commission has adopted rules that regulate
broker or dealer practices in connection with transactions in penny stocks.
Penny stocks generally are equity securities with a price of less than $5.00
(other than securities registered on certain national securities exchanges or
quoted on the Nasdaq system, provided that current price and volume information
with respect to transactions in such securities is provided by the exchange
system). The penny stock rules require a broker or dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document prepared by the Securities and Exchange
Commission that provides information about penny stocks and the nature and level
of risks in the penny stock market. The broker or dealer also must provide the
customer with bid and offer quotations for the penny stock, the compensation of
the broker or dealer, and its salesperson in the transaction, and monthly
account statements showing the market value of each penny stock held in the
customer's account. The penny stock rules also require that prior to a
transaction in a penny stock not otherwise exempt from such rules, the broker or
dealer must make a special written determination that a penny stock is a
suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in any secondary market for our stock that becomes subject to
the penny stock rules, and accordingly, shareholders of our Common Stock may
find it difficult to sell their securities, if at all.
ITEM 2. PROPERTIES
We presently utilize office space at 6986 La Jolla Blvd., Suite 208, La
Jolla, California. This space is provided to the Company by our president on a
rent free basis, and it is anticipated that this arrangement will remain until
such time as the Company successfully consummates a sales license, merger or
acquisition. Management believes that this arrangement will meet the Company's
needs for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
There is no litigation, pending or threatened, by or against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter
ended December 31, 2008.
PART II
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER
PURCHASES OF EQUITY SECURITIES
MARKET INFORMATION
Our common stock is listed on the OTC Bulletin Board under the symbol
"ISPI." No trades have been recorded since the stock was first listed in April
2008. Thus the value of the stock during each of the three quarters since it was
first listed may be considered to be none to negligible. This is shown below in
column format.
10
Second Quarter, 2008 No Trades. No Known Value.
Third Quarter, 2008 No Trades. No Known Value.
Fourth Quarter, 2008 No Trades. No Known Value.
HOLDERS
As of March 2, 2009, there were approximately 78 stockholders of record of
our common stock.
DIVIDENDS
We have never paid a dividend on our common stock and we do not intend to
pay a dividend in the foreseeable future. We have had no earnings to date and do
not anticipate any earnings until such time as a licensing, merger, or
acquisition is consummated with another entity.
RECENT SALES OF UNREGISTERED SECURITIES
During the fiscal years ended December 31, 2008 and 2007, the following
unregistered securities were issued.
(a) Securities issued in bankruptcy.
1,567,324 shares of our common stock were distributed to 77 shareholders by
order of the U.S. Bankruptcy Court for the Southern District of California as
part of the confirmed Plan of Reorganization of Arrin Systems, Inc. (the
"Debtor"), in bankruptcy case number 07-01926-JH11. Our software was developed
by the Debtor through one of its subsidiaries and it was an asset of the Debtor
in that case. The Court ordered the software to be assigned to the Issuer and
ordered the Issuer's securities to be distributed to creditors of the Debtor in
partial satisfaction of their claims against the Debtor.
The sale and issuance of the shares of stock issued in exchange for claims
against the estate of Arrin Systems, Inc. was exempt from registration under the
Securities Act of 1933, as amended, because they were issued under section 1145
of the Bankruptcy Code (Title 11 of the U.S. Code). In addition, we may have
also relied upon section 3(a)(7) of the Securities Act of 1933 as a transaction
ordered by a court as part of a bankruptcy reorganization.
(b) Securities sold.
On February 5, 2008 the Company issued 4,000,000 restricted shares of its
common stock to William R. Willard at par value (0.001 per share) for total
consideration of $4,000. We relied upon Section 4(2) of the Securities Act of
1933, as amended for the above issuance. We believed that Section 4(2) was
available because:
- The issuance had no underwriters, underwriting discounts or
commissions;
- We placed a restrictive legend on the certificate issued;
- The sale was not made by general solicitation or advertising;
- The sales was made to an officer, director, and accredited investor.
In connection with the above transaction, we provided the following to the
investor:
- Access to all our books and records.
- Access to all material contracts and documents relating to our
operations.
- The opportunity to obtain any additional information, to the extent we
possessed such information, necessary to verify the accuracy of the
information to which the investor was given access.
11
REPURCHASES
We have never repurchased any shares of our common stock, nor were any
repurchases made on our behalf, nor have any future repurchases been authorized.
ITEM 6. SELECTED FINANCIAL DATA
The following balance sheet data and statement of operations data for the
years ended December 31, 2008 and 2007 were derived from our audited financial
statements. Our audited financial statements for those periods and the notes
thereto appear elsewhere herein. The data should be read in conjunction with the
annual financial statements, related notes and other financial information
appearing elsewhere herein.
December 31, 2008 December 31, 2007
----------------- -----------------
Statement of Operations Data
Revenues 0 0
Expenses 3,775 225
(Net Loss) (3,775) (225)
Loss per share
Basic (0.0007) (0.0004)
Diluted (0.0004) n/a
Balance Sheet Data
Cash 0 0
Total Assets 1,567 567
Liabilities 0 225
Stockholders' Equity 1,567 342
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis is intended to help you understand
our financial condition and results of operations as of December 31, 2008 and
2007 and for each of the last two fiscal years then ended. You should read the
following discussion and analysis together with our audited consolidated
financial statements and the notes to the consolidated financial statements
included under Item 8 in this report. Our future financial condition and results
of operations will vary from our historical financial condition and results of
operations described below based on a variety of factors. You should carefully
review the risks described under Item 1A and elsewhere in this report, which
identify certain important factors that could cause our future financial
condition and results of operations to vary.
1) Liquidity: The Company had no cash and no liquid instruments at December
31, 2008 and also at December 31, 2007. It is anticipated that we will incur
nominal expenses in the implementation of the business plan described herein.
Because we have no capital with which to pay these anticipated expenses, present
management of the Company will pay these charges with their personal funds, as
interest free loans to the Company or as capital contributions. However, if
loans, the only opportunity which management has to have these loans repaid will
be from a prospective licensee or merger or acquisition candidate.
2) Capital Resources: As noted above, the Company has no significant
capital resources but will rely upon interest free loans or capital
contributions from management to meet its needs.
12
3) Results of Operations: As noted above, the Company was recently
organized as the result of the bankruptcy of its former affiliate. The Company
has conducted no operations other than acquisition of its software from its
former affiliate, Arrin Systems, Inc., the preparation of its filings with the
SEC, and preliminary discussions with various individuals and businesses
concerning licensing (with one party) or a business combination (with several
parties).
4) Off-Balance Sheet Arrangements: The Company has no off balance sheet
arrangements.
5) Disclosure of Contractual Obligations: The Company has no contractual
obligations.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Management believes that the Company bears no direct market risk. The
Company holds no debt or equity securities, no foreign currencies, and has no
credit facility. Management of the Company has agreed to extend loans to the
Company as needed to meet obligations, however these will be interest free. The
Company has not made any sales, purchases, or commitments with foreign entities
which would expose it to currency risks.
13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Stan J.H. Lee, CPA
2160 North Central Rd. Suite 203 * Fort Lee * NJ 07024
P.O. Box 436402 * San Ysidro * CA 92143-9402
Tel: 619-623-7799, Fax: 619-564-3408, E-mail: stan2u@gmail.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
INFOSPI,INC.
(A Development Stage Company)
We have audited the accompanying balance sheet of INFOSPI,INC. as at December
31, 2008 and the related statements of operation, shareholders' equity and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of INFOSPI,INC.as at December 31,
2008, and the results of its operation and its cash flows for the year then
ended in conformity with U.S. generally accepted accounting principles.
The financial statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 3 to the financial statements,
the Company has not established any source of revenue to cover Its operating
costs and losses from operations raises substantial doubt about its ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Stan J.H. Lee, CPA
- ----------------------------------
Stan J.H. Lee, CPA
March 1, 2009
Fort Lee, NJ
Registered with the Public Company Accounting Oversight Board
Member of New Jersey Society of Certified Public Accountants
14
Stan J.H. Lee, CPA
2160 North Central Rd. Suite 203 * Fort Lee * NJ 07024
794 Broadway * Chula Vista * CA 91910
619-623-7799 Fax 619-564-3408 E-mail) stan2u@gmail.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
INFOSPI,INC.
(A Development Stage Company)
We have audited the accompanying balance sheet of INFOSPI,INC.as at December 31,
2007 and the related statements of operation, shareholders' equity and cash
flows for the period from December 31, 2007 (inception) to December 31, 2007.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of INFOSPI,INC.as at December 31,
2007, and the results of its operation and its cash flows for the period from
December 31, 2007 (inception) to December 31, 2007 in conformity with U.S.
generally accepted accounting principles.
The financial statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 3 to the financial statements,
the Company has not established any source of revenue to cover Its operating
costs and losses from operations raises substantial doubt about its ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Stan J.H. Lee, CPA
- ----------------------------------
Stan J.H. Lee, CPA
January 22, 2008
Chula Vista CA
Registered with the Public Company Accounting Oversight Board
15
INFOSPI, INC.
(A Development Stage Company)
BALANCE SHEETS
As of As of
December 31, December 31,
2008 2007
------- -------
(inception)
ASSETS
Assets
Cash $ -- $ --
Receivable from other 1,000
Software 567 567
------- -------
TOTAL ASSETS $ 1,567 $ 567
======= =======
LIABILITIES
Liabilities
Accrued expense payable $ -- $ 225
------- -------
TOTAL LIABILITIES $ -- $ 225
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $0.001 par value:
75,000,000 shares authorized, 5,567,324 shares
issued and outstanding as of 12/31/2008
567,324 shares issued and outstanding as of 12/31/2007 5,567 567
Deficit (4,000) (225)
------- -------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) 1,567 342
------- -------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 1,567 $ 567
======= =======
See Notes to Financial Statements
16
INFOSPI, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
Cumulative From
December 31, 2007
(Inception)
Year Ended Year Ended Through
December 31, December 31, December 31,
2008 2007 2008
------------ ------------ ------------
REVENUE $ -- $ -- $ --
------------ ------------ ------------
Total Revenue -- -- --
EXPENSES
Professional Expense 3,425 225 3,650
General & Admin Expenses 350 -- 350
------------ ------------ ------------
Operating Expense 3,775 225 4,000
------------ ------------ ------------
OPERATING INCOME (LOSS) (3,775) (225) (4,000)
OTHER INCOME (EXPENSE) -- -- --
Current Income Tax -- -- --
Income Tax Benefit -- -- --
------------ ------------ ------------
NET INCOME (LOSS) $ (3,775) $ (225) $ (4,000)
============ ============ ============
Basic (Loss) per Share (0.0007) (0.0004)
------------ ------------
Weighted average number
of common shares
outstanding 5,142,666 567,324
Diluted (Loss) per Share
assuming all 5,000,000
Warrants were exercised (0.0004) N/A
Weighted number of shares
outstanding after exercise
Of 5,000,000 warrants 10,142,666 N/A
See Notes to Financial Statements
17
INFOSPI, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Accumulated
Common Stock Additional During the Total
--------------------- Paid-in Development Stockholders
Shares Amount Capital Stage Equity
------ ------ ------- ----- ------
Common Stock Issued Per Court
Order Dec. 31, 2007 567,324 $ 567 $ 0 $ 0 $ 567
Net loss for year Ended
Dec. 31, 2007 (225) (225)
Balance, Dec. 31, 2007 567,324 567 0 (225) 342
---------- ------- ------ -------- --------
Common Stock Issued Per
Court Order Jan. 15, 2008 1,000,000 1,000 0 1,000
Common Stock Issued For
Cash Feb. 4, 2008 4,000,000 4,000 0 4,000
Net loss for year
Ended December 31, 2008 (3,775) (3,775)
---------- ------- ------ -------- --------
Balance, December 31, 2008 5,567,324 $ 5,567 $ 0 $ (4,000) $ 1,567
========== ======= ====== ======== ========
See Notes to Financial Statements
18
INFOSPI, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
Cumulative From
December 31, 2007
(Inception)
Year Ended Year Ended Through
December 31, December 31, December 31,
2008 2007 2008
------- ------- -------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $(3,775) $ (225) $(4,000)
------- ------- -------
Adjustments to reconcile net income (loss)
to net cash (used in) operations
Changes in operating assets and liabilities
Increase (Decrease) in Receivable from other (1,000) -- (1,000)
Increase (Decrease) in Accrued Expense payable (225) 225 --
------- ------- -------
NET CASH PROVIDED BY (USED IN) OPERATIONS (5,000) -- (5,000)
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of software -- (567) (567)
------- ------- -------
NET CASH PROVIDED BY INVESTING ACTIVITIES -- (567) (567)
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issuance 5,000 567 5,567
------- ------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 5,000 567 5,567
------- ------- -------
NET INCREASE (DECREASE) -- -- --
------- ------- -------
CASH BEGINNING OF PERIOD -- -- --
------- ------- -------
CASH END OF PERIOD $ -- $ -- $ --
======= ======= =======
Supplemental Disclosures of Cash Flow Information
Interest paid $ -- $ -- $ --
------- ------- -------
Income taxes paid $ -- $ -- $ --
------- ------- -------
See Notes to Financial Statements
19
INFOSPI, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2008
NOTE 1. NATURE AND BACKGROUND OF BUSINESS
InfoSpi, Inc. ("the Company" or "the Issuer") was organized under the laws of
the State of Nevada on December 31, 2007. The Company was established as part of
the Chapter 11 reorganization of Arrin Systems, Inc. ("Arrin"). Under Arrin's
Plan of Reorganization, as confirmed by the U.S. Bankruptcy Court for the
Southern District of California, InfoSpi was organized to own, develop, and
market the proprietary software developed by Arrin to automate background checks
of prospective employees. Management believes the Company lacks the resources to
effectively market this software on its own and is therefore engaged in a search
for a merger or acquisition partner with the resources to use the software in
its own background search business or market it to others.
The Company has been in the development stage since its formation and has not
yet realized any revenues from its planned operations.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. BASIS OF ACCOUNTING
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a December 31 year-end.
b. BASIC EARNINGS PER SHARE
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share", which
specifies the computation, presentation and disclosure requirements for earnings
(loss) per share for entities with publicly held common stock. SFAS No. 128
supersedes the provisions of APB No. 15, and requires the presentation of basic
earnings (loss) per share and diluted earnings (loss) per share.
Basic net loss per share amounts are computed by dividing the net loss by the
weighted average number of common shares outstanding. Diluted earnings per share
are computed by dividing the net loss by the weighted average number of common
shares potentially outstanding, assuming that all outstanding warrants, options,
etc. were exercised. The Company has warrants outstanding which are exercisable
for a total of 5,000,000 common shares.
c. ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles 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.
d. CASH AND CASH EQUIVALENT
For the Balance Sheet and Statements of Cash Flows, all highly liquid
investments with maturity of three months or less are considered to be cash
equivalents.
20
INFOSPI, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2008
e. GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill represents the excess of the cost of businesses acquired over the fair
value of the identifiable net assets at the date of acquisition. Goodwill and
intangible assets acquired in a purchase or business combination and determined
to have indefinite useful lives are not amortized, but instead are evaluated for
impairment annually and if events or changes in circumstances indicate, the
carrying amount may be impaired per Statement of Financial Accounting Standards,
No.142 ("SFAS 142"), "Goodwill and Other Intangible Assets". An impairment loss
would generally be recognized when the carrying amount of the reporting unit's
net assets exceeds the estimated fair value of the reporting unit. The estimated
fair value is determined using a discounted cash flow analysis. SFAS 142 also
requires that intangible assets with estimable useful lives be amortized over
their respective estimated useful lives to their estimated residual values, and
reviewed for impairment in accordance with SFAS No. 144, "Accounting for
Impairment or Disposal of Long-Lived Assets".
f. REVENUE RECOGNITION
The Company recognizes revenues and the related costs when persuasive evidence
of an arrangement exists, delivery and acceptance has occurred or service has
been rendered, the price is fixed or determinable, and collection of the
resulting receivable is reasonably assured. Amounts invoiced or collected in
advance of product delivery or providing services are recorded as deferred
revenue. The Company accrues for warranty costs, sales returns, bad debts, and
other allowances based on its historical experience.
g. STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting
for Stock-Based Compensation", provides for the use of a fair value based method
of accounting for stock-based compensation. However, SFAS 123 allows the
measurement of compensation cost for stock options granted to employees using
the intrinsic value method of accounting prescribed by Accounting Principles
Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees",
which only requires charges to compensation expense for the excess, if any, of
the fair value of the underlying stock at the date a stock option is granted (or
at an appropriate subsequent measurement date) over the amount the employee must
pay to acquire the stock. The Company has elected to account for employee stock
options using the intrinsic value method under APB 25. By making that election,
the Company is required by SFAS 123 to provide pro forma disclosures of net loss
as if a fair value based method of accounting had been applied.
h. INCOME TAXES
Income taxes are provided for using the liability method of accounting in
accordance with SFAS No. 109 "ACCOUNTING FOR INCOME TAXES." A deferred tax asset
or liability is recorded for all temporary differences between financial and tax
reporting. Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax basis. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effect of
changes in tax laws and rates on the date of enactment.
21
INFOSPI, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2008
i. IMPACT OF NEW ACCOUNTING STANDARDS
The Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company's results of
operations, financial position, or cash flow.
NOTE 3. GOING CONCERN
The Company's financial statements are prepared in accordance with generally
accepted accounting principles applicable to a going concern. This contemplates
the realization of assets and the liquidation of liabilities in the normal
course of business. Currently, the Company does not have significant cash or
other material assets, nor does it have operations or a source of revenue
sufficient to cover its operation costs and allow it to continue as a going
concern. The officers and directors have committed to advancing certain
operating costs of the company.
Management plans to seek a merger or acquisition target with adequate funds to
support operations. Management has yet to identify a merger or acquisition
target, and there is no guarantee that the Company will be able to identify such
a target business in the future.
NOTE 4. STOCKHOLDERS' EQUITY - COMMON STOCK
The authorized common stock of the Company consists of 75,000,000 shares with
$0.001 par value. No other class of stock is authorized. As of December 31,
2008, there were a total of 5,567,324 common shares issued and outstanding.
The Company's first and second stock issuances took place pursuant to the Plan
of Reorganization of Arrin Systems, Inc. confirmed by the Bankruptcy Court. On
December 12, 2007, the Court ordered the distribution of shares in InfoSpi, Inc.
to all general unsecured creditors of Arrin Systems, with these creditors to
receive one share in InfoSpi for each $2.94 of Arrin Systems' debt which they
held. These creditors received an aggregate of 567,324 shares in the Company on
December 31, 2007.
The Court also ordered the distribution of shares and warrants in InfoSpi, Inc.
to all administrative creditors of Arrin Systems, with these creditors to
receive one share and five warrants in InfoSpi for each $0.10 of Arrin Systems'
administrative debt which they held. On January 15, 2008, these creditors
received an aggregate of 1,000,000 common shares in the Company and 5,000,000
warrants consisting of 1,000,000 "A Warrants" each convertible into one share of
common stock at an exercise price of $1.00; 1,000,000 "B Warrants" each
convertible into one share of common stock at an exercise price of $2.00;
1,000,000 "C Warrants" each convertible into one share of common stock at an
exercise price of $3.00; 1,000,000 "D Warrants" each convertible into one share
of common stock at an exercise price of $4.00; and 1,000,000 "E Warrants" each
convertible into one share of common stock at an exercise price of $5.00.
On February 4, 2008 the Company issued a total of 4,000,000 shares of common
stock to an Officer and Director in exchange for $4,000 in cash to be used as
operating capital for the Company. The shares were issued at a price of $0.001
per share which is their par value.
As a result of these issuances there were a total 5,567,324 common shares issued
and outstanding, and a total of 5,000,000 warrants issued and outstanding, at
December 31, 2008.
22
INFOSPI, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 2008
NOTE 5. INCOME TAXES
The Company had no business activity and made no U.S. federal income tax
provision for the year 2007 or the year ended 2008.
NOTE 6. RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal property. An officer of
the corporation provides office services without charge. Such costs are
immaterial to the financial statements and accordingly, have not been reflected
therein. The officers and directors for the Company are involved in other
business activities and may, in the future, become involved in other business
opportunities. If a specific business opportunity becomes available, such
persons may face a conflict in selecting between the Company and their other
business interest. The Company has not formulated a policy for the resolution of
such conflicts.
NOTE 7. WARRANTS AND OPTIONS
There were 5,000,000 warrants outstanding, each to acquire one share of common
stock of the Company, as at December 31, 2008. These warrants are more fully
described above in Note 4: Stockholders' Equity.
NOTE 8. COMMITMENT AND CONTINGENCY
There is no commitment or contingency to disclose as of the year ended December
31, 2008 other than the warrants described above.
NOTE 9. SUBSEQUENT EVENTS
There are no subsequent events to report.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There are no disagreements with the findings of our accountants.
ITEM 9A. CONTROLS AND PROCEDURES.
Based on an evaluation of our disclosure controls and procedures as of
the end of the period covered by this Annual Report (and the financial
statements contained in the report), our chief executive officer and our chief
financial officer have determined that our current disclosure controls and
procedures are effective.
There have not been any changes in our internal control over financial
reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) or
any other factors during the period covered by this report, that have materially
affected, or are reasonably likely to materially affect our internal control
over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.
The current members of our board of directors are as follows:
Name of Director Age Year First Became a Director
---------------- --- ----------------------------
Harold Hartley 68 Member since 2007
William R. Willard 66 Member since 2008
PRINCIPAL OCCUPATIONS DURING AT LEAST THE PAST FIVE YEARS AND CERTAIN
DIRECTORSHIPS
Harold Hartley, age 68, is the President and CEO and a director of Arrin
Background, Inc. From 2002 to 2008 he served as President, CEO, and a director
of Arrin Systems, Inc., and as CEO and Director of its former Affiliates (Arrin
Corp., Arrin Background, Inc., and InfoSpi, Inc.) since their organization in
2007. Prior to that, he was a consultant to Arrin Systems' predecessor from 2000
to 2002. Mr. Hartley started his business career in the Life Insurance Industry,
then moved into the Real Estate Industry. He built a sizeable real estate
investment company owning and managing properties in nine western states. At the
same time he provided management consulting to companies in various industries
including feeder airlines, construction, furniture, and real estate investment.
In 1992 he started Argus Holdings, an international marketing and consulting
company doing business in nine Asian, Latin American, and European Countries, as
well as in the United States. Mr. Hartley still heads Argus today. Mr. Hartley
received his B.S. degree in Business Administration from Oregon State
University.
William R. Willard, age 66, is the Secretary and Treasurer and a director
of Arrin Background, Inc. He has also served as CFO and a director of Arrin
Systems, Inc. and of its former Affiliates (Arrin Corp., Arrin Background, Inc.,
and InfoSpi, Inc.). He is also the Managing Principal of Bridgestream Partners,
LLC which he founded in 1988. Bridgestream provides management consulting,
corporate finance advice, and restructuring services to a variety of corporate
clients. Among the companies he has assisted in restructuring were Bendix
Corporation (prior to their takeover by Allied Signal), Kaiser Engineers, and
24
Everlast Filtration. Prior to forming Bridgestream Mr. Willard was First Vice
President of Corporate Finance for Bateman, Eichler, Hill Richards and before
that he served as Vice President of Moseley, Hallgarten, Estabrook and Weeden
and duPont Glore Forgan. Mr. Willard received his BS from the University of
Wisconsin and an MBA in finance from the University of Chicago.
The current executive officers of the Company are as follows:
Name of Director Age Position
---------------- --- --------
Harold Hartley 68 President and CEO
William R. Willard 66 Secretary, Treasurer, and CFO
Background information on our executive officers is set forth above under
our board of directors.
CODE OF ETHICS
We have adopted a code of ethics that applies to our principal executive
officer, principal financial officer, and persons performing similar functions.
The code of ethics will be posted on the investor relations section of the
Company's website in the event that we develop a website. At such time as we
have posted the code of ethics on our website, we intend to satisfy the
disclosure requirements under Item 10 of Form 8-K regarding any amendment to, or
waiver from, a provision of the code of ethics by posting such information on
the website.
AUDIT COMMITTEE
Our board of directors has not established an audit committee. In addition,
we do not have a compensation committee or executive committee or similar
committees. We will not, in all likelihood, establish an audit committee until
such time as the Company generates a positive cash flow of which there can be no
assurance. We recognize that an audit committee, when established, will play a
critical role in our financial reporting system by overseeing and monitoring
management's and the independent auditors' participation in the financial
reporting process. At such time as we establish an audit committee, its
additional disclosures with our auditors and management may promote investor
confidence in the integrity of the financial reporting process.
Until such time as an audit committee has been established, the full board
of directors will undertake those tasks normally associated with an audit
committee to include, but not by way of limitation, the (i) review and
discussion of the audited financial statements with management, and (ii)
discussions with the independent auditors of matters required to be discussed by
the Statement On Auditing Standards No. 61 and No. 90, as may be modified or
supplemented.
ITEM 11. EXECUTIVE COMPENSATION
No officer or director has received any compensation for services
rendered to the Company since its inception, nor are there any agreements in
place or contemplated to provide compensation to any officer or director. None
of our directors or officers will receive any finders fee, either directly or
indirectly, as a result of their respective efforts to implement the Company's
business plan outlined herein and/or identify or negotiate a licensee, merger,
or acquisition for the Company. We have no retirement, pension, profit sharing,
stock option or insurance programs or other similar programs for the benefit of
our officers, directors, or employees, and we have no employees.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth certain information as of December 31, 2008
regarding the beneficial ownership of our common stock (i) by each person known
by the Company to be the beneficial owner of more than five percent of the
outstanding common stock, (ii) by each director of the Company, (iii) by each
executive officer of the Company and (iv) by all executive officers and
directors of the Company as a group.
Name and Number of
Address of Shares
Beneficial Beneficially Percent
Owner Owned of Class
----- ----- --------
William Willard 4,000,000 71.85%
6968 La Jolla Blvd. Ste 208
La Jolla, CA 92037
Harold Hartley 55,442 1.00%
6968 La Jolla Blvd. Ste 208
La Jolla, CA 92037
All Officers and 4,055,442 72.85%
Directors as a Group
(two individuals)
The remaining 1,567,324 shares of the Company's outstanding common shares are
held by 77 persons, no one of which is known to be the beneficial owner of five
percent (5%) or more of the Company's common shares. There are, as of the date
hereof, a total of 5,567,324 common shares issued and outstanding.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS AND DIRECTOR
INDEPENDENCE
No reportable transactions with related persons occurred during fiscal 2008
or fiscal 2007.
The Company's two directors are also its two officers. Therefore none of
its directors may be considered as independent.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Stan J. H. Lee, CPA has audited the Company's financial statements since
its inception in 2007. The following table sets forth the aggregate fees billed
by Stan J. H. Lee to the Company for:
2008 2007
---- ----
Audit fees, including the audit of the Company's
annual financial statements and fees related to
consents and review of registration statements $2,500 $2,500
Audit related fees 0 0
Tax fees and tax related fees 0 0
All other fees for other services 0 0
The Board of Directors acts as the Audit Committee. The Board pre-approves
the engagement of accountants to render all audit services for the Company, as
well as any changes to the terms of the engagement. The Board will also
26
pre-approve all non-audit related services proposed to be provided by the
Company's independent registered public accounting firm. The Board reviews the
terms of the engagement, a description of the engagement and a budget for the
engagement.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this report:
The financial statements listed below are included under Item 8 of this
report:
Balance Sheets as of December 31, 2008 and 2007;
Statements of Operations for the years ended December 31, 2008 and 2007;
Statements of Stockholders' Equity for the years ended December 31, 2008
and 2007;
Statements of Cash Flows for the years ended December 31, 2008 and 2007;
and
Notes to Financial Statements.
Exhibit 31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
Filed herewith
Exhibit 31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
Filed herewith
Exhibit 32 Section 1350 Certification
Filed herewith
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, InfoSpi, Inc., the Registrant, has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 11, 2009 INFOSPI, INC.
By: /s/ Harold Hartley
---------------------------------
Harold Hartley
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of InfoSpi, Inc., in
the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Harold Hartley President and Director March 11, 2009
- ----------------------------- (Principal Executive Officer)
(Harold Hartley)
/s/ William R. Willard Secretary, Treasurer, Director March 11, 2009
- ----------------------------- (Principal Financial Officer)
(William R. Willard)
27