UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-KSB
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(Mark one)
[X] Annual Report Under Section 13 or 15(d) of The Securities Exchange
Act of 1934
For the fiscal year ended December 31, 2006
[ ] Transition Report Under Section 13 or 15(d) of The Securities Exchange
Act of 1934
For the transition period from ______________ to _____________
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Commission File Number: 0-52072
Marketing Acquisition Corporation
(Exact name of small business issuer as specified in its charter)
Nevada 62-1299374
(State of incorporation) (IRS Employer ID Number)
211 West Wall Street, Midland, Texas 79701
(Address of principal executive offices)
(432) 682-1761
(Issuer's telephone number)
Securities registered under Section 12 (b) of the Exchange Act - None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock - $0.001 par value
Check whether the issuer has (1) filed all reports required to be files by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period the Company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Company's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
Check whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes [X] No [ ]
The issuer's revenues for the fiscal year ended December 31, 2006 were $-0-.
The aggregate market value of voting common equity held by non-affiliates as of
February 13, 2007 was approximately $-0-, based on no trading activity and/or
posted quotations.
As of February 13, 2007, there were 24,033,600 shares of Common Stock issued and
outstanding.
Transitional Small Business Disclosure Format : Yes [ ] No [X]
MARKETING ACQUISITION CORPORATION
INDEX TO CONTENTS
Page
Number
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PART I
Item 1 Description of Business 3
Item 2 Description of Property 14
Item 3 Legal Proceedings 14
Item 4 Submission of Matters to a Vote of Security Holders 14
PART II
Item 5 Market for Company's Common Equity, Related Stockholders Matters
and Small Business Issuer Purchasers of Equity Securities 14
Item 6 Management's Discussion and Analysis or Plan of Operation 15
Item 7 Financial Statements 21
Item 8 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 21
Item 8A Controls and Procedures 21
PART III
Item 9 Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 21
Item 10 Executive Compensation 23
Item 11 Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 24
Item 12 Certain Relationships and Related Transactions 24
Item 13 Exhibits 25
Item 14 Principal Accountant Fees and Services 26
SIGNATURES 27
2
CAUTION REGARDING FORWARD-LOOKING INFORMATION
Certain statements contained in this annual filing, including, without
limitation, statements containing the words "believes", "anticipates", "expects"
and words of similar import, constitute forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that 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.
Such factors include, among others, the following: international, national and
local general economic and market conditions: demographic changes; the ability
of the Company to sustain, manage or forecast its growth; the ability of the
Company to successfully make and integrate acquisitions; existing government
regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; competition; fluctuations and difficulty in
forecasting operating results; changes in business strategy or development
plans; business disruptions; the ability to attract and retain qualified
personnel; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-KSB and investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
PART I
ITEM 1 - DESCRIPTION OF BUSINESS
GENERAL
Marketing Acquisition Corporation (Company) was originally incorporated on July
26, 1990 in accordance with the Laws of the State of Florida as Marketing
Educational Corp. On June 13, 2006, the Company changed its state of
incorporation from Florida to Nevada by means of a merger with and into a Nevada
corporation formed on June 8, 2006 solely for the purpose of effecting the
reincorporation. The Certificate of Incorporation and Bylaws of the Nevada
corporation are the Certificate of Incorporation and Bylaws of the surviving
corporation. Such Certificate of Incorporation kept the Company's new name of
Marketing Acquisition Corporation and modified the Company's capital structure
to allow for the issuance of up to 100,000,000 shares of $0.001 par value common
stock and up to 50,000,000 shares of $0.001 par value preferred stock.
The Company was originally formed for the purpose of direct marketing of certain
educational materials and photography packages. The educational materials
marketed by the Company consisted of encyclopedias, learning books, educational
audio and video tapes which were designed to be combined in various combinations
to accommodate the educational levels and needs of families with children of all
ages.
During 1991, the Company completed a public offering of 150,000 units of common
stock, through a Registration Statement on Form S-18 (Registration
No.33-37039-A). Each unit consisted of one share of common Stock, one Class A
Common Stock Purchase Warrant and one Class B Common Stock Purchase Warrant.
Each Class A Common Stock Purchase Warrant entitled the holder thereof to
purchase two shares of Common Stock and each Class B Common Stock Purchase
Warrant entitled the holder to purchase one Share of Common Stock. It was
anticipated that the registration of the common stock underlying the Class A and
Class B Common Stock Purchase Warrants would generate working capital for the
Company. There was no exercise of any Class A or Class B Common Stock Purchase
3
Warrants. On August 5, 1992, pursuant to notice given to all Warrant holders (as
disclosed on a Current Report on Form 8-K filed August 12, 1992), the Company
gave a 30-day exercise period notice and notice to redeem all outstanding
warrants at a price of $0.0005 per Warrant. The Company realized no gross or net
proceeds received by the Company as a result of this Registration Statement on
Form S-18.
Effective at the close of business on September 30, 1992, as reported in a
Current Report on Form 8-K, filed October 7, 1992, the Company experienced a
change in management. As a result of this event, the Company effectively
liquidated all operations and assets and became a dormant entity at that point
in time. The Company suspended its reporting under the Securities Exchange Act
of 1934, as amended, due to a lack of operating capital.
Since September 30, 1992, the Company has had virtually no operations, assets or
liabilities.
On April 16 and April 27, 2004, the Company, in two separate transactions, sold
a total of 20,000,000 shares of restricted, unregistered common stock to Glenn
A. Little, pursuant to two separate subscription agreements for 10,000,000
shares each, for gross proceeds of $20,000. The Company relied upon Section 4(2)
of The Securities Act of 1933, as amended, for an exemption from registration of
these shares and no underwriter was used in this transaction.
The Company stopped filing periodic reports in compliance with the Securities
Exchange Act of 1934, as amended, during 1992. Due to the absence of certain
accounting records, it was impossible to complete required filings from that
point through March 2005. On April 15, 2005, the Company filed a Form 10-SB in
order to disclose the Issuer's current status. The U. S. Securities and Exchange
Commission (SEC), while acknowledging the intent of the filing, took the
position that filing was improper and the filing was withdrawn. The Company then
voluntarily requested a revocation of the registration and, on February 15,
2006, the SEC entered an order pursuant to Section 12(j) of the Exchange Act
revoking the registration of the Company's securities which revocation cancelled
the Company's filling obligations from previous periods. The Company has had no
operations since 1992 and, accordingly, may now be deemed to be a "BLANK CHECK"
or shell company, that is, either a development stage company that has no
specific business plan or purpose or a dormant or inactive company that has
indicated that its sole business plan is to engage in a merger or other
acquisition with an unidentified company or companies, or other entity or
person. On June 21, 2006, the Company filed a Registration Statement on Form
10-SB to re-register the eligible issued and outstanding shares of the Company's
common stock as issued by the Company. It is the current position of the SEC
that securities issued by a "SHELL" company cannot be sold under the exemption
from registration provided by Rule 144 promulgated under the Securities Act of
1933 (the "ACT"), but must be registered under the Act. Any other securities
issued to individuals in the capacity of management, affiliates, control persons
and promoters will also require registered with the SEC prior to resale and
shall be issued with appropriate restricted legend to reflect the registration
requirements.
The Company's current principal business activity is to seek a suitable reverse
acquisition candidate through acquisition, merger or other suitable business
combination method.
The Company has very limited capital, and it is unlikely that the Company will
be able to take advantage of more than one such business opportunity. The
Company intends to seek opportunities demonstrating the potential of long-term
growth. At the present time, the Company has not identified any business
opportunity that it plans to pursue, nor has the Company reached any agreement
or definitive understanding with any person concerning an acquisition.
No assurance can be given that the Company will be successful in finding or
acquiring a desirable business opportunity, given the limited funds that are
expected to be available for acquisitions. Furthermore, no assurance can be
given that any acquisition, which does occur, will be on terms that are
favorable to the Company or its current stockholders.
4
The Company's search will be directed toward small and medium-sized enterprises,
which have a desire to become public corporations. In addition these enterprises
may wish to satisfy, either currently or in the reasonably near future, the
minimum tangible asset requirement in order to qualify shares for trading on
NASDAQ or on an exchange such as the American Stock Exchange. (See Investigation
and Selection of Business Opportunities.) The Company anticipates that the
business opportunities presented to it will (i) either be in the process of
formation, or be recently organized with limited operating history or a history
of losses attributable to under-capitalization or other factors; (ii)
experiencing financial or operating difficulties; (iii) be in need of funds to
develop new products or services or to expand into a new market, or have plans
for rapid expansion through acquisition of competing businesses; (iv) or other
similar characteristics. The Company intends to concentrate its acquisition
efforts on properties or businesses that it believes to be undervalued or that
it believes may realize a substantial benefit from being publicly owned. Given
the above factors, investors should expect that any acquisition candidate may
have little or no operating history, or a history of losses or low
profitability.
The Company does not propose to restrict its search for investment opportunities
to any particular geographical area or industry, and may, therefore, engage in
essentially any business, to the extent of its limited resources. The Company's
discretion in the selection of business opportunities is unrestricted, subject
to the availability of such opportunities, economic conditions, and other
factors.
Any entity which has an interest in being acquired by or merging into the
Company is expected to be an entity that desires to become a public company and
establish a public trading market for its securities. In connection with such a
merger or acquisition, it is highly likely that an amount of stock constituting
control of the Company would be issued by the Company.
Depending upon the nature of the transaction, the current officers and directors
of the Company may resign their management and board positions with the Company
in connection with a change of control or acquisition of a business opportunity
(See Form of Acquisition, below, and Risk Factors: The Company, Lack of
Continuity of Management). In the event of such a resignation, the Company's
current management would thereafter have no control over the conduct of the
Company's business.
It is anticipated that business opportunities will come to the Company's
attention from various sources, including its officers and directors, its other
stockholders, professional advisors such as attorneys and accountants,
securities broker-dealers, venture capitalists, members of the financial
community, and others who may present unsolicited proposals. The Company has no
plan, understandings, agreements, or commitments with any individual for such
person to act as a finder of opportunities for the Company.
INVESTIGATION AND SELECTION OF BUSINESS OPPORTUNITIES
To a large extent, a decision to participate in a specific business opportunity
may be made upon management's analysis of the quality of the other Company's
management and personnel, the anticipated acceptability of new products or
marketing concepts, the merit of technological changes, the perceived benefit
the business opportunity will derive from becoming a publicly held entity, and
numerous other factors which are difficult, if not impossible, to analyze
through the application of any objective criteria. In many instances, it is
anticipated that the historical operations of a specific business opportunity
may not necessarily be indicative of the potential for the future because of a
variety of factors, including, but not limited to, the possible need to expand
substantially, shift marketing approaches, change product emphasis, change or
substantially augment management, raise capital and the like.
It is anticipated that the Company will not be able to diversify, but will
essentially be limited to the acquisition of one business opportunity because of
the Company's limited financing. This lack of diversification will not permit
the Company to offset potential losses from one business opportunity against
profits from another, and should be considered an adverse factor affecting any
decision to purchase the Company's securities.
5
Certain types of business acquisition transactions may be completed without any
requirement that the Company first submit the transaction to the stockholders
for their approval. In the event the proposed transaction is structured in such
a fashion that stockholder approval is not required, holders of the Company's
securities (other than principal stockholders holding a controlling interest)
should not anticipate that they will be provided with financial statements or
any other documentation prior to the completion of the transaction. Other types
of transactions may require prior approval of the stockholders.
In the event a proposed business combination or business acquisition transaction
requires stockholder approval, the Company may be required to prepare a Proxy or
Information Statement describing the proposed transaction, file it with the
Securities and Exchange Commission for review and approval, and mail a copy of
it to all Company stockholders prior to holding a stockholders meeting for
purposes of voting on the proposal.
The analysis of business opportunities will be undertaken by or under the
supervision of the Company's officer and director, who is not a professional
business analyst (See Management.) Although there are no current plans to do so,
Company management might hire an outside consultant to assist in the
investigation and selection of business opportunities, and might pay a finder's
fee. Since Company management has no current plans to use any outside
consultants or advisors to assist in the investigation and selection of business
opportunities, no policies have been adopted regarding use of such consultants
or advisors, the criteria to be used in selecting such consultants or advisors,
the services to be provided, the term of service, or the total amount of fees
that may be paid. However, due to the limited resources of the Company, it is
likely that any such fee the Company agrees to pay would be paid in stock and
not in cash.
Otherwise, in analyzing potential business opportunities, Company management
anticipates that it will consider, among other things, the following factors:
* Potential for growth and profitability indicated by new technology,
anticipated market expansion, or new products;
* The Company's perception of how any particular business opportunity
will be received by the investment community and by the Company's
stockholders;
* Whether, following the business combination, the financial condition
of the business opportunity would be, or would have a significant
prospect in the foreseeable future of becoming, sufficient to enable
the securities of the Company to qualify for listing on an exchange or
on a national automated securities quotation system, such as NASDAQ,
so as to permit the trading of such securities to be exempt from the
requirements of Rule 15g-9 adopted by the Securities and Exchange
Commission (See Risk Factors: The Company Regulations of Penny
Stocks).
* Capital requirements and anticipated availability of required funds,
to be provided by the Company or from operations, through the sale of
additional securities, through joint ventures or similar arrangements,
or from other sources;
* The extent to which the business opportunity can be advanced;
* Competitive position as compared to other companies of similar size
and experience within the industry segment as well as within the
industry as a whole;
* Strength and diversity of existing management or management prospects
that are scheduled for recruitment;
* The cost of participation by the Company as compared to the perceived
tangible and intangible values and potential; and
* The accessibility of required management expertise, personnel, raw
materials, services, professional assistance, and other required
items.
In regard to the possibility that the shares of the Company would qualify for
listing on NASDAQ, the current standards for initial listing include, among
other requirements, that the Company (1) have net tangible assets of at least
$4.0 million, or a market capitalization of $50.0 million, or net income of not
less that $0.75 million in its latest fiscal year or in two of the last three
6
fiscal years; (2) have a public float (i.e., shares that are not held by any
officer, director or 10% stockholder) of at least 1.0 million shares; (3) have a
minimum bid price of at least $4.00; (4) have at least 300 round lot
stockholders (i.e., stockholders who own not less than 100 shares); and (5) have
an operating history of at least one year or have a market capitalization of at
least $50.0 million. Many, and perhaps most, of the business opportunities that
might be potential candidates for a combination with the Company would not
satisfy the NASDAQ listing criteria. No one of the factors described above will
be controlling in the selection of a business opportunity, and management will
attempt to analyze all factors appropriate to each opportunity and make a
determination based upon reasonable investigative measures and available data.
Potentially available business opportunities may occur in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex. Potential investors must recognize that,
because of the Company's limited capital available for investigation and
management's limited experience in business analysis, the Company may not
discover or adequately evaluate adverse facts about the opportunity to be
acquired.
The Company is unable to predict when it may participate in a business
opportunity. It expects, however, that the analysis of specific proposals and
the selection of a business opportunity may take several months or more.
Prior to making a decision to participate in a business opportunity, the Company
will generally request that it be provided with written materials regarding the
business opportunity containing as much relevant information as possible,
including, but not limited to, such items as a description of products, services
and Company history; management resumes; financial information; available
projections, with related assumptions upon which they are based; an explanation
of proprietary products and services; evidence of existing patents, trademarks,
or service marks, or rights thereto; present and proposed forms of compensation
to management; a description of transactions between such Company and its
affiliates during the relevant periods; a description of present and required
facilities; an analysis of risks and competitive conditions; a financial plan of
operation and estimated capital requirements; audited financial statements.
As part of the Company's investigation, the Company's executive officers and
directors may meet personally with management and key personnel, may visit and
inspect material facilities; obtain independent analysis or verification of
certain information provided; check references of management and key personnel;
and take other reasonable investigative measures, to the extent of the Company's
limited financial resources and management expertise.
It is possible that the range of business opportunities that might be available
for consideration by the Company could be limited by the impact of Securities
and Exchange Commission regulations regarding purchase and sale of penny stocks.
The regulations would affect, and possibly impair, any market that might develop
in the Company's securities until such time as they qualify for listing on
NASDAQ or on an exchange which would make them exempt from applicability of the
penny stock regulations. (See Risk Factors: Regulation of Penny Stocks)
Company management believes that various types of potential merger or
acquisition candidates might find a business combination with the Company to be
attractive. These include acquisition candidates desiring to create a public
market for their shares in order to enhance liquidity for current stockholders,
acquisition candidates which have long-term plans for raising capital through
public sale of securities and believe that the possible prior existence of a
public market for their securities would be beneficial, and acquisition
candidates which plan to acquire additional assets through issuance of
securities rather than for cash, and believe that the possibility of development
of a public market for their securities will be of assistance in that process.
Acquisition candidates, which have a need for an immediate cash infusion, are
not likely to find a potential business combination with the Company to be an
attractive alternative.
7
FORM OF ACQUISITION
It is impossible to predict the manner in which the Company may participate in a
business opportunity. Specific business opportunities will be reviewed as well
as the respective needs and desires of the Company and the promoters of the
opportunity and, upon the basis of the review and the relative negotiating
strength of the Company and such promoters, the legal structure or method deemed
by management to be suitable will be selected. Such structure may include, but
is not limited to leases, purchase and sale agreements, licenses, joint ventures
and other contractual arrangements. The Company may act directly or indirectly
through an interest in a partnership, corporation or other form of organization.
Implementing such structure may require the merger, consolidation or
reorganization of the Company with other corporations or forms of business
organization. In addition, the present management and stockholders of the
Company most likely will not have control of a majority of the voting stock of
the Company following a merger or reorganization transaction. As part of such a
transaction, the Company's existing directors may resign and new directors may
be appointed without any vote by stockholders.
It is likely that the Company will acquire its participation in a business
opportunity through the issuance of Common Stock or other securities of the
Company. Although the terms of any such transaction cannot be predicted, it
should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called B tax free reorganization under the
Internal Revenue Code of 1986 as amended, depends upon the issuance to the
stockholders of the acquired company of a controlling interest (i.e., 80% or
more) of the common stock of the combined entities immediately following the
reorganization. If a transaction were structured to take advantage of these
provisions rather than other a tax free provisions provided under the Internal
Revenue Code, the Company's current stockholders would retain in the aggregate
20% or less of the total issued and outstanding shares. This could result in
substantial additional dilution in the equity of those who were stockholders of
the Company prior to such reorganization. Any such issuance of additional shares
might also be done simultaneously with a sale or transfer of shares representing
a controlling interest in the Company by the current officers, directors and
principal stockholders.
It is anticipated that any new securities issued in any reorganization would be
issued in reliance upon one or more exemptions from registration under
applicable federal and state securities laws to the extent that such exemptions
are available. In some circumstances, however, as a negotiated element of the
transaction, the Company may agree to register such securities either at the
time the transaction is consummated or under certain conditions at specified
times thereafter. The issuance of substantial additional securities and their
potential sale into any trading market that might develop in the Company's
securities may have a depressive effect upon such market.
The Company will participate in a business opportunity only after the
negotiation and execution of a written agreement. Although the terms of such
agreement cannot be predicted, generally such an agreement would require
specific representations and warranties by all of the parties thereto, specify
certain events of default, detail the terms of closing and the conditions which
must be satisfied by each of the parties thereto prior to such closing, outline
the manner of bearing costs if the transaction is not closed, set forth remedies
upon default, and include miscellaneous other terms.
As a general matter, the Company anticipates that it, and/or its principal
stockholders will enter into a letter of intent with the management, principals
or owners of a prospective business opportunity prior to signing a binding
agreement. Such a letter of intent will set forth the terms of the proposed
acquisition but will not bind any of the parties to consummate the transaction.
Execution of a letter of intent will by no means indicate that consummation of
an acquisition is probable. Neither the Company nor any of the other parties to
the letter of intent will be bound to consummate the acquisition unless and
until a definitive agreement is executed. Even after a definitive agreement is
executed, it is possible that the acquisition would not be consummated should
any party elect to exercise any right provided in the agreement to terminate it
on specific grounds.
8
It is anticipated that the investigation of specific business opportunities and
the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial costs for accountants, attorneys and others. If a
decision is made not to participate in a specific business opportunity, the
costs incurred in the related investigation would not be recoverable. Moreover,
because many providers of goods and services require compensation at the time or
soon after the goods and services are provided, the inability of the Company to
pay until an indeterminate future time may make it impossible to produce goods
and services.
COMPETITION
The Company expects to encounter substantial competition in its efforts to
locate attractive business combination opportunities. The competition may in
part come from business development companies, venture capital partnerships and
corporations, small investment companies, brokerage firms, and the like. Some of
these types of organizations are likely to be in a better position than the
Company to obtain access to attractive business acquisition candidates either
because they have greater experience, resources and managerial capabilities than
the Company, because they are able to offer immediate access to limited amounts
of cash, or for a variety of other reasons. The Company also will experience
competition from other public companies with similar business purposes, some of
which may also have funds available for use by an acquisition candidate.
EMPLOYEES
The Company currently has no employees. Management of the Company expects to use
consultants, attorneys and accountants as necessary, and does not anticipate a
need to engage any full-time employees so long as it is seeking and evaluating
business opportunities. The need for employees and their availability will be
addressed in connection with the decision whether or not to acquire or
participate in specific business opportunities.
RISK FACTORS
The Company's business and plan of operation is subject to numerous risk
factors, including, but not limited to, the following:
LIMITED OPERATING HISTORY MAKES POTENTIAL DIFFICULT TO ASSESS
The Company has had no operating history nor any revenues or earnings from
operations since 1992. All efforts to engage in meaningful business operations
from our 1990 inception through 1992 were unsuccessful. The Company has limited
financial resources and no operating activities. The Company will, in all
likelihood, continue to sustain operating expenses without corresponding
revenues, at least until the consummation of a business combination. This will
most likely result in the Company incurring a net operating loss which will
increase continuously until the Company can consummate a business combination
with a target company. There is no assurance that the Company can identify such
a target company and consummate such a business combination.
THERE IS NO AGREEMENT FOR A BUSINESS COMBINATION
AND NO MINIMUM REQUIREMENTS FOR A BUSINESS COMBINATION
The Company has no current arrangement, agreement or understanding with respect
to engaging in a business combination with a specific entity. There can be no
assurance that the Company will be successful in identifying and evaluating
suitable business opportunities or in concluding a business combination. No
particular industry or specific business within an industry has been selected
for a target company. The Company has not established a specific length of
operating history or a specified level of earnings, assets, net worth or other
criteria which it will require a target company to have achieved, or without
which the Company would not consider a business combination with such business
9
entity. Accordingly, the Company may enter into a business combination with a
business entity having no significant operating history, losses, limited or no
potential for immediate earnings, limited assets, negative net worth or other
negative characteristics. There is no assurance that the Company will be able to
negotiate a business combination on terms favorable to the Company.
NO ASSURANCE OF SUCCESS OR PROFITABILITY
There is no assurance that the Company will acquire a favorable business
opportunity. Even if the Company should become involved in a business
opportunity, there is no assurance that it will generate revenues or profits, or
that the market price of the Company's outstanding shares will be increased
thereby.
TYPE OF BUSINESS ACQUIRED
The business to be acquired may wish to avoid effecting its own public offering
and the accompanying expense, delays, and uncertainties. Because of the
Company's limited capital, it is more likely than not that any acquisition by
the Company will involve other parties whose primary interest is the acquisition
of control of a publicly traded Company. Moreover, any business opportunity
acquired may be currently unprofitable or present other negative factors.
LACK OF DIVERSIFICATION
Because of the limited financial resources that the Company has, it is unlikely
that the Company will be able to diversify its acquisitions or operations. The
Company's probable inability to diversify its activities into more than one area
will subject the Company to economic fluctuations within a particular business
or industry and therefore increase the risks associated with the Company's
operations.
DEPENDENCE UPON MANAGEMENT; LIMITED PARTICIPATION OF MANAGEMENT
Because management consists of only one person, while seeking a business
combination, Glenn A. Little, the President of the Company, will be the only
person responsible in conducting the day-to-day operations of the Company. The
Company does not benefit from multiple judgments that a greater number of
directors or officers would provide, and the Company will rely completely on the
judgment of its one officer and director when selecting a target company. Mr.
Little anticipates devoting only a limited amount of time per month to the
business of the Company. Mr. Little has not entered into a written employment
agreement with the Company and he is not expected to do so. The Company does not
anticipate obtaining key man life insurance on Mr. Little. The loss of the
services of Mr. Little would adversely affect development of the Company's
business and its likelihood of continuing operations.
CONFLICTS OF INTEREST
The Company's sole officer and director has other business interests to which he
currently devotes attention, and is expected to continue to do so. As a result,
conflicts of interest may arise that can be resolved only through their exercise
of judgment in a manner which is consistent with his fiduciary duties to the
Company. (See Management, Conflicts of Interest.)
It is anticipated that the Company's principal stockholder may actively
negotiate or otherwise consent to the purchase of a portion of their common
stock as a condition to, or in connection with, a proposed merger or acquisition
transaction. In this process, the Company's principal stockholder may consider
his own personal pecuniary benefit rather than the best interest of other
Company stockholders. Depending upon the nature of a proposed transaction,
10
Company stockholders other than the principal stockholder may not be afforded
the opportunity to approve or consent to a particular transaction.
POSSIBLE NEED FOR ADDITIONAL FINANCING
The Company has very limited funds, and such funds, may not be adequate to take
advantage of any available business opportunities. Even if the Company's
currently available funds prove to be sufficient to pay for its operations until
it is able to acquire an interest in, or complete a transaction with, a business
opportunity, such funds will clearly not be sufficient to enable it to exploit
the opportunity. Thus, the ultimate success of the Company will depend, in part,
upon its availability to raise additional capital. In the event that the Company
requires modest amounts of additional capital to fund its operations until it is
able to complete a business acquisition or transaction, such funds, are expected
to be provided by the principal stockholder. The Company has not investigated
the availability, source, or terms that might govern the acquisition of the
additional capital which is expected to be required in order to exploit a
business opportunity, and will not do so until it has determined the level of
need for such additional financing. There is no assurance that additional
capital will be available from any source or, if available, that it can be
obtained on terms acceptable to the Company. If not available, the Company's
operations will be limited to those that can be financed with its modest
capital.
DEPENDENCE UPON OUTSIDE ADVISORS
To supplement the business experience of its officer and director, the Company
may be required to employ accountants, technical experts, appraisers, attorneys,
or other consultants or advisors. The selection of any such advisors will be
made by the Company's officer, without any input by stockholders. Furthermore,
it is anticipated that such persons may be engaged on an as needed basis without
a continuing fiduciary or other obligation to the Company. In the event the
officer of the Company considers it necessary to hire outside advisors, he may
elect to hire persons who are affiliates, if those affiliates are able to
provide the required services.
REGULATION OF PENNY STOCKS
The U. S. Securities and Exchange Commission (SEC) has adopted a number of rules
to regulate "penny stocks." Such rules include Rule 3a51-1 and Rules 15g-1
through 15g-9 under the Securities Exchange Act of 1934, as amended. Because the
securities of the Company may constitute "penny stocks" within the meaning of
the rules (as any equity security that has a market price of less than $5.00 per
share or with an exercise price of less than $5.00 per share, largely traded in
the National Association of Securities Dealers' (NASD) OTC Bulletin Board or the
"Pink Sheets", the rules would apply to the Company and to its securities. The
Commission has adopted Rule 15g-9 which established sales practice requirements
for certain low price securities. Unless the transaction is exempt, it shall be
unlawful for a broker or dealer to sell a penny stock to, or to effect the
purchase of a penny stock by, any person unless prior to the transaction: (i)
the broker or dealer has approved the person's account for transactions in penny
stock pursuant to this rule and (ii) the broker or dealer has received from the
person a written agreement to the transaction setting forth the identity and
quantity of the penny stock to be purchased. In order to approve a person's
account for transactions in penny stock, the broker or dealer must: (a) obtain
from the person information concerning the person's financial situation,
investment experience, and investment objectives; (b) reasonably determine that
transactions in penny stock are suitable for that person, and that the person
has sufficient knowledge and experience in financial matters that the person
reasonably may be expected to be capable of evaluating the risks of transactions
in penny stock; (c) deliver to the person a written statement setting forth the
basis on which the broker or dealer made the determination (i) stating in a
highlighted format that it is unlawful for the broker or dealer to affect a
transaction in penny stock unless the broker or dealer has received, prior to
the transaction, a written agreement to the transaction from the person; and
(ii) stating in a highlighted format immediately preceding the customer
signature line that (iii) the broker or dealer is required to provide the person
with the written statement; and (iv) the person should not sign and return the
written statement to the broker or dealer if it does not accurately reflect the
11
person's financial situation, investment experience, and investment objectives;
and (d) receive from the person a manually signed and dated copy of the written
statement. It is also required that disclosure be made as to the risks of
investing in penny stock and the commissions payable to the broker-dealer, as
well as current price quotations and the remedies and rights available in cases
of fraud in penny stock transactions. Statements, on a monthly basis, must be
sent to the investor listing recent prices for the Penny Stock and information
on the limited market. Stockholders should be aware that, according to
Securities and Exchange Commission Release No. 34-29093, the market for penny
stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include (i) control of the market for the security by one or a few
broker-dealers that are often related to the promoter or issuer; (ii)
manipulation of prices through prearranged matching of purchases and sales and
false and misleading press releases; (iii) "boiler room" practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (iv) excessive and undisclosed bid-ask differential and markups
by selling broker-dealers; and (v) the wholesale dumping of the same securities
by promoters and broker dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with
consequent investor losses. The Company's management is aware of the abuses that
have occurred historically in the penny stock market. Although the Company does
not expect to be in a position to dictate the behavior of the market or of
broker-dealers who participate in the market, management will strive within the
confines of practical limitations to prevent the described patterns from being
established with respect to the Company's securities.
THERE MAY BE A SCARCITY OF AND/OR SIGNIFICANT COMPETITION
FOR BUSINESS OPPORTUNITIES AND COMBINATIONS
The Company is and will continue to be an insignificant participant in the
business of seeking mergers with and acquisitions of business entities. A large
number of established and well-financed entities, including venture capital
firms, are active in mergers and acquisitions of companies which may be merger
or acquisition target candidates for the Company. Nearly all such entities have
significantly greater financial resources, technical expertise and managerial
capabilities than the Company and, consequently, the Company will be at a
competitive disadvantage in identifying possible business opportunities and
successfully completing a business combination. Moreover, the Company will also
compete in seeking merger or acquisition candidates with other public shell
companies, some of which may also have funds available for use by an acquisition
candidate.
REPORTING REQUIREMENTS MAY DELAY OR PRECLUDE ACQUISITION
Pursuant to the requirements of Section 13 of the Exchange Act, the Company is
required to provide certain information about significant acquisitions including
audited financial statements of the acquired company. These audited financial
statements must be furnished within 4 business days following the effective date
of a business combination. Obtaining audited financial statements are the
economic responsibility of the target company. The additional time and costs
that may be incurred by some potential target companies to prepare such
financial 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 Exchange Act are applicable. Notwithstanding a target
company's agreement to obtain audited financial statements within the required
time frame, such audited financials may not be available to the Company at the
time of effecting a business combination. In cases where audited financials are
unavailable, the Company will have to rely upon unaudited information that has
not been verified by outside auditors in making its decision to engage in a
transaction with the business entity. This risk increases the prospect that a
business combination with such a business entity might prove to be an
unfavorable one for the Company.
LACK OF MARKET RESEARCH OR MARKETING ORGANIZATION
The Company has neither conducted, nor have others made available to it, market
research indicating that demand exists for the transactions contemplated by the
Company. In the event demand exists for a transaction of the type contemplated
12
by the Company, there is no assurance the Company will be successful in
completing any such business combination.
PROBABLE CHANGE IN CONTROL OF THE COMPANY AND/OR MANAGEMENT
In conjunction with completion of a business acquisition, it is anticipated that
the Company will issue an amount of the Company's authorized but unissued common
stock that represents the greater majority of the voting power and equity of the
Company, which will, in all likelihood, result in stockholders of a target
company obtaining a controlling interest in the Company. The resulting change in
control of the Company will likely result in removal of the present officer and
director of the Company and a corresponding reduction in or elimination of his
participation in the future affairs of the Company.
POSSIBLE DILUTION OF VALUE OF SHARES UPON BUSINESS COMBINATION
A business combination normally will involve the issuance of a significant
number of additional shares. Depending upon the value of the assets acquired in
such business combination, the per share value of the Company's common stock may
increase or decrease, perhaps significantly.
NO PUBLIC MARKET EXISTS
There is currently no public market for the Company's common stock, and no
assurance can be given that a market will develop or that a stockholder ever
will be able to liquidate his investment without considerable delay, if at all.
If a market should develop, the price may be highly volatile. Factors such as
those discussed in this "Risk Factors" section may have a significant impact
upon the market price of the securities offered hereby. Owing to the low price
of the securities, many brokerage firms may not be willing to effect
transactions in the securities. Even if a purchaser finds a broker willing to
effect a transaction in theses securities, the combination of brokerage
commissions, state transfer taxes, if any, and any other selling costs may
exceed the sales proceeds.
REGISTRATION OF SHARES IS REQUIRED
It is the SEC's position that securities issued by a "shell" company cannot be
sold under the exemption from registration provided by Rule 144 promulgated
under the Securities Act of 1933, but must be registered under the Securities
Act of 1933.
BLUE SKY CONSIDERATION
Because the securities registered hereunder have not been registered for resale
under the Blue Sky laws of any state, the holders of such shares and persons who
desire to purchase them in any trading market that might develop in the future,
should be aware, that there may be significant state Blue Sky law restrictions
upon the ability of investors to sell the securities and of purchasers to
purchase the securities. Accordingly, investors should consider the secondary
market for the Company's securities to be a limited one.
ADDITIONAL RISKS--DOING BUSINESS IN A FOREIGN COUNTRY
The Company may effectuate a business combination with a merger target whose
business operations or even headquarters, place of formation or primary place of
business are located outside the United States of America. In such event, the
Company may face the significant additional risks associated with doing business
in that country. In addition to the language barriers, different presentations
of financial information, different business practices, and other cultural
differences and barriers that may make it difficult to evaluate such a merger
13
target, ongoing business risks result from the international political
situation, uncertain legal systems and applications of law, prejudice against
foreigners, corrupt practices, uncertain economic policies and potential
political and economic instability that may be exacerbated in various foreign
countries.
TAXATION
Federal and state tax consequences will, in all likelihood, be major
considerations in any business combination that the Company may undertake.
Currently, such transactions may be structured so as to result in tax-free
treatment to both companies, pursuant to various federal and state tax
provisions. The Company intends to structure any business combination so as to
minimize the federal and state tax consequences to both the Company and the
target entity; however, there can be no assurance that such business combination
will meet the statutory requirements of a tax-free reorganization or that the
parties will obtain the intended tax-free treatment upon a transfer of stock or
assets. A non-qualifying reorganization could result in the imposition of both
federal and state taxes, which may have an adverse effect on both parties to the
transaction.
ITEM 2 - DESCRIPTION OF PROPERTY
The Company currently maintains a mailing address at 211 West Wall, Midland,
Texas 79701. The Company's telephone number there is (432) 682-1761. Other than
this mailing address, the Company does not currently maintain any other office
facilities, and does not anticipate the need for maintaining office facilities
at any time in the foreseeable future. The Company pays no rent or other fees
for the use of the mailing address as these offices are used virtually full-time
by other businesses of the Company's sole officer and director.
It is likely that the Company will not establish an office until it has
completed a business acquisition transaction, but it is not possible to predict
what arrangements will actually be made with respect to future office
facilities.
ITEM 3 - LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings, and no such
proceedings are known to be contemplated.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company has not conducted any meetings of stockholders during the preceding
quarter.
PART II
ITEM 5 - MARKET FOR COMPANY'S COMMON EQUITY, ELATED STOCKHOLDER MATTERS
AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
COMMON STOCK
The authorized capital stock of the Company consists of 100,000,000 shares of
common stock, par value $0.001 per share, of which there are 24,033,600 shares
issued and outstanding.
14
The following summarizes the important provisions of the Company's capital
stock: Holders of shares of common stock are entitled to one vote for each share
on all matters to be voted on by the stockholders; have no preemptive rights;
have no conversion or redemption rights or sinking fund; do not have cumulative
voting rights; and share ratably in dividends, if any, as may be declared from
time to time by the Board of Directors in its discretion from funds legally
available therefore. In the event of a liquidation, dissolution or winding up of
the company, the holders of common stock are entitled to share pro rata all
assets remaining after payment in full of all liabilities. All of the
outstanding shares of common stock are fully paid and non-assessable.
PREFERRED STOCK
The Company is also authorized to issue up to 50,000,000 shares of $0.001 par
value Preferred Stock and no shares are issued and outstanding as of the date of
this Report.
MARKET FOR TRADING
The Company's securities are eligible for trading on the OTC Bulletin Board
under SEC Rule 15c2-11, Subsection (a)(5). The Company's trading symbol is MKAQ.
As of the date of this report, there have been no known trades of the Company's
securities.
DIVIDENDS
Dividends, if any, will be contingent upon the Company's revenues and earnings,
if any, and capital requirements and financial conditions. The payment of
dividends, if any, will be within the discretion of the Company's Board of
Directors. The Company presently intends to retain all earnings, if any, and
accordingly the Board of Directors does not anticipate declaring any dividends
prior to a business combination.
TRANSFER AGENT
Our independent stock transfer agent is Securities Transfer Corporation, located
in Frisco, Texas. The mailing address and telephone number are: 2591 Dallas
Parkway, Suite 102, Frisco, Texas 75034; (469) 633-0101.
REPORTS TO STOCKHOLDERS
The Company plans to furnish its stockholders with an annual report for each
fiscal year ending December 31 containing financial statements audited by its
registered independent public accounting firm. In the event the Company enters
into a business combination with another Company, it is the present intention of
management to continue furnishing annual reports to stockholders. Additionally,
the Company may, in its sole discretion, issue unaudited quarterly or other
interim reports to its stockholders when it deems appropriate. The Company
intends to maintain compliance with the periodic reporting requirements of the
Securities Exchange Act of 1934.
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(1) CAUTION REGARDING FORWARD-LOOKING INFORMATION
Certain statements contained in this annual filing, including, without
limitation, statements containing the words "believes", "anticipates", "expects"
and words of similar import, constitute forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that 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.
15
Such factors include, among others, the following: international, national and
local general economic and market conditions: demographic changes; the ability
of the Company to sustain, manage or forecast its growth; the ability of the
Company to successfully make and integrate acquisitions; existing government
regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; competition; fluctuations and difficulty in
forecasting operating results; changes in business strategy or development
plans; business disruptions; the ability to attract and retain qualified
personnel; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-KSB and investors are
cautioned not to place undue reliance on such forward-looking statements. The
Company disclaims any obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
(2) GENERAL
Marketing Educational Corp. (Company) was originally incorporated on July 26,
1990 in accordance with the Laws of the State of Florida.
The Company was originally formed for the purpose of direct marketing of certain
educational materials and photography packages. The educational materials
marketed by the Company consisted of encyclopedias, learning books, educational
audio and video tapes which were designed to be combined in various combinations
to accommodate the educational levels and needs of families with children of all
ages.
On June 13, 2006, the Company changed its state of incorporation from Florida to
Nevada by means of a merger with and into a Nevada corporation formed on June 8,
2006 solely for the purpose of effecting the reincorporation. The Certificate of
Incorporation and Bylaws of the Nevada corporation are the Certificate of
Incorporation and Bylaws of the surviving corporation. Such Certificate of
Incorporation kept the Company's new name of Marketing Acquisition Corporation
and modified the Company's capital structure to allow for the issuance of up to
100,000,000 shares of $0.001 par value common stock and up to 50,000,000 shares
of $0.001 par value preferred stock.
Effective at the close of business on September 30, 1992, as reported on a Form
8-K, filed October 7, 1992, the Company experienced a change in management. As a
result of this event, the Company effectively liquidated all operations and
assets and became a dormant entity at that point. The Company suspended its
reporting under the Securities Exchange Act of 1934, as amended, due to a lack
of operating capital.
Since September 30, 1992, the Company has had virtually no operations, assets or
liabilities.
The Company stopped filing periodic reports in compliance with the Securities
Exchange Act of 1934, as amended, during 1992. Due to the absence of certain
accounting records, it was impossible to complete required filings from that
point through the current date(s). On April 15, 2005, the Company filed a Form
10-SB in order to disclose the Issuer's current status. The U. S. Securities and
Exchange Commission (SEC), while acknowledging the intent of the filing, took
the position that filing was improper and the filing was withdrawn. The Company
then voluntarily requested a revocation of the registration and, on February 15,
2006, the SEC entered an order pursuant to Section 12(j) of the Exchange Act
revoking the registration of the Company's securities which revocation cancelled
the Company's filling obligations from previous periods. The Company has had no
operations since 1992 and, accordingly, may now be deemed to be a "BLANK CHECK"
or shell company, that is, either a development stage company that has no
specific business plan or purpose or a dormant or inactive company that has
indicated that its sole business plan is to engage in a merger or other
acquisition with an unidentified company or companies, or other entity or
person. On June 21, 2006, the Company filed a Registration Statement on Form
16
10-SB to re-register the eligible issued and outstanding shares of the Company's
common stock as issued by the Company. It is the current position of the SEC
that securities issued by a "SHELL" company cannot be sold under the exemption
from registration provided by Rule 144 promulgated under the Securities Act of
1933 (the "ACT"), but must be registered under the Act. Any other securities
issued to individuals in the capacity of management, affiliates, control persons
and promoters will also require registered with the SEC prior to resale and
shall be issued with appropriate restricted legend to reflect the registration
requirements.
The Company's current principal business activity is to seek a suitable reverse
acquisition candidate through acquisition, merger or other suitable business
combination method.
(3) RESULTS OF OPERATIONS
The Company had no revenue for either of the years ended December 31, 2006 or
2005, respectively.
General and administrative expenses for each of the years ended December 31,
2006 and 2005 were approximately $15,600 and $4,400, respectively. These
expenses were directly related to the maintenance of the corporate entity and
the preparation and filing of the June 21, 2006 Form 10-SB and subsequent
periodic reports pursuant to the Securities Exchange Act of 1934. It is
anticipated that future expenditure levels will increase as the Company intends
to fully comply with it's periodic reporting requirements. Earnings per share
for the respective nine month periods ended December 31, 2006 and 2005 were$0.00
and $0.00 based on the weighted-average shares issued and outstanding at the end
of each respective period.
It is anticipated that future expenditure levels will remain in line with the
calendar 2006 expenditure levels until such time that the Company completes a
business combination transaction. Upon completion of a business combination
transaction, it is anticipated that the Company's expenses will increase
significantly.
The Company does not expect to generate any meaningful revenue or incur
operating expenses for purposes other than fulfilling the obligations of a
reporting company under the Securities Exchange Act of 1934 unless and until
such time that the Company's operating subsidiary begins meaningful operations.
At December 31, 2006 and 2005, respectively, the Company had working capital of
$6,500 and $12,000, respectively.
The Company and its controlling stockholder, Glenn A. Little, have acknowledged
that outside funds may become necessary to support the corporate entity and
comply with the periodic reporting requirements of the Securities Exchange Act
of 1934, as amended. To this end, Mr. Little has agreed to lend the Company up
to $20,000 with a maturity period not to exceed two (2) years from the initial
funding date at an interest rate of 6.0% per annum. As of December 31, 2006, Mr.
Little has advanced an aggregate of $10,000 to the Company with a maturity date
of September 2008.
It is the intent of management to provide sufficient working capital necessary
to support and preserve the integrity of the corporate entity. However, there is
no legal obligation for management to provide additional future funding. Should
this pledge fail to provide financing, the Company has not identified any
alternative sources. Consequently, there is substantial doubt about the
Company's ability to continue as a going concern.
The Company's need for capital may change dramatically as a result of any
business acquisition or combination transaction. There can be no assurance that
the Company will identify any such business, product, technology or company
suitable for acquisition in the future. Further, there can be no assurance that
17
the Company would be successful in consummating any acquisition on favorable
terms or that it will be able to profitably manage the business, product,
technology or company it acquires.
(4) PLAN OF BUSINESS
GENERAL
The Company's current purpose is to seek, investigate and, if such investigation
warrants, merge or acquire an interest in business opportunities presented to it
by persons or companies who or which desire to seek the perceived advantages of
a Securities Exchange Act of 1934 registered corporation. As of the date of this
registration statement, the Company has no particular acquisitions in mind and
has not entered into any negotiations regarding such an acquisition, and neither
the Company's officer and director nor any promoter and affiliate has engaged in
any negotiations with any representatives of the owners of any business or
company regarding the possibility of a merger or acquisition between the Company
and such other company. Pending negotiation and consummation of a combination,
the Company anticipates that it will have, aside from carrying on its search for
a combination partner, no business activities, and, thus, will have no source of
revenue. Should the Company incur any significant liabilities prior to a
combination with a private company, it may not be able to satisfy such
liabilities as are incurred.
If the Company's management pursues one or more combination opportunities beyond
the preliminary negotiations stage and those negotiations are subsequently
terminated, it is foreseeable that such efforts will exhaust the Company's
ability to continue to seek such combination opportunities before any successful
combination can be consummated. In that event, the Company's common stock will
become worthless and holders of the Company's common stock will receive a
nominal distribution, if any, upon the Company's liquidation and dissolution.
MANAGEMENT
The Company is a blank check or shell corporation, and currently has no
full-time employees. Glenn A. Little is the Company's sole officer, director,
and controlling stockholder. All references herein to management of the Company
are to Mr. Little. Mr. Little, as president of the Company, has agreed to
allocate a limited portion of his time to the activities of the Company after
the effective date of this Registration Statement without compensation.
Potential conflicts may arise with respect to the limited time commitment by Mr.
Little and the potential demands of the Company's activities. See Item 7,
"Certain Relationships and Related Transactions - Conflicts of Interest."
The amount of time spent by Mr. Little on the activities of the Company is not
predictable. Such time may vary widely from an extensive amount when reviewing a
target company to an essentially quiet time when activities of management focus
elsewhere, or some amount in between. It is impossible to predict with any
precision the exact amount of time Mr. Little will actually be required to spend
to locate a suitable target company. Mr. Little estimates that the business plan
of the Company can be implemented by devoting less than 5 hours per month but
such figure cannot be stated with precision.
SEARCH FOR BUSINESS OPPORTUNITIES
The Company's search will be directed toward small and medium-sized enterprises,
which have a desire to become reporting corporations and which are able to
provide audited financial statements. The Company does not propose to restrict
its search for investment opportunities to any particular geographical area or
industry, and may, therefore, engage in essentially any business, to the extent
of its limited resources. The Company's discretion in the selection of business
opportunities is unrestricted, subject to the availability of such
opportunities, economic conditions, and other factors. No assurance can be given
that the Company will be successful in finding or acquiring a desirable business
18
opportunity, and no assurance can be given that any acquisition, which does
occur, will be on terms that are favorable to the Company or its current
stockholders.
The Company may merge with a company that has retained one or more consultants
or outside advisors. In that situation, the Company expects that the business
opportunity will compensate the consultant or outside advisor. As of the date of
this filing, there have been no discussions, agreements or understandings with
any party regarding the possibility of a merger or acquisition between the
Company and such other company. Consequently, the Company is unable to predict
how the amount of such compensation would be calculated at this time. It is
anticipated that any finder that the target company retains would be a
registered broker-dealer.
The Company will not restrict its search to any specific kind of firm, but may
acquire a venture, which is in its preliminary or development stage, one which
is already in operation, or in a more mature stage of its corporate existence.
The acquired business may need to seek additional capital, may desire to have
its shares publicly traded, or may seek other perceived advantages which the
Company may offer. The Company does not intend to obtain funds to finance the
operation of any acquired business opportunity until such time as the Company
has successfully consummated the merger or acquisition transaction. There are no
loan arrangements or arrangements for any financing whatsoever relating to any
business opportunities.
EVALUATION OF BUSINESS OPPORTUNITIES
The analysis of business opportunities will be under the supervision of the
Company's sole officer and director, who is not a professional business analyst.
In analyzing prospective business opportunities, management will consider such
matters as available technical, financial and managerial resources; working
capital and other financial requirements; history of operations, if any;
prospects for the future; nature of present and expected competition; the
quality and experience of management services which may be available and the
depth of that management; the potential for further research, development, or
exploration; specific risk factors not now foreseeable, but which then may be
anticipated to impact the proposed activities of the Company; the potential for
growth or expansion; the potential for profit; the perceived public recognition
or acceptance of products, services, or trades; name identification; and other
relevant factors. In many instances, it is anticipated that the historical
operations of a specific business opportunity may not necessarily be indicative
of the potential for the future because of a variety of factors, including, but
not limited to, the possible need to expand substantially, shift marketing
approaches, change product emphasis, change or substantially augment management,
raise capital and the like. Management intends to meet personally with
management and key personnel of the target business entity as part of its
investigation. To the extent possible, the Company intends to utilize written
reports and personal investigation to evaluate the above factors. Prior to
making a decision to participate in a business opportunity, the Company will
generally request that it be provided with written materials regarding the
business opportunity containing as much relevant information as possible.
Including, but not limited to, such items as a description of products, services
and company history; management resumes; financial information; available
projections, with related assumptions upon which they are based; an explanation
of proprietary products and services; evidence of existing patents, trademarks,
or service marks, or rights thereto; present and proposed forms of compensation
to management; a description of transactions between such company and its
affiliates during the relevant periods; a description of present and required
facilities; an analysis of risks and competitive conditions; a financial plan of
operation and estimated capital requirements.
The Company is currently subject to the reporting requirements of the Exchange
Act since the effective date of the Company's June 2006 filing of the
Registration Statement on Form 10-SB. Under the Exchange Act, any merger or
acquisition candidate will become subject to the same reporting requirements of
the Exchange Act as the Company following consummation of any merger or
acquisition. Thus, in the event the Company successfully completes the
acquisition of or merger with an operating business entity, that business entity
must provide audited financial statements for at least two most recent fiscal
years or, in the event the business entity has been in business for less than
two years, audited financial statements will be required from the period of
inception. Acquisition candidates that do not have or are unable to obtain the
19
required audited statements may not be considered appropriate for acquisition.
The Company will not acquire or merge with any entity which cannot provide
audited financial statements at or within a required period of time after
closing of the proposed transaction.
Management believes that various types of potential merger or acquisition
candidates might find a business combination with the Company to be attractive.
These include acquisition candidates desiring to create a public market for
their shares in order to enhance liquidity for current stockholders, acquisition
candidates which have long-term plans for raising capital through public sale of
securities and believe that the possible prior existence of a public market for
their securities would be beneficial, and acquisition candidates which plan to
acquire additional assets through issuance of securities rather than for cash,
and believe that the possibility of development of a public market for their
securities will be of assistance in that process. Acquisition candidates, who
have a need for an immediate cash infusion, are not likely to find a potential
business combination with the Company to be an attractive alternative.
Nevertheless, the Company has not conducted market research and is not aware of
statistical data which would support the perceived benefits of a merger or
acquisition transaction for the owners of a business opportunity. The Company is
unable to predict when it may participate in a business opportunity. It expects,
however, that the analysis of specific proposals and the selection of a business
opportunity may take several months or more. There can also be no assurances
that we are able to successfully pursue a business opportunity. In that event,
there is a substantial risk to the Company that failure to complete a business
combination will significantly restrict its business operation and force
management to cease operations and liquidate the Company.
(5) LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2006 and 2005, respectively, the Company had working capital of
approximately $6,500 and $12,000.
The Company and it's controlling stockholder, Glenn A. Little, have acknowledged
that outside funds may become necessary to support the corporate entity and
comply with the periodic reporting requirements of the Securities Exchange Act
of 1934, as amended. To this end, Mr. Little has agreed to lend the Company up
to $20,000 with a maturity period not to exceed two (2) years from the initial
funding date at an interest rate of 6.0% per annum. As of December 31, 2006, Mr.
Little has advanced $10,000 to the Company with a maturity date of September
2008.
It is the belief of management that sufficient working capital necessary to
support and preserve the integrity of the corporate entity will be present.
However, there is no legal obligation for management to provide additional
future funding. Should this pledge fail to provide financing, the Company has
not identified any alternative sources. Consequently, there is substantial doubt
about the Company's ability to continue as a going concern.
The Company's need for working capital may change dramatically as a result of
any business acquisition or combination transaction. There can be no assurance
that the Company will identify any such business, product, technology or company
suitable for acquisition in the future. Further, there can be no assurance that
the Company would be successful in consummating any acquisition on favorable
terms or that it will be able to profitably manage the business, product,
technology or company it acquires.
The Company has no current plans, proposals, arrangements or understandings with
respect to the sale or issuance of additional securities prior to the location
of a merger or acquisition candidate. Accordingly, there can be no assurance
that sufficient funds will be available to the Company to allow it to cover the
expenses related to such activities.
Regardless of whether the Company's cash assets prove to be inadequate to meet
the Company's operational needs, the Company might seek to compensate providers
of services by issuances of stock in lieu of cash.
20
ITEM 7 - INDEX TO FINANCIAL STATEMENTS
The required financial statements begin on page F-1 of this document.
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 8A - CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we conducted an
evaluation of our disclosure controls and procedures, as such term is defined
under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as
amended (Exchange Act), as of December 31, 2006. Based on this evaluation, our
principal executive officer and principal financial officer concluded that our
disclosure controls and procedures are effective in alerting them on a timely
basis to material information relating to our Company required to be included in
our reports filed or submitted under the Exchange Act.
(b) Changes in Internal Controls
There were no significant changes (including corrective actions with regard to
significant deficiencies or material weaknesses) in our internal controls over
financial reporting that occurred during the quarter ended December 31, 2006
that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
PART III
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The directors and executive officers serving the Company are as follows:
Name Age Position Held and Tenure
---- --- ------------------------
Glenn A. Little 53 President, Chief Executive Officer
Chief Financial Officer and Director
The director named above will serve until the next annual meeting of the
Company's stockholders or until any successors are duly elected and have
qualified. Directors will be elected for one-year terms at the annual
stockholders meeting. Officers will hold their positions at the pleasure of the
board of directors, absent any employment agreement, of which none currently
exists or is contemplated. There is no arrangement or understanding between any
of the directors or officers of the Company and any other person pursuant to
which any director or officer was or is to be selected as a director or officer,
and there is no arrangement, plan or understanding as to whether non-management
stockholders will exercise their voting rights to continue to elect the current
directors to the Company's board. There are also no arrangements, agreements or
understandings between non-management stockholders that may directly or
indirectly participate in or influence the management of the Company's affairs.
21
The sole director and officer will devote his time to the Company's affairs on
an as needed basis, which, depending on the circumstances, could amount to as
little as two hours per month, or more than forty hours per month, but more than
likely encompass less than four (4) hours per month. There are no agreements or
understandings for the officer or director to resign at the request of another
person, and the officer and director is not acting on behalf of, nor will he act
at the direction of, any other person.
BIOGRAPHICAL INFORMATION
GLENN A. LITTLE, is a graduate of The University of Florida, Gainesville
(Bachelor of Science in Business Administration), and the American Graduate
School of International Management (Master of Business Administration -
International Management) and has been the principal of Little and Company
Investment Securities (LITCO), a Securities Broker/Dealer with offices in
Midland, Texas since 1979. Before founding LITCO, Mr. Little was a stockbroker
with Howard, Weil, Labouisse Friedrich in their New Orleans, Louisiana, and
Midland, Texas, offices and also worked for First National Bank of Commerce in
New Orleans, Louisiana.
Mr. Little was appointed an Adjudicatory Official for the State Bar of Texas and
served in that capacity from 1997 through 2003.
INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Company's by-laws provide for the indemnification of its, directors,
officers, employees, and agents, under certain circumstances, against attorney's
fees and other expenses incurred by them in any litigation to which they become
a party arising from their association with or activities on behalf of the
Company. The Company will also bear the expenses of such litigation for any of
its directors, officers, employees, or agents, upon such persons promise to
repay the Company herefore if it is ultimately determined that any such person
shall not have been entitled to indemnification. This indemnification policy
could result in substantial expenditures by the Company, which it may be unable
to recoup.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act requires our executive officers and
directors and person who own more than 10% of our common stock to file reports
regarding ownership of and transactions in our securities with the Securities
and Exchange Commissioner and to provide us with copies of those filings. Based
solely on our review of the copies received by or a written representation from
certain reporting persons we believe that during fiscal year ended December 31,
2006, certain filing requirements regarding acquisitions of our common stock by
Glenn A. Little, our sole officer and director and the beneficial owner of more
than 10% of our common stock regarding two separate transactions involving the
acquisition of common stock on April 16, 2004 and April 17, 2004, respectively
had not been complied with by Mr. Little. The Company has confirmed that Mr.
Little has subsequently filed the required reports.
CONFLICTS OF INTEREST
The sole officer of the Company will not devote more than a small portion of his
time to the affairs of the Company. There will be occasions when the time
requirements of the Company's business conflict with the demands of the
officer's other business and investment activities. Such conflicts may require
that the Company attempt to employ additional personnel. There is no assurance
that the services of such persons will be available or that they can be obtained
upon terms favorable to the Company.
The officer, director and principal stockholder of the Company may actively
negotiate for the purchase of a portion of their common stock as a condition to,
or in connection with, a proposed merger or acquisition transaction. It is
22
anticipated that a substantial premium may be paid by the purchaser in
conjunction with any sale of shares by the Company's officer, director and
principal stockholder made as a condition to, or in connection with, a proposed
merger or acquisition transaction. The fact that a substantial premium may be
paid to the Company's sole officer and director to acquire his shares creates a
conflict of interest for him and may compromise his state law fiduciary duties
to the Company's other stockholders. In making any such sale, the Company's sole
officer and director may consider his own personal pecuniary benefit rather than
the best interests of the Company and the Company's other stockholders, and the
other stockholders are not expected to be afforded the opportunity to approve or
consent to any particular buy-out transaction involving shares held by Company
management.
The Company has adopted a policy under which any consulting or finders fee that
may be paid to a third party for consulting services to assist management in
evaluating a prospective business opportunity would be paid in stock rather than
in cash. Any such issuance of stock would be made on an ad hoc basis.
Accordingly, the Company is unable to predict whether, or in what amount, such
stock issuance might be made.
It is not currently anticipated that any salary, consulting fee, or finders fee
shall be paid to any of the Company's directors or executive officers, or to any
other affiliate of the Company except as described under Executive Compensation
above.
Although management has no current plans to cause the Company to do so, it is
possible that the Company may enter into an agreement with an acquisition
candidate requiring the sale of all or a portion of the Common Stock held by the
Company's current stockholders to the acquisition candidate or principals
thereof, or to other individuals or business entities, or requiring some other
form of payment to the Company's current stockholders, or requiring the future
employment of specified officers and payment of salaries to them. It is more
likely than not that any sale of securities by the Company's current
stockholders to an acquisition candidate would be at a price substantially
higher than that originally paid by such stockholders. Any payment to current
stockholders in the context of an acquisition involving the Company would be
determined entirely by the largely unforeseeable terms of a future agreement
with an unidentified business entity.
INVOLVEMENT ON CERTAIN MATERIAL LEGAL PROCEEDINGS
DURING THE PAST FIVE (5) YEARS
(1) No director, officer, significant employee or consultant has been
convicted in a criminal proceeding, exclusive of traffic violations or is
subject to any pending criminal proceeding.
(2) No bankruptcy petitions have been filed by or against any business or
property of any director, officer, significant employee or consultant of the
Company nor has any bankruptcy petition been filed against a partnership or
business association where these persons were general partners or executive
officers.
(3) No director, officer, significant employee or consultant has been
permanently or temporarily enjoined, barred, suspended or otherwise limited from
involvement in any type of business, securities or banking activities.
(4) No director, officer or significant employee has been convicted of
violating a federal or state securities or commodities law.
ITEM 10 - EXECUTIVE COMPENSATION
The current management and oversight of the Company requires less than four (4)
hours per month. As the Company's sole officer and director is engaged in other
full-time income producing activities, the Company's sole officer or director
has received any compensation from the Company. In future periods, subsequent to
the consummation of a business combination transaction, the Company anticipates
that it will pay compensation to its officer(s) and/or director(s). See Certain
Relationships and Related Transactions.
23
SUMMARY COMPENSATION TABLE
Change in
Pension
Value and
Nonqualified
Name and Non-Equity Deferred
Principal Stock Option Incentive Plan Compensation All Other
Position Year Salary($) Bonus($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Total($)
-------- ---- --------- -------- --------- --------- --------------- ----------- --------------- --------
Glenn A. Little
Principal 2006 $-0- $-0- $-0- $-0- $-0- $-0- $-0- $-0-
Executive 2005 $-0- $-0- $-0- $-0- $-0- $-0- $-0- $-0-
Officer 2004 $-0- $-0- $-0- $-0- $-0- $-0- $-0- $-0-
The Company has no other Executive Compensation issues which would require the
inclusion of other mandated table disclosures.
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the date of this Annual Report, the number
of shares of Common Stock owned of record and beneficially by executive
officers, directors and persons who hold 5% or more of the outstanding Common
Stock of the Company. Also included are the shares held by all executive
officers and directors as a group.
% of Class
Name and address Number of Shares Beneficially Owned
---------------- ---------------- ------------------
Glenn A. Little 20,000,000 83.2%
211 West Wall
Midland, Texas 79701
All Directors and 20,000,000 83.2%
Executive Officers (1 person)
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 16 and April 17, 2004, the Company, in two separate transactions, sold
a total of 20,000,000 shares of restricted, unregistered common stock to Glenn
A. Little, pursuant to two separate subscription agreements for 10,000,000
shares each, for gross proceeds of $20,000. The Company relied upon Section 4(2)
of The Securities Act of 1933, as amended, for an exemption from registration of
these shares and no underwriter was used in this transaction.
Mr. Little was concurrently elected President, Chief Executive Officer, Chief
Operating Officer, Chairman of the Board of Directors, and Secretary and
Treasurer of the Company.
24
As a result of this transaction, Glenn A. Little became the Company's
controlling stockholder, owning 20,000,000 shares of the 24,033,600 issued and
outstanding shares of the Registrant's common stock, or approximately 83.22%, at
the close of business on April 17, 2004.
The Company currently maintains a mailing address at 211 West Wall, Midland,
Texas 79701. The Company's telephone number there is (432) 682-1761. Other than
this mailing address, the Company does not currently maintain any other office
facilities, and does not anticipate the need for maintaining office facilities
at any time in the foreseeable future. The Company pays no rent or other fees
for the use of the mailing address as these offices are used virtually full-time
by other businesses of the Company's sole officer and director.
ITEM 13 - EXHIBITS
Exhibit
Number
------
3i.1 Articles of Incorporation (*)
3i.2 Articles of Merger (*)
3.2 By-Laws (*)
4.1 Specimen of Certificate of Common Stock (**)
31.1 Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002.
32.1 Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
----------
(*)- Incorporated by reference to the Company's Registration Statement on Form
10-SB (File No. 0-52072) on June 21, 2006.
(**)- Incorporated by reference to the Company's Registration Statement on Form
S-18 (File No. 0-19276) on March 26, 1991
(Remainder of this page left blank intentionally)
25
ITEM 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Company paid or accrued the following fees in each of the prior two fiscal
years to it's principal accountant, S. W. Hatfield, CPA of Dallas, Texas.
Year ended Year ended
December 31, December 31,
2006 2005
-------- --------
1. Audit fees $ 4,144 $ 2,188
2. Audit-related fees -- --
3. Tax fees -- --
4. All other fees -- --
-------- --------
Totals $ 4,144 $ 2,188
======== ========
We have considered whether the provision of any non-audit services, currently or
in the future, is compatible with S. W. Hatfield, CPA maintaining its
independence and have determined that these services do not compromise their
independence.
Financial Information System Design and Implementation: S. W. Hatfield, CPA did
not charge the Company any fees for financial information system design and
implementation fees.
The Company has no formal audit committee. However, the entire Board of
Directors (Board) is the Company's defacto audit committee. In discharging its
oversight responsibility as to the audit process, the Board obtained from the
independent auditors a formal written statement describing all relationships
between the auditors and the Company that might bear on the auditors'
independence as required by Independence Standards Board Standard No. 1,
"INDEPENDENCE DISCUSSIONS WITH AUDIT COMMITTEES." The Board discussed with the
auditors any relationships that may impact their objectivity and independence,
including fees for non-audit services, and satisfied itself as to the auditors'
independence. The Board also discussed with management, the internal auditors
and the independent auditors the quality and adequacy of the Company's internal
controls.
The Company's principal accountant, S. W. Hatfield, CPA, did not engage any
other persons or firms other than the principal accountant's full-time,
permanent employees.
26
SIGNATURES
In accord with Section 13 or 15(d) of the Securities Act of 1933, as amended,
the Company caused this report to be signed on its behalf by the undersigned,
thereto duly authorized.
MARKETING ACQUISITION CORPORATION
Dated: February 20, 2007 /s/ Glenn A. Little
----------------- ------------------------------------
Glenn A. Little
President, Chief Executive Officer
Chief Financial Officer and Director
In accordance with the Securities Exchange Act of 1934, as amended, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the date as indicated.
Dated: February 20, 2007 /s/ Glenn A. Little
----------------- ------------------------------------
Glenn A. Little
President, Chief Executive Officer
Chief Financial Officer and Director
27
MARKETING ACQUISITION CORPORATION
CONTENTS
Page
----
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-2
FINANCIAL STATEMENTS
Balance Sheets
as of December 31, 2006 and 2005 F-3
Statements of Operations and Comprehensive Loss
for the years ended December 31, 2006 and 2005 F-4
Statement of Changes in Shareholders' Equity
for the years ended December 31, 2006 and 2005 F-5
Statements of Cash Flows
for the years ended December 31, 2006 and 2005 F-6
Notes to Financial Statements F-7
F-1
LETTERHEAD OF S. W. HATFIELD, CPA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
Marketing Acquisition Corporation
We have audited the accompanying balance sheets of Marketing Acquisition
Corporation (a Nevada corporation) as of December 31, 2006 and 2005 and the
related statements of operations and comprehensive loss, changes in
shareholders' equity (deficit) and cash flows for the each of the two years
ended December 31, 2006 and 2005, respectively. 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 audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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 Marketing Acquisition
Corporation as of December 31, 2006 and 2005 and the results of its operations
and its cash flows for the each of the two years ended December 31, 2006 and
2005, respectively, in conformity with generally accepted accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note C to the
financial statements, the Company has no viable operations or significant assets
and is dependent upon significant shareholders to provide sufficient working
capital to maintain the integrity of the corporate entity. These circumstances
create substantial doubt about the Company's ability to continue as a going
concern and are discussed in Note C. The financial statements do not contain any
adjustments that might result from the outcome of these uncertainties.
/s/ S. W. Hatfield, CPA
-----------------------------
S. W. HATFIELD, CPA
Dallas, Texas
February 1, 2007
F-2
MARKETING ACQUISITION CORPORATION
BALANCE SHEETS
December 31, 2006 and 2005
December 31, December 31,
2006 2005
--------- ---------
ASSETS
CURRENT ASSETS
Cash on hand and in bank $ 6,759 $ 11,987
--------- ---------
TOTAL CURRENT ASSETS 6,759 11,987
--------- ---------
TOTAL ASSETS $ 6,759 $ 11,987
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
LIABILITIES
CURRENT LIABILITIES
Accounts payable - trade $ -- $ --
Accrued interest payable to stockholder 240 --
--------- ---------
TOTAL CURRENT LIABILITIES 240 --
--------- ---------
LONG-TERM LIABILITIES
Note payable to stockholder 10,000 --
--------- ---------
TOTAL LIABILITIES 10,240 --
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock - $0.001 par value
50,000,000 shares authorized
None issued and outstanding -- --
Common stock - $0.001 par value
100,000,000 shares authorized
24,033,600 shares issued and outstanding, respectively 24,034 24,034
Additional paid-in capital 459,930 459,930
Accumulated deficit (487,445) (471,977)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT) (3,481) 11,987
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,759 $ 11,987
========= =========
The accompanying notes are an integral part of these financial statements.
F-3
MARKETING ACQUISITION CORPORATION
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Years ended December 31, 2006 and 2005
Year ended Year ended
December 31, December 31,
2006 2005
------------ ------------
REVENUES $ -- $ --
------------ ------------
EXPENSES
General and administrative expenses 15,562 4,399
------------ ------------
INCOME (LOSS) FROM OPERATIONS (15,562) (4,399)
OTHER INCOME (EXPENSE)
Interest expense (240) --
Interest income 334 242
------------ ------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES (15,468) (4,157)
PROVISION FOR INCOME TAXES -- --
------------ ------------
NET LOSS (15,468) (4,157)
OTHER COMPREHENSIVE INCOME -- --
------------ ------------
COMPREHENSIVE LOSS $ (15,468) $ (4,157)
============ ============
Earnings per share of common stock
outstanding computed on net loss -
basic and fully diluted nil nil
============ ============
Weighted-average number of shares
outstanding - basic and fully diluted 24,033,600 24,033,600
============ ============
The accompanying notes are an integral part of these financial statements.
F-4
MARKETING ACQUISITION CORPORATION
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 2006 and 2005
Common Stock Additional
--------------------- paid-in Accumulated
Shares Amount capital deficit Total
------ ------ ------- ------- -----
BALANCES AT JANUARY 1, 2005 24,033,600 $24,034 $459,930 $(467,820) $ 16,144
Net loss for the year -- -- -- (4,157) (4,157)
---------- ------- -------- --------- --------
BALANCES AT DECEMBER 31, 2005 24,033,600 24,034 459,930 (471,977) 11,987
Net loss for the year -- -- -- (15,468) (15,468)
---------- ------- -------- --------- --------
BALANCES AT DECEMBER 31, 2006 24,033,600 $24,034 $459,930 $(487,445) $ (3,481)
========== ======= ======== ========= ========
The accompanying notes are an integral part of these financial statements.
F-5
MARKETING ACQUISITION CORPORATION
STATEMENTS OF CASH FLOWS
Years ended December 31, 2005 and 2004
Year ended Year ended
December 31, December 31,
2005 2004
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) for the period $(15,468) $ (4,157)
Adjustments to reconcile net loss
to net cash provided by operating activities
Depreciation and amortization -- --
Increase in Accrued interest payable 240 --
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (15,228) (4,157)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES -- --
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loan from officer 10,000 --
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,000 --
-------- --------
INCREASE (DECREASE) IN CASH (5,228) (4,157)
Cash at beginning of period 11,987 16,144
-------- --------
CASH AT END OF PERIOD $ 6,759 $ 11,987
======== ========
SUPPLEMENTAL DISCLOSURE OF INTEREST AND INCOME TAXES PAID
Interest paid for the year $ -- $ --
======== ========
Income taxes paid for the year $ -- $ --
======== ========
The accompanying notes are an integral part of these financial statements.
F-6
MARKETING ACQUISITION CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2006 and 2005
NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS
Marketing Acquisition Corporation (Company) was originally incorporated on July
26, 1990 in accordance with the Laws of the State of Florida as Marketing
Educational Corporation. The Company changed it's corporate name to Marketing
Acquisition Corporation on February 28, 2006.
On June 13, 2006, the Company changed its state of incorporation from Florida to
Nevada by means of a merger with and into a Nevada corporation formed on June 8,
2006 solely for the purpose of effecting the reincorporation. The Certificate of
Incorporation and Bylaws of the Nevada corporation are the Certificate of
Incorporation and Bylaws of the surviving corporation. Such Certificate of
Incorporation kept the Company's new name of Marketing Acquisition Corporation
and modified the Company's capital structure to allow for the issuance of up to
100,000,000 shares of $0.001 par value common stock and up to 50,000,000 shares
of $0.001 par value preferred stock.
The Company was originally formed for the purpose of direct marketing of certain
educational materials and photography packages. The educational materials
marketed by the Company consisted of encyclopedias, learning books, educational
audio and video tapes which were designed to be combined in various combinations
to accommodate the educational levels and needs of families with children of all
ages. During the year ended December 31, 1992, the Company sold or otherwise
disposed of all assets and operations in order to settle then-outstanding
indebtedness.
Since December 31, 1992, the Company has had no operations, significant assets
or liabilities.
The Company's current business plan is to locate and combine with an existing,
privately-held company which is profitable or, in management's view, has growth
potential, irrespective of the industry in which it is engaged. However, the
Company does not intend to combine with a private company which may be deemed to
be an investment company subject to the Investment Company Act of 1940. A
combination may be structured as a merger, consolidation, exchange of the
Company's common stock for stock or assets or any other form which will result
in the combined enterprise's becoming a publicly-held corporation.
NOTE B - PREPARATION OF FINANCIAL STATEMENTS
The Company follows the accrual basis of accounting in accordance with
accounting principles generally accepted in the United States of America and has
a year-end of December 31.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Management further acknowledges that it is solely responsible for adopting sound
accounting practices, establishing and maintaining a system of internal
accounting control and preventing and detecting fraud. The Company's system of
internal accounting control is designed to assure, among other items, that 1)
recorded transactions are valid; 2) valid transactions are recorded; and 3)
transactions are recorded in the proper period in a timely manner to produce
financial statements which present fairly the financial condition, results of
operations and cash flows of the Company for the respective periods being
presented
NOTE C - GOING CONCERN UNCERTAINTY
Marketing Acquisition Corporation (Company) was originally incorporated on July
26, 1990 in accordance with the Laws of the State of Florida. The Company was
originally formed for the purpose of direct marketing of certain educational
materials and photography packages. The educational materials marketed by the
Company consisted of encyclopedias, learning books, educational audio and video
tapes which were designed to be combined in various combinations to accommodate
the educational levels and needs of families with children of all ages. All
business operations were abandoned by December 31, 1992. Since December 31,
1992, the Company has had no operations, assets or liabilities. The Company's
current principal business activity is to seek a suitable reverse acquisition
candidate through acquisition, merger or other suitable business combination
method.
F-7
MARKETING ACQUISITION CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2006 and 2005
NOTE C - GOING CONCERN UNCERTAINTY - CONTINUED
The Company's continued existence is dependent upon its ability to generate
sufficient cash flows from operations to support its daily operations as well as
provide sufficient resources to retire existing liabilities and obligations on a
timely basis.
The Company anticipates future sales of equity securities to facilitate either
the consummation of a business combination transaction or to raise working
capital to support and preserve the integrity of the corporate entity. However,
there is no assurance that the Company will be able to obtain additional funding
through the sales of additional equity securities or, that such funding, if
available, will be obtained on terms favorable to or affordable by the Company.
If no additional operating capital is received during the next twelve months,
the Company will be forced to rely on existing cash in the bank and upon
additional funds loaned by management and/or significant stockholders to
preserve the integrity of the corporate entity at this time. In the event, the
Company is unable to acquire advances from management and/or significant
stockholders, the Company's ongoing operations would be negatively impacted.
It is the intent of management and significant stockholders to provide
sufficient working capital necessary to support and preserve the integrity of
the corporate entity. However, no formal commitments or arrangements to advance
or loan funds to the Company or repay any such advances or loans exist. There is
no legal obligation for either management or significant stockholders to provide
additional future funding.
While the Company is of the opinion that good faith estimates of the Company's
ability to secure additional capital in the future to reach our goals have been
made, there is no guarantee that the Company will receive sufficient funding to
sustain operations or implement any future business plan steps.
NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Cash and cash equivalents
For Statement of Cash Flows purposes, the Company considers all cash on
hand and in banks, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
2. Income Taxes
The Company uses the asset and liability method of accounting for income
taxes. At December 31, 2006 and 2005, respectively, the deferred tax asset
and deferred tax liability accounts, as recorded when material to the
financial statements, are entirely the result of temporary differences.
Temporary differences represent differences in the recognition of assets
and liabilities for tax and financial reporting purposes, primarily
accumulated depreciation and amortization, allowance for doubtful accounts
and vacation accruals.
As of December 31, 2006 and 2005, the deferred tax asset related to the
Company's net operating loss carryforward is fully reserved. Due to the
provisions of Internal Revenue Code Section 338, the Company may have no
net operating loss carryforwards available to offset financial statement or
tax return taxable income in future periods as a result of a change in
control involving 50 percentage points or more of the issued and
outstanding securities of the Company.
3. Earnings (loss) per share
Basic earnings (loss) per share is computed by dividing the net income
(loss) available to common shareholders by the weighted-average number of
common shares outstanding during the respective period presented in our
accompanying financial statements.
Fully diluted earnings (loss) per share is computed similar to basic income
(loss) per share except that the denominator is increased to include the
number of common stock equivalents (primarily outstanding options and
warrants).
F-8
MARKETING ACQUISITION CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2006 and 2005
NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
3. Earnings (loss) per share - continued
Common stock equivalents represent the dilutive effect of the assumed
exercise of the outstanding stock options and warrants, using the treasury
stock method, at either the beginning of the respective period presented or
the date of issuance, whichever is later, and only if the common stock
equivalents are considered dilutive based upon the Company's net income
(loss) position at the calculation date.
At December 31, 2006 and 2005, and subsequent thereto, the Company had no
outstanding common stock equivalents.
NOTE E - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
Interest rate risk is the risk that the Company's earnings are subject to
fluctuations in interest rates on either investments or on debt and is fully
dependent upon the volatility of these rates. The Company does not use
derivative instruments to moderate its exposure to interest rate risk, if any.
Financial risk is the risk that the Company's earnings are subject to
fluctuations in interest rates or foreign exchange rates and are fully dependent
upon the volatility of these rates. The company does not use derivative
instruments to moderate its exposure to financial risk, if any.
NOTE F - NOTE PAYABLE TO STOCKHOLDER
The Company and it's controlling shareholder, Glenn A. Little, have acknowledged
that outside funds may become necessary to support the corporate entity and
comply with the periodic reporting requirements of the Securities Exchange Act
of 1934, as amended. To this end, Mr. Little has agreed to lend the Company up
to $20,000 with a maturity period not to exceed two (2) years from the initial
funding date at an interest rate of 6.0% per annum. As of December 31, 2006, Mr.
Little has advanced $10,000 to the Company with a maturity date of September
2008.
NOTE G - INCOME TAXES
The components of income tax (benefit) expense for each of the years ended
December 31, 2006 and 2005, are as follows:
Year ended Year ended
December 31, December 31,
2006 2005
------- -------
Federal:
Current $ -- $ --
Deferred -- --
------- -------
-- --
------- -------
State:
Current -- --
Deferred -- --
------- -------
-- --
------- -------
Total $ -- $ --
======= =======
F-9
MARKETING ACQUISITION CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2006 and 2005
NOTE G - INCOME TAXES - CONTINUED
Concurrent with an April 2004 change in control, the Company has a operating
loss carryforward for income tax purposes of approximately $16,500. The amount
and availability of any future net operating loss carryforwards may be subject
to limitations set forth by the Internal Revenue Code. Factors such as the
number of shares ultimately issued within a three year look-back period; whether
there is a deemed more than 50 percent change in control; the applicable
long-term tax exempt bond rate; continuity of historical business; and
subsequent income of the Company all enter into the annual computation of
allowable annual utilization of the carryforwards.
The Company's income tax expense (benefit) for each of the years ended December
31, 2006 and 2005, respectively, differed from the statutory federal rate of 34
percent as follows:
Year ended Year ended
December 31, December 31,
2006 2005
------- -------
Statutory rate applied to income before income taxes $(5,300) $(1,400)
Increase (decrease) in income taxes resulting from:
State income taxes -- --
Other, including reserve for deferred tax asset
and application of net operating loss carryforward 5,300 1,400
------- -------
Income tax expense $ -- $ --
======= =======
Temporary differences, consisting primarily of statutory deferrals of expenses
for organizational costs and statutory differences in the depreciable lives for
property and equipment, between the financial statement carrying amounts and tax
bases of assets and liabilities give rise to deferred tax assets and liabilities
as of December 31, 2006 and 2005, respectively:
December 31, December 31,
2006 2005
------- -------
Deferred tax assets
Net operating loss carryforwards $ 8,000 $ 2,700
Less valuation allowance (8,000) (2,700)
------- -------
Net Deferred Tax Asset $ -- $ --
======= =======
During each of the years ended December 31, 2006 and 2005,respectively, the
valuation allowance increased by approximately $5,300 and $1,400. The ultimate
realization of the deferred tax asset is dependent upon sufficient future
taxable income during the period that deductible temporary differences and
carryforwards are expected to be available to reduce taxable income.
NOTE H - COMMON STOCK TRANSACTIONS
On June 13, 2006, the Company changed its state of incorporation from Florida to
Nevada by means of a merger with and into a Nevada corporation formed on June 8,
2006 solely for the purpose of effecting the reincorporation. The Certificate of
Incorporation and Bylaws of the Nevada corporation are the Certificate of
Incorporation and Bylaws of the surviving corporation. Such Certificate of
Incorporation kept the Company's new name of Marketing Acquisition Corporation
and modified the Company's capital structure to allow for the issuance of up to
100,000,000 shares of $0.001 par value common stock and up to 50,000,000 shares
of $0.001 par value preferred stock.
F-10