ACQUISITIONS
The Company’s acquisition of Connexus Technologies (Pte.) Ltd. has been accounted for using the purchase method of accounting. The Company acquired 100% of the common stock of Connexus for 1,662,562 shares of common stock valued at $100,000, and assumed a promissory note which at the time of acquisition (as of October 1, 2002) was valued at $50,000, subsequently with accrued interest is valued at $100,000 as of March 31, 2005. Connexus had a net book value of $22,026 (US dollar equivalent) resulting in $127,974 in goodwill, which management determined to be impaired based on the fact that the purchase price was determined based on what Connexus had been developing. The primary reason the Company acquired Connexus was the working model and software code that it had been developing fits nicely into the current business model and software code of the Company. The Company did not pay any cash for Connexus and there are no contingent payments, options, or commitments specified in the purchase agreement.
The book value of $22,026 of Connexus at the time of acquisition consisted of:
Current assets
$ 42,638
Fixed assets
18,190
Accounts payable and other accrued expenses
(38,802 )
Total
$ 22,026
NOTE 9- RELATED PARTY TRANSACTIONS
As discussed in Note 6, the Company has demand promissory notes with some of its officers for services rendered to the Company. Interest is accrued at 6.0% and 9.75% annually on these notes. As of March 31, 2005, the Company has $1,010,621 outstanding under these notes, including $74,888 in accrued interest.
NOTE 10- PROVISION FOR INCOME TAXES
Deferred income taxes will be determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes will be measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s consolidated tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.
At March 31, 2005, deferred tax assets consist of the following:
Net operating loss carryforwards
$ 930,170
Less: valuation allowance
(930,170
At March 31, 2005, the Company had deficits accumulated during the development stage in the approximate amount of $3,100,567, available to offset future taxable income through 2023. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.
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