CYTTA CORP. - Quarter Report: 2008 December (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
FORM 10-Q
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QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the quarterly period ended December 31,
2008
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TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the transition period from __________ to
__________
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CYTTA
CORP.
(Exact
name of registrant as specified in its charter)
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Nevada
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98-0505761
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(State
or other jurisdiction of
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(IRS
Employer Identification
No.)
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incorporation
or organization)
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16857
E. Saguaro Blvd.
Fountain
Hills, Arizona 85268
(Address
of principal executive offices) (Zip Code)
(480)
837-6165
(Registrant’s telephone
number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes þ No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
| Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes o No
þ
As of
February 9, 2009, there were 80,200,000 shares of the issuer’s common stock
issued and outstanding.
Table of
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| PART I. |
FINANCIAL
INFORMATION
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| Item 1. |
Financial
Statements
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UNAUDITED
CONSOLIDATED BALANCE SHEET
December
31, 2008 (Unaudited) and September 30, 2008
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ASSETS
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12/31/2008
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9/30/2008
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CURRENT
ASSETS
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Cash
& Cash Equivalents
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$ | 3,139 | $ | 283 | ||||
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Accounts
Receivable
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34,970 | 45,684 | ||||||
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Inventory
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6,397 | 4,624 | ||||||
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Total
Current Assets
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$ | 44,506 | $ | 50,591 | ||||
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Property
and equipment, net
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4,069 | 4,268 | ||||||
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OTHER
ASSETS
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Deposits
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4,520 | 4,520 | ||||||
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TOTAL
ASSETS
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$ | 53,095 | $ | 59,379 | ||||
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LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
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CURRENT
LIABILITIES
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Notes
payable - related parties
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$ | 274,110 | $ | 260,860 | ||||
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Notes
payable
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180,000 | 180,000 | ||||||
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Accounts
payable
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39,847 | 24,435 | ||||||
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Accrued
interest
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40,268 | 30,427 | ||||||
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Accrued
taxes
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163,794 | 163,794 | ||||||
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TOTAL
LIABILITIES
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$ | 698,019 | $ | 659,516 | ||||
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COMMITMENTS
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– | – | ||||||
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Preferred
Stock, $0.001 par value, 100,000,000 shares
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authorized
and zero shares outstanding at December 31, 2008
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and
September 30, 2008 respectively
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– | – | ||||||
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Common
Stock - $0.001 par value; 400,000,000 shares and
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100,000,000
authorized 80,200,000 and 6,050,000 shares
outstanding
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at
December 31, 2008 and September 30, 2008, respectively
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80,200 | 6,050 | ||||||
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Additional
paid-in capital
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12,208,347 | 12,257,126 | ||||||
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Accumulated
deficit
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(12,933,471 | ) | (12,863,313 | ) | ||||
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TOTAL
STOCKHOLDERS' EQUITY(DEFICIT)
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(644,924 | ) | (600,137 | ) | ||||
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TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)
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$ | 53,095 | $ | 59,379 | ||||
The accompanying notes are
an integral part of these financial statements.
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS
For the
three months ended December 31, 2008 and 2007
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Three
months ended,
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12/31/2008
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12/31/2007
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PRODUCT
REVENUES
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$ | 34,969 | $ | 20,819 | ||||
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Cost
of Product Revenues
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3,783 | 5,647 | ||||||
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GROSS
PROFIT
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31,186 | 15,172 | ||||||
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GENERAL
& ADMINISTRATIVE EXPENSES
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Salaries
and wages
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6,500 | 10,500 | ||||||
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Legal
and professional fees
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19,397 | – | ||||||
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Rent
expense
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13,560 | 13,560 | ||||||
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Miscellaneous
expense
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43,532 | 27,192 | ||||||
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TOTAL
GENERAL & ADMINISTRATIVE EXPENSES
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82,989 | 51,252 | ||||||
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LOSS
FROM OPERATIONS
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$ | (51,803 | ) | $ | (36,080 | ) | ||
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OTHER
INCOME (EXPENSES)
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Other
Income
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745 | – | ||||||
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Other
Expense
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(4,605 | ) | – | |||||
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Interest
expense
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(14,495 | ) | – | |||||
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TOTAL
OTHER INCOME (EXPENSES)
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(18,355 | ) | – | |||||
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NET
LOSS
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$ | (70,158 | ) | $ | (36,080 | ) | ||
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Basic
Loss per Share
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(0.00 | ) | (0.01 | ) | ||||
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Weighted
Average Shares Outstanding
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27,924,457 | 6,050,000 | ||||||
The accompanying notes are
an integral part of these financial statements.
UNAUDITED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’
EQUITY
For the
three months ended December 31, 2008
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Additional
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Stockholders'
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Common
Stock
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Paid-in
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Accumulated
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Equity
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Shares
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Par
Value
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Capital
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Deficit
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(Deficit)
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BALANCE
AT OCTOBER 1, 2007
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6,050,000 | 6,050 | 12,257,126 | (12,644,256 | ) | (381,080 | ) | |||||||||||||
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Net
loss
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– | – | – | (219,057 | ) | (219,057 | ) | |||||||||||||
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BALANCE
AT SEPTEMBER 30, 2008
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6,050,000 | 6,050 | 12,257,126 | (12,863,313 | ) | (600,137 | ) | |||||||||||||
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4
for 1 Stock Split
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18,150,000 | 18,150 | (18,150 | ) | – | – | ||||||||||||||
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Issuance
of Common Stock
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56,000,000 | 56,000 | (30,629 | ) | – | 25,371 | ||||||||||||||
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Net
loss
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– | – | – | (70,158 | ) | (64,773 | ) | |||||||||||||
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BALANCE
AT DECEMBER 31, 2008
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80,200,000 | 80,200 | 12,208,347 | (12,933,471 | ) | (639,539 | ) | |||||||||||||
The accompanying notes are
an integral part of these financial statements.
UNAUDITED
CONSOLIDATED STATEMENT OF CASH FLOWS
For the
three months ended December 31, 2008 and 2007
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Three
months ended,
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12/31/2008
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12/31/2007
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INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS:
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CASH
FLOWS FROM OPERATING ACTIVITIES:
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Net
Loss
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$ | (70,158 | ) | $ | (36,080 | ) | ||
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Adjustments
to reconcile net income to net
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cash
provided (used) by operating activities:
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Depreciation
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200 | – | ||||||
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Changes
in Assets and Liabilities:
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Accounts
Receivable
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10,713 | 7,290 | ||||||
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Inventory
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(1,773 | ) | 3,161 | |||||
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Accounts
payable
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6,247 | (965 | ) | |||||
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Accrued
interest
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9,841 | (3,750 | ) | |||||
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NET
CASH USED IN OPERATING ACTIVITIES
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$ | (44,930 | ) | $ | (30,344 | ) | ||
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CASH
FLOWS FROM FINANCING ACTIVITIES:
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Proceeds
from borrowings
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13,250 | 29,000 | ||||||
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NET
CASH PROVIDED BY FINANCING ACTIVITES
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$ | 13,250 | $ | 29,000 | ||||
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NET
CHANGE IN CASH & CASH EQUIVALENTS
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(31,680 | ) | (1,344 | ) | ||||
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CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
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34,819 | 2,781 | ||||||
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CASH
AND CASH EQUIVALENTS AT DECEMBER 31, 2008 and 2007
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$ | 3,139 | $ | 1,437 | ||||
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Supplemental
disclosure of cash flow information:
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Cash
paid during the three months for:
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Interest
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$ | 4,655 | $ | 3,750 | ||||
The accompanying notes are
an integral part of these financial statements.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 – ORGANIZATION AND
DESCRIPTION OF BUSINESS
Ophthalmic
International, Inc. (OI) was incorporated in March 1997 in the state of Nevada.
The Company had been a wholly owned subsidiary of Coronado Industries, Inc until
January 26, 2007 when the Company and its subsidiaries were purchased from
Coronado Industries, Inc. for cash and other consideration.
Cytta
Corp. (CC) was incorporated on May 30, 2006 under the laws of the State of
Nevada. It is located in Vancouver, British Columbia, Canada. The accounting and
reporting policies of the Company conform to accounting principles generally
accepted in the United States of America. The Company fiscal year end is
September 30.
On
December 5, 2008 CC consummated an Agreement of Share Exchange and Plan of
Reorganization (The Agreement)with OI. Pursuant to the Agreement CC agreed to
issue an aggregate of 56,000,000 shares of its restricted common stock to all of
the shareholders of OI in exchange for all the issued and outstanding common
stock shares or OI.
The
exchange of shares has been accounted for as a reverse merger in the form of a
recapitalization with OI as the “accounting acquirer” and the surviving entity.
After the merger OI retained the “legal acquirer” name of CYTTA Corp. (The
Company) and the fiscal year of September 30. Operations after the merger will
be based in Fountain Hills, Arizona where The Company intends to manufacture and
market a patented Vacuum Fixation Device and patented suction rings to major
medical supply companies and health care providers throughout the
world.
NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
BASIS
OF PRESENTATION
In the
opinion of management, the accompanying consolidated financial statements
reflect all adjustments (consisting of normal recurring accruals) necessary to
present fairly the Company’s financial position as of December 31, 2008 and the
results of its operations, changes in stockholders’ deficit, and cash flows for
the three months ended December 31, 2008. Although management believes that the
disclosures in these consolidated financial statements are adequate to make the
information presented not misleading, certain information and footnote
disclosures normally included in financial statements that have been prepared in
accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to the rules and regulations of
the Securities Exchange Commission.
CYTTA
CORP. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
BASIS
OF PRESENTATION (Continued)
The
result of operations for the three months ended, December 31, 2008, are not
necessarily indicative of the results that may be expected for the full year
ending September 30, 2009. The accompanying consolidated financial statements
should be read in conjunction with the more detailed consolidated financial
statements, and the related footnotes thereto, filed with the Company’s Annual
Report on Form 10-K for the year ended September 30, 2008.
GOING CONCERN
The
Company’s financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America which contemplates
continuation of the company as a going concern from the realization of assets
and liquidation of liabilities in the normal course of business. The
Company has not made an operating profit since 1997. Further, the Company has a
working capital deficit of $(653,513) and a negative net worth of $(644,924) as
of December 31, 2008.
In order
for the Company to continue operations as a going concern, the Company will
need, among other things, additional capital resources. Management’s current
plans to obtain such resources for the Company include obtaining capital from
management and significant shareholders to meet its minimal operating expenses
and to seek out a merger with an existing operating
company. Management cannot provide any assurances that the Company
will be successful in accomplishing any of its plans.
The
ability of the Company to continue as a going concern is dependent upon its
ability to successfully accomplish the plans described in the preceding
paragraph and eventually secure other sources of financing as well as attain
profitable operations. The accompanying financial statements do not include any
adjustments that might be necessary if the Company is unable to continue as a
going concern.
PRINCIPLES
OF CONSOLIDATION
The
consolidated financial statements include the financial position, results of
operations, cash flows and changes in stockholders’ deficit of CYTTA Corp. and
its wholly-owned subsidiaries. All material intercompany transactions, accounts
and balances have been eliminated.
CYTTA
CORP. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
FOREIGN
CURRENCY TRANSACTIONS
The
Company’s functional currency before the date of the merger was the Canadian
Dollar. The Company’s reporting currency is the U.S. Dollar. All
transactions initiated in Canadian Dollars are translated to U.S. Dollars in
accordance with SFAS No. 52 “Foreign Currency Translation” as
follows:
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(i)
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Monetary
assets and liabilities at the rate of exchange in effect at the balance
sheet date;
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(ii)
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Equity
at historical rates; and
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(iii)
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Revenue
and expense items at the average rate of exchange prevailing during the
period.
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Adjustments
arising from such translations are deferred until realization and are included
as a separate component of stockholders’ equity as a component of comprehensive
income or loss. Therefore, translation adjustments are not included in
determining net income (loss) but reported as other comprehensive
income.
For
foreign currency transactions, the Company translates these amounts to the
Company’s functional currency at the exchange rate effective on the invoice
date. If the exchange rate changes between the time of purchase and the
time actual payment is made, a foreign exchange transaction gain or loss results
which is included in determining net income for the period.
No
significant realized exchange gains or losses were recorded from inception May
30, 2006 to December 31, 2008.
CYTTA
CORP. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
SFAS No.
130, “Reporting Comprehensive Income”, establishes standards for reporting and
display of comprehensive income and its components in a full set of
general-purpose financial statements. From inception May 30, 2006 to
December 31, 2008, the Company had no items of other comprehensive income.
Therefore, net loss equals comprehensive loss from inception May 30, 2006
to December 31, 2008.
STOCK-BASED
COMPENSATION
The
Company adopted the provisions of Statement of Financial Accounting Standards
(“SFAS”) No. 123(R), “Share-Based Payment”, which
establishes accounting for equity instruments exchanged for employee services.
Under the provisions of SFAS 123(R), stock-based compensation cost is
measured at the grant date, based on the calculated fair value of the award, and
is recognized as an expense over the employees’ requisite service period
(generally the vesting period of the equity grant). The Company accounts
for share-based payments to non-employees, in accordance with SFAS 123 (as
originally issued) and Emerging Issues Task force Issue No 96-18, “Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services”.
REVENUE
RECOGNITION
The
company recognizes revenue based on guidance provided in Securities and Exchange
Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, “Revenue
Recognition,” and in accordance with Emerging Issues Task Force (“EITF”) Issue
No. 00-21, “Revenue Arrangements with Multiple Deliverables.” The Company
recognizes revenue when persuasive evidence of an arrangement exists, delivery
has occurred or services have been rendered, our price is fixed or determinable,
and collectibles is reasonably assured. We recognize revenue on our standard
products when title passes to the customer upon shipment. The standard products
do not have customer acceptance criteria. The company has standard rights of
return that are accounted for as a warranty provision under SFAS No. 5,
“Accounting for Contingencies.” The company does not have any price protection
agreements or other post shipment obligations. For custom equipment where
customer acceptance is part of the sales agreement, revenue
will be recognized when the customer has accepted the product. In case where
custom equipment does not have customer acceptance as part of the sales
agreement, revenue will be recognized upon shipment, as long as the system meets
the specifications as agreed upon with the customer. Certain transactions may
have multiple deliverables, with the deliverables clearly defined. To the extent
that the secondary deliverables are other than perfunctory, the company will
recognize the revenue on each deliverable, if separable, or on the completion of
all deliverables, if not separable.
CYTTA
CORP. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (“SFAS 159”), which provides
companies with an option to report selected financial assets and liabilities at
fair value with the changes in fair value recognized in earnings at each
subsequent reporting date. SFAS 159 provides an opportunity to mitigate
potential volatility in earnings caused by measuring related assets and
liabilities differently, and it may reduce the need for applying complex hedge
accounting provisions. SFAS 159 is effective for fiscal years beginning
after November 15, 2007. The Company does not expect SFAS No. 159 will
have a material effect on its financial statements.
In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations
(“SFAS 141(R)”). SFAS 141(R) requires that the acquisition
method of accounting be applied to a broader set of business combinations and
establishes principles and requirements for how an acquirer recognizes
and measures in its financial statements the identifiable assets acquired,
liabilities assumed, any noncontrolling interest in the acquiree, and the
goodwill acquired. SFAS 141(R) also establishes the disclosure requirements
to enable the evaluation of the nature and financial effects of the business
combination. SFAS 141(R) is effective for fiscal years beginning after
December 15, 2008. The Company does not expect SFAS No. 141 will have
a material effect on its financial statements.
In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements — an amendment of ARB No. 51
(“SFAS 160”). SFAS 160 requires that the noncontrolling
interest in the equity of a subsidiary be accounted for and reported as equity,
provides revised guidance on the treatment of net income and losses attributable
to the noncontrolling interest and changes in ownership interests in a
subsidiary and requires additional disclosures that identify and distinguish
between the interests of the controlling and noncontrolling owners.
SFAS 160 also establishes disclosure requirements that clearly identify and
distinguish between the interests of the parent and the interests of the
noncontrolling owners. SFAS 160 is effective for fiscal years beginning
after December 15, 2008. The Company does not expect SFAS No. 160 will
have a material effect on its financial statements.
In March
2008, the FASB issued SFAS 161, about Derivative Instruments and Hedging
Activities (“SFAS 161”), which becomes effective for the Company on
January 1, 2009. This standard amends and expands the disclosure
requirements of FASB Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities. FAS 161 requires disclosures related to
objectives and strategies for using derivatives; the fair-value amounts of, and
gains and losses on, derivative instruments; and credit-risk-related contingent
features in derivative agreements. The effect on the Company’s disclosures for
derivative instruments as a result of the adoption of FAS 161 in 2009 will
depend on the company’s derivative instruments and hedging activities at that
time.
CYTTA
CORP. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 2 – SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
In May
2008, the FASB issued SFAS No. 163, Accounting for Financial Guarantee Insurance
Contracts – an interpretation of FASB Statement No. 60 (“SFAS 163”). This
Statement requires that an insurance enterprise recognize a claim liability
prior to an event of default (insured event) when there is evidence that credit
deterioration has occurred in an insured financial obligation. This Statement
also clarifies how Statement 60 applies to financial guarantee insurance
contracts, including the recognition and measurement to be used to account for
premium revenue and claim liabilities. Those clarifications will increase
comparability in financial reporting of financial guarantee insurance contracts
by insurance enterprises by lessening inconsistencies in the recognition and
measurement of claim liabilities due to differing views about when a loss has
been incurred under FASB Statement No. 5, Accounting for Contingencies. The
Company does not expect SFAS No. 163 will have a material effect on its
financial statements.
LOSS
PER SHARE
Basic
loss per share includes no dilution and is computed by dividing loss to common
stockholders by the weighted average number of common shares outstanding for the
period.
NOTE 3 –
EQUITY
On
November 18, 2008, the Board of Directors approved a 4-for-1 forward stock
split.
| Item 2. |
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
|
Certain
statements contained herein with respect to factors which may affect future
earnings, including management’s beliefs and assumptions based on information
currently available, are forward-looking statements made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of
1995. Such forward-looking statements that are not historical facts
involve risks and uncertainties, and results could vary materially from the
descriptions contained herein.
Acquisition
On
December 5, 2008, we entered into an Agreement of Share Exchange and Plan of
Reorganization (the “Share Exchange Agreement”) and consummated a share exchange
(the “Share Exchange”) with Ophthalmic International, Inc. (“OI”), a Nevada
corporation. The closing of the transaction took place on December 9, 2008
(the “Closing Date”) and resulted in the acquisition of OI (the
“Acquisition”). Pursuant to the terms of the Share Exchange
Agreement, we acquired all of the outstanding capital stock of OI from the five
OI shareholders for an aggregate of 56,000,000 shares, or 69.8% of the Company’s
common stock.
OI was
founded in 1997 and until January 2007, was a subsidiary of Coronado Industries,
Inc., a publicly traded company. In January 2007, OI was acquired by G.
Richard Smith, OI’s President and
majority shareholder and formerly Chairman, Director and principal shareholder
or Coronado Industries, Inc. Since January 2007, OI has operated as a
private company.
As a
result of the Share Exchange Agreement, the OI shareholders transferred all
their interest in OI to the Company and, as a result, OI became our wholly owned
subsidiary.
The Share
Exchange Agreement contains customary terms and conditions for a transaction of
this type, including representations, warranties and covenants, as well as
provisions describing the consideration for the Acquisition, the process of
exchanging the consideration and the effect of the acquisition. For
complete details of this transaction are contained in the Form 8-K Current
Report filed with the Securities and Exchange Commission on December 12, 2008
(the "Form 8-K"), and incorporated herein by reference. This
brief discussion is qualified by reference to the provisions of the Share
Exchange Agreement which is attached in full to the Form 8-K as Exhibit
2.1.
Operations
Revenues
in the quarter ended December 31, 2008 increased by 68.0% ($14,150) over the
same quarter of the prior year, General and Administrative Expenses increased by
61.9% ($31,737), and total expenses far exceeded revenues. The
primary reason for the increase in General and Administrative Expenses in the
quarter ending December 31, 2008 over the same quarter of the prior year was the
increased Legal and Professional Fees relating to the acquisition of Ophthalmic
International, Inc. in December 2008. We accrued no compensation for our
President in the quarter ended December 31, 2008, although he is entitled to
receive an annual salary of $180,000.
We are
continuing discussions with various potential distributors for our PNT product
on an international basis. We are hopeful new foreign product
distributors can be obtained who will immediately order substantial quantities
of product. However, we presently have no such distribution agreements or
product orders.
Liquidity
and Capital Resources
We
continued to suffer a severe liquidity shortage in the quarter ended December
31, 2008. Our interest expense increased from $0 in prior year's
quarter to $14,495 in the quarter ended December 31, 2008. Our
liquidity shortage has become critical. Accounts payable and accrued
interest amounts are increasing. Without substantial funding or revenues in the
first half of the 2009 fiscal year, it is doubtful we will be able to continue
our limited operations. However, we presently have no agreements or
arrangements to obtain any such funding.
Over the
next three years, we must obtain at least $8,000,000 of funding to finance our
two planned patient clinical studies and a minimum level of administrative
staff. If such funding is not obtained, it is unlikely we will receive FDA
approval for the sale of our product in the U.S. Without FDA approval it is
unlikely our foreign sales will be able to sustain our company.
From
October 1, 2007 through September 30, 2008, our President, G. Richard Smith, and
his family members had loaned a total of $276,860 to the Company. During the
quarter ended December 31, 2008, G. Richard Smith and his family members loaned
the Company another $27,450, but Mr. Smith was repaid $14,200 of principal
during the quarter. Approximately $33,000 of these loans bear an annual interest
rate of 31% because they relate to credit card borrowings and the remainder bear
an annual interest rate of 12%. Non-affiliates have loaned the Company a total
of $180,000, all bearing annual interest at 12%. All of these loans are due on
demand or prior to December 31, 2009.
| Item 3. |
Quantitative and Qualitative
Disclosures About Market
Risk.
|
Not
applicable.
| Item 4T. |
Controls and
Procedures.
|
Our
management has responsibility for establishing and maintaining adequate internal
control over financial reporting for us. Our management uses a framework for
establishing these internal controls. This framework includes review of
accounting detailed records on at least a quarterly basis by our senior officers
and a third party service provider. This review process includes review of
significant accounting records and source documents, such as general journal
entry records, accounts payable records, and monthly bank statement
reconciliations. Documentary records are kept of this review
process.
The
Company carried out an evaluation, under the supervision and with the
participation of the Company’s management, including its Chief Executive Officer
and Chief Financial Officer, of the effectiveness, as of December 31, 2008, of
the design and operation of the Company’s disclosure controls and procedures
pursuant to Exchange Act Rule 13a-15(e). Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the Company’s
disclosure controls and procedures were ineffective to ensure that the
information we are required to disclose in reports that we file or submit under
the Securities and Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods specified in Securities and Exchange Commission
rules and forms. Specifically,
the Company identified a material weakness due to a lack of sufficient personnel
with appropriate knowledge of generally accepted accounting principles (“GAAP”)
and, therefore, a lack of sufficient analysis and documentation of the proper
application of GAAP to all Company transactions. Company management
plans to hire additional experienced personnel or a third party service provider
to eliminate this material weakness, if substantial funding can be obtained in
the future.
There
have been no changes in our internal control over financial reporting during the
quarter ended December 31, 2008 that have materially affected, or are reasonably
likely to materially affect, the Company’s internal control over financial
reporting.
The
controls and procedures for our disclosure as well as our internal controls over
financial reporting are processes designed by, or under the supervision of, the
chief executive and chief financial officers, and effected by the Board of
Directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. We believe that a control system, no matter how well
designed and operated, cannot provide absolute assurance that the objectives of
the control system are met, and no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, within a
company have been detected. However, our Chief Executive Officer and Chief
Financial Officer have concluded that the Company’s disclosure controls and
procedures and its internal controls and procedures are effective at providing
that reasonable level of assurance.
Our
management believes that upon significant future growth in the number of
accounting transactions we process, additional review and enhancement of
internal controls will be required. Our management is planning to assign
additional staff resources to assist with support for growth in the internal
controls area when the increase in transaction velocity dictates this as a
prudent step in order to maintain our effective level of internal
controls.
Exhibit
2.1 – Share Exchange Agreement, dated December 5, 2008, by
and among CYTTA Corp. and Ophthalmic International, Inc. (1)
Exhibit
31.1 – Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities
Exchange Act of 1934, as amended.
Exhibit
31.2 – Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities
Exchange Act of 1934, as amended.
Exhibit
32.1 – Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit
32.2 – Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
_______________
(1) Incorporated
by reference to Exhibit 2.1 of the Issuer's Form 8-K filed December 12,
2008.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Company has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
| CYTTA CORP. | ||
| Dated: February 13, 2009 | By: | /s/ G. Richard Smith |
| G. Richard Smith | ||
|
President,
Chief Executive Officer
and
Chief Financial
Officer
|
||
17