UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-KSB
x
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT
OF
1934 FOR FISCAL YEAR ENDED DECEMBER 31,
2006
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o
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TRANSITION
REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF
1934
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Commission
file number 000- 27243
CYIOS
CORPORATION
(Exact
name of registrant as specified in its charter)
Nevada
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03-7392107
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(State
or other jurisdiction of incorporation or
organization)
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(I.R.S.
Employer Identification
No.)
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1300
Pennsylvania Ave, Suite 700 Washington DC 20004
(Address
of principal executive offices) (Zip Code)
(703)
294-9933
(Issuer's
telephone number, including area code)
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
(Title
of
Class)
Check
whether the issuer (1) filed all reports required to be filed by Section13
or
15(d) of the Exchange Act during the past 12 months (or for such shorter
period
that the registrant was required to file such reports), and (2) has been
subject
to such filing requirements for the past 90 days. Yes x
NO
o
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 registrant'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. o
Indicate
by check mark whether the registrant is a shell company YES o
NO
x
TRANSITIONAL
SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE) YES o
NO
x
CYIOS
Corporation’s Revenue for the most recent fiscal year ended December 31, 2006
was $1,709,907
On
December 31, 2006, the aggregate market value of the voting stock of CYIOS
Corporation (consisting of common stock, $0.001 par value) held by
non-affiliates of the Registrant (3,402,531 shares) was approximately
$850,632.75 based on the closing price for such common stock ($0.25) on said
date as reported by the OTC Bulletin Board.
As
of
December 31, 2006, there were 23,356,210
outstanding
common shares of CYIOS Corporation common stock.
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FORWARD
LOOKING STATEMENTS
In
addition to historical information, this Report contains forward-looking
statements. Such forward-looking statements are generally accompanied by
words
such as "intends," "projects," "assumes," "believes," "anticipates," "plans,"
and similar terms that convey the uncertainty of future events or outcomes.
The
forward-looking statements contained herein are subject to certain risks
and
uncertainties that could cause actual results to differ materially from those
reflected in the forward-looking statements. Factors that might cause such
a
difference include, but are not limited to, those discussed in ITEM 6 of
this
Report, the section entitled "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF
OPERATION." Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's analysis only as of
the
date hereof and are in all cases subject to the Company's ability to cure
its
current liquidity problems. There is no assurance that the Company will be
able
to generate sufficient revenues from its current business activities to
meet day-to-day operation liabilities or to pursue the business objectives
discussed herein.
The
forward-looking statements contained in this Report also may be impacted
by
future economic conditions. Any adverse effect on general economic conditions
and consumer confidence may adversely affect the business of the Company.
CYIOS
Corporation undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date hereof.
Factors that could cause actual results or conditions to differ from those
anticipated by these and other forward-looking statements include those
more fully described in the "Risk Factors" section and elsewhere in this
report.
In addition, readers should carefully review the risk factors described in
other
documents the Company files from time to time with the Securities and Exchange
Commission.
ITEM
1. DESCRIPTION
OF BUSINESS
CORPORATE
HISTORY
Corporate
History prior to Jan 1, 2005 can be found in the company’s previous 10KSB
amended filing on June 3, 2005 with the Securities and Exchange
Commission.
The
company had filed a 14C and has obtained written consent from the majority
of
the stockholders as of April 7, 2005, approving (i) a reverse split of the
Company’s common stock at a ratio of 1:30 (the "Reverse Split"), and (ii) an
amendment to the Company's Articles of Incorporation changing the name of
the
Company to "China Print Inc." The Board of Directors of the Company unanimously
approved the Name Change on March 31, 2005 and the Reverse Split on April
1,
2005.
In
June
of 2005, management of WorldTeq Group International, then called China Print,
Inc. was informed by council that Harbin Yinhai decided not to complete the
merger transaction because the company was then listed on the pink sheets
and
not the OTC-BB as the original agreement had called for. Management decided
to
keep the name China Print, Inc. while searching for a new merger acquisition
candidate.
On
September 19, 2005, China Print, Inc. (“CHPR”) entered into an agreement with
CYIOS Corporation, a District of Columbia corporation and Timothy Carnahan,
whereby CHPR would acquire 100% of the issued and outstanding capital stock
of
CYIOS in exchange for 19,135,000 common shares of stock in CHPR.
On
September 27, 2005 the Corporation’s board of directors approved a resolution
calling on the stockholders of the Corporation to authorize the board of
directors to change the Corporation’s name to CYIOS Corporation. On September
27, 2005, the holders of a majority of the outstanding shares of the
Corporation’s common stock entitled to vote thereon executed a written consent
in accordance with Nevada law to adopt the amendment to the Corporation’s
articles of incorporation.
BUSINESS
OVERVIEW
CYIOS
Corporation, a Nevada corporation (“CYIOS”) is a holding company made up of two
operating subsidiaries: CYIOS Corporation and CKO Corporation. CYIOS
Corporation, which bares the same name as the parent company, is an Information
Technology (IT) Systems Integrator currently supporting the Department of
Defense (DoD) community. CKO is the product arm of CYIOS that offers CKO,
an
online office management tool for project and knowledge management (KM),
collaboration, scheduling and reporting. Currently CYIOS, the holding company,
still owns WorldTeq Corporation which was
inherited by current management during the acquisition by China Print, Inc.
Management has decided to close WorldTeq Corporation sometime by the end
2007.
WTC is a dormant entity which has ceased operating in October of 2005.
Aero-Financial has agreed to assume $611K of the WorldTeq Corporation debt
per
the merger and the 8-K filed September, 2005.
Additional
information on CYIOS DC, the subsidiary:
CYIOS
Corporation is recognized as a premier IT solutions provider for the DoD.
Established in 1994 CYIOS has worked closely with the United States military
as
a small business contractor providing innovative and comprehensive solutions
for
the Army’s General Officers and other high-level agencies. CYIOS DC wins its
business through bidding against other companies for federal and state
government contracts. These bids may be done independently or through teaming
arrangements with other contractors.
Timothy
Carnahan, president and CEO of CYIOS, has over 13 years of executive and
technical experience with the highest levels of the U.S. government. When
supporting the General Officer Management Office, Mr. Carnahan designed and
implemented the first knowledge management system for the Army, America’s Army
Online, which became the core for Army Knowledge Online (AKO), the portal
that
supports over 1.8 million soldiers and civilians worldwide. AKO has become
the
KM paradigm for the Department of Defense (“DoD”) as it has been an acclaimed
success in its worldwide support of the Army. The DoD will increase its KM
spending from $387 million in FY 2005 to $524 million in FY 2010, representing
a
growing market for CYIOS, where KM is the company’s core competency in both
product and service support.
With
KM
as a major focal point for CYIOS, the term and market need further explanation.
KM is the name of a concept in which an enterprise
consciously and comprehensively gathers, organizes, shares, and analyzes
its
information
in terms
of resources, documents, and people skills. In early 1998, it was believed
that
few enterprises actually had a comprehensive knowledge management
practice
(by any
name) in operation. Advances in technology and the way we access and share
information have changed that; it has been proven that successful organizations
have some kind of knowledge management framework in place. Knowledge Management
involves data mining and some method or operation to share information among
users.
CYIOS
uses its expertise in KM, performance-based contracting, enterprise management,
and web-based application development to bid on U.S. Government contracts.
Historically the company has focused on supporting the U.S. Army, but under
its
new growth strategy it is beginning to look at bids from other DoD agencies
as
well as all U.S. Government agencies. The first and most important part of
the
company’s growth strategy is its recent bid with the Department of Homeland
Security (DHS).
Additional
information on CKO Incorporated:
CKO
Corporation launched its CKO product the third week of November 2005. CKO
is a
robust and user-friendly knowledge management solution created by the same
experts who created the original AKO product. The solution has been created
for
both the government and commercial market. The company operates the site
http://ckoapp.cyios.com where customers can sign up for a free 30-day
trial.
CKO
is a
secure, web-based virtual office that uses an array of tools to give any
organization the ability to manage and retain knowledge, collaborate data
and
ideas, and securely store and share information, all for the purpose of making
an organization more efficient and therefore more successful. Using the
features
of CKO,
users can manage their entire organization online. Employees access the
organization via a virtual CKO from any computer with an Internet connection
and
web browser. The result: connected, organized and effective business practices.
The
tools
of our full online office suite include Email, Document and File management,
Calendar, Tasks, Meetings, Contacts, Project Management, Reporting, and
Timesheet Management. The power of managing knowledge and collaboration is
unleashed when all of these individual components are shared and used within
an
entire organization, a division, or a project team. CKO removes the dependency
of working from an organization's office, which frees employees to access
their
email, documents, projects, contacts, and reports from any geographic location
at anytime. Operational costs are also reduced as CKO helps small businesses
eliminate the burdensome expenses of owning and maintaining servers, associated
software, and an internal or outsourced IT staff.
RECENT
DEVELOPMENTS
In
April
of 2006, CYIOS received certification as a Microsoft Small Business Specialist.
Not only does this help the company become more valuable as it reaffirms
the
company as an expert in its areas of specialty, but also it will help increase
business, especially in the commercial sector as Microsoft offers very
aggressive sales assistance programs to its small business specialist partners.
Recently this has become more significant as the company works with Microsoft
on
its recent efforts to convert its product, CKO, to work on MS Mobile 5.0/6.0
software for mobile phone PDA’s.
In
May of
2006, CYIOS was awarded a $400k, 1 year follow-on contract at the Headquarters
Department of the Army Information Management Support Center (IMCEN). The
program, End-User Workstation Survey and Post Installation Quality Assurance,
makes CYIOS responsible for the inventory assets of over 10,000 Headquarters,
Department of the Army customer desktop devices in the preparation for upgrade
or replacement; conduct post-installation quality assurance surveys to gauge
customer satisfaction; and provide technical support and training to end
users
for desktop-related issues after an upgrade or replacement.
In
June
of 2006, CYIOS was awarded a contract to perform work for the U.S. Army's
Senior
Leadership Development (SLD) under operational control of the Chief of Staff,
Army (CSA). The contract is valued at up to $1 million with over $300,000
invoiced by the date of this filing. CYIOS designed and now supports the
General
Officer Management Office (GOMO) Knowledge Management system. The CSA approved,
and the Secretary of the Army endorsed, the realignment of GOMO to include
Colonels Division, Officer Personnel Management Directorate, U.S. Army Human
Resources Command (HRC) to form the Army Senior Leader Development Office
(SLD).
CYIOS has been recognized for delivering quality work, outstanding customer
service, and ingenuity; and this initiative is to expand its efforts to build
a
knowledge management system for the Colonel's Branch of SLD.
In
July
of 2006, CYIOS received a score of 94/100 from the Dun & Bradstreet Open
Ratings Past Performance Evaluation. CYIOS scored over 90% in every performance
category, including reliability, cost, order accuracy, delivery/timeliness,
quality, business relations, personnel, customer support and
responsiveness.
In
September of 2006 CYIOS Corporation entered into an agreement to set up and
own
25% of a joint venture called CLNS LLC. The company retained InterPlan Systems
to co-write a proposal for a multi-billion dollar, multi- award contract
with a
large Federal Agency for this new entity. This joint-venture includes three
other small business DoD contractors. This unique arrangement was created
to
allow a better chance of winning the contract as the past performance from
all
four company’s combined offered a very solid proposal. Awards are expected
August or September 2007.
In
January of 2007 CYIOS started off the new year with signing a subcontract
providing Change Management services worth $225,000 a year. The work is being
performed for DHS and is part of a subcontract with one of the top 10 government
contractors.
In
February of 2007 CYIOS once again used the services of InterPlan Systems
to
co-write a proposal for a U.S. Navy agency. This is a large multi-award contract
with award decisions expected by the end of the second quarter of
2007.
In
March
of 2007 CYIOS was awarded a new one-year task order by the Department of
Defense, U.S. Army for $330,000. This task order was awarded on Tuesday,
March
28, 2007. The company has the opportunity to get this task order renewed
two
more times, which would ultimately put the total value at approximately $1
million over three years.
2006
EMPLOYEES
As
of
December 31, 2006 there 22 full time employees in CYIOS Corporation and its
subsidiaries in the following capacities:
3.75
full
time employees in Executive Management and administration staff;
and
1.25
full
time in product development and technical operations; and
17
full
time employees that are on service contracts on either prime or subcontracted
contracts with the United States Government. These employees include but
are not
limited to:
Quality
Assurance Specialist
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Senior
Software Developer
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Project
Manager
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Database
Administrator
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Principal
Engineer
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Internet
Developer
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Senior
Systems Engineer
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Software
Developer
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LAN/WAN
Engineer
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Application
Testing Engineer III
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Computer
Analyst
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Application
Testing Engineer II
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Systems
Administrator
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Application
Testing Engineer I
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Business
Analyst III
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Technical
Writer / Editor
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Business
Analyst II
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Document
Publisher
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Business
Analyst I
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There
are
no collective bargaining agreements in effect. We believe the relationships
with
our employees are excellent.
ITEM
2. Description of Property
Real
Estate: CYIOS Corporation does not have any ownership on physical property.
Headquarters is located at leased space at The Ronald Reagan Building, 1300
Pennsylvania Ave, Suite 700 Washington DC 20004.
INTELLECTUAL
PROPERTY
The
Company’s subsidiary CKO Incorporate is the sole owner of 100% of the
intellectual property rights of its online software, CKO. CKO is copyright
protected and the company is currently considering the feasibility of patenting
certain currently confidential processes used within CKO.
ITEM
3. LEGAL
PROCEEDINGS
During
2006 CYIOS Corporation was involved in a trademark infringement with XO
Communications; it has been resolved in an equitable manner. None of its
subsidiaries were involved in any lawsuits or litigation.
ITEM
4. SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
No
matters were submitted during the fourth quarter of the fiscal year covered
by
this Report to a vote of security holders, through the solicitation of proxies
or otherwise. The annual shareholder meeting has been postponed to a date
in the
near future.
ITEM
5. Market
for Common Equity & related Stockholder matters
The
company trades on the Over the Counter Bulletin Board market
The
closing price of our common stock on the OTC was $0.25 as of December 31,
2005.
We
have
not declared any cash dividends on the common stock. We intend to retain
future
earnings, if any, for use in our business and do not anticipate paying regular
cash dividends on the common stock.
Approximately
3,500,000 shares of common stock issued to stockholders are available for
resale
under Rule 144, subject to notice, volume and manner of sale restrictions
under
that rule As of December 31, 2006, the Company had approximately 23,356,210
shares issued and outstanding of the common stock. As of December 31, 2006,
we
had approximately 150 holders of our common stock. The number of record holders
was determined from the records of our transfer agent and does not include
beneficial owners of common stock whose shares are held in the names of various
security brokers, dealers, and registered clearing agencies. The transfer
agent
for the Company is Corporate Stock Transfer, Inc. at 3200 Cherry Creek Drive
South, Suite 430, Denver, Colorado 80209.
RECENT
SALE OF UNREGISTERED SECURITIES:
There
were $0.00 sales made of restricted and unregistered common stock during
the
year ended December 31, 2006.
OPTIONS
AND WARRANTS: There were 1,872,300 options or warrants issued during the
year
ended December 31, 2006.
ITEM
6. MANAGEMENT'S
DISCUSSION AND ANALYSIS
The
following discussion and analysis of the financial condition and results
of
operations should be read in conjunction with the financial statements, related
notes, and other detailed information included elsewhere in this Form 10-KSB.
Certain information contained below and elsewhere in this Form 10-KSB, including
information regarding our plans and strategy for our business, are
forward-looking statements. See "Note Regarding Forward-Looking
Statements."
MANAGEMENTS
DISCUSSION AND ANALYSIS
The
total
sales for CYIOS’ two active subsidiaries CYIOS the subsidiary and CKO Inc, is
explained in detail below, total 2006 was $1,709,907 compared to 2005 that
was
$2,298,802.
The
sales
for CYIOS subsidiary for the year ending December 31, 2006 is 1,709,907
decreased $63,895 from the equivalent period in 2005 which was $1,773,802.
The
sales for CKO Inc subsidiary decreased from $0 in 2006 from the equivalent
period in 2005 which was $525,000; however, $525,000 was never collected.
CKO
has no revenue coming in at this time. CYIOS was awarded a contract that
only
has been active for part of the year in 2006. This is important to note that
as
we reduced our overhead due to the award and had more revenue coming into
4QTR
in 2006. Our net loss for the year ending December 31, 2006 was $889,357
or
$0.004 per share, compared to $271,573 for the equivalent period in 2005
or
$0.001 per share. The $889,357 net loss is primarily due to our third
subsidiary, WorldTeq Corporation.
In
addition to the WorldTeq debt, the loss in 2006 was primarily due to the
company’s investment in the development of the company’s product CKO and costs
incurred from the acquisition. During
2006 management made the decision to expand its operations by attempting
to
increase its business with the DoD and the rest of the Federal Government.
In
order to achieve this goal the company must actively bid on request for
proposals by the different departments and their agencies. The company has
and
continues to invest all of its earnings into additional personnel to help
achieve this goal. The current financial result of this is a net operating
loss
which should be re-cooped in future revenues and profits driven by awards.
While
this type of investment can be fruitful, the company must exude patience,
because the cycle of an award of a government contract can be as long as
12 to
18 months. It should be also noted that CYIOS, by using the benefits of its
own
product CKO, can expand its contract business more then three-fold without
having to add any additional overhead expenditures. The costs of running
a new
contract would only include that of compensation for the contracted
personnel.
Cost
of
sales for the year ended December 31, 2006 increased from the equivalent
period
in 2005 from 145,693 to 432,360. This increase is due to the 2005 merger.
Selling, general and administrative expenses for the period ending December
31,
2006 decreased from the equivalent period in 2005, $252,987 and $536,490
respectively. This is also due to the 2005 merger.
ITEM
7. FINANCIAL
STATEMENTS.
INDEPENDENT
AUDITOR’S REPORT
To
the
Board of Directors and Stockholders
CYIOS
Corporation (FKA China Print, Inc.), Inc. and Subsidiaries
I
have
audited the accompanying consolidated balance sheets of CYIOS Corporation
(FKA
China Print, Inc.) and Subsidiaries as of December 31, 2006, and the related
consolidated statements of operations, stockholders’ deficit and comprehensive
income, and cash flows for the years ended December 31, 2006 and 2005. These
financial statements are the responsibility of the company’s management. My
responsibility is to express an opinion on these financial statements based
on
my audits.
I
conducted my audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
I plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audits provide a reasonable
basis for my opinion.
In
my
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of CYIOS Corporation (FKA China
Print,
Inc.) and Subsidiaries as of December 31, 2006, and the results of its
operations and its cash flows for the years ended December 31, 2006 and 2005
in
conformity with accounting principles generally accepted in the United States
of
America.
The
accompanying financial statements have been prepared assuming the Company
will
continue as a going concern. The Company has recurring losses and has yet
to
generate an internal cash flow that raises substantial doubt about its ability
to continue as a going concern. Management’s plans in regard to these matters
are described in Note E. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Traci
J.
Anderson, CPA
Huntersville,
NC
April
13,
2007
CYIOS
Corporation and Subsidiaries
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Consolidated
Balance Sheet
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December
31, 2006
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ASSETS
|
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Current
Assets:
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Cash
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$
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25,305
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Accounts
Receivable (Note A)
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60,647
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Other
Current Assets
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19,913
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Total
Current Assets
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105,865
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Property
and Equipment:
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Property
and Equipment
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873,528
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Accumulated
Depreciation
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(873,528
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)
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Total
Furniture and Equipment
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|
-
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TOTAL
ASSETS
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$
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105,865
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LIABILITIES
AND STOCKHOLDERS' DEFICIT
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Current
Liabilities:
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Line
of Credit (Note O)
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$
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100,979
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Shareholder
Loan Payable (Note M)
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49,707
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Interest
Payable (Note M)
|
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4,971
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Taxes
Payable (Note L)
|
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13,629
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|
Payroll
Taxes Payable (Note L)
|
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46,779
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Accounts
Payable (Note N)
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407,891
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Total
Liabilities
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623,956
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Stockholders'
Deficit
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Convertible
Preferred Stock ($.001 par value; 5,000,000 authorized;911,553
issued and outstanding)
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911
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Common
Stock ($.001 par value; 100,000,000 authorized; 26,872,741 issued
and outstanding)
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26,872
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Paid
in Capital
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23,620,225
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Retained
Deficit
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(24,166,099
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)
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Total
Stockholders' Deficit
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(518,091
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)
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Total
Liabilities and Stockholders' Deficit
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$
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105,865
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The
accompanying notes are an integral part of these consolidated financial
statements.
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Consolidated
Statement of Operations
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For
the years ended December 31, 2006 and 2005
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2006
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2005
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SALES
AND COST OF SALES
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Sales
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$
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1,709,907
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$
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2,298,802
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Cost
of Sales
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432,360
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145,693
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Gross
Profit
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1,277,547
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2,153,109
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|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
252,987
|
|
|
536,490
|
|
Payroll
Expense
|
|
|
1,177,309
|
|
|
1,580,320
|
|
Professional
Fees
|
|
|
124,629
|
|
|
74,586
|
|
Bad
Debt Expense (Note A)
|
|
|
618,756
|
|
|
-
|
|
Loss
on Worthless Stock
|
|
|
5,400
|
|
|
-
|
|
Interest
|
|
|
20,515
|
|
|
26,215
|
|
Depreciation
and amortization
|
|
|
48,904
|
|
|
207,071
|
|
TOTAL
EXPENSES
|
|
|
2,248,490
|
|
|
2,424,682
|
|
|
|
|
|
|
|
|
|
Net
Loss from Operations
|
|
|
(970,943
|
)
|
|
(271,573
|
)
|
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
Forgiveness
of Debt
|
|
|
81,586
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
$
|
(889,357
|
)
|
$
|
(271,573
|
)
|
Net
(loss) per share--basic and fully diluted
|
|
|
(0.04
|
)
|
|
(0.01
|
)
|
Weighted
average shares outstanding
|
|
|
21,792,830
|
|
|
21,567,910
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
|
|
|
|
Consolidated
Statement of Cash Flow |
|
|
|
|
|
|
|
2006
|
|
2005
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
Net
loss
|
|
|
(889,367
|
)
|
|
(271,573
|
)
|
Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
Depreciation
|
|
|
48,903
|
|
|
170,529
|
|
Amortization
|
|
|
-
|
|
|
36,542
|
|
(Increase)/Decrease
in Accounts Receivable
|
|
|
567,822
|
|
|
(592,554
|
)
|
(Increase)/Decrease
in Other Assets
|
|
|
9,164
|
|
|
(28,229
|
)
|
Increase/(Decrease)
in Payroll Taxes Payable
|
|
|
(141,458
|
)
|
|
188,237
|
|
Increase/(Decrease)
In Taxes Payable
|
|
|
-
|
|
|
13,629
|
|
Increase/(Decrease)
in Interest Payable
|
|
|
(13,669
|
)
|
|
(51,798
|
)
|
Increase/(Decrease)
in Accounts Payable
|
|
|
17,474
|
|
|
50,698
|
|
NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
|
|
(401,131
|
)
|
|
(484,519
|
)
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTMENT ACTIVITIES:
|
|
|
|
|
|
|
|
Increase
in fixed assets as a result of merger
|
|
|
-
|
|
|
(71,821
|
)
|
NET
CASH PROVIDED BY (USED IN) INVESTMENT ACTIVITIES
|
|
|
-
|
|
|
(71,821
|
)
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock
|
|
|
452,000
|
|
|
629,022
|
|
Reduction
in Shareholder Receivable
|
|
|
-
|
|
|
(58,500
|
)
|
Principal
Reductions on Shareholder Loan Payable
|
|
|
(137,698
|
)
|
|
-
|
|
Increase/(Decrease)
in borrowings on Line of Credit
|
|
|
62,277
|
|
|
35,675
|
|
NET
CASH PROVIDED BY (USED IN) INVESTMENT ACTIVITIES
|
|
|
376,579
|
|
|
606,197
|
|
|
|
|
|
|
|
|
|
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(24,552
|
)
|
|
49,857
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS:
|
|
|
|
|
|
|
|
Beginning
of Period
|
|
|
49,857
|
|
|
-
|
|
|
|
|
|
|
|
|
|
End
of Period
|
|
|
25,305
|
|
|
49,857
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
CYIOS
Corporation, Inc. and Subsidiaries
|
|
|
|
Consolidated
Statement of Stockholders' Equity
|
|
|
|
For
the years ended December 31, 2006 and 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Shares
(000's)
|
|
Common
Stock
$
|
|
Preferred
Shares
(000's)
|
|
Preferred
Stock
$
|
|
Additional
Paid-in
Capital
|
|
Retained
Deficit
|
|
Balances,
January 1, 2005
|
|
|
1,290,206
|
|
$
|
1,290
|
|
|
911,553
|
|
|
911
|
|
$
|
22,564,785
|
|
$
|
(23,005,159
|
)
|
Issuance
of shares
|
|
|
20,277,704
|
|
|
20,278
|
|
|
-
|
|
|
-
|
|
|
608,744
|
|
|
-
|
|
Net
Income (loss) for the year
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(271,573
|
)
|
Balances,
December 31, 2005
|
|
|
21,567,910
|
|
$
|
21,568
|
|
|
911,553
|
|
$
|
911
|
|
$
|
23,173,529
|
|
$
|
(23,276,732
|
)
|
Issuance
of shares
|
|
|
5,304,831
|
|
|
5,304
|
|
|
-
|
|
|
-
|
|
|
446,696
|
|
|
-
|
|
Net
Income (loss) for the year
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(889,367
|
)
|
Balances,
December 31, 2006
|
|
|
26,872,741
|
|
$
|
26,872
|
|
|
911,553
|
|
$
|
911
|
|
$
|
23,620,225
|
|
$
|
(24,166,099
|
)
|
The
accompanying notes are an integral part of these consolidated financial
statements.
NOTE
A—SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Business
Activity— China Print, Inc. formerly known as WorldTeq Group International, Inc.
merged on September 19, 2005 with CYIOS Corporation of Washington DC. During
the
merger the company’s former CEO notified the public of his resignation and the
assignment of a new CEO, CFO, and president, Mr. Timothy Carnahan. After
the
merger, China Print, Inc. changed its name to CYIOS. The consolidated financial
statements of CYIOS Corporation (The Company), formerly China Print, Inc.
includes its subsidiary by the same name CYIOS Corporation, in addition to
CKO,
Inc. and WorldTeq Corporation. The Company, through its subsidiary CYIOS
Corporation does business as a leading systems integrator and Knowledge
Management Solutions provider supporting the United States Army. The company
contracts its services for single and multiple year awards to different US
Army
and US Government agencies. CKO Incorporated owns a custom designed online
office management. The company launched this product in November of 2005
to the
general public and commercial businesses. WorldTeq Corporation in the last
three
years has engaged primarily in the long distance service business and during
2006 it had no operating activity.
Cash
and
Cash Equivalents—For purposes of the Consolidated Statement of Cash Flows, the
Company considers liquid investments with an original maturity of three months
or less to be cash equivalents.
Management’s
Use of Estimates—The preparation of consolidated 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 disclosures of contingent
assets
and liabilities at the date of consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Revenue
Recognition— The Company recognizes revenue when persuasive evidence of an
arrangement exists, services have been rendered or goods delivered, the contract
price is fixed or determinable, and it is reasonably assured to be collectible.
The Company follows SOP 81-1 Accounting for Performance of Construction-Type
and
Certain Production-Type Contracts, as it applies to time-and-material contracts.
Revenue on time-and-materials contracts is recognized based on the hours
actually incurred at the negotiated contract billing rates, plus the cost
of any
allowable material costs and out-of-pocket expenses. Revenue on fixed-price
contracts pursuant to which a client pays the Company a specified amount
to
provide only a particular service for a stated time period, or so-called
fee-for-service arrangement, is recognized as amounts become billable, assuming
all other criteria for revenue recognition are met. The Company recognizes
revenue from government contracts.
NOTE
A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’)
Comprehensive
Income (Loss)—The Company adopted Financial Accounting Standards Board Statement
of Financial Accounting Standards (SFAS) No. 130, “Reporting Comprehensive
Income”, which establishes standards for the reporting and display of
comprehensive income and its components in the consolidated financial
statements. There were no items of comprehensive income (loss) applicable
to the
Company during the periods covered in the consolidated financial
statements.
Advertising
Costs—Advertising costs are expensed as incurred. For the year ended December
31, 2006, the company incurred $15,029.
Net
Loss
per Common Share—Statement of Financial Accounting Standard (SFAS) No. 128
requires dual presentation of basic and diluted earnings per share (EPS)
with a
reconciliation of the numerator and denominator of the EPS computations.
Basic
earnings per share amounts are based on the weighted average shares of common
stock outstanding. If applicable, diluted earnings per share would assume
the
conversion, exercise or issuance of all potential common stock instruments
such
as options, warrants and convertible securities, unless the effect is to
reduce
a loss or increase earnings per share. Accordingly, this presentation has
been
adopted for the period presented. There were no adjustments required to net
loss
for the period presented in the computation of diluted earnings per
share.
Income
Taxes—Income taxes are provided in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109, “Accounting for Income Taxes.” A deferred
tax asset or liability is recorded for all temporary differences between
financial and tax reporting and net operating loss-carry forwards.
Deferred
tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that, and some portion or the entire
deferred tax asset will not be realized. Deferred tax assets and liabilities
are
adjusted for the effect of changes in tax laws and rates on the date of
enactment.
Fair
Value of Financial Instruments—The carrying amounts reported in the consolidated
balance sheet for cash, accounts receivable and payable approximate fair
value
based on the short-term maturity of these instruments.
Accounts
Receivable—Accounts deemed uncollectible are written off in the year they become
uncollectible. During 2006, the following amounts by subsidiary were deemed
uncollectible and written off as bad debts:
CKO
|
|
$
|
525,000
|
|
WTC
|
|
|
93,756
|
|
|
|
$
|
618,756
|
|
Outstanding
Accounts Receivable as of December 31, 2006 was $60,647 (CYIOS
Subsidiary).
NOTE
A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’)
Impairment
of Long-Lived Assets—The Company evaluated the recoverability of its property
and equipment, and other assets in accordance with Statements of Financial
Accounting Standards (SFAS) No. 121, “Accounting for the Impairment of
Long-Lived Assets to be Disposed of” which requires recognition of impairment of
long-lived assets in the event the net book value of such assets exceeds
the
estimated future undiscounted cash flows attributable to such assets or the
business to which such intangible assets relate.
Property
and Equipment—Property and equipment is stated at cost. Depreciation is provided
by the straight-line method over the estimated economic life of the property
and
equipment remaining from five to seven years. All of the Company’s assets were
fully depreciated during 2006. Depreciation expense for 2006 was
$48,904.
Recent
Accounting Pronouncements—In May 2005, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No. 154 “Accounting
Changes and Error Corrections - a replacement of APB Opinion No. 20 and FASB
Statement No. 3.” This Statement replaces APB Opinion No. 20, “Accounting
Changes”, and FASB Statement No. 3, “Reporting Accounting Changes in Interim
Financial Statements” and changes the requirements for the accounting for and
reporting of a change in accounting principle. This Statement applies to
all
voluntary changes in accounting principle. It also applies to changes
required by an accounting pronouncement in the unusual instance that the
pronouncement does not include specific transition provision. When a
pronouncement includes specific transition provisions, those provisions should
be followed. The Company has no transactions that would be subject to SFAS
154.
In
February 2006, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 155, Accounting for Certain
Hybrid
Instruments-an amendment of FASB Statements No. 133 and 140. SFAS 155 allows
financial instruments that have embedded derivatives to be accounted for
as a
whole if the holder elects to account for the whole instrument on a fair
value
basis. SFAS 155 eliminates the need to bifurcate the derivative from its
host,
as previously required under Statement of Financial Accounting Standards
No.
133, Accounting for Derivative Instruments and Hedge Accounting. SFAS 155
also
amends SFAS 133 by establishing a requirement to evaluate interests in
securitized financial assets to determine whether they are free standing
derivatives or whether they contain embedded derivatives that require
bifurcation. SFAS 155 is effective for all hybrid financial instruments acquired
or issued by the Company on or after January 1, 2007. The Company does not
anticipate any material impact to its financial condition or results of
operations as a result of the adoption of SFAS 155.
NOTE
A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’)
Recent
Accounting Pronouncement (cont’)
In
March
2006, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 156, “Accounting for Servicing of Financial
Assets”. SFAS 156 addresses the accounting for recognized servicing assets and
servicing liabilities related to certain transfers of the servicer’s financial
assets and for acquisitions or assumptions of obligations to service financial
assets that do not relate to the financial assets of the servicer and its
related parties. SFAS 156 requires that all recognized servicing assets and
servicing liabilities are initially measured at fair value, and subsequently
measured at either fair value or by applying an amortization method for each
class of recognized servicing assets and servicing liabilities. SFAS 156
is
effective in fiscal years beginning after September 15, 2006. The adoption
of
SFAS 156 is not expected to have a material impact on our consolidated financial
statements.
In
June
2006, the FASB issued FIN 48, “Accounting for Uncertainty in Income Taxes—an
interpretation of FASB No. 109. This Interpretation clarifies the accounting
for
uncertainty in income taxes recognized in an enterprise’s financial statements
in accordance with FASB No. 109, “Accounting for Income Taxes”. This
interpretation prescribes recognition of threshold and measurement attribute
for
the financial statement recognition and measurement of a tax position taken
or
expected to be taken in a tax return. This interpretation also provides guidance
on derecognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. This interpretation is effective for
fiscal
years beginning after December 15, 2006. Earlier application is permitted
if the
entity has not yet issued interim or annual financial statements for that
fiscal
year. The adoption of this standard is not expected to have a material effect
on
the Company’s results of operations or financial position.
In
September 2006, the FASB issued Statement No. 157, “Fair Value Measurements”.
This Statement defines fair value, establishes a framework for measuring
fair
value in generally accepted accounting principles (GAAP), and expands
disclosures about fair value measurements. This statement applies under other
accounting pronouncements that require or permit fair value measurements,
the
Board having previously concluded in those accounting pronouncements that
fair
value is the relevant measurement attribute. Accordingly, SFAS No. 157 does
not
require any new fair value measurements. However, for some entities, the
application of SFAS No. 157 will change current practice. This Statement
is
effective for fiscal years beginning after November 15, 2007, and all interim
periods within those fiscal years. Earlier application is permitted if the
entity has not yet issued interim or annual financial statements for that
fiscal
year. Early adoption of this standard is not expected to have a material
effect
on the Company’s results of operations or its financial position, but the
Company is evaluating the Statement to determine what impact, if any, it
will
have on the Company.
NOTE
A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’)
Recent
Accounting Pronouncement (cont’)
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No.
158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R)” (“SFAS 158”).
This statement requires balance sheet recognition of the funded status, which
is
the difference between the fair value of plan assets and the benefit obligation,
of pension and postretirement benefit plans as a net asset or liability,
with an
offsetting adjustment to accumulate other comprehensive income in shareholders’
equity. In addition, the measurement date, the date at which plan assets
and the
benefit obligation are measured, is required to be the company’s fiscal year
end. The Company currently Company is currently evaluating the Statement
to
determine what impact, if any, it will have on the Company.
NOTE
B—SUPPLEMENTAL
CASH FLOW INFORMATION
Supplemental
disclosures of cash flow information for the years ended December 31, 2006
and
2005 is summarized as follows:
Cash
paid
during the years for interest and income taxes:
|
|
2006
|
|
2005
|
|
Income
Tax
|
|
$
|
-
|
|
$
|
-
|
|
Interest
|
|
$
|
20,515
|
|
$
|
26,215
|
|
NOTE
C—FINANCING
FACILITY
During
the year ended December 31, 2003 the Company entered into an accounts receivable
financing facility for a maximum of $500,000 with an unrelated third party.
Collateral for the facility is a first security interest in all corporate
assets
and a personal guarantee of the Company’s shareholder. The Company pays a 2% fee
for each advance and interest accrues on all advances at a floating rate,
at the
prime rate published in the Wall Street Journal plus 2% (7.25% at December
31,
2006). The Company is advanced 90% of Prime government contract invoices
and 85%
of subcontract, credit worthy, commercial accounts. The advances are used
for
general corporate working capital. Residual, or holdback amounts, less fees
and
interest, are remitted to the Company when payments are received from the
government. Substantially all of the Company’s revenue stream and accounts
receivables are factored through this facility.
Due
to
the operating loss and the inability to recognize an income tax benefit there
from, there is no provision for current or deferred federal or state income
taxes for the year ended December 31, 2006.
Deferred
income taxes reflect the net tax effects of temporary differences between
the
carrying amounts of assets and liabilities for financial reporting purposes
and
the amount used for federal and state income tax purposes.
The
Company’s total deferred tax asset, calculated using federal and state effective
tax rates, as of December 31, 2006 is as follows:
Total
Deferred Tax Asset
|
|
$
|
2,664,591
|
|
Valuation
Allowance
|
|
|
(2,664,591
|
)
|
Net
Deferred Tax Asset
|
|
$
|
-
|
|
The
reconciliation of income taxes computed at the federal statutory income tax
rate
to total income taxes for the year ended December 31, 2006 is as
follows:
|
|
2006
|
|
2005
|
|
Income
tax computed at the federal statutory rate
|
|
|
34
|
%
|
|
34
|
%
|
State
income tax, net of federal tax benefit
|
|
|
4
|
%
|
|
4
|
%
|
Total
|
|
|
38
|
%
|
|
38
|
%
|
Valuation
allowance
|
|
|
-38
|
%
|
|
-38
|
%
|
Total
deferred tax asset
|
|
|
0
|
%
|
|
0
|
%
|
Because
of the Company’s lack of earnings history, the deferred tax asset has been fully
offset by a valuation allowance. The valuation allowance increased (decreased)
by $339,540 and $103,197 in 2006 and 2005, respectively. No tax benefits
have
been recorded for the nondeductible (tax) expenses (including stock for
services) totaling $17,210,808.
NOTE
D—INCOME
TAXES (CONT’D)
As
of
December 31, 2006, the Company had federal and state net operating loss carry
forwards as follows:
Amount
|
|
Expiration
|
|
$
|
354,164
|
|
2017 |
|
|
478,371
|
|
2018 |
|
|
2,028,880
|
|
2019 |
|
|
713,564
|
|
2020 |
|
|
971,296
|
|
2021 |
|
|
432,497
|
|
2022 |
|
|
298,634
|
|
2023 |
|
|
516,946
|
|
2024 |
|
|
271,572
|
|
2025 |
|
|
893,526
|
|
2026 |
|
$
|
6,959,450
|
|
|
|
|
As
shown
in the accompanying financial statements, the Company has recurring losses
from
operations to date. During 2006, the Company had a net loss of $893,526,
a net
deficiency of $24,170,258 and a net working capital deficit of $522,260.
Management
believes that its actions presently being taken to raise equity capital,
seek
strategic relationships and alliances, and build its marketing efforts to
generate positive cash flow provide the means for the Company to continue
as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
The
Company is either a prime or sub contractor on contracts with the Titan
Corporation, Information Management Support Center (IMCEN) and GOMO/SLD.
Loss of
these contracts could have a material effect upon the Company’s financial
condition and results of operations.
The
Company has six reportable segments—WTC, DTC, WTEQ, CKO, China Print, and
CYIOS.
Net
Sales by Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WTC
|
|
DTC
|
|
WTEQ
|
|
CKO
|
|
China
Print
|
|
CYIOS
|
|
Totals
|
|
Sales,
net
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
1,709,907
|
|
$
|
1,709,907
|
|
Cost
of Sales
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
432,360
|
|
|
432,360
|
|
Gross
Profit
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
1,277,547
|
|
$
|
1,277,547
|
|
Profit/(Loss)
by Segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WTC
|
|
DTC
|
|
WTEQ
|
|
CKO
|
|
China
Print
|
|
CYIOS
|
|
Totals
|
|
Net
(Loss)
|
|
$
|
(75
|
)
|
$
|
-
|
|
$
|
-
|
|
$
|
(541,279
|
)
|
$
|
(11,453
|
)
|
$
|
(336,719
|
)
|
$
|
(889,526
|
)
|
The
accounting policies used for segment reporting are the same as those described
in Note A “Summary of Significant Accounting Policies”;
During
2005, the Company issued 20,277,704 common shares for cash and as a result
of
the acquisition of CYIOS Corporation. No warrants were granted or exercised
during 2005.
During
2006, the Company issued 0 common shares for cash. 1,872,300 options/warrants
were granted or exercised during 2006.
The
Company has a 401(k) plan which is administered by a third-party administrator.
Individuals who have been employed for one month and reached the age of 21
years
are eligible to participate. Employees may contribute up to the legal amount
allowed by law. The Company matches one-half of the employee’s contribution up
to a maximum of 4% of the employee’s wages. Employees are vested in the
Company’s contribution 25% a year and are fully vested after four years. The
Company’s contributions for the year ended December 31, 2006 was
$17,203.
NOTE
L—COMMITMENTS/LEASES
The
Company entered into a lease agreement on July 8, 2005 for an office space.
In
October of 2006, the lease was renewed for 12 months and expires September
30,
2007. Monthly fees are $1,040.00. The Company’s estimated future yearly minimum
lease obligations are as follows:
For
the
year ending December 31, 2007 $12,480.00
Total
rent expense for 2006 was $26,771.00.
The
Company has a Note Payable with one of its officers and major shareholders.
The
note is payable on demand and bears no interest. The Company calculated imputed
interest on this note using a rate of 15%. The effects of these notes are
included in the consolidated financial statements therein. The outstanding
balance as of December 31, 2006 is $49,707. Accrued interest for the year
on
this outstanding note was $4,971.
The
breakdown of Accounts Payable is as follows categorized by
subsidiary:
WTC
|
|
$
|
370,348
|
|
WTEQ
|
|
|
17,068
|
|
CYIOS
|
|
|
20,475
|
|
|
|
$
|
407,891
|
|
Two
of
the Company’s subsidiaries have lines of credit with Bank of America. The line
of credit for CKO is 11.75% interest and the line of credit for China Print,
Inc. is 14.25%. The outstanding balances of the line of credit by Subsidiary
as
of December 31, 2006 are as follows:
CKO
|
|
$
|
45,929
|
|
China
Print
|
|
|
55,050
|
|
|
|
$
|
100,979
|
|
NOTE
P—TAXES
PAYABLE AND PAYROLL TAXES PAYABLE
As
of
December 31, 2006, the Company’s subsidiary WTC owed $13,629 in income taxes to
the IRS.
As
of
December 31, 2006, the Company’s subsidiaries owed the following in payroll
taxes:
WTC
|
|
$
|
27,373
|
* |
DTC
|
|
|
2,205
|
* |
WTEQ
|
|
|
9,368
|
* |
CYIOS
|
|
|
7,833
|
|
|
|
$
|
46,779
|
|
*The
Company is in negotiations with the IRS to satisfy these debts which were
incurred prior to the merger in 2005.
As
of
December 31, 2005, CYIOS Corporation had entered into an agreement with the
IRS
to pay off the 2003 payroll liabilities as soon as the IRS had finished
abating penalties from previous years. Once the final abatements were
in and applied to the 2nd and 3rd quarters of 2003, CYIOS agreed to
pay the difference of what was owed. As of March 22, 2006, CYIOS
Corporation paid the remaining payroll liabilities for 2003. Our payroll
liabilities are now zero for 2003. CYIOS Corporation has filed all payroll
reports with the IRS in a timely manner and has had no late payroll payments
since the 4th quarter 2003. Payment of the aforementioned tax liability will
reduce the outstanding amount by $149,291.79.
ITEM
8.
Changes
in and disagreements with accountants and on accounting and financial
disclosure
On
September 14, 2005, China Print, Inc. (“CHPR”) finalized its change of auditors.
On or about June 9, 2005, CHPR contacted the accounting firm of Traci J.
Anderson, CPA, to review the unaudited financial statements included in its
Form
10-QSB for the quarter ended March 31, 2005, on the assumption that an auditor
other than the auditor of record could review interim quarterly financial
statements. At that point, CHPR was still using its then-current auditors,
Malone & Bailey, PC, to conduct its annual audits. Traci J. Anderson
conducted the review of the financial statements in the Form 10-QSB for the
quarter ended March 31, 2005, which was filed on June 15, 2005. Ms. Anderson
also reviewed the financial statements in the Form 10-QSB for the quarter
ended
June 30, 2005, which was filed on or about August 23, 2005. Malone & Bailey,
PC did not review the financial statements in the Forms 10-QSB for the quarters
ended March 31, 2005 or June 30, 2005.
On
or
about June 28, 2005, Malone & Bailey communicated with CHPR management its
concern that it had been dismissed as auditors, and on June 29, 2005, management
sent Malone & Bailey a letter saying they had not been dismissed. However,
based on the fact that CHPR had been using Ms. Anderson’s firm to review the
interim unaudited financial statements, management decided to formally dismiss
Malone & Bailey as its auditor of record, and to engage Traci J. Anderson as
its new auditor, both actions to be effective September 14, 2005. Malone
&
Bailey, PC has been authorized to respond fully to the inquiries of CHPR’s
successor accountant concerning the subject matter of these events.
Except
for an expression of substantial doubt about our ability to continue as a
going
concern, Malone & Bailey’s reports on our financial statements for the
fiscal years ended December 31, 2004 and December 31, 2003, did not contain
an
adverse opinion or a disclaimer of opinion, and was not qualified or modified
as
to uncertainty, audit scope or accounting principles.
For
the
fiscal years ended December 31, 2004 and December 31, 2003, and up to the
events
reported herein, there were no disagreements between Malone & Bailey and us
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which, if not resolved to Malone
& Bailey’s satisfaction, would have caused them to make reference to the
subject matter of the disagreement in connection with their report.
Pursuant
to Item 304(a)(3) of Regulation S-B, the disclosures in the Form 8-K were
provided to the former auditors, Malone & Bailey, via email and fax
transmission on September 14, 2005, and they were requested to furnish a
letter
stating whether they had any disagreement with the statements made in this
Form
8-K, within sufficient time that their letter could be filed with the SEC
within
10 days of this Form 8-K’s filing.
We
did
not discuss with Traci J. Anderson, CPA any questions regarding the application
of accounting principles to a specific completed or contemplated transaction,
or
the type of audit opinion that might be rendered, either before we contacted
her
on June 9 to review our unaudited quarterly financial statements or before
we
formally engaged her as our auditor on September 14, 2005.
Item
8A. CONTROLS AND PROCEDURES
DISCLOSURE
CONTROLS AND PROCEDURES. The Company maintains disclosure controls and
procedures that are designed to ensure that information required to be disclosed
in our Securities Exchange Act of 1934 reports is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules
and
forms, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer, as appropriate, to allow
timely decisions regarding required disclosure. As of the end of the period
covered by this report, December 31, 2006, we completed an evaluation, under
the
supervision and with the participation of our management, consisting of our
Chief Executive Officer, of the effectiveness of the design and operation
of our
disclosure controls and procedures pursuant to Securities Exchange Act of
1934
Rules 13a-14(C) and 15d-14c). Based upon the foregoing, our Chief Executive
Officer concluded that our disclosure controls and procedures are effective
in
connection with the filing of this annual report on Form 10-KSB for the fiscal
year ended December 31, 2006.
CHANGES
IN INTERNAL CONTROLS. There were no significant changes in our internal controls
over financial reporting during the fiscal year ended December 31, 2006 that
have materially affected or are reasonably likely to materially affect, our
internal controls over financial reporting.
Item
8B
OTHER INFORMATION - none
ITEM
9.
DIRECTORS,
EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
ACT
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The
following table sets forth information regarding the executive officers and
directors of the Company as of March 31, 2006.
Name
|
|
Age
|
|
Position
|
|
Since
|
|
|
|
|
|
|
|
Timothy
W. Carnahan
|
|
39
|
|
President,
Treasurer and Chairman of the Board of Directors
|
|
September
2005
|
|
|
|
|
|
|
|
Jeffrey
Lieberman
|
|
39
|
|
Secretary
and Director
|
|
September
2005
|
TIMOTHY
CARNAHAN - Mr. Carnahan serves as President and Chief Executive Officer as
well
as Chairman of the Board. Mr. Carnahan is the President and Founder of our
operating subsidiary, CYIOS Corporation, a Washington DC based firm, founded
in
1994 (“CYIOS DC”) and has served in that capacity since 1994. CYIOS DC is a
defense contractor offering services and products that reduce the time frame
for
achieving mission-critical goals. With the Department of Defense being CYIOS
DC's major customer, Mr. Carnahan has some level of security clearance at
the
Department of Defense. CYIOS built the Army Knowledge Online (AKO) to facilitate
greater knowledge transfer amongst Army personnel. Mr. Carnahan attended
Old
Dominion University in Norfolk, VA from 1985 to 1989. He graduated with a
Bachelors degree in Computer Science.
JEFF
LIEBERMAN - Mr. Lieberman serves as our Director of Sales and Operations,
Director and Secretary. He has been employed by the Company in various
capacities since its inception in 1997. He graduated from the University
of
Maryland in 1991 with a Bachelor of Science Degree in Personnel Management
and
Labor Relations. After completion of his degree he studied for and passed
his
Series 6, 63, and series 7 tests to become a fully licensed stockbroker and
financial planner. After a short internship with a small firm he accepted
a
position in 1991 with Robinson & Lukens, a conservative brokerage house
located in Washington D.C. There he worked very closely with many retired
clients with a structured focus on income and money preservation investment
strategies.
FAMILY
RELATIONSHIPS
No
family
relationships exist between the directors and the officers.
CODE
OF
ETHICS
On
March
31, 2003, the Board of Directors of the Company adopted a written Code of
Ethics
designed to deter wrongdoing and promote honest and ethical conduct, full,
fair
and accurate disclosure, compliance with laws, prompt internal reporting
and
accountability to adherence to the Code of Ethics. This Code of Ethics has
been
filed with the Securities and Exchange Commission as an Exhibit to its Form
10-KSB for the fiscal year ending December 31, 2003.
ITEM
10. EXECUTIVE
COMPENSATION
(a)
GENERAL. No salary or regular compensation is paid to our directors. Pursuant
to
our By-laws, directors are eligible to be reimbursed for their actual out
of
pocket expenses incurred in attending Board of Directors meetings and other
director functions, as well as fixed fees and other compensation to be
determined by the Board of Directors. No such compensation or expense
reimbursements have been requested by the directors or paid to date. Salary
amounts paid and stock options granted to our executive officers are detailed
in
subsection (b) below.
(b)
SUMMARY COMPENSATION TABLE. The following table sets forth certain summary
information concerning the compensation paid to the Chief Executive Officer
and
certain executive officers for the fiscal years ended December 31,
2005
SUMMARY
COMPENSATION TABLE
|
|
Annual
Compensation
|
|
Long
Term Compensation
|
|
|
|
Name
and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Other
Annual Compensation ($)
|
|
Restricted
Stock
Award(s) ($)
|
|
Securities
Underlying Options
(#)
|
|
LTIP
Payouts ($)
|
|
Other
($)
|
|
Timothy
Carnahan
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
CEO,
President,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasurer
and Chairman of the Board
|
|
|
|
|
142,000
|
|
|
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
Lieberman,
|
|
2005
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secretary
and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
(c)
LONG
TERM INCENTIVE PLAN AWARDS. No long-term incentive plans have been
awarded.
(d)
COMPENSATION OF DIRECTORS. No salary or regular compensation is paid to our
directors. Our directors are entitled to reimbursement of out of pocket expenses
incurred in connection with their duties as directors. To date, no such expenses
have been requested or paid.
(e)
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT. - None
(f)
REPORT ON REPRICING OF OPTIONS/SARs. None. PAST OPTIONS/SARS-ALL
EXPIRED
The
Company intends to maintain insurance against all liability incurred by its
officers and directors in defense of any actions to which they may be made
parties by reason of their positions as officers and directors and is in
the
process of obtaining this insurance.
Nevada
law authorizes a Nevada corporation to indemnify its officers and directors
against claims or liabilities arising out of such person's conduct as officers
or directors if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the Company. The
Articles of Incorporation provide for indemnification of the directors and
officers of the Company. In addition, the Bylaws of the Company provide for
indemnification of the directors, officers, employees, or agents of the Company.
In general, these provisions provide for indemnification in instances when
such
persons acted in good faith and in a manner they reasonably believed to be
in or
not opposed to the best interests of the Company.
ITEM
11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information regarding the ownership of
CYIOS
Corporation's common stock as of December 31, 2005, by each shareholder known
by
us to be the beneficial owner of more than 5% of CYIOS Corporation's common
stock, each director and all executive officers and directors as a group.
Unless
otherwise indicated by footnote, each of the shareholders named in the table
has
sole voting and investment power with respect to the shares of common stock
beneficially owned.
TITLE
OF CLASS
|
|
NAME
AND ADDRESS
|
|
Number
of
|
|
%
OF
|
|
|
|
|
|
|
|
Common
|
|
Timothy
Carnahan
|
|
15,645,000
|
|
67%
|
|
|
1300
Pennsylvania Ave Suite 700 NW
|
|
|
|
|
|
|
Washington
DC 20007
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
Jeffrey
Lieberman
|
|
1,289,000
|
|
5%
|
|
|
1300
Pennsylvania Ave Suite 700 NW
|
|
|
|
|
|
|
Washington
DC 20007
|
|
|
|
|
Notes:
(1)
Mr.
Carnahan is our CEO and Chairman, and has sole voting authority for all of
these
shares.
ITEM
12. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
(a)
The
following transactions have been undertaken within the last three years with
related parties. In May 2003, WorldTeq sold its Networld subsidiary to an
entity
owned by Bruce Bertman for $1. WorldTeq recorded the sale as a credit to
additional paid in-capital for the net liabilities totaling approximately
$435,000.
In
September 2003, the board of directors approved the conversion of $100,000
of
notes payable to Bruce Bertman into 5,353,511 shares of common stock. The
number
of shares issued was determined based on the formula outlined in Bruce Bertman's
Secured Convertible Promissory Note. The Note allowed Mr. Bertman to convert
at
the lower of either $.10 per share or the average closing bid price of WTEQ
common stock for the prior 20-day period. The average closing bid was $0.018714
per share for the period ended August 18, 2003 when Mr. Bertman
converted.
On
September 19, 2005, the Company entered into an agreement with CYIOS
Corporation, a District of Columbia corporation (“CYIOS DC”) and our current
director and Chief Executive Officer Timothy Carnahan, whereby we would acquire
100% of the issued and outstanding capital stock of CYIOS DC in exchange
for
19,135,000 common shares of stock of our Company, then named China Print,
Inc.
List
of
Exhibits
Certification
of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act
of
2002
Certification
of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
ITEM
14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
AUDIT
FEES. Total annual audit fees billed for professional services rendered by
Malone and Bailey PLLC during 2005 Malone & Bailey’s fees only included
reviews of Q1 and Q2 for a total of $6,000. The company then changed auditors
and the 3rd Quarter review and complete Audit for the fiscal year ending
December 31, 2005 was done by Traci Anderson, CPA for a total of $17,000
and
continued to have Traci Anderson review Q1, Q2 and Q3 of 2006 for approximately
$4,500.
ALL
OTHER
FEES:
Paul
Beeks, is the internal CPA for CYIOS Corporation and fees for internal
accounting amounted to approximately 6000.00 for year of 2006.
In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto
duly
authorized.
CYIOS
Corporation
/s/
Timothy W. Carnahan
Timothy
W. Carnahan
Chief
Executive Officer,
President,
Treasurer and Chairman of the Board
In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the
dates indicated.
/s/
Timothy W. Carnahan
Timothy
W. Carnahan
Chief
Financial Officer,
President,
Treasurer and Chairman of the Board
/s/
Jeffrey M. Lieberman
Jeffrey
M. Lieberman
Secretary
and Director
Dated:
April 17, 2007