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CEPHAS HOLDING CORP. - Recent Material Event

Item 405 of Regulation S-K is 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-K or any amendment to this Form 10-K. [X]


State issuer's revenues for its most recent fiscal year: $ 168


State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days: $  954,000 as of July 31, 2010


State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 119,983,617 AS OF September 1, 2010








Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]


PART I


ITEM 1. DESCRIPTION OF BUSINESS.


CAUTIONARY STATEMENT FOR PURPOSES OF "SAFE HARBOR PROVISIONS" OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.


Certain statements contained in this Annual Report on Securities and Exchange Commission ("SEC") Form 10-K ("Form 10-K") constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different than any expressed or implied by these forward-looking statements. These statements may be contained in our filings with the Securities and Exchange Commission, press releases, and written or oral presentations made by our representatives to analysts, rating agencies, stockholders, news organizations and others. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "intend", "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue," or the negative of these terms or other comparable terminology. Although we believe that the expectations in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.


OUR BUSINESS


We are a developer and marketer of mobile applications.  We are develop applications for the  iPhone platform. Our focus is on entertainment themed applications. We have two subsidiaries, Legend Credit Inc.  and Legend Studios which did not have any business operations as of December 31, 2009.


OUR SOURCES OF REVENUE


SALES OF MOBILE PRODUCTS


We currently sell an application on the iTunes store called, “The Iron Sheik Soundboard.” The

Iron Sheik is a popular character from professional wrestling.


We also distribute free of charge an iPhone application called MMAUnderboss which is a collection of newswires covering the sport of mixed martial arts.  We believe that this application will allow us to advertise additional apps that will be sold on a per download basis. We also have the option to add advertising to the MMA Underboss application but have not done so yet.


We are also developing applications for the iPhone under license from MMA star, Fedor Emelineko. We have completed primary development on Mobile Fedor and are finalizing its release.


We are negotiating with several other MMA and UFC personalities and brands for licenses related to the iPhone platform.


We also offer a newswire dedicated to rock music called Metal News. Metal News is advertiser supported and is a free download to users who agree to look at banner ads in exchange for free content.


We intend to develop more free applications with the intention of creating a large user base that can be attractive to advertisers as well as to allow us to  sell virtual goods such as images and ringtones, develop fantasy-type sports contests, and for location based incentives such as coupons and geographically specific offers.  We also expect to use our free newswire apps such as MMAUnderboss for the promotion and sale of fee based apps like Mobile Fedor.










MARKETING AND PROMOTION OF IPHONE PHONE PRODUCTS


We continually evaluate numerous ways to reach our potential customers and to promote our products. We intend to promote our products through the following means:


-Online advertising and promotion. We maintain both a Facebook page and a Twitter page. We continue to evaluate other new and emerging opportunities in the online field.

-Free products and promotions to early adopters, members of the media and other key influencers;

- Individual webpages for specific apps with special content such as behind the scenes videos. We currently maintain a site called IronSheikApps at www.ironsheikapps.com. The site promotes the sale of the application and allows users to see behind the scenes footage from the audio taping of the app with the Iron Sheik.

-Personal and media appearances. Our contracts with both Fedor Emelineko and the Iron Sheik grant us the ability to at our option to have personal appearances. These appearances can be used for radio and television or autograph signings directly to with fans.

-Comarketing with other related companies. For example, the Iron Sheik recently appeared on the Howard Stern radio program and discussed his work with Cephas Holdings. This was at no charge to the company as the Sheik was scheduled for a general promotional appearance.


RISKS THAT MAY AFFECT FUTURE RESULTS


The following risk factors and other information included in this Annual Report should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risks actually occur, our business, financial condition and operating results could be materially adversely affected.



WE HAVE AN ACCUMULATED DEFICIT AND ANTICIPATE FURTHER LOSSES.


We have incurred significant losses since we began doing business. For the year ended December 31, 2009 we incurred a net loss $479,608.  There can be no assurance that our services and products will ever generate sufficient revenues or that our operations will ever be profitable. As of December 31, 2009, we had an accumulated deficit of $21,662,302. We expect to incur operating losses for the near future until we can generate sufficient sales to cover our operating expenses.


We have generated limited revenues to date from the business we conduct and there can be no assurance that we will ever generate sufficient revenues from the business we conduct to cover all of our operating expenses. We also expect to significantly increase our operating expenses to expand our sales and marketing operations, to fund greater levels of product development, and to develop other forms of revenue generating business and licensing of our proprietary materials to others.


WE RECEIVED AN OPINION FROM OUR ACCOUNTANTS FOR THE PERIOD ENDED DECEMBER 31, 2009, WHICH RAISED DOUBT ABOUT OUR ABILITY TO CONTINUE AFTER SUCH DATE AS A GOING CONCERN.


Our consolidated financial statements for the year ended December 31, 2009, which are included in this Form 10-K, indicate that there was substantial doubt as of December 31, 2009 about our ability to continue as a going concern due to our need to generate cash from operations and obtain additional financing. We have had a going concern opinion from our auditors since our inception in 1997.


WE NEED TO RAISE ADDITIONAL FUNDS TO FUND OUR BUSINESS OPERATIONS.


We need to raise additional funds because our cash flows have proven to be insufficient to fund operations,







including our obligations to pay minimum royalties under our agreements. Several of our trade creditors and licensors have outstanding balances and may elect to sue to recover their amounts owed. Management feels that these can be defended or settled on favorable terms. There can be no assurance that additional financing will be available to us on commercially reasonable terms, or at all. We may raise funds through equity or debt financings, depending on our opportunities. If we raise additional funds by issuing equity securities, this will further dilute the interests of our current stockholders. If we raise additional funds by issuing debt securities, we will be subject to the risks associated with incurring substantial indebtedness, including the risks that interest rates may fluctuate and cash flow may be insufficient to pay principal and interest on any such indebtedness. We have no current arrangements with respect to, or sources of, additional financing, and it is not anticipated that our existing stockholders will provide any portion of our future financing requirements.


WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY IN THE MOBILE PHONE, MOBILE ACCESSORY, MOBILE DATA AND GAMING, AND OPERATING SYSTEM SOFTWARE MARKETS. THIS WOULD HAVE A MATERIAL ADVERSE EFFECT ON OR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.


As we attempt to expand into the mobile services software markets, our future growth will depend on the commercial success of our branded accessory products. The markets for these products and services are highly competitive and we expect competition to increase in the future. Most of our competitors in this market have significantly greater financial, technical and marketing resources than we do. This will make it difficult for us to compete successfully in the hand-held device and operating system software markets.


WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY IN THE MARTIAL ARTS  INDUSTRY.


In an attempt to diversify our business, we have entered into the mixed martial arts industry.  However, we have no prior experience in this industry. To date we have not derived any revenue form the sale of mixed martial art products.  In order to compete successfully in this industry we will need to increase our brand recognition. The markets for these products and services are highly competitive and we expect competition to increase in the future. Most of our competitors in this market have significantly greater financial, technical and marketing resources than we do.  There can be no assurance that we will be able to develop brand recognition of our products in this industry or compete successfully.


THE LOSS OF OUR CHIEF EXECUTIVE OFFICER'S SERVICES WOULD HAVE A MATERIAL ADVERSE EFFECT ON US.


Our success will be largely dependent on the efforts of Peter Klamka, our Chairman, President and Chief Executive Officer, and his ability to forge new relationships with celebrities and to maintain such relationships, as well as to oversee the development and maintenance of our products. Our success will also be highly dependent on Mr. Klamka's ability, as well as the ability of others employed by us, to successful market new products and develop new products. The loss of his services would have a material adverse effect on our business and prospects.


We have not entered into an employment agreement with Mr. Klamka and Mr. Klamka has not entered into any agreement restricting his involvement in a business which competes with us. As a result, Mr. Klamka is an employee-at-will and has the right to leave us at any time. Mr. Klamka has informed us that he intends to devote a portion of his working time to our business and that he also intends to devote a portion of his time to other business interests that do not compete with our business. In addition, Mr. Klamka is not restricted from entering into a competing business after the term of his employment with us; provided, however, that he would not be permitted to use proprietary information and trade secrets belonging to us. Our success will also be dependent upon our ability to hire and retain marketing, financial and other personnel. Competition for qualified personnel is intense and there can be no assurance that we will be able to hire or retain additional qualified personnel. The loss of our Chief Executive Officer’s service would have a material adverse effect on us .


We have changed Auditors







On September , 2010, Auditor  Silberstein Ungar, PLLC resigned  as Cephas Holding Corps independent accountant responsible for auditing its financial statements over fees.  The Company retained Peter Messineo, CPA as its new independent accountants.


EMPLOYEES


As of December 31, 2009, we had a total of one full-time employee. None of our employees is covered by a collective bargaining agreement.



ITEM 2. DESCRIPTION OF PROPERTY.


We currently maintain our executive offices, consisting of  an executive office suite at 2942 North 24th Street Ste. 114-508 Phoenix, AZ 85016. The monthly rent is variable based on usage and is renewable annually.


ITEM 3. LEGAL PROCEEDINGS.


The company is party to legal proceedings from time to time. None of the legal proceedings in management’s opinion would have an adverse material impact on the company.


On September 26, 2008, Mr. Denner filed a suit against the Company and Mr. Klamka in the Iowa District Court for Polk County alleging, among other things, that the Company’s and Mr. Klamka’s failure to pay a loan made by Mr. Denner to the Company constituted a breach of contract.  Mr. Denner is seeking compensatory damages plus interest and costs. The loan was made by Mr. Denner in 2001 in the principal amount of $100,000 and bears interest only upon default at a rate of 24% per annum.  As o f July 31, 2010 case against Cephas Holdings f/k/a Legend Mobile and Peter Klamka,, individually, was dismissed.


There are several judgments against our company that could effect our operations.



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.


None.


PART II


ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.


MARKET INFORMATION


Our common stock is traded on the Pink Sheets under the symbol CEHC.  The following table sets forth the range of high and low bid quotations for each of the prior eight (8) fiscal quarters. The quotations represent inter-dealer quotations without adjustment for retail mark-ups, mark-downs or commissions and may not represent actual transactions.












FISCAL QUARTER ENDING                      HIGH BID          LOW BID



March 31, 2008                                  $.003          $.004

June 30, 2008                                     $.004           $.0045

September 30, 2008                            $.01            $.001

December 31, 2008                            $.005          $.001


March 31, 2009.......................          $   0.006         $   0.006

June 30, 2009........................            $   0.006        $   0.005

September 30, 2009...................       $   0.15           $  0.006

December 31, 2009....................       $   0.0075        $   0.0075




On July 30 2010 the closing bid price for the common stock on the Pink Sheets was $0.008


HOLDERS


As of July 30, 2010  there were 153 record holders of our common stock. This does not include shares held in street names.


DIVIDENDS


Since our inception, no cash dividends have been declared on our common stock.


SALES OF UNREGISTERED SECURITIES


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.


FORWARD LOOKING STATEMENTS


This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Shareholders are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation, our ability develop our mobile applications. Although we believe the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements contained in the report will prove to be accurate.


GENERAL


The following discussion and analysis should be read in conjunction with our consolidated financial statements and related footnotes for the year ended December 31, 2009  elsewhere in this Annual Report on Form 10-K. The discussion of results, causes and trends should not be construed to imply any conclusion that such results or trends will necessarily continue in the future.


We were incorporated in Delaware on January 13, 1998 and are the successor to Interactive Entertainment Studio, Inc. (IES). IES was incorporated in the State of Nevada on May 27, 1997 and was merged into us in March 1998 for the sole purpose of changing the domicile of the company to Delaware. This merger was retroactively reflected in the December 31, 1997 financial statements. On June 27, 2002 we changed our name to Legend Mobile, Inc. In October 2008, the Company amended its articles to change the name to Cephas Holding Corp.








We are a developer and marketer of  mobile phone applications for the iPhone platform. We currently have three apps available to consumers. Our three apps our are “Iron Sheik Soundboard”, “MMAUnderboss” and “Metal News”.


Since our inception, we have incurred net losses of $21,662,302and at December 31, 2009 current liabilities exceeded current assets by $5,316,861. In addition, we are delinquent in certain payments due for license fees and notes payable. We may be unable to continue in existence unless we are able to arrange additional financing and achieve profitable operations. We plan to raise additional capital and expect to generate cash from the sale of the Iphone and Ipad applications .


Our business model is to grow in the area of mobile content   and mobile applications specifically in the area of mixed martial arts and more generally content that reaches a young male demographic. This business model includes seeking to obtain licenses with well-known MMA figures and brands, develop large promotional programs that permit us to market our products more effectively and develop other distribution channels.


Significant Accounting Policies and Estimates


Management's Discussion and Analysis of Financial Condition and Results of Operations discusses the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates and judgments on historical experiences and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of the Company's financial statements relate to the allowance for doubtful accounts. These accounting policies are described at relevant sections in this discussion and analysis and in the notes to the consolidated financial statements included in this Annual Report on Form l0-KSB for the year ended December 31, 2009.


Results of Operations



Year ended December 31, 2009 vs. December 31, 2008


Revenue for the year ended December 31, 2009 increased by $168 from $0 for the year ended December 31, 2008 to $168 for the year ended December 31, 2009. Revenue for the year ended December 31, 2009  was from sales of the Iron Sheik Iphone application .


Cost of revenue for the year ended December 31, 2009 decreased by $ 34,995  from $225,089 for the year ended December 31, 2008 to $190,094 for the year ended December 31, 2009. Cost of revenue as a percentage of revenue was 100% and 100% for the year ended December 31, 2009 and 2008, respectively.

 

Selling, general and administrative expenses for the year ended December 31, 2009 decreased by $34,995 or 15.5% from $225,089 for the year ended December 31, 2008 to $190,094 for the year ended December 31, 2009. A majority of selling, general and administrative expenses in 2009 are related to professional and consulting fees paid with shares of our common stock.


Interest expense and financing costs for the year ended December 31, 2009 stayed the same at 333,756 for the year ended December 31, 2008  and $333,756 for the year ended December 31, 2009.


Equity loss in Legend Credit, Inc. was $0 for both the year ended December 31, 2008 and 2009. We own a 50% interest in Legend Credit, which previously marketed prepaid debit cards.








Net loss for the year ended December 31, 2009 was $479,608 as compared with $583,264 for the year ended December 31, 2008.  The loss was attributable primarily to the increase in selling, general and administrative expenses.


LIQUIDITY AND CAPITAL RESOURCES


In 2009, we raised $8 , 000 from the sale of   5,000,000 shares of our common stock.


We have incurred net losses since our inception of $21,662,302. In order for us to continue in existence, we will have to raise additional capital through the sale of equity or debt or generate sufficient profits from operations, or a combination of both.


ITEM 7. FINANCIAL STATEMENTS.


See pages beginning with page F-1.


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.


On September 15, 2010,  Auditor  Silberstein Ungar, PLLC resigned  as Cephas Holding Corps independent accountant responsible for auditing its financial statements the Company  retained Peter Messineo CPA as its new independent accountants.

The company’s   decision to retain Peter Messineo was unanimously approved by Cephas Holdings’ board of directors.



ITEM 8A(T).  CONTROLS AND PROCEDURES


Disclosure Controls and Procedures

 

 Our President being the sole member of our management, in his capacity as our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report (December 31, 2009), as is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Our disclosure controls and procedures are intended to ensure that the information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and (ii) accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as the principal executive and financial officers, respectively, to allow timely decisions regarding required disclosures. 

 

Based on that evaluation, our President concluded that, as of the end of the period covered by this Annual Report, our disclosure controls and procedures were effective.

 

Our management has concluded that the financial statements included in this Form 10-K present fairly, in all material respects our financial position, results of operations and cash flows for the periods presented in conformity with generally accepted accounting principles.

 

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.

 

Management’s Annual Report on Internal Control Over Financial Reporting







 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles.

 

Our President conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) as set forth in Internal Control - Integrated Framework. Based on our evaluation under the framework in Internal Control - Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2009.

 

This annual report does not include an audit or attestation report of our registered public accounting firm regarding our internal control over financial reporting. Our management’s report was not subject to audit or attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.

 

ecause of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Evaluation of Changes in Internal Control over Financial Reporting

 

Our President also conducted an evaluation of our internal control over financial reporting to determine whether any change occurred during the fourth quarter of 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, our management concluded that there were no changes.  As of the end of the period covered by this Annual Report, no deficiencies were identified in our internal controls over financial reporting which constitute a “material weakness.”


Under the supervision of our Chief Executive Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report.  Because we were we required by change auditors, the company did not have in place disclosure controls or procedures which allowed it to transition to a new auditor within the time periods specified in the SEC rules and forms.  Based upon that evaluation, our Chief Executive Officer concluded that as of December 31, 2009, the design and operation of such disclosure controls and procedures were not effective at the reasonable assurance level because of material weaknesses in those controls and procedures.


While our lack of internal controls during the transition to our new auditor has affected both the nature and the timeliness of our processing information, we have completed our internal control procedures. Accordingly, our management has concluded that the financial statements included in this report fairly present in all material respects our financial position, results of operations and cash flows for the periods presented in conformity with generally accepted accounting principles



Because we acknowledge that the failure to perform management’s assessment adversely affects the company’s and its shareholders ability to avail themselves of rules and forms that are predicated on the current or timely filing of Exchange Act reports








PART III


ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.


DIRECTORS AND EXECUTIVE OFFICERS


Our executive officers and directors are:



NAME                 AGE     POSITION

----                 ---     --------


Peter Klamka          41     Chairman of the Board, CEO, President,

                                             Treasurer & Secretary



The business experience, principal occupations and employment, as well as the periods of service, of our sole director and executive officer during the last five years are set forth below.


Peter Klamka has been our Chairman of the Board and Chief Executive Officer since our inception in May 1997. Mr. Klamka is a former licensed Mixed Martial Arts promoter in the State of Nevada. He also has worked with numerous professional athletes, celebrities, and well known brands. Mr. Klamka received his Bachelor of Arts degree from the University of Michigan.


EMPLOYMENT AND CONSULTING AGREEMENTS


We have no employment or other written agreement with Peter Klamka, our President and Chief Executive Officer. Mr. Klamka has an oral agreement with the Company to receive a base salary of $175,000 per year and such other compensation as the Board of Directors shall designate. The Company believes that Mr. Klamka will continue to waive a portion of the base salary for the foreseeable future, although no assurance thereof can be given.


Mr. Klamka is involved in other business ventures, including the ownership and management other private and public businesses.  Mr. Klamka is the   President of  Solar Acquisition Corp., a reporting company.  Mr. Klamka is also the President of Miss World Holdings Inc. a reporting company.  Mr. Klamka is also the President of WTTJ Corp., a reporting company.


We have no employment or other written agreement with Mr. Klamka.  Mr. Klamka has stated he will not enter into any business that competes directly with Cephas Holding Corp.


AUDIT COMMITTEE FINANCIAL EXPERT

The audit committee is responsible for recommending independent auditors and reviewing management actions in matters relating to audit functions. The committee reviews, with independent auditors, the scope and results of its audit engagement, the system of internal controls and procedures and reviews the effectiveness of procedures intended to prevent violations of laws.


The audit committee, consistent with the Sarbanes-Oxley Act of 2002 and the rules adopted thereunder, meets with management and the auditors prior to filing of officers’ certifications with the SEC to receive information concerning, among other things, significant deficiencies in the design or operation of internal controls.


Our board of directors currently acts as our audit committee. Our audit committee member is not “independent” in accordance with rule 4200(a)(14) of the Nasdaq Marketplace Rules. Our board of







directors does not have an “audit committee financial  expert,” within the meaning of that phrase under applicable regulations of the Securities and Exchange Commission, serving on the audit committee. The board of directors believes that the member of the audit committee is financially literate and experienced in business matters and is capable of (1) understanding generally accepted accounting principles (“GAAP”) and financial statements, (2) assessing the general application of GAAP principles in connection with our accounting for estimates, accruals and reserves, (3) analyzing and evaluating our financial  statements, (4) understanding our internal controls and procedures for financial reporting, and (5) understanding audit committee functions, all of which are attributes of an audit committee financial expert. However, the board of directors believes that no audit committee member has obtained these attributes through the experience specified in the SEC's definition of “audit committee financial expert.” Further, as is the case with many small companies, it would be difficult for us to attract and retain board members who qualify as “audit committee financial experts,” and competition for such individuals is significant. The board of directors believes that its current audit committee is able to fulfill its role under SEC regulations despite not having a designated “audit committee financial expert.”



CODE OF ETHICS


We have not yet adopted a code of ethics that applies to our principal executive officers, principal financial officer, principal accounting officer or controller, or persons performing similar functions, since we have been focusing our efforts on obtaining financing for the company. We expect to adopt a code by the end of the current fiscal year.



SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE


Section 16(a) of the Securities Exchange Act of 1934 requires our officers, directors, and persons who beneficially own more than 10% of our common stock to file reports of securities ownership and changes in such ownership with the Securities and Exchange Commission ("SEC"). Officers, directors and greater than 10% beneficial owners are also required by rules promulgated by the SEC to furnish us with copies of all Section 16(a) forms they file.


Based solely upon a review of the copies of such forms furnished to us, or written representations that no Form 5 filings were required, we believe that during the fiscal year ended December 31, 2009, there was compliance with all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners.


ITEM 10. EXECUTIVE COMPENSATION.


The following table sets forth information the remuneration of our chief executive officer:












                                               SUMMARY COMPENSATION TABLE

----------------------------------------------------------------------------------------------------------------------

    NAME AND

    PRINCIPAL

    POSITION                    ANNUAL COMPENSATION                       LONG TERM COMPENSATION

------------------ ----------------------------------------------- --------------------------------------

                                                                            AWARDS             PAYOUTS

                                                                  ------------------------- ------------

                                                        OTHER      RESTRICTED   SECURITIES

                                                        ANNUAL       STOCK      UNDERLYING      LTIP        ALL OTHER

                   FISCAL                            COMPENSATION   AWARD(S)     OPTIONS/      PAYOUTS    COMPENSATION

                    YEAR    SALARY ($)    BONUS ($)       ($)          ($)       SARS (#)        ($)           ($)

------------------ -------- ------------ ------------ ------------ ------------ ------------ ------------ ------------

Peter Klamka, CEO   2009     $175,000 (1)    -0-          -0-          -0-         -0-           -0-          -0-  

                                   2008     $175,000 (2)    -0-          -0-          -0-          -0-        -0-          -0-

------------------ -------- ------------ ------------ ------------ ------------ ------------ ------------ ------------


(1) In 2008 and 2009, Mr. Klamka was not paid any of his salary, the total $175,000 has been accrued



                                        OPTION/SAR GRANTS IN LAST FISCAL YEAR

----------------------------------------------------------------------------------------------------------------------


                                                  INDIVIDUAL GRANTS

----------------------------------------------------------------------------------------------------------------------

                             NUMBER OF SECURITIES      PERCENT OF TOTAL

                                  UNDERLYING         OPTIONS/SARS GRANTED

                             OPTIONS/SARS GRANTED      TO EMPLOYEES IN         EXERCISE OR BASE

           NAME                      (#)                 FISCAL YEAR             PRICE ($/SH)        EXPIRATION DATE

--------------------------- ----------------------- ----------------------- ----------------------- ------------------

       Peter Klamka                -0-                       0%                    $                   

--------------------------- ----------------------- ----------------------- ----------------------- ------------------















                  AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

------------------------ ---------------------- ---------------------- ----------------------- -----------------------

                                                                      NUMBER OF SECURITIES

                                                                             UNDERLYING         VALUE OF UNEXERCISED

                                                                            UNEXERCISED             IN-THE-MONEY

                                                                          OPTIONS/SARS AT         OPTIONS/SARS AT

                                                                         FISCAL YEAR END (#)     FISCAL YEAR END ($)

                                                                      ----------------------- -----------------------

                          SHARES ACQUIRED ON                                  EXERCISABLE/            EXERCISABLE/

       NAME                 EXERCISE (#)          VALUE REALIZED ($)         UNEXERCISABLE           UNEXERCISABLE

------------------------ ---------------------- ---------------------- ----------------------- -----------------------

     Peter Klamka                 -0-                    -0-               1,240,500/-0-            260,505/-0-

------------------------ ---------------------- ---------------------- ----------------------- -----------------------


COMPENSATION OF DIRECTORS


Directors do not receive compensation but are reimbursed for their expenses for each meeting of the board that they attend.


STOCK OPTION PLANS


The Company adopted the 1998 Stock Option Plan and the Year 2000 Stock Option Plan (the Plans), which provides for the grant of options to purchase up to 1,250,000 shares of the Company's common stock. Under these Plans incentive stock options may be granted to employees and non-statutory stock options may be granted to employees and non-employees. During the year ended December 31, 2009, 0 options were granted under this plan.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.


The following table sets forth certain information regarding our Common Stock beneficially owned on July 31, 2010 (i) each person who is known by us to own beneficially or exercise voting or dispositive control over 5% or more of our Common Stock, (ii) each Director and (iii) all executive officers and Directors as a group. Except as otherwise indicated, all stockholders have sole voting and investment power with respect to the shares listed as beneficially owned by them, subject to the rights of spouses under applicable community property laws.


Name and Address(1)

 

Amount and

Nature

Of

Beneficial

Ownership

 

Percentage

of Class(1)

 

 

 

 

 

 

 

Peter Klamka

 

1,240,500 Common(2)

 

 

1.8

%

 

 

850,000 Series B Preferred(3)

 

 

100

%










 

 

147,775 Series C Preferred(4)

 

 

100

%

 

 

1,000,000 Series D Preferred(5)

 

 

100

%

Barton PK, LLC

 

4,000,000 Common(6)

 

 

6.2

%



(1)  Figures based on an estimated 94,883,679 shares of common stock outstanding as of December 31, 2009.

(2)  Includes 1,125,000 currently exercisable options to purchase 1,125,000, shares of the Company's common stock, and 115,500 currently exercisable warrants to purchase 115,500 shares of the Company's common stock. The number of common shares beneficially owned does not included 4,000,000 shares transferred by Mr. Klamka to Barton PK, LLC, a limited liability company owned and controlled by Mr. Klamka.

(3) Series B preferred stock is entitled to 10 votes per share.

(4) Series C preferred stock is entitled to 100 votes per share.

(5) Series D preferred stock is entitled to vote 135 votes per share.

(6) Barton PK, LLC is a limited liability company owned and controlled by Mr. Klamka.






EQUITY COMPENSATION PLANS


As of December 31, 2009, our equity compensation plans were as follows:



------------------------------- ---------------------------- ---------------------------- ----------------------------

                                NUMBER OF SECURITIES TO BE    WEIGHTED AVERAGE EXERCISE

                                  ISSUED UPON EXERCISE OF       PRICE OF OUTSTANDING         NUMBER OF SECURITIES

                                   OUTSTANDING OPTIONS,         OPTIONS, WARRANTS AND       REMAINING AVAILABLE FOR

        PLAN CATEGORY               WARRANTS AND RIGHTS                RIGHTS                   FUTURE ISSUANCE

------------------------------- ---------------------------- ---------------------------- ----------------------------

Equity compensation plans

approved by security holders             1,150,000                      $0.10                        None

------------------------------- ---------------------------- ---------------------------- ----------------------------


Equity compensation plans not

approved by security holders               None                          N/A                         None

------------------------------- ---------------------------- ---------------------------- ----------------------------


Total                                    1,150,000                      $0.10                        None

------------------------------- ---------------------------- ---------------------------- ----------------------------






ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.








None




ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.


(a) Exhibits to this Form 10-K:










    REGULATION                                                   EXHIBIT

    S-K NUMBER

------------------- --------------------------------------------------------------------------------------------------

Certificate of Incorporation of PTN Media, Inc. dated as of January 13, 1998 (1)

----------------------------------------------------------------------------------------------------------------------

1.1

Certificate Of Designations Of  Class A Convertible Preferred Stock(1)

1.2

Certificate  Of Decrees of Class A Convertible Preferred Stock(1)

1.3

Certificate Of Designations Of  C Convertible Preferred Stock(1)

------------------- --------------------------------------------------------------------------------------------------

       3.5          By-Laws of PTN Media, Inc. (1)

------------------- --------------------------------------------------------------------------------------------------

       4.2          PTN Media, Inc. 2000 Stock Option Plan (2)

------------------- --------------------------------------------------------------------------------------------------

       10.1         Amendment to Palm, Inc. and PTN Media, Inc. Agreement of October 5, 2000 (3)

------------------- --------------------------------------------------------------------------------------------------

       10.2         License Agreement dated February 19, 2001 between 3 Wishes Production f/s/o Christina Aguilera

                    and PTN Media, Inc. (3)

------------------- --------------------------------------------------------------------------------------------------

       10.3         General Agreement dated July 28, 2000, between PTN Media, Inc. and NeoHand, Inc. (4)

------------------- --------------------------------------------------------------------------------------------------

       10.4         Partnering Agreement dated October 27, 2000, between PTN Media, Inc. and TWEC.com, LLC (4)

------------------- --------------------------------------------------------------------------------------------------

       10.5         Palm, Inc. OEM Partner Agreement dated October 5, 200, between PTN Media, Inc. and Palm, Inc. (4)

------------------- --------------------------------------------------------------------------------------------------

       10.6         Merchant and Partner Network Agreement dated May 8, 2000, between PTN Media, Inc.

                    and Dynamic Trade Inc. (4)

------------------- --------------------------------------------------------------------------------------------------

       10.7         License Agreement dated January 4, 2001 between PTN Media, Inc. and Michael Jordan (5)

------------------- --------------------------------------------------------------------------------------------------

       10.8         License Supply and Distributor Agreement between PTN Media, Inc. and Motorola, Inc. dated   February 25, 2002 (6)

------------------- --------------------------------------------------------------------------------------------------

       10.9         License Amendment between PTN Media, Inc. and Christina Aguilera (6)

------------------- --------------------------------------------------------------------------------------------------

       21.1         List of Cephus Holding Inc. Subsidiaries (7)

------------------- --------------------------------------------------------------------------------------------------

23.1         Consent of Independent Certified Public Accountants (7)

23.2         Consent of Independent Certified Public Accountants(7)

------------------- --------------------------------------------------------------------------------------------------

       31.1         Rule 13a-14(a) Certification of Chief Executive Officer and Chief Financial Officer (7)

------------------- --------------------------------------------------------------------------------------------------

       32.1         Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the

                    Sarbanes-Oxley Act of 2002 of Chief Executive Officer and Chief Financial Officer (7)

------------------- --------------------------------------------------------------------------------------------------











 



(1) Incorporated by reference from the Company's Registration Statement on Form SB-2 (File #333-51933).


(2) Incorporated by reference from the Company's Definitive Proxy Statement filed on July 24, 2000.


(3) Incorporated by reference from the Company's Form 10-K for the fiscal year ended December 31, 2000.


(4) Incorporated by reference from the Company's Registration Statement on Form S-3 filed on December 11, 2000.


(5) Incorporated by reference from the Company's Form 8-K filed January 9, 2001.


(6) Incorporated by reference from the Company's Form 10-K filed April 16, 2002


(7) Filed herewith.


(b) Reports on Form 8-K


None




ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.


AUDIT FEES


For the audited fiscal years ended December 31, 2008 and 2009, our principal accountants have billed approximately $7,250 and approximately $5,250 respectively, for the audit of our annual financial statements and Form 10-K and review of financial statements included in our Form 10-Q filings.


AUDIT-RELATED FEES


There were no fees billed for services reasonably related to the performance of the audit or review of our financial statements outside of those fees disclosed above under "Audit Fees" for fiscal years 2009 and 2008.


TAX FEES


There were not fees billed for the fiscal years ended December 31, 2009 and 2008, for tax compliance, tax advice, and tax planning services.


ALL OTHER FEES


There were no fees billed for services by our principal accountant, other than those disclosed above.


PRE-APPROVAL POLICIES AND PROCEDURES


Prior to engaging our accountants to perform a particular service, our board of directors obtains an estimate for the service to be performed.




SIGNATURES








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.


Cephas Holding Corp..




Date:   October 5, 2010            By:      /s/ Peter Klamka

                                      ------------------------------------------

                                         Peter Klamka, Chairman, President,

                                         Secretary and Chief Executive Officer







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.



      SIGNATURE                    TITLE                       DATE

      ---------                    -----                       ----


                                Chairman, President,

                                Secretary and

                                Chief Executive Officer

/s/ Peter Klamka                (Principal Executive

----------------------------    and Accounting Officer)         October 5, 2010

Peter Klamka

















CEPHUS HOLDING CORP. AND SUBSIDIARIES


CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER 31, 2009


















































CEPHUS HOLDING CORP. AND SUBSIDIARIES


TABLE OF CONTENTS


DECEMBER 31, 2009







Report of Independent Registered Public Accounting Firm

F - 1


Consolidated Balance Sheets as of December 31, 2009 and 2008

F - 2


Consolidated Statements of Operations for the years ended

December 31, 2009 and 2008

F - 3


Consolidated Statement of Stockholders’ Deficit as of December 31, 2009

F - 4


Consolidated Statements of Cash Flows for the years ended

December 31, 2009 and 2008

F - 5


Notes to Financial Statements

  

F - 6 – F - 14




















Silberstein Ungar, PLLC CPAs and Business Advisors

  Phone (248) 203-0080

Fax (248) 281-0940

30600 Telegraph Road, Suite 2175

Bingham Farms, MI 48025-4586

www.sucpas.com


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors

Cephus Holding Corp. and Subsidiaries

Ann Arbor, MI

We have audited the accompanying balance sheet of Cephus Holding Corp. and Subsidiaries, as of December 31, 2009, and the related statements of operations, stockholders’ deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. The financial statements of Cephus Holding Corp. and Subsidiaries as of and for the year ended December 31, 2008 were audited by other auditors whose report dated May 1, 2009 on those statements included an explanatory paragraph describing conditions that raised substantial doubt about the Company’s ability to continue as a going concern.


We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cephus Holding Corp. and Subsidiaries, as of December 31, 2009 and the results of their operations and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.

The accompanying financial statements have been prepared assuming that Cephus Holding Corp. and Subsidiaries will continue as a going concern.  As discussed in Note 1 to the financial statements, the Company has incurred losses from operations, has negative working capital and is in need of additional capital to grow its operations so that it can become profitable.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans with regard to these matters are described in Note 1. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Silberstein Ungar, PLLC

Silberstein Ungar, PLLC

Bingham Farms, Michigan

August 23, 2010

F-1









CEPHUS HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2009 AND 2008

 

 

ASSETS

 

 

 

2009

2008

Current Assets

 

 

Cash

$              176

$                64

Prepaid expenses

36,000

0

Total Current Assets

           36,176

                 64

 

 

 

Property and equipment, net

0

               163

 

 

 

TOTAL ASSETS

$         36,176

$              227

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

Liabilities

 

 

Current Liabilities

 

 

Accounts payable

$       229,307

$       229,307

Accrued expenses

865,500

690,500

Accrued interest

1,813,132

1,479,376

Accrued derivative liability

230,695

        250,744

License fees payable

200,000

        200,000

Due to related parties

          64,038

          74,688

Advances from an officer

          97,466

        102,816

Notes payable

        538,250

        565,750

Note payable - officer

     1,217,149

     1,229,649

Note payable – related party

          97,500

          95,000

Total Liabilities

5,353,037

     4,917,830

 

 

 

Stockholders’ Deficit

 

 

Series A Preferred Stock, $0.01 par value, 1,000,000 shares authorized; 2,225 shares issued and outstanding

22

22

Series B Convertible Preferred Stock, $0.01 par value; 850,000 shares authorized; 850,000 shares issued and outstanding

8,500

8,500

Series C Convertible Preferred Stock, $0.01 par value; 147,775 shares authorized; 147,775 shares issued and outstanding

1,478

1,478

Common stock; $0.001 par value; 150,000,000 shares authorized; 94,883,679 shares issued and outstanding (2008 – 74,613,521)

94,884

74,613

Additional paid-in capital

   16,406,025

   16,341,921

Stock subscription receivable

      (156,300)

      (156,300)

Non-controlling interest

(9,168)

(5,143)

Accumulated deficit

 (21,662,302)

 (21,182,694)

Total Stockholders’ Deficit

   (5,316,861)

   (4,917,603)

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

$         36,176

$              227

See accompanying notes to financial statements.

F-2









CEPHUS HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

 

 

 

 

2009

2008

 

 

 

REVENUE

$             168

$                  0

 

 

 

EXPENSES:

 

 

Selling, general and administrative

190,094

         225,089

 

 

 

LOSS FROM OPERATIONS

      (189,926)

      (225,089)

 

 

 

OTHER INCOME (EXPENSE):

 

 

Interest expense and financing costs

      (333,756)

      (333,756)

Change in derivative liability

20,049

0

Impairment of investments

0

(29,562)

Write off of loan payable

          20,000

0

TOTAL OTHER INCOME (EXPENSE)

      (293,707)

      (363,318)

 

 

 

LOSS BEFORE PROVISION FOR INCOME TAXES

      (483,633)

      (588,407)

 

 

 

PROVISION FOR INCOME TAXES

                  -

                   -  

 

 

 

LESS: LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST

4,025

5,143

 

 

 

NET LOSS

$    (479,608)

$    (583,264)

 

 

 

LOSS PER COMMON SHARE: BASIC AND DILUTED

$          (0.01)

$          (0.01)

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:  BASIC AND DILUTED

   78,861,437

    73,563,384















See accompanying notes to financial statements.


F-3








CEPHUS HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED  STATEMENT OF STOCKHOLDERS' DEFICIT

AS OF DECEMBER 31, 2009

 

 

 

Preferred Stock

 

Series A

Series B

Series C

 

Shares

Amount

Shares

Amount

Shares

Amount

Balance - December 31, 2008

2,225

$       22

850,000

$      8,500

147,775

$      1,478

 

 

 

 

 

 

 

Balance - December 31, 2009

  2,225

$       22

850,000

$      8,500

147,775

$      1,478


 

Common stock



Additional paid-in

Stock subscription

Non-controlling

Accumulated

Total Stockholders’ Deficit (including preferred stock from

 

Shares

Amount

capital

receivable

interest

deficit

above)

 

 

 

 

 

 

 

 

Balance, December 31, 2008

 74,613,521

$    74,613

$16,341,921

$   (156,300)

$      (5,143)

$ (21,182,694)

$    (4,917,603)

 

 

 

 

 

 

 

 

Prior year share adjustment

 (4,842)

(4)

4

-

-

-

0

 

 

 

 

 

 

 

 

Shares issued for services

 9,025,000

9,025

36,100

-

-

-

45,125

 

 

 

 

 

 

 

 

Shares issued for reduction in debt

6,250,000

6,250

25,000

-

-

-

31,250

 

 

 

 

 

 

 

 

Shares issued for cash

5,000,000

5,000

3,000

-

-

-

8,000

 

 

 

 

 

 

 

 









Net loss for the year ended December 31, 2009

-

-

-

-

(4,025)

(479,608)

(483,633)

 

 

 

 

 

 

 

 

Balance, December 31, 2009

94,883,679

$    94,884

$16,406,025

$   (156,300)

$      (9,168)

$   (21,662,302)

$    (5,316,861)               


See accompanying notes to financial statements.


F-4








CEPHUS HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

 

 

 

2009

2008

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

Net loss for the year

$      (479,608)

$    (583,264)

Adjustment to reconcile net loss to net cash used in operating activities:

 

 

Depreciation

                163

                536

Loss attributable to non-controlling interest

(4,025)

(5,143)

Change in derivative liability

(20,049)

0

Write off of note payable

         (20,000)

0

Impairment of investment

0

29,562

Issuance of common stock for services and expenses

9,125

             3,500

Changes in operating assets and liabilities:

 

 

Accounts payable

0

           38,672

Accrued expenses - net

         175,000

         255,196

Accrued interest

         333,756

         253,442

Net cash used in operating activities

(5,638)

(7,499)

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

Advances to/from related parties

             3,100

0

Shares issued for cash

             8,000

0

Advances from an officer - net

           (5,350)

             7,516

Net cash used in provided by financing activities

5,750

7,516

 

 

 

INCREASE IN CASH

                112

                  17

 

 

 

CASH, Beginning of year

                  64

                  47

 

 

 

CASH, End of year

$                176

$                64

 

 

 

SUPPLEMENTAL NON-CASH DISCLOSURES:

 

 

Cash paid for interest

$                    0

$                  0

Cash paid for income taxes

$                    0

$                  0

 

 

 

SUPPLEMENTAL NON-CASH INVESTING AND FINANCING DISCLOSURES:

 

 

Stock issued for services and recorded as prepaid expense

$           36,000

$                  0

Stock issued for reduction in notes payable and accrued expenses

$           31,250

$         17,000






See accompanying notes to financial statements.


F-5







CEPHUS HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2009


Note 1 - Organization and Significant Accounting Policies


Organization and Lines of Business

Cephus Holding Corp formerly Legend Mobile, Inc., (the "Company"), was incorporated in Delaware on January 13, 1998 and is the successor to Interactive Entertainment Studio, Inc. (IES). IES was incorporated in the State of Nevada on May 27, 1997 and was merged into the Company in March 1998 for the sole purpose of changing the domicile of the Company to Delaware. On June 27, 2002, the Company filed a Certificate of Amendment to its Certificate of Incorporation to amend the Company's Certificate of Incorporation name from PTN Media, Inc. to Legend Mobile, Inc. In October 2008, the Company amended its articles to change the name to Cephus Holding Corp.

  

The Company is a developer and marketer of branded mobile phone applications for the iPhone platform. The Company is an approved developer by Apple Computer to distribute its products on their iTunes store. The Company currently sells the “Iron Sheik Soundboard” and it distributes free of charge “MMA Underboss” -a newswire dedicated to mixed martial arts news.  The Company also has a license from Mixed Martial Arts Champion, Fedor Emelianeko to produce iPhone applications under his brand and is currently developing that application.

  

In February 2001, the Company formed Legend Credit as a wholly owned subsidiary.  On April 1, 2003, Mr. Peter Klamka, CEO of the Company, contributed the rights to an affinity credit card business valued at $37,000 to Legend Credit. Mr. Klamka's contribution has been determined pursuant to Accounting Principles Board Opinion No. 29, "Non monetary Transactions," using his cost basis in the investment, which is the most readily determinable cost.  In exchange for this contribution, Legend Credit issued to Mr.  Peter Klamka 60% of the issued and outstanding shares of Legend Credit common stock and the Company issued to Mr. Klamka 850,000 shares of Series B convertible preferred stock. These issuances were valued at $22,200 and $14,800, respectively.  The Company retains a 40% minority interest in Legend Credit which is accounted for using the equity method.  Effective October 1, 2004, Mr. Klamka contributed an additional 10% interest in Legend Credit to the Company that was valued at $3,700 (10% of $37,000, the original value of the affinity credit card business). The Company now owns 50% of Legend Credit and accounts for the subsidiary using the acquisition method. The subsidiary currently has no business operations.

  In July 1999, the Company formed Legend Studios, Inc. (formerly FragranceDirect.com, Inc.)  ("Legend Studios"), a majority owned subsidiary.   As of December 31, 2009, Legend Studios did not have any operations.


Basis of Presentation and Going Concern

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern.  The Company incurred a net loss for the year ended December  31, 2009 of  $479,618  and at  December  31,  2009,  had an accumulated  deficit of $21,637,883 and a working  capital  deficit of $5,316,861. In addition, the Company generates minimal revenue from its operations and is in default on the payment of notes payable and license fee payable obligations. These conditions raise substantial doubt as to the Company's   ability to continue as a going concern.   These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.


The Company plans to take the following steps that it believes will be sufficient to provide the Company with the ability to continue in existence.  The Company is seeking additional equity or debt capital to expand its mobile application business. 

F-6







CEPHUS HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2009


Note 1 - Organization and Significant Accounting Policies (continued)


Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its 91%-owned subsidiary, Legend Studios, and its 50% owned subsidiary, Legend Credit. Significant intercompany accounts and transactions have been eliminated.


Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company defines cash equivalents as all highly liquid debt instruments purchased with a maturity of three months or less, plus all certificates of deposit.


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 the consolidated financial  statements and the reported  amounts of revenue and expenses during the reporting periods. As of December 31, 2009, the Company used estimates in determining the value of common stock issued to consultants for services. Actual results could differ from these estimates.


Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash. The Company places its cash with high quality financial institutions and at times may exceed the FDIC $250,000 insurance limit. The Company extends credit based on an evaluation of the customer's financial condition, generally without collateral.  Exposure to losses on receivables is principally dependent on each customer's financial condition. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses, as required.


Comprehensive Income

The Company has adopted SFAS No. 130 (ASC220-10), "Reporting Comprehensive Income." This statement establishes standards for reporting comprehensive income and its components in a financial statement. Comprehensive income as defined includes all changes in equity (net assets) during a period from non-owner sources. Examples of items to be included in comprehensive income, which are excluded from net income, include foreign currency translation adjustments and unrealized gains and losses on available-for-sale securities. Comprehensive income (loss) is not presented in the Company's financial statements since there is no difference between net loss and comprehensive loss in any period presented.


Stock Based Compensation

Stock-based compensation is accounted for at fair value in accordance with SFAS No. 123 and 123 (R) (ASC 718).  During the year ended December 31, 2009, the Company has not adopted a stock option plan and has not granted any stock options.


Stock-based compensation represents the cost related to common stock and options to purchase common stock granted to employees and related parties of the Company. The Company determines the cost of common stock grants at the date the common stock was issued, based on the quoted market price of the Company’s common stock and recognizes the cost as expense over the requisite service period. The Company estimates the fair value of all warrants and options issued during the period using the Black-Scholes option-pricing model with the assumptions appropriate to the circumstances of the Company at the time of the transaction. There were no options or warrants issued during the year ended December 31, 2009.



F-7







CEPHUS HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2009


Note 1 - Organization and Significant Accounting Policies (continued)

                              

          

The Company records deferred tax assets for awards that result in deductions on the Company’s income tax returns, based on the amount of compensation cost recognized and the Company’s statutory tax rate in the jurisdiction in which it will receive a deduction. Differences between the deferred tax assets recognized for financial reporting purposes and the actual tax deduction reported on the Company’s income tax return are recorded in Additional Paid-In Capital.


Fair Value of Financial Instruments

For certain of the Company's  financial  instruments,  including  cash, accounts  payable,  accrued  expenses,  accrued  interest,  license fee payable, due to related parties, and advances from an officer,  the carrying  amounts  approximate fair value due to their short  maturities.  The amounts shown for notes payable also approximate fair value because current interest rates and terms offered to the Company for similar debt are substantially the same.


Property and equipment

Property and equipment is recorded at cost. Depreciation is provided on a straight-line basis over estimated useful lives of the assets.

Expenditures for maintenance and repairs are charged to operations as incurred while renewals and betterments are capitalized.  Gains and losses on disposals are included in the results of operations.


Revenue Recognition

The Company generates revenue from the sale of products on its web sites and through other channels, the sale of advertisements on radio stations it operated and service fees from the sale of debit cards. The Company recognizes revenue for these product sales when the product is shipped to the customer.  The Company recognizes revenue from the radio stations it operated when advertisements were aired.  The Company recognizes service fee revenue from the sale of debit cards at the time the customer is sent the debit card.  Shipping and handling costs are recorded as revenue and related costs are charged to cost of sales.


Income Taxes

Income taxes are computed using the asset and liability method.  Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws.  A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.


Reclassifications

Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statement presentation.


Impairment of Long-Lived Assets

In October 2001, the FASB issued SFAS No. 144 (ASC 360), "Accounting for Impairment or Disposal of Long-Lived Assets".  This statement also amends ARB No. 51 (ASC 810), "Consolidated Financial Statements", to eliminate the exception to consolidation for a subsidiary for which control is likely to be impaired. SFAS No. 144 (ASC 360) requires that long-lived assets  to be  disposed  of by sale,  including  those of  discontinued operations,  be measured at the lower of carrying  amount or fair value less cost to sell,  whether  reported in  continuing  operations  or in discontinued  operations.  SFAS No. 144 (ASC 360)  broadens  the  reporting  of discontinued  operations  to include all  components  of an entity with operations  that can be  distinguished  from the rest of the entity and that will be eliminated from the ongoing  operations of the entity in a disposal  transaction.  SFAS No. 144 (ASC 360) also establishes a

F-8







CEPHUS HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2009


Note 1 - Organization and Significant Accounting Policies (continued)


"primary-asset" approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used. The Company's adoption effective January 1, 2002 did not have a material impact to the Company's financial position or results of operations.


Earnings (Loss) Per Share

The Company reports earnings (loss) per share in accordance with SFAS No. 128 (ASC 260), "Earnings per Share."  Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted average number of common shares available.  Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share  except  that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.  Diluted earnings (loss) per share has not been presented since the effect of the assumed conversion of options and warrants to purchase common shares would have an anti-dilutive effect.  The following potential common shares have been excluded from the computation of diluted net loss per share for the year ended December 31, 2009 and 2008 because the effect would have been anti-dilutive:


 

2009

2008

Conversion of Series A preferred stock

 44,500

44,500

Conversion of Series B preferred stock

8,500,000

8,500,000

Conversion of Series C preferred stock

14,777,500

14,777,500

Total

23,322,000

23,322,000







All warrants and stock options were cancelled during the year ended December 31, 2007.


Non-Controlling Interest

In December 2007, the FASB issued SFAS No. 160 (ASC 810), “Non-controlling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (ASC 810)”, which addresses the accounting and reporting framework for minority interests by a parent company. SFAS 160 (ASC 810) also addresses disclosure requirements to distinguish between interests of the parent and interests of the non-controlling owners of a subsidiary. SFAS 160 (ASC 810) became effective beginning with our first quarter of 2009. We will be reporting minority interest as a component of equity in our Consolidated Balance Sheets and below income tax expense in our Consolidated Statement of Operations. As minority interest will be recorded below income tax expense, it will have an impact to our total effective tax rate, but our total taxes will not change. For comparability, we will be retrospectively applying the presentation of our prior year balances in our Consolidated Financial Statements.


Recently Issued Accounting Pronouncements

In April 2009, the Financial Accounting Standards Board (FASB) issued guidance for accounting for assets acquired and liabilities assumed in a business combination that arise from contingencies. This guidance modified earlier guidance to provide that contingent assets acquired or liabilities assumed in a business combination be recorded at fair value if the acquisition-date fair value can be determined during the measurement period. If not, such items would be recognized at the acquisition date if they meet the recognition requirements under GAAP for accounting for contingencies. In periods after the acquisition date, an acquirer shall account for contingent assets and liabilities that were not recognized at the acquisition date in accordance with other applicable GAAP, as appropriate. Items not recognized as part of the acquisition but recognized subsequently would be reflected in that subsequent period’s income. This guidance, which was effective for the Company when issued, has no impact on the Company’s current financial statements, but will apply to any future acquisitions.

F-9







CEPHUS HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2009


Note 1 - Organization and Significant Accounting Policies (continued)


In April 2009, the FASB issued guidance concerning interim disclosures about fair value of financial instruments requiring publicly traded companies to provide disclosure about the fair value of financial instruments whenever interim summarized financial information is reported. Previously, disclosures about the fair value of financial instruments were only required on an annual basis. Disclosure shall include the method(s) and significant assumptions used to estimate the fair value of financial instruments and shall describe changes in method(s) and significant assumptions, if any, during the period. This guidance was effective for interim and annual periods ending after June 15, 2009, and, as such, the Company began including this disclosure with its second quarter 2009 financial statements. 


Recently Issued Accounting Pronouncements (continued)

In May 2009, the FASB issued guidance regarding the disclosure of subsequent events. This guidance made no changes to current accounting but added required disclosures regarding the date through which the Company has evaluated subsequent events and whether that evaluation date is the date of financial statement issuance or the date the financial statements were available to be issued. This guidance was effective for interim and annual periods ending after June 15, 2009.      


In June 2009, the FASB issued guidance changing the approach used to determine the primary beneficiary of a variable interest entity. The guidance requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity, amends previous guidance for determining whether an entity is a variable interest entity, and adds as a reconsideration event any change in facts and circumstances where the holders of the equity investment at risk, as a group, lose the power to direct the activities of the entity that most significantly impact the entity’s economic performance. In addition, the revised guidance requires enhanced disclosures regarding an enterprise’s involvement in a variable interest entity. The new guidance is effective for the Company beginning January 1, 2010 and is not expected to have a material impact on the Company’s financial statements.      


In June 2009, the FASB issued FAS No.168 (ASC 105), “The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles” This statement established the FASB Accounting Standards Codification as the source of authoritative U.S. generally accepted accounting principles (GAAP). This statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. Adoption of this statement did not have a material effect on the Company’s financial statements.  Subsequent to the issuance of FAS No. 168 (ASC 105), the FASB has released Accounting Standard Update Nos. 2009-01 through 2009-15. The Company has reviewed each of these updates and determined that none will have a material impact on the Company’s financial statements.


Note 2 – Property and Equipment


Property and equipment as at December 31, 2009 and 2008 consisted of the following:


 

2009

2008

Computer equipment

$      11,376

$      11,376

Less: Accumulated depreciation

(11,376)

(11,213)

Net Fixed Assets

$               0

$           163





               

Depreciation expense for the years ended December 31, 2009 and 2008 was $163 and $565, respectively.





F-10







CEPHUS HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2009

Note 3 - Accrued Expenses


Accrued expenses at December 31, 2009 and 2008 consisted of the following:


 

2009

2008

Michael Jordan settlement

$    468,750

$    468,750

Management salary

393,750

218,750

Professional fees

3,000

3,000

Total Accrued Expenses

$    865,500

$    690,500







The amount owing to Michael Jordan bears interest at 12% per annum and is currently in default.  Accrued interest on that settlement to date amounts to $389,579.


Note 4 - Notes Payable - Officer


As of September 30, 2004, the Company converted $291,000 of advances from its CEO, Mr. Klamka, into a note payable that bears interest at 21% per annum and is payable upon demand.  As of December 31, 2009, the balance on this note is $263,496 with accrued interest related to this note amounted to $283,892.


During the year ended December 2006 the Company converted certain of the accrued amounts owing to the CEO and for salaries payable to the CEO into a note totaling $758,920.  This note is unsecured and bears interest at the rate of 21% per annum.  Accrued interest to date is $523,212.


Additional notes were issued during 2007 to Peter Klamka for unpaid salaries of $175,000 bearing interest at the rate of 8% per annum. Interest accrued to date is $29,750. Additionally, a note for expenses paid by Mr. Klamka on behalf of the Company totaling $29,733 was issued and bears interest at 10% per annum.  Interest accrued to date is $5,946.


During the year ended December 31, 2009, the Company converted $10,000 of the notes payable – officer into 2,000,000 shares of the company’s common stock.  


The total amount due for notes payable – officer is $1,217,149 as of December 31, 2009.


Note 5 - Notes Payable


In July and August 1997, the Company received $56,250 through the issuance of 8% promissory notes and common stock purchase warrants to acquire Company stock.  In 1999, one of the note holders converted $25,000 of principal and $5,500 of accrued interest into 6,100 shares of the Company's common stock. The remainder of the notes, which amounts to $31,250, continues to be outstanding notwithstanding the fact that payments owed by the Company there under are now past due.  Interest accrued as of December 31, 2009 aggregated to $27,875.


In July and August of 1999, the Company's Subsidiaries, Legend Studios issued 10% promissory notes aggregating to $160,000.  The notes are due the earlier of one year or the completion of an initial public offering of Legend Studios common stock. In addition, Legend Studios issued to the note  holders  an  aggregate  of  96,000  two-year  stock  purchase warrants to purchase  Legend  Studios  common stock at $3.50 per share. During the year ended  December  31, 2002,  two note holders  converted principal  and accrued  interest  of $35,000  and  $13,358  into 48,358 shares of the Company's common stock. As of December 31, 2009, $125,000 of these notes and accrued interest of $127,084 are still outstanding. These notes were in default as of December 31, 2006.



F-11







CEPHUS HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2009

Note 5 - Notes Payable(continued)


In August  2001,  the Company  issued  notes  payable for  $100,000 and $300,000  which  were  due in 60 days  and 14  days,  respectively. The balance of those loans as of December 31, 2009 was $100,000 and $282,000, respectively.


In October 2003, the Company issued a note payable in the amount of $20,000.  The note was due 45 days after issuance.  The note was forgiven in 2009 and written off as other income.


During the year ended December 31, 2009, the Company converted $21,250 of the notes payable into 4,250,000 shares of the company’s common stock.  


The total amount due for notes payable is $538,250 as of December 31, 2009.


Note 6 – Notes Payable – Related Party


The Company issued a note to Eric Joffe for unpaid salaries for 2006 for $100,000 of which $2,500 was repaid. The remaining balance of $97,500 bears interest at 7% per annum and accrued interest to date is $16,139.


Note 7 - Stockholders' Deficit


Series A Preferred Stock

The Company has 1,000,000 shares of $0.001 par value Series A Preferred Stock ("Series A") authorized of which 2,225 shares are issued and outstanding at December 31, 2009. Each share of Series A can be converted into 20 shares of common stock.


Series B Convertible Preferred Stock

The Company has 850,000 shares of $0.01 par value Series B Convertible Preferred Stock (‘Series B”) authorized of which 850,000 shares are issued and outstanding at December 31, 2009.


In the event of a voluntary or involuntary liquidation,  dissolution or winding  up of the  Company,  prior to the time  the  Series B  becomes convertible  into  common  shares,  the  holders  of  Series B shall be entitled to $0.01 per share. In the event of a voluntary or involuntary liquidation,  dissolution  or winding up of the Company  after the time the Series B becomes  convertible  into common  shares,  the holders of Series B shall be entitled  to share with the  holders of common  stock pari  passu in the assets of the  Company,  on an as  converted  basis, whether such assets are capital or surplus of any nature. The Series B shall be convertible upon the earlier to occur of: (i) the date the Company generates net profits in any two consecutive fiscal quarters or (ii) April 1, 2006.


The  conversion  of  Series B shall be on the  basis of ten  shares  of common  stock for one Series B share,  as may be adjusted  from time to time. Upon conversion, the holder of the Series B will be required to pay to the Company a conversion price for each share of common stock equal to $0.10.


The holders of the Series B shall vote on all matters with the holders of the common stock (and not as a separate class) on a ten votes per share basis.  The holders of the Series B shall be entitled to receive all notices relating to voting as are required to be given to the holders of the common stock.


During 2003, the Company issued to Mr. Peter Klamka, the Company's CEO, 850,000 shares of Series B as consideration for the contribution of an affinity credit card business to Legend Credit.



F-12







CEPHUS HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2009


Note 7 - Stockholders' Deficit (continued)


Series C Convertible Preferred Stock


The Company has 147,775 shares of $0.01 par value Series C Convertible Preferred Stock (“Series C”) authorized of which 147,775 shares are issued and outstanding at December 31, 2009.


In the event of a voluntary or involuntary liquidation,  dissolution or winding  up of the  Company  prior  to the time  the  Series C  becomes convertible  into  common  shares,  the  holders  of  Series C shall be entitled to $0.01 per share. In the event of a voluntary or involuntary liquidation,  dissolution  or winding up of the Company  after the time the Series C becomes  convertible  into common  shares,  the holders of Series C shall be  entitled  to share with the holders of  shares of common stock and Series B convertible preferred stock pari passu in the assets of the Company, on an as converted  basis, whether such assets are capital or surplus of any nature.   The Series C shall be convertible upon the earlier to occur of:  (i) the date the Company generates net profits in any two consecutive fiscal quarters; (ii) April 1, 2006; or (iii) any date that the market price per share of common stock equals or exceeds $0.50.


The  conversion of Series C shall be on the  basis of one hundred shares of common stock for one Series C share,  as may be adjusted  from time to time. Upon conversion, the holder of the Series C will be required to pay to the Company a conversion price for each share of common stock equal to $0.10.


Series C Convertible Preferred Stock (continued)

The holders of the Series C shall vote on all matters with the holders of the common stock (and not as a separate class) on a ten votes per share basis.  The holders of the Series C shall be entitled to receive all notices relating to voting as are required to be given to the holders of the common stock.


During 2004, the Company issued to Mr. Peter Klamka, the Company's CEO, 147,775 shares of Series C as consideration for the contribution of an additional 10% ownership in Legend Credit. (See Note 3)


Common Stock

During the year ended December 31, 2009 the Company issued 75,000 shares of common stock for services rendered totaling $375. Also during the year ended December 31, 2009 the Company issued 5,000,000 shares of common stock for cash totaling $8,000. Additionally during the year ended December 31, 2009, the Company issued 8,950,000 shares of common stock for services rendered for consideration equal to $44,750, and 6,250,000 shares of common stock for reduction of various notes payable equal to $31,250.


Note 8 - Commitments and Contingencies


Litigation

Legend Studios, Inc. vs. Quorum Radio Partners, Inc., Quorum Radio Partners of Virginia, Inc. and Quorum Communications, Inc.


Legend Studios lawsuit arises from defendants' breach of the parties' Asset Purchase Agreement and Time Brokerage Agreement that govern the sale, programming, operations and revenues of certain radio stations (KELE-AM, KELE-FM, WIQO, WKEY and WKCI). Legend Studios seeks specific performance of the agreements, as well as in excess of $1.5 million in damages.  Defendants have been served with the complaint, but have not filed answers and may be subject to entry of default.  Quorum Radio Partners of Virginia, Inc., however, filed a bankruptcy petition after being served with the complaint, which stays Legend Studios’ proceedings solely against that entity.


F-13







CEPHUS HOLDING CORP. AND SUBSIDIARIES

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2009



Note 8 - Commitments and Contingencies(continued)


In the ordinary course of business, the Company is generally subject to claims, complaints, and legal actions. At December 31, 2009, management believes that the Company is not a party to any action which would have a material impact on its financial condition, operations, or cash flows.


Commitments

In September, 2007, Legend Credit, Inc. entered into an agreement with UCE, Inc. in which the Company agreed to contribute $500,000 toward production, marketing and promotion costs for a weekly mixed martial arts event scheduled and produced by UCE, Inc.  The Company contributed $29,562 toward the agreed-upon.  The investment of $29,562 was fully impaired during the year ended December 31, 2008.


Note 9 – Subsequent Events


Management has evaluated subsequent events through August 23, 2010, the date on which the financial statements were issued, and has determined it does not have any material subsequent events to disclose.

































F-14






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