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NYXIO TECHNOLOGIES CORP - 10-K/A - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
(Edgar Glimpses Via Acquire Media NewsEdge)
This discussion summarizes the significant factors affecting the operating
results, financial condition, liquidity and cash flows of the Company and its
subsidiaries for the year ended December 31, 2011 and for the period of July 8,
2010 (inception) to December 31, 2010. The discussion and analysis that follows
should be read together with our consolidated financial statements and the notes
to the consolidated financial statements included elsewhere in this Annual
Report on Form 10-K. Except for historical information, the matters discussed in
this section are forward looking statements that involve risks and uncertainties
and are based upon judgments concerning various factors that are beyond the
Company's control. Consequently, and because forward-looking statements are
inherently subject to risks and uncertainties, the actual results and outcomes
may differ materially from the results and outcomes discussed in the
forward-looking statements. You are urged to carefully review and consider the
various disclosures made by us in this report.
OVERVIEW
On July 5, 2011, we closed our Share Exchange Agreement with Nyxio Technologies,
Inc. ("Nyxio") through the issuance of 22,500,000 shares of our common stock for
100% of the outstanding shares of Nyxio. As a result of the Share Exchange
Transaction, Nyxio became our wholly-owned subsidiary.
Through our wholly-owned subsidiary, we develop and provide innovative
technology for the consumer electronics market at a reasonable cost with an
integrated solutions platform. We are determined to become a leading-edge driver
and developer of technology across a wide range of vertical markets that include
retail, education, and distribution. We strive to reduce the overall
environmental footprint of end users by consolidating key hardware into more
efficient devices such as the VioSphere, our flagship product, which management
believes is the world's first TV with a built-in PC. We are dedicated to
bringing the very best innovation to market across a wide range of products that
include Tablet PC's, All in One PC's, Smart TV's, and groundbreaking concepts
like the Venture Mobile Media Viewers. Our development process is identifying
technological deficiencies within the consumer electronics market and offering
products that provide creative solutions.
Since July 8, 2010, the inception date of Nyxio, through December 31, 2011, we
have generated revenue of $21,388 and have incurred a net loss of
$5,095,876. Our greatest challenges which have prohibited us from executing our
business plan are as follows:
· Lack of adequate funding to obtain a small inventory, establish a healthy PR
campaign, recruit a world class management team, and fund future development
to enhance current product features and new products to stay ahead of the
technology curve.
· Manufacturing in Asia - Too far away to monitor quality and suppliers without
costly travel.
· Lack of adequate funding to retain skilled sales team .
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Our current and future operations are focused on continuing to carry out our
business plan through the marketing and continued development of our current
products, including the VioSphere, Omega Classic tablet PC, Venture MMV
technology and Ascend keyboards, and our future products, continued development
efforts, and the continued evaluation of potential strategic acquisitions and/or
partnerships.
Our operations to date have consisted primarily of the following:
· Enhancing product features and esthetics
· Negotiations to reduce product cost and enhance quality
· Building a reliable Bill of Material for all products and sourcing from
established suppliers
· Work with technology partners such as Avnet, Intel, and AMD, with whom we have
collaboration agreements, to develop new CPU list of options and board
options. To date we have not entered into any Purchase Orders with these
partners.
· Develop new products with alternate revenue streams, such a gaming and cloud
commerce
· Develop clear and concise marketing, sales, and specification literature and
tools
Our efforts are directed at generating revenue through the sales of our current
products, which are available for purchase at the following locations:
Amazon.com., OrderBorder, Rapid Buyer, Focus, University Book Stores, and at our
proprietary web-site.
Key factors affecting our results of operations include revenues, cost of
revenues, operating expenses and income and taxation.
Critical Accounting Policies and Estimates
Principles of Consolidation
The financial statements as of December 31, 2011 and for the year then ended
include Nyxio Technologies Corporation ("NTC") and its wholly owned subsidiary,
Nyxio Technologies, Inc. ("NTI"). The financial statements for the period of
July 8, 2010 (inception) to December 31, 2010 are that of Nyxio Technologies,
Inc. ("NTI"). On July 5, 2011, the Company completed its reverse acquisition
with LED Power Group whereby Nyxio Technologies, Inc. was the accounting
acquirer and surviving entity. All significant inter-company transactions and
balances have been eliminated. NTC and its subsidiary are collectively referred
to herein as the "Company".
Basis of presentation
The Company is in the development stage in accordance with Accounting Standards
Codification ("ASC") Topic No. 915.
Inventory
Inventories are stated at the lower of cost or market. Cost is determined on a
standard cost basis that approximates the first-in, first-out (FIFO) method.
Market is determined based on net realizable value. Appropriate consideration is
given to obsolescence, excessive levels, deterioration, and other factors in
evaluating net realizable value.
Revenue recognition
The Company recognizes revenue in accordance with ASC subtopic 605-10 (formerly
SEC Staff Accounting Bulletin No. 104 and 13A, "Revenue Recognition") net of
expected cancellations and allowances. As of December 31, 2011 and 2010, the
Company evaluated evidence of cancellation in order to make a reliable estimate
and determined there were no material cancellations during the years and
therefore no allowances has been made.
The Company's revenues, which do not require any significant production,
modification or customization for the Company's targeted customers and do not
have multiple elements, are recognized when (i) persuasive evidence of an
arrangement exists; (ii) delivery has occurred; (iii) the Company's fee is fixed
and determinable; and (iv) collectability is probable.
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Substantially all of the Company's revenues are derived from the sales of Smart
TV and Tablet PC technology and products. The Company's clients are charged for
these products on a per transaction basis. Pricing varies depending on the
product sold. Revenue is recognized in the period in which the products are
sold.
Results of Operations - For the year ended December 31, 2011
On July 5, 2011 we consummated our merger with Nyxio. Pursuant to the agreement,
the transaction was accounted for as a reverse merger whereby Nyxio was deemed
the accounting acquirer and Nyxio Corp., the legal acquirer accordingly, the
financial statements of the Company reflect the historical operating activities
of Nyxio and the historical equity of Nyxio Corp. Nyxio was incorporated on July
8, 2010 (inception) and therefore does not have two complete twelve-month
periods available for meaningful comparison.
Revenue and Cost of Goods
During the year ending December 31, 2011, we achieved gross revenue of $11,283
which is derived from the sale of our proprietary products including the Omega
Classic tablet PC, Venture MMV (mobile media viewer) technology and Ascend
keyboard PC products. The corresponding cost of goods sold, comprised primarily
of assembly and transportation costs, totaled $7,603 or 67% realizing a gross
profit of $3,680 or 33%. As a development stage enterprise, we had limited
capital resources available to fund product production nor were we able to fully
execute our sales and marketing plan. We believe that our merger activities have
provide new opportunities to obtain the necessary capital to fully execute our
business plan and further, anticipate monthly revenue growth in 2012 as a
result.
Operating Expenses
The Company's operating expenses for the year ended December 31, 2011 totaled
$4,156,865 and consists primarily of a $3,967,500 consulting expense incurred in
connection with the fair value of a warrant grant to our CEO, pursuant to our
July 2011 Share Exchange Agreement. Additionally, we recognized $190,835 in
professional expense which includes our legal and accounting fees. In large,
these costs are non-recurring since they specifically related to our July merger
activities. Therefore, in 2012, we anticipate seeing a decline in both
consulting and professional expenses.
Net (Loss) Income
Net (loss) for the year ended December 31, 2011 was $4,992,038 The Net Loss is
primarily the result of the consulting fees described above as well as minimal
initial revenues generated during the first full operational and transitional
year.
Period from inception, July 8, 2010, to December 31, 2011
Since July 8, 2010 (inception) through December 31, 2011, our revenue has
totaled $21,388 and we have incurred a net losses of $5,095,876, primarily due
to consulting fees paid during 2011. We expect to continue to have negative cash
flows as our business plan is implemented, however we expect to see swift
results from the implementation of our sales and marketing plan and expect to
see significant improvement during 2012 and beyond.
Liquidity and Capital Resources
Overview
As of December 31, 2011, we had cash and equivalents on hand of $1,341, and a
working capital (deficit) of $314,265. We determined that our cash on hand and
working capital were not sufficient to meet our current anticipated cash
requirements. As such, we evaluated several options to obtain short term
financing and entered into a Securities Purchase Agreement with ICG USA, LLC as
discussed below. While we hope to see a significant increase in revenue towards
the latter part of the second quarter of 2012, we will continue to rely on funds
obtained through the issuance of debt and equity securities throughout 2012. We
may enter into further debt and equity agreements to fund operations and
inventory requirements if management feels it is required, and we expect to see
sharp increases in revenues to fund future operating expenses. Our operations to
date have been primarily funded through the issuance of debt and equity
securities
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Specifically, on June 30, 2011, we entered into a promissory note with Coach
Capital LLC in the amount of $111,000 (the "Coach Note"). The Coach Note is
unsecured, bears interest at 10% per annum and is due on demand. The holder of
the Coach Note may elect to convert all or part of the indebtedness owing under
the Coach Note into our securities at such rate as that being offered to
investors at the time of conversion. During the year ended December 31, 2011, we
sold 1,555,000 shares of our common stock to certain accredited investors in
exchange for cash totaling $777,500 in accordance with our form of Securities
Purchase Agreement requiring payment equal to $0.50 per share. In the fourth
quarter of 2011 we sold an additional 2,100,000 shares of our common stock in
exchange for cash totaling $210,000 in accordance with our form of Securities
Purchase Agreement requiring payment equal to $0.10 per share.
Subsequent to our fiscal year ended December 31, 2011, on February 16, 2012, we
entered into a Securities Purchase Agreement with and issued a Convertible
Promissory Note in the amount of $200,000, at 6% interest per annum, to ICG USA,
LLC (the "ICG Note"). The ICG Note is convertible into shares of our common
stock beginning six months after the date of issuance of the ICG Note at the
discretion of ICG USA, LLC. The ICG Note is due February 16, 2013.
Additionally, on February 21, 2012, we entered into a securities purchase
agreement (the "Purchase Agreement") with Socius CG II, Ltd., a Bermuda exempted
company ("Socius"). Under the terms and subject to the conditions of the
Purchase Agreement, we have the right, in our sole discretion, over a term of
two years from the closing of the Purchase Agreement, to demand through separate
tranche notices that Socius purchase up to a total of $5 million of redeemable
Series A Preferred Stock. In order to effectuate a future issuance of Series A
Preferred Stock, on March 22, 2012, after receiving approval of a majority of
our outstanding common stock, we filed an amendment to our Articles of
Incorporation to designate 1,500 shares of blank check preferred stock, and on
March 26, 2012, we filed a Certificate of Designations of Preferences, Rights
and Limitations to authorize the issuance of 1,100 shares of Series A Preferred
Stock. In our sole discretion, we have the right to issue to Socius, subject to
the terms and conditions of the Purchase Agreement, one or more tranche notices
to purchase a certain dollar amount of such Series A Preferred Stock. As of the
date of this Annual Report, we have not provided Socius with a tranche notice
and no Series A Preferred Stock has been issued.
To meet our future objectives, we will need to meet our revenue objectives
and/or sell additional equity and debt securities, which could result in
dilution to current shareholders. The incurrence of indebtedness would result in
increased debt service obligations and could require us to agree to operating
and financial covenants that would restrict our operations. Financing may not be
available in amounts or on terms acceptable to us, if at all. Any failure by us
to raise additional funds on terms favorable to us, or at all, could limit our
ability to expand our business operations and could harm our overall business
prospects.
Our current cash requirements are significant due to planned development and
marketing of our current products, and we anticipate generating losses. In
order to execute on our business strategy, we will require additional working
capital, commensurate with the operational needs of our planned marketing,
development and production efforts. Our management believes that we should be
able to raise sufficient amounts of working capital through debt or equity
offerings, as may be required to meet our short-term obligations. However,
changes in our operating plans, increased expenses, acquisitions, or other
events, may cause us to seek additional equity or debt financing in the future.
We anticipate continued and additional marketing, development and production
expenses. Accordingly, we expect to continue to use debt and equity financing
to fund operations for the next twelve months, as we look to expand our asset
base and fund marketing, development and production of our products.
There are no assurances that we will be able to raise the required working
capital on terms favorable, or that such working capital will be available on
any terms when needed. Any failure to secure additional financing may force us
to modify our business plan. In addition, we cannot be assured of profitability
in the future.
Off-Balance Sheet Arrangements
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We have not entered into any other financial guarantees or other commitments to
guarantee the payment obligations of any third parties. We have not entered into
any derivative contracts that are indexed to its shares and classified as
shareholder's equity or that are not reflected in its consolidated financial
statements. Furthermore, we do not have any retained or contingent interest in
assets transferred to an unconsolidated entity that serves as credit, liquidity
or market risk support to such entity. We do not have any variable interest in
any unconsolidated entity that provides financing, liquidity, market risk or
credit support to it or engages in leasing, hedging or research and development
services with it.
Contractual Obligations
The following table outlines payments due under our significant contractual
obligations over the periods shown, exclusive of interest:
Payments due by Period
Contractual
Obligations At
December 31, Less than One to
2011 One Year Three Years Three to Five Years More than Five Years Total
Operating Lease
Obligations $ 25,048 25,799 $ 50,847
Debt Obligations 305,137 305,137
Capital
Expenditure
Obligations
Purchase
Obligations
Other Long-Term
Liabilities
The above table outlines our obligations as of December 31, 2011 and does not
reflect any changes in our obligations that have occurred after that date.
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