**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-K**

(Mark( 

| x | Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 |
|---|--------------------------------------------------------------------------------------|

 

For the Fiscal Year Ended December 31, 2009

 

| o |   | Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 |
|---|--------|------------------------------------------------------------------------------------------|

 

For the transition period from ______________to ______________

 

**Commission File Number: 000-31199**

 

**CALYPSOMEDIASERVICESGROUP,INC.**

(Exact name of registrant as specified in its charter)

 

|   | **Nevada** | **87-0638338** |
|--------|------------|----------------|

|   | (State or other jurisdiction of | (I.R.S. Employer |
|--------|---------------------------------|------------------|

|   | incorporation or organization) | Identification No.) |
|--------|--------------------------------|---------------------|

 

**12 North Washington Street, Montoursville, Pennsylvania 17754**

(Address of principal executive offices) (Zip Code)

 

| Registrant's telephone number, including area code: | **(570) 368-7633** |
|-----------------------------------------------------|--------------------|

 

**Securities registered pursuant to Section 12(b) of the Act:**

**None**

 

**Securities registered pursuant to Section 12(g) of the Act:**

**Common Stock, $0.00001 par value**

 

| Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. |
|-------------------------------------------------------------------------------------------------------------------------|

|   | Yes o |   | No x |
|--------|-------|--------|------|

 

| Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. |
|------------------------------------------------------------------------------------------------------------------------------|

|   | Yes o |   | No x |
|--------|-------|--------|------|

 

Indicate  Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the SeSecurities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was requwas required to file such reports), and (2) has been subject to such filing requirements for the past            90 days.

|   | Yes x | No o |   |
|--------|-------|------|--------|

 

Indicate  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained, herein, a and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorpoi  incorporatedd by reference in Part III of this Form 10-K or any amendment to this            Form 10-K. o 

 

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was            required to submit and post such files).                                                                                        Yes o No o

 

Indicate  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

|   | Large accelerated filer | o |  | Accelerated filer | o |  |
|--------|-------------------------|---|--|-------------------|---|--|

|   | Non-accelerated filer | o |  | Smaller reporting company | x |
|--------|-----------------------|---|--|---------------------------|---|

|   | (Do not check if a smaller reporting company) |
|--------|-----------------------------------------------|

 

IndicateIIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x 

State the

State the aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of June 30, 2009, the last business day of the registrant’s most recently completed second fiscal quarter:            $1,975,000 based on 79% of the 5,000,000 common shares at a price of $0.50 per share.

 

**Note.**—If a determination as to whether a particular person or entity is an affiliate cannot be made without involving unreasonable effort and expense, the aggregate market value of the common stock held by non-affiliates may be calculated on the basis of assumptions reasonable            under the circumstances, provided that the assumptions are set forth in this Form.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practical date. 5,000,000 shares of Common Stock April 15, 2010

 

**DOCUMENTS INCORPORATED BY REFERENCE**

 

|   | A description of "Documents Incorporated by Reference" is contained in Part IV, Item 15.

 

  |
|--------|----------------------------------------------------------------------------------------------------------|

 

 

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**CALYPSO MEDIA SERVICES GROUP, INC.**

 

**TABLE OF CONTENTS**

 

|   | Page |
|--------|------|

**PART I**

 

| Item 1. | Business | 3 |
|---------|----------|---|

 

| Item 1A. | Risk Factors | 6 |
|----------|--------------|---|

 

| Item 1B. | Unresolved Staff Comments | 10 |
|----------|---------------------------|----|

 

| Item 2. | Properties | 10 |
|---------|------------|----|

 

| Item 3. | Legal Proceedings | 11 |
|---------|-------------------|----|

 

| Item 4. | Removed and reserved by the SEC | 11 |
|---------|---------------------------------|----|

 

**PART II**

 

| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer |
|---------|-------------------------------------------------------------------------------------|

|   | Purchases of Equity Securities | 11 |
|--------|--------------------------------|----|

 

| Item 6. | Selected Financial Data | 12 |
|---------|-------------------------|----|

 

| Item 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 12 |
|---------|---------------------------------------------------------------------------------------|----|

 

| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 14 |
|----------|------------------------------------------------------------|----|

 

| Item 8. | Financial Statements and Supplementary Data | 14 |
|---------|---------------------------------------------|----|

 

| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 14 |
|---------|--------------------------------------------------------------------------------------|----|

 

| Item 9A(T). | Controls and Procedures | 15 |
|-------------|-------------------------|----|

 

| Item 9B | Other Information | 18 |
|---------|-------------------|----|

 

**PART III**

 

| Item 10. | Directors, Executive Officers and Corporate Governance | 18 |
|----------|--------------------------------------------------------|----|

 

| Item 11. | Executive Compensation | 20 |
|----------|------------------------|----|

 

| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder |
|----------|----------------------------------------------------------------------------------------|

|   | Matters | 21 |
|--------|---------|----|

 

| Item 13. | Certain Relationships and Related Transactions and Director Independence | 21 |
|----------|--------------------------------------------------------------------------|----|

 

| Item 14. | Principal Accounting Fees and Services | 22 |
|----------|----------------------------------------|----|

 

**PART IV**

 

| Item 15. | Exhibits, Financial Statement Schedules. | 23 |
|----------|------------------------------------------|----|

 

|   | Signatures | 39 |
|--------|------------|----|

 

 

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**EXPLANATORY NOTE**

 

This Annual Report on Form 10-K for the year ended December 31, 2009 of Calypso Media Services Group, Inc. includes the re-audited financial statements for the year ended December 31, 2008. The previously issued financial statements for the fiscal year  ending December 31, 2008 were audited by Moore and Associates, Chartered, whose registration with the Public Company Accounting Oversight Board                was revoked in August of 2009.

____________________________

 

 

**PART I**

 

| **Item 1.** | **Business.** |
|-------------|---------------|

 

**Business Development**

 

|   | *History* |
|--------|-----------|

 

We incorporated on July 27, 1999 in the State of Delaware as Calypso Financial Services, Inc. Our original purpose was to actively seek potential operating businesses and/or business opportunities, with the intent to acquire or merge with such businesses. Following our organization, we issued a total of 1.5 million shares of our common stock.

 

On December 31, 2007, we completed the acquisition of Media Depot, Inc., a Nevada corporation, changed our corporate domicile to the State of Nevada and changed our name to Calypso Media Services Group, Inc. As a result of the acquisition, Media Depot became our wholly owned subsidiary engaged in offering a full line of advertising services to manufacturers,            distributors and dealers across the United States and Canada.

 

Our principal executive offices are located at 12 North Washington Street, Montoursville, Pennsylvania 17754, telephone number (570) 368-7633. We also maintain a satellite office in Lonoke, Arkansas, telephone number, (501) 676-0233. Our website can be accessed at            www.CalypsoAdvertising[dot]com.

 

**Current Business Activities**

 

Media Depot is a national agency specializing in co-op advertising offering an array of services ranging from buying and planning media in radio, TV, cable, print or outdoor advertising, to creating print ads and producing electronic commercials. Media Depot was founded in March 2005 by combining its operations with Media Max, Inc., a privately held corporation            operating since 1998. In August 2007, Media Depot acquired all of the assets, properties, goods, inventories, contracts and other intangible assets of Media Max, which then became a subsidiary of Media Depot. Both companies offer a full line of advertising services to manufacturers, distributors and dealers. Unless otherwise indicated, references herein to Media Depot will include the operations of Media Max.

 

Our objective is to offer quality advertising services at a reduced cost to clients. A typical media agency will bill clients for creative expense. However, Media Depot provides these services at no cost, which we consider a primary selling tool when soliciting clients. In seeking prospective clients, we first identify targeted manufacturer clients, establish            corporate relationships that lead to distributors/dealers, and then implement ad campaigns for segmented client groups. Our target markets are manufacturers that use a co-op advertising strategy with their distributor/dealer network. Media Depot offers a cohesive ad campaign for the manufacturer as well as advertising buying power for the distributor/dealer that they otherwise would not have. Media Depot aggressively negotiates rates for the benefit of clients resulting in increased            exposure for the client’s advertising campaign.

 

Media Depot also offers, through an arrangement with Rovion, “*InPerson Moving Media*,” a unique way to deliver video characters on a web site with a personalized message to viewers. *InPerson Moving Media*runs video clips of actors, spokespersons or            company representatives that draw a visual connection with customers visiting web sites. This allows the client’s web site to get personal by delivering content in a way that truly speaks to their customers.

 

Media Depot is experienced with many local and regional markets in the United States. Its media buyers have in the aggregate over 30 years of experience in the advertising arena. Media Depot offers an array of services as outlined below:

 

|   | *Media & Marketing* |
|--------|-------------------------|

|   | ● | Media buying & planning |
|--------|---------|-----------------------------|

|   | ● | Radio |
|--------|---------|-------|

|   | ● | Network TV |
|--------|---------|------------|

|   | ● | Cable |
|--------|---------|-------|

|   | ● | Newspaper |
|--------|---------|-----------|

|   | ● | Magazine |
|--------|---------|----------|

|   | ● | Direct mail |
|--------|---------|-------------|

|   | ● | Outdoor |
|--------|---------|---------|

|   | ● | Market research  |
|--------|---------|------------------|
|        | ● | Co-Op management |

 

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|   | *Graphic Design* |
|--------|------------------|

|   | ● | Logo design |
|--------|---------|-------------|

|   | ● | Point of purchase |
|--------|---------|-------------------|

|   | ● | Display design |
|--------|---------|----------------|

|   | ● | Outdoor advertising |
|--------|---------|---------------------|

|   | ● | Printed materials |
|--------|---------|-------------------|

|   | ● | Newspaper ads |
|--------|---------|---------------|

|   | ● | Magazine ads |
|--------|---------|--------------|

|   | ● | Business cards |
|--------|---------|----------------|

|   | ● | Door hangers |
|--------|---------|--------------|

|   | ● | Direct mail |
|--------|---------|-------------|

|   | ● | Brochures |
|--------|---------|-----------|

|   | ● | Postcards |
|--------|---------|-----------|

|   | ● | Inserts |
|--------|---------|---------|

|   | *Video* |
|--------|---------|

|   | ● | Television scripts |
|--------|---------|--------------------|

|   | ● | Television storyboards |
|--------|---------|------------------------|

|   | ● | Television production |
|--------|---------|-----------------------|

|   | *Radio* |
|--------|---------|

|   | ● | Radio scripts |
|--------|---------|---------------|

|   | ● | Professional voices |
|--------|---------|---------------------|

|   | ● | Radio production |
|--------|---------|------------------|

|   | *Interactive Media* |
|--------|---------------------|

|   | ● | Web site consulting |
|--------|---------|---------------------|

|   | ● | Web site design |
|--------|---------|-----------------|

|   | ● | Custom graphics |
|--------|---------|-----------------|

|   | ● | Web Hosting |
|--------|---------|-------------|

 

Certain costs are directly attributable to each advertising campaign including creative, planning and verification of ads placed. These costs represent approximately 10% of a campaign's budget. Most agencies bill clients for creative expense, but Media Depot provides creative services at no cost. We believe this an important selling tool when soliciting            clients.

 

Our overall strategy is to first identify targeted manufacturer clients, establish corporate relationships that lead to distributors/dealers, and then implement ad campaigns for segmented client groups that benefit from pricing leverage. Our target markets are manufacturers that utilize a Co-Op advertising strategy with their distributor/dealer network. We offer a            cohesive ad campaign for the manufacturer as well as advertising buying power for the distributor/dealer that they otherwise would not have.

 

A typical advertising agency generates a 15% agency fee and does not generally negotiate rates for the benefit of the client. Media Depot compares rate card costs with the client's past invoices, reviews circulation/subscriber numbers, and then contacts the media offering what our buyers feel is a competitive price for the client's ads. We aggressively negotiate            rates for the benefit of the client that equates to increased exposure for the client’s advertising campaign. Because we are not necessarily tied to any single media, the media will bid for a customer's advertising budgets.

 

**Services**

 

We are a full-service advertising agency offering media planning and placement for clients throughout the United States and Canada. In addition to traditional media, we offer Search Engine Marketing campaigns that utilize optimized landing pages, trackable phone numbers and automatic email response. We also specialize in Co-Op advertising campaigns for manufacturers            and dealers.

 

We aggressively negotiate media rates that will deliver more ads per dollar spent for the client, which results in what we believe to be a competitive advantage. We also handle all aspects of creating, buying and planning media in radio, TV, cable, print and outdoor advertising.

 

Through an agreement with Rovion, we offer “*InPerson Moving Media*,” a unique way to deliver video characters on web sites with a personalized message to anyone who visits a website. This product runs video clips of actors, spokespeople or company representatives, that can draw a visual connection with            customers visiting web sites. Learning what a company does online is no longer about reading content, but about viewing and listening. Moving Media adds a personal touch to a client’s web site by delivering content that truly speaks to their customers.

 

 

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**Trademarks and Copyrights**

 

We do not typically own trademarks or copyrights on properties on which our services and products are based. These rights are owned or controlled by the creator of the property or by the entity which licenses its intellectual property rights, such as a motion picture or television producer. 

 

**Markets and Competition**

 

Media Depot operates in a highly competitive marketplace. Principal competitors include Interpublic Group, Catalina Marketing Group, Omnicom Group Inc. and other local and national advertising agencies. We also compete with various local companies in each regional market. We believe the principal competitive factors affecting our business are development of client            marketing and promotional strategies, unique consumer insights, creative execution, licenses, selection, price and service quality. We must compete with companies that have far more extensive sales and development staffs and significantly greater financial resources.

 

Management believes that we are competitive in our offered services and the marketing and promotional strategies we develop. We also use bulk buying of advertising time and space so that we can offer reduced rates to clients. Further, by not charging for creative expenses, clients realize additional savings. We believe that the Moving Media product is unique to the            marketplace and gives us an advantage when competing for on-line advertising business.

 

**Creative Expertise**

 

Some Media Depot clients require that we provide certain creative services to produce ads. Media Depot employs experienced graphic design persons to create ads for the required media as a client demands. We also employ creative writing and in-house production personnel as needed.

 

**Government Regulation**

 

|   | Our business may be subject to certain government regulations and agencies, such as truth in   |
|--------|----------------------------------------------------------------------------------------------------------|

advertising and legal disclaimers for certain advertisements, in addition to certain consumer advocacy groups.

 

**Employees**

 

Media Depot presently has 14 full time employees, three part-time employees and one consultant. We anticipate that during the next 12 months, we will add approximately 10 employees, including a chief operating officer. Media Depot’s employees are not members of any union, nor have they entered into any collective bargaining agreements, nor is it anticipated in            the near future. We believe that our relationship with employees is good.  

 

**Facilities**

 

Our principal offices, located at 12 North Washington Street, Montoursville, Pennsylvania, consist of 4,000 sq. ft. of office space. The offices are leased from the Hoff Family Limited Partnership that is controlled by Rose Hoff, the wife of Matthew Hoff, a principal stockholder. Lease payments are $1,500 per month and renews monthly.

 

We also maintain a satellite office in Lonoke, Arkansas, which consists of 2,000 sq. ft. of office space. The offices are leased for $916 per month and renews monthly. The facilities are owned by the J.S. Parnell Trust, of which our C.E.O. Michael D. Parnell is trustee.

 

**Employee Stock Plan**

 

Pursuant to our employee stock plan, eight employees are entitled to receive a total of 134,000 shares of our common stock. An aggregate of 180,000 shares are authorized to be issued under the plan. All issued shares will remain in trust and ownership will not vest with the individual employee until certain employment criteria have been met. Each employee must            execute an employment agreement with Media Depot and continuously remain an employee for the time period indicated below.

 

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|   | **Time Period** | **Percent of Shares Vested** |
|--------|-----------------|------------------------------|

 

|   | 12 months from the date employment agreement is signed | 25% |
|--------|--------------------------------------------------------|-----|

|   | 24 months from the date employment agreement is signed | 25% |
|--------|--------------------------------------------------------|-----|

|   | 36 months from the date employment agreement is signed | 25% |
|--------|--------------------------------------------------------|-----|

|   | 48 months from the date employment agreement is signed | 25% |
|--------|--------------------------------------------------------|-----|

 

Upon an employee fulfilling each time period of employment, we will deliver to the employee a stock certificate for that number of common shares indicated above. In the event an employee does not enter into an employment agreement or fails to fulfill any of the applicable time periods of employment, those shares of common stock not so earned by and vested with the            employee will be delivered to the company and canceled.

 

The plan shares are being issued pursuant to an exemption from registration under the Securities Act. We have included an aggregate of 30,000 shares previously issued under the plan in a registration statement that became effective on December 29, 2008. These shares may be sold or transferred by the holders without restriction. The balance of the shares are            considered restricted securities and may be sold or transferred only pursuant to a registration statement or an appropriate exemption from registration.

 

**Industry Segments**

 

No information is presented as to industry segments. We are presently engaged in the principal business of offering a full line of advertising services through our national advertising agency. Reference is made to the statements of operations contained in the financial statements included herewith for a statement of our revenues and operating loss for the past two            fiscal years.

 

| **Item 1A.** | **Risk Factors.** |
|--------------|-------------------|

 

*An investment in our common stock involves significant risks, and should not be made by anyone who cannot afford to lose his or her entire investment. Prospective investors should consider carefully the following risk factors, together with all other information contained in this report, before deciding to invest in our common stock. If any of the following            events or risks actually occur, our business, operating results and financial condition would likely suffer materially and you could lose all or part of your investment.*

 

**Risks Relating to Our Business**

 

***The success of our future operations depends on our ability to generate revenues from new and existing clients, which may be subject to many factors.***

 

Media Depot, together with its subsidiary Media Max, has operated since 1998. Our ability to generate profits in the future depends on many factors, including the following:  

 

|   | ● | our ability to maintain Media Depot’s current client base and to secure new clients in the future; |
|--------|---------|----------------------------------------------------------------------------------------------------------|

 

|   | ● | our ability to develop new advertising marketing strategies to offer existing and future clients; |
|--------|---------|---------------------------------------------------------------------------------------------------|

 

|   | ● | our ability to compete with existing and new entities that offer the same or similar services and products as Media Depot; |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------|

 

|   | ● | the costs of maintaining and expanding operations; and |
|--------|---------|--------------------------------------------------------|

 

|   | ● | our ability to attract and retain a qualified work force. |
|--------|---------|-----------------------------------------------------------|

 

We cannot assure you that we will achieve or maintain any of the foregoing factors or realize profitable operations in future.

 

***Future operating results are difficult to predict.***

 

We may experience significant quarter-to-quarter fluctuations in revenues and net income (loss). The advertising business tends to include larger promotions in the summer and during the winter holiday season. Advertising budgets for existing and new clients vary year-to-year, influencing their advertising schedules. Thus, we believe that quarter-to-quarter            comparisons of historical operating results will not be a good indication of future performance. It is likely that in some future quarter, operating results may fall below the expectations of securities analysts and investors, which could have negative impact on the price of our common stock.

 

 

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***Media Depot relies on the continued development of new and competitive promotional programs and advertising campaigns.***

 

A significant portion of our revenues come from promotional programs and advertising campaigns developed for clients. We must continually develop and market new and competitive promotional programs and advertising campaigns that will be competitive with other companies offering the same or similar services and products. There can be no assurance that Media Depot or            our clients will be able to secure necessary licenses for additional entertainment properties on which to base promotional programs or that, if secured, such licenses will result in successful campaigns.

 

***If some clients experience financial distress, their weakened financial position could negatively affect our own financial position and results.***

 

We have a diverse client base and, at any given time, one or more clients may experience financial distress, file for bankruptcy protection or go out of business. If a substantial client experiences financial difficulty, it could delay or jeopardize the collection of accounts receivable, result in significant reductions in services provided by us and may have a            material adverse effect on our financial position, results of operations and liquidity. 

 

***Media Depot receives approximately 38% of its revenue from its three largest clients and the loss of one or more of these clients could adversely impact results of operations and financial condition.***

 

Our clients generally are able to reduce advertising and marketing spending or cancel projects at any time for any reason. It is possible that clients could reduce spending in comparison with historical patterns, or they could reduce future spending. Media Depot’s three largest clients account for approximately 38% of total revenues. A significant reduction in            advertising and marketing spending by its largest clients, or the loss of one or more of these clients, if not replaced by new client accounts or an increase in business from existing clients, would adversely affect revenues. This could have a material adverse effect on our results of operations and financial condition. 

 

***Our business may be vulnerable to potential lawsuits regarding ad content or system failure.***

 

Because Media Depot facilitates the placement of advertisements in print and/or on-line publications, potential claims may be asserted for negligence, defamation or personal injury, or for reasons based on other theories, due to the nature of the advertisements’ content. Current technology does not contemplate the review of classified ad content processed on            websites for libelous or other statements that might give rise to possible liability. This role has been fulfilled historically by each publication and we expect the publications will continue to monitor their ads. Although we anticipate obtaining general and professional liability insurance, such coverage may not cover potential claims or may not be adequate to indemnify us fully. Any imposition of liability or legal defense expenses that are not covered by insurance or that are in            excess of our insurance coverage could place a strain on our available cash resources, could seriously jeopardize the success of our business plan and could materially and adversely affect our financial position, results of operations and cash flows. 

 

***The advertising industry is highly competitive and if we are unable to compete successfully, our results of operations could be negatively and severely affected.***

 

The advertising and media industry is highly competitive and marked by several competitors of various size and resources. A significant capital base is not necessarily required to enter into the business making it relatively easy for new competitors to enter the market. Our principal competitors and potential competitors include Interpublic Group, Catalina Marketing            Group, Omnicom Group Inc. and other local and national advertising agencies. Our services must compete with other agencies and providers of creative or media services in order to maintain existing client relationships and to win new clients. A client’s perception of the quality of our creative work, our reputation and the reputations of the agencies with which we work, are important factors in determining our competitive position. An agency’s ability to serve clients,            particularly large international clients, on a broad geographic basis is also an important competitive consideration. Because an agency’s principal asset is its people, freedom of entry into the business is almost unlimited and a small agency is, on occasion, able to take all or some portion of a client’s account from a much larger competitor. Many existing and potential competitors have greater financial resources, larger market share, and larger production and creative            capability, which may enable them to establish a stronger competitive position than we have. If we fail to address competitive developments quickly and effectively, we will not be able to grow our business or remain a viable entity.

 

 

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***If we fail to keep up with changes affecting marketing trends, technology and the markets that we serve, we will become less competitive, which would adversely affect future financial performance.***

 

In order to remain competitive, we must respond on a timely and cost-efficient basis to changes in advertising and marketing trends, technology, industry standards and procedures and customer preferences. We need to continuously develop new strategies, advertising and marketing campaigns, technologies and services to address new developments in advertising. In some            cases these changes may be significant and the cost to comply with these changes substantial. We cannot assure you that we will be able to adapt to any changes in the future or that we will have the financial resources to keep up with changes in the marketplace. Also, the cost of adapting to changes may have a material and adverse effect on our operating results.

 

***Our future success depends on retaining existing key employees and hiring and assimilating new key employees.***

 

In order to achieve success, we must retain Media Depot’s key employees, including its executive officers, creative staff and research and media personnel. We must also be able to attract new personnel as needed. Although we currently have employment agreements with our C.E.O. and Business Manager, each individual may be able to terminate his agreement at any            time. Presently, no other employment contracts exist. Our ability to attract and retain key personnel is influenced by a variety of factors, including compensation we pay, which could be adversely affected by our financial or market performance. It would be difficult for us to replace any one of these individuals. In addition, as we grow we may need to hire additional key personnel. We may not be able to identify and attract high quality employees or successfully assimilate new            employees into our existing management structure.

 

***Government regulations and consumer advocates may limit the scope of the content of our services, which could affect our ability to meet clients’ needs.***

 

Government agencies and consumer advocacy groups may, directly or indirectly from time to time, affect or attempt to affect the scope, content and manner of presentation of advertising, marketing and corporate communications services, whether through regulations or other governmental actions. There has been an increasing tendency on the part of advertisers and            consumer groups to challenge advertising through legislation, regulations, courts or otherwise. These actions may be premised on the grounds that the advertising is false and deceptive or injurious to public welfare. Any such limitations on the scope of the content of services provided could affect our ability to meet clients’ needs. In addition, there has been an increasing tendency on the part of businesses to resort to the judicial system to challenge advertising practices.            We cannot assure investors in our stock that such claims by businesses or governmental agencies will not have a material adverse effect on our results of operations and financial condition in the future. 

 

***Our business could be adversely affected by negative economic developments in the advertising industry and/or the economy in general.***

 

Media Depot depends on the perceived demand for advertising in the business community, which can be adversely affected by declines in the businesses of clients and prospective clients and/or downturns in the general economy. Accordingly, the success of our business is susceptible to downturns in not only the business of our clients, but also in the economy in            general. Any significant downturn in the advertising market or in general economic conditions would likely hurt our business and operating results. 

 

***We may not be able to manage future growth effectively, which could adversely affect our operations and financial performance.***

 

The ability to manage and operate our business as we execute our development and growth strategy will require effective planning. Significant rapid growth and/or possible future acquisitions could strain management and internal resources that could adversely affect financial performance. We anticipate that future growth or acquisitions could place a significant            strain on personnel, management systems, infrastructure and other resources. Our ability to manage future growth effectively will also require attracting, training, motivating, retaining and managing new employees and continuing to update and improve operational, financial and management controls and procedures. If we do not manage growth effectively, our operations could be adversely affected resulting in slower growth and a failure to achieve or sustain profitability.

 

|   | ***There are risks associated with possible future acquisitions.*** |
|--------|---------------------------------------------------------------------|

 

We have reserved 5.0 million shares of our common stock for use in potential future acquisitions of other businesses, entities or assets related to the Media Depot’s business. If presented with an appropriate 

 

 

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opportunity, we may make an acquisition of one or more complementary companies or businesses. There can be no assurance that the anticipated benefits of any future acquisition will be realized. In the event we make a future acquisition, we could have difficulty in assimilating that business’ personnel and operations. In addition, key personnel of an acquired business may decide            not to work for us. If we make other types of acquisitions, we could have difficulty in assimilating the acquired technology or products into our operations. These difficulties could disrupt our ongoing business, distract management and employees and increase expenses. Also, future acquisitions would most likely result in potentially dilutive issuances of our common stock, the incurrence of debt, contingent liabilities and/or amortization expenses related to goodwill and other            intangible assets, which could adversely affect our results of operations and financial condition.

 

***Being a public company involves increased administrative costs, which could result in lower net income and make it more difficult for us to attract and retain key personnel.***

 

As a public company, we incur significant legal, accounting and other expenses that Media Depot did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002 as well as new rules subsequently implemented by the SEC, have required changes in corporate governance practices of public companies. We expect that these new rules and regulations will            increase our legal and financial compliance costs and make some activities more time consuming. For example, in connection with being a public company, we may have to create new board committees, implement additional internal controls and disclose controls and procedures, retain a financial printer, adopt an insider trading policy and incur costs relating to preparing and distributing periodic public reports. These new rules and regulations could also make it more difficult for us            to attract and retain qualified executive officers and members of our board of directors, particularly to serve on our audit committee.

 

**Risks Relating to Ownership of Our Common Stock**

 

***There is a limited public trading market for our common stock and there is no assurance that a market will be maintained.***

 

There is currently a limited public trading market for our common stock on the OTC Bulletin Board under the ticker symbol “CALY.” We cannot give any assurance that an active trading market will develop or be sustained. If an active trading market for our common stock does not develop, it would be difficult, if not impossible, for stockholders to            liquidate their shares. Also, the trading price for our shares may be highly volatile and subject to significant fluctuations in response to variations in our quarterly operating results and other factors. These price fluctuations may adversely affect the liquidity of our shares, as well as the price that holders may realize for their shares upon any future sale.

 

***Trading in our shares is subject to price volatility and numerous other factors.***

 

Trading of our shares on the OTC Bulletin Board is likely to be volatile and subject to numerous factors that can affect price, many of which are beyond our control. There can be no assurance that an active trading market will be achieved or maintained. Accordingly, it could be difficult for holders of our common stock to liquidate their shares. Some of the factors            that may influence the price of our shares are:

 

|   | ● | our failure to achieve and maintain profitability; |
|--------|---------|----------------------------------------------------|

 

|   | ● | changes in earnings estimates and recommendations by financial analysts; |
|--------|---------|--------------------------------------------------------------------------|

 

|   | ● | actual or anticipated variations in our quarterly and annual results of operations; |
|--------|---------|-------------------------------------------------------------------------------------|

 

|   | ● | changes in market valuations of similar companies; |
|--------|---------|----------------------------------------------------|

 

|   | ● | announcements by us or our competitors of significant contracts, new products or services, acquisitions, commercial relationships, joint ventures or capital commitments; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | ● | the loss of significant clients or customers; |
|--------|---------|-----------------------------------------------|

 

|   | ● | the loss of significant partnering relationships; and |
|--------|---------|-------------------------------------------------------|

 

|   | ● | general market, political and economic conditions. |
|--------|---------|----------------------------------------------------|

 

In the past, following periods of extreme volatility in the market price of a company's securities, securities class action litigation has often been instituted. A securities class action suit against us could result 

 

 

-9-

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in substantial costs and divert our management's time and attention, which would otherwise be used to benefit our business. 

 

|   | ***Effective voting control of our company is held by directors and certain principal stockholders.*** |
|--------|--------------------------------------------------------------------------------------------------------|

 

Approximately 96% of our outstanding shares are held by directors and a small number of principal stockholders. These persons have the ability to exert significant control in matters requiring stockholder vote and may have interests that conflict with other stockholders. As a result, a relatively small number of stockholders acting together, have the ability to            control all matters requiring stockholder approval, including the election of directors and approval of acquisitions, mergers and other significant corporate transactions. This concentration of ownership may have the effect of delaying, preventing or deterring a change in control of our company. It could also deprive our stockholders of an opportunity to receive a premium for their shares as part of a sale of our company and it may affect the market price of our common            stock.

 

***We do not expect to pay dividends in the foreseeable future, which could make our stock less attractive to potential investors.***

 

We anticipate retaining any future earnings and other cash resources for operation and business development and do not intend to declare or pay any cash dividends in the foreseeable future. Any future payment of cash dividends will be at the discretion of our board of directors after taking into account many factors, including operating results, financial condition            and capital requirements. Corporations that pay dividends may be viewed as a better investment than corporations that do not.

 

***Trading of our shares may be subject to certain "penny stock” regulations, which could have a negative effect on the price of our shares in the public market.***

 

Public trading of our common stock on the OTC Bulletin Board is likely subject to certain regulations commonly referred to as penny stock rules. A penny stock is generally defined to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. If our stock is deemed to be a penny stock, trading in the shares will be            subject to additional sales practice requirements on broker-dealers. These may require a broker-dealer to make a special suitability determination for purchasers of penny stocks and to receive the purchaser's prior written consent to the transaction. A broker-dealer may also be required to deliver to a prospective purchaser of a penny stock, prior to the first transaction, a risk disclosure document relating to the penny stock market. 

 

Consequently, penny stock rules may restrict the ability of broker-dealers to trade and/or maintain a market in our common stock and may affect the ability of stockholders to sell their shares. These requirements may be considered cumbersome by broker-dealers and could impact the willingness of a particular broker-dealer to make a market in our shares, or they could            affect the price at which our shares trade. Also, many prospective investors may not want to get involved with the additional administrative requirements, which may have a material adverse effect on the trading of our shares.

 

***Future sales or the potential for sale of a substantial number of shares of our common stock could cause our market value to decline.***

 

Of the 5.0 million shares of common stock outstanding, approximately 4.7 million shares are considered restricted securities and may be sold only pursuant to a registration statement or the availability of an appropriate exemption from registration. Sales of a substantial number of these restricted shares in the public markets, or the perception that these sales may            occur, could cause the market price of our common stock to decline and materially impair our ability to raise capital through the sale of additional equity securities.

 

***We have identified material weaknesses in our internal procedures and controls over financial***

***reporting.***  

 

As of December 31, 2009, management identified certain material weaknesses in our internal procedures and controls over financial reporting. Accordingly, we have put in place a remediation plan to strengthen and improve our internal controls and address the material weaknesses identified. If these remedial measures are insufficient to address these weaknesses or are            not implemented effectively, material misstatements in our interim or annual financial statements may occur in the future. This may cause future interim or annual reports to be delayed or become delinquent, which would have a negative impact on our company and the public market for our stock.

 

| **Item 1B.** | **Unresolved Staff Comments.** |
|--------------|--------------------------------|

 

|   | This item is not required for a smaller reporting company. |
|--------|------------------------------------------------------------|

 

| **Item 2.** | **Property.** |
|-------------|---------------|

 

We do not presently own any real property. Our principal offices are located in leased facilities located at 12 North Washington Street, Montoursville, Pennsylvania. The facilities consist of 4,000 sq. ft. of office space and are leased from a related party at the rate of $1,500 per month and renews monthly. We also lease an office in Lonoke, Arkansas, which            consists of 2,000 sq. ft. of office space. The offices are leased from a related party at the rate of $916 per month and renews monthly.

 

 

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| **Item 3.** | **Legal Proceedings.** |
|-------------|------------------------|

 

There are no material pending legal proceedings to which the company or any subsidiary is a party, or to which any property is subject and, to the best of our knowledge, no such action against us is contemplated or threatened.

 

| **Item 4.** | **Removed and Reserved.** |
|-------------|---------------------------|

 

|   | Item removed and reserved by the SEC. |
|--------|---------------------------------------|

 

**PART II**

 

| **Item 5.** | **Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.** |
|-------------|-------------------------------------------------------------------------------------------------------------------------|

 

Our common stock became eligible for trading on the OTC Bulletin Board during the second quarter of 2009. There is currently a limited public trading market for our common stock trading under the OTCBB ticker symbol: “CALY.” There has only been sporadic trades and, accordingly, no trading history is being presented. The last reported trade was at $0.50            per share. As of the date hereof there are approximately 61 stockholders of record of our common stock. 

 

Inclusion on the OTCBB permits price quotations for our shares to be published by that service. Any future secondary trading of our shares may be subject to certain state imposed restrictions. Except for our application to the OTCBB, there are no plans, proposals, arrangements or understandings with any person concerning the development of a trading market in any of            our securities. Also, there can be no assurance that an active public trading market in our shares will develop or, that if such a market does develop, that it can be sustained. 

 

The ability of individual stockholders to trade their shares in a particular state may be subject to various rules and regulations of that state. A number of states require that an issuer's securities be registered in their state or appropriately exempted from registration before the securities are permitted to trade in that state. Presently, we have no plans to            register our securities in any particular state.

 

**Recent Issuance of Securities**

 

Upon the closing the Media Depot on December 31, 2007, we issued 3.5 million shares of our authorized, but previously unissued common stock to 15 persons pursuant to the terms of the merger agreement. These shares were issued in consideration for the exchange of the recipients’ Media Depot securities and were issued pursuant to an exemption from registration            under the Securities Act of 1933 provided by Section 4(2) of that Act. 

 

**Penny Stock Rule**

 

It is unlikely that our securities will be listed on any national or regional exchange or The Nasdaq Stock Market in the foreseeable future. Therefore our shares most likely will be subject to the provisions of Section 15(g) and Rule 15g-9 of the Exchange Act, commonly referred to as the "penny stock" rule. Section 15(g) sets forth certain requirements for            broker-dealer transactions in penny stocks and Rule 15g-9(d)(1) incorporates the definition of penny stock as that used in Rule 3a51-1 of the Exchange Act.

 

The SEC generally defines a penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. Rule 3a51-1 provides that any equity security is considered to be a penny stock unless that security is: 

 

|   | ● | registered and traded on a national securities exchange meeting specified criteria set by the SEC; |
|--------|---------|----------------------------------------------------------------------------------------------------|

 

|   | ● | authorized for quotation on The Nasdaq Stock Market; |
|--------|---------|------------------------------------------------------|

 

|   | ● | issued by a registered investment company; |
|--------|---------|--------------------------------------------|

 

|   | ● | excluded from the definition on the basis of price (at least $5.00 per share) or the issuer's net tangible assets; or |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------|

 

|   | ● | exempted from the definition by the SEC. |
|--------|---------|------------------------------------------|

 

 

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A broker-dealer who sells penny stocks to a person other than an established customer or accredited investor is subject to additional sales practice requirements. An accredited investor is generally defined as a person with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse. 

 

For transactions covered by these rules, a broker-dealer must make a special suitability determination for the purchase of such securities and must receive the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction,            of a risk disclosure document relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, a monthly statement must be sent to the client disclosing recent price information for the penny stocks held in the account and information on the limited market in penny stocks. Consequently, these rules may restrict the ability of            broker-dealers to trade and/or maintain a market in our common stock and may affect the ability of stockholders to sell their shares.

 

These requirements may be considered cumbersome by broker-dealers and could impact the willingness of a particular broker-dealer to make a market in our shares, or they could affect the value at which our shares trade. Classification of the shares as penny stocks increases the risk of an investment in our shares.

 

**Rule 144**

 

We have registered a total of 269,800 shares of our outstanding common stock for resale under the registration statement declared effective December 29, 2008. The balance of 4,730,200 shares are deemed to be “restricted securities” as defined by Rule 144 under the Securities Act. Rule 144 is the common means for a stockholder to resell restricted            securities and for affiliates to sell their securities, either restricted on no restricted (control) shares. Rule 144 was amended by the SEC, effective February 15, 2008.

 

Under the amended Rule 144, an affiliate of a company filing reports under the Exchange Act who has held their shares for more than six months, may sell in any three-month period an amount of shares that does not exceed the greater of:

 

|   | ● | the average weekly trading volume in the common stock, as reported through the automated quotation system of a registered securities association, during the four calendar weeks preceding such sale, or |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | ● | 1% of the shares then outstanding. |
|--------|---------|------------------------------------|

 

Sales by affiliates under Rule 144 are also subject to certain requirements as to the manner of sale, filing appropriate notice and the availability of current public information about the issuer. 

 

A non-affiliate stockholder of a reporting company who has held their shares for more than six months, may make unlimited resales under Rule 144, *provided*only that the issuer has available current public information about itself. After a one-year holding period, a non-affiliate may make unlimited sales with no            other requirements or limitations. 

 

Holders of restricted shares of our common stock are eligible to avail themselves to sell their shares under the provisions of Rule 144, provided they comply with the selling and volume limitations of that Rule. We cannot predict the effect any future sales under Rule 144 may have on the market price of our common stock, if a market for our shares develops, but such            sales may have a substantial depressing effect on such market price.

 

**Dividends Policy**

 

We have never declared cash dividends on our common stock, nor do we anticipate paying any dividends on our common stock in the foreseeable future. 

 

| **Item 6.** | **Selected Financial Data.** |
|-------------|------------------------------|

 

|   | This item is not required for a smaller reporting company. |
|--------|------------------------------------------------------------|

 

| **Item 7.** | **Management’s Discussion and Analysis of Financial Condition and Results of Operations.** |
|-------------|--------------------------------------------------------------------------------------------------|

 

*The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Form 10-K.*

 

 

-12-

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**Forward Looking and Cautionary Statements**

 

This report contains forward-looking statements relating to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will” “should," “expect," "intend," "plan," anticipate," "believe," "estimate," "predict," "potential," "continue," or similar            terms, variations of such terms or the negative of such terms. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including those risks discussed elsewhere in this report. Although forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment, actual results could differ materially from those anticipated in such statements. Except as required by applicable            law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

**Results of Operations**

 

The following table sets forth the percentage relationship to total revenues of principal items contained in our consolidated statements of operations for the two most recent fiscal years ended December 31, 2009 and 2008. It should be noted that percentages discussed throughout this analysis are stated on an approximate basis.

 

|   | **Fiscal Years Ended** |
|--------|------------------------|

|   | **December 31,** |
|--------|------------------|

|   | **2009_______2008** |
|--------|---------------------|

|   | Total revenues | 100% | 100% |
|--------|----------------|------|------|

|   | Cost of goods sold | 74% | 74% |
|--------|--------------------|-----|-----|

|   | Gross margin | 26% | 26% |
|--------|--------------|-----|-----|

|   | Total operating expenses | 27% | 27% |
|--------|--------------------------|-----|-----|

|   | Loss from operations | (1%) | (1%) |
|--------|----------------------|------|------|

|   | Other income (expenses) | 0% | 0% |
|--------|-------------------------|----|----|

|   | Loss before income taxes | (1%) | (1%) |
|--------|--------------------------|------|------|

|   | Income tax expense (benefit) | (0%) | (0%) |
|--------|------------------------------|------|------|

|   | Net loss | (1%) | (1%) |
|--------|----------|------|------|

 

|   | *For the years ended December 31, 2009 and 2008.* |
|--------|---------------------------------------------------|

 

Total revenues for the year ended December 31, 2009 were $3,105,470 compared to $3,581,638 for 2008. This 13% decrease is attributed to decreased advertising revenue as a result of general weakness in advertising spending. Cost of goods sold decreased 14% from $2,653,007 in 2008 to $2,288,496 in 2009, primarily attributed to a change in media mix for clients. As a            percentage of revenues, cost of goods sold was constant from 74% in 2008 to 74% in 2009, consistent with the decrease in revenues in 2009. General and administrative expenses decreased 13% to $817,312 in 2009 from $938,885 in 2008, primarily attributed to decreased professional costs. The net loss for 2009 was $21,199 compared to $18,244 in 2008.

 

**Liquidity and Capital Resources**

 

At December 31, 2009, we had total current assets of $526,897, compared to $655,644 at December 31, 2008. This decrease is attributed to the decrease in cash from $239,143 at December 31, 2008 to $175,570 at December 31, 2009, due to lower margins resulting from change in media mix for clients, and the decrease in accounts receivable from $416,501 at December 31,            2008 to $351,327 at December 31, 2009. The decrease in accounts receivable is attributed to decreased advertising revenue as a result of general weakness in advertising spending. Working capital at December 31, 2009 was $434,618 compared to $458,892 at December 31, 2008. The decrease in working capital was also due to the decreases in cash and accounts receivable in 2009 and was partially offset by the decrease in accounts payable from $196,752 at December 31, 2008 to $92,279 at            December 31, 2009. At December 31, 2009 we had total assets of $593,052 and stockholders’ equity of $500,774, compared to total assets of $718,725 and stockholders' equity of $521,973 at December 31, 2008.

 

Cash decreased $63,573 from $239,143 at December 31, 2008 to $175,570 at December 31, 2009. Net cash provided by operating activities was $306,742 for the year ended December 31, 2008 compared to net cash used by operating activities of $37,407 for 2009. This is attributed primarily to the net loss recognized in 2009 and the decrease in accounts payable of $104,473            for the year.

 

 

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**Inflation**

 

In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future. Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.

 

**Off-balance Sheet Arrangements**

 

|   | We have no off-balance sheet arrangements. |
|--------|--------------------------------------------|

 

 

 

**Recent Accounting Pronouncements**

 

In May 2009, the Financial Accounting Standards Board (“***FASB***”) issued SFAS 165 (ASC 855-10) entitled “*Subsequent Events*”. Companies are now required to disclose the date through which subsequent events have been evaluated by            management. Public entities (as defined) must conduct the evaluation as of the date the financial statements are issued, and provide disclosure that such date was used for this evaluation. SFAS 165 (ASC 855-10) provides that financial statements are considered “issued” when they are widely distributed for general use and reliance in a form and format that complies with GAAP. SFAS 165 (ASC 855-10) is effective for interim and annual periods ending after June 15, 2009 and            must be applied prospectively. The adoption of SFAS 165 (ASC 855-10) during the year ended December 31, 2009 did not have a significant effect on our financial statements as of that date.

 

In June 2009, the FASB issued SFAS 168, “*The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles*”. (“SFAS 168” pr ASC 105-10) SFAS 168 (ASC 105-10) establishes the Codification as the sole source of authoritative accounting principles            recognized by the FASB to be applied by all nongovernmental entities in the preparation of financial statements in conformity with GAAP. SFAS 168 (ASC 105-10) was prospectively effective for financial statements issued for fiscal years ending on or after September 15, 2009 and interim periods within those fiscal years. The adoption of SFAS 168 (ASC 105-10) on July 1, 2009 did not impact our results of operations or financial condition. The Codification did not change GAAP, however,            it did change the way GAAP is organized and presented. As a result, these changes impact how companies reference GAAP in their financial statements and in their significant accounting policies.

 

| **Item 7A.** | **Quantitative and Qualitative Disclosures About Market Risk.** |
|--------------|-----------------------------------------------------------------|

 

|   | This item is not required for a smaller reporting company. |
|--------|------------------------------------------------------------|

 

| **Item 8.** | **Financial Statements and Supplementary Data.** |
|-------------|--------------------------------------------------|

 

Consolidated financial statements for the fiscal years ended December 31, 2009 and 2008 have been examined to the extent indicated in the report by GPH CPAs, PC, independent certified public accountants and have been prepared in accordance with accounting principles generally accepted in the United States of America and pursuant to regulations promulgated by the            SEC. The aforementioned financial statements are included herein under Item 15.

 

| **Item 9.** | **Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.** |
|-------------|-------------------------------------------------------------------------------------------|

 

On August 7, 2009, we dismissed Moore & Associates Chartered as our independent registered public accountants. None of the reports of Moore & Associates on our financial statements for either of the past two years contained an adverse opinion or disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope or accounting principles.            During the two most recent fiscal years, there were no disagreements with Moore and Associates, whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to Moore and Associates, Chartered's satisfaction, would have caused it to make reference to the subject matter of the disagreement in connection with its report on the registrant's financial statements.

 

On August 27, 2009, the PCAOB issued PCAOB Release No. 105-2009-006 revoking the registration of Moore & Associates, Chartered and barring Michael J. Moore, CPA, from being an associated person of a registered public accounting firm. The PCAOB imposed these sanctions on the basis of its findings concerning the alleged violations of Moore & Associates and            Michael J. Moore of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, PCAOB rules and auditing standards in 

 

 

-14-

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auditing the financial statements of three issuer clients from 2006 to 2008, PCAOB rules and quality controls standards, and noncooperation with a Board investigation. A copy of the PCAOB Release can be accessed at the PCAOB website at http://www.pcaobus[dot]org.

 

On August 7, 2009, we engaged the accounting firm of Seale and Beers, CPAs as our new independent registered public accounting firm. Our board of directors approved the dismissal of Moore & Associates Chartered and the engagement of Seale and Beers, CPAs. During the two most recent fiscal years and the interim periods preceding the engagement, we did not consult            Seale and Beers regarding any of the matters set forth in Item 304(a)(2)(i) or (ii) of Regulation S-B.

 

On September 22, 2009, we dismissed Seale and Beers, CPAs as our independent certifying accountants pursuant to the unanimous consent of our board of directors. We initially retained Seale and Beers on August 7, 2009, but the firm did not performed any auditing or accounting services nor has it issued any audit or other reports on our financial statements.            Accordingly, since we retained Seale and Beers, we had no disagreements with the firm, whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to Seale and Beers’ satisfaction, would have caused it to make reference to the subject matter of the disagreement in connection with its report on our financial statements.

 

On September 22, 2009, we engaged GBH CPAs, PC, as our new independent registered public accountants. Our board of directors unanimously approved the engagement of GBH CPAs, PC. During the two most recent fiscal years and the interim periods preceding the engagement, we have not consulted GBH CPAs, PC regarding any of the matters set forth in Item            304(a)(2)(i) or (ii) of Regulation S-B.

 

| **Item 9A(T).** | **Controls and Procedures.** |
|-----------------|------------------------------|

 

|   | *Evaluation of Disclosures and Procedures* |
|--------|--------------------------------------------|

 

As of the end of the period covered by this annual report, our chief executive officer, also acting as principal financial officer, carried out an evaluation of the effectiveness of “disclosure controls and procedures,” as defined in the Securities Exchange Act of 1934, Rules 13a-15(e) and 15-d-15(e). Based upon that evaluation, it was concluded that as            of December 31, 2009, our disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: 

 

(i) recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms; and 

 

(ii) accumulated and communicated to management, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. 

 

*Management’s Annual Report on Internal Control Over Financial Reporting*

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting for our company. Our control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting            principals. Our internal control over financial reporting includes those policies and procedures that:

 

|   | ● | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of our assets; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | ● | provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures are being made only with proper authorizations of management and directors; and |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | ● | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of company assets that could have a material effect on the financial statements. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented            or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. 

 

 

-15-

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Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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.            

 

Management, including our chief executive officer, also acting as chief financial officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2009. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in            *Internal Control Over Financial Reporting – Guidance for Smaller Public Companies.*

 

As of December 31, 2009, our principal officers identified material weaknesses in our internal control over financial reporting. A material weakness is a significant deficiency (within the meaning of Public Company Accounting Oversight Board Auditing Standard No. 5), or combination of significant deficiencies, that results in there being more than a remote likelihood that a            material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by employees in the normal course of their assigned functions. Each material weakness is discussed below.

 

*1. Inadequate and ineffective controls over the corporate financial statement close process*

As a result of ineffective procedures and controls, our December 31, 2008 year-end financial statements were issued with a material misstatement which resulted in a material restatement that has been reflected in our restated consolidated financial statements for the year ended December 31, 2008. The ineffective procedures and controls occurred within our            accounting process and involved account reconciliations, period cut-off procedures and manual journal entries that were not properly prepared and/or reviewed and approved. The Company intends to continue to rely on consulting professionals as needed until a permanent accounting and finance team is appointed. These weaknesses resulted in the material restatement identified by our accounting staff and/or our independent registered public accounting firm. 

*2. Inadequate and ineffective controls over the recognition of cost of revenue*

We did not have adequate controls to ensure that cost of revenue was recorded in accordance with generally accepted accounting principles. Specifically, we noted the following with respect to our accounting for cost of revenue transactions:

 

|   | • |   | our sales and operations teams did not communicate to our accounting staff all of the information necessary to record accurately our cost of revenue; |
|--------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | • |   | we did not have adequate procedures in place to validate the completeness and accuracy of the information that was provided to our accounting team by our sales and operations teams; |
|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | • |   | we did not make a complete assessment of our cost of revenue transactins, and did not utilize documentation necessary to support the Company's accounting conclusions. |
|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

These material weaknesses led to the restatement of our consolidated financial results for previously issued 2008 consolidated financial statements that are included in this Annual Report on Form 10-K. As a result of the material weaknesses described above, our management has determined that, as of December 31, 2009, we did not maintain effective internal control over financial            reporting based on the COSO criteria. 

 

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to            provide only management’s report in this annual report. 

 

|   |   |
|--------|--------|

 

 

 

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*        Changes in Internal Control over Financial Reporting*

 

During the period covered by this report, there was no significant change in our internal controls over financial reporting or in other factors that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Remediation plans

Management plans to put in place the following measures to strengthen internal controls over financial reporting and address the material weaknesses described above. Our remediation efforts involve numerous business and accounting process improvements. The improvements are generally designed to: enhance the number of persons within the corporate accounting group with the technical            experience to properly evaluate and account for accounting transactions, as well as to provide appropriate managerial oversight to our accounting staff,  improve the timeliness and access to information that is required by the accounting team in order to make appropriate assessments of transactions in accordance with generally accepted accounting principles. 

The remediation plans that we plan to undertake, include the following measures: 

*Plans with respect to accounting personnel*

 

|   | • |   | Appoint a permanent Chief Financial Officer and enhance the number and quality of the composition of our corporate finance team. This will include the Company conducting an assessment of the current skill set to support the staffing of a finance group with the requisite expertise. We will review the composition of our team of salaried accounting professionals, in terms of skills, technical expertise and overall experience level. |
|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | • |   | Until such time as the review and hiring of salaried accounting professionals is finalized, we have engaged outside professionals to assist us in finalizing our accounting and related SEC reporting for the periods included in this Annual Report on Form 10-K. The Company plans to continue to rely on outside professionals as needed until a permanent staff is deployed. |
|--------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Plans with respect to organization-wide personnel**

 

|   | • |   | Provide training to our sales, operations and accounting teams with respect to certain corporate governance and public company matters. The training will include guidelines and procedures to ensure that relevant information is promptly and completely communicated to the accounting team, or other senior management representatives, as appropriate. The training will also educate our sales, operations and accounting teams with respect to revenue                            recognition implications of certain activities, including discussions or other communications between our personnel and customers. |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | • |   | Develop procedures whereby the consistent application of our policies for cost of revenue recognition are understood and are able to be applied. |
|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | • |   | Develop enhanced procedures with respect to the review of facts, assumptions and other related information that has been reviewed or considered when reaching accounting conclusions. These procedures will be further enhanced by improved documentation, review and approvals of material facts and assumptions by management within the accounting function, and outside of the accounting function when deemed appropriate or necessary. |
|--------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

 

 

 

-17-

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*          Plans with respect to organization-wide processes and information systems*

 

|   | • |   | Review our information systems to assess which processes can be further automated including, as appropriate, the configuration of our information systems to allow for tracking of certain information that is not routinely captured currently. The accounting processes will be reviewed, and expanded as deemed necessary, to review and assess non-accounting information that is captured in our enterprise wide information systems, as certain of this                            information can assist the evaluation and documentation of accounting conclusions. |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | • |   | Redesign our key accounting processes with respect to our accounting team management’s oversight and review of accounting records, source documentation and related assumptions that form the basis for conclusions. |
|--------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

        If the remedial measures described above are insufficient to address any of the identified material weaknesses or are not implemented effectively, or additional deficiencies arise in the future, material misstatements in our interim or annual financial statements may occur in the future and we may continue to be delinquent in our filings. We            are currently working to improve our internal processes and implement enhanced controls, as discussed above, to address the material weaknesses in our internal control over financial reporting and to remedy the ineffectiveness of our disclosure controls and procedures. While this implementation phase is underway, we are relying on extensive manual procedures including the use of qualified external consultants and incremental management oversight and reviews, to assist us with            meeting the objectives otherwise fulfilled by an effective internal control. Despite our efforts to continually improve our control procedures and environment, we can not provide assurance that our remediation measures will be completed or become effective by any given date after 2009. Among other things, any unremediated material weaknesses could result in material post-closing adjustments in future financial statements and in the Company’s inability to file future financial            statements with the SEC in a timely manner. Furthermore, any such unremediated material weaknesses could have the effects described in “Item 1A. Risk Factors”- Our Audit Committee, management and independent auditors have identified material weaknesses in our internal procedures and controls, and we may be unable to develop, implement and maintain appropriate procedures and controls in future periods” in Part I of this Annual Report on Form 10-K.

 

| **Item 9B.** | **Other Information.** |
|--------------|------------------------|

 

|   | Not applicable. |
|--------|-----------------|

 

 

**PART III**

 

| **Item 10.** | **Directors, Executive Officers and Corporate Governance.** |
|--------------|-------------------------------------------------------------|

 

|   | Our executive officers and directors are as follows: |
|--------|------------------------------------------------------|

 

|   | **Name** | **Age** | **Position** |
|--------|----------|---------|--------------|

|   | Michael D. Parnell | 51 | Chief Executive Officer and Director |
|--------|--------------------|----|--------------------------------------|

|   | Timothy Young | 44 | Director |
|--------|---------------|----|----------|

|   | Phyllis Park | 51 | Secretary |
|--------|--------------|----|-----------|

___________________________

 

All directors serve for one-year terms until their successors are elected or they are re-elected at the annual stockholders' meeting. Officers hold their positions at the pleasure of the board of directors, absent any employment agreement, of which none currently exists or is contemplated. 

 

There is no arrangement, agreement or understanding between any of the directors or officers and any other person pursuant to which any director or officer was or is to be selected as a director or officer. Also, there is no arrangement, agreement or understanding between management and non-management stockholders under which non-management stockholders may directly            or indirectly participate in or influence the management of our affairs. 

 

|   | The business experience of each of the persons listed above during the past five years is as follows: |
|--------|-------------------------------------------------------------------------------------------------------|

 

***Michael D. Parnell***was appointed as a directors and Chief Executive Officer on December 31, 2007 following the acquisition of Media Depot. Mr. Parnell is a graduate of the University of Arkansas with a degree in Agricultural Economics. In 2002, Mr. Parnell joined J.I.T. Distribution as President and was responsible for marketing,            licensing and branding a variety of odor control products through retail distribution chains. In 2004, Mr. Parnell joined GWA, a national advertising agency as a National Account Director, directing Co-Op advertising for 23 markets across the United States. In 2005, Mr. Parnell joined 

 

 

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Media Depot as National Account Director and was responsible for securing new clients and maintaining existing client relationships. 

 

On January 21, 2000, Mr. Parnell, entered into a judgment with the SEC against Mr. Parnell and Ammonia Hold, Inc., of which he was a major stockholder and one-time President. Without admitting or denying the SEC’s allegations, Mr. Parnell and Ammonia Hold consented to the entry of a judgment permanently enjoining them from violation Sections 5(a), 5(c) and            17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Mr. Parnell also agreed to pay a $25,000 civil penalty.

 

This action arose from the SEC’s allegation that Ammonia Hold and Mr. Parnell violated the registration requirements of the Securities Act in the issuance and sale of stock to a public relations firm. The SEC further alleged that Ammonia Hold and Mr. Parnell improperly reported the proceeds from the sale of stock as licensing revenues instead as an infusion of            capital.

 

***Timothy Young***was appointed as a director following the acquisition of Media Depot. Mr. Young is a graduate of Pepperdine University with a degree in Communications. He has worked in media sales management and revenue generation, specific to the Internet and television, for the past 15 years with a focused on revenue forecasting, sales training,            and concept selling. In 2002, Mr. Young joined Time Warner Cable Inc. as Regional Vice President, responsible for over $200 million in revenue and 250 sales and marketing personnel. In 2007, Mr. Young joined Rovion Inc., a leading provider of on-line media solutions for web publishers, advertisers, media organizations and business users as President. In 2010 Mr. Young joined HyperSolar, Inc., a start-up company that develops solar concentrator technology, as Chief Executive            Officer.

 

***Phyllis Park***was appointed as our corporate Secretary on January 8, 2008. Prior to joining the Company, Ms. Park handled all the accounting functions for Media Depot since its inception in 2004 including payroll, receivables and payables, costing spreadsheets and maintaining all financials records. Prior to 2004, she work in a            similar position with a private company, J.I.T. Packaging, LLC, which she joined in 2001, where she was responsible for all clerical and accounting duties for the Company.

 

**Key Personnel**

 

Our future success depends in large part on the continued services of senior management and key personnel.  In particular, we are highly dependent on the services of Matthew J. Hoff and Michael D. Parnell. Mr. Hoff is the founder of both Media Max and Media Depot and currently serves as Business Manager. Mr. Parnell currently serves as President and Chief            Executive Officer. Both Mr. Hoff and Mr. Parnell will be instrumental in the growth of the Company through acquisitions and strategic partnerships.

 

Except as set otherwise set forth herein, during the past five years, none of our officers, directors, promoters or control persons has had any of the following events occur:

 

•    any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer, either at the time of the bankruptcy or within two years prior to that time;

 

•   any conviction in a criminal proceeding or being subject to a pending criminal proceeding, excluding traffic violations and other minor offenses;

 

•   being subject to any order, judgment or decree, not substantially reversed, suspended or vacated, of any court of competent jurisdiction, permanently enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking business; and

 

•    being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

 

**Committees of the Board of Directors**

 

None of our directors are deemed to be independent directors. Currently we do not have any standing committees of the board of directors. Until formal committees are established, our board of directors will 

 

 

-19-

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perform some of the functions associated with a nominating committee and a compensation committee, including reviewing all forms of compensation provided to our executive officers, directors, consultants and employees, including stock compensation. The board will also perform the functions of an audit committee until we establish a formal committee. 

 

**Compliance With Section 16(a) of the Exchange Act**

 

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of our common stock, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. We believe that no reports were filed during the fiscal year 2009.

 

**Code of Ethics**

 

We have adopted a Code of Ethics and Business Conduct that applies to our directors and employees, including our principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions. In addition, we intend to promptly disclose (i) the nature of any amendment to the policy that applies to these            persons, and (ii) the nature of any waiver, including an implicit waiver, from a provision of the policy that is granted to one of these specified individuals, the name of such person who is granted the waiver and the date of the waiver on our website in the future.

 

A written copy of the Code will be provided upon request at no charge by writing to our Principal Financial Officer, c/o Calypso Media Services Group, Inc., 12 North Washington Street, Montoursville, Pennsylvania 17754.

 

| **Item 11.** | **Executive Compensation.** |
|--------------|-----------------------------|

 

Prior to our acquisition of Media Depot in December 2007, we did not have a bonus, profit sharing, or deferred compensation plan for the benefit of employees, officers or directors.

 

In 2009, we did not have a bonus, profit sharing, or deferred compensation plan for the benefit of employees, officers or directors.

 

In 2009, the Company paid compensation of $ 78,000 to Matthew J. Hoff, its Business Manager. In 2008, Mr. Hoff earned $70,800. In 2009, the Company paid compensation of $ 78,000 to Michael D. Parnell, its President and CEO. In 2008, Mr. Parnell earned $67,166

Following the Media Depot acquisition, we assumed the employment agreements of Messrs. Hoff and Parnell. Each agreement is for a term of three years commencing January 1, 2007 and were renewed for an additional three years on January 1, 2010

 

Pursuant to the renewed agreements, Mr. Hoff is employed as the company’s business manager and Mr. Parnell as the Chief Executive Officer. Each employee will receive an annual salary of $96,000, in 2010, $110,000 in 2011 and $125,000 in 2012. Each employee is entitled to six weeks annual vacation and benefits generally extended to executive employees including            health and hospitalization insurance for the employee and his family. Also, we may pay each employee an annual incentive bonus, the terms of which will be determined and approved by the board of directors.

 

|   | **Name and Principal** | **Other** | **Total** |
|--------|------------------------|-----------|-----------|

|   | **Position**_____**Year**____**Salary________Compensation____Compensation** |
|--------|-----------------------------------------------------------------------------|

 

|   | Michael D. Parnell | 2009 | $78,000 | $      -- | $78,000 |
|--------|--------------------|------|---------|------------------------------------|---------|

|   | (C.E.O) | 2008 | $67,166 | $ | -- | $67,166 |
|--------|---------|------|---------|---|----|---------|

|   | 2007 | $62,666 | $ | -- | $62,666 |
|--------|------|---------|---|----|---------|

 

|   | Matthew J. Hoff | 2009 | $78,000 | $      --

                | $78,000 |
|--------|-----------------|------|---------|--------------------------------------------------------------------------------------------------------------------------------|---------|

|   | (Business Manager) | 2008 | $70,800 | $ | -- | $70,800 |
|--------|--------------------|------|---------|---|----|---------|

|   | 2007 | $62,700 | $ | -- | $62,700 |
|--------|------|---------|---|----|---------|

 

 

 

 

-20-

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| **Item 12.** | **Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.** |
|--------------|-----------------------------------------------------------------------------------------------------|

 

The following table sets forth certain information as of April 15, 2010 with respect to the beneficial ownership of our common stock:

|   | ● | each stockholder believed to be the beneficial owner of more than 5% of our common stock; |
|--------|---------|-------------------------------------------------------------------------------------------|

 

|   | ● | by each of our directors and executive officers; and |
|--------|---------|------------------------------------------------------|

 

|   | ● | all of our directors and executive officers as a group. |
|--------|---------|---------------------------------------------------------|

 

For purposes of the following table, a person is deemed to be the beneficial owner of any shares of common stock (i) over which the person has or shares, directly or indirectly, voting or investment power, or (ii) of which the person has a right to acquire beneficial ownership at any time within 60 days after the date of this report. “Voting power” is            the power to vote or direct the voting of shares and “investment power” includes the power to dispose or direct the disposition of shares. The address of each person listed below, unless otherwise indicated, is c/o Calypso Media Services Group, Inc., 12 North Washington Street, Montoursville, Pennsylvania 17754. The number of shares outstanding is 5.0 million shares.

 

| **Name and Address** | **Amount and Nature of** | **Percent** |
|----------------------|--------------------------|-------------|

| **of Beneficial Owner** | **Beneficial Ownership**(1) | **of Class**(2) |
|-------------------------|-----------------------------|-----------------|

|   | *5% Beneficial Owners*: |
|--------|-------------------------|

| Matthew J. Hoff | 1,035,000(3) | 20.7 % |
|-----------------|--------------|--------|

|   | 91 Faircrest Road |
|--------|-------------------|

|   | Montoursville, PA 17754 |
|--------|-------------------------|

| Greg Welteroth | 1,000,000 | 20.0 % |
|----------------|-----------|--------|

|   | 356 Laurens Road |
|--------|------------------|

|   | Montoursville, PA 17754 |
|--------|-------------------------|

| Edward F. Cowle | 600,000 | 12.0 % |
|-----------------|---------|--------|

|   | 20 West 64th Street |
|--------|---------------------|

|   | New York, NY 10023 |
|--------|--------------------|

| H. Deworth Williams | 596,000 | 11.9 % |
|---------------------|---------|--------|

|   | 19 East 200 South, Suite 1080 |
|--------|-------------------------------|

|   | Salt Lake City, Utah 84111 |
|--------|----------------------------|

| Leonard E. Neilson | 250,000 | 5.0 % |
|--------------------|---------|-------|

|   | 8160 South Highland Drive, Suite 104 |
|--------|--------------------------------------|

|   | Salt Lake City, Utah 84093 |
|--------|----------------------------|

|   | *Directors and Executive Officers*: |
|--------|-------------------------------------|

|   | Michael D. Parnell | 1,035,000(4) | 20.7 % |
|--------|--------------------|--------------|--------|

|   | c/o Media Depot, Inc. |
|--------|-----------------------|

|   | 12 North Washington Street |
|--------|----------------------------|

|   | Montoursville, PA 17754 |
|--------|-------------------------|

| Timothy Young | 15,000 | .003 % |
|---------------|--------|--------|

 

| All directors and executive officers | 1,050,000(4) | 21.0 % |
|--------------------------------------|--------------|--------|

as a group (2 persons)

_____________________________

 

(1)  Unless otherwise indicated, the named person will be the record and beneficially owner of the shares indicated. 

 

(2)  Percentage ownership is based on 5.0 million shares of common stock outstanding as of April 15, 2010.

 

|   | (3) | Includes 750,000 shares in the name of the Hoff Family Trust of which Rose Hoff is the trustee. |
|--------|-----|-------------------------------------------------------------------------------------------------|

 

(4)  Includes 1,035,000 shares in the name of the Michael D. Parnell Living Trust, of which Mr. Parnell is the trustee.

 

| **Item 13.** | **Certain Relationships and Related Transactions, and Director Independence.** |
|--------------|--------------------------------------------------------------------------------|

 

Media Depot has entered into an acquisition agreement with two of its principals, Matthew J. Hoff and Michael D. Parnell, as an incentive to locate and acquire new businesses associated with the advertising industry. This would include, but not be limited to businesses such as advertising agencies, printing and public relations firms. The agreement provides that if            Media Depot makes an acquisition through the efforts of for Messrs. Hoff and Parnell, they will be entitled to a fee of 10% of the value of the acquisition. Payment of the fee may be in cash or in shares of our common stock. We have assumed the agreement 

 

 

-21-

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following the acquisition of Media Depot. No prospective acquisitions have been identified as of the date hereof and there can be no assurance that any acquisition will be made in the future. 

 

Media Depot’s principal offices in Montoursville, Pennsylvania are leased from the Hoff Family Limited Partnership that is controlled by Matthew Hoff, a founder of Media Depot and a principal stockholder of Calypso. This agreement was entered into before we acquired Media Depot and has been continued following the acquisition. Lease payments are $1,500 per            month and renews monthly.

 

Our Lonoke, Arkansas offices are leased from the J.S. Parnell Trust, of which our C.E.O. Michael D. Parnell is trustee. This agreement was entered into before we acquired Media Depot and has been continued following the acquisition. Lease payments are $916 per month and renews monthly.

 

Except as set forth above, we have not entered into any other material transactions with any officer, director, nominee for election as director, or any stockholder owning greater than five percent (5%) of our outstanding shares, nor any member of the above referenced individuals' immediate family.

 

None of our directors are deemed to be independent directors. We do not have a compensation, audit or nominating committee, rather these functions are carried out by the board as a whole.

 

| **Item 14.** | **Principal Accounting Fees and Services.** |
|--------------|---------------------------------------------|

 

We do not have an audit committee and therefore our entire board of directors performs the duties of an audit committee. Our board of directors will approve in advance the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. As a result, we do not rely on pre-approval policies and procedures.

 

|   | *Audit Fees* |
|--------|--------------|

 

The aggregate fees billed by our former independent auditors, Moore & Associates, Chartered, for professional services rendered for the audit of our annual financial statements included in our annual report for the year ended December 31, 2008 and for the review of quarterly financial statements included in our quarterly reports during 2008, were $13,300. Moore            & Associates also billed $2,500 for the review of our quarterly financial statements include in our quarterly reports during 2009. Our other former independent auditors Seal and Beers, CPAs did not bill us for services in 2009.

 

GBH CPAs, PC, our new auditors as of September 2009, billed us $28,000 for the audits of our annual financial statements included in this annual report for the years ended December 31, 2009 and 2008 and for the review of quarterly financial statements included in our quarterly report for September 30, 2009.

 

|   | *Audit Related Fees* |
|--------|----------------------|

 

For the year ended December 31, 2009 and 2008, there were no fees billed for assurance and related services by our former auditors, Moore & Associates and Seale and Beers, or our current auditors GBH CPAs, PC relating to the performance of the audit of our financial statements which are not reported under the caption "Audit Fees" above.

 

|   | *Tax Fees* |
|--------|------------|

 

For the years ended December 31, 2009 and 2008, no fees were billed by our former auditors, Moore & Associates and Seale and Beers, or our current auditors GBH CPAs, PC, for tax compliance, tax advice and tax planning. 

 

We do not use GBH CPAs, PC for financial information system design and implementation. These services, which include designing or implementing a system that aggregates source data underlying the financial statements or generates information that is significant to our financial statements, are provided internally or by other service providers. We do not engage GBH            CPAs, PC to provide compliance outsourcing services.

 

The board of directors has considered the nature and amount of fees billed by GBH CPAs, PC and believes that the provision of services for activities unrelated to the audit is compatible with maintaining GBH CPAs, PC’s independence.

 

**PART 1V**

 

 

-22-

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| **Item 15.** | **Exhibits, Financial Statement Schedules** |
|--------------|---------------------------------------------|

 

|   | (a) | Exhibits |
|--------|-----|----------|

 

| Exhibit No. | Exhibit Name |
|-------------|--------------|

 

|   | 2.1* | Agreement and Plan of Merger with Media Depot, Inc. and Calypso Acquisitions, Inc. [Included as Appendix C to 14C Information Statement filed with SEC on December 10, 2007] |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2.2* | Merger Agreement (Change of Domicile) [Included as Appendix B to 14C Information Statement filed with SEC on December 10, 2007] |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------|

|   | 3.1* | Articles of Incorporation (Nevada – change of domicile) [Included as Appendix A to 14C Information Statement filed with SEC on December 10, 2007] |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.2* | By-Laws [Filed as Exhibit to the Form 10-SB registration statement filed with SEC on July 28, 2000] |
|--------|------|-----------------------------------------------------------------------------------------------------|

|   | 4.1* | Instrument defining security holder rights [Filed as Exhibit to Form SB-2 Registration Statement filed with SEC on November 17, 1999] |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.1* | Employment Contract of Matthew J. Hoff [Filed as Exhibit to Form 8-K Current Notice filed with SEC on January 4, 2008] |
|--------|-------|------------------------------------------------------------------------------------------------------------------------|

|   | 10.2* | Employment Contract of Michael D. Parnell [Filed as Exhibit to Form 8-K Current Notice filed with SEC on January 4, 2008] |
|--------|-------|---------------------------------------------------------------------------------------------------------------------------|

|   | 10.3* | Incentive Acquisition Agreement [Filed as Exhibit to Form 8-K Current Notice filed with SEC on January 4, 2008] |
|--------|-------|-----------------------------------------------------------------------------------------------------------------|

|   | 10.4 | Employment Contract of Matthew J. Hoff as of January 1, 2010 |
|--------|------|--------------------------------------------------------------|

|   | 10.5 | Employment Contract of Michael D. Parnell as of January 1, 2010 |
|--------|------|-----------------------------------------------------------------|

|   | 21.1* | Subsidiaries [Filed as Exhibit to Form 8-K Current Notice filed with SEC on January 4, 2008] |
|--------|-------|----------------------------------------------------------------------------------------------|

|   | 31.1 | Certification of C.E.O. and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|--------|------|-------------------------------------------------------------------------------------------------------------------|

|   | 32.1 | Certification of C.E.O. and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 99.1* | Form of lock-up / leak-out agreement (included in initial Form S-1 registration statement filed with SEC on September 3, 2008) |
|--------|-------|--------------------------------------------------------------------------------------------------------------------------------|

________________

|   | * | Previously filed as indicated. |
|--------|---|--------------------------------|

 

-23-

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**CALYPSO MEDIA SERVICES GROUP, INC.**

 

CONSOLIDATED FINANCIAL STATEMENTS

 

December 31, 2009 and 2008

 

 

 

 

 

 

 

 

 

-24-

----

 

 

 

 

**C O N T E N T S**

 

| Report of Independent Registered Public Accounting Firm | 26 |
|---------------------------------------------------------|----|

 

| Consolidated Balance Sheets | 27 |
|-----------------------------|----|

 

| Consolidated Statements of Operations | 28 |
|---------------------------------------|----|

 

| Consolidated Statements of Stockholders’ Equity | 29 |
|-------------------------------------------------------|----|

 

| Consolidated Statements of Cash Flows | 30 |
|---------------------------------------|----|

 

| Notes to the Consolidated Financial Statements | 31 |
|------------------------------------------------|----|

 

 

 

-25-

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**Report of Independent Registered Public Accounting Firm**

 

To the Board of Directors and Stockholders 

Calypso Media Services Group, Inc. 

Montoursville, Pennsylvania 

 

We have audited the accompanying consolidated balance sheets of Calypso Media Services Group, Inc. (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our            responsibility is to express an opinion on these consolidated financial statements based on our audits. 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, audits of its internal control            over financial reporting. Our audits 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 consolidated financial            statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Calypso Media Services Group, Inc. as of December 31, 2009 and 2008 and the consolidated results of their operations and their consolidated cash flows for the years then ended, in conformity with accounting principles generally accepted in the            United States of America. 

The 2008 consolidated financial statements have been restated for the correction of an error. See Note 4 to the consolidated financial statements describing the restatement.

 

/s/ GBH CPAs, PC

www.gbhcpas[dot]com

Houston, Texas

April 15, 2010

 

 

-26-

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| **CALYPSO MEDIA SERVICES GROUP, INC.**                                                  |
|-----------------------------------------------------------------------------------------|
| Consolidated Balance Sheets                                                             |
|                                                                                    |   |   |   |   |   |   |   |
| **ASSETS**                                                                              |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    |   |   | December 31, |   | December 31, |
|                                                                                    |   |   | 2009 |   | 2008 |
| CURRENT ASSETS                                                                          |   |   |   | (Restated) |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    | Cash | $ | 175,570 |   | $ | 239,143 |
|                                                                                    | Accounts receivable, net |   | 351,327 |   |   | 416,501 |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    |   | Total Current Assets |   | 526,897 |   |   | 655,644 |
|                                                                                    |   |   |   |   |   |   |   |
| FIXED ASSETS                                                                            |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    | Office equipment |   | 208,571 |   |   | 182,405 |
|                                                                                    | Leasehold improvements |   | 25,754 |   |   | 25,754 |
|                                                                                    | Accumulated depreciation |   | (168,169) |   |   | (145,078) |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    |   | Total Fixed Assets |   | 66,156 |   |   | 63,081 |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    |   | TOTAL ASSETS | $ | 593,053 |   | $ | 718,725 |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |
| **LIABILITIES AND STOCKHOLDERS' EQUITY**                                                |
|                                                                                    |   |   |   |   |   |   |   |
| CURRENT LIABILITIES                                                                     |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    | Accounts payable and accrued expenses | $ | 92,279 |   | $ | 196,752 |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    |   | Total Current Liabilities |   | 92,279 |   |   | 196,752 |
|                                                                                    |   |   |   |   |   |   |   |
| STOCKHOLDERS' EQUITY                                                                    |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    | Common stock; 20,000,000 shares authorized, |   |   |   |   |   |
|                                                                                    | at $0.00001 par value, 5,000,000 shares |   | 50 |   |   | 50 |
|                                                                                    | issued and outstanding, respectively |   |   |   |   |   |
|                                                                                    | Additional paid-in capital |   | 19,920 |   |   | 19,920 |
|                                                                                    | Retained earnings |   | 480,804 |   |   | 502,003 |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    |   | Total Stockholders' Equity |   | 500,774 |   |   | 521,973 |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    |   | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 593,053 |   | $ | 718,725 |
|                                                                                    |   |   |   |   |   |   |   |
| The accompanying notes are an integral part of these consolidated financial statements. |

 

 

 

 

 

-27-

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| **CALYPSO MEDIA SERVICES GROUP, INC.**                                                  |
|-----------------------------------------------------------------------------------------|
| Consolidated Statements of Operations                                                   |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    |   |   | Year Ended |   | Year Ended |
|                                                                                    |   |   | December 31, |   | December 31, |
|                                                                                    |   |   | 2009 |   | 2008 |
|                                                                                    |   |   |   |   |   | (Restated) |
| ADVERTISING REVENUES                                                                    | $ | 3,105,470 |   | $ | 3,581,638 |
|                                                                                    |   |   |   |   |   |   |   |
| COST OF REVENUES                                                                        |   | 2,288,496 |   |   | 2,653,007 |
|                                                                                    |   |   |   |   |   |   |   |
| GROSS PROFIT                                                                            |   | 816,974 |   |   | 928,631 |
|                                                                                    |   |   |   |   |   |   |   |
| OPERATING EXPENSES                                                                      |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    | General and administrative |   | 817,737 |   |   | 938,885 |
|                                                                                    | Depreciation expense |   | 23,091 |   |   | 16,782 |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    |   | Total Operating Expenses |   | 840,828 |   |   | 955,667 |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    |   | Loss from Operations |   | (23,854) |   |   | (27,036) |
|                                                                                    |   |   |   |   |   |   |   |
| OTHER INCOME                                                                            |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    | Interest income |   | 2,655 |   |   | 4,932 |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    |   | Total Other Income |   | 2,655 |   |   | 4,932 |
|                                                                                    |   |   |   |   |   |   |   |
| LOSS BEFORE INCOME TAXES                                                                |   | (21,199) |   |   | (22,104) |
| INCOME TAX BENEFIT                                                                      |   | - |   |   | (3,860) |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    |   | Net Loss | $ | (21,199) |   | $ | (18,244) |
|                                                                                    |   |   |   |   |   |   |   |
| PER SHARE DATA:                                                                         |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |
| BASIC AND DILUTED LOSS                                                                  |   |   |   |   |   |
| PER SHARE                                                                               | $ | (0.00) |   | $ | (0.00) |
|                                                                                    |   |   |   |   |   |   |   |
| BASIC AND DILUTED WEIGHTED AVERAGE                                                      |   |   |   |   |   |
| NUMBER OF SHARES OUTSTANDING                                                            |   | 5,000,000 |   |   | 5,000,000 |
|                                                                                    |   |   |   |   |   |   |   |
| The accompanying notes are an integral part of these consolidated financial statements. |

 

 

 

 

 

 

 

-28-

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| **CALYPSO MEDIA SERVICES GROUP, INC.**                                                  |
|-----------------------------------------------------------------------------------------|
| Consolidated Statements of Stockholders' Equity                                         |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   | Additional |   |   |   |   |
|                                                                                    |   | Common Stock |   | Paid-in |   | Retained |   |   |
|                                                                                    |   | Shares |   | Amount |   | Capital |   | Earnings |   | Total |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2007                                                              |   |   | 5,000,000 |   | $ | 50 |   | $ | 19,920 |   | $ | 520,247 |   | $ | 540,217 |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss for the year ended                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2008 (restated)                                                            |   |   | - |   |   | - |   |   | - |   |   | (18,244) |   |   | (18,244) |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2008                                                              |   |   | 5,000,000 |   |   | 50 |   |   | 19,920 |   |   | 502,003 |   |   | 521,973 |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss for the year ended                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2009                                                                       |   |   | - |   |   | - |   |   | - |   |   | (21,199) |   |   | (21,199) |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, December 31, 2009                                                              |   |   | 5,000,000 |   | $ | 50 |   | $ | 19,920 |   | $ | 480,804 |   | $ | 500,774 |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The accompanying notes are an integral part of these consolidated financial statements. |

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

-29-

----

 

 

| **CALYPSO MEDIA SERVICES GROUP, INC.**                                                  |
|-----------------------------------------------------------------------------------------|
| Consolidated Statements of Cash Flows                                                   |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    |   |   | Year Ended |   | Year Ended |
|                                                                                    |   |   | December 31, |   | December 31, |
|                                                                                    |   |   | 2009 |   | 2008 |
| OPERATING ACTIVITIES                                                                    |   |   |   | (Restated) |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    | Net loss | $ | (21,199) |   | $ | (18,244) |
|                                                                                    | Adjustments to Reconcile Net Loss to Net Cash |   |   |   |   |   |
|                                                                                    | Provided (Used) by Operating Activities: |   |   |   |   |   |
|                                                                                    |   | Depreciation and amortization |   | 23,091 |   |   | 16,782 |
|                                                                                    | Changes in Operating Assets and Liabilities: |   |   |   |   |   |
|                                                                                    |   | Decrease in accounts receivable |   | 65,174 |   |   | 163,467 |
|                                                                                    |   | Decrease in prepaid expenses |   | - |   |   | 2,498 |
|                                                                                    |   | Decrease in income taxes payable |   | - |   |   | (3,860) |
|                                                                                    |   | Increase (decrease) in accounts payable |   | (104,473) |   |   | 146,099 |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    |   | Net Cash Provided (Used) By |   |   |   |   |   |
|                                                                                    |   | Operating Activities |   | (37,407) |   |   | 306,742 |
|                                                                                    |   |   |   |   |   |   |   |
| INVESTING ACTIVITIES                                                                    |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    | Purchase of fixed assets |   | (26,166) |   |   | (36,939) |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    |   | Net Cash Used By |   |   |   |   |   |
|                                                                                    |   | Investing Activities |   | (26,166) |   |   | (36,939) |
|                                                                                    |   |   |   |   |   |   |   |
| FINANCING ACTIVITIES                                                                    |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    | Repayment of shareholder loans |   | - |   |   | (62,200) |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    |   | Net Cash Used By |   | - |   |   | (62,200) |
|                                                                                    |   | Financing Activities |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |
| INCREASE (DECREASE) IN CASH                                                             |   | (63,573) |   |   | 207,603 |
|                                                                                    |   |   |   |   |   |   |   |
| CASH AT BEGINNING OF YEAR                                                               |   | 239,143 |   |   | 31,540 |
|                                                                                    |   |   |   |   |   |   |   |
| CASH AT END OF YEAR                                                                     | $ | 175,570 |   | $ | 239,143 |
|                                                                                    |   |   |   |   |   |   |   |
| Supplemental Cash Flow Disclosures:                                                     |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    | Cash paid for: |   |   |   |   |   |
|                                                                                    |   | Interest expense | $ | - |   | $ | - |
|                                                                                    |   | Income taxes | $ | - |   | $ | - |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    | Non Cash Financing Activities: |   |   |   |   |   |
|                                                                                    |   | None | $ | - |   | $ | - |
|                                                                                    |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |
| The accompanying notes are an integral part of these consolidated financial statements. |

 

 

 

-30-

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**CALYPSO MEDIA SERVICES GROUP, INC.**

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

 

 

NOTE 1 - NATURE OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

 

a. Organization and Business Activities

 

Calypso Media Services Group, Inc. (the Company) was incorporated under the laws of the State of Delaware on July 27, 1999. The Company’s principal business objective is that of offering a full line of advertising services to manufacturers, distributors and dealers across the United States and Canada. The Company specializes in co-op advertising and offers services ranging from buying and            planning media in radio, TV, cable, print or outdoor advertising, to creating print ads and producing electronic commercials. 

 

b. Accounting Basis

 

The basis is accounting principles generally accepted in the United States of America. The Company has adopted a December 31 fiscal year end. The financial statements present the consolidated operations of Calypso Media Services Group, Inc., Media Depot, Inc. and Media Max, Inc. on a consolidated basis from January 1, 2001 All significant intercompany transactions and balances have been            eliminated.

 

 

c. Property and Equipment

 

Property and equipment are stated at cost. Depreciation is computed principally on the straight-line method over the estimated useful lives of the assets. The useful lives of the Company’s property and equipment ranges from 5 to 7 years.  During fiscal years 2009 and 2008, depreciation expense was $23,091, and $16,782, respectively. 

 

d. Cash and Cash Equivalents

 

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

 

e. Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could            differ from those estimates.

 

f. Revenue Recognition

 

The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.

 

g. Accounts Receivable 

 

The Company’s accounts receivable are net of the allowance for estimated doubtful accounts. The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, historical experience, and other currently available evidence. The allowance totaled $104,056 as of December 31,            2009 and 2008.

 

 

-31-

----

**CALYPSO MEDIA SERVICES GROUP, INC.**

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

 

 

| NOTE 1 - | NATURE OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued) |
|----------|------------------------------------------------------------------------|

 

h. Concentrations of Risk

 

The Company’s bank accounts are held by insured institutions. The funds are insured up to $250,000. At December 31, 2009, the Company’s bank deposits did not exceed the insured amounts.

 

The Company's three largest clients account for approximately 50% and 40% of total revenues for the years ended December 31, 2009 and 2008, respectively. A significant reduction in advertising and marketing spending by its largest clients, or the loss of one or more of these clients, if not replaced by new client accounts or an increase in business from existing clients, would adversely affect            revenues. This could have a material adverse effect on our results of operations and financial condition. 

 

i. Earnings (Loss) Per Share

 

The computation of basic net income (loss) per share of common stock is based on the weighted average number of shares outstanding during the year. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is            the basic weighted number of shares adjusted for any potentially dilutive debt or equity securities. There are no such common stock equivalents outstanding as of December 31, 2009 and 2008. 

 

j. Income Taxes

 

The Company provides for income taxes under ASC 740, Accounting for Income Taxes. ASC 740 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. The            Company’s predecessor operated as an entity exempt from Federal and State income taxes.

 

ASC 740 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. 

 

-32-

----

**CALYPSO MEDIA SERVICES GROUP, INC.**

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

 

 

| NOTE 1 - | NATURE OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued) |
|----------|------------------------------------------------------------------------|

 

j. Income Taxes

 

The income tax provision differs from the amount of income tax (benefit) determined by applying the U.S. federal and state income tax rates to pretax income (loss) from continuing operations for the years ended December 31, 2009 and 2008. The components of income tax expense (benefit) are as follows:

 

 

|                                           | 2009   |    | 2008   |
|------------------------------------------------|--------|---------|--------|
| Income tax expense (benefit) at statutory rate | $      | (2,613) |   | $ | (3,860) |
| Change in valuation allowance                  |   | 2,613   |   |   | -- |
|                                           |   |    |   |   |   |
| Income tax expense (benefit)                   | $      | -       |   | $ | (3,860) |

 

 

Deferred tax assets and the valuation account are as follows:

 

 

|                             | 2009   |     | 2008   |
|----------------------------------|--------|----------|--------|
| Net operating loss carryforwards | $      | 21,082   |   | $ | 18,469 |
| Valuation allowance              |   | (21,082) |   |   | (18,469) |
| Net deferred tax asset           | $      | -        |   | $ | - |

 

i. Income Taxes

 

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.

 

k. Stock-based compensation.

 

Pursuant to our employee stock plan, eight employees are entitled to receive a total of 134,000 shares of our common stock. An aggregate of 180,000 shares are authorized to be issued under the plan. All issued shares will remain in trust and ownership will not vest with the individual employee until certain employment criteria have been met. Each employee must execute an employment agreement with the            Company and continuously remain an employee for the time period indicated below.

 

|   | **Time Period** | **Percent of Shares Vested** |
|--------|-----------------|------------------------------|

|   | 12 months from the date employment agreement is signed | 25% |
|--------|--------------------------------------------------------|-----|

|   | 24 months from the date employment agreement is signed | 25% |
|--------|--------------------------------------------------------|-----|

|   | 36 months from the date employment agreement is signed | 25% |
|--------|--------------------------------------------------------|-----|

|   | 48 months from the date employment agreement is signed | 25% |
|--------|--------------------------------------------------------|-----|

 

Upon an employee fulfilling each time period of employment, we will deliver to the employee a stock certificate for that percentage of common shares indicated above. In the event an employee does not enter into an employment agreement or fails to fulfill any of the applicable time periods of employment, those 

 

 

-33-

----

**CALYPSO MEDIA SERVICES GROUP, INC.**

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

 

shares of common stock not so earned by and vested with the employee will be delivered to the company and canceled.

| NOTE 1 - | NATURE OF ORGANIZATION  AND SIGNIFICANT ACCOUNTING POLICIES (continued) |
|----------|------------------------------------------------------------------------------|

 

k. Stock-based compensation.

 

The plan shares are being issued pursuant to an exemption from registration under the Securities Act. We have included an aggregate of 30,000 shares previously issued under the plan in a registration statement that became effective on December 29, 2008. These shares may be sold or transferred by the holders without restriction. The balance of the shares is considered restricted securities and may be            sold or transferred only pursuant to a registration statement or an appropriate exemption from registration. Except for the 30,000 shares previously issued, the Company has not issued any shares under the plan or other share-based payments to its employees.

 

l. Impairment of Long-Lived Assets 

 

The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the            total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. 

 

m. Impact of Recent Accounting Pronouncements

 

In May 2009, the FASB issued SFAS 165 (ASC 855-10) entitled “Subsequent Events”. Companies are now required to disclose the date through which subsequent events have been evaluated by management. Public entities (as defined) must conduct the evaluation as of the date the financial statements are issued, and provide disclosure that such date was used for this evaluation. SFAS 165 (ASC            855-10) provides that financial statements are considered “issued” when they are widely distributed for general use and reliance in a form and format that complies with GAAP. SFAS 165 (ASC 855-10) is effective for interim and annual periods ending after June 15, 2009 and must be applied prospectively. The adoption of SFAS 165 (ASC 855-10) during the quarter ended September 30, 2009 did not have a significant effect on the Company’s financial statements as of that            date or for the quarter or year-to-date period then ended.

 

In June 2009, the FASB issued SFAS 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. (“SFAS 168” pr ASC 105-10) SFAS 168 (ASC 105-10) establishes the Codification as the sole source of authoritative accounting principles recognized by the FASB to be applied by all nongovernmental entities in the preparation of financial            statements in conformity with GAAP. SFAS 168 (ASC 105-10) was prospectively effective for financial statements issued for fiscal years ending on or after September 15, 2009 and interim periods within those fiscal years. The adoption of SFAS 168 (ASC 105-10) on July 1, 2009 did not impact the Company’s results of operations or financial condition. The Codification did not change GAAP, however, it did change the way GAAP is organized and presented. As a result, these changes            impact how companies reference GAAP in their financial statements and in their significant accounting policies. The Company implemented the Codification in this Report by providing references to the Codification topics alongside references to the corresponding historical standards. 

 

 

-34-

----

**CALYPSO MEDIA SERVICES GROUP, INC.**

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

 

 

 

 

| NOTE 1 - | NATURE OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued) |
|----------|------------------------------------------------------------------------|

 

m. Impact of Recent Accounting Pronouncements (continued)

 

With the exception of the pronouncements noted above, no other accounting standards or interpretations issued or recently adopted are expected to have a material impact on the Company’s financial position, operations or cash flows.

 

| NOTE 2 - | SIGNIFICANT EVENTS |
|----------|--------------------|

 

Calypso has reserved an additional 5.0 million shares of its authorized but unissued common stock for possible future issuance in connection with potential acquisitions of other businesses, entities or assets related to the business of the Company. However, there is no present commitment or definitive agreement to issue any of these shares and no assurances can be given that any future acquisitions            will be finalized.

 

| NOTE 3 - | SUBSEQUENT EVENTS |
|----------|-------------------|

 

In accordance with SFAS 165 (ASC 855-10) The Company’s management reviewed all material events through April 15, 2010 and there are no material subsequent events to report.

 

NOTE 4 – RESTATEMENT OF FINANCIALS STATEMENTS

 

On August 27, 2009 the Company was informed that the Public Company Accounting Oversight Board ("PCAOB") revoked the registration of Moore & Associates who was serving as the Company’s independent registered public accounting firm. The revocation was a result of Moore’s violation of PCAOB rules and auditing standards. This revocation of Moore’s registration required the Company            to have the financial statements previously issued reaudited for the fiscal years ended December 31, 2008. 

 

This reaudit produced material differences from the previously filed versions. These misstatements are the result of the Company failing to accrue various marketing (cost of revenues) and general & administrative expenses prior to the fiscal year end at December 31, 2008. This resulted in the Company understating cost of revenues and total expenses as well as accounts payable at December            31, 2008. The reallocation of expense between periods also affected the Company’s tax obligation. The Company reclassified certain expenses that were classified as operating expenses into cost of revenues thus affecting the previously reported gross profit. The Company also reclassified capitalized fixed assets between classes and adjusted a deferred income tax payable. 

 

Included in this filing are the restated 2008 fiscal year consolidated financial statements. For comparative purposes, the table below presents the previously reported and restated balance sheet and statement of operations.

 

 

 

 

-35-

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**CALYPSO MEDIA SERVICES GROUP, INC.**

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

 

 

 

 

NOTE 4 – RESTATEMENT OF FINANCIALS STATEMENTS (CONTINUED)

 

| Consolidated Balance Sheets              |
|------------------------------------------|
| **ASSETS**                               |   |   |   |
|                                     |   |   | As Previously Reported December 31, |   | As Restated December 31, |   | Net |
|                                     |   |   | 2008 |   | 2008 |   | Change |
| CURRENT ASSETS                           |   | 655,644 |   |   | 655,644 |   |   | - |
| FIXED ASSETS                             |   |   |   |   |   |   |   |   |
|                                     | Office equipment |   | 25,754 |   |   | 182,405 |   |   | (156,651) |
|                                     | Leasehold improvements |   | 182,405 |   |   | 25,754 |   |   | 156,651 |
|                                     | Accumulated depreciation |   | (145,078) |   |   | (145,078) |   |   | - |
|                                     |   | Total Fixed Assets |   | 63,081 |   |   | 63,081 |   |   | - |
|                                     |   | TOTAL ASSETS | $ | 718,725 |   | $ | 718,725 |   | $ | - |
|                                     |   |   |   |   |   |   |   |   |   |   |
| **LIABILITIES AND STOCKHOLDERS' EQUITY** |   |   |   |
|                                     |   |   |   |   |   |   |   |   |   |   |
| CURRENT LIABILITIES                      |   |   |   |   |   |   |   |   |
|                                     | Accounts payable and accrued expenses | $ | 99,633 |   | $ | 196,752 |   | $ | (97,119) |
|                                     | Deferred income taxes payable |   | 33,116 |   |   | - |   |   | 33,116 |
|                                     |   | Total Current Liabilities |   | 132,749 |   |   | 196,752 |   |   | (64,003) |
|                                     |   |   |   |   |   |   |   |   |   |   |
| STOCKHOLDERS' EQUITY                     |   |   |   |   |   |   |   |   |
|                                     | Common stock; 20,000,000 shares authorized, |   |   |   |   |   |   |   |   |
|                                     | at $0.00001 par value, 5,000,000 shares |   |   |   |   |  |   |   |  |
|                                     | issued and outstanding, respectively |   | 50 |   |   | 50 |   |   |   |
|                                     | Additional paid-in capital |   | 19,920 |   |   | 19,920 |   |   | - |
|                                     | Retained earnings |   | 566,006 |   |   | 502,003 |   |   | 64,003 |
|                                     |   | Total Stockholders' Equity |   | 585,976 |   |   | 521,973 |   |   | 64,003 |
|                                     |   | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 718,725 |   | $ | 718,725 |   | $ | - |

 

 

 

 

 

 

-36-

----

**CALYPSO MEDIA SERVICES GROUP, INC.**

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

 

 

 

 

 

NOTE 4 – RESTATEMENT OF FINANCIALS STATEMENTS (CONTINUED)

 

| Consolidated Statements of Operations |
|---------------------------------------|
|                                  |   |   |   |   |   |   |   |   |   |   |
|                                  |   |   | As Previously Reported 

Year Ended |   | As Restated Year Ended |   |   |
|                                  |   |   | December 31, |   | December 31, |   | Net |
|                                  |   |   | 2008 |   | 2008 |   | Change |
|                                  |   |   |   |   | (Restated) |   |   |
| ADVERTISING REVENUES                  | $ | 3,581,638 |   | $ | 3,581,638 |   | $ | - |
| COST OF REVENUE                       |   | 1,194,212 |   |   | 2,653,007 |   |   | 1,458,795 |
| GROSS PROFIT                          |   | 2,387,426 |   |   | 928,631 |   |   | (1,458,795) |
| OPERATING EXPENSES                    |   |   |   |   |   |   |   |   |
|                                  | General and administrative |   | 2,300,560 |   |   | 938,885 |   |   | (1,361,675) |
|                                  | Depreciation expense |   | 16,782 |   |   | 16,782 |   |   | - |
|                                  |   | Total Operating Expenses |   | 2,317,342 |   |   | 955,667 |   |   | (1,361,675) |
|                                  |   | Income (Loss) from Operations |   | 70,084 |   |   | (27,036) |   |   | (97,120) |
| OTHER INCOME                          |   |   |   |   |   |   |   |   |
|                                  | Interest income |   | 4,931 |   |   | 4,932 |   |   | 1 |
|                                  |   | Total Other Income |   | 4,931 |   |   | 4,932 |   |   | 1 |
| (LOSS) BEFORE INCOME TAXES            |   | 75,015 |   |   | (22,104) |   |   | (97,119) |
| INCOME TAX (BENEFIT)                  |   | 29,256 |   |   | (3,860) |   |   | (33,116) |
|                                  |   | Net Income (Loss) | $ | 45,759 |   | $ | (18,244) |   | $ | (64,003) |
| PER SHARE DATA:                       |   |   |   |   |   |   |   |   |
|                                  |   |   |   |   |   |   |   |   |   |   |
| BASIC AND DILUTED INCOME (LOSS)       |   |   |   |   |   |   |   |   |
| PER SHARE                             | $ | 0.01 |   | $ | (0.00) |   | $ | (0.01) |
|                                  |   |   |   |   |   |   |   |   |   |   |
| BASIC AND DILUTED WEIGHTED AVERAGE    |   |   |   |   |   |   |   |   |
| NUMBER OF SHARES OUTSTANDING          |   | 5,000,000 |   |   | 5,000,000 |   |   | - |

 

 

 

 

 

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**CALYPSO MEDIA SERVICES GROUP, INC.**

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

 

 

NOTE 5 – COMMITMENTS AND CONTINGENCIES

 

The Company has entered into an acquisition agreement with two of its principals, Matthew J. Hoff and Michael D. Parnell, as an incentive to locate and acquire new businesses associated with the advertising industry. This would include, but not be limited to businesses such as advertising agencies, printing                and public relations firms. The agreement provides that if the Company makes an acquisition through the efforts of for Messrs. Hoff and Parnell, they will be entitled to a fee of 10% of the value of the acquisition. Payment of the fee may be in cash or in shares of our common stock. We have assumed the agreement following the acquisition of Media Depot. No prospective acquisitions have been identified as of the date hereof and                there can be no assurance that any acquisition will be made in the future.

The Company’sprincipal offices in Montoursville, Pennsylvania are leased from the Hoff Family Limited Partnership that is controlled by Matthew Hoff, a founder of Media Depot                and a principal stockholder of Calypso. This agreement was entered into before we acquired Media Depot and has been continued following the acquisition. Lease payments are $1,500 per month and renews monthly.  Our Lonoke, Arkansas offices are leased from the J.S. Parnell Trust, of which our C.E.O. Michael D. Parnell is trustee. This agreement was entered into before we acquired Media Depot and has been continued following the acquisition. Lease payments are $916 per month and renews monthly.

Litigation

The Company is party to various legal actions arising in the ordinary course of business. Matters that are probable of unfavorable outcomes to the Company and which can be reasonably estimated are accrued. Such accruals are based on information known about the matters, the Company’s estimates of the outcomes of such                matters and its experience in contesting, litigating and settling similar matters. None of the actions are believed by management to involve future amounts that would be material to our financial position or results of operations after consideration of recorded accruals although actual amounts could differ materially from management’s estimate that are reasonably possible to occur will not have a material adverse affect on the Company’s financial position or results                of operations. There is no litigation or contingencies that require accrual or disclosure as of December 31, 2009.

 

 

 

 

 

 

 

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**CALYPSO MEDIA SERVICES GROUP, INC.**

Notes to the Consolidated Financial Statements

December 31, 2009 and 2008

 

**SIGNATURES**

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

**Calypso Media Services Group, Inc.**

 

 

|   | By: | /S/ | MICHAELD.PARNELL_____ |
|--------|-----|-----|-----------------------|

Michael D. Parnell

|   | Chief Executive Officer |
|--------|-------------------------|

|   | Principal Financial Officer |
|--------|-----------------------------|

|   | Principal Accounting Officer |
|--------|------------------------------|

 

 

| Dated: | April 15, 2010 |
|--------|----------------|

 

Pursuant to the requirements of the Securities Exchange Act of 1934, 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** |
|--------|---------------|-----------|----------|

 

        

 

April 15, 2010

| /S/ | MICHAELD.PARNELL | Chief Executive Officer and director |
|-----|------------------|--------------------------------------|

|   | Michael D. Parnell |
|--------|--------------------|

(Principal Accounting Officer)

|   | (Principal Financial Officer) |
|--------|-------------------------------|

 

 

|   | April 15, 2010 |
|--------|----------------|

| /S/ | TIMOTHYYOUNG | Director |
|-----|--------------|----------|

|   | Timothy Young |
|--------|---------------|

 

 

 

 

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