Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information.  Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation. The results for the interim period are not necessarily indicative of the results to be expected for the full year.

The unaudited interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10, which contains the audited financial statements and notes thereto, together with the Management’s Discussion and Analysis, for the fiscal year ended June 30, 2010.  The interim results for the three and six months ended September 30,December 31, 2010 are not necessarily indicative of the results for the full fiscal year.

Ghost Technology, Inc. (“the Company”), formerly IA Europe Group Inc. (“IAEG”), is a Delaware Corporation that was incorporated on November 12, 1999. On January 16, 2008, the Company changed its name to Ghost Technology, Inc.

 

The Company's financial statements are presented as those of a development stage company. Activities during the development stage primarily include negotiating distribution agreements and marketing the territory for distribution outlets for the product.  The Company, while seeking to implement its business plan, will look to obtain additional debt and/or equity related funding opportunities. The Company has  generated minimal revenues since inception.

 

The preparation of financial statements in conformity with U.S. 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.

Such estimates and assumptions impact, among others, the following: the fair value of share-based payments and transactions and a full valuation allowance on deferred tax assets due to continuing losses.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from estimates.

The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents.  There were no cash equivalents at September 30,December 31, 2010 and June 30, 2010, respectively.

The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits. At September 30,December 31, 2010 the balance did not exceed the federally insured limit.

The Company recognizes revenue at the time the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured. The Company intends on selling advertisement broadcasting time to its customers and will recognize revenue over the period of each broadcast. The Company also sells advertising media production services to its customers and recognizes revenues from such sales when the completed media product is shipped to the customer and when no further services are required to be performed. All revenue was earned from one customer for the three and six months ended September 30,December 31, 2010.

The Company operates in an industry that is subject to intense competition and change in consumer demand. The Company's operations are subject to significant risk and uncertainties including financial and operational risks including the potential risk of business failure. Also, see Note 4 regarding going concern matters.

Generally, all forms of share-based payments, including stock option grants, restricted stock grants and stock appreciation rights, are measured at their fair value on the awards’ grant date, and based on the estimated number of awards that are ultimately expected to vest. Share-based payment awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. The expense resulting from share-based payments are recorded as a component of general and administrative expense.

 

Basic earnings per share (“EPS”) is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period, excluding the effects of any potentially dilutive securities. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt or convertible preferred stock, using the if-converted method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive. The Company had no common stock equivalents.equivalents at December 31, 2010.

The computation of basic and diluted loss per share for the three and six months ended September 30,December 31, 2010 and 2009, and from November 12, 1999 ( Inception) to September 30,December 31, 2010, are equivalent since the Company has had continuing losses.

 

As reflected in the accompanying financial statements, the Company has a working capital deficit of $156,113$220,171 at September 30,December 31, 2010, and a net loss of $129,173$281,564 and net cash used in operations of $71,530$154,447 for the threesix months ended September 30,December 31, 2010.

The Company is in the development stage. Further, losses from operations are continuing subsequent to September 30,December 31, 2010. The Company anticipates that it will continue to generate significant losses from operations in the near future. The Company believes its current available cash along with anticipated revenues may be insufficient to meet its cash needs for the near future.  There can be no assurance that additional financing will be available in amounts or terms acceptable to the Company, if at all.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue its operations is dependent on Management's plans, which include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements.  The Company may need to incur additional liabilities with certain related parties to sustain the Company’s existence.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

In response to the going concern issue, management has taken the following actions:

 

 

In April 2010, the Company advanced $130,000 to a director, which was due on April 1, 2011.  The loan iswas not interest bearing. Subsequently, the Company was advised by securities counsel that the loan would have been a violation of the Sarbanes-Oxley Act of 2002, which prohibits loans to officers and directors, following effectiveness of the Form 10.  The Company’s Board of Directors agreed on August 19, 2010 to accept 130,000 shares of common stock, owned by this director, in exchange for the loan receivable, based on the estimated fair value per common share of $1.00, which was based upon the fair value of stock issued in connection with a debt conversion in March 2010. This debt holder was a third party and the conversion rate represented the best evidence of fair value.  These shar esshares are reflected as treasury stock on the accompanying balance sheet.