Nevada | 5700 | 26-0478989 |
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer |
5 Victory Road |
Suffern NY 10901 |
(845) 548-0888 |
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) |
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Peter J Sarkesian, Esq. |
401 South Old Woodward Avenue, Suite 400, |
Birmingham, Michigan 48009 |
Phone: (248) 645-0800 |
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(Name, address, including zip code, and telephone number, including area code, of agent for service) |
(Names, addresses and telephone numbers of agents for service) |
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Approximate date of commencement of proposed sale to public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. Θ
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Large accelerated filer | Accelerated filer |
Non-accelerated filer (Do not check if a smaller reporting company) | Smaller reporting company Θ |
CALCULATION OF REGISTRATION FEE
Title of each class of securities to be registered | Amount to be registered(1)(3) | Proposed maximum offering price per unit (2) | Proposed maximum aggregate offering price(2) | Amount of registration fee |
Common stock, $0.001 par value | 1,750,000 | $0.05 | $87,500 | $18 |
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PROSPECTUS
Subject to completion, dated September 13 , 2010
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AVENUE SOUTH LTD.
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1,750,000 Shares of Common Stock |
This prospectus relates to 1,750,000 shares of common stock of Avenue South Ltd. that may be sold from time to time by the selling stockholders named in this prospectus. |
We will not receive any proceeds from the sales by the selling stockholders. |
Our common stock is presently not traded on any market or securities exchange. The 1,750,000 shares of our common stock will be sold by the selling stockholders at a fixed price of $0.05 per share until our shares are quoted on the OTC Bulletin Board and thereafter at prevailing market prices or privately negotiated prices. There can be no assurance that a market maker will agree to file the necessary documents with The Financial Industry Regulatory Authority, or FINRA, which operates the OTC Bulletin Board, nor can there be any assurance that such an application for quotation will be approved. We have agreed to bear the expenses relating to the registration of the shares for the selling stockholders. |
Any participating broker-dealers and any selling stockholders who are affiliates of broker-dealers may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended, or the Securities Act, and any commissions or discounts given to any such broker-dealer or affiliates of a broker-dealer may be regarded as underwriting commissions or discounts under the Securities Act. The selling stockholders have informed us that they do not have any agreement or understanding, directly or indirectly, with any person to distribute their common stock. |
Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 7 to read about factors you should consider before buying shares of our common stock. |
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. |
The date of this Prospectus is , 2010. |
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. |
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TABLE OF CONTENTS |
SUMMARY | 1 |
RISK FACTORS | 6 |
USE OF PROCEEDS | 10 |
DETERMINATION OF OFFERING PRICE | 10 |
MARKET FOR COMMON EQUITY AND RELATED | 10 |
STOCKHOLDER MATTERS | 10 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 11 |
CORPORATE STRUCTURE AND HISTORY | 16 |
LEGAL PROCEEDINGS | 20 |
MANAGEMENT | 20 |
EXECUTIVE COMPENSATION | 21 |
SECURITY OWNERSHIP AND CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | 22 |
SELLING STOCKHOLDERS | 23 |
DESCRIPTION OF CAPITAL STOCK | 24 |
SHARES ELIGIBLE FOR FUTURE SALE | 26 |
PLAN OF DISTRIBUTION | 26 |
LEGAL MATTERS | 28 |
EXPERTS | 28 |
WHERE YOU CAN FIND MORE INFORMATION | 28 |
REPORTS OF INDEPENDENT REGISTERED PUBLIS ACCOUNTING FIRM | F-12 - F13 |
You should only rely on the information contained in this prospectus. We have not, and the selling stockholders have not, authorized any other person to provide you with different information. This prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities in any state where the offer or sale is not permitted. The information in this prospectus is accurate only as of the date on the front cover, but the information may have changed since that date. |
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The items in the following summary are described in more detail later in this prospectus. This summary provides an overview of selected information and does not contain all the information you should consider. Therefore, you should also read the more detailed information set out in this prospectus, including the financial statements, the notes thereto and matters set forth under “Risk Factors.”
The Company
Overview
We are a retailer of domestic distinctive art reproductions, collectibles and home décor items for sale in the United States and for export sales. We sell through our website www.avenuesouth.com and through an informal relationship with a home furnishing distributor in Hong Kong. We do not plan to occupy any physical stores or outlets or hold any inventory. Upon receiving sales orders from our customers, our suppliers will drop-ship the products we buy from them, directly to our customers. We believe that the products we sell are relatively unique because they are not readily available at many retail outlets. We feel that we have a strong platform for selling our type of products on the internet and we believe there are significant opportunities for us to sell our products outside the United States.
We acquire our product inventory from approximately 15 wholesale vendors all located in the United States. We do not manufacture any of our own products. We have not entered into any formal supply agreements with these vendors. We are required to pay in full for product inventory purchased from these vendors, prior to them drop-shipping their inventory to our customer. Our retail customers are required to pre-pay for their sales orders.
We are a development stage company. For the year ended March 31, 2010 we sold $13,500 worth of our products, which constituted our entire inventory on hand at the time, to Crown Trend Trading Limited, our (“major customer”), a home furnishing distributor to various retail store outlets in Hong Kong, to whom we give 30 day payment terms. For the three months ended June 30, 2010 our revenues were $20,010, all from the sale of our products to this major customer. Revenue for the month of July 2010 to our major customer will be approximately $10,000. We expect to see an increase in the demand for our products from our major customer in Hong Kong and potentially other customers. We will seek to broaden or further develop our relationship with our major customer by entering into a formal distribution agreement so that we may continue to distribute more of our products through them. We pre-pay allshipping and handling costs and we then charge back all these shipping and handling costs to our customers. Our customers have a 30 day right of return on the products we sell to them. We will also seek to develop relationships with other home furnishing distributors in the United States and Hong Kong in order to increase our products sales and distribution base.
Our Competitive Strengths
We believe that we have the following competitive strengths:
● Existing relationships with our wholesale suppliers;
● Robust website that features streamlined navigation;
● Distinct product inventory sourced by our President;
● A continuing presence in Hong Kong where our Vice President of Sales is marketing our products to the Hong Kong market;
● No storage costs;
● Personalized customer support from our President and Vice President Sales; and
● Low overhead costs.
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Our Growth Strategy We will implement the following strategic plans to take advantage of industry opportunities and our competitive strengths: ● We plan to develop relationships with home furnishing distributors in the U.S. and in Hong Kong that will help us increase our domestic and international sales. ● We plan to begin marketing our website and product inventory on the internet and through other marketing channels later in 2010 or in 2011. ● We plan to leverage the social and business network of Ms. Ngai, our Hong Kong based director, and our Hong Kong stockholder base to find new sales opportunities in Hong Kong. We believe we can increase our product sales to the Hong Kong market. ● We plan to diversify our product portfolio to satisfy a larger array of customer preferences. Risk Factors Our ability to successfully operate our business and achieve our goals and strategies is subject to numerous risks as discussed more fully in the section titled “Risk Factors,” including:
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Any of the above risks could materially and adversely affect our business, financial position and results of operations. An investment in our common stock involves risks. You should read and consider the information set forth in “Risk Factors” and all other information set forth in this prospectus before investing in our common stock. Corporate Information We were incorporated on July 6, 2007 (“successor inception date or “inception”) in the State of Nevada for the sole purpose of acquiring Avenue South, Inc. Avenue South, Inc. was incorporated on February 15, 2005 (“predecessor inception date”) in the State of North Carolina for the purpose of engaging in the business of online sales of imported and domestic distinctive art reproductions, collectibles and home décor items. Our President, Irina Goldman, acquired Avenue South, Inc. on July 6, 2007, from David F. Ruppen, the former owner of Avenue South, Inc., for a cash purchase price of $10,000. Immediately thereafter, on the same day, July 6, 2007, Irina Goldman, our company and Avenue South, Inc. entered into a share exchange agreement, or (“Share Exchange Agreement”), pursuant to which Ms. Goldman exchanged her one share of Avenue South, Inc. for 2,000,000 shares of our company. Upon the consummation of the transactions contemplated by the Share Exchange Agreement, Irina Goldman became our sole stockholder and Avenue South, Inc. became our wholly-owned subsidiary. Our principal office is located at 5 Victory Road, Suffern, NY. Our telephone number is (845) 548-0888. We maintain a website at http://www.avenuesouth.com. Information available on our website is not incorporated by reference in and is not deemed a part of this prospectus. |
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Conventions Used in this Prospectus |
In this prospectus, unless indicated otherwise, references to: |
● “we,” “us,” “our” or the “Company” are to Avenue South Ltd. and our subsidiary, Avenue South, Inc., on a consolidated basis; |
● “Hong Kong” are to the Hong Kong Special Administrative Region of the People’s Republic of China; |
● “U.S. dollar,” “$” and “US$” are to the legal currency of the United States; |
● “SEC” are to the Securities and Exchange Commission; |
● “Securities Act” are to the Securities Act of 1933, as amended, and “Exchange Act” are to the Securities Exchange Act of 1934, as amended. |
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The Offering
1,750,000 shares. This number represents 42% of our current outstanding common stock (1) | ||
Common stock outstanding before the offering | 4,200,000 shares. | |
Common stock outstanding after the offering | 4,200,000 shares. | |
Initial Offering Price | The selling stockholders will sell their shares at an initial offering price of $0.05 per share unless and until a market for our common stock develops on the OTC Bulletin Board, and thereafter at prevailing market prices or privately negotiated prices. | |
Proceeds to us | We will not receive proceeds from the resale of shares by the Selling Stockholders. | |
No Trading Symbol | Our securities are not traded on any exchange or on the over-the-counter markets |
(1) Based on 4,200,000 shares of common stock outstanding as of July 1, 2010. |
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Summary Financial Data
The following summary sets forth selected financial data for the periods and at the dates indicated. The financial data has been derived from our unaudited financial statements for the three months ended June 30, 2010 and June 30, 2009 and for our audited financial statements for each of the fiscal years ended March 31, 2010 and March 31, 2009. The information set forth below should be read in conjunction with, and is qualified in its entirety by reference to, our financial statements beginning on page F-1 of this prospectus and the information set forth in the section of this prospectus captioned "Management’s Discussion and Analysis of Financial Position and Results of Operations".
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Income Statement Data |
Three Months Ended | Three Months Ended | Year Ended | Year Ended | |
June 30, 2010 | June 30, 2009 | March 31, 2010 | March 31, 2009 | |
Revenues | 20,010 | 0 | 13,500 | 417 |
Expenses | 17,063 | 697 | 12,292 | 8,190 |
Net Income (Loss) | 2,947 | (697) | 1,208 | (7,773) |
Net Loss per share | (0.00) | (0.00) | (0.00) | (0.00) |
Balance Sheet Data |
As of June 30, 2010 | As of March 31, 2010 | As of March 31, 2009 | |
Working Capital | 49,157 | 11,210 | 10,002 |
Total Assets | 161,367 | 123,420 | 12,237 |
Total Current Liabilities | 112,210 | 112,210 | 2,235 |
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Based upon current plans, we expect to incur operating losses in future periods because we will continue to be in the development stage and will be incurring expenses and not generating significant revenues. We cannot guarantee that we will be successful in generating significant revenues in the future. Failure to generate revenues which are greater than our expenses will result in the loss of all or a portion of your investment. Changing consumer preferences will require periodic new product introduction. If we are unable to continually satisfy new consumer preferences, we may not generate any material level of revenues. As a result of changing consumer preferences, many Internet websites are successfully marketed for a limited period of time. Even if our products become popular, there can be no assurance that any of our products will continue to be popular for a sustained period of time. Our success will be dependent upon our ability to develop new and improved product lines. Our failure to introduce new product lines and to achieve and sustain market acceptance could result in us being unable to continually meet consumer preferences and generate any material level of revenues. We face intense competition now and if we are unable to successfully compete with our competitors we will not be able to achieve profitability. The Internet home furnishing industry is highly competitive. Most of our competitors have longer operating histories, greater brand recognition, broader product lines and greater financial resources and advertising budgets than we do. Many of our competitors offer similar products or alternatives to our products. We may not be able to develop a more appealing online website than our competitors and we may not be able to otherwise compete effectively against our competitors. Further, our competitors may be able to develop their markets more effectively, have significantly more products than us, may be able to sell their products on more favorable terms, and may be able to adopt more aggressive pricing than us. They may have longer operating histories, greater brand name recognition, larger customer bases and significantly greater financial, technical and marketing resources. In the event that we are unable to successfully compete with our competitors we will not be able to achieve profitability. We face a difficult current retail environment and changing economic conditions that may further adversely affect consumer demand and spending, and as a result, adversely affect our financial condition. Historically, the home furnishings industry has been subject to cyclical variations in the general economy and to uncertainty regarding future economic prospects. Such uncertainty, as well as other variations in global economic conditions such as consumer confidence, rising fuel costs and slowing housing starts, may continue to cause inconsistent and unpredictable consumer spending habits. Many industry analysts believe the current home furnishings environment is as difficult as the industry has ever experienced. Should consumer demand for home furnishings continue at these current low levels for an extended period of time or further deteriorate, it will be difficult to achieve our financial goals and plans. Our relationship with our major customer Crown Trend Trading Ltd. creates risks associated with a concentrated sales source. We currently generate all of our net sales from our business with Crown Trend Trading Ltd., but we cannot be assured that Crown Trend Trading Ltd will continue to purchase from us. Several of our competitors are likely to pursue business opportunities with this customer and threaten our current position. If we fail to maintain this relationship, our sales will be significantly diminished. Even if we maintain our relationship, our sales concentration as a result of this relationship increases the potential impact to our business that could result from any changes in the economic terms of this relationship. Any change in the terms of our sales to this customer could have a material impact on our financial position and results of operations. Further, to the extent Crown Trend Trading Ltd overall business or market share decreases, or does not increase as anticipated, we may be adversely impacted. If we do not attract customers to our website on cost-effective terms, we will not make a profit, which ultimately will result in a cessation of operations. Our success depends on our ability to attract retail customers to our website on cost-effective terms. Our strategy to attract customers to our website, which has not been formalized or implemented, includes viral marketing, the practice of generating "buzz" among Internet users in our products through the developing and maintaining weblogs or "blogs", online journals that are updated frequently and available to the public, postings on online communities such as Facebook, MySpace, Yahoo!(R) Groups and amateur websites such as YouTube.com, and other methods of getting Internet users to refer others to our website by e-mail or word of mouth; search engine optimization, marketing our website via search engines by purchasing sponsored placement in search results; and entering into affiliate marketing relationships with website providers to increase our access to Internet consumers. We expect to rely on word of mouth marketing as the primary source of traffic to our website, with search engine optimization and affiliate marketing as secondary sources. Our marketing strategy may not be enough to attract sufficient traffic to our website. If we do not attract customers to our website on cost-effective terms, we will not make a profit, which ultimately will result in a cessation of operations. Our success depends on the continuing efforts of the members of our senior management and the loss of their services could result in a disruption of operations which could result in reduced revenues. We have no employees and our future success depends heavily upon the continuing services of the members of our senior management team, in particular, our President and principal shareholder Irina Goldman, and our Vice President of Sales and Director Fung Chun Ngai. If one or both of these people are unable or unwilling to continue in their present positions, we may not be able to replace them easily or at all, and our business may be disrupted and our financial condition and results of operations may be materially and adversely affected. The loss of Ms. Ngai as our Director, Treasurer and Vice President of Sales may result in the loss of our major customer. Ms. Ngai does not have any business relationship with Crown Trend outside of our company’s sales to Crown Trend. Ms. Ngai, however, is our only employee or agent in Hong Kong and she is, and historically has been, responsible for maintaining our relationship with Crown Trend given her physical proximity to Crown Trend. Given that Ms. Ngai is physically located in Hong Kong and has been responsible for maintaining our relationship with Crown Trend and facilitating responses to sales inquires, sales returns and sales orders, the loss of her services could adversely affect our business relationship with Crown Trend and the service level provided to Crown Trend.
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Our President and director has never been associated with a larger and profitable home furnishing company, which could adversely affect our ability to becoming profitable in the future.
Our President and director has never been associated with a larger profitable home furnishing company, and her lack of experience in operating a larger home furnishing company like ours could adversely affect our ability to successfully become profitable in the future.
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Irina Goldman, our President and director, owns 2,450,000 shares of our common stock constituting approximately 58% of our outstanding common stock. As a result, Ms. Goldman will be able to elect all of our directors and control our operations. She will also be able to unilaterally decide major corporate actions such as mergers, acquisitions, future securities offerings, amendments to our charter and bylaws and other significant corporate events. Ms. Goldman’s unilateral control over us could decrease the price and marketability of our shares. Our business depends on the development and maintenance of the Internet infrastructure. Outages and delays could reduce the level of Internet usage generally as well as the level of usage of our services and reduce our revenues. The success of our services will depend largely on the development and maintenance of the Internet infrastructure. This includes maintenance of a reliable network backbone with the necessary speed, data capacity, and security, as well as timely development of complementary products, for providing reliable Internet access and services. The Internet has experienced, and is likely to continue to experience, significant growth in the numbers of users and amount of traffic. The Internet infrastructure may be unable to support such demands. In addition, increasing numbers of users, increasing bandwidth requirements, or problems caused by “viruses,” “worms,” and similar programs may harm the performance of the Internet. The backbone computers of the Internet have been the targets of such programs. The Internet has experienced a variety of outages and other delays as a result of damage to portions of its infrastructure, and it could face outages and delays in the future. These outages and delays could reduce the level of Internet usage generally as well as the level of usage of our services and reduce our revenues. Interruption or failure of our information technology and communications systems could impair our ability to effectively provide our products and services, which could damage our reputation and harm our operating results. Our ability to provide our products and services depends on the continuing operation of our information technology and communications systems. Any damage to or failure of our systems could interrupt our service. Service interruptions could reduce our revenues and profits, and damage our name if our system is perceived to be unreliable. Our systems are vulnerable to damage or interruption as a result of terrorist attacks, war, earthquakes, floods, fires, power loss, telecommunications failures, computer viruses, interruptions in access to our websites through the use of “denial of service” or similar attacks, hacking or other attempts to harm our systems, and similar events. Some of our systems are not fully redundant, and our disaster recovery planning does not account for all possible scenarios. The occurrence of a natural disaster or a closure of an internet data center by a third-party provider without adequate notice could result in lengthy service interruptions. Interruption or failure of our information technology and communications systems could impair our ability to effectively provide our products and services, which could damage our reputation and harm our operating results. If our website contains undetected errors, we could lose the confidence of users, resulting in loss of customers and a reduction of revenue. Our websites could contain undetected errors or “bugs” that could adversely affect the ability of our customers to order products through our website. The occurrence of errors may cause us to lose market share, damage our reputation and brand name, and reduce our revenues. If the security measures that we use to protect our user’s personal information such as credit card numbers, are ineffective, our customers may lose their confidence in our websites and stop visiting it. This may result in a reduction in revenues and increase our operating expenses, which would prevent us from achieving profitability. We use www.authorize.net for our website security. Any breach in our website security could expose us to a risk of loss or litigation and possible liability. We anticipate that we will rely on encryption and authentication technology licensed from third parties to provide secure transmission of confidential information. As a result of advances in computer capabilities, new discoveries in the field of cryptography or other developments, a compromise or breach of our security precautions may occur. A compromise in our proposed security could severely harm our business. A party who is able to circumvent our proposed security measures could misappropriate proprietary information, including customer credit card information, or cause interruptions in the operation of our website. We may be required to spend significant funds and other resources to protect against the threat of security breaches or to alleviate problems caused by these breaches. However, protection may not be available at a reasonable price, or at all. Concerns regarding the security of e-commerce and the privacy of users may also inhibit the growth of the Internet as a means of conducting commercial transactions. This may result in a reduction in revenues and increase our operating expenses, which would prevent us from achieving profitability. |
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RISKS RELATED TO THE OWNERSHIP OF OUR STOCK |
Our stock has not been listed on any public exchange, and no prediction can be made as to when, if ever, a public market for our common stock would develop. |
To date, there has been no public market for our common stock. No prediction can be made as to when, if ever, a public market for our common stock will develop. There is no liquidity for shares distributed in this offering and investors may have difficulty in selling any shares acquired in the offering at prices they want. If a public market for the common stock does develop at a future time, sales of shares by stockholders of substantial amounts of our common stock in the public market could reduce the prevailing market price and could impair our future ability to raise capital through the sale of additional equity securities. The company is not listed on any public exchange and there are no market makers currently applying to handle the company’s stock. |
We will likely conduct offerings of our equity securities in the future, in which case your proportionate interest will be diluted. |
We completed a private placement offering of 1,750,000 shares of our common stock at a price of $0.02 per share to investors on March 28, 2010. Since our inception, we have relied on the proceeds of that private placement offering and stock sales to our principal stockholder and loans from our principal stockholder to fund our operations. We will likely be required to undertake additional equity offerings in the future to finance our current business. If common stock is issued in return for additional funds, the price per share could be lower than that paid by our current stockholders. We anticipate continuing to rely on equity sales of our common stock in order to fund our business operations. If we issue additional stock, your percentage interest in us will be diluted. |
Penny stock regulations under U.S. federal securities laws may adversely affect the ability of investors to resell their shares. |
We anticipate that our common stock will be subject to the penny stock rules under the Securities Exchange Act of 1934. These rules regulate broker-dealer practices for transactions in “penny stocks.” Penny stocks are generally equity securities with a price of less than $5.00 per share. The penny stock rules require broker-dealers that derive more than five percent of their customer transaction revenues from transactions in penny stocks to deliver a standardized risk disclosure document that provides information about penny stocks, and the nature and level of risks in the penny stock market, to any non-institutional customer to whom the broker-dealer recommends a penny stock transaction. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction, the broker and/or dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The transaction costs associated with penny stocks are high, reducing the number of broker-dealers who may be willing to engage in the trading of our shares. These additional penny stock disclosure requirements are burdensome and may reduce all the trading activity in the market for our common stock. As long as the common stock is subject to the penny stock rules, holders of our common stock may find it more difficult to sell their shares. |
Reporting requirements under the Exchange Act and compliance with the Sarbanes-Oxley Act of 2002, including establishing and maintaining acceptable internal controls over financial reporting, are costly. |
We presently do not have a business that produces significant revenues, however, the rules and regulations pursuant to the Exchange Act require a public company to provide periodic reports which will require that we engage legal, accounting and auditing services. The engagement of such services can be costly and we are likely to incur losses which may adversely affect our ability to continue as a going concern. Additionally, the Sarbanes-Oxley Act of 2002 will require that our company establish and maintain adequate internal controls and procedures over financial reporting. The costs of complying with the Sarbanes-Oxley Act of 2002 and the limited time that management will devote to our company may make it difficult for us to establish and maintain adequate internal controls over financial reporting. In the event that we fail to maintain an effective system of internal controls or discover material weaknesses in our internal controls, we may not be able to produce reliable financial reports or prevent fraud, which may harm our financial condition and result in loss of investor confidence and a decline in our share price. |
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F-7 |
AVENUE SOUTH LTD. |
(A Development Stage Company) |
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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Inventory
Inventories consist of finished goods of home furnishing products. Cost is stated at the lower of cost or market on a first-in, first-out (FIFO) basis. The Company has not recorded an allowance for slow-moving or obsolete inventory. There was no inventory on hand at June 30, 2010.
Income Taxes
The Company uses the liability approach to financial accounting and reporting for income taxes. The differences between the financial statement and tax bases of assets and liabilities are determined annually. Deferred income tax assets and liabilities are computed for those differences that have future tax consequences using the currently enacted tax laws and rates that apply to the period in which they are expected to affect taxable income. Valuation allowances are established, if necessary, to reduce deferred tax asset accounts to the amounts that will more likely than not be realized. Income tax expense is the current tax payable or refundable for the period, plus or minus the net change in the deferred tax asset and liability accounts.
Revenue Recognition
The Company recognizes revenue in accordance with accounting standards issued by the FASB, which specifies that revenue is realized or realizable and earned when four criteria are met:
The Company recognizes revenue when the goods are accepted by the customer and title has passed. The Company sells its goods via shipment from its suppliers directly to its customers.Shipping and handling costs were not significant. The Company has a 30 day return policy and customers have a general right of 30 days return on products delivered.
The Company did not provide for an allowance for return products since the Company has not experienced any sales returns.
Certain customer arrangements require evaluation of the criteria outlined in the accounting standards of reporting revenue “Gross” as a Principal Versus “Net” as an Agent in determining whether it is appropriate to record the gross amount of revenue and related costs or the net amount earned as agent fees. Generally, when we are primarily obligated in a transaction, revenue is recorded on a gross basis. Other factors that we consider in determining whether to recognize revenue on a gross versus net basis include our assumption of credit risk, our latitude in establishing prices, our determination of service specifications and our involvement in the provision of services. When we conclude that we are not primarily obligated as a principal, we record the net amount earned as agent fees within net sales.
Basic Income/Loss Per Common Share
The computation of income / loss per share is based on the weighted average number of shares outstanding during the period presented in accordance with ASC 260, “Earnings Per Share”. At June 30, 2010 and March 31, 2010, the Company did not have any stock equivalents.
Use of 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 period. Actual results could differ from those estimates.
Foreign Currency Transactions
For the year ended March 31, 2010 and 2009, there are no gain and loss on foreign currency transaction as all transactions are denominated in US dollars.
AVENUE SOUTH LTD. |
(A Development Stage Company) |
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4. RECENT CHANGES IN ACCOUNTING STANDARDS
Recent Accounting Pronouncements
In May 2009, the FASB issued new guidance of ASC 855 “Subsequent Events” on the treatment of subsequent events which is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, management of a reporting entity is required to evaluate subsequent events through the date that financial statements are issued and disclose the date through which subsequent events have been evaluated, as well as the date the financial statements were issued. This new guidance was effective for fiscal years and interim periods ended after June 15, 2009, and must be applied prospectively. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
In August 2009, the FASB issued an Accounting Standards Update (“ASU”) No.2009.05 regarding measuring liabilities at fair value. This ASU provides additional guidance clarifying the measurement of liabilities at fair value in circumstances in which a quoted price in an active market for the identical liability is not available; under those circumstances, a reporting entity is required to measure fair value using one or more of valuation techniques, as defined. This ASU is effective for the first reporting period, including interim periods, beginning after the issuance of this ASU. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
The Company does not expect that adoption of recently issued accounting pronouncements will have a material impact on its financial position, results of operations or cash flows.
5. DUE TO RELATED PARTIES
As of June 30, 2010, the amount due related parties of $112,210 included $77,235 due to President, Principal Accounting Officer, Secretary and director and $34,975 due to Vice President Sales and Director. As of March 31,2009, the amount due to related parties of $2,235 represented the amount due to President, Principal Accounting Officer, Secretary and director. The amounts due are unsecured, non-interest bearing, and due on demand.
In August 2009, the FASB issued an Accounting Standards Update (“ASU”) No.2009.05 regarding measuring liabilities at fair value. This ASU provides additional guidance clarifying the measurement of liabilities at fair value in circumstances in which a quoted price in an active market for the identical liability is not available; under those circumstances, a reporting entity is required to measure fair value using one or more of valuation techniques, as defined. This ASU is effective for the first reporting period, including interim periods, beginning after the issuance of this ASU. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
The Company does not expect that adoption of recently issued accounting pronouncements will have a material impact on its financial position, results of operations or cash flows.
5. DUE TO A STOCKHOLDER
The major stockholder advanced $112,210 to the Company for future operations in the US and China. This non-interest bearing advance is due on demand and the balance was $112,210 at June 30, 2010 and March 31, 2009.
6. INCOME TAXES
The Company accounts for income taxes using the liability method; under which deferred tax liabilities and assets are determined based on the difference between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.
At June 30, 2010, the Company had accumulated deficit during the development stage of $4,843 to offset future taxable income. The Company has established a valuation allowance equal to the full amount of this deferred tax asset due to the uncertainty of the utilization of the operating losses in future periods.
The Company adopted the provisions of ASC 740, “Accounting for Uncertainty in Income Taxes,” at inception. As a result of the implementation of ASC 740, the Company recognized no increase in the liability for unrecognized tax benefits.
The Company has no uncertain tax positions at June 30, 2010 and 2009 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
F-9 |
AVENUE SOUTH LTD. |
(A Development Stage Company) |
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7. STOCKHOLDER’S’ EQUITY
The Company’s Articles of Incorporation authorize 100,000,000 shares of $0.001 par value common stock. On December 17, 2008, the Company issued 450,000 shares of its Common Stock to the Company’s sole stockholder, at $0.02 per share, for total proceeds of $9,000.
On March 28, 2010 the Company had received stock subscriptions to issue 1,750,000 shares of its common stock to 28 non-US investors at $0.02 per share. The Company completed the private placement offering for gross proceeds of $35,000 to non-US persons in reliance of Regulation S promulgated under the Securities Act of 1933 in June 2010. The total amount of common stock subscribed at March 31, 2010 was $35,000. The Company also entered into a Registration Rights Agreement on March 28, 2010 with each investor whereby as soon as possible but in any event not later than the 120th day after March 28, 2010, the Company agreed to file a registration statement on Form S-1. Upon the failure by the Company to have the Registration Statement declared effective within 180 days from the date of the closing of our offering (September 27, 2010), the Company may be required to issue additional shares of its common stock (valued at $0.02 per share) to each Subscriber as liquidated damages. The penalty amount is equal to five percent of the subscription price paid by each subscriber for the first month starting September 27, 2010, if the Registration Statement is not declared effective by that date. The penalty amount equals an additional 87,500 total common shares that may be issued to all the investors for a one month delay and one percent of the subscription price paid in shares (valued at $0.02 per share) to each subscriber for every month thereafter. The maximum amount of liquidated damages due shall not exceed twenty five percent of the Subscription Price paid by the Subscribers (valued at $0.02 per share), which equals a potential maximum of 437,500 additional total common shares that may be issued to all subscribers.
On June 16, 2010 the Company collected all stock subscriptions receivable totaling $35,000 and issued the 1,750,000 shares that were subscribed in the offering.
8. SUBSEQUENT EVENTS
The Company evaluated subsequent events through the time of issuance of the financial statements. Pursuant to the requirements of FASB ASC Topic 855, there were no events or transactions occurring during this subsequent event reporting period that require recognition or disclosure in the financial statements.
F-10 |
AVENUE SOUTH LTD. |
(A Development Stage Company) |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS |
March 31, 2010 |
Page | |
Reports of Independent Registered Public Accounting Firm | F12 |
Consolidated Balance Sheets | F13 |
Consolidated Statements of Operations | F14 |
Consolidated Statements of Changes in Stockholder’s Equity | F15 |
Consolidated Statements of Cash Flows | F16 |
Notes to Consolidated Financial Statements | F17-F20 |
F-11 |
To the Board of Directors and |
Stockholders of Avenue South Ltd |
We have audited the accompanying consolidated balance sheets of Avenue South Ltd as of March 31, 2010 and 2009, and the related consolidated statements of operations, changes in stockholder’s equity, and cash flows for each of the years in the two-year period ended March 31, 2010 and for the period since inception, July 6, 2007, through March 31, 2010. Avenue South Ltd’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. |
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. |
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Avenue South Ltd as of March 31, 2010 and 2009, and the results of its operations and its cash flows for each of the years in the two-year period ended March 31, 2010 and for the period since inception, July 6, 2007, through March 31, 2010 in conformity with accounting principles generally accepted in the United States of America. |
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. |
/s/ EFP Rotenberg, LLP |
EFP Rotenberg, LLP |
Rochester, New York |
July 26, 2010 |
F-12 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Board of Directors and |
Stockholders of Avenue South Inc. |
We have audited the accompanying statements of operations, changes in stockholder’s equity, and cash flows for the period since inception, February 15, 2005, through July 5, 2007. Avenue South Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit. |
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. |
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Avenue South Inc. for the period since inception, February 15, 2005, through July 5, 2007 in conformity with accounting principles generally accepted in the United States of America. |
/s/ EFP Rotenberg, LLP |
EFP Rotenberg, LLP |
Rochester, New York |
July 26, 2010 |
F-13 |
AVENUE SOUTH LTD. |
( A Development Stage Company) |
CONSOLIDATED BALANCE SHEETS |
March 31,2010 | March 31,2009 | March 31,2010 | March 31,2009 | |||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 123,420 | $ | 2,237 | $ | 123,420 | $ | 2,237 |
Inventory | - | 10,000 | - | 10,000 | ||||
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Total Assets | 123,420 | 12,237 | 123,420 | 12,237 | ||||
LIABILITIES AND STOCKHOLDER’S EQUITY | ||||||||
Current Liabilities | ||||||||
Due to a stockholder | $ | 112,210 | $ | 2,235 | ||||
Due to related parties | $ | 112,210 | $ | 2,235 | ||||
Total Liabilities | 112,210 | 2,235 | 112,210 | 2,235 | ||||
Commitments and contingencies | ||||||||
Stockholder’s Equity: | ||||||||
Common stock , $0.001 par value; 100,000,000 shares authorized; | ||||||||
2,450,000 shares and 2,450,000 shares issued and outstanding at March 31, 2010 and 2009, respectively. | 2,450 | 2,450 | 2,450 | 2,450 | ||||
Common stock subscribed, 1,750,000 shares | 35,000 | - | 35,000 | - | ||||
Additional paid-in capital | 16,550 | 16,550 | 16,550 | 16,550 | ||||
Deficit accumulated during the development stage | (7,790) | (8,998) | (7,790) | (8,998) | ||||
Stock subscription receivable | (35,000) | - | (35,000) | - | ||||
Total Stockholder’s Equity | 11,210 | 10,002 | 11,210 | 10,002 | ||||
Total Liabilities and Stockholder’s Equity | $ | 123,420 | $ | 12,237 | $ | 123,420 | $ | 12,237 |
See accompanying notes to consolidated financial statements |
F-14 |
AVENUE SOUTH LTD. |
( A Development Stage Company) |
CONSOLIDATED STATEMENTS OF OPERATIONS |
Successor | Successor | Successor | Predecessor | ||||||
For the period | For the period from | ||||||||
July 6, 2007 | February 15, 2005 | ||||||||
For the year ended | For the year ended | (Date of Inception) | (Date of Inception) to | ||||||
March 31, 2010 | March 31, 2009 | to March 31, 2010 | July 5, 2007 | ||||||
Revenue | |||||||||
Sales | $ | 13,500 | $ | 417 | $ | 14,210 | $ | 10,787 | |
Cost of sales | 10,000 | 276 | 10,276 | 8,675 | |||||
Gross Margin | 3,500 | 141 | 3,934 | 2,112 | |||||
Operating Expenses | |||||||||
Other selling, general and administrative expenses | 2,292 | 7,914 | 11,724 | 40,024 | |||||
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Total operating expenses | 2,292 | 7,914 | 11,724 | 40,024 | |||||
Net operating income (loss) | 1,208 | (7,773) | (7,790) | (37,912) | |||||
Other Income (expenses) | - | - | - | - | - | - | |||
Net income (loss) | $ | 1,208 | $ | (7,773) | $ | (7,790) | $ | (37,912) | |
Income (Loss) per common share: | |||||||||
- Basic and fully diluted | $ | 0.00 | $ | 0.00 | |||||
Weighted average number of shares | |||||||||
- Basic and fully diluted | 2,450,000 | 2,129,452 |
See accompanying notes to Consolidated financial statements |
F-15 |
AVENUE SOUTH LTD. |
(A Development Stage Company) |
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY |
Additional | Deficit Accumulated | Stock | Total | ||||||||||||
Common Stock | Capital Stock Subscribed | Paid | During the | Subscription | Stockholder’s | ||||||||||
Predecessor Entity | Shares |
| Amount | Shares |
| Amount | In capital |
| Development Stage |
| Receivable |
| Equity | ||
Balance, February 15, 2005 | - | $ - | - | $ - | $ - | $ - | $ - | $ - | |||||||
Share issued in inception | 1 | 100 | - | - | - | - | - | 100 | |||||||
Net loss for the period | - | - | - | - | - | (2,167) | - | (2,167) | |||||||
Balance, March 31, 2005 | 1 | 100 | - | - | - | (2,167) | - | (2,067) | |||||||
Net loss for the year | - | - | - | - | - | (15,439) |
| - | (15,439) | ||||||
Balance, March 31, 2006 | 1 | 100 | - | - | - | (17,606) | - | (17,506) | |||||||
Net loss for the year | - | - | - | - | - | (275) | - | (275) | |||||||
Balance, March 31, 2007 | 1 | 100 | - | - | - | (17,881) | - | (17,781) | |||||||
Net loss for the year | - | - | - | - | - | (20,031) | - | (20,031) | |||||||
Balance, July 5, 2007 | 1 | $ 100 | - | $ - | $ - | (37,912) | $ - | (37,812) | |||||||
Successor Entity | |||||||||||||||
Balance, July 6, 2007 | - |
| $ - | - | $ - |
| $ - | $ - | $ - | $ - | |||||
Issuance of Common Stock | 2,000,000 | 2,000 | - | - | 8,000 | - | - | 10,000 | |||||||
Net loss for the period | - | - | - | - | - | (1,225) | - | (1,225) | |||||||
Balance, March 31, 2008 | 2,000,000 | 2,000 | - | - | $ 8,000 | (1,225) | - | 8,775 | |||||||
Share issued in private placement at $0.02 per share | 450,000 | 450 | - | - | 8,550 | - | - | 9,000 | |||||||
Net loss for the year | - | - | - | - | - | (7,773) | - | (7,773) | |||||||
Balance, at March 31, 2009 | 2,450,000 | 2,450 | - | - | 16,550 | (8,998) | - | 10,002 | |||||||
Common stock subscribed in private placement at | - | - | 1,750,000 | 35,000 | - | - | - | 35,000 | |||||||
Shares subscription receivable | - | - | - | - | - | - | (35,000) | (35,000) | |||||||
Net income for the year | - | - | - | - | - | 1,208 | - | 1,208 | |||||||
Balance, March 31, 2010 | 2,450,000 | $ 2,450 | 1,750,000 | $ 35,000 | $ 16,550 | $ (7,790) | $ (35,000) | $ 11,210 |
See accompanying notes to consolidated financial statements |
F-16 |
AVENUE SOUTH LTD.
( A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Successor | Successor | Successor | Predecessor | Successor | Successor | Successor | Predecessor | |||||||||||
For the period | For the period | |||||||||||||||||
July 6, 2007 | For the period | July 6, 2007 | For the period | |||||||||||||||
For the year | For the year | (Date of | from February 15, | For the year | For the year | (Date of | from February 15, | |||||||||||
ended | ended | Inception) | 2005 (Date of | ended | ended | Inception) | 2005 (Date of | |||||||||||
March 31, | March 31, | to March 31, | Inception) to | March 31, | March 31, | to March 31, | Inception) to | |||||||||||
2010 | 2009 | 2010 | July 5, 2007 | 2010 | 2009 | 2010 | July 5, 2007 | |||||||||||
Cash flows from operating activities | ||||||||||||||||||
Net income (loss) for the year/period | $ | 1,208 | $ | (7,773) | $ | (7,790) | $ | (37,912) | $ | 1,208 | $ | (7,773) | $ | (7,790) | $ | (37,912) | ||
Amortization | - | - | - | 6,735 | - | - | - | 6,735 | ||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||||
Other current assets | - | - | - | (74) | - | - | - | (74) | ||||||||||
Inventories | 10,000 | - | (10,000) | (10,500) | 10,000 | - | (10,000) | (10,500) | ||||||||||
Net cash provided by (used in) operating activities | 11,208 | (7,773) | (17,790) | (41,751) | 11,208 | (7,773) | (17,790) | (41,751) | ||||||||||
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Cash flows from investing activities | ||||||||||||||||||
Acquisition of web site | - | - | - | (33,000) | - | - | - | (33,000) | ||||||||||
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Net cash flows used in investing activities: | - | - | - | (33,000) | - | - | - | (33,000) | ||||||||||
Cash flows from financing activities | ||||||||||||||||||
Advance from (to) stockholder | 109,975 | (3,000) | 122,210 | 76,882 | ||||||||||||||
Advance from (to) related parties | 109,975 | (3,000) | 122,210 | 76,882 | ||||||||||||||
Proceeds from issuance of common stock | - | 9,000 | 19,000 | 100 | - | 9,000 | 19,000 | 100 | ||||||||||
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Net cash flows provided by financing activities | 109,975 | 6,000 | 141,210 | 76,982 | 109,975 | 6,000 | 141,210 | 76,982 | ||||||||||
Net increase (decrease) in cash | 121,183 | (1,773) | 123,420 | 2,231 | 121,183 | (1,773) | 123,420 | 2,231 | ||||||||||
Cash- beginning of year/period | 2,237 | 4,010 | - | - | 2,237 | 4,010 | - | - | ||||||||||
Cash- end of year/period | $ | 123,420 | $ | 2,237 | $ | 123,420 | $ | 2,231 | $ | 123,420 | $ | 2,237 | $ | 123,420 | $ | 2,231 | ||
Supplemental disclosure of non cash financing activities: | ||||||||||||||||||
Stock subscription receivable | $ | 35,000 | $ | - | $ | 35,000 | $ | - | $ | 35,000 | $ | - | $ | 35,000 | $ | - | ||
Supplemental cash flow Information: | ||||||||||||||||||
Cash paid for interest | - | - | - | - | - | - | - | - | ||||||||||
Cash paid for income taxes | - | - | - | - | - | - | - | - |
See accompanying notes to consolidated financial statements |
F-17 |
AVENUE SOUTH LTD. |
( A Development Stage Company) |
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
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1. ORGANIZATION AND NATURE OF BUSINESS
On July 6, 2007, our principal stockholder acquired 100% of the equity of Avenue South, Inc., a North Carolina corporation. On July 6, 2007, Avenue South Ltd., a Nevada corporation was formed by our principal stockholder and our principal stockholder entered into a share exchange agreement, pursuant to which all the common stock held by our principal stockholder in Avenue South, Inc. was acquired by Avenue South Ltd. by issuing 2 million common shares to our principal stockholder. Avenue South Ltd. then became the parent corporation owning 100% of Avenue South, Inc.
Avenue South, Inc. was incorporated in the State of North Carolina on February 15, 2005 (date of predecessor inception) with the principal business objective of a “one-stop” web based supplier of imported and domestic art reproductions, collectibles and home décor items that are difficult to find in traditional home furnishing retail outlets. All items are sold through the Company’s website, www.avenuesouth.com.
The Company’s success will depend in part on its ability to market and sell its products over the internet and through other marketing channels. There can be no assurance that these marketing efforts will be successful. The Company believes that it currently has sufficient cash and financing commitments to meet its funding requirements over the next year. In addition, the Company may wish to selectively pursue additional products complementary to those of the Company in the future in order to expand its presence in the marketplace and achieve operating efficiencies. The Company may expect to seek to obtain additional funding through debt or equity transactions. There can be no assurance as to the availability or terms upon which such financing and capital might be available.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Avenue South Ltd. and its wholly-owned subsidiary Avenue South, Inc., after elimination of all material intercompany accounts, transactions, and profits.
A summary of significant accounting policies of Avenue South Ltd. (A Development Stage Company) (the “Company” or “Successor”) is presented to assist in understanding the Company’s financial statements. The accounting policies presented in these footnotes conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the accompanying financial statements. The Company has not realized any significant revenues from its planned principal business purpose and is considered to be in a development stage in accordance with ASC 915, “Development Stage Entities.”
Inventory
Inventories consist of finished goods of home furnishing products. Cost is stated at the lower of cost or market on a first-in, first-out (FIFO) basis. The Company has not recorded an allowance for slow-moving or obsolete inventory. There was no inventory on hand at March 31, 2010 and no obsolete inventory at March 31, 2009. The Company sold its entire inventory during the year ended March 31, 2010.
Income Taxes
The Company uses the liability approach to financial accounting and reporting for income taxes. The differences between the financial statement and tax bases of assets and liabilities are determined annually. Deferred income tax assets and liabilities are computed for those differences that have future tax consequences using the currently enacted tax laws and rates that apply to the period in which they are expected to affect taxable income. Valuation allowances are established, if necessary, to reduce deferred tax asset accounts to the amounts that will more likely than not be realized. Income tax expense is the current tax payable or refundable for the period, plus or minus the net change in the deferred tax asset and liability accounts.
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( A Development Stage Company) |
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Revenue Recognition
The Company recognizes revenue in accordance with accounting standards issued by the FASB, which specifies that revenue is realized or realizable and earned when four criteria are met:
The Company recognizes revenue when the goods are accepted by the customer and title has passed. The Company sells its goods via shipment from its suppliers directly to its customers.Shipping and handling costs were not significant. The Company has a 30 day return policy and customers have a general right of return on products delivered.
The Company did not provide for an allowance for return products since the Company has not experienced any sales returns.
Certain customer arrangements require evaluation of the criteria outlined in the accounting standards of reporting revenue “Gross” as a Principal Versus “Net” as an Agent in determining whether it is appropriate to record the gross amount of revenue and related costs or the net amount earned as agent fees. Generally, when we are primarily obligated in a transaction, revenue is recorded on a gross basis. Other factors that we consider in determining whether to recognize revenue on a gross versus net basis include our assumption of credit risk, our latitude in establishing prices, our determination of service specifications and our involvement in the provision of services. When we conclude that we are not primarily obligated as a principal, we record the net amount earned as agent fees within net sales.
Basic Income/Loss Per Common Share
The computation of income / loss per share is based on the weighted average number of shares outstanding during the period presented in accordance with ASC 260, “Earnings Per Share”. At March 31, 2010 and 2009, the Company did not have any stock equivalents.
Use of 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 year. Actual results could differ from those estimates.
Foreign Currency Transactions
For the year ended March 31, 2010 and 2009, there are no gain and loss on foreign currency transaction as all transactions are denominated in US dollars.
Use of 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 year. Actual results could differ from those estimates.
3. RECENT CHANGES IN ACCOUNTING STANDARDS
Recent Accounting Pronouncements
In May 2009, the FASB issued new guidance of ASC 855 “Subsequent Events” on the treatment of subsequent events which is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, management of a reporting entity is required to evaluate subsequent events through the date that financial statements are issued and disclose the date through which subsequent events have been evaluated, as well as the date the financial statements were issued. This new guidance was effective for fiscal years and interim periods ended after June 15, 2009, and must be applied prospectively. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
In August 2009, the FASB issued an Accounting Standards Update (“ASU”) No.2009.05 regarding measuring liabilities at fair value. This ASU provides additional guidance clarifying the measurement of liabilities at fair value in circumstances in which a quoted price in an active market for the identical liability is not available; under those circumstances, a reporting entity is required to measure fair value using one or more of valuation techniques, as defined. This ASU is effective for the first reporting period, including interim periods, beginning after the issuance of this ASU. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
The Company does not expect that adoption of recently issued accounting pronouncements will have a material impact on its financial position, results of operations or cash flows.
F-19 |
4. REORGANIZATION OF AVENUE SOUTH, INC. |
On July 6, 2007, Avenue South Ltd. (the Successor) acquired all of the assets but contractually was not required to assume the liabilities of the Avenue South, Inc. (Predecessor). |
On July 5, 2007 before the date of reorganization, the assets and liabilities of the Predecessor are as follow: |
Assets not acquired - Cash and Cash equivalents | $ | 2,231 |
Inventory | 10,500 | |
Assets not acquired - Other current assets | 74 | |
Web site, net | 26,265 | |
Liabilities not assumed - Due to stockholder | (76,882) | |
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Net liabilities of the Predecessor | $ | (37,812) |
The assets acquired from the Predecessor were recorded based on their fair values and were allocated in accordance with the purchase method accounting, to tangible assets acquired to the extent of the bargain purchase consideration paid by the Successor to the owner of the Predecessor for $10,000, as follows: |
Inventory | $ | 10,000 |
Web site, net | - | |
Net assets recorded by the Company from the Predecessor | $ | 10,000 |
The following financial information presents the results of the Predecessors before the reorganization: |
For the period from | ||||||
April 1, 2007 to | For the year ended | For the year ended | ||||
July 5, 2007 | March 31, 2007 | March 31, 2006 | ||||
Sales | $ | - | - | 10,613 | ||
Cost of sales | - | - | 8,675 | |||
Gross margin | - | - | 1,938 | |||
Other Selling, general and administrative expenses | 20,031 | 275 | 17,377 | |||
Net loss | $ | (20,031) | (275) | (15,439) |
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5. DUE TO RELATED PARTIES
As of March 31, 2010, the amount due related parties of $112,210 included $77,235 due to President, Principal Accounting Officer, Secretary and director and $34,975 due to Vice President Sales and Director. As of March 31,2009, the amount due to related parties of $2,235 represented the amount due to President, Principal Accounting Officer, Secretary and director. The amounts due are unsecured, non-interest bearing, and due on demand.
F-20 |
6. INCOME TAXES
The Company accounts for income taxes using the liability method; under which deferred tax liabilities and assets are determined based on the difference between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.
At March 31, 2010, the Company had accumulated deficit during the development stage of $7,790 to offset future taxable income. The Company has established a valuation allowance equal to the full amount of this deferred tax asset due to the uncertainty of the utilization of the operating losses in future periods.
The Company adopted the provisions of ASC 740,“Accounting for Uncertainty in Income Taxes,” at inception. As a result of the implementation of ASC 740, the Company recognized no increase in the liability for unrecognized tax benefits.
The Company has no uncertain tax positions at March 31, 2010 and 2009 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
7. STOCKHOLDER’S’ EQUITY
The Company’s Articles of Incorporation authorize 100,000,000 shares of $0.001 par value common stock. On December 17, 2008, the Company issued 450,000 shares of its Common Stock to the Company’s sole stockholder, at $0.02 per share, for total proceeds of $9,000.
On March 28, 2010 the Company had received stock subscriptions to issue 1,750,000 shares of its common stock to 28 non-US investors at $0.02 per share. The Company completed the private placement offering for gross proceeds of $35,000 to non-US persons in reliance of Regulation S promulgated under the Securities Act of 1933 in June 2010. The total amount of common stock subscribed at March 31, 2010 was $35,000.
The Company also entered into a Registration Rights Agreement on March 28, 2010 with each investor whereby as soon as possible but in any event not later than the 120th day after March 28, 2010, the Company agreed to file a registration statement on Form S-1. Upon the failure by the Company to have the Registration Statement declared effective within 180 days from the date of the closing of our offering (September 27, 2010), the Company may be required to issue additional shares of its common stock (valued at $0.02 per share) to each Subscriber as liquidated damages. The penalty amount is equal to five percent of the subscription price paid by each subscriber for the first month starting September 27, 2010, if the Registration Statement is not declared effective by that date. The penalty amount equals an additional 87,500 total common shares that may be issued to all the investors for a one month delay and one percent of the subscription price paid in shares (valued at $0.02 per share) to each subscriber for every month thereafter. The maximum amount of liquidated damages due shall not exceed twenty five percent of the Subscription Price paid by the Subscribers (valued at $0.02 per share), which equals a potential maximum of 437,500 additional total common shares that may be issued to all subscribers.
8. SUBSEQUENT EVENTS
The Company evaluated subsequent events through the time of issuance of the financial statements. Pursuant to the requirements of FASB ASC Topic 855, there were no events or transactions occurring during this subsequent event reporting period that require recognition or disclosure in the financial statements.
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F-21 |
1,750,000 Shares |
AVENUE SOUTH LTD. |
Common Stock |
PROSPECTUS |
, 2010 |
Until ____, 2010 (X days after the commencement of this offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
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INFORMATION NOT REQUIRED IN THE PROSPECTUS |
The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by us in connection with the sale of common stock being registered. All amounts, other than the SEC registration fee, are estimates. We will pay all these expenses. |
Commission filing fee |
| $ | 300 |
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Legal fees and expenses |
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| 10,000 |
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Accounting fees and expenses |
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| 2,000 |
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Printing and marketing expenses |
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| 500 |
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Miscellaneous |
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| 200 |
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Total |
| $ | 13,000 |
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Item 14. Indemnification of Directors and Officers |
Our bylaws provide for the indemnification of our present and prior directors and officers or any person who may have served at our request as a director or officer of another corporation in which we own shares of capital stock or of which we are a creditor, against expenses actually and reasonably incurred by them in connection with the defense of any actions, suits or proceedings in which they, or any of them, are made parties, or a party, by reason of being or having been director(s) or officer(s) of us or of such other corporation, in the absence of negligence or misconduct in the performance of their duties. This indemnification policy could result in substantial expenditure by us, which we may be unable to recoup. |
Insofar as indemnification by us for liabilities arising under the Exchange Act may be permitted to our directors, officers and controlling persons pursuant to provisions of the Articles of Incorporation and Bylaws, or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy and is, therefore, unenforceable. In the event that a claim for indemnification by such director, officer or controlling person of us in the successful defense of any action, suit or proceeding is asserted by such director, officer or controlling person in connection with the securities being offered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
At the present time, there is no pending litigation or proceeding involving a director, officer, employee or other agent of ours in which indemnification would be required or permitted. We are not aware of any threatened litigation or proceeding which may result in a claim for such indemnification. |
On July 6, 2007 we issued 2,000,000 shares of our common stock at a price of $0.005 per share to Irina Goldman upon the formation of our company for $10,000. These securities were issued without a prospectus pursuant to Section 4(2) of the Securities Act. |
II-1 |
On December 17, 2008, we issued 450,000 shares of our common stock at a price of $0.02 per share to Irina Goldman for cash proceeds of $9,000. These securities were issued without a prospectus pursuant to Section 4(2) of the Securities Act. |
We relied on Section 4(2) of the Securities Act in connection with the above issuances of securities based upon the following factors: (a) the issuance of the securities was an isolated private transaction by us which did not involve a public offering; (b) there were only a limited number of offerees; (c) there were no subsequent or contemporaneous public offerings of the securities by us; (d) the securities were not broken down into smaller denominations; and (e) the negotiations for the sale of the stock took place directly between the offeree and us. |
On March 28, 2010, we completed a private placement in which we issued and sold to the selling stockholders an aggregate of 1,750,000 shares of our common stock, for an aggregate purchase price of $35,000, or $0.02 per share. As a result of this private placement, we raised approximately $35,000 in gross proceeds, which left us with approximately $35,000 in net proceeds after the deduction of offering expenses in the amount of $0. The foregoing issuance was made in reliance upon exemptions provided by Rule 903 of Regulation S of the Securities Act. We were able to rely on Rule 903 because (a) the subscriber was neither a U.S. person nor acquiring the shares for the account or benefit of any U.S. person, (b) the subscriber agreed not to offer or sell the shares (including any pre-arrangement for a purchase by a U.S. person or other person in the U.S.) directly or indirectly, in the United States or to any natural person who is a resident of the United States or to any other U.S. person as defined in Regulation S unless registered under the Securities Act and all applicable state laws or an exemption from the registration requirements of the Securities Act and similar state laws is available, (c) the subscriber made his, her or its subscription from the subscriber’s residence or offices at an address outside of the U.S. and (d) the subscriber or the subscriber’s advisor has such knowledge and experience in financial and business matters that the subscriber is capable of evaluating the merits and risks of, and protecting his interests in connection with an investment in our company. |
Item 16. Exhibits. |
Exhibit No. |
| Description |
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3.1 | Articles of Incorporation of the Company, as amended to date* | |
3.2 | Bylaws of the Company, as amended to date* | |
4.5 | Registration Rights Agreement* | |
5 | Opinion of Law Offices of Gary R. Henrie as to the legality of the shares* | |
10.1 | Form of Subscription Agreement, dated March 28, 2010* | |
10.2 | Stock Purchase Agreement, dated July 6, 2007, among David F. Ruppen and Mary Carol Ruppen and Irina Goldman.* | |
10.3 | Share Exchange Agreement among Irina Goldman, the Company and Avenue South, Inc.* | |
21 | Subsidiaries of the Company* | |
23.1 | Consent of EFP Rotenberg LLP * | |
23.2 | Consent of Law Offices of Gary R. | |
Power of Attorney (included on the signature page of this registration statement)* |
*Filed herewith. |
II-2 |
Item 17. Undertakings |
The undersigned registrant hereby undertakes to: |
File, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to: |
(a) Include any prospectus required by Section 10(a)(3) of the Securities Act, and |
(b) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement, and |
(c) Include any additional or changed material information on the plan of distribution. |
For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering. |
File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. |
For determining liability under the Securities Act, treat the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act as part of this registration statement as of the time the Commission declared it effective. |
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. |
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Until _______, all dealers that affect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments and subscriptions.
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Suffern, NY on the 27th day of July, 2010. |
| AVENUE SOUTH LTD. | |
| By: | /s/ IRINA GOLDMAN |
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| Irina Goldman |
President and Principal |
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POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. Each person whose signature appears below constitutes and appoints Irina Goldman and Fung Chun Ngai, and each of them individually, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Signature | Title | ||
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President, Principal Financial Officer and Secretary | |||
(Principal Executive Officer and Principal | |||
September 13, 2010 | /s/ IRINA GOLDMAN |
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Irina Goldman | |||
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September 13, 2010 | /s/ FUNG CHUN NGAI | Treasurer, Vice President Sales and Director |
Fung Chun Ngai | ||
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EXHIBIT INDEX |
Exhibit No. |
| Description |
---|---|---|
3.1 | Articles of Incorporation of the Company, as amended to date* | |
3.2 | Bylaws of the Company, as amended to date* | |
4.5 | Registration Rights Agreement* | |
5 | Opinion of Law Offices of Gary R. Henrie as to the legality of the shares* | |
10.1 | Form of Subscription Agreement, dated March 28, 2010* | |
10.2 | Stock Purchase Agreement, dated July 6, 2007, among David F. Ruppen and Mary Carol Ruppen and Irina Goldman.* | |
10.3 | Share Exchange Agreement among Irina Goldman, the Company and Avenue South, Inc.* | |
21 | Subsidiaries of the Company* | |
23.1 | Consent of EFP Rotenberg LLP * | |
23.2 | Consent of Law Offices of Gary R. | |
Power of Attorney (included on the signature page of this registration statement)* |
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