UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For The Quarterly Period Ended September 30, 2002
| [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For The Transition Period from __________ To _________
Commission file number: 0-266932
(Exact name of registrant as specified in its charter)
| | Nevada | | 87-0431036 | |
| | (State or other jurisdiction of incorporation or organization) | | (IRS Employer Identification No.) | |
| | | | | |
| | 525 Inner Circle, The Villages, Florida | | 32162 | |
| | (Address of principal executive offices) | | (zip code) | |
(Registrant’s telephone number, including area code)
(Former Name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [ ] No [X]
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.
| | Large accelerated filer [ ] | | Accelerated filer [ ] | |
| | | | | |
| | Non-accelerated filer [ ] | | Smaller reporting company [X] | |
Indicate by check mark whether the issuer is a shell company (as defined in rule 12b-2 of the Ex-change Act) Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
As of March 31, 2009 there were 88,043,662 shares of the Registrant's Common stock, $0.001 par value per share, outstanding.
BRIGHTCUBE, INC.
For The Quarterly Period Ended September 30, 2002
TABLE OF CONTENTS
| PART I - FINANCIAL INFORMATION | |
| | | |
| Item 1. | Financial Statements | 3 |
| | Balance Sheets | F-1 |
| | Statements of Operations | F-2 |
| | Statements of Cash Flows | F-3 |
| | Notes to the Consolidated Financial Statements | F-4 |
| Item 2. | Management’s Discussion and Analysis Financial Condition and Results of Operations | 8 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 10 |
| Item 4T. | Controls and Procedures | 10 |
| | | |
| PART II - OTHER INFORMATION | |
| | | |
| Item 1. | Legal Proceedings | 12 |
| Item 1A. | Risk Factors | 12 |
| Item 2. | Unregistered Sales Of Equity Securities And Use Of Proceeds | 12 |
| Item 3. | Defaults Upon Senior Securities | 12 |
| Item 4. | Removed and Reserved | 12 |
| Item 5. | Other Information | 12 |
| Item 6. | Exhibits | 12 |
| | | |
| EXHIBIT | 12 |
| SIGNATURES | 13 |
PART I - FINANCIAL INFORMATION
| Item 1. | Financial Statements |
It is the opinion of management that the interim consolidated financial statements for the period ended September 30, 2002, include all adjustments necessary in order to ensure that the interim consolidated financial statements are not misleading. Our interim consolidated financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.
Brightcube, Inc.Balance Sheets
| | | Successor Company 9/30/02 | | | Predecessor Company 12/31/01 | |
| | | (unaudited) | | | | |
| Assets | | | | | | |
| Current assets | | | | | | |
| Cash | | $ | 0 | | | $ | 237,200 | |
| Restricted cash | | | 0 | | | $ | 345,000 | |
| Short-term investments | | | 0 | | | | 0 | |
| Accounts receivable | | | 0 | | | | 297,000 | |
| Inventory | | | 0 | | | | 348,400 | |
| Prepaid expenses | | | 0 | | | | 213,700 | |
| Total current assets | | | 0 | | | | 1,441,300 | |
| | | | | | | | | |
| Assets from discontinued operations held for sale: | | | | | | | | |
| Equipment, net | | | 0 | | | | 309,300 | |
| Goodwill | | | 0 | | | | 3,768,000 | |
| Other assets | | | 0 | | | | 45,100 | |
| | | | | | | | | |
| Total Assets | | $ | 0 | | | $ | 5,563,700 | |
| | | | | | | | | |
| Liabilities and Stockholders' Equity | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Notes payable | | $ | 0 | | | $ | 345,000 | |
| Accounts payable-trade | | | 0 | | | | 806,800 | |
| Accrued expenses | | | 0 | | | | 220,700 | |
| Deferred revenue | | | 0 | | | | 63,500 | |
| Advances from shareholders | | | 0 | | | | 620,500 | |
| Current portion of long term debt | | | 0 | | | | 0 | |
| Total current liabilities | | | 0 | | | | 2,056,500 | |
| | | | | | | | | |
| Stockholders' Equity: | | | | | | | | |
| Common stock-200,000,000 authorized $0.001 par value | | | | | | | | |
| 88,043,662 issued & outstanding | | | 88,000 | | | | 77,600 | |
| Additional paid-in capital | | | 0 | | | | 43,126,800 | |
| Accumulated deficit | | | (88,000 | ) | | | (39,697,200 | ) |
| Total Stockholders' Equity | | | 0 | | | | 3,507,200 | |
| | | | | | | | | |
| Total Liabilities & Stockholders' Equity | | $ | 0 | | | $ | 5,563,700 | |
See notes to unaudited interim financial statements.
Brightcube, Inc.
Statement of Operations
(unaudited)
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | | 2002 | | | 2001 | | | 2002 | | | 2001 | |
| | | | | | | | | | | | | |
| Revenue | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
| | | | | | | | | | | | | | | | | |
| Costs & Expenses: | | | | | | | | | | | | | | | | |
| General & administrative | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
| Interest | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
| Total Costs & Expenses | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
| | | | | | | | | | | | | | | | | |
| Loss from continuing operations before income taxes, extraordinary gain and discontinued operations | | | 0 | | | | 0 | | | | 0 | | | | 0 | |
| | | | | | | | | | | | | | | | | |
| Discontinued operations: | | | | | | | | | | | | | | | | |
| Loss from discontinued operations (net of taxes) | | | (5,943,400 | ) | | | (1,961,000 | ) | | | (9,036,600 | ) | | | (6,429,900 | ) |
| Gain on disposal of assets used in discontinued operations | | | 3,549,700 | | | | 0 | | | | 3,549,700 | | | | 0 | |
| Loss from discontinued operations | | | (2,393,700 | ) | | | (1,961,000 | ) | | | (5,486,900 | ) | | | (6,429,900 | ) |
| | | | | | | | | | | | | | | | | |
| Net Loss | | $ | (2,393,700 | ) | | $ | (1,961,000 | ) | | $ | (5,486,900 | ) | | $ | (6,429,900 | ) |
| Basic and diluted per share amounts: | | | | | | | | | | | | | | | | |
| Continuing operations | | Nil | | | Nil | | | Nil | | | Nil | |
| Discontinued operations | | $ | (0.03 | ) | | $ | (0.03 | ) | | $ | (0.06 | ) | | $ | (0.10 | ) |
| Basic and diluted net loss | | $ | (0.03 | ) | | $ | (0.03 | ) | | $ | (0.06 | ) | | $ | (0.10 | ) |
| | | | | | | | | | | | | | | | | |
| Weighted average shares outstanding (basic & diluted) | | | 88,000,000 | | | | 70,568,700 | | | | 85,000,000 | | | | 63,318,700 | |
See notes to unaudited interim financial statements.
Brightcube, Inc.
Statement of Cash Flows
(unaudited)
| | | Nine Months Ended September 30, | |
| | | 2002 | | | 2001 | |
| Cash flows from operating activities: | | | | | | |
| Net Loss | | $ | (5,486,900 | ) | | $ | (6,429,900 | ) |
| Adjustments required to reconcile net loss | | | | | | | | |
| to cash used in operating activities: | | | | | | | | |
| Expenses paid by issuance of equity instruments | | | 383,900 | | | | 1,167,900 | |
| Depreciation | | | 0 | | | | 232,200 | |
| Amortization | | | 0 | | | | 1,025,000 | |
| Loss on disposal of assets | | | 0 | | | | 7,700 | |
| Goodwill impairment | | | 3,768,000 | | | | 0 | |
| Changes in assets of discontinued operations | | | 3,473,800 | | | | (731,000 | ) |
| Gain from discontinued operations | | | (3,549,700 | ) | | | 0 | |
| Changes in operating assets & liabilities: | | | | | | | | |
| (Increase) decrease in restricted cash | | | 122,200 | | | | (431,300 | ) |
| Cash flows used by operating activities: | | | (1,288,700 | ) | | | (5,159,400 | ) |
| | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | |
| Other | | | 0 | | | | 2,000 | |
| Proceed from sale of discontinued operations | | | 0 | | | | 4,000 | |
| Purchase of equipment | | | (23,400 | ) | | | (23,300 | ) |
| Cash used in investing activities | | | (23,400 | ) | | | (17,300 | ) |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Proceeds from issuance of common stock | | | 0 | | | | 1,339,200 | |
| Proceeds from debt borrowings | | | 1,174,700 | | | | 0 | |
| Proceeds from related party borrowings | | | 72,700 | | | | 522,200 | |
| Payments on long term debt | | | (172,500 | ) | | | (258,800 | ) |
| Cash generated by financing activities | | | 1,074,900 | | | | 1,602,600 | |
| | | | | | | | | |
| Change in cash | | | (237,200 | ) | | | (3,574,100 | ) |
| Cash-beginning of period | | | 237,200 | | | | 3,787,300 | |
| Cash-end of period | | $ | 0 | | | $ | 213,200 | |
See notes to unaudited interim financial statements.
BRIGHTCUBE, INC.
(Successor Company)
NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS
We adopted "fresh-start" accounting as of October 1, 2002 in accordance with procedures specified by AICPA Statement of Position ("SOP") No. 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code. The results of the discontinued component have been reclassified from continuing operations.
The Financial Statements presented herein have been prepared by us in accordance with the accounting policies described in our December 31, 2001 Annual Report on Form 10-KSB and should be read in conjunction with the Notes to Financial Statements which appear in that report.
The preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on going basis, we evaluate our estimates, including those related intangible assets, income taxes, insurance obligations and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources. Actual results may differ from these estimates under different assumptions or conditions.
In the opinion of management, the information furnished in this Form 10-QSB reflects all adjustments necessary for a fair statement of the financial position and results of operations and cash flows as of and for the three and nine-month periods ended September 30, 2002 and 2001. All such adjustments are of a normal recurring nature. The Financial Statements have been prepared in accordance with the instructions to Form 10-QSB and therefore do not include some information and notes necessary to conform with annual reporting requirements.
| 2. | “Fresh Start” Accounting |
On September 30, 2002 all assets were transferred to the Chapter 7 Trustee in settlement of all outstanding corporate obligations. We adopted "fresh-start" accounting as of September 30, 2002 in accordance with procedures specified by AICPA Statement of Position ("SOP") No. 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code."
In accordance with SOP No. 90-7, the reorganized value of the Company was allocated to the Company's assets based on procedures specified by SFAS No. 141, "Business Combinations". Each liability existing at the plan sale date, other than deferred taxes, was stated at the present value of the amounts to be paid at appropriate market rates. It was determined that the Company's reorganization value computed immediately before September 30, 2002 was $0. We adopted "fresh-start" accounting because holders of existing voting shares immediately before filing and confirmation of the sale received less than 50% of the voting shares of the emerging entity and its reorganization value is less than its post-petition liabilities and allowed claims.
| 3. | Discontinued operations |
In conjunction with our chapter 7 filing on September 30, 2002 we terminated all operations. Operating results have been classified to the “discontinued operations” section of the Statements of Operations. The prior year’s operations have been reclassified to conform to the current period classification.
| 4. | Restatement of 2001 Financial Statements |
In connection with filing a registration statement on Form SB-2 in May 2002, the Company's accounting was reviewed by the Securities and Exchange Commission (SEC). Due to this review and based upon the Company's consultation with the SEC, the Company's accounting treatment for the transaction involving the issuance of the Company's Series B Preferred Stock, issued during 2000, was changed. During 2000, the Company issued 900 shares of Series B preferred stock that was convertible into 50% of the Company's shares of common stock on a fully-diluted basis for cash proceeds of $9,000. The accounting for this transaction, which had originally been recorded as a stock issuance cost (with the estimated fair value security recorded by both increasing and decreasing additional paid in capital) relating to a private placement of common stock, has b een changed resulting in a $12.1 million charge to general and administrative expense during 2000. As a result the Company's balance sheet for the year ended December 31, 2001 has been restated. The accompanying balance sheet as of December 31, 2001 reflects the $12,143,000 increase in the accumulated deficit and additional paid in capital as a result of the change in accounting treatment for this transaction.
| 5. | Earnings/Loss Per Share |
Basic earnings per share is computed by dividing income available to common shareholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period. Diluted earnings per share assume that any dilutive convertible securities outstanding were converted, with related preferred stock dividend requirements and outstanding common shares adjusted accordingly. It also assumes that outstanding common shares were increased by shares issuable upon exercise of those stock options for which market price exceeds the exercise price, less shares which could have been purchased by us with the related proceeds. In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive.
Securities and Exchange Commission Administrative Proceeding:
On March 24, 2010, The Securities and Exchange Commission issued an Order Instituting Proceedings (File No. 3-13834). The administrative proceeding was instituted pursuant to Section 12(j) of the Securities Exchange Act of 1934 against Brightcube, Inc. for being delinquent in its periodic filings with the Commission since the Company declared bankruptcy in September of 2002. The proceeding is on going and has not been resolved to date.
We have informed the Division of the Company’s intention to file the delinquent reports and to date have filed 29 separate delinquent reports. Additionally, we filed an 8K May 5, 2010 addressing the OIP and the Division of Corporate Finance comments regarding deficiencies in the delinquent reports.
While we were hopeful of reaching a reasonable settlement agreement with the Commission regarding these proceedings, we have concluded that we are unable to meet all the provisions of the Act and rules and regulations thereunder to the satisfaction of the Commission. Therefore, today we have signed an Offer of Settlement from the Commission that is submitted solely for the propose of settling these proceedings which effectively results in the revocation of our common stock registration pursuant to Section 12(j) of the Exchange Act.
Clark County Court Proceedings:
On December 19, 2005, Clark County Court, Nevada approved an Order granting the custodianship of the company to Michael F. Manion. The appointment is requires the custodian is to continue the business of the corporation and not to liquidate its affairs or distribute its assets. The material terms of the transaction confirmed by the Clark County Court generally authorize Mr. Manion to appoint new members to the Registrant's board of directors and to take any and all actions on behalf of the Company permitted by Nevada Statutes Section 78.347, including actions to:
settle affairs, collect outstanding debts, sell and convey property, real and personal
demand, sue for, collect, receive and take into his or their possession all the goods and chattels, rights and credits, moneys and effects, lands and tenements, books, papers, choses in action, bills, notes and property, of every description of the corporation
institute suits at law or in equity for the recovery of any estate, property, damages or demands existing in favor of the corporation
exercise the rights and authority of a Board of Directors and Officers in accordance with state law, the articles and bylaws
Resultant Change in Control:
In connection with the Order and subsequent shareholder meeting, Michael F. Manion became our sole director on December 19, 2005.
Bankruptcy Proceedings:
On September 30, 2002, the Registrant filed a voluntary Chapter 7 petition under the U.S. Bankruptcy Code in the U.S. Bankruptcy Court Central District of California (case no. LA02-37844SB). On March 19, 2003 this Chapter 7 bankruptcy was closed by the U.S. Bankruptcy Court Central District of California.
| Item 2. | Management’s Discussion and Analysis Financial Condition and Results of Operations |
Some of the statements contained in this quarterly report of Brightcube, Inc., a Nevada corporation discuss future expectations, contain projections of our plan of operation or financial condition or state other forward-looking information. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use of words such as “anticipate”,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. From time to time, we also may provide forward-looking statements in o ther materials we release to the public.
General Background
Brightcube, Inc., a Nevada corporation (sometimes referred to herein as “we”, “us”, “our”, “Company” and the “Registrant”) (formerly Photoloft, Inc.) was incorporated in Nevada on January 23, 1986. Prior to filing for bankruptcy (described below), we provided Internet and digital imaging infrastructure, technology, products and services to the professional art and photography markets.
On September 30, 2002, we filed in the U.S. Bankruptcy Court for the Central District of California (the “Bankruptcy Court”) a voluntary petition seeking relief under Chapter 7 of Title 11 of the U.S. Bankruptcy Code, Case No. LA02-37844SB. As a result of the Chapter 7 bankruptcy petition, ours assets were transferred to a U.S. Trustee and we terminated our business operations. In connection with the Chapter 7 petition, each of our officers and directors either resigned or was terminated. After the Trustee disposed of substantially all of our assets, the Bankruptcy Court on March 19, 2003 closed this Bankruptcy.
Since September 2002, we have not engaged in any business operations, and have not filed the reports required by the Securities and Exchange Commission. Accordingly, we had abandoned our business.
Change in Control following Emergence from Bankruptcy
On December 19, 2005, the Clark County Court, Nevada approved an Order granting the custodianship of the Company to Michael F. Manion. The appointment requires the custodian to continue the business of the Company and not to liquidate its affairs or distribute its assets. The material terms of the transaction confirmed by the Clark County Court generally authorize Mr. Manion to appoint new members to the Company's board of directors and to take any and all actions on behalf of the Company permitted by Nevada Statutes Section 78.347, including actions to:
settle affairs, collect outstanding debts, sell and convey property, real and personal
demand, sue for, collect, receive and take into his or their possession all the goods and chattels, rights and credits, moneys and effects, lands and tenements, books, papers, choses in action, bills, notes and property, of every description of the corporation
institute suits at law or in equity for the recovery of any estate, property, damages or demands existing in favor of the corporation
exercise the rights and authority of a Board of Directors and Officers in accordance with state law, the articles and bylaws.
In connection with the Order and subsequent Directors meeting held on December 20, 2005 Michael F. Manion was appointed our sole director and president (“Management”). In consideration for these services, we expect to issue restricted shares of common stock and or Series C Preferred stock to Mr. Manion as we are unable to pay for any expenses incurred or services rendered on the Company’s behalf. Such issuance shall result in Mr. Manion having a majority interest in our common stock.
At the annual meeting of shareholders held on September 27, 2006, the shareholders, in part,: (a) elected Michael F. Manion Director of the corporation, (b) approved a plan of corporate restoration whereby Brightcube Inc would attempt to become a current and compliant with its Security and Exchange reporting obligations, (c) approved a resolution that all previously issued and unissued preferred stock of every Series and all conversion rights of said stock were rescinded and extinguished, (d) authorized and approved a new series of super voting convertible preferred stock to be designated Series C Preferred, and (e) ratified the engagement of Michael Cronin CPA to audit the Company’s financial statements.
New Business Objectives
As a result of the Chapter 7 bankruptcy proceeding, we have no present operations. Management has determined to direct its efforts and limited resources to pursue potential new business opportunities. We do not intend to limit ourselves to a particular industry and have not established any particular criteria upon which we shall consider and proceed with a business opportunity.
From March 1, 1999 through December 20, 2000, our common stock was trading on the OTCBB under the symbol “LOFT” and since December 20, 2000, under the symbol “BRCU”. In connection with filing a Chapter 7 bankruptcy petition in September 2002 and subsequent delinquency in our reporting requirements, our common stock became subject to quotation on the pink sheets under the symbol “BRCU.PK”.
There is currently only a very limited trading market in our shares. There can be no assurance that there will be an active trading market for our common stock. In the event that an active trading market commences, there can be no assurance as to the market price of our shares of common stock, whether any trading market will provide liquidity to investors, or whether any trading market will be sustained. Management intends to devote such time as it deems necessary to carry out our affairs. The exact length of time required for the pursuit of any new potential business opportunities is uncertain. No assurance can be made that we will be successful in our efforts. We cannot project the amount of time that our Management will actually devote to our plan of operation.
Plan of Operation
We have no present operations or revenues and our current activities are related to seeking new business opportunities, including seeking an acquisition or merger with an operating company. Management has voting control of the Company and therefore has substantial flexibility in identifying and selecting a prospective new business opportunity. The Company is not obligated nor does Management intend to seek pre-approval from our shareholders.
We are entirely dependent on the judgment of Management in connection with pursuing a new business opportunity or a selection process for a target operating company. In evaluating a prospective new business opportunity or an operating company, we would consider, among other factors, the following: (i) costs associated with effecting a transaction; (ii) equity interest in and opportunity to control the prospective candidate; (iii) growth potential of the target business; (iv) experience and skill of management and availability of additional personnel; (v) necessary capital requirements; (vi) the prospective candidate's competitive position; (vii) stage of development of the business opportunity; (viii) the market acceptance of the business, its products or services; (ix) the availability of audited financial statements of the po tential business opportunity; and (x) the regulatory environment that may be applicable to any prospective business opportunity.
The foregoing criteria are not intended to be exhaustive and there may be other criteria that Management may deem relevant. In connection with an evaluation of a prospective or potential business opportunity, Management may be expected to conduct a due diligence review.
Liquidity and Capital Resources
Due to the filing of our petition for relief under Chapter 7 of the Bankruptcy Code, at September 30, 2002, we had no assets and no liabilities. We will use our limited personnel and financial resources in connection with seeking new business opportunities, including seeking an acquisition or merger with an operating company. It may be expected that entering into a new business opportunity or business combination will involve the issuance of a substantial number of restricted shares of common stock. If such additional restricted shares of common stock are is-sued, our shareholders will experience a dilution in their ownership interest in us. If a substantial number of restricted shares are issued in connection with a business combination, a change in control may be expected to occur.
In connection with our plan to seek new business opportunities and/or effecting a business combination, we may determine to seek to raise funds from the sale of restricted stock or debt securities. We have no agreements to issue any debt or equity securities and cannot predict whether equity or debt financing will become available at terms acceptable to us, if at all.
There are no limitations in our articles of incorporation on our ability to borrow funds or raise funds through the issuance of restricted common stock to effect a business combination. Our limited resources and lack of operating history may make it difficult to do borrow funds or raise capital. Our inability to borrow funds or raise funds through the issuance of restricted common stock required to effect or facilitate a business combination may have a material ad-verse effect on our financial condition and future prospects, including the ability to complete a business combination. To the extent that debt financing ultimately proves to be available, any borrowing will subject us to various risks traditionally associated with indebtedness, including the risks of interest rate fluctuations and insufficiency of cash flow to pay principal and interest, including debt of an acquired business.
Results Of Operations
Three Months Ended September 30, 2002 (Q1 2002)
Compared To Three Months Ended September 30, 2001 (Q1 2001)
The successor Company had no revenue for the three months ended September 30, 2002 and September 30, 2001. For the three months ended September 30, 2002, the loss due to discontinued operations totaled $2,393,700.
Nine Months Ended September 30, 2002 (Q1 2002)
Compared To Nine Months Ended September 30, 2001 (Q1 2001)
The successor Company had no revenue for the nine months ended September 30, 2002 and September 30, 2001. For the nine months ended September 30, 2002, the loss due to discontinued operations totaled $5,486,900.
The Company has no present operations or revenues and its current activities are related to seeking new business opportunities, including seeking an acquisition or merger with an operating company.
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
We are a small reporting company as defined by Rule 12b-2 of the Securities Exchange Act 1934 and are not required to provide information under this item.
| Item 4T. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
The Company’s Management, which consists solely of Mr. Michael F. Manion, who acts as both our Chief Executive Officer and Chief Financial Officer and is the sole member of our Board of Directors, along with the participation of an outside CPA conducted an evaluation regarding the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures, Management concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this annual filing. Management concluded that there are several material weaknesses in our disclosure controls and procedures.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Management’s Annual Report on Internal Control Over Financial Reporting
The Management of the Company, which consists solely of Mr. Michael F. Manion, who acts as both our Chief Executive Officer and Chief Financial Officer and is the sole member of our Board of Directors, is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of our Management and directors; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of our assets that could have a material effect on the financial statements.
The Company’s internal control system was designed to provide reasonable assurance to the Company’s Management and Directors regarding the preparation and fair presentation of published financial statements. Our accounting issues are not complex and indeed quite elementary. Our quarterly and annual reports do in fact reflect accurately and fairly the financial condition of the company for each period covered. We are reasonably assured and confident regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes. However, Management does recognize the existence of several material weaknesses.
Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2009. In making this assessment, Management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment and those criteria, we have concluded that our internal control over financial reporting was not effective as of December 31, 2009 because of the existence of the following material weaknesses.
| a. | The Company is completely dependent on one person, Mr. Manion, who acts as both chief executive officer and chief financial officer. Furthermore, Mr. Manion is the sole member of the Board of Directors. Mr. Manion is also the only source of capital to satisfy the Company’s cash requirements. |
| b. | The Company’s is unable to have sufficient segregation of duties within its accounting and financial reporting activities. The Company does not have any independent board members, nor does it have an independent audit committee. The Management has limited public accounting expertise. |
| c. | The Company’s has failed to file the required interim and annual reports on a timely basis. Indeed to date, none of our financial statements since our declaration of bankruptcy in September 2002 have been filed on a timely basis. |
These circumstances constitute material weaknesses in the Company’s corporate governance structure.
Our 2009 annual report did not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only Management’s report in the 2009 annual report. We have not preformed another evaluation during the quarterly interim period covered in this filing.
Action Taken to Address Material Weaknesses in Disclosure and Procedures
We have initiated measures to remedy the identified material weaknesses. Management recognized the weaknesses of inadequate segregation of duties consistent with control objectives due to our small size and limited resources but believes that compensating controls are in place to mitigate the risks associated with the lack of segregation of duties.
Compensating controls include outsourcing certain financial functions to an independent contractor. The Company shall in the future utilize a third party independent contractor for the preparation of its financial statements.
We have also identified an outside resource to assist in the timely and accurate filing of our financial reports to ensure that the information required to be disclosed by the issuer in the reports it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.
In light of the Company’s financial situation and limited operations, Management will periodically re-evaluate this situation including the implementation of additional procedures.
Readers are cautioned that internal control over financial reporting, no matter how well designed, has inherent limitations and may not prevent or detect misstatements. Therefore, even effective internal control over financial reporting can only provide reasonable assurance with respect to the financial statement preparation and presentation.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal controls over financial reporting for the nine months ended September 30, 2002 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
| Item 1. | Legal Proceedings |
Present and previous legal proceedings have been disclosed above in item number 6. Court Proceedings as part of the Notes to the Unaudited Financial Statements.
Information regarding risk factors appears in Part I, Item 1A for our Annual Report on Form 10-K for the fiscal year ended December 30, 2009 and filed April 21, 2010. There have been no material changes from the risk factors previously disclosed in our 2009 Annual Report on Form 10-K excepting the possible revocation consequences disclosed above in item number 6. Court Proceedings Securities and Exchange Commission Administrative Proceeding.
| Item 2. | Unregistered Sales Of Equity Securities And Use Of Proceeds. |
None
| Item 3. | Defaults Upon Senior Securities |
None
| Item 4. | Submission of Matters to a Vote of Security Holders |
None
| Item 5. | Other Information |
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has caused this Quarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized.
By: /s/ Michael F. Manion
Name: Michael F. Manion
Title: Chief Executive Officer, Chief Financial Officer, Director
Date: June 2, 2010
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