UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934.
For the quarterly period ended June 30, 2004 | Commission file number 333-72230 |
ROYAL PHOENIX
(Exact name of small business issuer as specified in its charter)
Nevada | 88-0475757 |
(State or other jurisdiction of | (I.R.S. Employer |
incorporation or organization) | Identification No.) |
| |
2950 E. Flamingo Rd. Suite B-A2 | |
Las Vegas, Nevada | 89121 |
(Address of principal executive offices) | (zip code) |
(702) 866-5835
(Issuer's telephone number)
Check whether the issuer (1) 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 X No
As of June 30, 2004 there were 9,615,000 shares of common stock outstanding.
Transitional Small Business Disclosure Format (check one)
Yes No X
ROYAL PHOENIX
JUNE 30, 2004
INDEX
PART I - FINANCIAL INFORMATION | Page No.(s) |
Item 1. | Financial Statements | |
| Balance Sheet as of June 30, 2004 and December 31, 2003 | 1 |
| Statement of Operations for the three and six ended June 30, 2004 and 2003 | 2 |
| Statement of Cash Flows for the six months ended June 30, 2004 and 2003 | 3 |
| Notes to Unaudited Financial Statements | 4 |
Item 2. | Plan of Operation | 5-11 |
Item 3. | Controls and Procedures | 11 |
PART II - OTHER INFORMATION
Item 1. | Legal Proceedings | 11 |
Item 2. | Changes in Securities | 12 |
Item 3. | Defaults Upon Senior Securities | 12 |
Item 4. | Submission of Matters to a Vote of Security Holders | 12 |
Item 5. | Other Information | 12 |
Item 6. | Exhibits and Reports on Form 8-K | 12 |
SIGNATURES |
| 13 |
ROYAL PHOENIX
(a Development Stage Company)
BALANCE SHEETS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
June 30, 2004 (unaudited) |
December 31, 2003 (audited) | |
ASSETS | ||
CURRENT ASSETS | ||
Cash | $ 18,101 | $ 23,351 |
TOTAL CURRENT ASSETS | 18,101 | 23,351 |
$ 18,101 | $ 23,351 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| ||
CURRENT LIABILITIES | ||
Notes Payable | $ 0 | $ 0 |
| ||
TOTAL CURRENT LIABILITIES | 0 | 0 |
| ||
STOCKHOLDERS' EQUITY | ||
| ||
|
0 |
0 |
|
9,615 |
9,615 |
Additional paid-in capital | 38,185 | 38,185 |
(Deficit) accumulated during development stage | (29,699) | (24,449) |
TOTAL STOCKHOLDER'S EQUITY | 18,101 | 23,351 |
$ 18,101 | $ 23,351 |
The accompanying notes are an integral part of these financial statements.
1
ROYAL PHOENIX
(a Development Stage Company)
STATEMENTS OF OPERATIONS
UNAUDITED
Three Months Ended June 30, 2004 |
Three Months Ended June 30, 2003 |
Six Months Ended June 30, 2004 |
Six Months Ended June 30, 2003 |
For the Period October 17, 2000, (Inception) to June 30, 2004 | |
Revenue | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 |
|
|
|
|
| |
EXPENSES | |||||
General and Administrative | 750 | 500 | 5,250 | 2,500 | 29,699 |
TOTAL EXPENSES | 750 | 500 | 5,250 | 2,500 | 29,699 |
NET (LOSS) | $ (750) | $ (500) | $ (5,250) | $ (2,500) | $ (29,699) |
Weighted average number of common shares outstanding basic and fully diluted |
9,615,000 |
9,600,000 |
9,615,000 |
9,600,000 | |
Net (loss) per weighted shares-basic and fully diluted |
$ (0.00) |
$ (0.00) |
$ (0.00) |
$ (0.00) | |
The accompanying notes are an integral part of these financial statements.
2
ROYAL PHOENIX
(a Development Stage Company)
STATEMENTS OF CASH FLOWS
UNAUDITED
|
Six Months Ended June 30, 2004 |
Six Months Ended June 30, 2003 |
For the Period October 17, 2000, (Inception) to June 30, 2004 |
|
|
|
|
Cash Flows from |
|
|
|
Operating Activities |
|
|
|
Net loss | $ (5,250) | $ (2,500) | $ (29,699) |
Shares issued for services | 0 | 0 | 7,500 |
| |||
Adjustment to reconcile net loss to net cash used by operations | 0 | 0 | 0 |
Note Payable | 0 | 1,500 | 0 |
|
|
|
|
Net cash used in operating activities | (5,250) | (1,000) | (22,199) |
|
|
|
|
Cash Flows from Investing Activities | 0 | 0 | 0 |
|
|
|
|
Cash Flows from Financing Activities | |||
Converted Note Payable to Equity | 0 | 0 | 1,500 |
Issuance of common stock | 0 | 25,000 | 38,800 |
|
|
|
|
Net increase in cash | (5,250) | 24,000 | 18,101 |
|
|
|
|
Cash, beginning of period | 23,351 | 1,351 | 0 |
Cash, end of period | $ 18,101 | $ 25,351 | $ 18,101 |
| |||
Supplemental Disclosure | |||
Interest Paid | $ 0 | $ 0 | $ 0 |
Taxes Paid | $ 0 | $ 0 | $ 0 |
The accompanying notes are an integral part of these financial statements.
3
ROYAL PHOENIX
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
Note 1 - - Basis of Presentation
The condensed interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.
These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these condensed interim financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2003 and notes thereto included in the Company's 10-KSB annual report. The Company follows the same accounting policies in the preparation of interim reports.
Results of operation for the interim period are not indicative of annual results.
Note 2 - - Going concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. As noted above, the Company is in the development stage and, accordingly, has not yet generated revenues from operations. Since its inception, the Company has been engaged substantially in financing activities and developing its product line, setting up its e-commerce website, and incurring substantial costs and expenses. As a result, the Company incurred accumulated net losses from October 17, 2000 (inception) through the period ended June 30, 2004 of $29,699. In addition, the Company's development activities since inception have been financially sustained through equity financing.
The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating revenues. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to recover the value of its assets or satisfy its liabilities.
Note 3 - - Related party transactions
The officer and director of the Company is involved in other business activities and may in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such person may face a conflict in selecting between the Company and its other business interests. The Company has not formulated a policy for the resolution of such conflicts.
4
Item 2. Plan of Operation.
This report contains forward-looking statements. Actual results and events could differ materially from those projected, anticipated, or implicit, in the forward-looking statements as a result of the risk factors set forth below and elsewhere in this report.
With the exception of historical matters, the matters discussed herein are forward-looking statements that involve risks and uncertainties. Forward-looking statements include, but are not limited to, statements concerning anticipated trends in revenues and net income, the date of introduction or completion of our products, projections concerning operations and available cash flow. Our actual results could differ materially from the results discussed in such forward-looking statements primarily as the result of insufficient cash to pursue production and marketing efforts. The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes thereto appearing elsewhere herein.
Overview
Royal Phoenix, which was incorporated in Nevada in October 2000, is a Development Stage Company, engaged in the business of marketing and distributing Royal Phoenix, a line of herbal products. The Royal Phoenix herbal product line was developed by Desert Health Products several years ago, however, the product line, after development, was not marketed.
We have a limited operating history and have not generated revenues from the sale of any products. Our company and products are the result of an agreement, which was entered into between Royal Phoenix and Desert Health Products, which resulted in the separation from Desert Health Products of the Royal Phoenix line of herbal products developed by Desert Health Products. Our activities have been limited to the negotiation of a license agreement and preliminary market analysis, capital raising and placing the Company in a position of raising additional capital once the Company's securities are quoted. Consequently, we have incurred the expenses of start-up. Future operating results will depend on many factors, including our ability to raise adequate working capital, demand for our products, the level of competition and our ability to deliver products while maintaining quality and controlling costs. As a result of our lack of liabilities, and limited operations our current cash position allows us to maintain a status quo position for a period of approximately six months. However; this position will not allow us to pursue any significant business opportunity.
Plan of Operation
Initially, Royal Phoenix commenced operations as a division of a vitamin company, which ultimately spun from the parent. Since this occurred near 9/11, and the middle of a down market, the business plan of Royal Phoenix initially stalled, then we chose to move forward with the small amount of capital we acquired through private placements and our SEC registration. What we have achieved with the small amount of capital is the development of what we believe to be a fairly unique business model combining the information and technology explosion currently happening in the dietary supplement and nutraceutical industries with the need for information and products for health and wellness. There are several phases of our business model based upon anticipated capital commitments and the actual receipt of capital. Based upon our receipt of capital, certain Milestones will be triggered.
5
We have suffered start-up losses and have limited working capital, which raises substantial concern regarding our ability to continue as a going concern.
During the next 12 months we plan to re-assess our business plan, and alternatively seek out other business opportunities. As a result of our lack of revenue generation, we have not been satisfied with our business plan or original plan of operation. In an effort to substantiate stockholder value, we are seeking compatible business opportunities. We can provide no assurance that we will be able to locate compatible business opportunities.
Satisfaction of our cash obligations for the next 12 months. Our plan of operation is to establish an operational website as soon as practical. When having established our website as operational, and raising funds under our Plan of Operation, we are to commence advertising through selected Internet banner advertising.
Summary of any product research and development that we will perform for the term of the plan. We do not anticipate performing any significant product research and development under our plan of operation. In lieu of product research and development we anticipate maintaining control over our advertising, especially on the Internet, to assist us in determining the allocation of our limited advertising dollars.
Expected purchase or sale of plant and significant equipment. We do not anticipate the purchase or sale of any plant or significant equipment, as such items are not required by us at this time or in the next 12 months.
Significant changes in number of employees. The number of employees required to operate our business is currently one part time individual. After we commence generating revenues based upon the expenditures of our advertising dollars, and word of mouth advertising, and at the end of the initial 12 month period, our plan of operation anticipates our requiring additional capital to hire at least one full time person.
Liquidity and Capital Resources
Since inception, we have financed our cash flow requirements through the issuance of common stock which has resulted in our receipt of $38,500. As we expand our activities, we may continue to experience net negative cash flows from operations, pending receipt of sales revenues. Additionally we anticipate obtaining additional financing to fund operations through common stock offerings and bank borrowings, to the extent available, or to obtain additional financing to the extent necessary to augment our working capital.
Over the next twelve months we believe that existing capital and anticipated funds from operations will be sufficient to sustain operations and planned expansion. However, in order to expand our business operations we will be required to seek additional capital in the future to fund growth and expansion through additional equity or debt financing or credit facilities. No assurance can be made that such financing would be available, and if available it may take either the form of debt or equity. In either case, the financing could have a negative impact on our financial condition and our Stockholders.
6
We anticipate incurring operating losses over the next twelve months. Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development. Such risks include, but are not limited to, an evolving and unpredictable business model and the management of growth. To address these risks we must, among other things, obtain a customer base, implement and successfully execute our business and marketing strategy, continue to develop and upgrade technology and products, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital resources that is material to investors.
FACTORS THAT MAY AFFECT OUR PLAN OF OPERATION
We are a development stage company, recently organized and have minimal operating history, which raises substantial doubt as to our ability to successfully develop profitable business operations.
We were incorporated in October of 2000 as a wholly owned subsidiary of Desert Health Products. Concurrent with formation it was determined to separate Royal Phoenix from Desert Health Products. As a result of our recent start up, Royal Phoenix has yet to generate revenues from operations and has been focused on organizational, start-up, and market analysis activities since we incorporated. Although we have products to market as a result of our license with Desert Health Products, there is nothing at this time on which to base an assumption that our business operations will prove to be successful or that we will ever be able to operate profitably.
At this stage of our business operations, even with our good faith efforts, potential investors have a high probability of losing their investment.
Because the nature of our business is expected to change as a result of shifts in the market, competition, and the development of new and improved technology, management forecasts are not necessarily indicative of future operations and should not be relied upon as an indication of future performance.
7
While Management believes its estimates of projected occurrences and events are within the timetable of its business plan, our actual results may differ substantially from those that are currently anticipated.
Because our common stock is deemed a low-priced "Penny" stock, an investment in our common stock should be considered high risk and subject to marketability restrictions.
Since our common stock is a penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act, it will be more difficult for investors to liquidate their investment even if and when a market develops for the common stock. Until the trading price of the common stock rises above $5.00 per share, if ever, trading in the common stock is subject to the penny stock rules of the Securities Exchange Act specified in rules 15g-1 through 15g-10. Those rules require broker-dealers, before effecting transactions in any penny stock, to:
Deliver to the customer, and obtain a written receipt for, a disclosure document;
Disclose certain price information about the stock;
Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;
Send monthly statements to customers with market and price information about the penny stock; and
In some circumstances, approve the purchaser's account under certain standards and deliver written statements to the customer with information specified in the rules.
Consequently, the penny stock rules may restrict the ability or willingness of broker-dealers to sell the common stock and may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities. These additional procedures could also limit our ability to raise additional capital in the future.
We will need additional capital in the future to finance our planned growth, which we may not be able to raise or it may only be available on terms unfavorable to us or our stockholders, which may result in our inability to fund our working capital requirements and harm our operational results.
We have and expect to continue to have substantial capital expenditure and working capital needs. We believe that current cash on hand and the other sources of liquidity are only sufficient enough to fund our operations through December 31, 2004. After that time we will need to raise additional funds to fund our operations, and implement our growth strategy, or to respond to competitive pressures and/or perceived opportunities.
If operating difficulties or other factors, many of which are beyond our control, cause our revenues or cash flows from operations, if any, to decrease, we may be limited in our ability to spend the capital necessary to complete our development, exploitation and exploration programs. If our resources or cash flows do not rapidly commence, we will require additional financing, in addition to anticipated cash generated from our operations, to fund our planned growth.
8
Additional financing might not be available on terms favorable to us, or at all. If adequate funds were not available or were not available on acceptable terms, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our business or otherwise respond to competitive pressures would be significantly limited.
If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders would be reduced, and these newly issued securities might have rights, preferences or privileges senior to those of existing stockholders.
We are significantly dependent on our sole officer and director, who has limited experience. The loss or unavailability to Royal Phoenix of Mr. Wilson's services would have an adverse effect on our business, operations and prospects.
Our business plan is significantly dependent upon the abilities and continued participation of Joseph Scott Wilson, our sole officer and director. Although Mr. Wilson is not irreplaceable it would be difficult to replace Mr. Wilson at such an early stage of development of Royal Phoenix. The loss by or unavailability to Royal Phoenix of Mr. Wilson's services would have an adverse effect on our business, operations and prospects. There can be no assurance that we would be able to locate or employ personnel to replace Mr. Wilson, should his services be discontinued. In the event that we are unable to locate or employ personnel to replace Mr. Wilson, then, in that event we would be required to cease pursuing our business opportunity, which could result in a loss of your investment.
Mr. Wilson is involved with other businesses and there can be no assurance that he will continue to provide services to us. Mr. Wilson's limited time devotion to Royal Phoenix could have an adverse effect on our operations.
As compared to many other public companies, we do not have the depth of managerial or technical personnel. Mr. Wilson is involved with other businesses and there can be no assurance that he will continue to provide services to us. Mr. Wilson will devote only a portion, less than 10 hours per month, of his time to our activities. As our sole officer and director, decisions are made at his sole discretion and not as a result of compromise or vote by members of a board.
We may never become profitable or sell any of our herbal products.
We have had no revenue since our incorporation in October 2000. We have yet to undertake the sale of our herbal products or develop our website. As a result of market conditions we have delayed the commencement of business operations until our stock became quoted on the OTC:BB. Even after we commence distribution of our product there is no guarantee that we will become profitable. Our industry is highly competitive and there is no guarantee that we will be able to secure the business of our target buyers.
Our auditor's report reflects the fact that without realization of additional capital, it would be unlikely for us to continue as a going concern.
9
As a result of our deficiency in working capital at December 31, 2003 and other factors, our auditors have included a paragraph in their report regarding substantial doubt about our ability to continue as a going concern. Our plans in this regard are to seek additional funding through this offering and future equity private placements or debt facilities.
Going Concern
The financial statements included in this filing have been prepared in conformity with generally accepted accounting principles that contemplate the continuance of the Company as a going concern. The Company's cash position may be inadequate to pay all of the costs associated with testing, production and marketing of products. Management intends to use borrowings and security sales to mitigate the effects of its cash position, however no assurance can be given that debt or equity financing, if and when required will be available. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets and classification of liabilities that might be necessary should the Company be unable to continue existence.
Item 3. Controls and Procedures
We are a development stage company with no revenues and during the period covered by this quarterly report, our board of directors had responsibility for our internal controls and procedures over our financial reporting.
We have implemented and maintain disclosure controls and procedures which consist of: the control environment, risk assessment, control activities, information and communication and monitoring. Our scope of internal control therefore extends to policies, plans procedures, processes, systems, activities, initiatives, and endeavors required of a company with our limited transactions, expenses, and operations. These controls and procedures are designed to ensure that the information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules.
There have been no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls or in other factors that could significantly affect the controls subsequent to the date of the evaluation referenced below.
Within 90 days prior to the date of this report, we carried out an evaluation, under the supervision of Joseph Scott Wilson, our President, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based on the foregoing, Mr. Wilson concluded that, given the Company's limited operations, our disclosure controls and procedures were effective.
10
PART II--OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
Use of Proceeds From Sales of Registered Securities
Our Registration Statement on Form SB- 2 (File No. 333-72230), related to our initial public offering, was declared effective by the SEC on December 30, 2002. A total of 250,000 shares of our Common Stock was registered with the SEC with an aggregate offering price of $25,000. All of these shares were registered on our behalf. The offering commenced in June 2003, and all shares of common stock offered were sold for the aggregate offering price directly by the Company with no commissions paid on funds raised.
We incurred offering expenses of approximately $6,000 in connection with the offering. Thus the net offering proceeds to us (after deducting offering expenses) were approximately $19,000. No offering expenses were paid directly or indirectly to any of our directors or officers (or their associates), persons owning ten percent (10%) or more of any class of our equity securities or to any other affiliates.
As of June 30, 2004, $4,000 of the net proceeds had been used for legal, accounting and transfer agent expenses. The remaining $15,000 of the net proceeds are in our operating account pending future use.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matter to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
Ex-31 - Certification pursuant to Section 302 of the Sarbanes-Oxley Act
Ex-32 - Certification pursuant to Section 906 of the Sarbanes-Oxley Act
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ROYAL PHOENIX
By: /s/ Joseph Scott Wilson, President
Joseph Scott Wilson, President
(On behalf of the registrant and as
principal accounting officer)
Date: August 13, 2004
