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ZALDIVA, INC.
Notes to the Condensed Financial Statements
December 31, 2009 and September 30, 2009
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) nece ssary to present fairly the financial position, results of operations, and cash flows at December 31, 2009, and for all periods presented herein, have been made.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's September 30, 2009 audited financial statements. The results of operations for the three month period ended December 31, 2009 is not necessarily indicative of the operating results for the full year.
NOTE 2 - GOING CONCERN
The Company's financial statements are prep ared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equ ity and/or debt financing. However management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
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ZALDIVA, INC.
Notes to the Condensed Financial Statements
December 31, 2009 and September 30, 2009
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements
In June 2009, the FASB issued SFAS 168, the FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. (“SFAS 168” pr ASC 105-10) SFAS 168 (ASC 105-10) establishes the Codification as the sole source of authoritative accounting principles recognized by the FASB to be applied by all nongovernmental entities in the preparation of financial statements in conformity with GAAP. SFAS 168 (ASC 105-10) was prospectively effective for financial statements issued for fiscal years ending on or after Septe mber 15, 2009 and interim periods within those fiscal years. The adoption of SFAS 168 (ASC 105-10) on July 1, 2009 did not impact the Company’s results of operations or financial condition. The Codification did not change GAAP, however, it did change the way GAAP is organized and presented. As a result, these changes impact how companies reference GAAP in their financial statements and in their significant accounting policies. The Company implemented the Codification in this Report by providing references to the Codification topics alongside references to the corresponding standards.
In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements, (amendments to FASB ASC Topic 605, Revenue Recognition) ("ASU 2009-13") and ASU 2009-14, Certain Arrangements That Include Software &nbs p;Elements, (amendments to FASB ASC Topic 985, Software) ("ASU 2009-14"). ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The amendments eliminate the residual method of revenue allocation and require revenue to be allocated using the relative selling price method. ASU 2009-14 removes tangible products from the scope of software revenue guidance and provides guidance on determining whether software deliverables in an arrangement that includes a tangible product are covered by the scope of the software revenue guidance. ASU 2009-13 and ASU 2009-14 should be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company is currently evaluating, but does not expect adoption of ASU 2009-13 or ASU 2009-14 to have a material impact on the Company's consolidated results of operations or financial condition.
With the exception of the pronouncements noted above, no other accounting standards or interpretations issued or recently adopted are expected to have a material impact on the Company’s financial position, operations or cash flows.
NOTE 4 – EQUITY ACTIVITY
On October 2, 2009 the owners of cashless warrants exercised a total of 1,166,667 sha res of common stock resulting in a recognized expense of $5,833.
On November 16, 2009 the Company entered into a consulting agreement and issued 350,000 shares of common stock valued at $14,875 as part of that contract. In conjunction with this agreement the Company also issued 1,000,000 options. Under ASC 718, the Company estimates the fair value of each stock award at the grant date by using the Black-Scholes option pricing model with the following weighted average assumptions used for the grant of these warrants: dividend yield of zero percent; expected volatility of 151%; risk-free interest rates of 1.35 percent and expected lives of 1.0. The Company recorded an expense of $38,181 for the quarter ended December 31, 2009.
On November 18, 2009 the Company issued 100,000 shares of common stock valued at $5,000 to an employee .
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ZALDIVA, INC.
Notes to the Condensed Financial Statements
December 31, 2009 and September 30, 2009
NOTE 5 – NOTES PAYABLE AND RELATED PARTY PAYABLES
On November 16, 2009, the Company entered into an Investment Banking and Advisory Agreement for general business advice and assistance to be provided and to use its best efforts with respect to an initial private placement of $250,000 at a price of $0.02 per share of the Company’s common stock and an additional private placement of up to $750,000 of convertible debt in or around February 2010.
As compensation, the Company agreed to pay a fee of $120,000, payable in 12 monthly installments of $10,000 each, or an amount in common stock having a value of 125% of the cash payment alternative. In addition, the Company shall issue a total of 650,000 unregistered and restricted shares of common stock, with 350,000 such shares payable at the time of the execution of the Agreement, 150,000 such shares payable on February 16, 2010, and 150,000 such shares payable on May 16, 2010. The Company also agreed to pay an engagement fee of $30,000 payable at signing of the Agreement, and to offer a cash option to purchase up to 1,000, 000 unregistered and restricted shares of the Company’s common stock at a price of $0.005 per share.
Additionally, the Company has agreed to pay:
a)
Cash compensation in an amount equal to ten percent (10%) of the aggregate purchase price of the Equity sold to the investors, plus
b)
An additional three percent (3%) unaccountable expense allowance of the aggregate purchase price of the equity placed by the Consultant with the investors;
c)
Cashless Warrants to purchase a number of shares equal to 10% of the shares issuable by the Company at an exercise price equal to 120% of the initial price paid by the investors, with the shares underlying such warrants to have piggy-back registration rights.
The term of this agreement is twelve (12) months from the date thereof with an automatic renewal for a year if written notice for termination is not received, by either party, 30 days prior to the termination of this agreement. Either party may terminate this agreement after the first ninety days with a written notice of termination. Any fees that are due and payable after the termination date will not be owed or payable. Any compensation paid prior to the date of termination will be deemed earned and paid.
In conjunction with t his agreement, the Company has accrued a total of $30,000 in fees related to this contract.
On November 13, 2009 a related party lent the Company $16,000 on a short-term basis. The note bears interest at $1,500 per month, is non-collateralized and is due on demand.
As of December 31, 2009 the Company has accrued $5,000 of dividend payable related to the outstanding convertible preferred stock and $2,250 of interest payable on the related party note.
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ZALDIVA, INC.
Notes to the Condensed Financial Statements
December 31, 2009 and September 30, 2009
NOTE 6 – SUBSEQUENT EVENTS
In accordance with ASC 855-10 the Company has evaluated subsequent events through February 12, 2010, the date the financial statements were issued, and has concluded that no recognized or nonrecognized subsequent events have occurred since the quarter ended December 31, 2009 apart from the following:
On January 27, 2010, the Company issued 1,250,000 7;unregistered” and “restricted” shares of its common stock to one accredited investor in consideration of $25,000.
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Item 2. Management’s Discussions and Analysis of Financial Condition and Results of Operations.
Forward-looking Statements
Statements made in this Quarterly Report which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and our business, including, without limitation, (i) our ability to raise capital, and (ii) statements preceded by, followed by or that include the words “may,” “would,” “could,” “should,” “expects,” “projects,” “anticipates,” “believes,” “estimates,” “plans,” “intends,” “targets” or similar expressions.
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, general economic or industry conditions, nationally and/or in the communities in which we may conduct business, changes in the interest rate environment, legislation or regulatory requirements, conditions of the securities markets, our abi lity to raise capital, changes in accounting principles, policies or guidelines, financial or political instability, acts of war or terrorism, other economic, competitive, governmental, regulatory and technical factors affecting our current or potential business and related matters.
Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. We do not undertake, and specifically disclaim, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.
Results of Operation
For The Three Months Ended December 31, 2009 Compared to The Three Months Ended December 31, 2008.
During the quarterly period ended December 31, 2009, we received total revenues of $50,554, a decrease of $44,533, or approximately 47%, over our total revenues of $95,087 in the quarterly period ended December 31, 2008. We have focused our marketing on collectibles and comic book sales. The decreased sales were the result of a generally worse retail environment in the fourth calendar quarter of 2009 as compared to the year-ago period. Costs of goods sold during these periods were $32,240 and $52,985, respectively. Cost of goods sold was approximately 64% and 56% of sales for 2009 and 2008, respectively.
Operating expenses decreased to $157,456 during the quarterly period ended December 31, 2009, from $176,406 in the year-ago period. This decrease was due primarily t o a decrease of approximately 82% in general and administrative expenses, from $146,205 to $26,440, from the 2008 period to the 2009. We also had an increase in professional fees from $23,762 in the December 31, 2008 period to $126,522 in the December 31, 2009 period. This increase is primarily due to non-cash expenses related to the exercise of warrants and common stock and options issued for services. These non-cash expenses totaled $62,272 during the three months ended December 31, 2009. If it were not for these non-cash items, our operating expenses would have totaled $95,184 during the period.
For the three months ended December 31, 2009, our net loss was $146,384 or $0.01 per share as compared to a net loss of $140,043, or $0.02 per share during the December 31, 2008 period. If non-cash expenses related to warrants and common stock are excluded from this number, our net loss for the three mont hs ended December 31, 2009 would have been $84,112
Liquidity
The Company had cash on hand of $8,258 at December 31, 2009. We believe that this cash on hand will not be sufficient to meet our expenses through the end of our 2010 fiscal year. During the quarterly period ended December 31, 2009, we borrowed $16,000 from a related party to help pay our operating expenses. In addition, on November 16, 2009, we entered into an Investment Banking and Advisory Agreement with Charles Morgan Securities Inc. (“Charles Morgan”), by which Charles Morgan agreed to use its best efforts with respect to private
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placements of up to $1 million in equity and convertible debt securities in the second quarter of our 2010 fiscal year. As of the date of this Report, the Company has not yet raised any material funds under this arrangement.
Our ability to achieve a level of profitable operations and/or additional financing may affect our ability to continue as a going concern.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not required.
Item 4T. Controls and Proc edures.
Evaluation of disclosure controls and procedures
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of poss ible controls and procedures relative to their costs. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of December 31, 2009, our disclosure controls and procedures were, subject to the limitations noted above, effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules, regulations and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chi ef financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in internal control over financial reporting
In connection with the preparation of our financial statements for the fiscal year ended September 30, 2009, we identified a deficiency that existed in the design or operation of our internal control over financial reporting that we consider to be a “material weakness.” The Public Company Accounting Oversight Board has defined a material weakness as a “significant deficiency or combination of significant deficiencies that results in more than a remote likelihood that a material misstatement on the annual or interim financial statements will not be prevented or detected.”
The material weakness identified relates to our recording, review and control of material information required to be included in our periodic Securities and Exchange Commission reports and our communication of such material information to our attorneys and accountants such that it can be properly disclosed in our periodic reports. This material weakness resulted in failure to properly report and disclose information and matters affecting the Company’s financial statements for the three month and nine month periods ended June 30, 2009, and related footnotes. On January 12, 2010, the Company filed an amended Quarterly Report on Form 10-Q-A2 for the purpose of correcting these matters.
During the first quarter of our 2010 fiscal year, we took the following step to remediate this weakness:
Commu nication with corporate counsel and accountants prior to the adoption of any corporate resolution providing for the issuance of shares of our common stock, the granting of options and other material events that require
disclosure in our periodic Securities and Exchange Commission reports, and quarterly conferences with our counsel to ensure that all corporate actions undertaken during the prior quarter have been properly documented.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None; not applicable.
Item 1A. Risk Factors.
Not required.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On October 2, 2009 the owners of cashless warrants exercised a total of 1,166,667 shares of common stock.
On November 16, 2009 the Company entered into its Investment Banking and Advisory Agreement with Charles Morgan. This Agreement provided, among other things, for the issuance of 350,000 shares of the Company’s common stock to Charles Morgan upon signing. The shares were issued in the second quarter of our 2010 fiscal year. In conjunction with the Agreement, the Company also issued to Charles Morgan options to purchase up to 1,000,000 shares of common stock at a price of $0.005 per share.
On November 18, 2009 the Company issued 100,000 shares of common stock valued at $5,000 to an employee.
On January 27, 2010, which is subsequent to the end of the period covered by this Report, the Company issued 1,250,000 “unregistered” and “restricted” shares of its common stock to one accredited investor in consideration of $25,000.
These shares were issued in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 promulgated thereunder.
Item 3. Defaults Upon Senior Securities.
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders during the period covered by this Report, through the solicitation of proxies or otherwise.
Item 5. Other Information.
None; not applicable.
Item 6. Exhibits.
Exhibit No. Identification of Exhibit
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| |
31.1 31.2 32 | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act provided by Nicole Leigh, President and Director.
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act provided by Robert B. Lees, Chief Financial Officer and Director.
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 provided by Nicole Leigh, President and Robert B. Lees, Chief Financial Officer. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized
ZALDIVA, INC.
| | | | |
| | | | |
Date: | February 12, 2010 | | By: | /s/Nicole Leigh |
| | | | Nicole Leigh, President and Director |
| | | | |
| | | | |
Date: | February 12, 2010 | | By: | /s/Robert B. Lees |
| | | | Robert B. Lees, CFO, and Director |
| | | | |
| | | | |
Date: | February 12, 2010 | | By: | /s/John A. Palmer, Jr. |
| | | | John A. Palmer, Jr., Secretary and Director |
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