ZALDIVA, INC.
Statements of Cash Flows
(Unaudited)
| | | | | | | | |
| | | | For the Six Months Ended |
| | | | March 31, |
| | | | 2010 | | 2009 |
OPERATING ACTIVITIES | | | | | |
| Net loss | $ | (258,124) | | $ | (259,738) |
| Adjustments to reconcile net loss to net cash | | | | | |
| used by operating activities: | | | | | |
| | Depreciation, depletion and amortization | | 7,687 | | | 7,985 |
| | Fair value of warrants | | - | | | 229,172 |
| | Fair value of options | | 44,556 | | | - |
| | Exercise of cashless warrants | | 5,958 | | | - |
| | Common stock issued for services | | 26,250 | | | - |
| Changes in operating assets and liabilities | | | | | |
| | (Increase) decrease in inventory | | 11,770 | | | (1,864) |
| | (Increase) decrease in prepaid expenses | | - | | | (1,500) |
| | Increase (decrease) in current liabilities | | 94,424 | | | (9,348) |
| | | | | | | | |
| | | Net Cash Used by Operating Activities | | (67,479) | | | (35,293) |
| | | | | | | | |
INVESTING ACTIVITIES | | - | | | - |
| | | | | | | | |
FINANCING ACTIVITIES | | | | | |
| | | | | | | | |
| | Proceeds from related party payable | | 66,000 | | | - |
| | Common stock issued for cash | | 25,000 | | | 76,250 |
| | | | | | | | |
| | | Net Cash Provided by Financing Activities | | 91,000 | | | 76,250 |
| | | | | | | | |
| | NET INCREASE IN CASH | | 2 3,521 | | | 40,957 |
| | | | | | | | |
| | CASH AT BEGINNING OF PERIOD | | 12,936 | | | 16,967 |
| | | | | | | | |
| | CASH AT END OF PERIOD | $ | 36,457 | | $ | 57,924 |
| | | | | | | | |
SUPPLEMENTAL DISCLOSURES OF | | | | | |
| CASH FLOW INFORMATION | | | | | |
| | | | | | | | |
| CASH PAID FOR: | | | | | |
| | | | | | | | |
| | Interest | $ | - | | $ | 7,173 |
| | Income Taxes | $ | - | | $ | - |
The accompanying condensed notes are an integral part of these interim financial statements.
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ZALDIVA, INC.
Notes to the Condensed Financial Statements
March 31, 2010 and September 30, 2009
NOTE 1 - CONDENSED FINANCIAL STATEMENTS
The accompanying financial statements have been pr epared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at March 31, 2010, 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 period ended March 31, 2010 is not necessarily indicative of the operating results for the full year.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared 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 equity 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.
Recent Accounting Pronouncements
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 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.
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ZALDIVA, INC.
Notes to the Condensed Financial Statements
March 31, 2010 and September 30, 2009
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting Pronouncements (continued)
In January 2010, the FASB issued Accounting Standards Update 2010-02, Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary. This amendment to Topic 810 clarifies, but does not change, the scope of current US GAAP. It clarifies the decrease in ownership provisions of Subtopic 810-10 and removes the potential conflict between guidance in that Subtopic and asset de-recognition and gain or loss recognition guidance that may exist in other US GAAP. An entity will be required to follow the amended guidance beginning in the period that it first adopts FAS 160 (now included in Subtopic 810-10). For those entities that have already adopted FAS 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The amendments should be applied retrospectively to the first period that an entity ado pted FAS 160. The Company does not expect the provisions of ASU 2010-02 to have a material effect on the financial position, results of operations or cash flows of the Company.
In January 2010, the FASB issued Accounting Standards Update 2010-01, Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash (A Consensus of the FASB Emerging Issues Task Force). This amendment to Topic 505 clarifies the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a limit on the amount of cash that will be distributed is not a stock dividend for purposes of applying Topics 505 and 260. Effective for interim and annual periods ending on or after December 15, 2009, and would be applied on a retrospective basis. The Company does not expect the provisions of ASU 2010-01 to have a material effect on the financial position, results of operations or cash flows of the Company.
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 1,191,667 shares of common stock and recognized an expense of $5,958.
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 valued at $38,181.
On November 18, 2009 the Company issued 100,000 shares of common stock valued at $5,000 to an employee.
On January 27, 2010 the Company issued 1,250,000 shares of common stock for cash at $0.02 per share.
On February 16, 2010 the Company issued an additional 150,000 shares, under the terms of the consulting agreement mentioned previously, valued at $6,375.
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 paid an engagement fee of $30,000 at the signing of the Agreement, and offered 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.
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ZALDIVA, INC.
Notes to the Condensed Financial Statements
March 31, 2010 and September 30, 2009
NOTE 5 – NOTES PAYABLE AND RELATED PARTY PAYABLES (CONTINUED)
Additionally, the Company has agreed to pay:
a)
Cash compensation in an amo unt 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 provided for the investors.
The term of this agreement is twelve (12) months from the date hereof with an automatic renewal for a year if writ ten 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 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 this agreement, the Company has paid a total of $30,000 in cash and has accrued an additional $56,250 in unpaid fees as of March 31, 2010. On May 4, 2010, Charles Morgan resigned as the Company’s consultant and terminated the agreement. As such, all amounts owed to Charles Morgan will be waived as part of the resignation.
On November 13, 2009 a principal shareholder lent the Company $16,000 on a short-term basis. The not e bears interest at $1,500 per month, is non-collateralized and is due on demand. This note carries an effective interest rate of approximately 113% annualized. On March 30, 2010, the shareholder lent an additional $50,000 to the Company. The $50,000 note payable is unsecured and bears interest at 6% per annum.
As of March 31, 2010 the Company has accrued $10,000 of dividend payable related to the outstanding convertible preferred stock and $6,750 of interest payable on the related party note.
NOTE 6 – SUBSEQUENT EVENTS
On May 4, 2010, Charles Morgan resigned as the Company’s consultant and terminated the agreement. As such, all amounts owed to Charles Morgan will be waived as part of the resignation.
On May 5, 2010 the Company entered into a Securities Purchase Agreement with Asher Enterprises, Inc., a Delaware corporation (“Asher”), by which Asher purchased an 8% convertible note in the aggregate principal amount of $50,000.
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Item 2. Management’s Discussions and An alysis 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 ability 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 sta tements 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 March 31, 2010 Compared to The Three Months Ended March 31, 2009.
During the quarterly period ended March 31, 2010, we received total revenues of $75,808, an increase of $12,905, or approximately 21%, over our total revenues of $62,903 in the quarterly period ended March 31, 2009. Increases are primarily due to the fact that the Company is maturing in its area and beginning to see results from building positive brand equity along wit h slow improvement in general economic conditions.
Costs of goods sold during these periods were $48,345 and $34,597, respectively. Cost of goods sold was approximately 64% and 55% of sales for 2010 and 2009, respectively. The Company’s management feels this is in line with its expectations and expects some variation in overall gross margin period to period depending on the product mix sold during the period.
Operating expenses increased to $143,846 during the quarterly period ended March 31, 2010, from $142,243 in the year-ago period. This increase was due primarily to an increase in professional fees from $7,786 in the March 31, 2009 period to $28,321 in the March 31, 2010 period. The Company has realized significant savings in its general operating expenses that helped offset this increase.
Interest expense totaled $9,500 in the three months ended March 31, 2010, as compared to $5,882 in the prior year period. For the three months ended March 31, 2010, our net loss was $125,883or $0.01 per share as compared to a net loss of $119,694, or $0.01 per share during the March 31, 2009 period.
For The Six Months Ended March 31, 2010 Compared to The Six Months Ended March 31, 2009.
During the six months ended March 31, 2010, we received total revenues of $126,362, a decrease of $31,628, or approximately 20%, over our total revenues of $157,990 in the six months ended March 31, 2009. Like many companies in today’s environment, sales have been negatively impacted due to slow consumer spending and poor economic conditions.
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Costs of goods sold during these periods were $80,585 and $87,582, respectively. Cost of goods sold was approximately 64% and 55% of sales for the six month periods ended March 31, 2010 and 2009, respectively. The Company’s management feels this is in line with its expectations and expect some variation in overall gross margin period to period depending on the product mix sold during the period.
Operating expenses decreased to $287,159 during the six months ended March 31, 2010, from $318,650 in the year-ago period. This decrease was due primarily to a decrease of approximately 13% in general and administrative expenses, from $273,590 to $239,458, from the 2009 period to the 2010 period. This reduction primarily stems from non-compensatory warrants issued and expensed in 2008 totaling approximately $230,000 that were charged to General & Administrative expense. We also had an increase in professional fees from $31,548 in the six months ended March 31, 2009, to $37,091 in the six months ended March 31, 2010. If it were not for these non-cash items, our operating expenses would have totaled $210,395 during the period.
Interest expense totaled $16,750 in the six months ended March 31, 2010, as compared to $11,765 in the year-ago period. For the six months ended March 31, 2010, our net loss was $258,124 or $0.02 per share as compared to a net loss of $259,739, or $0.03 per share during the March 31, 2009 period. If non-cash expenses related to warrants and common stock are excluded from this number, our net loss for the six months ended March 31, 2010 would have been $181,360.
Liquidity
The Company had cash on hand of $36,457 at March 31, 2010. 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 six months ended March 31, 2010, we borrowed $66,000 from a related party to help pay our operating expenses. Beginning November 16, 2009, we initiated a private placement offering of up to $1 million. As of the date of this Report, the Company has raised $25,000 under this arrangement, which was terminated on May 4, 2010, subsequent to the end of the period covere d by this report.. On May 5, 2010, which is also subsequent to the end of the period covered by this Report, we entered into a Securities Purchase Agreement with Asher Enterprises, Inc., a Delaware corporation (“Asher”), by which Asher purchased an 8% convertible note in the aggregate principal amount of $50,000. See the Company’s Current Reports on Form 8-K dated May 4, 2010, and May 5, 2010, which were filed with the Securities and Exchange Commission on May 6, 2010, and May 10, 2010, respectively. We do not believe that the proceeds from the Asher convertible note will be sufficient to enable us to complete the current fiscal year without additional borrowing or contributions from officers or principle shareholders of the Company to fund operations.
Our ability to achieve a level of profitable operations and/or additional financing may affect our ability to continue as a goin g concern.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not required.
Item 4T. Controls and Procedures.
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. & nbsp;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 possible controls and procedures relative to their costs. The design of any disclosure controls and procedures also is based in part upon certain assumptions
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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 March 31, 2010, our disclosure controls and procedures were not 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 chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. This material deficiency is due to a lack of adequate internal controls and the absence of an audit committee.
Changes in internal control over financial reporting
Our management, with the participation of our chief executive officer and our chief financial officer, has concluded that there were no significant changes in our internal controls over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.
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 January 27, 2010, 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. (Removed and Reserved).
Item 5. Other Information.
None; not applicable.
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Item 6. Exhibits.
Exhibit No. Identification of Exhibit
| |
| |
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: | May 14, 2010 | | By: | /s/Nicole Leigh |
| | | | Nicole Leigh, President and Director |
| | | | |
| | | | |
Date: | May 14, 2010 | ; | By: | /s/Robert B. Lees |
| | | | Robert B. Lees, CFO, and Director |
| | | | |
| | | | |
Date: | M ay 14, 2010 | | By: | /s/John A. Palmer, Jr. |
| | | | John A. Palmer, Jr., Secretary and Director |
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