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 June 30, 2011
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to____________
Commission File No. 000-49652
ZALDIVA, INC.
(Exact name of registrant as specified in its charter)
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Florida | 65-0773383 |
(State or Other Jurisdiction of | (I.R.S. Employer Identification No.) |
incorporation or organization) | |
331 East Commercial Blvd.
Ft. Lauderdale, Florida 33334
(Address of principal executive offices)
(954) 938-4133
(Registrant’s telephone number, including area code)
N/A
(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 [X] No [ ]
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 (§232.405 of this chapter) 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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Not applicable.
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date:
August 10, 2011 - Common – 18,194,840
August 10, 2011 - Preferred – 500,000
PART I
Item 1. Financial Statements
The financial statements of the registrant required to be filed with this Quarterly Report on Form 10-Q were prepared by management and commence below, together with related notes. In the opinion of management, the financial statements fairly present the financial condition of the registrant.
ZALDIVA, INC.
Balance Sheets
ASSETS
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
June 30, 2011 and September 30, 2010
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) necessary to present fairly the financial position, results of operations, and cash flows at June 30, 2011 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, 2010 audited financial statements. The results of operations for the period ended June 30, 2011 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. During the nine months ended June 30, 2011 the Company realized a net loss of $336,941 and has incurred an accumulated deficit of $3,235,088. 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
Management has considered all recent accounting pronouncements issued since the last audit of our financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
ZALDIVA, INC.
Notes to the Condensed Financial Statements
June 30, 2011 and September 30, 2010
NOTE 4 – NOTES PAYABLES
On April 28, 2010 the Company signed a $50,000 convertible promissory note with a third party. The note bears interest at 8% per annum and was due on January 31, 2011. The note has conversion rights that allow the holder of the note to convert, at any time, all or any part of the remaining principal balance into the Company’s common stock at a price equal to 50% of the average of the lowest three trading prices for the Common Stock during the most recent ten day period. See below for current status.
On June 4, 2010 the Company signed a $25,000 convertible promissory note with a third party. The note bears interest at 8% per annum and was due on March 9, 2011. The note had original conversion rights that allowed the holder of the note at any time to convert all or any part of the remaining principal balance into the Company’s common stock at a price equal to the lower of $0.0035 per share or 50% of the average of the lowest three trading prices for the Common Stock during the most recent ten day period. On September 8, 2010 the Company signed Amendment No. 1 to this convertible note which increased the discount from 50% to 59% and removed the ceiling of $0.0035 per share conversion price. See below for current status.
In accordance with ASC 470, the Company has analyzed the beneficial nature of the conversion terms of the above mentioned notes and determined that a beneficial conversion feature (BCF) exists. The Company calculated the value of the BCF using the intrinsic method as stipulated in ASC 470. The value of the BCF was determined based on the stock price on the day of commitments, the discounts as agreed to in the notes, the number of convertible shares, and the difference between the effective conversion price and the fair value of the common stock. The value of the BCF of the two notes was calculated at $75,000. The BCF was recorded as a discount to the note payable and to Additional Paid-in Capital.
During the nine months ended June 30, 2011 the above convertible notes, along with accrued interest of $3,615, were converted into 2,251,508 shares of the Company’s common stock in 6 separate tranches. With the conversion of the note, all of the previously recorded beneficial conversion features have been fully amortized to interest expense.
NOTE 5 – COMMON STOCK
The Company is authorized to issue 2,000,000,000 shares of its common stock at a par value of $0.001 per share. As of June 30, 2011 there were 18,194,840 shares issued and outstanding.
On October 18, 2010 the Company issued 250,000 shares of common stock for cash at $0.10 per share. Attached to each share was an option to purchase an additional share of common stock at $0.25.
On October 11, 2010, the Company issued 500,000 shares of common stock for services performed by a related party. The shares were valued at $55,000 based on the closing price of the stock on the date of issuance. The capitalized value of the contract will amortize the expense to consulting fees over the 12 month life of the contract. As of June 30, 2011, the Company has amortized $39,480 to professional fees.
In six separate tranches from November 8, 2010 to January 10, 2011 the Company issued a total of 2,251,508 shares of common stock in conversion of a convertible note payable. Principle and interest totaled $78,615 at the time of conversion.
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ZALDIVA, INC.
Notes to the Condensed Financial Statements
June 30, 2011 and September 30, 2010
NOTE 6 – WARRANTS
The Company records stock-based compensation awards issued to non-employees for goods and services at either the fair market value of the goods received or services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in FASB ASC 505. 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; volatility of 273%-282%; risk-free interest rates of 0.29%-0.37% and expected term of one year as determined by the use of the simplified method.
On October 11, 2010 the Company granted 2,000,000 options to a related party consultant for services. The warrants were valued at $179,568 based on the closing price of the stock on the date of issuance. The capitalized value of the contract will amortize the expense to consulting fees over the 12 month life of the contract. As of June 30, 2011, the Company has amortized $128,895 to professional fees.
On November 10 and December 10, 2010 the Company issued a total of 72,000 warrants (36,000 on each date) to a consultant for services performed. An expense of $4,819 was recorded during the nine months ended June 30, 2011 for the value of these options.
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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 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 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 June 30, 2011 Compared to The Three Months Ended June 30, 2010.
During the quarterly period ended June 30, 2011, we recognized total revenues of $51,691; a slight decrease compared our total revenues of $51,850 in the quarterly period ended June 30, 2010.
Cost of goods sold during quarterly periods ended June 30, 2011, and 2010 was $13,751 and $33,065, respectively, or approximately 27% and 64% of sales in these periods. The decrease in cost of sales as a percentage of total revenue is primarily attributable to an unusually high gross margin in the 2010 period and the fact that we are making moves into other sales outlets that management hopes will result in a sustainable increase in our gross margin on a going forward basis.
Our operating expenses increased slightly to $90,620 during the quarterly period ended June 30, 2011, from $79,452 in the year-ago period. The increase is due primarily to non-cash expenses recognized in conjunction with stock and warrants issued for services. During the three months ended June 30, 2011, we recorded $58,519 for the value of stock and warrants issued for services as compared to $22,458 in 2010.
For the three months ended June 30, 2011, our net loss was $57,556, or $0.01 per share, as compared to a net loss of $25,947, or $0.01 per share, during the June 30, 2010 period. Absent our large non-cash expenses associated with the issuance of stock and warrants for services as required by ASC 718 and 505, and additional non-cash interest expense recorded as a result of the embedded conversion options in our now extinguished convertible notes payable as required by ASC 470, we would have recorded a net income of $961 for the nine month periods ended June 30, 2011 compared to a net loss of $46,485 in 2010.
Even though we have recognized higher professional fees associated with the issuance of stock and warrants for services, we have managed to reduce our cash operating expenses by approximately 44% during the three months ended June 30, 2011 from 2010. We believe many of these expense reductions are sustainable and are working to add new and more profitable lines of business through soliciting estate sales activities using our auctioneer’s license. Initial results are promising and as our profitability continues to improve through implementation of our expanded
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business model, we are looking for opportunities to forge alliances, raise additional capital to fund a TV deal about our activities as a company, and mergers or acquisitions that make sense for the long term health of the company.
For The Nine Months Ended June 30, 2011 Compared to The Nine Months Ended June 30, 2010.
During the nine months ended June 30, 2011, we received total revenues of $158,116, a decrease of $20,096, or approximately 11.3%, from our total revenues of $178,212 in the nine months ended June 30, 2010. The decreased sales were the result of continued weakness in the general economy and in the comic book and collectibles market in particular. In addition, we believe that higher gasoline prices have led to decreased traffic in our retail location as well as decreased discretionary spending by potential customers.
Costs of goods sold during the nine months ended June 30, 2011, and 2010, were $54,403 and $113,650, respectively. Cost of goods sold was approximately 34% and 64% of sales for 2011 and 2010, respectively. The decrease in cost of sales as a percentage of total revenue is primarily attributable to an unusually high gross margin in the 2010 period and the fact that we are making moves into other sales outlets that management hopes will result in a sustainable increase in our gross margin on a going forward basis.
Operating expenses increased to $388,220 during the nine months ended June 30, 2011, from $366,612 in the year-ago period. This increase was due primarily to an increase of approximately 153% in professional fees from $82,331 to $208,105, from the 2010 period to the 2011 period. In an effort to conserve cash during the nine months ended June 30, 2011, we issued warrants and stock to consultants valued at $239,387 compared to only $87,306 in 2010. This increase was partially offset by a decrease in general and administrative expenses from $272,750 to $165,804 from the 2010 period to the 2011 period. We are working to preserve cash in order to have capital available to continue operations with less reliance on external financing and to be able to seek out new opportunities to realize revenue from our auctioneer’s license
For the nine months ended June 30, 2011, our net loss was $336,941, or $0.02 per share, as compared to a net loss of $284,072, or $0.03 per share, during the June 30, 2010 period. Absent our large non-cash expenses associated with the issuance of stock and warrants for services as required by ASC 718 and 505, and additional non-cash interest expense recorded as a result of the embedded conversion options in our now extinguished convertible notes payable as required by ASC 470, our net loss for the nine month periods ended June 30, 2011 and 2010 would have been $126,973 and $233,804, respectively.
We have managed to reduce our cash operating expenses by approximately 47% during the nine months ended June 30, 2011 from 2010. As mentioned above, we believe many of these expense reductions are sustainable and are working aggressively toward expanding our business model, looking for opportunities to forge alliances, raising additional capital to fund a TV deal about our activities as a company, and exploring mergers or acquisitions that make sense for the long term health of the company.
Liquidity
The Company had cash on hand of $59,008 at June 30, 2011. We believe that this cash on hand will not be sufficient to meet our expenses through the end of our 2011 fiscal year. We will have to seek additional financing through either a private placement of our stock or through debt financing. While management expects to be able to raise the require funds, there is no guarantee that we can obtain adequate financing. 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.
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Item 4. 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. 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 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 June 30, 2011, 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.
None; not applicable.
Item 3. Defaults Upon Senior Securities.
None; not applicable.
Item 4. (Removed and Reserved).
Item 5. Other Information.
During the quarterly period ended June 30, 2011, there were no material changes to the procedures by which security holders may recommend nominees to the Company’s Board of Directors.
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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.
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101.INS | XBRL Instance Document* |
101.PRE. | XBRL Taxonomy Extension Presentation Linkbase* |
101.LAB | XBRL Taxonomy Extension Label Linkbase* |
101.DEF | XBRL Taxonomy Extension Definition Linkbase* |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase* |
101.SCH | XBRL Taxonomy Extension Schema* |
*Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed “furnished” and not “filed” or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, or deemed “furnished” and not “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.
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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.
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Date: | August 15, 2011 | | By: | /s/Nicole Leigh |
| | | | Nicole Leigh, President and Director |
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Date: | August 15, 2011 | | By: | /s/Robert B. Lees |
| | | | Robert B. Lees, CFO, and Director |
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Date: | August 15, 2011 | | By: | /s/John A. Palmer, Jr. |
| | | | John A. Palmer, Jr., Secretary and Director |
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