UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period endedFebruary 28, 2007
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from __________ to __________
Commission file number0-49978
| Island Residences Club, Inc. |
|
| (Exact name of registrant as specified in its charter) |
|
Delaware |
| 20-2443790 |
(State or other jurisdiction of incorporation) |
| (I.R.S. Employer Identification No.) |
| 4465 Pacific Coast Hwy, Unit B306 Torrance, CA 90505 |
|
| (Address of principal executive offices) (Zip Code) |
|
| P.O. Box 3631, Manhattan Beach, CA 90266 |
|
| (Mailing address of principal executive offices) (Zip Code) |
|
| (310)498-5567 |
|
| (Registrant's telephone number, including area code) |
|
| 1769-203 Jamestown Rd, Williamsburg, VA 23185 |
|
| (Former name, former address and former fiscal year, if changed since last report) |
|
Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. [X] Yes [ ] No
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date:
Outstanding at May 31, 2007
Common Stock, par value $0.0001 - 14,737,000
Transitional Small Business Disclosure Format (check one): [ ] Yes [X] No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ISLAND RESIDENCES CLUB, INC.
AS OF FEBRUARY 28, 2007
(UNAUDITED)
CURRENT ASSETS |
|
|
Cash and Cash Equivalents | $ | 652 |
Receivable from Related Party |
| 50,850 |
Marketable Securities |
| 1,792,031 |
TOTAL ASSETS | $ | 1,843,533 |
LIABILITIES and STOCKHOLDERS' EQUITY |
|
|
CURRENT LIABILITIES |
|
|
Accounts Payable | $ | 41,353 |
Loan Payable |
| 5,000 |
Due to Officers |
| 32,000 |
Due to Related Party |
| 178,812 |
TOTAL LIABILITIES | $ | 257,165 |
STOCKHOLDERS' EQUITY |
|
|
Preferred stock, $0.0001 par value; 20,000,000 shares authorized, no shares issued and outstanding |
| - |
Common stock, $0.0001 par value; 100,000,000 shares authorized; 14,737,000 shares issued and outstanding | $ | 1,474 |
Additional paid-in capital |
| 270,095 |
Accumulated comprehensive unrealized gain on marketable securities |
| 1,502,510 |
Accumulated comprehensive gain on foreign currency translation |
| 47,021 |
Prepaid Consulting Fees |
| (9,635) |
Accumulated deficit |
| (225,097) |
TOTAL STOCKHOLDERS' EQUITY | $ | 1,586,368 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 1,843,533 |
The accompanying notes are an integral part of these unaudited financial statements.
ISLAND RESIDENCES CLUB, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Month |
| Nine Month | ||||||||
| Periods Ended |
| Periods Ended | ||||||||
| February 28, |
| February 28, | ||||||||
| 2007 |
| 2006 |
| 2007 |
| 2006 | ||||
Net revenue–related | $ | - |
| $ | 92,500 |
| $ | 16,750 |
| $ | 227,500 |
Cost of revenue–related |
| - |
|
| 64,750 |
|
| 11,725 |
|
| 159,250 |
Gross Profit |
| - |
|
| 27,750 |
|
| 5,025 |
|
| 68,250 |
General administrative |
| 26,699 |
|
| 82,798 |
|
| 79,555 |
|
| 270,769 |
Net Loss |
| (26,699) |
|
| (55,048) |
|
| (74,530) |
|
| (202,519) |
Comprehensive Gain/loss |
|
|
|
|
|
|
|
|
|
|
|
Unrealized Gain(Loss)-Foreign |
|
|
|
|
|
|
|
|
|
|
|
Currency translation |
| 19,255 |
|
| - |
|
| 47,021 |
|
| - |
Unrealized loss on marketable securities |
| - |
|
| - |
|
| (881,265) |
|
| - |
Comprehensive Loss |
| (7,444) |
|
| - |
|
| (908,774) |
|
| (202,519) |
Loss per share | $ | (0.01) |
| $ | (0.01) |
| $ | (0.01) |
| $ | (0.03) |
Weighted Average Shares |
| 14,737,000 |
|
| 7,798,756 |
|
| 14,737,000 |
|
| 6,768,527 |
Basic and diluted weight average number of shares are the same as the company has no dilutive securities
The accompanying notes are an integral part of these unaudited financial statements.
ISLAND RESIDENCES CLUB, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED FEBRUARY 28, 2007 AND 2006
(UNAUDITED)
| 2007 |
| 2006 | ||
Cash flows from operating activities: |
|
|
|
|
|
Net loss | $ | (74,530) |
| $ | (202,519) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
Issuance in exchange for services |
| - |
|
| 6,595 |
Shares issued for services |
| - |
|
| 9,300 |
Amortization of prepaid consulting |
| 5,830 |
|
| 2,591 |
Increase/(decrease)in current assets: |
|
|
|
|
|
Receivable from related party |
| 5,025 |
|
| (92,500) |
Increase/(decrease) in current liabilities: |
|
|
|
|
|
Account payable |
| (13,584) |
|
| 123,844 |
Due to related parties |
| 82,484 |
|
| 153,270 |
Total adjustments |
| 69,705 |
|
| 203,100 |
Net cash used in operating activities |
| (4,825) |
|
| - |
Cash flows from financing activities: |
|
|
|
|
|
Proceeds from loan |
| 5,000 |
|
| - |
Net increase in cash and cash equivalent |
| 175 |
|
| 581 |
Cash and cash equivalents, beginning |
| 477 |
|
| - |
Cash and cash equivalents, ending | $ | 652 |
| $ | 581 |
Supplemental disclosure of cash flow information: |
|
|
|
|
|
Interest paid | $ | - |
| $ | - |
Income taxes paid | $ | - |
| $ | - |
The accompanying notes are an integral part of these unaudited financial statements.
ISLAND RESIDENCES CLUB, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Organization and Business Operations
Island Residences Club, Inc., formerly Island Investments, Inc., formerly Hengest Investments, Inc. was incorporated in the State of Delaware on July 16, 2002 to serve as a vehicle to effect a merger, exchange of capital stock, asset acquisition or other business combination with a domestic or foreign private business. On March 17, 2005, the Company began business operations, and all activity prior to that date relates to the Company's formation and proposed fund raising. The principal business of the Company includes the development, management and operations of luxury resorts and residences and marketing and selling of vacation stay entitlement ("rights"). The rights are issued as stay entitlements in the Island Residences Club, Inc. affiliate's recently completed Bali Island Villas in Seminyak, Bali.
On June 20, 2005, the board of directors resolved to change the company's fiscal year end from December 31 to May 31, commencing May 31, 2005. During the three month period ended November 30, 2005, the Company began to earn revenue, therefore is no longer a development stage company.
B. Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents.
C. Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
D. Basic and diluted net loss per share
Net loss per share is calculated in accordance with Statement of Financial Accounting Standards 128, Earnings per Share ("SFAS 128"). Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares, stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method. At February 28, 2007 there were no dilutive convertible shares, stock options or warrants.
E. Revenue recognition
The Company recognizes revenues under the parameters described in SAB 10. The Company utilizes the full accrual method of accounting when a formal arrangement exists, title is transferred, no other significant obligations of the Company exist and the Company deems the receivables to be collectible. The revenue is recognized net of returns and discounts.
F. Issuance of shares for service
The Company accounts for the issuance of equity instruments to acquire goods and services based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more reliably measurable.
G. Reclassifications
For comparative purposes, prior year's financial statements have been reclassified to conform with report classifications of the current year.
H. Recent Pronouncements
In September 2006, FASB issued SFAS 157 `Fair Value Measurements'. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles ("GAAP"), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The management is currently evaluating the effect of this pronouncement on the financial statements.
In September 2006, FASB issued SFAS 158 `Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans--an amendment of FASB Statements No. 87, 88, 106, and 132(R)' This Statement improves financial reporting by requiring an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. An employer without publicly traded equity securities is required to recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after June 15, 2007. However, an employer without publicly traded equity securities is required to disclose the following information in the notes to financial statements for a fiscal year ending after December 15, 2006, but before June 16, 2007, unless it has applied the recognition provisions of this Statement in preparing those financial statements:
a.
A brief description of the provisions of this Statement
b.
The date that adoption is required
c.
The date the employer plans to adopt the recognition provisions of this Statement, if earlier.
The requirement to measure plan assets and benefit obligations as of the date of the employer's fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The management is currently evaluating the effect of this pronouncement on the financial statements.
In February of 2007 the FASB issued SASB 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The management is currently evaluating the effect of this pronouncement on the financial statements.
In July 2006, the FASB released FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the accounting and reporting for uncertainties in income tax law. This interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. This statement is effective for fiscal years beginning after December 15, 2006. The management is currently evaluating the effect of this pronouncement on the financial statements.
NOTE 2 - MARKETABLE SECURITIES
The Company's marketable securities are classified as available-for-sale and, as such, are carried at fair value. All of the securities are comprised of shares of common stock of Island Concepts Indonesia (ICON), a Company related through common ownership. Securities classified as available-for-sale may be sold in response to changes in interest rates, liquidity needs, and for other purposes.
The investment in marketable securities represents less than twenty percent (20%) of the outstanding common stock and stock equivalents of the investee, and is traded on the Surabaya Stock Exchange in Indonesia through brokers. As such, each investment is accounted for in accordance with the provisions of SFAS No. 115. The Company has recorded the market value of the shares based upon the information provided by the broker.
Unrealized holding gains and losses for marketable securities are excluded from earnings and reported as a separate component of stockholder's equity. Realized gains and losses for securities classified as available-for-sale are reported in earnings based upon the adjusted cost of the specific security sold.
Gains or losses on foreign currency translation are excluded from earnings and reported as a separate component of stockholder's equity.
On February 28, 2007, the investments have been valued at $1,792,031 based upon the fair value of the marketable securities at the balance sheet date.
Following is a summary of marketable equity securities classified as available for sale as of February 28, 2007:
Number of Shares | Investee Name | Cost at February 28, 2007 | Market Value at February 28, 2007 | Gain |
24,500,000 shares | Island Concepts Indonesia | $ 242,500 | $ 1,792,031 | $ 1,502,510 |
NOTE 3 - STOCKHOLDERS' EQUITY
A. Preferred Stock
The Company is authorized to issue 20,000,000 shares of preferred stock at $.0001 par value, with such designations voting and other rights and preference as may be determined from time to time by the Board of Directors.
As of February 28, 2007, no preferred stock has been issued.
B. Common stock
During the three month period ended August 31, 2006, the Company issued 1,600,000 shares to Angela Whichard, Inc. (AWI) per a Share Exchange Agreement, whereby the Company will exchange 1,600,000 shares of its common stock for 400,000 restricted shares of common stock of Grand Sierra Resorts Corp., a Nevada Corp., owned by AWI. The Company recorded subscription receivable based on the market price of the shares issued. However, AWI did not fulfill its obligation under the Share Exchange Agreement. These shares were canceled on July 24, 2006.
C. Prepaid consulting
During the year ended May 31, 2006, the Company recorded $20,000 as prepaid consulting for common stock issued for consulting service, which was the fair value of the shares. During the nine month period ended February 28, 2007 the Company amortized $5,830 as an operating expense. The balance of prepaid consulting at February 28, 2007 is $9,635.
D. Warrant and Options
There are no warrants or options outstanding to issue any additional shares of common stock or preferred stock of the Company.
NOTE 4 - SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
The Company prepares its statements of cash flows using the indirect method as defined under the Financial Accounting Standard No. 95.
NOTE 5 - RELATED PARTY TRANSACTIONS
Due to officers represents unpaid salaries accrued for two officers (See Note 8). As of February 28, 2007, the balance due to officers amounted to $32,000. Due to related party represents expenses paid on behalf of the Company, which are non-interest bearing, unsecured, and due on demand. As of February 28, 2007, the balance due to the related party amounted to $178,812.
During the nine month period ended February 28, 2007, the Company sold rights amounting to $ 16,750 to Island Concepts, which represent 100% of the revenue. As of February 28, 2007, the balance of the accounts receivable due from Island Concepts is $50,850.
During the nine month period ended February 28, 2007, the Company incurred $11,725 of management fees to Island Concepts, which represent 100% cost of revenue.
On November 1, 2005, the Company entered into an advisory agreement with Francis Street Pty Ltd., whereby Francis Street would provide certain business consulting services for the period from November 1, 2005 to December 31, 2008 in exchange for 1,000,000 shares of common stock valued at $10,000, which is the fair value of the shares. The prepaid consulting is being amortized over the service period.
Island Residences Club, Inc ("IRCI"), Island Regency Group Limited a/k/a Meridian Pacific Investments ("Island Regency"), Francis Street Pty Limited, and PT Island Concepts, Indonesia Tbk ("Island Concepts") are related parties through common ownership and officers.
Specifically in respect to the following: IRCI is a Delaware Corporation that is publicly reporting but is not publicly trading. Island Regency is a Hong Kong company that is privately owned. Francis Street is an Australian company that is privately owned. Island Concepts (www.islandconcepts.com) is an Indonesian Company that is publicly trading on the Surabaya Stock Exchange in Indonesia under the symbol ("ICON"). Graham Bristow is an officer and director in Francis Street and Island Regency. Graham Bristow, through direct and indirect ownership, owns 100% of Meridian and approximately 92.8% of Island Concepts, 100% of Francis Street, and 78% of IRCI as at February 28, 2007. On August 2, 2006, Meridian changed its name to Island Regency Group Limited.
NOTE 6 - CONCENTRATION
One customer - a related party (related through common officer) represent 100% of the Company's revenue and cost of revenue. The balance of account receivable from this customer amounted to $50,850 as of February 28, 2007. 100% of the Company's revenue is from the sale of rights to the Indonesia market.
NOTE 7 - GOING CONCERN CONSIDERATION
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company's assets and the satisfaction of its liabilities in the normal course of business. The Company incurred a loss of $74,530 and $202,519 for the nine month periods ended February 28, 2007 and 2006, respectively. The Company has an accumulated deficit of $225,097 as of February 28, 2007. The continuing losses have adversely affected the liquidity of the Company.
In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Management has made plans to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue as a going concern. The management's plans include the sale of membership in The Island Residences Club, a vacation rights club initially based in Bali and the possible acquisition of a suitable business venture to provide the opportunity for the Company to continue as a going concern. However, there can be no assurance that management will be successful in this endeavor.
NOTE 8 - AGREEMENTS
On June 3, 2006, James Rowbotham resigned as Chief Operating Officer and Vice resident of Operations of Island Residences Club, Inc. (the "Company"). On June 7, 2006, the Company appointed Julian James Bristow as the Company's Chief Operating Officer and Vice President of Operations and Bettina Pfeiffer as the Company's Vice President of Sales & Marketing for the Company. Effective July 1, 2006, the Company entered into employment agreements with both of these individuals for a term of one year. Both agreements provide for compensation of $2,000 per month during the employment term. Mr. Julian Bristow is the son of Graham J. Bristow, Chief Executive Officer, director and majority shareholder of the Company.
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This report contains various forward-looking statements that are based on the Company's beliefs as well as assumptions made by and information currently available to the Company. When used in this report, the words "believe," "expect," "anticipate," "estimate" and similar expressions are intended to identify forward-looking statements. Such statements may include statements regarding seeking business opportunities, payment of operating expenses, and the like, and are subject to certain risks, uncertainties and assumptions which could cause actual results to differ materially from projections or estimates contained herein. Factors which could cause actual results to differ materially include, among others, unanticipated delays or difficulties in the company's business plan, unanticipated or unexpected costs and expenses, competition and changes in market conditions, lack of adequate management personnel and the like. Should one or more of these ris ks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. The Company cautions against placing undue reliance on forward-looking statements all of that speak only as of the date made.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the information contained in our financial statements and the accompanying Notes.
PLAN OF OPERATION
Our principal business includes the development, management and operations of luxury resorts and residences and marketing and selling vacation stay entitlements ("rights"). The rights are issued as stay entitlements in the Island Residences Club, Inc. and/or the recently completed Bali Island Villas in Seminyak, Bali. The purchase of 10,000 rights at $2.50 per right entitles the purchaser to membership in the Island Residences Club, a vacation membership club we have established.
Island Residences Club, Inc. is finalizing a sales and marketing campaign to launch the Island Residences Club concept in the US. Initially the property owned by PT Island Concepts Indonesia Tbk in Seminyak, Bali is the only property available to members for vacation and/or business stays. At this time, there are ten (10) one bedroom luxury villas in Bali, each with its own lap pool available in the vacation rights program. Currently the target market is the higher income local and expatriate communities in Asia. We are seeking to acquire and/or develop properties in the United States and Mexico to launch the Club concept in the US and Canada later in 2007. Ultimately, Club Members will enjoy "stays" at the Island Villas in Bali, and later, a selection of luxury apartments and Villas in Thailand, North America, Mexico and elsewhere when available, each and every year. The membership will receive a right each year to stay at an Island Residences Club property. PT Island Concept s Indonesia Tbk will expand its current Bali Island Villa Resort in Seminyak, Bali and construct unique modern Villas on land it has identified in Thailand. These properties will be modern,contemporary and yet tropical in design and can be sold with or without a lease-back option to the Island Residences Club or with a contract to the company for management and/or sundry letting. We will maintain a policy of keeping our properties in the utmost pristine condition and will sell and roll-over our inventory within a three to five year time frame. Over time we expect to develop into essentially a property trust with the increasing value of our inventory creating an increasing asset value for the shareholders. We also intend to develop a commercial property portfolio consisting of luxury hotels, spas and resorts. These properties will provide the infrastructure to support villas and residences located within or adjacent to the resorts.
Our plan for the next twelve months includes moving forward with next phase of our business plan, which is to (1) develop, acquire and manage vacation properties in the U.S. and Mexico for members of the Island Residences Club, (2) develop, market and manage the Island Residences Club concept and (3) sell existing inventory of Vacation Stay Entitlements in the Bali Island Villas and obtain and sell future Vacation Stay Entitlements in other properties. PT Island Concepts Indonesia Tbk, on behalf of the company, currently has a software and web design team of three persons and a research team of seven persons developing our websites and back and front office software systems. This includes but is not limited to the development of a membership loyalty program, online reservation system and an in-room information system. This work will be moved to the United States when staff and expertise become available or are employed.
However, we will continue to maintain a research and online concierge service from Bali. These systems will be for our use and not for resale. We do not intend to seek any specific patents or trademarks but will use a general copyright to protect our property and systems. We invoice Island Concepts for the sale of vacation rights and credit the invoice for management services that they provide in the sales of the rights. There are no material agreements that cover these transactions. IT services are provided on a normal commercial basis.
We intend to invest up to $10,000,000 in 2007 and 2008 into property and income producing assets located in the USA and Mexico. We intend for these funds to come from the sale of Vacation Stay Entitlements ("Right"), and/or borrowings secured over the assets acquired. There is no guarantee that we will be able to sell these Vacation Stay Entitlements or obtain these funds or that the cost of funds is acceptable to the Company. We intend to hire up to fifteen persons in 2006 and 2007, predominately for our Southern California operations, that we have yet to establish.
In the next twelve months, Island Concepts has advised us that it will raise funds to move forward with the next stage of development in the Bali Island Villas in Seminyak, Bali. Ten two Bedroom Villas and a Spa Complex will be built on land already owned by Island Concepts adjacent to stage I, being the existing ten one bedroom Villas. These new Villas along with the original development will be managed by PT Island Concepts Indonesia Tbk for the Island Residences Club, Inc. Construction of Stage II is expected to be completed by April 2008. Island Concepts also intends to expand in Thailand in 2007 on land it has identified.
Island Residences Club, Inc. will market the Vacation Stay Entitlements applicable to the new development as with the existing ten one bedroom Villas. PT Island Concepts Indonesia Tbk will own and operate this development on behalf of Island Residences Club, Inc.
CRITICAL ACCOUNTING POLICIES
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less from the date of purchase that are readily convertible into cash to be cash equivalents.
Use of Estimates
The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Basic and diluted net loss per share
Net loss per share is calculated in accordance with Statement of Financial Accounting Standards 128, Earnings per Share ("SFAS 128"). Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares, stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method. At February 28, 2007 there were no dilutive convertible shares, stock options or warrants.
Revenue recognition
The Company recognizes revenues under the full accrual method of accounting when a formal arrangement exists, title is transferred, no other significant obligations of the Company exist and the Company deems the receivables to be collectible. The revenue is recognized net of returns and discounts.
Issuance of shares for service
The Company accounts for the issuance of equity instruments to acquire goods and services based on the fair value of the goods and services or the fair value of the equity instrument at the time of issuance, whichever is more reliably measurable.
Reclassifications
For comparative purposes, prior year's financial statements have been reclassified to conform with report classifications of the current year.
Recent Pronouncements
In September 2006, FASB issued SFAS 157 `Fair Value Measurements'. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles ("GAAP"), and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice. This Statement is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The management is currently evaluating the effect of this pronouncement on the financial statements.
In September 2006, FASB issued SFAS 158 `Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans--an amendment of FASB Statements No. 87, 88, 106, and 132(R)' This Statement improves financial reporting by requiring an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. An employer without publicly traded equity securities is required to recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after June 15, 2007. However, an employer without publicly traded equity securities is required to disclose the following information in the notes to financial statements for a fiscal year ending after December 15, 2006, but before June 16, 2007, unless it has applied the recognition provisions of this Statement in preparing those financial statements:
a.
A brief description of the provisions of this Statement
b.
The date that adoption is required
c.
The date the employer plans to adopt the recognition provisions of this Statement, if earlier.
The requirement to measure plan assets and benefit obligations as of the date of the employer's fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The management is currently evaluating the effect of this pronouncement on the financial statements.
In February of 2007 the FASB issued SASB 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The management is currently evaluating the effect of this pronouncement on the financial statements.
In July 2006, the FASB released FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the accounting and reporting for uncertainties in income tax law. This interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. This statement is effective for fiscal years beginning after December 15, 2006. The management is currently evaluating the effect of this pronouncement on the financial statements.
RESULTS OF OPERATIONS - FOR THE THREE AND NINE MONTH PERIODS ENDED FEBRUARY 28, 2007 AND 2006
The operations of Island Residences Clubs, Inc. will include marketing and selling the vacation stay entitlement rights ("Vacation Rights"). The rights are issued as stay entitlements in the Bali Island Villas in Seminyak, Bali. There is a minimum of 1,000 rights required to be owned for a period of more than one year that entitles the owner of the rights to 10 nights stay valued at $250 per night. These Villas have been developed by and are operated by, PT Island Concepts Indonesia Tbk for The Island Residences Club. PT Island Concepts Indonesia Tbk is working with the company to (i) acquire, develop and operate other vacation ownership resorts, (ii) providing resort management and maintenance services to vacation ownership resorts (iii) sell existing inventory of Vacation Stay Entitlements in the Bali Island Villas held by the company and obtain and sell future Vacation Stay Entitlements in other properties on behalf of The Island Residences Club.
The Company did not generate any revenue for the three months ended February 28, 2007 and generated $16,750 in net revenue from a related party for the nine months ended February 28, 2007, compared to $92,500 in net revenue from a related party generated for the three months ended February 28, 2006 and $227,500 for the nine months ended February 28, 2006. The decrease in net revenue was due to a decrease in sale of vacation rights. There was no cost of revenue for the three months ended February 28, 2007 as compared to $64,750 in cost of revenue (related) for the three months ended February 28, 2006. For the nine months ended February 28, 2007, cost of revenue was $11,725 (related) as compared to $159,250 (related) in cost of revenue for the nine months ended February 28, 2006. The decrease in cost of revenue is due to lack of or zero sales and redemption of vacation stay entitlements for the period at the Island Villas Bali. General and administrative expenses were $26,699 for th e three months ended February 28, 2007 as compared to $82,798 at the three months ended February 28, 2006. For the nine month period ended February 28, 2007, general and administrative expenses were $79,555 as compared to $270,769 for the nine months ended February 28, 2006. The decrease in general and administrative expenses was due to a lack of marketing effort to sell vacation rights entitlements in the period under review. The company has been concentrating on researching available Resort properties in North America as a platform to develop the business in this region.
Net loss for the three months ended February 28, 2007 was $26,699 as compared to
$55,048 for the three months ended February 28, 2006. Net loss for the nine months ended February 28, 2007 was $74,530 as compared to $202,519 for the nine months ended February 28, 2006. The decrease in net loss was due to a decrease in costs associated with sales and administrative costs.
Our basic and diluted loss per share for the three months ended February 28, 2007 was ($0.01) as compared to ($0.01) for the three months ended February 28, 2006 and ($0.01) for the nine months ended February 28, 2007 as compared to ($0.03) for the nine months ended February 28, 2006.
LIQUIDITY AND CAPITAL RESOURCES
The Company had $652 in cash and cash equivalents as of February 28, 2007. At February 28, 2007, the company had current assets of $1,843,533 in the form of $652 in cash and cash equivalents, marketable securities in the amount of $1,792,031 and $50,850 in the form of an account receivable from a related party. All of the marketable securities are comprised of shares of common stock of Island Concepts Indonesia (ICON), a company related through common ownership. As of February 28, 2007, the Company had $257,165 in current liabilities consisting of $41,353 in the form of an account payable, $32,000 due to officers and $178,812 due to a related party. Due to related party represents expenses paid by related parties on behalf of the Company, are non-interest bearing, unsecured, and due on demand.
Our plan for meeting our liquidity needs may be affected by, but not limited to, the following: demand for our product, our ability to enter into financing agreements, the threat and/or effects on the travel and leisure industry of future terrorist attacks and limitations on our ability to conduct marketing activities, and other factors. Further, the Company has limited sources of revenue. Without realization of additional capital, it would be unlikely for the Company to continue as a going concern.
On June 20, 2005, we entered into an Investment Agreement (the "Agreement") with Dutchess Private Equities Fund II, LP (the "Investor"). This Agreement provides that, following notice to the Investor, the company may put to the Investor up to $10,000,000 of its common stock for a purchase price equal to 95% of the lowest closing bid price of its common stock during the five day period following that notice. The number of shares that we are permitted to put pursuant to the Agreement is either: (A) 200% of the average daily volume of the common stock for the twenty trading days prior to the applicable put notice date, multiplied by the average of the three daily closing bid prices immediately preceding the put date; or (B) $100,000; provided however, that the put amount can never exceed $1,000,000 with respect to any single put. In connection with this Agreement, we agreed to register the shares issuable pursuant to the Agreement. This line of credit is not available u nless there is an effective registration statement for the shares of common stock underlying this line of credit. This registration statement will not be filed until the Company establishes a market, if at all, for its common stock.
On November 1, 2005, we entered into an advisory agreement with Francis Street Pty Ltd., whereby Francis Street would provide certain business consulting services in exchange for 1,000,000 shares of common stock. Graham Bristow, our CEO, controls Francis Street Pty Ltd.
On November 16, 2005, we entered into a Share Purchase Agreement with Island Regency Group Limited f/k/a Meridian Pacific Investments HK Limited ("Island Regency"), whereby we would purchase 20.25 million shares and a warrant to purchase 24.25 million shares of PT Island Concepts Indonesia Tbk ("ICON") (collectively, the "Shares"). In exchange for the Shares, we agreed to issue Island Regency 6,000,000 shares of our restricted common stock. Island Regency is considered an affiliate of the company as it owns more than 10% of the outstanding common stock and is controlled by Graham Bristow, who is also the CEO of Island Residences Club, Inc. On August 2, 2006, Meridian Pacific Investments HK Limited changed its name to Island Regency Group Limited.
On November 17, 2005, we entered into a Share Exchange Agreement with Angela Whichard, Inc. ("AWI"), whereby we would exchange 1,600,000 shares of our common stock for 400,000 restricted shares of common stock of Grand Sierra Resorts Corp., a Nevada Corp., owned by AWI. AWI has contracted to purchase up to 51% of the outstanding common stock of Grand Sierra Resorts. In connection with this agreement, AWI also granted us the right to purchase up to 51% of the total outstanding shares of Grand Sierra Resorts. This option was subject to the execution of definitive agreements and expired on December 1, 2005. The Company recorded subscription receivable based on the market price of the shares issued.
On February 24, 2006, we entered into a Stock Purchase Agreement with DTLL, Inc., a publicly traded Minnesota corporation, whereby we would purchase 400,000 shares of DTLL, Inc. in exchange for 400,000 shares of Grand Sierra Resorts Corporation. On July 17, 2006, both the AWI and DTLL transactions were rescinded and the 1,600,000 shares issued to AWI were cancelled.
On February 23, 2006, the company and Rich Woods, an unaffiliated investor, entered into a Stock Purchase Agreement with RotateBlack LLC, a Michigan limited liability company ("RBL"), whereby the company and the investor would purchase 9,400,000 shares of common stock, $.01 par value (the "Shares") of DTLL, Inc., a publicly traded Minnesota corporation. The allocation of the Shares and the company's obligation related thereto was to be determined at closing. The Shares represent approximately 70% of the 13.5 million issued and outstanding common stock of DTLL. The transaction was to result in a change of control of DTLL. The purchase price for the shares to be paid at closing was $1,500,000, represented by cash in the amount of $500,000 and a Secured Note Payable in the amount of $1,000,000 due no later than April 10, 2006. On April 11, 2006, this agreement was terminated. The company did not purchase any shares pursuant to the terms of the Stock Purchase Agreement b etween the company, RotateBlack LLC and Rich Woods.
On June 7, 2006, the Company appointed Julian James Bristow as the Company's Chief Operating Officer and Vice President of Operations and Bettina Pfeiffer as the Company's Vice President of Sales & Marketing for the Company. Effective July 1, 2006, the Company entered into employment agreements with both of these individuals for a term of one year. Both agreements provide for compensation of $2,000 per month during the employment term. Mr. Julian Bristow is the son of Graham J. Bristow, Chief Executive Officer, director and majority shareholder of the Company. As of February 28, 2007, the balance due to officers amounted to $32,000.
Due to related party represents expenses paid by Francis Street Pty Ltd. On behalf of the Company, which are non-interest bearing, unsecured, and due on demand. As of February 28, 2007, the balance due to the related party amounted to $178,812.
During the period ended February 28, 2007, the Company sold rights amounting to $16,750 to Island Concepts, which represent 100% of the revenue. As of February 28, 2007, the balance of the accounts receivable due from Island Concepts is $50,850.
During the period ended February 28, 2007, the Company incurred $11,725 of management fees to Island Concepts, which represent 100% cost of revenue.
Island Residences Club, Inc., Island Regency Group Limited, Francis Street Pty Limited, and PT Island Concepts Indonesia Tbk are related parties through common ownership and Graham Bristow. Specifically in respect to the following: IRCI is a Delaware Corporation that is publicly reporting but is not publicly trading. Island Regency is a Hong Kong company that is privately owned. Island Concepts (www.islandconcepts.com) is an Indonesian Company that is publicly trading on the Surabaya Stock Exchange in Indonesia under the symbol ("ICON"). Graham Bristow is an officer and director in IRCI and Island Regency. At February 28, 2007 Graham Bristow, through direct and indirect ownership, owned 100% of Island Regency and approximately 92.8% of Island Concepts and 78% of IRCI.
ITEM 3. CONTROLS AND PROCEDURES
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Our chief executive officer and chief financial officer, carried out an evaluation (as required by paragraph (b) of Rule 13a-15 or 15d-15) of the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e)) as of the end of the period covered by this report. Based on their evaluation, our chief executive officer and chief financial officer believe that, given our limited operations, our disclosure controls and procedures are effective.
(b) CHANGES IN INTERNAL CONTROLS. There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that materially affected or is reasonably likely to materially affect our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings against the Company and the Company is unaware of such proceedings contemplated against it.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
(a)
Exhibits.
Exhibit No. |
| Description |
Exhibit 31.1. |
| Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
Exhibit 31.2. |
| Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
Exhibit 32.1 |
| Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 11, 2007 |
| Island Residences Club, Inc. |
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| (Registrant) |
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| By: | /s/ Graham J. Bristow |
| Name: | Graham J. Bristow |
| Title: | President |
