| [ X ] | Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 |
| For the quarterly period ended May 31, 2005 |
| [ ] | 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. 333-100110
SimplaGene USA, Inc.
(Name of Small Business Issuer as specified in its charter)
| Nevada | 01-0741042 | |
| (State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer Identification No.) |
11900 Wayzata Blvd., Suite 100, Hopkins, MN 55305
(Address of Principal Executive Offices and Zip Code)
(952) 541-1155
(Issuer’s Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by sections 13 or 15(d) of the Exchange Act during the past 12 months (or such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. 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:
June 28, 2005: 2,950,000
Transitional Small Business Disclosure Format (check one): YES [ ] NO [ X]
SimplaGene USA, Inc.
(a development stage enterprise)
Form 10-QSB for the Quarter ended May 31, 2005
Table of Contents
Page
Part I - Financial Information
Item 1 | Financial Statements | 3 |
Item 2 | Management's Discussion and Analysis or Plan of Operation | 12 |
Item 3 | Controls and Procedures | 13 |
Part II - Other Information
Item 1 | Legal Proceedings | 13 |
Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 13 |
Item 3 | Defaults Upon Senior Securities | 14 |
Item 4 | Submission of Matters to a Vote of Security Holders | 14 |
Item 5 | Other Information | 14 |
Item 6 | Exhibits | 14 |
Signatures | 14 |
2
PART I
Item 1 - Financial Statements
SimplaGene USA, Inc.
(a development stage enterprise)
Balance Sheets
May 31, 2005 and 2004
(Unaudited)
| May 31, 2005 | May 31, 2004 | |||||||
|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash in bank | $ | 49,639 | $ | 78,960 | ||||
| Total Assets | $ | 49,639 | $ | 78,960 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable - trade | $ | -- | $ | -- | ||||
| Loans from officer/shareholder | -- | 600 | ||||||
| Total Liabilities | -- | 600 | ||||||
| Commitments and Contingencies | ||||||||
| Shareholders’ Equity | ||||||||
| Preferred stock - $0.001 par value | ||||||||
| 10,000,000 shares authorized | ||||||||
| None issued and outstanding | -- | -- | ||||||
| Common stock - $0.001 par value | ||||||||
| 50,000,000 shares authorized | ||||||||
| 2,950,000 shares issued and outstanding | 2,950 | 2,950 | ||||||
| Additional paid-in capital | 94,466 | 92,666 | ||||||
| Deficit accumulated during the development stage | (47,777 | ) | (19,056 | ) | ||||
| Total Stockholders’ Equity | 49,639 | 78,360 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 49,639 | $ | 78,960 | ||||
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
3
SimplaGene USA, Inc.
(a development stage enterprise)
Statements of Operations and Comprehensive Loss
Nine and Three months ended May 31, 2005 and 2004 and
Period from August 2, 2002 (date of inception) through May 31, 2005
(Unaudited)
| Nine months ended May 31, 2005 | Nine months ended May 31, 2004 | Three months ended May 31, 2005 | Three months ended May 31, 2004 | Period from August 2, 2002 (date of inception) through May 31, 2005 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenues | $ | -- | $ | -- | $ | -- | $ | -- | $ | -- | |||||||
| Cost of Sales | -- | -- | -- | -- | -- | ||||||||||||
| Gross Profit | -- | -- | -- | -- | -- | ||||||||||||
| Operating expenses | |||||||||||||||||
| Organizational | |||||||||||||||||
| and start-up costs | -- | -- | -- | -- | 4,679 | ||||||||||||
| General and | |||||||||||||||||
| administrative | |||||||||||||||||
| expenses | 13,805 | 9,358 | 4,171 | 1,927 | 43,098 | ||||||||||||
| Depreciation | |||||||||||||||||
| and amortization | -- | -- | -- | -- | -- | ||||||||||||
| Total operating expenses | 13,805 | 9,358 | 4,171 | 1,927 | 47,777 | ||||||||||||
| Loss from operations | |||||||||||||||||
| and before provision | |||||||||||||||||
| for income taxes | (13,805 | ) | (9,358 | ) | (4,171 | ) | (1,927 | ) | (47,777 | ) | |||||||
| Provision for | |||||||||||||||||
| income taxes | -- | -- | -- | -- | -- | ||||||||||||
| Net Loss | (13,805 | ) | (9,358 | ) | (4,171 | ) | (1,927 | ) | (47,777 | ) | |||||||
| Other comprehensive | |||||||||||||||||
| income | -- | -- | -- | -- | -- | ||||||||||||
| Comprehensive Loss | $ | (13,805 | ) | $ | (9,358 | ) | $ | (4,171 | ) | $ | (1,927 | ) | $ | (47,777 | ) | ||
| Loss per weighted-average | |||||||||||||||||
| share of common stock | |||||||||||||||||
| outstanding, computed | |||||||||||||||||
| on net loss - basic and | |||||||||||||||||
| fully diluted | nil | nil | nil | nil | nil | ||||||||||||
| Weighted-average | |||||||||||||||||
| number of common | |||||||||||||||||
| shares outstanding | 2,950,000 | 2,950,000 | 2,950,000 | 2,950,000 | 2,704,066 | ||||||||||||
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
4
SimplaGene USA, Inc.
(a development stage enterprise)
Statements of Cash Flows
Nine months ended May 31, 2005 and 2004 and
Period from August 2, 2002 (date of inception) through May 31, 2005
(Unaudited)
| Nine months ended May 31, 2005 | Nine months ended May 31, 2004 | Period from August 2, 2002 (date of inception) through May 31, 2005 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash Flows from Operating Activities | |||||||||||
| Net Loss | $ | (13,805 | ) | $ | (9,358 | ) | $ | (47,777 | ) | ||
| Adjustments to reconcile net income to | |||||||||||
| net cash provided by operating activities | |||||||||||
| Depreciation | -- | -- | -- | ||||||||
| Increase (Decrease) in | |||||||||||
| Accounts payable-trade | (315 | ) | -- | -- | |||||||
| Net cash used in operating activities | (14,120 | ) | (9,358 | ) | (47,777 | ) | |||||
| Cash Flows from Investing Activities | -- | -- | -- | ||||||||
| Cash Flows from Financing Activities | |||||||||||
| Cash advanced by officer/shareholder | 4,400 | -- | 16,800 | ||||||||
| Cash repaid to officer/shareholder | (16,800 | ) | -- | (16,800 | ) | ||||||
| Proceeds from sale of common stock | -- | -- | 119,500 | ||||||||
| Cash paid to raise capital | -- | -- | (22,084 | ) | |||||||
| Net cash provided by financing activities | (12,400 | ) | -- | 97,416 | |||||||
| Increase (Decrease) in | |||||||||||
| Cash and Cash Equivalents | (26,520 | ) | (9,358 | ) | 49,639 | ||||||
| Cash and cash equivalents at beginning of period | 76,159 | 88,318 | -- | ||||||||
| Cash and cash equivalents at end of period | $ | 49,639 | $ | 78,960 | $ | 49,639 | |||||
| Supplemental Disclosures of | |||||||||||
| Interest and Income Taxes Paid | |||||||||||
| Interest paid during the period | $ | -- | $ | -- | $ | -- | |||||
| Income taxes paid (refunded) | $ | -- | $ | -- | $ | -- | |||||
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
The accompanying notes are an integral part of these financial statements.
5
SimplaGene USA, Inc.
(a development stage enterprise)
Notes to Financial Statements
NOTE A - Organization and Description of Business
SimplaGene USA, Inc. (Company) was incorporated on August 2, 2002 under the laws of the State of Nevada. The Company was formed to market hepatitis B virus (HBV) genetic data gathered by Ningbo SimplaGene Institute, a Chinese research institute, to pharmaceutical firms and research organizations. We intend to market this information on compact disc for use in scientific research and drug studies. Anticipated uses of this information include, analyzing mechanisms of viral infection, developing new pharmaceuticals, conducting standardized testing, and conducting other research. We do not intend to engage in any research activity and do not believe our business will be subject to any meaningful government regulation.
The Company has had no substantial operations or substantial assets since inception. Accordingly, the Company is considered in the development stage.
NOTE B - Preparation of Financial Statements
The Company follows the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America and has a year-end of August 31.
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 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.
Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.
During interim periods, the Company follows the accounting policies set forth in its annual audited financial statements filed with the U. S. Securities and Exchange Commission on its Annual Report on Form 10-KSB for the year ended August 31, 2004. The information presented within these interim financial statements may not include all disclosures required by generally accepted accounting principles and the users of financial information provided for interim periods should refer to the annual financial information and footnotes when reviewing the interim financial results presented herein.
In the opinion of management, the accompanying interim financial statements, prepared in accordance with the U. S. Securities and Exchange Commission’s instructions for Form 10-QSB, are unaudited and contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, results of operations and cash flows of the Company for the respective interim periods presented. The current period results of operations are not necessarily indicative of results which ultimately will be reported for the full fiscal year ending August 31, 2005.
For segment reporting purposes, the Company operated in only one industry segment during the periods represented in the accompanying financial statements and makes all operating decisions and allocates resources based on the best benefit to the Company as a whole.
6
SimplaGene USA, Inc.
(a development stage enterprise)
Notes to Financial Statements - Continued
NOTE C - Going Concern Uncertainty
In prior periods, the Company completed an initial public offering of common stock, has not completed implementation of its business plan and has not generated revenue producing transactions. Accordingly, the Company is considered in the development stage.
On May 15, 2004, the Company entered into a six-month Marketing Agreement with Ningbo Freetrade Zone Aipuweixi Trading Co., Ltd. (an unrelated party) (Ningbo Freetrade), located in Ningbo, Zhejiang Province, China whereby Ningbo Freetrade undertook to provide all marketing activities related to the Company’s HBV DNA data and data processing results in the United States of America and Canada. As no sales were made, the contract was not renewed.
As the Company has not been successful in finding buyers for the HBV data, the Company is exploring the possibility of selling purified DNA samples taken from the blood of patients with diseases specifically requested by customers. These samples may be collected specifically for a customer, or, if available, taken from the Ningbo SimplaGene sample library.
The Company’s management continues to believe that the proceeds from the Company’s initial capitalization and initial public offering of common stock will be sufficient to maintain the corporate status of the Company for the immediate future. However, due to the Company's lack of operating assets, the Company’s continuance may become dependent on either future sales of securities and/or advances or loans from significant stockholders or corporate officers to provide sufficient working capital to preserve the integrity of the corporate entity during the development phase.
There is no assurance that the Company will be able to obtain additional equity or debt funding or, that such funding, if available, will be obtained on terms favorable to or affordable by the Company.
It is the intent of management and significant stockholders to provide sufficient working capital necessary to support and preserve the integrity of the corporate entity. However, there is no legal obligation for either management or significant stockholders to provide additional future funding.
NOTE D - Summary of Significant Accounting Policies
1. | Cash and cash equivalents |
For Statement of Cash Flows purposes, the Company considers all cash on hand and in banks, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.
Cash overdraft positions may occur from time to time due to the timing of making bank deposits and releasing checks, in accordance with the Company's cash management policies.
2. | Organization costs |
The Company has adopted the provisions of AICPA Statement of Position 98-5, “Reporting on the Costs of Start-Up Activities” whereby all organization and initial costs incurred with the incorporation and initial capitalization of the Company were charged to operations as incurred.
7
SimplaGene USA, Inc.
(a development stage enterprise)
Notes to Financial Statements - Continued
NOTE D - Summary of Significant Accounting Policies - Continued
3. | Deferred public offering costs |
During the process of "going public" through an initial public offering (an IPO), the Company deferred certain costs related to the registration process. Deferred public offering costs represent accounting, legal and underwriting costs incurred by the Company pertaining to this process. These costs were charged against additional paid-in capital (deducted from stock proceeds) upon completion of the public offering.
4. | Income Taxes |
The Company uses the asset and liability method of accounting for income taxes. At May 31, 2005 and 2004, the deferred tax asset and deferred tax liability accounts, as recorded when material to the financial statements, are entirely the result of temporary differences. Temporary differences generally represent differences in the recognition of assets and liabilities for tax and financial reporting purposes, primarily accumulated depreciation and amortization, allowance for doubtful accounts and accruals for compensated vacation time.
As of May 31, 2005 and 2004, the deferred tax asset related to the Company’s net operating loss carryforward is fully reserved. If these carryforwards are not utilized, they will begin to expire in 2020.
5. | Earnings (loss) per share |
Basic earnings (loss) per share is computed by dividing the net income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the respective period presented in our accompanying financial statements.
Fully diluted earnings (loss) per share is computed similar to basic income (loss) per share except that the denominator is increased to include the number of common stock equivalents (primarily outstanding options and warrants).
Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon the Company’s net income (loss) position at the calculation date.
As of May 31, 2005 and 2004, the Company has no outstanding stock options and warrants which would be deemed dilutive.
NOTE E - Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable and notes payable, as applicable, approximates fair value due to the short term nature of these items and/or the current interest rates payable in relation to current market conditions.
Interest rate risk is the risk that the Company’s earnings are subject to fluctuations in interest rates on either investments or on debt and is fully dependent upon the volatility of these rates. The Company does not use derivative instruments to moderate its exposure to interest rate risk, if any.
8
SimplaGene USA, Inc.
(a development stage enterprise)
Notes to Financial Statements - Continued
NOTE E - Fair Value of Financial Instruments - Continued
Financial risk is the risk that the Company’s earnings are subject to fluctuations in interest rates or foreign exchange rates and are fully dependent upon the volatility of these rates. The company does not use derivative instruments to moderate its exposure to financial risk, if any.
NOTE F - Advances from Shareholder
During Fiscal 2005, 2004 and 2003, respectively, the Company was advanced approximately $4,400, $11,800 and $600 by the Company’s President and controlling shareholder, Xinbo Wang, for the purpose of funding the Company’s Marketing Agreement and to provide working capital. These advances are non-interest bearing and are repayable upon demand. As of May 31, 2005, all working capital advances had been repaid by the Company to the Company’s President and controlling shareholder.
NOTE G - Income Taxes
The components of income tax (benefit) expense for the nine month periods ended May 31, 2005 and 2004 and for the period from August 2, 2002 (date of inception) through May 31, 2005, are as follows:
| Nine months ended May 31, 2005 | Nine months ended May 31, 2004 | Period from August 2, 2002 (date of incorporation) through May 31, 2005 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Federal: | $ | -- | $ | -- | $ | -- | |||||
| Current | -- | -- | -- | ||||||||
| Deferred | -- | -- | -- | ||||||||
| State: | -- | -- | -- | ||||||||
| Current | -- | -- | -- | ||||||||
| Deferred | -- | -- | -- | ||||||||
| Total | $ | -- | $ | -- | $ | -- | |||||
As of May 31, 2005, the Company has a net operating loss carryforward of approximately $45,670 to offset future taxable income. Subject to current regulations, this carryforward will begin to expire in 2023. The amount and availability of the net operating loss carryforwards may be subject to limitations set forth by the Internal Revenue Code. Factors such as the number of shares ultimately issued within a three year look-back period; whether there is a deemed more than 50 percent change in control among shareholders controlling 5.0% or more of the Company’s issued and outstanding common stock; the applicable long-term tax exempt bond rate; continuity of historical business; and subsequent income of the Company all enter into the annual computation of allowable annual utilization of the carryforwards.
9
SimplaGene USA, Inc.
(a development stage enterprise)
Notes to Financial Statements - Continued
NOTE G - Income Taxes - Continued
The Company's income tax expense (benefit) for each of the nine month periods ended May 31, 2005 and 2004 and for the period from August 2, 2002 (date of inception) through May 31, 2005, respectively, differed from the statutory rate of 34% as follows:
| Nine months ended May 31, 2005 | Nine months ended May 31, 2004 | Period from August 2, 2002 (date of incorporation) through May 31, 2005 | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Statutory rate applied to | |||||||||||
| income (loss) before income taxes | $ | (4,694 | ) | $ | (3,181 | ) | $ | (16,244 | ) | ||
| Increase (decrease) in income taxes | |||||||||||
| resulting from: | |||||||||||
| State income taxes | -- | -- | -- | ||||||||
| Difference between book method | |||||||||||
| and statutory recognition differences | |||||||||||
| on organization costs | (239 | ) | (239 | ) | 716 | ||||||
| Other, including reserve for deferred | |||||||||||
| tax asset and application of net | |||||||||||
| operating loss carryforward | 4,933 | 3,420 | 15,528 | ||||||||
| Income tax expense | $ | -- | $ | -- | $ | -- | |||||
Temporary differences, consisting primarily of statutory deferrals of expenses for organizational costs and statutory differences in the depreciable lives for property and equipment, between the financial statement carrying amounts and tax bases of assets and liabilities give rise to deferred tax assets and liabilities as of May 31, 2005 and 2004, respectively:
| May 31, 2005 | May 31, 2004 | |||||||
|---|---|---|---|---|---|---|---|---|
| Deferred tax assets | ||||||||
| Net operating loss carryforwards | $ | 15,500 | $ | 5,445 | ||||
| Less valuation allowance | (15,500 | ) | (5,445 | ) | ||||
| Net Deferred Tax Asset | $ | -- | $ | -- | ||||
During the nine months ended May 31, 2005 and 2004, respectively, the valuation allowance increased by approximately $4,930 and $3,420.
(Remainder of this page left blank intentionally)
10
SimplaGene USA, Inc.
(a development stage enterprise)
Notes to Financial Statements - Continued
NOTE H - Equity Transactions
On April 16, 2003, the Company completed the sale of an aggregate of 1,000,000 shares of its common stock for aggregate proceeds of approximately $100,000, in satisfaction of the offering requirement of its self-underwritten public offering of securities, pursuant to a Registration Statement Under The Securities Act of 1933on Form SB-2. Offering proceeds were released from escrow in April 2003 pursuant to the terms of the offering as detailed in the Company's prospectus dated January 9, 2003. On April 16, 2003, the Company closed its self-underwritten public offering of securities.
NOTE I - Commitments
On May 15, 2004, the Company entered into a Marketing Agreement with Ningbo Freetrade Zone Aipuweixi Trading Co., Ltd. (an unrelated party) (Ningbo Freetrade), located in Ningbo, Zhejiang Province, China whereby Ningbo Freetrade undertook to provide all marketing activities related to the Company’s HBV DNA data and data processing results in the United States of America and Canada.
This agreement was for an initial term of six (6) months and required an initial payment of $3,000 USD and monthly payments of $2,200 USD. Further, Ningbo Freetrade was entitled to receive a commission of 20% of the retail selling price of any products sold through Ningbo Freetrade’s efforts. The Company paid, through advances by the Company’s controlling shareholder, $11,800 and $4,400, respectfully, during Fiscal 2004 and 2005 in satisfaction of this contract. During the quarter ended May 31, 2005, the Company repaid these advances to the Company’s controlling shareholder, and the agreement was not renewed.
(Remainder of this page left blank intentionally)
11
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
Caution Regarding Forward-Looking Information
Certain statements contained in this annual filing, including, without limitation, statements containing the words “believes”, “anticipates”, “expects” and words of similar import, constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
Such factors include, among others, the following: international, national and local general economic and market conditions: demographic changes; the ability of the Company to sustain, manage or forecast its growth; the ability of the Company to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-QSB and investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.
Plan of Operation
SimplaGene USA was formed to market hepatitis B virus (HBV) genetic data gathered by Ningbo SimplaGene Institute, a Chinese research institute, to pharmaceutical firms and research organizations. Anticipated uses of this information include, analyzing mechanisms of viral infection, developing new pharmaceuticals, conducting standardized testing, and conducting other research. During the fiscal year ended August 31, 2004, we expanded our focus to include purified DNA data derived form human samples. Our business will not require us to engage in any product research or development activity. Our business is limited to developing and maintaining a sales capability for the data products we offer. We have not conducted any market studies or contacted any potential users to determine whether there is a market for our data products. It is management’s belief alone that there may be a market for this data that served as the basis for us embarking on this venture.
We have not engaged in any material operations or generated any revenues. Since the completion of our public offering of common stock, we have worked on developing and implementing marketing programs that have not proven successful. In May 2004, we entered into a six-month agreement with Ningbo Freetrade Zone Aipuweixi Trading Co., Ltd., located in Ningbo, Zhejiang Province, China to market our HBV data, as well as DNA processing. As compensation for its services, we paid Ningbo Freetrade an initial fee of $3,000 and $2,200 a month and agreed to pay a 20 percent commission on all product sold. The agreement expired in November 2004.
We cannot predict when the first product sale may occur, if at all, because we have been unable to obtain customers for our products at our planned pricing. These factors suggest that there may not be the demand for our products we expected, or that we have been unable to develop a workable marketing plan.
Under these circumstances, we are now re-evaluating our products and plan of operation to determine how to proceed with the limited resources remaining. We may determine that it is in the best interests of SimplaGene USA and its stockholders to abandon its current product offerings altogether and participate in other business ventures that we believe we can be successful with our limited resources. No decision to pursue any course of action other than marketing our products has been made at this time, and we can not predict whether we will continue on our present course our move in a different direction.
We expect our executive officers will continue to render services on a part-time basis. Our executive officers will provide such services without compensation in consideration of the benefits they expect to derive as
12
stockholders, and because SimplaGene USA will not have the capital to pay compensation unless it generates revenue from operations or obtains additional financing. Regardless of whether we are successful, we are required to file certain periodic reports with the Securities and Exchange Commission, and will retain the services of outside professionals, such as attorneys and accountants, to assist us with meeting this obligation. We estimate the cost of these outside services will be at least $10,000 over the next 12 months.
Selling, general and administrative expenses for the nine months ended May 31, 2005 and 2004 were approximately $13,805 and $9,357, respectively. We recognized net losses in the same amounts for both periods.
We currently maintain a mailing address at 11900 Wayzata Blvd., Suite 100, Hopkins, MN 55305, which is the address of Craig Laughlin, a Company Vice President, director, and stockholder. Other than this mailing address, the Company does not currently maintain any other office facilities, and does not anticipate the need for maintaining office facilities at any time in the foreseeable future. The Company pays no rent or other fees for the use of the mailing address as these offices are used virtually full-time by other businesses and ventures of Mr. Laughlin.
At May 31, 2005, we had approximately $49,600 in cash and cash equivalents and our working capital was $49,600. During Fiscal 2005 and 2004, the Company was advanced an aggregate of approximately $16,200 by its President and controlling shareholder, Xinbo Wang, for the purpose of funding a marketing agreement and to provide working capital. These advances were non-interest bearing and were repayable upon demand. During the quarter ended May 31, 2005, the Company repaid these advances in full.
To date, we have experienced negative cash flows from operating activities and we expect this trend to continue into the foreseeable future. We will not generate revenue from operations unless we can establish meaningful operations, which we have been unable to do over the past two years. We believe the working capital we have will be adequate to fund our capital requirements for the next twelve months. If we are not successful in generating revenues within that period to sustain our operations, we may need to obtain additional debt or equity financing to remain in operation. We have not presently identified any sources of additional financing should that become necessary, so we cannot predict whether additional financing will be available on terms we find acceptable. If additional financing is needed and cannot be obtained, we would likely be forced to curtail or terminate our operations. These factors raise substantial uncertainty about our ability to establish SimplaGene USA as a going concern in the future.
Item 3 - Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, on May 31, 2005, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer. Based upon that evaluation, the Company’s Chief Executive Officer along with the Company’s Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective. There have been no significant changes in the Company’s internal controls or in other factors, which could significantly affect internal controls subsequent to the date the Company carried out its evaluation.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in Company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in Company reports filed under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.
13
PART II
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults on Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
The Company has held no regularly scheduled, called or special meetings of shareholders during the reporting period.
Item 5 - Other Information
None
Item 6 - Exhibits
Exhibits
31.1 | Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002 - Chief Executive Officer |
31.2. | Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002 - Chief Financial Officer |
32.1 | Certifications pursuant to Section 906 of 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.
| SimplaGene USA, Inc. |
| Dated: | June 28, 2005 | By: | /s/ Xinbo Wang | |
| Xinbo Wang President, Chief Executive Officer and Director |
| Dated: | June 28, 2005 | By: | /s/ Craig S. Laughlin | |
| Craig S. Laughlin Vice President and Principal Financial and Accounting Officer |
14
