UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter endedJanuary 31, 2007
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission File Number 333-122870
AEGIS INDUSTRIES, INC.
(formerly Major Creations Incorporated)
(Exact name of registrant as specified in its charter)
| NEVADA | 98-0420577 |
| State or other jurisdiction of | (I.R.S. Employer |
| incorporation or organization | Identification No.) |
75200 Shady Grove Road, Suite 202, Rockville, MD 20850
(Address of principal executive offices) (Zip Code)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
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 [ ]
Number of shares outstanding of Registrant's class of common stock as of March 14, 2007: 91,800,000
Authorized share capital of the registrant: 200,000,000 common shares, par value of $0.001
The Company recorded $0 revenue for the quarter ended January 31, 2007
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FORWARD-LOOKING STATEMENTS
This Report on Form 10QB contains forward-looking statements, in particular in our Plan of Operations, that relate to our current expectations and views of future events. These statements relate to events that involve known and unknown risks, uncertainties and other factors, including those listed under “Risk Factors,” which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements.
In some cases, these forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan or planned” “believe,” “potential,” “continue,” “is/are likely to”, “hope” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.
YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD LOOKING STATEMENTS
The forward-looking statements made in this Report on Form 10QSB relate only to events or information as of the date on which the statements are made in this Report on Form 10QSB. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this Report and the documents that we reference in this report, including documents referenced by incorporation, completely and with the understanding that our actual future results may be materially different from what we expect or hope.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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Aegis Industries, Inc.
(A Development Stage Company)
Interim Financial Statements
January 31, 2007
(Stated in US Dollars)
(Unaudited)
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Aegis Industries, Inc.
(A Development Stage Company)
Interim Balance Sheets
January 31, 2007 and October 31, 2006
(Stated in US Dollars)
(Unaudited)
| January 31, 2007 | October 31, 2006 | |||||
| ASSETS | ||||||
| Current | ||||||
| Cash | $ | 19,191 | $ | - | ||
| Prepaid expenses | 28,990 | - | ||||
| Notes receivable (note 3) | 545,365 | - | ||||
| 593,546 | - | |||||
| Inventory | 23,598 | 23,598 | ||||
| Equipment,net | 10,515 | 11,279 | ||||
| Web site development,net | - | 1,500 | ||||
| $ | 627,659 | $ | 36,377 | |||
| LIABILITIES | ||||||
| Current | ||||||
| Accounts payable and accrued liabilities | $ | 60,500 | $ | 25,444 | ||
| Loans payable (note 4) | 678,975 | 19,723 | ||||
| 739,475 | 45,167 | |||||
| STOCKHOLDERS' EQUITY | ||||||
| Capital stock (note 5) | ||||||
| Common $0.001 par value | ||||||
| 200,000,000 shares authorized; | ||||||
| 91,800,000 shares issued and outstanding | 2,550 | 2,550 | ||||
| Additional paid in capital | 115,950 | 115,950 | ||||
| Deficit accumulated during development stage | (230,316 | ) | (127,290 | ) | ||
| (111,816 | ) | (8,790 | ) | |||
| $ | 627,659 | $ | 36,377 |
The accompanying notes are an integral part of these financial statements.
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Aegis Industries, Inc.
(A Development Stage Company)
Interim Statements of Operations
For the three months ended January 31, 2007 and 2006
and for the period from February 5, 2004 [Date of Inception]
to January 31, 2007
(Stated in US Dollars)
(Unaudited)
| Cumulative from | |||||||||
| For the three months ended | February 5, 2004 | ||||||||
| January 31, | (Date of Inception) | ||||||||
| 2007 | 2006 | to January 31, 2007 | |||||||
| Expenses | |||||||||
| Amortization | $ | 764 | $ | - | $ | 2,923 | |||
| Consulting fees | - | - | 4,341 | ||||||
| Interest expense | 8,852 | - | 8,974 | ||||||
| Management fees | 8,480 | - | 8,480 | ||||||
| Marketing and promotion | 43,320 | 7,337 | 64,925 | ||||||
| Office and administrative | 7,878 | 4,167 | 22,527 | ||||||
| Organizational costs | - | - | 1,189 | ||||||
| Professional fees | 32,314 | 2,742 | 109,950 | ||||||
| Write-down of inventory | - | - | 5,589 | ||||||
| Write-off of website development | 1,500 | - | 1,500 | ||||||
| Loss | (103,108 | ) | (14,246 | ) | (230,398 | ) | |||
| Interest income | 82 | - | 82 | ||||||
| Net loss | $ | (103,026 | ) | $ | (14,246 | ) | $ | (230,316 | ) |
| Net loss per share - basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | |||
| Weighted Average Shares Outstanding | 91,800,000 | 151,258,680 | |||||||
The accompanying notes are an integral part of these financial statements.
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Aegis Industries,Inc.
(ADevelopment StageCompany)
InterimStatements ofStockholders' Equity(Deficit)
For the period fromFebruary 5, 2004 [Date ofInception]
toJanuary 31, 2007
(Stated in USDollars)
(Unaudited)
| Accumulated Deficit | |||||||||||||||
| Common Stock | Additional Paid-in | during Development | Total Stockholders' | ||||||||||||
| Shares | Amount | Capital | Stage | Equity (Deficit) | |||||||||||
| Balance, at inception | - | $ | - | $ | - | $ | - | $ | - | ||||||
| Stock issued for cash at $0.000027778 | 72,000,000 | 2,000 | - | - | 2,000 | ||||||||||
| Stock issued for cash at $0.000277778 | 77,400,000 | 2,150 | 19,350 | - | 21,500 | ||||||||||
| Net loss for the period | - | - | - | (7,025 | ) | (7,025 | ) | ||||||||
| Balance, October 31,2004 | 149,400,000 | 4,150 | 19,350 | (7,025 | ) | 16,475 | |||||||||
| Net loss for the year | - | - | - | (15,064 | ) | (15,064 | ) | ||||||||
| Balance, October 31,2005 | 149,400,000 | 4,150 | 19,350 | (22,089 | ) | 1,411 | |||||||||
| Stock issued for cash at $0.002777778 | 34,200,000 | 950 | 94,050 | - | 95,000 | ||||||||||
| Stock returned to treasury | (91,800,000 | ) | (2,550 | ) | 2,550 | - | - | ||||||||
| Net loss for the year | - | - | - | (105,201 | ) | (105,201 | ) | ||||||||
| Balance, October 31,2006 | 91,800,000 | 2,550 | 115,950 | (127,290 | ) | (8,790 | ) | ||||||||
| Net loss for the period | (103,026 | ) | (103,026 | ) | |||||||||||
| Balance, January 31,2007 | 91,800,000 | $ | 2,550 | $ | 115,950 | $ | (230,316 | ) | $ | (111,816 | ) | ||||
The accompanying notes are an integral part of these financial statements.
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Aegis Industries, Inc.
(A Development Stage Company)
Interim Statements of Cash Flows
For the three months ended January 31, 2007 and 2006
and for the period from February 5, 2004 [Date of Inception]
to January 31, 2007
(Stated in US Dollars)
(Unaudited)
| Cumulative from | |||||||||
| For the three months ended | February 5, 2004 | ||||||||
| January 31, | (Date of Inception) to | ||||||||
| 2007 | 2006 | January 31, 2007 | |||||||
| Cash Flows from (used in) | |||||||||
| Operating Activities | |||||||||
| Net loss for the year | $ | (103,026 | ) | $ | (14,246 | ) | $ | (230,316 | ) |
| Items not affecting cash: | |||||||||
| - amortization | 764 | - | 2,923 | ||||||
| - interest accruals | 8,770 | - | 8,893 | ||||||
| - write-down of inventory | - | - | 5,589 | ||||||
| - write-off of website development | 1,500 | - | 1,500 | ||||||
| Change in non-cash working capital balance | |||||||||
| related to operations: | - | ||||||||
| - prepaid expenses | (28,990 | ) | - | (28,990 | ) | ||||
| - accounts payable and accrued | |||||||||
| liabilities | 35,056 | 120 | 60,500 | ||||||
| Cash Flows - Operating Activities | (85,926 | ) | (14,126 | ) | (179,901 | ) | |||
| Cash flows used in | |||||||||
| Investing Activities | |||||||||
| Acquisition of equipment | - | - | (12,938 | ) | |||||
| Web site development | - | - | (2,000 | ) | |||||
| Notes receivable | (545,282 | ) | - | (545,282 | ) | ||||
| Acquisition of inventory | - | - | (29,187 | ) | |||||
| Cash Flows - Investing Activities | (545,282 | ) | - | (589,407 | ) | ||||
| Cash flows from Financing Activities | |||||||||
| Proceeds from loan payable | 650,400 | - | 670,000 | ||||||
| Proceeds from issue of common stock | - | 95,000 | 118,500 | ||||||
| Cash Flows - Financing Activities | 650,400 | 95,000 | 788,500 | ||||||
| Net Increase in Cash | 19,192 | 80,874 | 19,192 | ||||||
| Cash, Beginning of Period | - | 5,811 | - | ||||||
| Cash, End of Period | $ | 19,192 | $ | 86,685 | $ | 19,192 | |||
The accompanying notes are an integral part of these financial statements.
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Aegis Industries, Inc.
(A Development Stage Company)
Notes to the Interim Financial Statements
January 31, 2007 and October 31, 2006
(Stated in US Dollars)
(Unaudited)
1. Interim Reporting
The accompanying unaudited interim financial statements have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these financial statements have been included. Such adjustments consist of normal recurring adjustments. These interim financial statements should be read in conjunction with the Company’s October 31, 2006, audited financial statements.
The results of operations for the three months ended January 31, 2007, are not indicative of the results that may be expected for the full year.
2. Nature and Continuance of Operations
Aegis Industries, Inc. (the “Company”) was incorporated in the State of Nevada, United States of America, on February 5, 2004 under the name Major Creations Incorporated. On December 5, 2006, the Company changed its name to Aegis Industries, Inc. The Company is listed on the Over-the-Counter Bulletin Board.
The Company has had limited operations as a retailer of vintage style compact diesel tractors. The Company intends to engage in the business of designing, developing and manufacturing intermediate force options for military, law enforcement and security forces. To facilitate this change in business, on November 30, 2006, and as amended on January 25, 2007, the Company signed a letter of intent whereby it would acquire substantially all the assets of Aegis Industries, Inc. (“AI Inc.”) for the issuance of 15,000,000 shares of common stock (see note 7).
These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next twelve months. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At January 31, 2007, the Company had not yet achieved profitable operations, has accumulated losses of $230,316 since its inception, has a working capital deficiency of $145,929 and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances, however there is no assurance of additional funding being available.
3. Notes Receivable
| a. | On December 1, 2006, the Company loaned $295,283 to AI Inc. The loan is unsecured, and is due on demand. Subsequent to demand for payment, principal and interest in arrears will bear interest at 10% per annum, calculated annually; | |
| b. | On January 31, 2007, the Company loaned $250,000 to AI Inc., accruing interest at 12% per annum, calculated annually. The loan is unsecured, and is due on demand. Subsequent to demand for payment, principal and interest in arrears will bear interest at 30% per annum, calculated annually. Accrued interest of $82 is included in notes receivable at January 31, 2007. |
4. Loans Payable
| a. | On October 12, 2006, the Company received loan proceeds of $19,600, accruing interest at 12% per annum. On January 15, 2007, the principal amount of the loan was repaid. Accrued interest of $619 (October 31, 2006 - $123) has not yet been paid and is included in loans payable at January 31, 2007; |
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| b. | On November 15, 2006, the Company received loan proceeds of $5,000. The amount is unsecured and is due on demand but demand cannot be made earlier than May 15, 2007. The principal amount bears interest at 12% per annum calculated monthly. Any payments of principal or interest in arrears bear interest at 12% per annum calculated annually. Default in payment shall, at the option of the holder, render the entire balance payable. Accrued interest of $128 is included in loans payable at January 31, 2007; | |
| c. | On November 28, 2006, the Company received loan proceeds of $315,000. The amount is unsecured and is due on demand but demand cannot be made earlier than May 28, 2007. The principal amount bears interest at 12% per annum calculated monthly. Any payments of principle or interest in arrears bear interest at 12% per annum calculated annually. Default in payment shall, at the option of the holder, render the entire balance payable. Accrued interest of $6,732 is included in loans payable at January 31, 2007; | |
| d. | On December 20, 2006, the Company received loan proceeds of $100,000. The amount is unsecured and is due on demand. The principal amount bears interest at 12% per annum calculated monthly. Any payments of principle or interest in arrears bear interest at 30% per annum calculated annually. Default in payment shall, at the option of the holder, render the entire balance payable. Accrued interest of $1,414 is included in loans payable at January 31, 2007; | |
| e. | On January 31, 2007, the Company received loan proceeds of $250,000. The amount is unsecured and is due on demand. The principal amount bears interest at 12% per annum calculated monthly. Any payments of principle or interest in arrears bear interest at 30% per annum calculated annually. Default in payment shall, at the option of the holder, render the entire balance payable. Accrued interest of $82 is included in loans payable at January 31, 2007. |
5. Capital Stock
Effective September 9, 2006, the Company forward split its issued common shares on the basis of thirty-six new shares for one old share. The number of shares referred to in these financial statements has been restated to give retrospective effect on the forward stock split. The retrospective restatement of the issued common shares is required by the Securities and Exchange Commission’s Staff Accounting Bulletin, Topic 4(c). The number of common shares outstanding pre-forward stock split was 2,550,000, and after giving effect to the forward split, the outstanding common shares totaled 91,800,000.
In September 2006, the Company authorized the increase of its authorized capital stock from 75,000,000 common shares with a par value of $0.001 to 200,000,000 common shares with a par value of $0.001.
6. Related Party Transactions
During the three months ended January 31, 2007, the Company paid management fees totaling $8,480 (2006 : $Nil) to a company controlled by a director and officer of the Company.
7. Commitments
| a. | On November 21, 2006, the Company entered into a one year contract for marketing and communications consulting services, for a monthly fee of $5,000. This commitment can be terminated by either party with 30 days’ written notice; | ||
| b. | Effective November 16, 2006, the Company signed a letter of intent (the “Letter”) whereby in consideration for the issuance of 15,000,000 shares of common stock, the Company will acquire 100% of the issued and outstanding shares of common stock outstanding of Aegis Industries, Inc., a Delaware company (“AI Inc.”); | ||
Working together with the AI Inc., the Company will secure $11,000,000 in financing as follows: | |||
| (i) | $2,000,000 on or before February 28, 2007 (extended to April 30, 2007); | ||
| (ii) | an additional $2,000,000 on or before May 31, 2007; | ||
| (iii) | an additional $2,000,000 on or before August 30, 2007; and | ||
| (iv) | an additional $5,000,000 on or before April 30, 2008. | ||
By amending agreement dated January 25, 2007and March 8, 2007, a definitive agreement will be entered into on or before April 30, 2007. The definitive agreement will provide for the payment of 600,000 shares of the Company’s common stock as a finder’s fee. | |||
The acquisition of AI Inc. will constitute a change in business to the design, development and manufacture of intermediate force options for military, law enforcement and security forces. | |||
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During the three months ended January 31, 2007, AI Inc. paid expenses on behalf of the Company, totaling $37,785. This amount is included in accounts payable and accrued liabilities on the balance sheet at January 31, 2007; | ||
| c. | On December 1, 2006, the Company entered into a contract for investor relations services requiring the payment of $10,000 per month expiring on November 30, 2008. This commitment can be terminated by either party with 30 days’ written notice; | |
| d. | On December 1, 2006, the Company entered into a contract for management services with a company controlled by a director and officer of the Company requiring the payment of $4,000 per month for a period of two years expiring on November 30, 2008. This commitment can be terminated by either party with 30 days’ notice; | |
| e. | On January 5th, 2007, the Company entered into an office lease at $2,350 per month expiring June 30, 2007. Occupancy beyond the expiry date will be on a month to month basis subject to a sixty day notice of termination by either party. |
8. Comparative Figures
Certain of the prior period’s comparative figures for the three months ended January 31, 2006 and for the period February 5, 2004 (Date of Inception) to January 31, 2007 have been reclassified to conform with the presentation used in the current period.
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Item 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
We have not generated any revenues from products, services or operations since the inception of our company. The foregoing analysis should be read jointly with the financial statements, related notes, and the cautionary statement regarding forward-looking statements, which appear elsewhere in this filing.
The following Risk Factors summarize some of the risks inherent in our business and to our company in particular:
RISKS RELATED TO OUR BUSINESS
Investors should carefully consider the risks described below before deciding whether to invest in our common stock. The risks described below are not the only ones we face. Additional risks not presently known to us or that we currently believe are immaterial may also impair our business operations and financial results. If any of the following risks actually occurs, our business, financial condition or results of operations could be adversely affected. In such case, the trading price of our common stock could decline and you could lose all or part of your investment. Our filings with the Securities and Exchange Commission also contain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks we face described below. See "Forward-Looking Statements."
Our limited operating history may not serve as an adequate basis to judge our future prospects and results of operations.
We have a limited operating history. As such, our historical operating results may not provide a meaningful basis for evaluating our business, financial performance and prospects. We may not be able to achieve a similar growth rate in future periods. Accordingly, you should not rely on our results of operations for any prior periods as an indication of our future performance.
We have incurred losses in prior periods and may incur losses in the future.
We incurred a net loss in all prior financial periods and we have not yet completed a financial year in our contemplated new business. We expect our operating expenses to increase as we start our new operations. Our ability to achieve profitability depends on our ability to penetrate the intermediate forces products and services industry, the continued market acceptance of our products and services, the competitiveness of products and services as well as our ability to provide new products and services to meet the demands of our customers.
Our business depends substantially on the continuing efforts of our executive officers and our ability to maintain a skilled labor force, and our business may be severely disrupted if we lose their services.
Our future success depends substantially on the continued services of our executive officer, especially Paul Evancoe, our President and chief executive officer, and Mr. David M. Kirby, our director and finally, our CFO and third director, Mr. Dennis Mee. We do not maintain key man life insurance on our executive officers. If our executive officers are unable or unwilling to continue in their present positions, we may not be able to replace them readily, if at all. Therefore, our business may be severely disrupted, and we may incur additional expenses to recruit and retain new officers. Our executive officer has entered into an employment agreement with AI Inc., which contains confidentiality and non-competition provisions. However, we cannot assure you the extent to which any of these agreements could be enforced.
Inability of Our Officers and Directors to Devote Sufficient Time to the Operation of the Business May Limit Our Success.
Presently, the officers and directors of the Company allocate only a portion of their time to the operation of our business. If the business requires more time for operations than anticipated or the business develops faster than anticipated, the officers and directors may not be able to devote sufficient time to the operation of the business to ensure that it continues as a going concern. Even if this lack of sufficient time of our management is not fatal to our existence, it may result in limited growth and success of the business.
If we are unable to attract, train and retain technical personnel, our business may be materially and adversely affected.
Our future success depends, to a significant extent, on our ability to attract, train and retain technical personnel. Recruiting and retaining capable personnel, particularly those with expertise in the intermediate forces industry, are vital to our success. There is substantial competition for qualified technical personnel, and there can be no assurance that we will be able to attract or retain our technical personnel. If we are unable to attract and retain qualified employees, our business may be materially and adversely affected.
If we grant employee share options and other share-based compensation in the future, our net income could be adversely affected.
The Company may grant share purchase options to employees in the future although it does not have a share based compensation plan in place as of today. If the Company does this, it will account for options granted to our directors and employees in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” or APB 25, and its related interpretations, and according FASB Statement No. 123 (Revised 2004), “Share-Based Payments,” or SFAS 123R, which requires all companies to recognize, as an expense, the fair value of share options and other share-based compensation to employees. As a result, if we were to grant options to directors and employees, we would have to account for compensation costs for all share options using a fair-value based method and recognize expenses in our statement of operations in accordance with the relevant rules under U.S. GAAP, which may have a material and adverse effect on our reported earnings. If we try to avoid incurring these compensation costs, we may not be able to attract and retain key personnel, as share options are an important employee recruitment and retention tool. If we grant employee share options or other share-based compensation in the future, our net income could be adversely affected.
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We are subject to new corporate governance and internal control reporting requirements, and our costs related to compliance with, or our failure to comply with existing and future requirements, could adversely affect our business.
We may face new corporate governance requirements under the Sarbanes-Oxley Act of 2002, as well as new rules and regulations subsequently adopted by the SEC and the Public Company Accounting Oversight Board. These laws, rules and regulations continue to evolve and may become increasingly stringent in the future. In particular, under rules proposed by the SEC on August 6, 2006 we will be required to include management's report on internal controls as part of our annual report for the fiscal year ending September 30, 2008 pursuant to Section 404 of the Sarbanes-Oxley Act. Furthermore, under the proposed rules, an attestation report on our internal controls from our independent registered public accounting firm will be required as part of our annual report for the fiscal year ending September 30, 2009. We are in the process of evaluating our control structure to help ensure that we will be able to comply with Section 404 of the Sarbanes-Oxley Act. The financial cost of compliance with these laws, rules and regulations is expected to be substantial. We cannot assure you that we will be able to fully comply with these laws, rules and regulations that address corporate governance, internal control reporting and similar matters. Failure to comply with these laws, rules and regulations could materially adversely affect our reputation, financial condition and the value of our securities.
Shell company
We are a shell company, have no operations and do not generate revenue. We have entered into the LOT with AI Inc. to enter into a business combination. If that transaction is not consummated, we will pursue another acquisition of an operating company. There can be no assurance that the business combination with AI Inc. will be consummated or that we will be able to acquire an operating company or business. Further, if we are able to acquire an operating company or business, there is no assurance that we will be able to operate profitably. Although there arc many companies that are looking to become public through a reverse acquisition / shell merger, there is competition for attractive acquisition candidates and there can be no assurance that we will be able to find a suitable acquisition.
The original shareholders and other shareholders acquired shares at extremely low prices.
Our original shareholders acquired shares at $0.001 and $ 0.01 per share, and we have other shareholders who have acquired shares under the prospectus, filed on November 14, 2005, who paid $0.1 per share. The closing price of our common stock was trading at the market close on January 26, 2007 was $0.85. The original shareholders could liquidate their shares at prices substantially below the price paid by the later shareholders and still realize a substantial profit. The shareholders who purchased their shares for $0.1 could liquidate their shares at prices substantially below the price paid by shareholders in the private placement and still realize a substantial profit.
Risks Relating to an Investment in our Securities
Our Independent Auditors’ Report States that there is a Substantial Doubt that we will be able to Continue as a Going Concern.
Our independent auditors, Amisano Hanson, Chartered Accountants, state in their audit report, dated January 18, 2007, except as to Note 10(iv) which is as of January 25, 2007, that since we are a development stage company, have no established source of revenue and are dependent on our ability to raise capital from shareholders or other sources to sustain operations, there is a substantial doubt that we will be able to continue as a going concern.
GENERAL
Aegis Industries, Inc. (formerly Major Creations Incorporated ) (“Aegis” or the “Company”) was incorporated under the laws of the state of Nevada on February 5, 2004, and was engaged in the business of selling new, small diesel tractors which were modified to have a vintage styled appearance. With the appointment of new directors and officers of the Company in November 2006, the Company no longer intends to pursue this business. The Company has entered into a non-binding Letter of Intent (“Letter”) with Aegis Industries, Inc., a Delaware corporation (“AI Inc.”), a company in the business of designing, developing and manufacturing intermediate force options for military, law enforcement and security forces, to acquire all of the issued and outstanding shares of AI Inc. The shareholders of AI Inc. are not signatories to the Letter and, as a result, it is not binding upon them.
The Letter contemplates the Company performing a number of due diligence procedures on the business and affairs of AI Inc., including review of its financial statements. AI Inc. does not at this time have significant revenues. By amending agreement dated January 25, 2007 and March 8, 2007, the Letter further contemplates that the Company and the shareholders of AI Inc. enter into a definitive agreement on or before April 30, 2007 on similar terms and conditions as outlined in the Letter.
The Letter calls for the issuance of up to 15,000,000 common shares of the Company in exchange for the purchase of all of the issued and outstanding shares of AI Inc. The intent is that the shareholders of AI Inc. should hold, after closing, that number of common shares of the Company which is equal to approximately 25% of the issued and outstanding shares of the Company.
The Letter, as amended, provides that the definitive agreement shall state that closing is to occur on or before April 30, 2007. It is the intention, as stated in the Letter as amended, that the Company should raise funds totaling $11,000,000 as follows: $2,000,000 on or before April 30, 2007; $2,000,000 on or before May 31, 2007; $2,000,000 on or before August 30, 2007; and an additional $5,000,000 on or before April 30, 2008.
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As of the date of this Report, the Company does not have these funds available to it at this time and cannot say that these funds will be made available to it. Any attempt to raise these funds, through debt or equity financing, would likely result in dilution to existing shareholders and / or the granting of security on the assets of the Company, if any.
Pursuant to the Letter, as amended, the Company has loaned $545,283 to AI Inc.
There can be no assurance given that the Company will proceed with any proposed acquisition of AI Inc. or that a definitive agreement will be entered into by the Registrant and the shareholders of AI Inc. There can be no assurance given that any terms and conditions on closing of the acquisition of AI Inc. will be met including the condition that AI Inc.’s financial history must be auditable according to US GAAP standards so that audited, pro forma financial statements can be filed upon closing of any proposed acquisition.
As of the date of this Report, the Company has no business operations at present and no working capital.
The Company’s future operations are dependent upon the identification and successful completion of additional long-term or permanent equity financing, the support of creditors and shareholders, and, ultimately, the achievement of profitable operations. There can be no assurances that the Company will be successful. We will continue to evaluate possible business projects and our projected expenditures thereon relative to our available cash and to seek additional means of financing in order to satisfy our working capital and other cash requirements.
Principal Products and Services
If the Company enters into a definitive agreement with AI Inc. and is successful in closing an acquisition of AI Inc. the Company’s business will focus on developing intermediate-force devices and unique training programs that are effective with acceptable Human Effects. Non-Lethal devices are of great interest to the military and civilian sectors and are used increasingly around the world in peacekeeping missions. The philosophy is to innovate beyond current market products by designing devices that can be used intelligently to facilitate the transfer throughout the force continuum and are full dimensional in scope, ranging from a warning to full engagement and final threat resolution. Key to the Aegis approach is simplicity, multi-functionality and compatibility with other NLW including features for increased stand-off and effective crowd control.
RESULTS OF OPERATIONS
The following discussion of the plan of operation, financial condition, results of operations, cash flows and changes in financial position of our Company should be read in conjunction with our audited financial statements and notes filed on Form 10-KSB on January 29, 2007.
Limited Operating History
There is limited historical financial information about our company upon which to base an evaluation of our future performance. Our company does not currently have a business and, accordingly, has yet to generate revenues from operations. We cannot guarantee that we will be successful in our business. We are subject to risks inherent in a fast growing company, including limited capital resources, possible delays in product development and manufacturing, and possible cost overruns due to price and cost increases. There is no assurance that future financing will be available to our company on acceptable terms. Additional equity financing could result in dilution to existing shareholders.
In November of 2006, the Company undertook to change its focus from providing customers with vintage style tractors to the business of designing, developing and manufacturing intermediate force options for military, law enforcement and security forces.
In keeping with its intention to develop a business in the intermediate force, the Company:
| 1. | Retained new officers and directors; | |
| 2. | Entered into a Letter of intent with Aegis Industries, Inc. (AI Inc.); | |
| 3. | Increased its authorized capital; | |
| 4. | changed its name to Aegis Industries, Inc.; and | |
| 5. | Initiated due diligence of the business operations of AI Inc.; |
We have financed our operations since inception primarily through private sales of securities. As of January 31, 2007 we had $19,191 in cash, and a working capital deficiency of $145,929.
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Three-month period ended January 31, 2007
The following table sets forth our statements of operations for the quarter ended January 31, 2007.
| Expenses | |||
| Corporate development, marketing and promotion | $ | 43,320 | |
| Professional fees | 32,314 | ||
| Management fees | 8,480 | ||
| Interest expense | 8,852 | ||
| Other, general and administrative | 10,142 | ||
| Loss before other items | (103,108 | ) | |
| Interest income | 82 | ||
| Net loss | $ | (103,026 | ) |
As discussed above, in 2005, we had no business, and in 2006, our business focus began to change to designing, developing and manufacturing intermediate force options for military, law enforcement and security forces, from the sale of vintage styled tractors, with the Company entering into the non-binding Letter with AI Inc. as described above. Due to the significant changes in our operations, we believe that a comparison of results of operations for the first quarter of the years ended October 31, 2007 and 2006 should not be relied on as an indication of future performance. Factors that may cause our results of operations to fluctuate include those discussed in the “Risk Factors.”
Revenues
For the quarter ended January 31, 2007, we had no revenues from operations, and interest income of $82.
Expenses and general and administrative expenses
During the fiscal quarter ended January 31, 2007, the Company incurred total expenses of $103,108. These expenses were related mainly to costs associated with the contemplated change in business and activities associated with the maintenance of a public listing, such as communication shareholders, legal and accounting fees, and corporate development and promotion. The anticipated expenditures for the Company are described elsewhere. Readers should not assume that expenses or other cash flows in this period are indicative of future periods as the Company is in the development stage.
Discontinued Operations
Due to the contemplate significant changes in business, we anticipate that part of our results of operations for the year ended October 31, 2006 and all the results for the period form Inception to October 31, 2005, will be as reclassified as results from discontinued operations to conform to this new business and presentation.
Liquidity and Capital Resources
As of January 31, 2007, we had cash and cash equivalents of $19,191 and working capital deficiency of $145,929. Since inception, we funded our operations from private sales of equity and short term borrowings. We believe our current strategies will provide sufficient working capital to fund our operations for at least the next 12 months assuming we enter into a definitive agreement with AI Inc. Changes in our operating plans , increased expenses, additional acquisitions, or other events, may cause us to seek additional equity or debt financing in the future.
For the quarter ended January 31, 2007, we used $85,925 of cash in operations. Net cash used by operating activities reflected $28,990 in prepaid expenses, $764 in amortization, an increase in accounts payable of $35,057 and increase in accrued interest of $8,770. Investment activities used $545,283 of cash during the period, which consisted of loans to AI Inc.
Financing activities provided $650,400 of cash during the period from demand loans.
Our current cash requirements are significant due to our change in business, including the acquisition of AI Inc., start up and other operational expenses. During the third quarter of our fiscal year 2007, we expect to need significant cash as we begin to ramp up the operations. We will need money to build inventory, build working capital and to fund operations. Accordingly, we expect to continue
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to use cash for at least fiscal 2007 as we commence our new business operations (See “Plan of Operations” below).
In the past, we paid cash for our inventory purchases. With this new business, we plan on negotiating credit terms with our vendors. We also paid cash for our equipment purchases. In the future, we plan to finance some of our equipment purchases by short term bank borrowings and by establishing a working capital line of credit.
Recent Financings
Notes payable
On October 12, 2006, a loan payable in the amount of $19,600, bearing interest at 12% per annum, was received. Principal and accrued interest due in 90 days. On January 15, 2007, the principal amount of the loan was repaid. As at January 31, 2007 $619 in accrued interest was due in relation to this note.
On November 15, 2006, the Company received loan proceeds of $5,000. The amount is unsecured and is due on demand but demand cannot be made earlier than May 15, 2007. The principal amount bears interest at 12% per annum calculated monthly. Any payments of principal or interest in arrears bear interest at 12% per annum calculated annually. Default in payment shall, at the option of the holder, render the entire balance payable. Accrued interest of $128 is included in loans payable at January 31, 2007.
On November 28, 2006, the Company received loan proceeds of $315,000. The amount unsecured and is due on demand but demand cannot be made earlier than May 29, 2007. The principal amount bears interest at 12% per annum calculated monthly. Accrued interest of $6,732 is included in loans payable at January 31, 2007.
On December 20, 2006, the Company received loan proceeds of $100,000. The amount is unsecured and is due on demand. The principal amount bears interest at 12% per annum calculated monthly. Accrued interest of $1,414 is included in loans payable at January 31, 2007.
On January 31, 2007, the Company received loan proceeds of $250,000. The amount is unsecured and is due on demand. The principal amount bears interest at 12% per annum calculated monthly. Accrued interest of $82 is included in loans payable at January 31, 2007.
Critical Accounting Policies
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management of our company to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
Our management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. As the number of variables and assumptions affecting the probable future resolution of the uncertainties increase, these judgments become even more subjective and complex. Our significant accounting policies are discussed in Note 2 to our financial statements for the fiscal year ended October 31, 2006 files on Form 10KJSB on January 29, 2007 and in Note 2 of our financial statements for the quarter ended January 31, 2007 included in this Report. We have identified the following accounting policy, described below, as the most important to an understanding of our current financial condition and results of operations.
Development stage company
As defined by SFAS No. 7, Financial Statements, the Company has been in the development stage since its formation on February 5, 2004, and has not yet realized any revenues from its planned operations. The Company is devoting substantially all of its present efforts towards the change of business as described elsewhere in this Report.
Plan of Operations
Our future operations are dependent upon the identification and successful completion of additional long-term or permanent equity financing, the support of creditors and shareholders, and, ultimately, the achievement of profitable operations. There can be no assurances that we will be successful, which would in turn significantly affect our ability to roll out our business plan. If not, we will likely be required to reduce operations or liquidate assets. We will continue to evaluate our projected expenditures relative to our available cash and to seek additional means of financing in order to satisfy our working capital and other cash requirements.
We continue to operate with very limited administrative support, and our current officers and directors continue to be responsible for many duties.
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Projected Expenditures Over The Next 12 Months
The following chart provides an overview of our budgeted expenditures by major area of activity, for the next 12 months from the date of this Report, assuming the closing of the acquisition of AI Inc.:
| (a) | Personnel costs in the United States: | $ | 100,000 | ||
| (b) | Product research & development: | $ | 360,000 | ||
| (c) | Medical research & development | $ | 2,700,000 | ||
| (d) | US Army research & development | $ | 100,000 | ||
| (e) | Administration, sales and marketing office: | $ | 160,000 | ||
| (f) | General and administrative expenses: | $ | 110,000 | ||
| (g) | Professional fees and expenses, regulatory expenses: | $ | 155,000 | ||
| (h) | Shareholder communications: | $ | 85,000 | ||
| (i) | Travel, Miscellaneous, Unallocated | $ | 95,000 | ||
| Total: | $ | 3,865,000 |
As of the date of this report, we have $19,191 in cash. The amounts noted above reflect our current cash resources and assume that we will raise, through equity or convertible debt, approximately $4,000,000 over the next 12 months. There can be no assurance that the Company will be successful in raising these additional funds and, if the Company is unsuccessful in raising these additional funds, its plans for expanding operations and business activities may have to be curtailed.
Other than as detailed above, we do not anticipate making any major purchases of capital assets in the next 6 months, or conducting any large-scale research and development. Any development of research and development functions would be dependent upon securing additional equity or other financing to add to our working capital. The Company plans to hire personal for development and product development research but that is the extent of its planned research and development activities. Under US GAAP, these activities may possibly not be classified as research and development but may be classified as expenses given that the costs are associated with paying salaries to the two individuals.
We believe we have sufficient cash resources to satisfy our needs over the next twelve months. Our ability to satisfy cash requirements thereafter will determine whether we achieve our business objectives, including but not limited to completion of our manufacturing facilities and production lines. Should we require additional cash in the future, there can be no assurance that we will be successful in raising additional debt or equity financing on terms acceptable to our company, if at all.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, as defined in Item 303(c)(2) of Regulation S-B.
ITEM 3. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures.
Evaluation of disclosure controls and procedures.
An evaluation was performed under the supervision and with the participation of our management, including the chief executive officer and the chief financial officer, of the effectiveness of the design and operation of our disclosure procedures. Based on management's evaluation as of the end of the period covered by this Annual Report, our principal executive officer and chief financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) were sufficiently effective to ensure that the information required to be disclosed by us in the reports that we file under the Exchange Act is gathered, analyzed and disclosed with adequate timeliness, accuracy and completeness.
(b) Changes in Internal Control Over Financial Reporting.
There have been no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referred to above, nor were there any significant deficiencies or material weaknesses in our internal controls. Accordingly, no corrective actions were required or undertaken.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Pursuant to Rule 601 of Regulation SB, the following exhibits are included herein or incorporated by reference.
| 3.1 | Articles of Incorporation, incorporated by reference to the Exhibits filed with our Registration Statement on Form SB-2 filed on February 17, 2005, SEC File Number 333-122870 |
| 3.2 | By-laws, incorporated by reference to the Exhibits filed with our Registration Statement on Form SB-2 filed on February 17, 2005, SEC File Number 333-122870. |
| 3.3 | Article of Merger filed with the Secretary of State of Nevada, incorporated by reference from Exhibit 3.1 to the Form 8-K filed April 10, 2006. |
| 10.1 | Management agreement with Dennis Mee, incorporated by reference from Exhibit 10.1 to our Form 8-K filed December 5, 2006 |
| 10.2 | Non-binding Letter of Intent between the Company and AI Inc., dated November 16, 2006, incorporated by reference from Exhibit 10.1 to our Form 8-K filed November 17, 2006. |
| 31.1 | |
| 31.2 | |
| 32.1 | |
| 32.2 |
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this Report to be signed on it behalf by the undersigned, thereto duly authorized.
| AEGIS INDUSTRIES, INC. | |
| By: | /s/Paul Evancoe |
| Paul Evancoe | |
| President, CEO and Director | |
| Date: March 14, 2007 | |
In accordance with the Exchange Act, this Report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates included:
| By: | /s/Dennis Mee |
| Dennis Mee | |
| Chief Financial Officer, Secretary and Director | |
| Date: March 14, 2007 | |
| By: | /s/David Kirby |
| David Kirby | |
| Director | |
| Date: March 14, 2007 |
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