U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Former name, former address and former fiscal year, if changed since last report)
Statements made in this Form 10-Q (the "Quarterly Report") that are not historical or current facts are "forward-looking statements" made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the "Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements often can be identified by the use of terms such as "may", "will", "expect", "believe", "anticipate", "estimate", "approximate", or "continue", or the negative thereof. Frezer, Inc. (the "Company") intends that such forward-looking statements be subject to the safe harbors for such statements. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond the control of the Company that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. These factors include adverse economic conditions, entry of new and stronger competitors, inadequate capital and unexpected costs. The Company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
1. | Basis of Presentation and Organization |
The accompanying unaudited financial statements of Frezer, Inc. (the “Company” or “Frezer”) are presented in accordance with the requirements for Form 10-Q and Regulation S-X. Accordingly, they do not include all of the disclosures required by generally accepted accounting principles. In the opinion of management, all adjustments (all of which were of a normal recurring nature) considered necessary to fairly present the financial position, results of operations, and cash flows of the Company on a consistent basis, have been made.
These results have been determined on the basis of generally accepted accounting principles and practices applied consistently with those used in the preparation of the Company’s annual financial statements for the year ending December 31, 2007. Operating results for the three and nine months ended September 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008.
The Company recommends that the accompanying financial statements for the interim period be read in conjunction with the financial statements and notes for the year ending December 31, 2007 included in the Company’s Annual Report on Form 10-KSB as filed on March 28, 2008.
Organization and Business
Frezer, Inc. was incorporated in the State of Nevada on May 2, 2005. The Company was previously a wholly owned subsidiary of BMXP Holdings, Inc., then known as Bio- Matrix Scientific Group, Inc. (“BMXG”), a Delaware Corporation engaged primarily in the development of medical devices. The Board of Directors of BMXG voted to distribute all Shares of Frezer common stock held by BMXG to holders of BMXG common stock of record as of May 31, 2005, which was the record date. These stockholders received one share of Frezer common stock for every one share of BMXG common stock held on the record date. The distribution was paid on June 15, 2005.
From inception to July 11, 2006 The Company’s objective was to operate in the field of stem cell banking and regenerative medicine. On July 11, 2006, the Company’s Board of Directors unanimously approved resolutions to abandon all plans to develop a stem cell banking facility and market that facility's services.
Since July 11, 2006, the Company had been focused on the development and marketing of intellectual property relating to the Cryo-Chip, which may be used to provide an extensive line of stem cells for research and development, and the development and marketing of intellectual property relating to Cryogenic Storage tank modifications for increased storage capacity.
Effective February 22, 2007, the Company experienced a change in control (see Note 3) and its management changed, pursuant to a Securities Purchase Agreement by and between the Company and KI Equity Partners IV, LLC.
Following the change in control, Kevin R. Keating, the Company’s new President, Secretary and sole director, commenced an investigation to determine whether to continue or to cease the present operations of the Company. To date, there has been no formal decision to terminate operations; however, Mr. Keating determined it to be in the best interests of the Company to suspend its operations pending the results of the investigation. In the meantime, the Company’s current business strategy is to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation. The Company’s principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings. The Company will not restrict its potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.
Frezer, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2008
On November 7, 2007, the Company entered into a Letter of Intent with Breakthrough Venture Corp., pursuant to which the Company intends to combine with Breakthrough either through a merger between Breakthrough and a wholly owned subsidiary of the Company, or an exchange of shares of stock of Breakthrough for shares of Common Stock of the Company. The Letter of Intent expired pursuant to its terms on March 31, 2008, and had subsequently been extended to May 15, 2008, but expired on that date with no further obligation by either party (see Note 7).
Basis of Presentation
To date, the Company has not earned revenues from its principle operations and as a result is currently in the development stage as defined by Statement of Financial Accounting Standards No. 7, Accounting and Reporting by Development Stage Enterprises (“SFAS No. 7”).
Going Concern
Since inception, the Company has generated no revenues and has incurred a cumulative operating loss of $1,584,771 and a cumulative net loss of $1,668,501. Since inception, the Company has also been dependent upon the receipt of capital investment or other financing to fund its operations. The Company currently has no source of operating revenue, and has only limited working capital with which to pursue its business plan, which contemplates the completion of a business combination with an operating company. The amount of capital required to sustain operations until the successful completion of a business combination is subject to future events and uncertainties. It may be necessary for the Company to secure additional working capital through loans or sales of common stock, and there can be no assurance that such funding will be available in the future. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
The accompanying financial statements have been presented on the basis of the continuation of the Company as a going concern and do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
2. | Summary of Significant Accounting Policies |
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as well as the reported amounts of revenues and expenses. Actual results could differ from these estimates.
Income Taxes
The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes (“SFAS No. 109”), which requires the recognition of deferred tax liabilities and assets at currently enacted tax rates for the expected future tax consequences of events that have been included in the financial statements or tax returns. A valuation allowance is recognized to reduce the net deferred tax asset to an amount that is more likely than not to be realized. The tax provision shown on the accompanying statement of operations is zero since the deferred tax asset generated from net operating losses is offset in its entirety by a valuation allowance. State minimum taxes are expensed as incurred.
Frezer, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2008
Cash and Cash Equivalents
Cash and cash equivalents, if any, include all highly liquid instruments with an original maturity of three months or less at the date of purchase.
Fair Value of Financial Instruments
The Company's financial instruments are comprised of accrued expenses and related party notes payable. The carrying amounts of financial instruments approximate fair value due to their short maturities.
Net Loss Per Share
Basic loss per share (EPS) is calculated by dividing the loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The Company currently has no dilutive securities and as such, basic and diluted loss per share are the same for all periods presented.
Comprehensive Loss
Comprehensive loss is defined as all changes in stockholders’ equity (deficit), exclusive of transactions with owners, such as capital investments. Comprehensive loss includes net loss, changes in certain assets and liabilities that are reported directly in equity such as translation adjustments on investments in foreign subsidiaries and unrealized gains (losses) on available-for-sale securities. For the three and nine months ended September 30, 2008 and 2007 and for the cumulative period from May 2, 2005 (Inception) to September 30, 2008, the Company’s comprehensive loss was the same as its net loss.
Recently Issued Accounting Pronouncements
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities - an amendment of SFAS No. 133.” This Statement amends and expands the disclosure requirements by requiring qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of, and gains and losses on, derivative instruments, and disclosures about credit risk-related contingent features in derivative agreements. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008.
The adoption of this new Statement, when effective, is not expected to have a material effect on the Company’s financial position, results of operations, or cash flows.
On February 1, 2007, the Company and KI Equity Partners IV, LLC, a Delaware limited liability company (“KI Equity”) entered into a securities purchase agreement (“Purchase Agreement”) under which the Company agreed to sell and KI Equity agreed to purchase 3,195,000 shares (on a post Reverse-Split basis) of Frezer’s common stock (“Shares”) for a purchase price of $639,000 (“Purchase Price”), or $0.20 per share. The closing of the transactions under the Purchase Agreement occurred on February 22, 2007 (“Closing”).
Frezer, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2008
The issuance of the Shares is intended to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(2) thereof and such other available exemptions. As such, the Shares may not be offered or sold in the United States unless they are registered under the Securities Act, or an exemption from the registration requirements of the Securities Act is available. No registration statement covering the Shares has been or is expected to be filed with the SEC or with any state securities commission in connection with the issuance of the Shares. However, Frezer has granted certain demand and piggyback registration rights to KI Equity with respect to the Shares. At the Closing, Frezer and KI Equity executed a registration rights agreement (“Registration Rights Agreement”) granting the foregoing registration rights.
Immediately prior to the Closing, David R. Koos, the former Chairman and Chief Executive Officer of Frezer (“Koos”), Brian F. Pockett, the former Chief Operating Officer of Frezer (“Pockett”), Geoffrey O’Neill, the former President of Frezer (“O’Neill”) and Bombardier Pacific Ventures, Inc., a Nevada corporation controlled by Koos (“Bombardier”) (collectively, the “Principals”) entered into a certain indemnity agreement with Frezer (“Indemnity Agreement”). Under the Indemnity Agreement, the Principals have agreed to indemnify and hold Frezer harmless from all liabilities and obligations related to the period prior to Closing (“Damages”). Except for indemnity claims related to taxes, Frezer is not entitled to indemnification for any Damages in excess of $499,700 (“Cap”), and no demand or claim for indemnification may be made after second anniversary of the Closing (the “Claim Period”). As consideration for providing the indemnification, the Company agreed to pay the Principals an aggregate sum of $376,750. At the Closing, the Principals were paid $351,750, in the aggregate, and the remaining $25,000 was held in escrow for a period of ninety (90) days following the Closing to satisfy any indemnification claims pursuant to the Indemnity Agreement (“Indemnity Escrow”). In June of 2007, the remaining $25,000 that was initially held in escrow was released to the Principles.
Following the execution of the Indemnity Agreement, the Company recorded the $376,750 aggregate sum to be paid to the Principles as Other (Expense) in the accompanying statement of operations.
Immediately prior to the Closing, the Principals also entered into a certain release agreement (“Release Agreement”) under which each of them agreed to terminate any and all agreements and contracts with Frezer including, without limitation, any employment agreements between Frezer, on the one hand, and Koos, Pockett and O’Neill, on the other hand. Under the Release Agreement, the Principals also agreed to irrevocably release Frezer from any and all debts, liabilities and obligations, including, without limitation, any claims for unpaid compensation.
Following the execution of the Release Agreement, the Company reversed $300,000 of previously accrued compensation due to Koos, Pockett and O’Neill, accounting for the reversal of the liability as Other Income in the accompanying statement of operations.
Separately, Pockett, O’Neill and Bombardier agreed to sell 305,000 shares (on a post Reverse-Split basis) of Frezer’s common stock (“Transferred Shares”), in the aggregate, to KI Equity for an aggregate purchase price of $61,000, or $0.20 per share (the “Stock Transfer”). The closing of the Stock Transfer occurred on February 22, 2007.
Effective as of the Closing, in accordance with the terms of the Purchase Agreement, the existing officers and directors of Frezer resigned and Kevin R. Keating was appointed as the sole director, Chief Executive Officer, Chief Financial Officer, President, Secretary and Treasurer of Frezer. Accordingly, at the Closing, in accordance with the provisions of the Purchase Agreement, a change of a majority of Frezer’s directors occurred.
Frezer, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2008
Kevin R. Keating is the father of Timothy J. Keating, the principal member of Keating Investments, LLC. Keating Investments, LLC is the managing member of KI Equity. Timothy J. Keating is the manager of KI Equity.
On July 3, 2006, the Company established a Line of Credit Promissory Note Agreement for $50,000 with Bio Technology Business Partners Trust. The unpaid principal of this line of credit bears simple interest at a rate of 10% per annum. As of December 31, 2006, there had been ten advances under this credit line totaling $32,675.70. Amounts advanced under this credit line are due and payable on a date that is 365 days from each advance.
On August 14, 2006, the Company entered into a Promissory Note Agreement with Dermatex Medical Device Consultants for $25,000. In November 2006 this agreement was amended and an additional $1,955.42 was loaned. This note bears interest at a rate of 10% simple per annum and all Principal and accrued interest is due and payable on August 13, 2007.
On October 26, 2006, the Company borrowed $18,384.68 from the AFN Trust. On November 7, 2006, the Company borrowed an additional $4,601.44 from the AFN Trust. These loans bear simple interest at 10% per annum and are due and payable on October 25, 2007.
On November 14, 2006, the Company borrowed $1,800.00 from Venture Bridge Advisors, Inc. On December 8, 2006, the Company borrowed an additional $1,100.00 and on December 11, 2006, the Company borrowed and additional $628.00. These loans bear simple interest at 10% per annum and are due and payable on November 13, 2007.
In February of 2007, the Company repaid all outstanding notes payable and accrued interest using a portion of the proceeds raised from the issuance common stock to KI Equity (see Note 3).
On April 23, 2008, the Company borrowed $20,000 from Vero under an unsecured promissory note bearing interest at 5.0% per annum, with principal and interest due and payable upon demand.
5. | Stockholders’ Equity (Deficit) |
Pursuant to its certificate of incorporation, the Company is authorized to issue up to 200,000,000 shares of common stock and 10,000,000 shares of preferred stock, each with a par value of $0.001 per share. At September 30, 2008, there were 4,239,824 shares of common stock issued and outstanding (on a post reverse split basis) and no shares of preferred stock issued or outstanding.
On January 10, 2008, the Company’s Board of Directors authorized a 1-for-20 reverse stock split (“Reverse Split”) of the Company’s common stock outstanding on January 10, 2008, with special treatment for certain of the Company’s stockholders to preserve round lot stockholders.
Frezer, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2008
The Company’s Board of Directors approved special treatment of stockholders of record as of the record date of January 10, 2008 (the “Record Date”) holding fewer than 2,000 shares of common stock to prevent those stockholders from holding less than 100 shares after the Reverse Split (the “Special Treatment”). Accordingly, stockholders who held less than 2,000 shares but at least 100 shares of common stock as of the Record Date and who continued to hold such shares as of the effective date of the reverse split of February 26, 2008 (the “Effective Date”), received 100 shares of common stock. Stockholders who held less than 2,000 shares but at least 100 shares after the Record Date and who continued to hold such shares as of the Effective Date were not afforded the Special Treatment. No fractional shares were issued for any fractional share interest created by the Reverse Split. Any stockholder who would have otherwise received a fractional share instead received a full share of common stock for any fractional share interests created by the Reverse Split.
As a result of the Special Treatment and round-up for fractional shares, an additional 98,120 shares of common stock were issued as a result of the Reverse Split.
6. | Related Party Transactions |
Management Agreement
Effective February 27, 2007, the Company entered into a management agreement (“Management Agreement”) with Vero Management, L.L.C., a Delaware limited liability company (“Vero”) under which Vero had agreed to provide a broad range of managerial and administrative services to the Company including, but not limited to, assistance in the preparation and maintenance of the Company’s financial books and records, the filing of various reports with the appropriate regulatory agencies as are required by State and Federal rules and regulations, the administration of matters relating to the Company’s shareholders including responding to various information requests from shareholders as well as the preparation and distribution to shareholders of relevant Company materials, and to provide office space, corporate identity, telephone and fax services, mailing, postage and courier services for a fixed fee of $2,000 per month, for an initial period of twelve months. At the end of the initial twelve month term, the agreement will continue to remain in effect until terminated in writing by either party.
Effective July 1, 2007, the Management Agreement was amended to reduce the monthly fixed fee to $1,000 per month.
The Management Agreement was terminated by Frezer on August 15, 2008, retroactive to July 1, 2008.
Kevin R. Keating owns and controls Vero and is also the sole officer and director of the Company. The terms of the Management Agreement were determined based on terms which the Company believes would be available to it from third parties on an arms’ length basis.
For the three months ended September 30, 2008 and 2007, the Company recorded $0 and $3,000, respectively, of managerial and administrative expenses associated with this agreement which are included as a component of general and administrative expenses in the accompanying statements of operations.
For the nine months ended September 30, 2008 and 2007, the Company recorded $6,000 and $11,000, respectively, of managerial and administrative expenses associated with this agreement which are included as a component of general and administrative expenses in the accompanying statements of operations.
Frezer, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2008
Note Payable
On April 23, 2008, the Company borrowed $20,000 from Vero under an unsecured promissory note bearing interest at 5.0% per annum, with principal and interest due and payable upon demand.
For the three and nine months ended September 30, 2008 and 2007, the Company recognized $255 and $444, respectively, of interest expense in relation to this outstanding related party note payable.
Other
As of September 30, 2008 and December 31, 2007, the $14,027 and $3,000, respectively, of accrued expenses listed in the accompanying balance sheets were comprised entirely of liabilities due to related parties.
On November 7 2007, the Company entered into a letter of intent (the “Letter of Intent”) with Breakthrough Venture Corp. (“Breakthrough”), pursuant to which the Company intended to combine with Breakthrough either through a merger between Breakthrough and a wholly owned subsidiary of the Company, or an exchange of shares of stock of Breakthrough for shares of common stock (“Common Stock”) of the Company (the “Merger”). The Letter of Intent expired pursuant to its terms on March 31, 2008, and had subsequently been extended to May 15, 2008, but expired on that date with no further obligation by either party.
The tax effects of temporary differences that give rise to significant portions of the Company’s net deferred tax assets at September 30, 2008 and December 31, 2007 are as follows:
| | | September 30, | | December 31, | |
| | | 2008 | | 2007 | |
| | | (Unaudited) | | | |
Assets | | | | | |
| Net Operating tax carry forwards | | $ | 567,290 | | $ | 555,321 | |
| Gross deferred tax asset | | | 567,290 | | | 555,321 | |
| Valuation allowance | | | (567,290 | ) | | (555,321 | ) |
| Net deferred tax asset | | $ | - | | $ | - | |
A full valuation allowance has been recorded against the Company’s deferred tax asset because, based on the weight of available evidence, it is more likely than not that such benefits will not be realized.
Frezer, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 2008
The benefit from income taxes differs from the amount computed by applying the U.S. federal income tax rate of 34% to loss before income taxes for the cumulative period from May 2, 2005 (Inception) to September 30, 2008 and May 2, 2005 (Inception) to December 31, 2007 as follows:
| | | September 30, | | December 31, | |
| | | 2008 | | 2007 | |
| | | (Unaudited) | | | |
| | | | | | |
| U.S. federal income tax benefit at statutory rate | | $ | (567,290 | ) | $ | (555,321 | ) |
| Change in valuation allowance | | | 567,290 | | | 555,321 | |
| Benefit from income taxes | | $ | - | | $ | - | |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward Looking Statement Notice
Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) in regard to the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Frezer, Inc. (“we”, “us”, “our” or the “Company”) to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Quarterly Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.
Description of Business
The Company was incorporated in the State of Nevada on May 2, 2005 and maintains its principal executive office at 190 Lakeview Way, Vero Beach, Florida 32963. On June 1, 2005 the Company filed a Registration Statement on Form 10-SB with the Securities and Exchange Commission (the “SEC”). Upon effectiveness of such Registration Statement, the Company became subject to the reporting requirements under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
The Company, based on proposed business activities, is a “blank check” company. The SEC defines those companies as "any development stage company that is issuing a penny stock, within the meaning of Section 3(a)(51) of the Exchange Act, and that has no specific business plan or purpose, or has indicated that its business plan is to merge with an unidentified company or companies." Many states have enacted statutes, rules and regulations limiting the sale of securities of "blank check" companies in their respective jurisdictions. The Company is also a “shell company,” defined in Rule 12b-2 under the Exchange Act as a company with no or nominal assets (other than cash) and no or nominal operations. Management does not intend to undertake any efforts to cause a market to develop in our securities, either debt or equity, until we have successfully concluded a business combination. The Company intends to comply with the periodic reporting requirements of the Exchange Act for so long as we are subject to those requirements.
The Company’s current business strategy is to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation. The Company’s principal business objective for the next 12 months and beyond such time will be to consummate the Merger (as defined below) and achieve long-term growth potential through the Merger or, in the event the Merger is not consummated, some other combination with a business rather than immediate, short-term earnings. The Company will not restrict its potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.
Proposed Merger
On November 7, 2007, the Company entered into a letter of intent (the “Letter of Intent”) with Breakthrough Venture Corp. (“Breakthrough”), pursuant to which the Company intended to combine with Breakthrough either through a merger between Breakthrough and a wholly owned subsidiary of the Company, or an exchange of shares of stock of Breakthrough for shares of Common Stock of the Company (the “Merger”). The Letter of Intent expired pursuant to its terms on March 31, 2008, and had subsequently been extended to May 15, 2008, but expired on that date with no further obligation by either party.
Liquidity and Capital Resources
As of September 30, 2008, the Company had assets equal to $2,041, comprised exclusively of cash and cash equivalents. This compares with assets of $5,775, comprised exclusively of cash and cash equivalents, as of December 31, 2007. The Company’s current liabilities as of September 30, 2008 totaled $34,471, comprised of $14,027 of accrued expenses and $20,444 of notes payable and accrued interest due to related parties. This compares to the Company’s current liabilities as of December 31, 2007 of $3,000, comprised exclusively of accrued expenses. The Company can provide no assurance that it can continue to satisfy its cash requirements for at least the next twelve months.
The following is a summary of the Company's cash flows provided by (used in) operating, investing, and financing activities for the nine months ended September 30, 2008 and 2007 and for the cumulative period from May 2, 2005 (inception) to September 30, 2008:
| | | For the Nine Months Ended September 30, 2008 | | For the Nine Months Ended September 30, 2007 | | For the Cumulative Period from May 2, 2005 (Inception) to September 30, 2008 | |
| Net cash used in operating activities | | $ | (23,734 | ) | $ | (532,820 | ) | $ | (1,682,971 | ) |
| Net cash used in investing activities | | $ | 0 | | $ | 0 | | $ | (5,122 | ) |
| Net cash provided by financing activities | | $ | 20,000 | | $ | 552,855 | | $ | 1,690,134 | |
| Net increase/(decrease) in cash and cash equivalents | | $ | (3,734 | ) | $ | 20,035 | | $ | 2,041 | |
The Company has nominal assets and has generated no revenues since inception. The Company is also dependent upon the receipt of capital investment or other financing to fund its ongoing operations and to execute its business plan of seeking a combination with a private operating company. In addition, the Company is dependent upon certain related parties to provide continued funding and capital resources. If continued funding and capital resources are unavailable at reasonable terms, the Company may not be able to implement its plan of operations.
Results of Operations
For the three and nine months ended September 30, 2008, the Company had no activities that produced revenues from operations. It is unlikely the Company will have any revenues unless it is able to effect an acquisition or merger with an operating company, of which there can be no assurance. It is management's assertion that these circumstances may hinder the Company's ability to continue as a going concern. The Company’s plan of operation for the next twelve months shall be to consummate the Merger.
For the three months ended September 30, 2008, the Company had a net loss of $5,725, comprised of (a) legal, accounting, audit and other professional service fees of $4,926 incurred in relation to the filing of the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2008 in August of 2008, (b) stock transfer agent fees of $544 and (c) interest expenses of $255. This compares with a net loss of $9,562 for the three months ended September 30, 2007, comprised of (a) legal, accounting, audit and other professional service fees of $6,104 incurred in relation to the filing of the Company’s Quarterly Report on Form 10-QSB for the period ended June 30, 2007 in August of 2007, (b) management fees of $3,000 incurred in relation to a broad range of managerial and administrative services provided by Vero Management, LLC and (c) other miscellaneous operating expenses of $458.
For the nine months ended September 30, 2008, the Company had a net loss of $35,205, comprised of (a) legal, accounting, audit and other professional service fees of $21,099 incurred in relation to the filing of the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007 in March of 2008, Quarterly Report on Form 10-Q for the period ended March 31, 2008 in May of 2008, and Quarterly Report on Form 10-Q for the period ended June 30, 2008 in August of 2008, (b) management fees of $6,000 incurred in relation to a broad range of managerial and administrative services provided by Vero Management, LLC, (c) stock transfer agent fees of $3,070, (d) interest expense of $444 and (e) miscellaneous expenses of $4,592 incurred in connection to the 1-for-20 reverse stock split that occurred in January of 2008. This compares with a net loss of $265,615 for the nine months ended September 30, 2007, comprised of (a) $180,053 of operating expenses, consisting of (i) professional fees of $146,650 paid to attorneys, accountants and other consultants related to the reorganization and change of management which took place during February of 2007 and the filing of the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2006 in February of 2007, (ii) legal, accounting, audit and other professional service fees of $14,213 incurred in relation to the filing of the Company’s Quarterly Report on Form 10-QSB for the period ended March 31, 2007 in May of 2007 and Quarterly Report on Form 10-QSB for the period ended June 30, 2007 in August of 2007, (iii) management fees of $11,000 incurred in relation to a broad range of managerial and administrative services provided by Vero Management, LLC and (iv) other miscellaneous operating expenses of $8,190; (b) $391,526 of other non-operating expenses, comprised of $376,750 of payments made to the Company’s former executive officers under the terms of an indemnity agreement and $14,776 related to the write-off of miscellaneous prepaid expenses and other assets; (c) $(309,623) of other non-operating income, consisting of $(300,000) of previously accrued compensation due to the Company’s former executive officers that was forgiven upon execution of a liability release agreement and $(9,623) of previously accrued miscellaneous expenses that was also forgiven upon execution of a liability release agreement; and (d) interest expense of $3,659.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Contractual Obligations
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
Item 4T. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules, regulations and related forms, and that such information is accumulated and communicated to our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
As of September 30, 2008, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and our principal financial officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Controls
There have been no changes in our internal controls over financial reporting during the quarter ended September 30, 2008 that have materially affected or are reasonably likely to materially affect our internal controls.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
To the best knowledge of our sole officer and director, the Company is not a party to any legal proceeding or litigation.
Item 1A. Risk Factors.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
Item 2. Unregistered Sales of Equity 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.
The management agreement (“Management Agreement”) dated February 27, 2007 and amended July 1, 2007, between the Company and Vero Management, L.L.C., (“Vero”) under which Vero had agreed to provide a broad range of managerial and administrative services to the Company was terminated by Frezer on August 15, 2008, retroactive to July 1, 2008.
Item 6. Exhibits.
| (a) | Exhibits required by Item 601 of Regulation S-K. |
| *3.1 | Certificate of Incorporation. |
| **3.2 | Certificate of Amendment of Articles of Incorporation. |
| 31.1 | Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008. |
| 32.1 | Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| * | Filed as an exhibit to the Company’s Registration Statement on Form 10-SB, as filed with the Securities and Exchange Commission on June 1, 2005 and incorporated herein by this reference. |
| ** | Filed as an exhibit to the Company’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on April 16, 2007 and incorporated herein by this reference. |
| *** | Filed as an exhibit to the Company's Current Report on Form 8-K, as filed with the Securities and Exchange Commission on April 29, 2008, and incorporated herein by this reference. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | FREZER, INC. |
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| Dated: November 7, 2008 | By: | /s/ Kevin R. Keating |
| | Kevin R. Keating President, Secretary and Director |
