Deltron, Inc.
(A Development Stage Company)
Interim Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | |
| | | | | | | | | | Cumulative from |
| | | | | | | | | | Inception |
| | | | | | | | | | (September 14, |
| | | | | | | | | | 2005) to |
| | | | Three Months Ended December 31, | | December 31, |
| | | | | 2009 | | | 2008 | | 2009 |
| | | | | | | | | | | |
OPERATING ACTIVITIES | | | | | | | | | |
| Loss for the period | | $ | (7,791) | | $ | (5,188) | | $ | (105,642) |
| Adjustments to reconcile net loss to net cash | | | | | | | | | |
| used in operations: | | | | | | | | | |
| Impairment of development costs | | | - | | | - | | | 12,514 |
| Changes in Operating Assets and Liabilities: | | | | | | | | | |
| Increase (decrease) in accounts payable and | | | | | | | | | |
| accrued liabilities | | | 130 | | | 788 | | | 1,458 |
| | Net Cash Used in Operating Activities | | | (7,661) | | | (4,400) | | | (91,670) |
| | | | | | | | | | | |
| | | | | | | | | | | |
INVESTING ACTIVITIES | | | | | | | | | |
| Development costs | | | - | | | - | | | (12,514) |
| Property purchased | | | - | | | - | | | (40,657) |
| | Net Cash Used in Investing Activities | | | - | | | - | | | (53,171) |
| | | | | | | | | | | |
| | | | | | | | | | | |
FINANCING ACTIVITIES | | | | | | | | | |
| Advances from (payments to) related party | | | 4,585 | | | - | | | 46,850 |
| Common stock issued for cash | | | - | | | - | | | 105,900 |
| | Net Cash Provided by (used in) Financing | | | | | | | | | |
| | Activities | | | 4,585 | | | - | | | 152,750 |
| | | | | | | | | | | |
INCREASE (DECREASE) IN CASH AND CASH | | | | | | | | | |
EQUIVALENTS | | | (3,076) | | | (4,400) | | | 7,909 |
| | | | | | | | | | | |
CASH AND CASH EQUIVALENTS AT BEGINNING | | | | | | | | | |
OF PERIOD | | | 10,985 | | | 23,541 | | | - |
| | | | | | | | | | | |
CASH AND CASH EQUIVALENTS AT END OF | | | | | | | | | |
PERIOD | | $ | 7,909 | | $ | 19,141 | | $ | 7,909 |
| | | | | | | | | | | |
| | | | | | | | | | | |
Supplemental Cash Flow Disclosures: | | | | | | | | | |
| | | | | | | | | | | |
| Cash paid for: | | | | | | | | | |
| | Interest expense | | $ | - | | $ | - | | $ | - |
| | Income taxes | | $ | - | | $ | - | | $ | - |
| | | | | | | | | | | |
- The Accompanying Notes Are An Integral Part Of These Financial Statements -
7
Deltron, Inc.
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
December 31, 2009
(Unaudited)
1.
Organization and Description of Business
Deltron, Inc. (the “Company”) is a Nevada corporation incorporated on September 14, 2005. It is based in San Jose, Costa Rica. The Company incorporated a wholly owned subsidiary, Deltron Holdings Corporation S.A., in San Jose, Costa Rica on November 17, 2005.
The Company is a development stage company that intended to engage principally in the acquisition and development of rental housing properties in the district of San Isidro de Heredia, Costa Rica. To date, the Company’s activities have been limited to its formation, the raising of equity capital and the acquisition and development of property(Note 4).
The Company recently decided to refocus its business strategy towards identifying and pursuing options regarding the development of a new business plan and direction. The Company entered into a Letter of Intent with Blu Vu Deep Oil & Gas Exploration (Blu Vu). The companies plan to enter into a definitive agreement under which Deltron will acquire Blu Vu in exchange for stock of Deltron in the form of a merger.
2.
Significant Accounting Policies
Basis of Consolidation
These consolidated financial statements presented are those of the Company and its wholly-owned subsidiary, Deltron Holdings Corporation S.A. All intercompany balances and transactions have been eliminated.
Basis of Presentation
The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles (US GAAP) applicable to development stage companies.
Use of Estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s periodic filings with the Securities and Exchange Commission include, where applicable, disclosures of estimates, assumptions, uncertainties and markets that could affect the financial statements and future operations of the Company.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from date of purchase, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. The Company had $7,909 and $10,985 in cash and cash equivalents at December 31 and September 30, 2009, respectively.
8
Deltron, Inc.
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
December 31, 2009
(Unaudited)
2.
Significant Accounting Policies– Continued
Start-Up Costs
In accordance with FASC 720-15-20 “Start-up Activities,” the Company expenses all costs incurred in connection with the start-up and organization of the Company.
Risks and Uncertainties
The Company operates in the real estate development and property rental industry that is subject to significant risks and uncertainties, including financial, operational, technological and other risks associated with operating a real estate development and property rental business, including the potential risk of business failure.
Earning (Loss) Per Share of Common Stock
The Company has adopted FASC 260-10-20,“Earnings per Share,” (“EPS”) which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.
The Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding.
Comprehensive Income (Loss)
FASC Topic No. 220,“Comprehensive Income”, establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. From inception (September 14, 2005) to December 31, 2009, the Company had no items of other comprehensive income. Therefore, net loss equals comprehensive loss from inception (September 14, 2005) to December 31, 2009.
Concentrations of Credit Risk
The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related party payables. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
Foreign Currency Translations
The Company’s functional currency is the Costa Rican Colon. The Company’s reporting currency is the U.S. dollar. All transactions initiated in Costa Rican Colones are translated into U.S. dollars in accordance with FASC 830-10-20, "Foreign Currency Translation" as follows:
i)
Monetary assets and liabilities at the rate of exchange in effect at the balance sheet date;
ii)
Equity at historical rates; and
iii)
Revenue and expense items at the average rate of exchange prevailing during the period.
9
Deltron, Inc.
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
December 31, 2009
(Unaudited)
2.
Significant Accounting Policies- Continued
Foreign Currency Translations- Continued
Adjustments arising from such translations are deferred until realization and are included as a separate component of stockholders’ equity (deficit) as a component of comprehensive income or (loss). Therefore, translation adjustments are not included in determining net income (loss) but reported as other comprehensive income (loss).
For foreign currency transactions, the Company translates these amounts to the Company’s functional currency at the exchange rate effective on the invoice date. If the exchange rate changes between the time of purchase and the time actual payment is made, a foreign exchange transaction gain or loss results which is included in determining net income (loss) for the period. No significant realized exchange gains or losses were recorded since September 14, 2005 (inception) to December 31, 2009
Revenue Recognition
The Company recognizes revenue from the sale of products and services in accordance with the Securities and Exchange Commission Staff Accounting Bulletin No. 104 (“SAB 104”),“Revenue Recognition in Financial Statements.” Revenue will consist of rental income and will be recognized only when all of the following criteria have been met:
i)
Persuasive evidence for an agreement exists;
ii)
Delivery has occurred;
iii)
The fee is fixed or determinable; and
iv)
Revenue is reasonably assured.
Recent Accounting Pronouncements
In June 2009 the FASB established the Accounting Standards Codification ("Codification" or "ASC") as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States ("GAAP"). Rules and interpretive releases of the Securities and Exchange Commission ("SEC") issued under authority of federal securities laws are also sources of GAAP for SEC registrants. Existing GAAP was not intended to be changed as a result of the Codification, and accordingly the change did not impact our financial statements. The ASC does change the way the guidance is organized and presented.
Statement of Financial Accounting Standards ("SFAS") SFAS No. 165 (ASC Topic 855),"Subsequent Events", SFAS No. 166 (ASC Topic 810),"Accounting for Transfers of Financial Assets-an Amendment of FASB Statement No. 140", SFAS No. 167 (ASC Topic 810),"Amendments to FASB
Interpretation No. 46(R)", and SFAS No. 168 (ASC Topic 105),"The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles-a replacement of FASB Statement No. 162" were recently issued. SFAS No. 165, 166, 167, and 168 have no current applicability to the Company or their effect on the financial statements would not have been significant.
10
Deltron, Inc.
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
December 31, 2009
(Unaudited)
2.
Significant Accounting Policies– Continued
Recent Accounting Pronouncements - Continued
Accounting Standards Update ("ASU") ASU No. 2009-05 (ASC Topic 820), which amends Fair Value Measurements and Disclosures - Overall, ASU No. 2009-13 (ASC Topic 605), Multiple-Deliverable Revenue Arrangements, ASU No. 2009-14 (ASC Topic 985), Certain Revenue Arrangements that include Software Elements, and various other ASU's No. 2009-2 through ASU No. 2009-15 which contain technical corrections to existing guidance or affect guidance to specialized industries or entities were recently issued. These updates have no current applicability to the Company or their effect on the financial statements would not have been significant.
3.
Capital Stock
Authorized Stock
The Company has authorized 100,000,000 common shares with a par value of $0.001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholder of the corporation is sought.
Share Issuances
From inception of the Company (September 14, 2005) to December 31, 2009, the Company has issued 500,000 common shares at $0.01 per share and 5,045,000 common shares at $0.02 per share, resulting in total proceeds of $105,900 and 5,545,000 common shares issued and outstanding at December 31, 2009 and 2008. Of these shares, 400,000 were issued to a director of the Company, 400,000 were issued to a former director and officer, 1,000,000 were issued to the spouse of a director of the Company, and 3,745,000 were issued to independent investors.
4.
Property
On March 29, 2006, through our wholly-owned subsidiary Deltron Holdings Corporation S.A., a property was purchased for $40,657. The funds to purchase the property were loaned to Deltron Holdings Corporation S.A., by a director of the Company.
5.
Related Party Balances and Transactions
As of December 31 and September 30, 2009, the Company was obligated to a director of the Company, for a non-interest bearing demand loan with a balance of $46,850 and $42,265, respectively. The Company plans to pay the loan back as cash flows become available.
11
Deltron, Inc.
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
December 31, 2009
(Unaudited)
6.
Provision for Income Taxes
The Company recognizes the tax effects of transactions in the year in which such transactions enter into the determination of net income, regardless of when reported for tax purposes. Deferred taxes are provided in the financial statements under FASC 718-740-20 to give effect to the resulting temporary differences which may arise from differences in the bases of fixed assets, depreciation methods, allowances, and start-up costs based on the income taxes expected to be payable in future years.
Development stage deferred tax assets arising as a result of net operating loss carryforwards have been offset completely by a valuation allowance due to the uncertainty of their utilization in future periods. Operating loss carryforwards generated during the period from September 14, 2005 (date of inception) through December 31, 2009 of approximately $105,642 will begin to expire in 2025. Accordingly, deferred tax assets of approximately $36,800 were offset by the valuation allowance that increased by approximately $3,000 and $1,100 during the three months ended December 31, 2009 and 2008, respectively.
The Company follows the provisions of uncertain tax positions as addressed in FASC 740-10-65-1. The Company recognized approximately no increase in the liability for unrecognized tax benefits.
The Company has no tax position at December 31, 2009 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. No such interest or penalties were recognized during the periods presented. The Company had no accruals for interest and penalties at December 31, 2009. The Company’s utilization of any net operating loss carry forward may be unlikely as a result of its intended development stage activities.
7.
Going Concern and Liquidity Considerations
The accompanying audited consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As at December 31, 2009, the Company had a working capital deficiency of $40,399 and an accumulated deficit of $105,642. The Company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending September 30, 2010.
The ability of the Company to emerge from the development stage is dependent upon, among other things, obtaining additional financing to continue operations, and development of its business plan.
In response to these problems, management intends to raise additional funds through public or private placement offerings.
These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying audited consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
12
Deltron, Inc.
(A Development Stage Company)
Notes to Interim Consolidated Financial Statements
December 31, 2009
(Unaudited)
8.
Subsequent Events
The Company has evaluated subsequent events from the balance sheet date through February 4, 2010 and determined there are no other items to disclose.
13
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses. Such forward-looking statements include, among others, those statements including the words “expects,” “anticipates,” “intends,” “believes” and similar language. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed herein as well as in the “Description of Business – Risk Factors” section in our Annual Report on Form 10-K for the year ended September 30, 2009. You should carefully review the risks described in our Annual Report and in other documents we file from time to time with the Securities and Exchange Commission. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.
Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.
All references in this Form 10-Q to the “Company,” “Deltron,” “we,” “us,” or “our” are to Deltron, Inc.
Results of Operations
We are a development stage corporation. We have generated no revenues from our business operations since inception and have incurred $105,642 in expenses through December 31, 2009.
The following table provides selected financial data about our company as of December 31, 2009 and September 30, 2009.
Balance Sheet Data
December 31, 2009
September 30, 2009
Cash and cash equivalents
$
7,909
$
10,985
Total assets
$
48,566
$
51,642
Total liabilities
$
48,308
$
43,593
Shareholders’ equity
$
258
$
8,049
Net cash provided by financing activities since inception through December 31, 2009 was $152,750, consisting of $105,900 raised from the sale of our common stock and $46,850 advanced from a director and former officer of the company.
Plan of Operation
Our auditors have issued a going concern opinion on our September 30, 2009, audited financial statements, refer to note 7. This means that there is substantial doubt that we can continue as an ongoing business for the next twelve months unless we obtain additional capital to pay for our expenses. This is because we have not generated any revenues and there is no assurance we will ever reach this point.
14
Accordingly, we must raise sufficient capital from other sources. Our only other source for cash at this time is investments by others and loans from a director. We must raise cash to stay in business.
We are a development stage company that has no operations, no revenue, no financial backing and limited assets. We had originally planned to develop our property in San Jose, Costa Rica, to rent two three-bedroom apartments to middle income families. Recently, the Company has decided to redirect its business focus towards identifying and pursuing options regarding the development of a new business plan and direction. The Company is currently seeking ventures of merit for corporate participation as a means of enhancing stockholder value. This may involve sales of equity or debt securities in merger or acquisition transactions.
On October 22, 2009, the Company entered into a Letter of Intent with Blu Vu Deep Oil & Gas Exploration (Blu Vu). The companies plan to enter into a definitive agreement under which Deltron will acquire Blu Vu in exchange for stock of Deltron in the form of a merger.
We do not currently engage in any product research and development and have no plans to do so in the foreseeable future. We have no present plans to purchase or sell any plant or significant equipment. We also have no present plans to add employees although we may do so in the future if we engage in any merger or acquisition transactions.
Liquidity and Capital Resources
Our cash and cash equivalents balance as of December 31, 2009 was $7,909.
We are a development stage company and currently have no operations.
We do not have sufficient funds on hand to pursue our business objectives for the near future or to commence operations without seeking additional funding. We currently do not have a specific plan of how we will obtain such funding.
Loans to the Company
We received $46,850 in loans from Mr. Phillips, a director and former officer of the company. This amount owed to Mr. Phillips is non-interest bearing, unsecured, and due on demand.
We have minimal operating costs and expenses at the present time due to our limited business activities. We will, however, be required to raise additional capital over the next twelve months to meet our current administrative expenses, and, additionally, we may do so in connection with or in anticipation of possible acquisition transactions. This financing may take the form of additional sales of our equity or debt securities to, or loans from, our majority stockholder, or from our sole officer and director. There is no assurance that additional financing will be available from these or other sources, or, if available, that it will be on terms favorable to us.
Off-Balance Sheet Arrangements
We have never entered into any off-balance sheet financing arrangements and have not formed any special purpose entities. We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
15
Not applicable.
ITEM 4T.
CONTROLS AND PROCEDURES
Evaluation of Our Disclosure Controls
Under the supervision and with the participation of our senior management, including our chief executive officer and chief financial officer, Randall Fernandez, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this quarterly report (the “Evaluation Date”). Based on this evaluation, our chief executive officer and chief financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the information relating to us, required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2009 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
In the ordinary course of our business, we may from time to time become subject to routine litigation or administrative proceedings which are incidental to our business. We are not a party to nor are we aware of any existing, pending or threatened lawsuits or other legal actions involving us.
ITEM 1A.
RISK FACTORS
Not applicable.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We did not issue any equity securities during the quarter ended December 31, 2009.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5.
OTHER INFORMATION
Not applicable.
16
ITEM 6.
EXHIBITS
Exhibit No.
Description
31.1 / 31.2
Rule 13(a)-14(a)/15(d)-14(a) Certification of Principal Executive and Financial Officer
32.1 / 32.2
Rule 1350 Certification of Principal Executive and Financial Officer
17
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.
DELTRON, INC.
Dated: February 9, 2010
By:/s/Randall Fernandez
Randall Fernandez
President, Principal Executive and Financial Officer
18
