UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
(Mark one)
x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 2009
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission File Number: 000-52007
LID HAIR STUDIOS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 20-2718075 |
| (State or other jurisdiction | (I.R.S. Employer |
| of incorporation or organization) | Identification Number) |
| Avenida Atlantica 1260, Apt 801, Rio de Janeiro, RJ Brazil 22021-000 Tel: 604-628-4658 Fax: 425-920-1020 |
| (Address and telephone number of registrant's principal executive offices) |
Incorp Services
3155 East Patrick Lane, Suite 1, Las Vegas, NV 89120-3481 Tel: 702-866-2500
(Name, address and telephone number for Agent for Service)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Shares
(Title of class)
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 past 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES x NO o
Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K (229.405 of the Chapter) is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Smaller Reporting Company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO x
The Company's revenues for the most recent fiscal year were $41,112.
As of July 15, 2009 the Company had 9,300,000 issued and outstanding shares of common stock.
Business Development
Lid Hair Studios International, Inc. was established on April 20, 2005 in the state of Nevada. The company was originally incorporated under the name Belford Enterprises, Inc. and changed its name to Lid Hair Studios International Inc. on August 15, 2005. Our operating subsidiary Belford Enterprises B.C. Ltd., doing business as Lid Hair Studio was established June 7, 2005, in the City of Vancouver, British Columbia Canada. There are no bankruptcies, receivership, or similar proceedings against the parent or operating subsidiary.
On June 18, 2005, the company purchased hair salon equipment and the rights to an office lease from Farideh Jafari in the amount of approximately $39,150 US ($45,000CDN).
On July 4, 2005 we entered into a lease agreement by way of Assignment of Lease by Tenant with Landlord’s Consent. The lease commenced July 1, 2005 and terminates June 30, 2015.
Business of Issuer
We are in the hair salon and personal services business and provide related personal services including but not limited to hair cuts, permanents, styling, manicures, and pedicures.
Our hours of operation are Monday to Saturday, 10 a.m. until 6 p.m. As our client base expands we expect that we will hire additional stylists and extend our hours of operation to include early evenings. We consider our employee relations to be good and to date we have experienced no work stoppages, strikes, or labor disputes. None of the company’s employees are covered by a collective bargaining agreement. There are no employee agreements.
Our clientele base consists of approximately 60% walk-ins and 40% of the customer-base is from the manager’s and stylists’ previous positions at other salons.
The Company has contracted the monthly bookkeeping to an outside source.
Corporate History
Lid Hair Studios International, Inc. was established on April 20, 2005 in the state of Nevada. The company was originally incorporated under the name Belford Enterprises, Inc. and changed its name to Lid Hair Studios International Inc. on August 15, 2005. Our operating subsidiary Belford Enterprises B.C. Ltd., doing business as Lid Hair Studio was established June 7, 2005, in the City of Vancouver, British Columbia Canada. There are no bankruptcies, receivership, or similar proceedings against the parent or operating subsidiary.
On June 18, 2005, the company purchased hair salon equipment and the rights to an office lease from Farideh Jafari in the amount of approximately $39,150US ($45,000CDN).
On July 4, 2005 we entered into a lease agreement by way of Assignment of Lease by Tenant with Landlord’s Consent. The lease commenced July 1, 2005 and terminates June 30, 2015.
Employees
We have one employee as of the date of this annual report, our director and president, Eric Anderson.
Seasonality
Generally our salon business is not affected by season. We have regular monthly clients and walk-in traffic.
Our salon services including but not limited to cuts, colouring, various hair treatments and product sales. Revenue is generated both through sales and hair services.
Clients
We do not have a significant concentration of sales with any individual customer and, therefore, the loss of any one customer would not have a material impact on our business.
Relevant Regulations
The Cosmetologist industry is subject to extensive licensing and regulation by state and/or Provincial and local departments and bureaus of cosmetology, health, sanitation, and fire and to periodic review by the state and municipal authorities for areas in which the salons are located.
Primarily, the company must comply with very stringent regulations through the British Columbia Cosmetologist Act imposed on the business and its operations designed to protect the public or its ability to operate will be restricted. Some jurisdictions may impose restrictions or licensing requirements on the company’s salon services and products. In addition, we are subject to local land use, zoning, building, planning, and traffic ordinances and regulations in the selection and acquisition of suitable sites for constructing new salons. Delays in obtaining, or denials of, or revocation or temporary suspension of, necessary licenses or approvals could have a material adverse impact on our development of salons.
Various Federal, State and/or Provincial, and local laws affect our business. The development and operation of salons depend on a significant extent of the selection and acquisition of suitable sites. These sites are subject to zoning, land use, environmental, traffic, and other regulations of state and local governmental agencies. City ordinances or other regulations, or the application of such ordinances or regulations, could impair our ability to construct or acquire salons in desired locations and could result in costly delays.
The delay or failure to obtain or maintain any licenses or permits necessary for operations could have a material adverse effect on our business. In addition, an increase in the minimum wage rate, employee benefit costs, costs of installing fixtures or accommodations for handicapped individuals or other costs associated with employees could adversely affect our business. We also are subject laws and regulations that, among other things, may require us to install certain fixtures or accommodations in new salons or to renovate existing salon to meet federally mandated requirements.
Competition
We compete with a variety of established competitors in this market. As an example there are 13 Hair Studios on Davie Street, the same street where Lid Hair Studio is located. These competitors may have longer operating histories, greater name recognition, established customer bases, and substantially greater financial, technical and marketing resources than the Company. The Company believes that the principal factors affecting competition in its proposed market include degree of name recognition (goodwill), ability to differentiate its salon service offerings, developing aesthetic and pleasing interiors, maintaining a high level of customer service and customer satisfaction, and the ability to effectively respond to changing customer needs and preferences. Currently, there are no significant proprietary or other barriers of entry that could keep potential competitors from developing or acquiring similar salon offerings and providing competing services in the Company's market. The Company's ability to compete successfully in the Hair Studio industry will depend in large part on its ability to execute acquisitions of established salon businesses that have developed a core customer base as a result of developing a sustainable competitive advantage in the market place in which they compete by offering market-differentiated food services and products.
Marketing and Sales Strategy
The company will need to raise funds to commence the expansion. We will need to expand our current salon to improve revenues and hope to increase interest from current and/or new investors.
Our principal revenues are from chair rentals in our salon.
We offer a variety of brand name styling aids available for client purchase. These include shampoos, conditions, gels, nail polish and body creams and are displayed in the reception area of the salon.
The Company’s business strategies include the following aspects:
Concentrate on a Few Carefully Selected Geographic Markets - The Company’s current market focus includes the West End in Vancouver and the surrounding areas where the Company is located. The Company selects markets where clients can walk/bike or drive to the salon as it is located near residential apartment buildings and condos as well as several office buildings. There is a higher potential for walk-ins due to the dense population of the area.
Leverage the Skills of our Management Team - Lid Hair Studios depends on its management and leveraging to successfully develop, acquire or reposition salons. We have raised additional funds to either acquire existing salons or create new salons which other organizations may not have the resources to pursue.
Opportunistically Acquire Assets - The Company will seek to acquire assets and/or salons which increase the Company’s penetration in the markets where it has chosen to concentrate and which exhibit an opportunity to improve or sustain returns through hair salon services.
There can be no assurance that the Company will be able to compete successfully in the future, or that future competition will not have a material adverse effect on the business, operating results and financial condition of the Company.
The hair salon and personal services industry in general is highly competitive with respect to price, service, and quality. Hair salon and personal services operators also compete for high traffic sites and qualified hairdressers, personnel and managers. Our salon will compete with a large number of other salons, including national and regional salon chains, as well as with locally owned, independent salons. Many of our competitors have greater financial resources, more experience, and longer operating histories than we possess.
The Company's primary objective for fiscal year ending May 31, 2010 is to increase its existing salon sales while controlling costs. We will focus our marketing efforts on positioning our salon business based on quality services and products while maintaining affordable pricing for its customers.
The Company's other objectives for fiscal 2010 are as follows:
| | · | Improve customer value by offering a wider range services at a variety of prices, |
| | · | Introduce “special occasion” packages for Valentine’s Day, Mother’s Day, Secretary’s Day, |
| | · | Develop quality enhancements based on excellent customer service and products |
| | · | Analyze our core market and to assess its viability for market growth for additional salon locations |
Our ongoing objective is to increase sales through increased services and price promotions and effective marketing of Lid Hair Studios’ competitive attributes of quality services and value pricing.
The Company has plans to fully develop the Vancouver market area in terms of additional salon locations that will carry the same name. Management estimates that the Vancouver and surrounding cities will support additional locations while focusing on brand name recognition of Lids Hair Studios for high quality service and products and value pricing. Media advertising is important to effectively build brand awareness and enhance the positioning of the Lids Hair Studios in a very competitive Vancouver market. All of our potential growth for fiscal 2010 will be focused in the Vancouver. These development plans are highly dependent on the availability of potential sites, lease terms, financing availability and cost, and availability and quality of management and staff personnel.
Lid Hair Studio is located at 939 Davie Street, Vancouver, Canada. Davie Street is a high foot and vehicle traffic area that spans from Vancouver’s West End to Vancouver’s Yaletown areas (approximately 25 blocks). The salon is one-quarter block from the busy corner of Burrard and Davie Streets. Burrard Street is a main thorough-fare to Vancouver’s downtown business center.
The salon is approximately 832 square feet and has four stylist chairs with room to expand to six chairs. There is a front reception area with waiting area, a supply and laundry area, staff area, washroom and a private esthetics room. The salon is at street level with a coffee shop on the west side and alley on east side. There is a pay parking lot located behind the salon.
We are not aware of any legal proceedings or pending legal proceedings against us. We may however be involved, from time to time, in various legal proceedings and claims incident to the normal conduct of our business.
Item 4. Submission of Matters to a Vote of Security Holders
None to report.
Item 5. Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
The company received its trading symbol on April 9, 2007 and the company’s common stock is presently being traded on the over-the-counter market under the symbol “LHSI” and is quoted on the OTC Bulletin Board. For the periods indicated, the following table sets forth the high and low sales prices per share of our common stock. These prices represent inter-dealer quotations without retail markup, markdown, or commission and may not necessarily represent actual transactions.
| Year ended May 31, 2009: | | High | | | Low | |
| | | | | | | |
| March 1, 2009 to May 31, 2009 | | | 0.06 | | | | 0.06 | |
| December 1, 2008 to February 28, 2009 | | | 0.20 | | | | 0.06 | |
| September 1, 2008 to November 30, 2008 | | | 1.00 | | | | 0.20 | |
| June 1, 2008 to August 31, 2008 | | | 1.10 | | | | 1.00 | |
| March 1, 2008 to May 31, 2008 | | | 2.50 | | | | 1.10 | |
| December 1, 2007 to February 28, 2008 | | | 2.50 | | | | 2.50 | |
| September 1, 2007 to November 30, 2007 | | | 2.50 | | | | 0.10 | |
| March 31, 2007 to May 31, 2009 | | | 0.10 | | | | 0.10 | |
To date, none of our outstanding shares of common stock are subject to outstanding options, warrants to purchase or securities convertible into common stock. We have agreed to register shares of common stock held by existing security holders for resale with the exception of Eric Anderson’s and Mrs. Amber Fallis’s shareholdings.
Holders
As of July 15, 2009, there were 49 holders of record of Lid Hair Studios International, Inc., holding 9,300,000 shares.
Dividends
Lid Hair Studios International, Inc. has not declared, and does not foresee declaring, any dividends now or in the foreseeable future.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our consolidated audited financial statements and the related notes that appear elsewhere in this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking
statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this report.
Our consolidated audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Executive Overview
Lid Hair Studios International, Inc. (“we”, “us”, “our” or the “Company”) was incorporated in the State of Nevada on April 20, 2005 under the name Belford Enterprises, Inc. and changed its name to Lid Hair Studios International Inc. on August 15, 2005. Our operating subsidiary Belford Enterprises B.C. Ltd., doing business as Lid Hair Studio was established June 7, 2005, in the City of Vancouver, British Columbia Canada. There are no bankruptcies, receivership, or similar proceedings against the parent or operating subsidiary.
On June 18, 2005, the company purchased hair salon equipment and the rights to an office lease from Farideh Jafari in the amount of approximately $39,150 US ($45,000CDN).
On July 4, 2005 we entered into a lease agreement by way of Assignment of Lease by Tenant with Landlord’s Consent. The lease commenced July 1, 2005 and terminates June 30, 2015.
RESULTS OF OPERATIONS
Net revenues decreased year over year to $42,153 from $73,326 respectively for the year ended May 31, 2009 versus May 31, 2008. This decrease is the result of a change to principally chair rental revenues and reduced discretionary customer spending due to the global recession.
We realized a net loss of $56,094 for the fiscal year ended May 31, 2009, compared to a net loss of $76,985 for the fiscal year ended May 31, 2008. The decrease in our net loss was due to management’s efforts to conserve cash and reduce non-essential expenditures.
Sales refer to our gross profit – Sales less Cost of Sales. Our gross profit decreased from $73,326 for the year ended May 31, 2008 to $42,153 for the year ended May 31, 2009.
Our operating expenses are classified into several categories, including:
| | § | Amortization and depreciation |
| | § | Other Administrative Expenses |
Professional Fees consist primarily of our contracted accounting, legal and audit fees. These amounted to $41,138 for the year ended May 31, 2009 and $41,849 for the year ended May 31, 2008. Professional fees are attributable primarily to accounting, legal and audit fees for preparation and review of our filings with the Securities & Exchange Commission (SEC) in 2009.
Amortization and depreciation expense charged to operations was $5,741 and $7,462 in 2009 and 2008, respectively.
Other Administrative Expenses refers to our wages, director’s fees, office supplies, telephone expenses, bank charges, fees to process and file documents with the SEC, stock transfer fees and corporate filing fees with the State of Nevada and other administrative expenses. These amounted to $51,368 for the year ended May 31, 2009, and $101,000 for the year ended May 31, 2008 respectively. The decrease in 2009 versus 2008 is attributable primarily to a decrease in wages expenses and directors’ fees.
The overall decrease in expenses for 2009 is due to LID’s efforts to reduce costs and conserve cash.
We achieved comprehensive income of $3,938 in 2009 (2008: $3,359) as a result of the translation of LID’s revenues and expenses from $CDN to $US.
OPERATIONS OUTLOOK
We are incorporating the following strategy to our future objectives:
| | · | Expand our salon operations through: |
• the addition and development of additional Lid Hair Studios with additional locations in our existing market by 2010;
• the possible acquisition or development of salons operating under other names;
| | · | Improve our profitability by continuing to enhance the salon services for our clients and improving operating efficiency of our salon brand; |
| | · | Focus on improving efficiency and utilizing creative and aggressive marketing initiatives |
During the next twelve months, we intend to continue to make efforts to increase the number of clients and increase the number of salons. Net income may not be recognized until 2010 depending on the tenant improvements and commencement of leases and close dates for sales.
Over the next twelve months we expect to fill the remaining chairs in the operating salon.
We are currently actively seeking new acquisitions and looking for a suitable location to start a new salon.
We cannot predict with certainty what revenues we can expect during the next twelve months, although we believe that we probably will have enough revenue, when added to our cash on hand, to pay our operating expenses, including our debt service, for the next twelve months. In addition, there can be no assurance that any of our current or future projects will be a commercial success. However, significant capital resources will be required to fund our development expenditures. Since our performance continues to be dependent on future cash flows from real estate sales and rental income, there can be no assurance that we will generate sufficient cash flow or otherwise obtain sufficient funds from other sources to meet the expected development plans for our properties. We anticipate that we will seek to raise additional capital to expand our operations, although we cannot guarantee that we will be able to raise that capital on terms acceptable to us or at all.
Liquidity and Capital Resources
On May 31, 2009, we had a working capital deficiency of $68,246 and stockholders’ deficiency of $38,112. Also, at May 31, 2009, we had cash of $5,580, total assets of $36,472 and total liabilities of $74,584. On May 31, 2008, we had a working capital deficiency $17,671 and stockholders’ equity of $21,920. Also, at May 31, 2008, we had cash of $6,917, total assets of $47,848 and total liabilities of $25,928.
A substantial portion of our total liabilities consists of amounts due to a shareholder. At May 31, 2009, we had amounts due to a shareholder of $51,261, and accounts payable and accrued liabilities of $23,323. At May 31, 2008, we had amounts due to a shareholder of $11,009 and accounts payable and accrued liabilities of $14,919.
For the year ended May 31, 2009, cash used by operating activities was $41,416. Cash used by operating activities for the year ended May 31, 2008 was $81,840.
No cash was used or provided by investing activities in the 2009 or 2008 fiscal years.
Net cash provided by financing activities for the year ended May 31, 2009 was $40,252. Cash provided by financing activities for the year ended May 31, 2008 was $10,067. The change in cash provided by financing activities is due to a director’s loan was in the 2009 fiscal year.
Other Information - Certain Relationships and Related Transactions
To date, several related party transactions have taken place, in addition to the transactions described above with the sole director/officer, Eric Anderson. We believe that any transactions between us and our officers, directors, principal stockholders, affiliates or advisors have been or will be on terms no less favorable to us than those reasonably obtainable from third parties. As of May 31, 2009, there are no advances to officers and employees. There is a shareholder loan of $51,261. Loan from the shareholder represents a temporary short-term loan from Eric Anderson. This loan is unsecured, non-interest bearing and have no fixed terms of repayment, therefore, deemed payable on demand.
Recent Accounting Pronouncements
There were various accounting standards and interpretations issued during 2009 and 2008, none of which are expected to have a material impact on the Company’s consolidated financial position, operations or cash flows.
Off-Balance Sheet Arrangements
We are not currently a party to, or otherwise involved with, any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
Item 8. Financial Statements AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
LID HAIR STUDIOS INTERNATIONAL, INC.
CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 2009
US FUNDS
F-1
Report of Independent Registered Public Accounting Firm
Board of Directors
Lid Hair Studios International, Inc.
We have audited the accompanying balance sheets of Lid Hair Studios International, Inc., as of May 31, 2009 and 2008, and the related statements of operations, stockholders' equity (deficit), and cash flows for the two years ended May 31, 2009 and 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Lid Hair Studios International, Inc. as of May 31, 2009 and 2008, and the results of its operations and cash flows for the two years ended May 31, 2009 and 2008, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2, the Company has a working capital deficit and stockholders’ deficit, and has recurring losses from operations, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to this matter are also discussed in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
SCHUMACHER & ASSOCIATES, INC.
Denver, Colorado
August 20, 2009
F-2
LID HAIR STUDIOS INTERNATIONAL, INC.
| ASSETS | | May 31 2009 | | | May 31 2008 | |
| Current | | | | | | |
| Cash | | $ | 5,580 | | | $ | 6,917 | |
| Inventory | | | 758 | | | | 1,340 | |
| Total Current Assets | | | 6,338 | | | | 8,257 | |
Property and equipment, net of depreciation (Note 7) | | | 19,086 | | | | 25,924 | |
Lease rights, net of amortization (Note 8) | | | 9,487 | | | | 12,155 | |
| Prepaid expenses and deposits | | | 1,561 | | | | 1,512 | |
| Total Assets | | $ | 36,472 | | | $ | 47,848 | |
| | | | | | | | | |
| LIABILITIES | | | | | | | | |
| Current | | | | | | | | |
| Accounts payable | | $ | 9,873 | | | $ | 3,919 | |
| Accrued liabilities | | | 13,450 | | | | 11,000 | |
Due to shareholder (Note 5a) | | | 51,261 | | | | 11,009 | |
| Total Current Liabilities | | | 74,584 | | | | 25,928 | |
| | | | | | | | | |
Commitments and contingencies (Notes 2, 5, 6 ,8 and 9) | | | | | | | | |
| | | | | | | | | |
| STOCKHOLDERS’ EQUITY (DEFICIT) | | | | | | | | |
Capital Stock (Note 4) | | | | | | | | |
| Authorized: 75,000,000 common shares at $0.001 par value | | | | | | | | |
| Issued, allotted and outstanding: 9,300,000 common shares | | | 9,300 | | | | 9,300 | |
| Additional paid-in capital | | | 227,200 | | | | 227,200 | |
| Accumulated comprehensive income | | | 1,233 | | | | 5,171 | |
| Accumulated Deficit | | | (275,845 | ) | | | (219,751 | ) |
| Total Stockholders’ Equity (Deficit) | | | (38,112 | ) | | | 21,920 | |
| Total Liabilities and Stockholders’ (Deficit) | | $ | 36,472 | | | $ | 47,848 | |
The accompanying notes are an integral part of these consolidated financial statements
F-3
LID HAIR STUDIOS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTOF
| | | Common Stock | | | Additional Paid-in | | | | | | Accumulated Comprehensive | | | Total Stockholders’ Equity | |
| | | Shares | | | Amount | | | Capital | | | Deficit | | | Income (Loss) | | | (Deficiency) | |
| | | | | | | | | | | | | | | | | | | |
| Balance – May 31, 2007 | | | 9,300,000 | | | $ | 9,300 | | | $ | 227,200 | | | $ | (142,766 | ) | | $ | 1,812 | | | $ | 95,546 | |
| | | | | | | �� | | | | | | | | | | | | | | | | | | |
| Loss for the year ended May 31, 2008 | | | - | | | | - | | | | - | | | | (76,985 | ) | | | - | | | | (76,985 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Foreign currency translation adjustment | | | - | | | | - | | | | - | | | | - | | | | 3,359 | | | | 3,359 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance - May 31, 2008 | | | 9,300,000 | | | | 9,300 | | | | 227,200 | | | | (219,751 | ) | | | 5,171 | | | | 21,920 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Loss for the year ended May 31, 2009 | | | - | | | | - | | | | - | | | | (56,094 | ) | | | - | | | | (56,094 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Foreign currency translation Adjustment | | | - | | | | - | | | | - | | | | - | | | | (3,938 | ) | | | (3,938 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Balance - May 31, 2009 | | | 9,300,000 | | | $ | 9,300 | | | $ | 227,200 | | | $ | (275,845 | ) | | $ | 1,233 | | | $ | (38,112 | ) |
The accompanying notes are an integral part of these consolidated financial statements
F-4
LID HAIR STUDIOS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS Statement 3
| | | May 31, 2009 | | | May 31, 2008 | |
| REVENUE | | | | | | |
| Hair salon services | | $ | 41,112 | | | $ | 70,882 | |
| | | | | | | | | |
| Retail sales | | | 2,633 | | | | 6,109 | |
| Cost of goods sold | | | (1,592 | ) | | | (3,665 | ) |
| Gross profit from retail sales | | | 1,041 | | | | 2,444 | |
| Net revenue | | | 42,153 | | | | 73,326 | |
| | | | | | | | | |
| EXPENSES | | | | | | | | |
| Advertising and promotion | | | 126 | | | | 96 | |
| Amortization and depreciation | | | 5,741 | | | | 7,462 | |
| Directors’ fees | | | 3,000 | | | | 27,300 | |
| Insurance | | | 970 | | | | 1,109 | |
| Interest and bank charges | | | 2,117 | | | | 2,308 | |
| Professional fees | | | 41,138 | | | | 41,849 | |
| Rent | | | 16,226 | | | | 18,359 | |
| Supplies | | | 3,471 | | | | 4,746 | |
| Telephone | | | 481 | | | | 420 | |
| Transfer agent and printing | | | 5,922 | | | | 1,720 | |
| Utilities | | | 2,410 | | | | 3,285 | |
| Wages | | | 16,645 | | | | 41,657 | |
| | | | 98,247 | | | | 150,311 | |
| | | | | | | | | |
| NET LOSS FOR THE YEAR | | $ | (56,094 | ) | | $ | (76,985 | ) |
| | | | | | | | | |
| | | | | | | | | |
| Weighted average shares outstanding | | | 9,300,000 | | | | 9,300,000 | |
| | | | | | | | | |
| Loss per share | | $ | (0.01 | ) | | $ | (0.01 | ) |
| | | | | | | | | |
Other Comprehensive Loss: | | | | | | | | |
| Net loss for the year | | $ | (56,094 | ) | | $ | (76,985 | ) |
| Foreign currency translation adjustment | | | 3,938 | | | | (3,359 | ) |
| | | $ | (52,156 | ) | | $ | (80,344 | ) |
The accompanying notes are an integral part of these consolidated financial statements
F-5
LID HAIR STUDIOS INTERNATIONAL, INC.
| Cash Flows from (Used By): | | May 31, 2009 | | | May 31, 2008 | |
| OPERATING ACTIVITIES | | | | | | |
| Net loss for the year | | $ | (56,094 | ) | | $ | (76,985 | ) |
| Items not involving cash: | | | | | | | | |
| Amortization and depreciation | | | 5,741 | | | | 7,462 | |
| | | | (50,353 | ) | | | (69,523 | ) |
| Changes in non-cash working capital: | | | | | | | | |
| Prepaid expenses and deposits | | | (49 | ) | | | 7,386 | |
| Inventory | | | 582 | | | | 8 | |
| Accounts payable and accrued liabilities | | | 8,404 | | | | (19,711 | ) |
| | | | (41,416 | ) | | | (81,840 | ) |
| | | | | | | | | |
| | | | | | | | | |
| FINANCING ACTIVITY | | | | | | | | |
| Due to (from) shareholder | | | 40,252 | | | | 10,067 | |
| | | | | | | | | |
| Foreign Currency Adjustment | | | (173 | ) | | | 61 | |
| | | | | | | | | |
| Decrease in Cash | | | (1,337 | ) | | | (71,712 | ) |
| Cash – Beginning of year | | | 6,917 | | | | 78,629 | |
| CASH – END OF YEAR | | $ | 5,580 | | | $ | 6,917 | |
| | | | | | | | | |
| SUPPLEMENTAL CASH FLOW INFORMATION | | | | | | | | |
| Interest paid | | $ | - | | | $ | - | |
| Income taxes paid | | $ | - | | | $ | - | |
| | | | | | | | | |
| SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | | | | | | | | |
| Foreign currency translation adjustment included in property and equipment | | $ | 3,765 | | | $ | 3,298 | |
| Purchase of property and equipment funded by shareholder | | $ | - | | | $ | - | |
The accompanying notes are an integral part of these consolidated financial statements
F-6
LID HAIR STUDIOS INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (EXPRESSED IN UNITED STATES DOLLARS)
1. SUMMARY OF SIGNFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of the Company is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management who are responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles in the United States of America and have been consistently applied in the preparation of the financial statements.
Organization and Description of Business
Belford Enterprises, Inc. (the “Company”) was incorporated in the State of Nevada on April 20, 2005. On August 15, 2005, the Company changed its name to Lid Hair Studios International, Inc. to reflect its business plan, which is to open a nationwide chain of hair salons.
On June 7, 2005, the Company incorporated a wholly-owned subsidiary, Belford Enterprises B.C. Ltd., in the Province of British Columbia, Canada. On June 18, 2005, the Company, through its subsidiary, purchased hair salon equipment and commenced operations in the hair salon and personal services business and provides related personal services including but not limited to hair cuts, permanents, styling, manicures, and pedicures.
Principles of Consolidation
The consolidated financial statements include the accounts of both Lid Hair Studios International, Inc. and Belford Enterprises B.C. Ltd. All inter-company accounts have been eliminated in the consolidation.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid debt instruments purchased with an initial maturity of three months or less.
Risks and Uncertainties
The Company's operations are subject to significant risks and uncertainties, including financial, operational and other risks associated with operating an emerging business, including the potential risk of business failure.
Concentrations
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. At May 31, 2009, the Company had $4,957 (May 31, 2008: $3,780) of cash or cash equivalents which are not insured by agencies of the U.S. Government.
Since the Company's business is principally in one area, this concentration of operations results in an associated risk and uncertainty.
Inventory
Inventory is stated at the lower of cost or market. Cost includes all costs of purchase, cost of conversion and other costs incurred in bringing the inventory to its present location and condition, and is calculated using the weighted average method.
F-7
LID HAIR STUDIOS INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
1. SUMMARY OF SIGNFICANT ACCOUNTING POLICIES - Continued
Foreign Currency Translations
The Company’s functional currency is the Canadian dollar. The Company’s reporting currency is the U.S. dollar. All transactions initiated in other currencies are re-measured into the functional currency as follows:
Monetary assets and liabilities at the rate of exchange in effect at the balance sheet date,
ii) Non-monetary assets and liabilities, and equity at historical rates, and
iii) Revenue and expense items at the average rate of exchange prevailing during the period.
Gains and losses on re-measurement are included in determining net income for the period.
Translation of balances from the functional currency into the reporting currency is conducted as follows:
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.
Translation adjustments resulting from translation of balances from functional to reporting currency are accumulated as a separate component of shareholders’ equity as a component of comprehensive income or loss.
Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable or at least at the end of each reporting period. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or a significant adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable. For long-lived assets to be held and used, management measures fair value based on quoted market prices or based on discounted estimates of future cash flows.
Loss per Share
The Company computes net loss per common share using SFAS No. 128 "Earnings Per Share." Basic loss per common share is computed based on the weighted average number of shares outstanding for the period. Diluted loss per share is computed by dividing net loss by the weighted average shares outstanding assuming all dilutive potential common shares were issued. There were no dilutive potential common shares at May 31, 2009. The Company has incurred a net loss and has no potentially dilutive common shares, therefore; basic and diluted loss per share is the same. Additionally, for the purposes of calculating diluted loss per share, there were no adjustments to net loss.
Advertising
The Company expenses the cost of advertising when incurred. Advertising expenses are included with marketing and promotion in selling, general and administrative expenses in the accompanying statements of operations.
F-8
LID HAIR STUDIOS INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
1. SUMMARY OF SIGNFICANT ACCOUNTING POLICIES - Continued
Segment Reporting
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", changed the way public companies report information about segments of their business in their quarterly reports issued to stockholders. It also requires entity-wide disclosures about the products and services an entity provides, the material countries in which it holds assets and reports revenues and its major customers.
The Company is currently operating in one geographical segment, being Canada.
Derivative Financial Instruments
The Company was not a party to any derivative financial instruments during the reported fiscal periods.
Stock-Based Compensation
The Company accounts for stock-based compensation issued to employees based on SFAS No. 123R “Share Based Payment”. SFAS No. 123R is a revision of SFAS No. 123 “Accounting for Stock-Based Compensation”, and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees” and its related implementation guidance. SFAS 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. SFAS 123R focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS 123R does not change the accounting guidance for share-based payment transactions with parties other than employees provided in SFAS 123 as originally issued and Emerging Issues Task Force Issue No. 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services”. SFAS 123R does not address the accounting for employee share ownership plans, which are subject to AICPA Statement of Position 93-6, “Employers’ Accounting for Employee Stock Ownership Plans”.
SFAS 123R requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award – the requisite service period (usually the vesting period). SFAS 123R requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued.
As at May 31, 2009, the Company had no stock-based compensation plans nor had it granted options to employees. No stock-based employee compensation cost is reflected in net loss, as no options had been granted.
Revenue Recognition
Revenues are recognized in accordance with SEC Staff Accounting Bulletin (SAB) No. 104, "Revenue Recognition." Under SAB 104, product revenues (or service revenues) are recognized when persuasive evidence of an arrangement exists, delivery has occurred (or service has been performed), the sales price is fixed and determinable and collectability is reasonably assured.
The Company's revenues are derived principally from hair styling fees, sales of hair products and other related charges. Revenue is recognized from services when performed and billed.
F-9
LID HAIR STUDIOS INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
1. SUMMARY OF SIGNFICANT ACCOUNTING POLICIES - Continued
Use of Estimates
The preparation of the Company's financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates.
Estimated Fair Value of Financial Instruments
The carrying values of cash, accounts payable, accrued liabilities, and due to shareholder reflected in the financial statements approximates their fair value due to the short-term maturity of the instruments.
Comprehensive Income (Loss)
The Company has adopted Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income". SFAS 130 requires that the components and total amounts of comprehensive income be displayed in the financial statements beginning in 1998. Comprehensive income includes net income and all changes in equity during a period that arises from non-owner sources, such as foreign currency items and unrealized gains and losses on certain investments in equity securities.
Income Taxes
The Company records deferred taxes in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." The statement requires recognition of deferred tax assets and liabilities for temporary differences between the tax bases of assets and liabilities and the amounts at which they are carried in the financial statements, based upon the enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.
Start-up Costs
The Company has adopted Statement of Position No. 98-5 ("SOP 98-5"), "Reporting the Costs of Start-Up Activities." SOP 98-5 requires that all non-governmental entities expense the cost of start-up activities, including organizational costs as those costs are incurred.
Other
The Company's fiscal year end is May 31.
The Company paid no dividends during the year presented.
The Company’s operating assets are principally located in Canada.
F-10
LID HAIR STUDIOS INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
2. Basis of Presentation - Going Concern
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, 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 of May 31, 2009, the Company had a working capital deficit and a stockholders’ deficit, and has recurring losses from operations which raises substantial doubt about the Company’s ability to continue as a going concern. 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 May 31, 2010.
In response to these problems, management has taken the following actions:
· The Company’s SB-2 Registration Statement has become effective, and
· Management intends to raise additional funds through public or private placement offerings.
There is no assurance that the Company will be able to raise sufficient funds to complete its business plan. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
3. Recent Accounting Pronouncements
There were various accounting standards and interpretations issued during 2009 and 2008, none of which are expected to have a material impact on the Company’s consolidated financial position, operations or cash flows.
| a) | On May 11, 2005, the Company issued 5,000,000 common shares at $0.005 to its sole shareholder for $25,000. These shares were issued during the period ended May 31, 2005. |
| | |
| b) | On June 20, 2005, the Company issued 2,300,000 common shares at $0.005 per share to various shareholders for total cash consideration of $11,500. |
| | |
| c) | On July 31, 2006, the Company issued 2,000,000 common shares at $0.10 per share to various shareholders for total cash consideration of $200,000. |
5. Related Party Balances and Transactions
| a) | As of May 31, 2009, the amount due to shareholder of $51,261 (May 31, 2008: $11,009) is uncollateralized, non-interest bearing and due on demand. |
| | |
| b) | During the year ended May 31, 2009, the Company paid a former director and officer of the Company $12,930 in wages and director’s fees (2008: $47,605). |
F-11
LID HAIR STUDIOS INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
6. Commitments
On July 4, 2005, the Company, through its wholly owned subsidiary, as the assignee, signed an agreement for the assignment of lease by tenant with landlord’s consent. The lease is personally guaranteed by the President of the Company. The assigned lease was amended and renewed by the previous tenant on July 1, 2005 for an additional term of nine (9) years commencing on July 1, 2006 and ending on June 30, 2015. The monthly rental payments from July 1, 2005 to June 30, 2015 are as follows:
| Periods | | Monthly Rental Payment | |
| July 1, 2005 to June 30, 2006 | | $ | 1,407 | |
| July 1, 2006 to June 30, 2009 | | $ | 1,407 | |
| July 1, 2009 to June 30, 2015 | | $ | 1,543 | |
Future minimum lease payments are as follows:
| Year ending May 31, | | Future minimum lease payments | |
| 2010 | | $ | 18,516 | |
| 2011 | | $ | 18,516 | |
| 2012 | | $ | 18,516 | |
| 2013 | | $ | 18,516 | |
| Thereafter | | $ | 38,575 | |
| | | $ | 112,639 | |
7. Property and Equipment
The Company applies the following depreciation policies:
| Leasehold improvements | 9 years straight line |
| Furniture and equipment | 20% declining balance over 5 years |
| Computer equipment | 30% declining balance over 3 years |
| | | May 31, 2009 | | | May 31, 2008 | |
| | | Cost | | | Accumulated Depreciation | | | Net Book Value | | | Cost | | | Accumulated Depreciation | | | Net Book Value | |
| | | | | | | | | | | | | | | | | | | |
| Leasehold improvements | | $ | 9,970 | | | $ | 3,876 | | | $ | 6,094 | | | $ | 10,970 | | | $ | 3,047 | | | $ | 7,923 | |
| Furniture and equipment | | | 26,745 | | | | 14,423 | | | | 12,322 | | | | 29,427 | | | | 12,478 | | | | 16,949 | |
| Computer equipment | | | 2,291 | | | | 1,621 | | | | 670 | | | | 2,521 | | | | 1,469 | | | | 1,052 | |
| | | $ | 39,006 | | | $ | 19,920 | | | $ | 19,086 | | | $ | 42,918 | | | $ | 16,994 | | | $ | 25,924 | |
F-12
LID HAIR STUDIOS INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
On June 18, 2005, the Company entered into an Agreement of Purchase and Sale of Equipment to purchase furniture and equipment and obtain an assignment of lease for approximately $40,000 ($45,000 Canadian $). According to FASB 141, the purchase price was allocated first to the fair market value of the fixed assets, and then to the intangible rights to the lease received. A total of $25,403 was allocated to furniture and equipment, and the balance of $14,375 to lease rights. The lease rights are being amortized over ten years through June 30, 2015, the remaining life of the lease. Amortization expense for the year ended May 31, 2009 was $1,483 (2008: $1,680). The net book value of the lease rights at May 31, 2009 was $9,487 (May 31, 2008: $12,155).
Estimated future amortization expense:
| Year ending May 31, | | Future estimated amortization expense | |
| 2010 | | $ | 1,438 | |
| 2011 | | $ | 1,438 | |
| 2012 | | $ | 1,438 | |
| 2013 | | $ | 1,438 | |
| Thereafter | | $ | 3,735 | |
| | | $ | 9,487 | |
The Company is subject to foreign and domestic income taxes. The Company has had no income, and therefore has paid no income tax.
Deferred income taxes arise from temporary timing differences in the recognition of income and expenses for financial reporting and tax purposes. The Company’s deferred tax assets consist entirely of the benefit from net operating loss (NOL) carryforwards. The net operating loss carry forwards expire in various years through 2029. The Company’s deferred tax assets are offset by a valuation allowance due to the uncertainty of the realization of the net operating loss carryforwards. Net operating loss carryforwards may be further limited by a change in company ownership and other provisions of the tax laws.
The Company’s deferred tax assets, valuation allowance, and change in valuation allowance are as follows:
| | | Estimated NOL Carry- Forward | | NOL Expires | | Estimated Tax Benefit from NOL | | | Valuation Allowance | | | Change in Valuation Allowance | | | Net Tax Benefit | |
| May 31, 2008 | | | 219,751 | | Various | | | 54,938 | | | | (54,938 | ) | | | (19,247 | ) | | | - | |
| May 21, 2009 | | | 275,845 | | Various | | | 68,961 | | | | (68,961 | ) | | | (14,024 | ) | | | - | |
Income taxes at the statutory rate are reconciled to the Company’s actual income taxes as follows:
| Income tax benefit at statutory rate resulting from net operating loss carryforward | | | (25 | %) |
| Deferred income tax valuation allowance | | | 25 | % |
| Actual tax rate | | | 0 | % |
F-13
Item 9. Changes in and disagreements with Accountants on Accounting and Financial Disclosure
There have been no disagreements on accounting and financial disclosures from the inception of the Company through to the date of this Report.
Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of May 31, 2009, these disclosure controls and procedures were effective to ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported, within the time periods specified in the Commission’s rule and forms; and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
There have been no material changes in internal control over financial reporting that occurred during the fourth fiscal quarter that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the Chief Executive Officer and Chief Financial Officer and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Our evaluation of internal control over financial reporting includes using the COSO framework, an integrated framework for the evaluation of internal controls issued by the Committee of Sponsoring Organizations of the Treadway Commission, to identify the risks and control objectives related to the evaluation of our control environment.
Based on our evaluation under the frameworks described above, our management has concluded that our internal control over financial reporting was not effective as of May 31, 2009 as a result of the material weakness described below.
A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
Our management, including our chief executive officer who is also chief financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
The Company's management has identified a material weakness in the effectiveness of internal control over financial reporting related to a shortage of resources in the accounting department required to close its books and records effectively at each reporting date, obtain the necessary information from operational departments and to complete the work necessary to file its financial reports timely.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation requirements by the company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.
None to Report.
Item 10. Directors, Executive Officers and Corporate Governance
The following table sets forth certain information as of July 15, 2009.
Executive Compensation
The following table sets forth the salaries and directors’ fees we expect to pay to our executives on an annual basis.
| Person | | Age | | Position | | Term |
| | | | | | | |
Mr. Eric Steven Anderson (1) | | 41 | | President & Director | | 1 Year |
| | (1) | Mr. Eric Steven Anderson is the President and Director of Lid Hair Studios International, Inc. |
We do not have an audit committee, nor do we have a compensation committee. We anticipate forming these committees at a future Board of Directors’ meeting.
Chairman, Chief Executive Officer, President, Chief Financial Officer and Chief Accounting Officer
Eric Steven Anderson was born February 1967, in Canada. Mr. Anderson in addition to his obligations at Lid Hair Studios, is a Subway Restaurant franchisee from October 2004 to present. Prior to October 2004, Mr. Anderson was the proprietor of a personal fitness training company, “Physical Intensity” based in Vancouver, Canada since November 1995. During this same period, Mr. Anderson held positions at different nightclubs in Vancouver, Canada: November 1995 – August 1998 – Bartender at Big Bam Boo, Vancouver; August 1998 – January 2000 – Manager at On the Rox, Vancouver; January 2000 – August 2002 – Bartender at Au Bar, Vancouver.
Mr. Anderson resides in Rio de Janeiro, Brazil however he has daily contact with the Lid Hair Studios on a daily basis via telephone, email and fax.
None of the directors and officers is related to any other director or officer of the Company.
To the knowledge of the Company, our officer or director has not been personally involved in any bankruptcy or insolvency proceedings. To the knowledge of the Company, our director or officer has not convicted in any criminal proceedings (excluding traffic violations and other minor offenses) or are the subject of a criminal proceeding which is presently pending, nor have such persons been the subject of any order, judgment, or decree of any court of competent jurisdiction, permanently or temporarily enjoining them from acting as an investment advisor, underwriter, broker or dealer in securities, or as an affiliated person, director or insurance company, or from engaging in or continuing in any conduct or practice in connection with any such activity or in connection with the purchase or sale of any security, nor were any of such persons
the subject of a federal or state authority barring or suspending, for more than 60 days, the right of such person to be engaged in any such activity, which order has not been reversed or suspended.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers, and persons who own more than ten percent of the Company’s Common Stock, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes of ownership of Common Stock of the Company. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
Based solely on the Company’s review of such forms received by it, or written representations from certain of such persons, the Company believes that, with respect to the year ended May 31, 2009, all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied.
Code of Ethics
We have adopted a Code of Ethics and Business Conduct that applies to our Chief Executive Officer and Chief Financial Officer, which was filed as Exhibit 14.1 to our annual report on Form 10-K for the fiscal year ended May 31, 2009. Upon request, we will provide to any person without charge a copy of our Code of Ethics.
The following table sets forth the salaries and directors’ fees paid to our executives on an annual basis.
Executive Compensation
The following table sets forth the salaries and directors’ fees we expect to pay to our executives on an annual basis.
| Person | | Position | | Salary | | | Directors’ fees | |
| | | | | | | | | |
Mr. Eric Steven Anderson (1) | | President & Director | | $ | 0.00 | | | $ | 0.00 | * |
| | | | | | | | | | | |
| (1) Mr. Eric Steven Anderson is the President and Director of Lid Hair Studios International, Inc.; | | | | | |
We do not have an audit committee, nor do we have a compensation committee. We anticipate forming these committees at a future Board of Directors’ meeting.
| Person | | Director’s Position | | Stock Based Salary | | | Fees | | | Compensation | | | Total | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| Eric Steven Anderson | | Chair, CEO, CFO, CAO | | | 0 | | | | 0 | | | | 0 | | | $ | 8,500 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 8,500 | |
We currently have one director.
Outstanding Equity Awards at Fiscal Year-End
Our named executive officers in the Summary Compensation Table have not been granted any stock options or other stock awards to date.
Compensation of Directors
At the present time, directors receive no cash compensation for serving on the Board of Directors. Directors are reimbursed for their reasonable out-of-pocket expenses incurred in connection with their duties.
Employment Agreements
None of our officers and key employees are presently bound by employment agreements. We do not have any termination or change in control arrangements with any of our named executive officers.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of March 31, 2009, certain information with regard to the record and beneficial ownership of the Company’s Common Stock by (i) each stockholder owning of record or beneficially 5% or more of the Company’s Common Stock, (ii) each director of the Company, (iii) the Company’s Chief Executive Officer and other executive officers named in the Summary Compensation Table under “Executive Compensation”, and (iv) all officers and directors of the Company as a group:
| | | Amount and Nature | | Percent |
| Name of Beneficial Owner | | of Beneficial Ownership | | of Class |
| | | | | |
| Eric Anderson * | | 5,000,000 | | 54.35% |
| * | Mr. Anderson’s shares are not registered. |
Item 13. Certain Relationships and Related Transactions
To date, several related party transactions have taken place, in addition to the transactions described above with the sole director/officer, Eric Anderson. We believe that any transactions between us and our officers, directors, principal stockholders, affiliates or advisors have been or will be on terms no less favorable to us than those reasonably obtainable from third parties. To date, several related party transactions have occurred. These are described in note 5 of the financial statements.
Item 14. Principal Accounting Fees and Services
The following is a summary of the fees billed to us by the principal accountants to the Company for professional services rendered for the fiscal years ended May 31, 2009 and May 31, 2008:
| Fee Category | | 2009 Fees | | | 2008 Fees | |
| | | | | | | |
| Audit Fees | | $ | 13,450 | | | $ | 13,000 | |
| Audit Related Fees | | $ | - | | | $ | - | |
| Tax Fees | | $ | - | | | $ | - | |
| All Other Fees | | $ | - | | | $ | - | |
| | | | | | | | | |
| Total Fees | | $ | 13,450 | | | $ | 13,000 | |
Audit Fees. This consists of fees billed for professional services rendered for the audit of our financial statements and review of interim consolidated financial statements included in quarterly reports and services that are normally provided by the principal accountants in connection with statutory and regulatory filings or engagements.
Audit Related Fees. This consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees”.
Tax Fees. This consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include preparation of federal and state income tax returns.
All Other Fees. Consists of fees for product and services other than the services reported above.
Although our audit fees have increased because we are a reporting company and filing the requisite quarterly and annual reports with the Securities and Exchange Commission, many of these same expenses have been incurred to date due to our merger, and during the last fiscal year we have had two full audits performed whereas only one would be done in a typical year. However, we are aware that audit fees have generally increased as a function of the increased reporting requirements mandated by the recently enacted Sarbanes-Oxley Act. We are also optimistic that our business activities will increase, which will require auditing procedures over a greater transaction base.
Exhibits
(a) Audited Consolidated Financial Statements (included in Part 11 of this Report):
(b) None
(c) Exhibit
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | LID HAIR STUDIOS INTERNATIONAL INC. | |
| | | (Registrant) | |
| | | | |
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| | By: | /s/ Eric Anderson | |
| | | Eric Anderson, Chief Executive Officer, | |
| | | Chief Financial Officer & Chief Accounting Officer | |
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| | Date: | August 28, 2009 | |
