UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended November 30, 2010
OR
| ¨ | TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________________________ to ___________________________
Commission file number: 000-52062
GRACE 2, INC.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 20-3708500 | |
| (State of Other Jurisdiction of Incorporation or | (I.R.S. Employer Identification Number) | |
| Organization) |
735 Broad Street, Suite 400 Chattanooga, TN | 37402 | |
| (Address of Principal Executive Offices) | (Zip Code) |
(423) 265-5062
(Registrant’s Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)
Copies to:
The Sourlis Law Firm
Joseph M. Patricola, Esq.
The Courts of Red Bank
130 Maple Avenue, Suite 9B2
Red Bank, New Jersey 07701
(732) 530-9007
www.SourlisLaw.com
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” "non-accelerated filer" and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | ¨ | Accelerated filer | ¨ |
| Non-accelerated filer | ¨ | 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 x No o
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
As of July 14, 2011, there were 100,000 shares of common stock outstanding and no shares of preferred stock outstanding.
TABLE OF CONTENTS
| Page | ||
| PART I – FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 3 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Plan of Operations | 10 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 12 |
| Item 4. | Controls and Procedures | 12 |
| PART II – OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 13 |
| Item 1A. | Risk Factors | 13 |
| Item 2. | Unregistered Sale of Equity Securities and Use of Proceeds | 13 |
| Item 3. | Defaults Upon Senior Securities | 13 |
| Item 4. | Submission of Matters to a Vote of Security Holders | 14 |
| Item 5. | Other Information | 14 |
| Item 6. | Exhibits | 15 |
| SIGNATURES | 16 | |
2
PART I
Item 1. Financial Statements.
GRACE 2, INC.
A DEVELOPMENT STAGE COMPANY
November 30, 2010
| 11/30/2010 | 05/31/2010 | |||||||
| (Unaudited) | (Audited) | |||||||
| Current Assets | ||||||||
| Cash | $ | - | $ | - | ||||
| Total Assets | $ | - | $ | - | ||||
| Liabilities And Stockholders' Deficit | ||||||||
| Current Liabilities | ||||||||
| Accounts Payable | $ | 5,500 | $ | 4,725 | ||||
| Accrued Expenses (Professional fees) | $ | 17,000 | $ | 9,000 | ||||
| Due to Shareholder | $ | 20,425 | $ | 25,050 | ||||
| Note Payable | $ | - | $ | - | ||||
| Total liabilities | $ | 42,925 | $ | 38,775 | ||||
| Stockholders' Equity (Deficit) | ||||||||
| Preferred stock, $.0001 par value, authorized 10,000000 shares, none issued | $ | - | $ | - | ||||
| Common stock, $.0001 par value, authorized 10,000,000 shares, 100,000 issued and outstanding | $ | 10 | $ | 10 | ||||
| Additional Paid-in Capital | $ | 9,784 | $ | 9,784 | ||||
| Accumulated Deficit | $ | (52,719 | ) | $ | (48,569 | ) | ||
| Total Stockholders' Equity (Deficit) | $ | (42,925 | ) | $ | (38,775 | ) | ||
| Total Liabilities & Stock Holders' Equity (Deficit) | $ | - | $ | - | ||||
See accompanying notes to financial statements.
3
GRACE 2, INC.
A DEVELOPMENT STAGE COMPANY
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD OCTOBER 27, 2005 (INCEPTION) TO NOVEMBER 30, 2010
(Unaudited)
| Deficit | ||||||||||||||||||||
| Accumulated | ||||||||||||||||||||
| Additional | During the | Stockholders' | ||||||||||||||||||
| Common Stock | Paid-In | Development | Equity | |||||||||||||||||
| Shares | Amount | Capital | Stage | (Deficit) | ||||||||||||||||
| Balance-October 27, 2005 | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
| Issuance of common shares | 100,000 | 10 | 90 | - | 100 | |||||||||||||||
| Net (loss) | - | - | - | (100 | ) | (100 | ) | |||||||||||||
| Balance, June 02, 2006(1) | 100,000 | 10 | 90 | (100 | ) | - | ||||||||||||||
| Capital contributions-shareholder | - | - | 2,694 | - | 2,694 | |||||||||||||||
| Net(loss) | - | - | - | (5,194 | ) | (5,194 | ) | |||||||||||||
| Balance, May 31, 2007 | 100,000 | 10 | 2,784 | (5,294 | ) | (2,500 | ) | |||||||||||||
| Capital contributions-shareholder | - | 5,000 | - | 5,000 | ||||||||||||||||
| Net(loss) | (4,500 | ) | (4,500 | ) | ||||||||||||||||
| Balance, May 31, 2008 | 100,000 | 10 | 7,784 | (9,794 | ) | (2,000 | ) | |||||||||||||
| Capital contributions-shareholder | 2,000 | 2,000 | ||||||||||||||||||
| Net(loss) | (20,575 | ) | (20,575 | ) | ||||||||||||||||
| Balance, May 31, 2009 | 100,000 | 10 | 9,784 | (30,369 | ) | (20,575 | ) | |||||||||||||
| Capital contributions-shareholder | ||||||||||||||||||||
| Net(loss) | (14,388 | ) | (14,388 | ) | ||||||||||||||||
| Balance, November 30, 2009 | 100,000 | $ | 10 | $ | 9,784 | $ | (44,757 | ) | $ | (34,963 | ) | |||||||||
| Capital contributions-shareholder | ||||||||||||||||||||
| Net(loss) | (18,200 | ) | (18,200 | ) | ||||||||||||||||
| Balance, May 31, 2010 | 100,000 | $ | 10 | $ | 9,784 | $ | (48,569 | ) | $ | (38,775 | ) | |||||||||
| Capital contributions-shareholder | ||||||||||||||||||||
| Net(loss) | (2,150 | ) | (2,150 | ) | ||||||||||||||||
| Balance, August 31, 2010 | 100,000 | $ | 10 | $ | 9,784 | $ | (50,719 | ) | $ | (40,925 | ) | |||||||||
| Capital contributions-shareholder | ||||||||||||||||||||
| Net(loss) | (2,000 | ) | (2,000 | ) | ||||||||||||||||
| Balance, November 30, 2010 | 100,000 | $ | 10 | $ | 9,784 | $ | (52,719 | ) | $ | (42,925 | ) | |||||||||
| (1) | Restated for comparison purposes |
The financial information presented herein has been prepared by management without audit by independent certified public accountants.
The accompanying notes should be read in conjunction with the financial statements.
4
GRACE 2, INC.
A DEVELEOPMENT STAGE COMPANY
STATEMENT OF OPERATIONS
| 3 Month | 3 Month | 6 Month | 6 Month | For Period of (inception)October 27, 2005 to November 30, | ||||||||||||||||
11/30/2010 (Unaudited) | 11/30/2009 (Unaudited) | 11/30/2010 (Unaudited) | 11/30/2009 (Unaudited) | 2010 ( Unaudited) | ||||||||||||||||
| Sales | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
| Cost Of Goods Sold | - | - | - | - | - | |||||||||||||||
| Gross Profit | - | - | - | - | - | |||||||||||||||
| Professional Services (Accounting) | ||||||||||||||||||||
| General And Administrative | $ | 2,000 | $ | 3,525 | $ | 4,150 | $ | 14,388 | $ | 52,719 | ||||||||||
| Net Profit / (Loss) From Operations | $ | (2,000 | ) | $ | (3,525 | ) | $ | (4,150 | ) | $ | (14,388 | ) | $ | (52,719 | ) | |||||
| Per Share Information: | ||||||||||||||||||||
| Per Share Information: | ||||||||||||||||||||
| Diluted, weighted average number | ||||||||||||||||||||
| of common shares outstanding | 100,000 | 100,000 | 100,000 | 100,000 | 100,000 | |||||||||||||||
| Basic & Diluted, Net Profit / (Loss) per common share | $ | 0.020 | $ | 0.035 | $ | 0.042 | $ | 0.144 | $ | 0.527 | ||||||||||
See accompanying notes to financial statements.
5
GRACE 2, INC.
A DEVELOPMENT STAGE COMPANY
STATEMENT OF CASH FLOWS
| 3 Month | 3 Month | 6 Month | 6 Month | Year ended | October 27, 2005 (Inception) to | |||||||||||||||||||
11/30/2010 (Unaudited) | 11/30/2009 (Unaudited) | 11/30/2010 (Unaudited) | 11/30/2009 (Unaudited) | 05/31/2010 (Audited) | Nov, 30,2011 (Unaudited) | |||||||||||||||||||
| Cash flows from operating activities | ||||||||||||||||||||||||
| Net (loss) | $ | (2,000 | ) | $ | (3,525 | ) | $ | (3,650 | ) | $ | (14,388 | ) | $ | (18,200 | ) | $ | (52,719 | ) | ||||||
| Adjustments to reconcile net (loss) to net | ||||||||||||||||||||||||
| cash used in operating activities: | ||||||||||||||||||||||||
| Increase (decrease) in accounts payable | $ | 500 | $ | (375 | ) | $ | 775 | $ | 2,525 | $ | 225 | $ | 5,500 | |||||||||||
| Increase (decrease) in accrued expenses | $ | 1,500 | $ | - | $ | 8,000 | $ | - | $ | 9,000 | $ | 1,500 | ||||||||||||
| Net cash (used in) operating activities | $ | - | $ | (3,900 | ) | $ | 5,125 | $ | (11,863 | ) | $ | (8,975 | ) | $ | (45,719 | ) | ||||||||
| Cash flows from financing activities | ||||||||||||||||||||||||
| Advances - due from shareholders, (no repayments) | $ | - | $ | 3,900 | $ | (5,125 | ) | $ | 11,863 | $ | 8,975 | $ | 35,925 | |||||||||||
| Proceeds from issuance of common stock | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 10 | ||||||||||||
| Proceeds from additional capital contributions | $ | - | $ | - | $ | - | $ | - | $ | - | $ | 9,784 | ||||||||||||
| Net cash provided by financing activities | $ | - | $ | 3,900 | $ | (5,125 | ) | $ | 11,863 | $ | 8,975 | $ | 45,719 | |||||||||||
| Net increase in cash and cash equivalents | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||
| Cash - beginning of period | - | |||||||||||||||||||||||
| Cash - end of period | $ | $ | $ | - | ||||||||||||||||||||
| Supplemental disclosure of cash flow information: | ||||||||||||||||||||||||
| Taxes paid | ||||||||||||||||||||||||
| Interest paid | $ | $ | $ | - | ||||||||||||||||||||
.See accompanying notes to financial statements.
6
GRACE 2, INC.
A DEVELOPMENT STAGE COMPANY
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2010
(UNAUDITED)
NOTE 1. DEVELOPMENT STAGE COMPANY
Grace 2, Inc., - A Developmental Stage Entity
The company is considered to be a development stage company and as such the financial statements presented herein are presented in accordance to FASB Accounting Standards Codification (“ASC”) 915 “Development Stage Entities.” The company is subject to the risks associated with activities of development stage companies.
Grace 2, Inc. (“the Company”) was incorporated in the State of Delaware on October 27, 2005 and is currently in its development stage.
As a blank check company, the Company’s business is to pursue a business combination through acquisition, or merger with, an existing company. As of the date of the financial statements, the Company has made an effort to identify a possible business combination, see Subsequent event (unaudited). As a result, the Company has conducted negotiations and entered into a letter of intent concerning target business. No assurances can be given that the Company will be successful in finalizing or negotiating with any target company. Since inception, the Company has been engaged in organizational efforts.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company’s accompanying financial statements are prepared in accordance with U.S. generally accepted accounting principles in the United States. Significant accounting policies are as follows:
| a. | Use of Estimates - The preparation of the statement of financial condition in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the statement of financial condition and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
| b. | Cash and Cash Equivalents - For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with a maturity of three months or less to be cash equivalents. For the period October 27, 2005 (inception) through November 30, 2010, the Company did not maintain any bank accounts. |
| c. | Income Taxes - The Company utilizes the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on the differences between financial reporting basis and tax basis of the assets and liabilities and are measured using enacted tax rates that will be in effect when the differences are expected to reverse. An allowance against deferred tax assets is recognized, when it is more likely than not, that such tax benefits will not be realized. |
| d. | Loss per Common Share - Basic loss per share is calculated using the weighted-average number of common shares outstanding during each period as required by the Financial Accounting Standards Board (FASB) under Statement of Financial Accounting Standards (SFAS) No. 128. Diluted loss per share includes potentially dilutive securities such as outstanding options and warrants, using various methods such as the treasury stock or modified treasury stock method in the determination of dilutive shares outstanding during each period. The Company does not have any potentially dilutive instruments. |
| e. | Fair Value of Financial Instruments - The carrying value of accounts payable approximates fair value due to their short term nature. |
| f | Recently Issued Accounting Pronouncements – as of November 30, 2010, the Company does not expect any of the recently issued accounting pronouncements to have a material impact on its financial condition or results of operations. |
7
NOTE 3. PREFERRED STOCK
As of November 30, 2010, the Company was authorized to issue 10,000,000 shares of preferred stock; zero preferred shares were outstanding.
The preferred stock of the Company shall be issued by the Board of Directors of the Company in one or more classes or one or more series within any class and such classes or series shall have such voting powers, full or limited, or no voting powers, and such designations, preferences, limitations or restrictions as the Board of Directors of the Company may determine, from time to time.
NOTE 4. COMMON STOCK
As of November 30, 2010, the Company is authorized to issue 100,000,000 shares of common stock; 100,000 shares of common stock were outstanding.
Holders of shares of common stock shall be entitled to cast one vote for each share held at all stockholders’ meetings for all purposes, including the election of directors. The common stock does not have cumulative voting rights. No holder of shares of stock of any class shall be entitled as a matter of right to subscribe for or purchase or receive any part of any new or additional issue of shares of stock of any class, or of securities convertible into shares of stock of any class, whether now hereafter authorized or whether issued for money, for consideration other than money, or by way of dividend.
NOTE 5. RELATED PARTY TRANSACTIONS
The Company utilizes the office space and equipment of its majority shareholder at no cost. Management estimates such amounts to be immaterial.
As of November 30, 2010, the majority shareholder advanced the Company $20,425 for working capital purposes. The advances are not documented and do not bear any specific repayment terms.
NOTE 6. INCOME TAXES AND CHANGE IN CONTROL
As of August 31, 2010, the Company had approximately $15,122 in gross deferred tax assets resulting from net operating loss carry forwards. A valuation allowance has been recorded to fully offset these deferred tax assets because the future realization of the related income tax benefits is uncertain. Accordingly, the net provision for income taxes is zero for the period October 27, 2005 (inception) to November 30, 2010.
As of November 30, 2010 the Company could have federal net operating loss carry forwards of approximately $52,719 available to offset future taxable income through 2030.
For the period October 27, 2005 (inception) to November 30, 2010, the difference between the tax provision at the statutory federal income tax rate and the tax provision attributable to loss before income taxes is as follows (in percentages):
| Statutory federal income tax rate | -34 | % | ||
| State taxes - net of federal benefits | -5 | % | ||
| Valuation allowance | 39 | % | ||
| Income tax rate – net | 0 | % |
The stock purchase transaction that took place in July 2008 affects a change in control of the Company, and as such the federal net operating loss carry forwards as of the date of the transaction are limited under Section 382 of the Internal Revenue Code. At the present time there have been no tax returns filed for this company since inception. The company is a C Corporation and is domiciled within the State of Delaware.
8
NOTE 7. CAPITAL STOCK
On July 7, 2008 (the “Effective Date”), pursuant to the terms of a Stock Purchase Agreement (“the Agreement”), Broad Street Ventures, LLC, a limited liability company formed in the State of Colorado purchased a total of 96,000 shares of the issued and outstanding common stock of the Company from Getting You There, LLC, then the sole shareholder of the Company. The total of 96,000 shares represents 96% of the shares of outstanding common stock of the Company (the “Acquisition”). As part of the Acquisition and pursuant to the Agreement, the following changes to the Company’s directors and officers occurred:
Virginia K. Sourlis resigned as the Company’s President, Chief Executive Officer, Chief Financial Officer and Secretary and Sole Director effective July 18, 2008.
As of July 18 2008, Douglas Dyer was appointed as the Company’s President and Sole Director.
NOTE 8. GOING CONCERN
As of November 30, 2010, the Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business.
As of November 30, 2010, the Company’s current business is to pursue a business combination through acquisition, or merger with, an existing company. The Company’s ability to continue as a going concern is dependent upon its ability to develop additional sources of capital, locate and complete a merger with another company and ultimately achieve profitable operations. No assurances can be given that the Company will be successful in locating or negotiating with any target company.
NOTE 9. Subsequent Events (Unaudited)
Subsequent to year end Grace 2, Inc., [the Company] has executed a term sheet to reverse merge into an operating company. Negotiations are ongoing and it is management’s opinion that it will culminate into an executed merger agreement soon. Terms are non-binding, but do contain an exclusivity provision to the Company through June 30, 2011.
9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
This Report contains statements that we believe are, or may be considered to be, “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact included in this Report regarding the prospects of our industry or our prospects, plans, financial position or business strategy, may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking words such as “may,” “will,” “expect,” “intend,” “estimate,” “foresee,” “project,” “anticipate,” “believe,” “plans,” “forecasts,” “continue” or “could” or the negatives of these terms or variations of them or similar terms. Furthermore, such forward-looking statements may be included in various filings that we make with the SEC or press releases or oral statements made by or with the approval of one of our authorized executive officers. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that these expectations will prove to be correct. These forward-looking statements are subject to certain known and unknown risks and uncertainties, as well as assumptions that could cause actual results to differ materially from those reflected in these forward-looking statements. Readers are cautioned not to place undue reliance on any forward-looking statements contained herein, which reflect management’s opinions only as of the date hereof. Except as required by law, we undertake no obligation to revise or publicly release the results of any revision to any forward-looking statements. You are advised, however, to consult any additional disclosures we make in our reports to the SEC. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this Report.
Plan of Operation; Going Concern
The Company has not realized any revenues from operations since inception, and its plan of operation for the next twelve months is to locate a suitable acquisition or merger candidate and consummate a business combination. The Company may need additional cash advances from its stockholder or loans from other parties to pay for operating expenses until the Company consummates a merger or business combination with a privately-held operating company. Although it is currently anticipated that the Company can satisfy its cash requirements with additional cash advances or loans from other parties, if needed, for at least the next twelve months, the Company can provide no assurance that it can continue to satisfy its cash requirements for such period.
Since our formation on October 27, 2005 through the date of this filing, our purpose has been to effect a business combination with an operating business which we believe has significant growth potential. We are currently considered to be a “blank check” company in as much as we have no specific business plans, no operations, revenues or employees. We currently have no definitive agreements or understanding with any prospective business combination candidates and have not targeted any business for investigation and evaluation nor are there any assurances that we will find a suitable business with which to combine. The implementation of our business objectives is wholly contingent upon a business combination and/or the successful sale of securities in the company.
Management anticipates seeking out a target company through solicitation. Such solicitation may include newspaper or magazine advertisements, mailings and other distributions to law firms, accounting firms, investment bankers, financial advisors and similar persons, the use of one or more Internet websites and similar methods. No estimate can be made as to the number of persons who will be contacted or solicited. Management may engage in such solicitation directly or may employ one or more other entities to conduct or assist in such solicitation. Management and its affiliates will pay referral fees to consultants and others who refer target businesses for mergers into public companies in which management and its affiliates have an interest. Payments are made if a business combination occurs, and may consist of cash or a portion of the stock in the Company retained by management and its affiliates, or both.
The Company’s management will supervise the search for target companies as potential candidates for a business combination. The Company may enter into agreements with other consultants to assist in locating a target company and may share stock received by it or cash resulting from the sale of its securities with such other consultants.
As a result of our limited resources, we expect to effect only a single business combination. Accordingly, the prospects for our success will be entirely dependent upon the future performance of a single business. Unlike certain entities that have the resources to consummate several business combinations or entities operating in multiple industries or multiple segments of a single industry, we will not have the resources to diversify our operations or benefit from the possible spreading of risks or offsetting of losses. A target business may be dependent upon the development or market acceptance of a single or limited number of products, processes or services, in which case there will be an even higher risk that the target business will not prove to be commercially viable.
Our officers and directors are only required to devote a very limited portion of their time to our affairs on a part-time or as-needed basis. We expect to use outside consultants, advisors, attorneys and accountants as necessary, none of which will be hired on a retainer basis. We do not anticipate hiring any full-time employees so long as we are seeking and evaluating business opportunities.
10
We expect our present management to play no managerial role in the Company following a merger or business combination. Although we intend to scrutinize closely the management of a prospective target business in connection with our evaluation of a business combination with a target business, our assessment of management may be incorrect. We cannot assure you that we will find a suitable business with which to combine.
Changes in Control of Registrant
On July 7, 2008 (the “Effective Date”), pursuant to the terms of a Stock Purchase Agreement (the “Agreement”), Broad Street Ventures, LLC, a limited liability company formed in the State of Colorado (“BSV”) purchased a total of 96,000 shares of the issued and outstanding common stock of Grace 2, Inc., a Delaware corporation (the “Company”), from Getting You There, LLC, the sole shareholder of the Company (“GYT”). The total of 96,000 shares represents 96% of the shares of outstanding common stock of the Company (the “Acquisition”).
Also, as part of the Acquisition and pursuant to the Agreement, the following changes to the Company’s directors and officers occurred:
| · | Douglas Dyer resigned as the Company’s President, Chief Executive Officer, Chief Financial Officer and Secretary and Sole Director effective July 18, 2008 |
| · | As of July 18, 2008, Douglas Dyer was appointed as the Company’s President and Sole Director. |
Results of Operations
General. The Company has not conducted any active operations since inception, except for its efforts to locate a suitable acquisition or merger transaction. No revenue has been generated by the Company during such period, and it is unlikely the Company will have any revenues unless it is able to effect an acquisition of or merger with another operating company, of which there can be no assurance.
Assets. At November 30, 2010, the Company had $0 in assets, compared to $0 at May 31, 2010.
Liabilities. At November 30, 2010, the Company had $42,925 in total liabilities. At May 31, 2010, the Company had total liabilities of $38,775. Total liabilities consist of Accounts Payable, Accrued Expenses (Professional Fees) and Amounts due to a Shareholder. The Accounts Payable consists of legal and accounting fees accrued for the preparation and filing the Registration Statement on Form 10-SB filed on June 19, 2006 and annual and quarterly reports filed since the effectiveness of such registration statement.
Comparison of Three Months Ended November 30, 2010 to November 30, 2009
Revenues. For the three months ended November 30, 2010 and November 30, 2009 and for the period from October 27, 2005 (Inception) to November 30, 2010, the Company had no activities that produced revenues from operations.
Net Loss. For the three month periods ended November 30, 2010 and November 30, 2009, the Company had a net loss of $2,000 and $3,525, respectively. From the Company’s date of inception (October 27, 2005) to November 30, 2010, the Company had net losses of $52,719. These losses were mostly due to legal, accounting, audit and other professional service fees incurred in relation to the filing of the Company’s Registration Statement on Form 10-SB filed on June 19, 2006 and annual and quarterly reports filed since the effectiveness of such registration statement.
General and Administrative Expenses. For the three months ended November 30, 2010and November 30, 2009, the Company had general and administrative expenses of $2,000 and $3,525, respectively. From the Company’s date of inception (October 27, 2005) to November 30, 2010, the Company had general and administrative expenses of $52,719. These expenses were due to legal, accounting, audit and other professional service fees incurred in relation to the filing of the Company’s Registration Statement on Form 10-SB filed on June 19, 2006 and annual and quarterly reports filed since the effectiveness of such registration statement.
Comparison of Six Months Ended November 30, 2010 to November 30, 2009
Revenues. For the six months ended November 30, 2010 and November 30, 2009 and for the period from October 27, 2005 (Inception) to November 30, 2010, the Company had no activities that produced revenues from operations.
Net Loss. For the six months ended November 30, 2010 and November 30, 2009, the Company had a net loss of $4,150 and $14,388, respectively. From the Company’s date of inception (October 27, 2005) to November 30, 2010, the Company had net losses of $52,719. These losses were mostly due to legal, accounting, audit and other professional service fees incurred in relation to the filing of the Company’s Registration Statement on Form 10-SB filed on June 19, 2006 and annual and quarterly reports filed since the effectiveness of such registration statement.
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General and Administrative Expenses. For the six months ended November 30, 2010 and November 30, 2009 the Company had general and administrative expenses of $4,150 and $14,288, respectively. From the Company’s date of inception (October 27, 2005) to November 30, 2010, the Company had general and administrative expenses of $52,719. These expenses were due to legal, accounting, audit and other professional service fees incurred in relation to the filing of the Company’s Registration Statement on Form 10-SB filed on June 19, 2006 and annual and quarterly reports filed since the effectiveness of such registration statement.
Liquidity and Capital Resources
At November 30, 2010, the Company had $0 in total assets. At May 31, 2009, the Company had $0 in total assets. The Company’s current liabilities at November 30, 2010 and at May 31, 2010, totaled $42,925 and $38,775, respectively, comprised of accounts payable and advances/loans from shareholders’.
The Company has no assets and has generated no revenues since inception. The Company is also dependent upon the receipt of capital investment or other financing to fund its ongoing operations and to execute its business plan of seeking a combination with a private operating company. If continued funding and capital resources are unavailable at reasonable terms, the Company may not be able to implement its plan of operations.
At November 30, 2010, the Company had no capital resources to fund administrative expenses pending acquisition of an operating company. The Company has not realized any revenues from operations since inception, and its plan of operation for the next twelve months is to locate a suitable acquisition or merger candidate and consummate a business combination. There is substantial doubt that we will continue as a going concern. The Company may need additional cash advances from its stockholder or loans from other parties to pay for operating expenses until the Company consummates a merger or business combination with a privately-held operating company. Although it is currently anticipated that the Company can satisfy its cash requirements with additional cash advances or loans from other parties, if needed, for at least the next twelve months, the Company can provide no assurance that it can continue to satisfy its cash requirements for such period.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Going Concern
The Company’s financial statements have been presented on the basis that it is a going concern in the development stage, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of the date of these financial statements, the Company has made no efforts to identify a possible business combination.
The Company’s shareholder shall fund the Company’s activities while the Company takes steps to locate and negotiate with a business entity through acquisition, or merger with, an existing company; however, there can be no assurance these activities will be successful. These matters raise substantial doubt about the Company’s ability to continue as a going concern.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
N/A.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures.
In accordance with Exchange Act Rules 13a-15 and 15d-15, our management is required to perform an evaluation under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of the end of the period.
Based upon that evaluation, our Management has concluded that, as of November 30, 2010, our disclosure controls and procedures were not effective in timely alerting management to the material information relating to us required to be included in our periodic filings with the SEC.
Our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures had the following material weaknesses:
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| · | We were unable to maintain any segregation of duties within our financial operations due to our reliance on limited personnel in the finance function. While this control deficiency did not result in any audit adjustments to 2009-10 interim or annual financial statements, it could have resulted in a material misstatement that might have been prevented or detected by a segregation of duties. |
| The Company lacks sufficient resources to perform the internal audit function and does not have an Audit Committee; |
| We do not have an independent Board of Directors, nor do we have a board member designated as an independent financial expert for the Company. The Board of Directors is comprised of one (1) member of management. As a result, there may be lack of independent oversight of the management team, lack of independent review of our operating and financial results, and lack of independent review of disclosures made by the Company; and |
To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned material weaknesses, including, but not limited to, the following:
| Considering the engagement of consultants to assist in ensuring that accounting policies and procedures are consistent across the organization and that we have adequate control over financial statement disclosures; |
| Hiring additional qualified financial personnel including a Chief Financial Officer on a full-time basis; |
| Expanding our current board of directors to include additional independent individuals willing to perform directorial functions; and |
| Increasing our workforce in preparation for exiting the development stage and commencing revenue producing operations. |
Since the recited remedial actions will require that we hire or engage additional personnel, these material weaknesses may not be overcome in the near term due to our limited financial resources. Until such remedial actions can be realized, we will continue to rely on the advice of outside professionals and consultants.
We anticipate that these initiatives will be at least partially, if not fully, implemented by December 31, 2011, subject to our ability to obtain sufficient future financing and subject to our ability to produce revenue in the short term.
Changes in Internal Controls.
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended November 30, 2010 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is currently not a party to any pending legal proceedings and no such action by or to the best of its knowledge, against the Company has been threatened.
Item 1A. Risk Factors.
N/A.
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds.
On October 27, 2005, the Company issued 100,000 shares of common stock for total consideration of $100 to the sole shareholder of the Company under the exemption from registration afforded the Company under Section 4(2) of the Securities Act of 1933, as amended due to the fact that the issuance did not involve a public offering of securities.
Item 3. Defaults Upon Senior Securities.
N/A.
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Item 4. Submission of Matters to a Vote of Security Holders.
N/A.
Item 5. Other Information.
N/A.
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Item 6. Exhibits.
Index to Exhibits
| Exhibit | Description | |
31.1 | Certification of the Company’s Principal Executive Officer pursuant to 15d-15(e), under the Securities and Exchange Act of 1934, as amended, with respect to the registrant’s Quarterly Report on Form 10-Q for the quarter ended November 30, 2010. | |
| 32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Principal Executive Officer). | |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
| Date: July 14, 2011 | By: /s/ DOUGLAS DYER | |
Name: Douglas Dyer Title: President and Director (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) |
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