UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2008 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ |
Commission File Number: 333-144888
SN Strategies Corp.
(Exact name of registrant as specified in its charter)
| Nevada | 01-0660195 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| 1077 Balboa Avenue, Laguna Beach, California 92651 |
| (Address of principal executive offices) |
| (714) 651-8000 | |
| (Registrant’s telephone number including area code) | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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. x Yes o No
Indicate by check mark whether the registrant is a large accelerated file, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer o | ||
Non-accelerated filer o (Do not check if 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). x Yes o No | |||
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practical date. As of November 11, 2008, there were 2,876,000 shares of the issuer's $.001 par value common stock issued and outstanding.
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SN STRATEGIES CORP.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
September 30, 2008 (Unaudited) | December 31, 2007 | |||||||
| Current assets | ||||||||
| Cash | $ | 2,402 | $ | 216 | ||||
| Prepaid expense | - | 6,250 | ||||||
| Total current assets | 2,402 | 6,466 | ||||||
| Other assets | ||||||||
| Investment | 27,500 | 27,500 | ||||||
| Total assets | $ | 29,902 | $ | 33,966 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | 35,008 | $ | 20,091 | ||||
| Income taxes payable | 800 | - | ||||||
| Convertible note payable | 3,000 | |||||||
| Note payable, related party | 23,500 | - | ||||||
| Total current liabilities | 62,308 | 20,091 | ||||||
| Stockholders’ equity (deficit) | ||||||||
| Preferred stock, $.001 par value; 5,000,000 shares authorized, 0 shares issued and outstanding | - | - | ||||||
| Common stock, $.001 par value; 50,000,000 shares authorized, 2,876,000 shares issued and outstanding at September 30, 2008 and December 31, 2007 | 2,876 | 2,876 | ||||||
| Additional paid-in capital | 91,281 | 91,281 | ||||||
| Deficit accumulated during the development stage | (126,563 | ) | (80,282 | ) | ||||
| Total stockholders’ equity (deficit) | (32,406 | ) | 13,875 | |||||
| Total liabilities and stockholders’ equity (deficit) | $ | 29,902 | $ | 33,966 | ||||
See accompanying notes to unaudited financial statements.
2
SN STRATEGIES CORP.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
SEPTEMBER 30, 2008
(Unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | Inception (January 18, 2002) to September 30, | |||||||||||||
| 2008 | 2007 | 2008 | 2007 | 2008 | |||||||||||
| Net revenue | $ | 8,150 | $ | 1,000 | $ | 16,911 | $ | 1,000 | $ | 22,205 | |||||
| Operating expenses | |||||||||||||||
| Legal and professional | 7,343 | 19,015 | 34,571 | 31,750 | 81,012 | ||||||||||
| Dues and fees | 2,092 | 3,495 | 9,254 | 6,232 | 18,899 | ||||||||||
| Rent | 3,000 | 300 | 9,000 | 900 | 12,900 | ||||||||||
| General and administrative | 4,537 | 960 | 8,654 | 1,015 | 12,669 | ||||||||||
| Total operating expenses | 16,972 | 23,770 | 61,479 | 39,897 | 125,480 | ||||||||||
| Other income (expense) | |||||||||||||||
| Interest income (expense), net | (489) | 319 | (913) | 472 | (288) | ||||||||||
| Loss from continuing operations before income taxes | (9,311) | (22,451) | (45,481) | (38,425) | (103,563) | ||||||||||
| Provision for income taxes | - | - | 800 | 800 | 1,600 | ||||||||||
| Loss from continuing operations | (9,311) | (22,451) | (46,281) | (39,225) | (105,163) | ||||||||||
| Discontinued operations | - | - | - | - | (21,400) | ||||||||||
| Net loss | $ | (9,311) | $ | (22,451) | $ | (46,281) | $ | (39,225) | $ | (126,563) | |||||
| Net loss per common share from continuing operations – basic and diluted | $ | (0.00) | $ | (0.01) | $ | (0.02) | $ | (0.02) | $ | (0.06) | |||||
| Net loss per common share from discontinued operations – basic and diluted | $ | - | $ | - | $ | - | $ | - | $ | (0.01) | |||||
| Weighted average of common shares – basic and diluted | 2,876,000 | 2,876,000 | 2,876,000 | 2,378,701 | 2,122,873 | ||||||||||
See accompanying notes to unaudited financial statements.
3
SN STRATEGIES CORP.
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY/(DEFICIT)
(Unaudited)
| Common Stock | ||||||||||||||||||||
Number of Shares | Amount | Additional Paid-In Capital | Deficit Accumulated During Development Stage | Total Stockholders' Equity (Deficit) | ||||||||||||||||
| Balance, January 18, 2002 | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
| Issuance of founder shares for services, January 30, 2002, retroactively stated for 1:5 reverse stock split on April 22, 2007 | 1,200,000 | 1,200 | 4,800 | - | 6,000 | |||||||||||||||
| Issuance of common stock, November 1, 2002, retroactively stated for 1:5 reverse stock split on April 22, 2007 | 751,000 | 751 | 36,799 | - | 37,550 | |||||||||||||||
| Additional paid-in capital in exchange for facilities provided by related party | - | - | 900 | - | 900 | |||||||||||||||
| Net loss | - | - | - | (8,889 | ) | (8,889 | ) | |||||||||||||
| Balance, December 31, 2002 (Audited) | 1,951,000 | 1,951 | 42,499 | (8,889 | ) | 35,561 | ||||||||||||||
| Distributions to shareholders | - | - | (32,750 | ) | - | (32,750 | ) | |||||||||||||
| Additional paid-in capital in exchange for facilities provided by related party (2003-2006) | - | - | 5,682 | - | 5,682 | |||||||||||||||
See accompanying notes to unaudited financial statements.
4
SN STRATEGIES CORP.
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY/(DEFICIT)
(Unaudited)
| Common Stock | ||||||||||||||||
Number of Shares | Amount | Additional Paid-in Capital | Deficit Accumulated During Development Stage | Total Stockholder’s Equity (Deficit) | ||||||||||||
| Net losses (2003-2006) | - | - | - | (12,511) | (12,511) | |||||||||||
| Balance, December 31, 2006 (Audited) | 1,951,000 | 1,951 | 15,431 | (21,400) | (4,018) | |||||||||||
| Issuance of common stock, May 18, 2007 | 437,500 | 437 | 34,563 | - | 35,000 | |||||||||||
| Issuance of common stock, May 31, 2007 | 218,750 | 219 | 17,281 | - | 17,500 | |||||||||||
| Issuance of common stock, June 7, 2007 | 268,750 | 269 | 21,231 | - | 21,500 | |||||||||||
| Additional paid-in capital in exchange for facilities provided by related party | - | - | 900 | - | 900 | |||||||||||
| Conversion of note receivable | - | - | 1,875 | 1,875 | ||||||||||||
| Net loss | - | - | - | (58,882) | (58,882) | |||||||||||
| Balance, December 31, 2007 (Audited) | 2,876,000 | 2,876 | 91,281 | (80,282) | 13,875 | |||||||||||
| Net loss | - | - | - | (46,281) | (46,281) | |||||||||||
| Balance, September 30, 2008 (Unaudited) | 2,876,000 | $ | 2,876 | $ | 91,281 | $ | (126,563) | $ | (32,406) | |||||||
See accompanying notes to unaudited financial statements.
5
SN STRATEGIES CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30, | Inception (January 18, 2002) to September 30, | |||||||||||
| 2008 | 2007 | 2008 | ||||||||||
| Cash flows from operating activities | ||||||||||||
| Net loss | $ | (46,281 | ) | $ | (39,225 | ) | $ | (126,563 | ) | |||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities | - | |||||||||||
| Cost of services paid for with common stock | - | - | 6,000 | |||||||||
| Additional paid-in capital in exchange for facilities provided by related party | - | 900 | 6,600 | |||||||||
| Changes in operating assets and liabilities | ||||||||||||
| Decrease (increase) in prepaid expenses | 6,250 | (8,750 | ) | - | ||||||||
| Increase in accounts payable and accrued expenses | 14,917 | 9,367 | 35,008 | |||||||||
| Increase (decrease) in income taxes payable | 800 | (3,299 | ) | 800 | ||||||||
| Net cash used in operating activities | (24,314 | ) | (41,007 | ) | (78,155 | ) | ||||||
| Cash flows from investing activities | ||||||||||||
| Promissory note receivable | - | (25,000 | ) | (25,000 | ) | |||||||
| Increase in interest on note receivable | - | (472 | ) | (625 | ) | |||||||
| Net cash used in investing activities | - | (25,472 | ) | (25,625 | ) | |||||||
| Cash flows from financing activities | ||||||||||||
| Proceeds from issuance of common stock | - | 74,000 | 111,550 | |||||||||
| Distributions to shareholders | - | - | (32,750 | ) | ||||||||
| Capital contributions | - | - | 882 | |||||||||
| Proceeds from note payable, related party | 23,500 | - | 23,500 | |||||||||
| Proceeds from convertible note payable | 3,000 | - | 3,000 | |||||||||
| Net cash provided by financing activities | 26,500 | 74,000 | 106,182 | |||||||||
| Net (decrease) increase in cash | 2,186 | 7,521 | 2,402 | |||||||||
| Cash, beginning of period | 216 | - | - | |||||||||
| Cash, end of period | $ | 2,402 | $ | 7,521 | $ | 2,402 | ||||||
6
SN STRATEGIES CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30, | Inception (January 18, 2002) to September 30, | |||||||||||
| 2008 | 2007 | 2008 | ||||||||||
| Supplemental disclosure of cash flow information | ||||||||||||
Income taxes paid | $ | - | $ | 3,200 | $ | 4,000 | ||||||
Interest paid | $ | - | $ | - | $ | - | ||||||
Conversion of note receivable and accrued interest into common stock of long term investment | $ | - | $ | - | $ | 25,625 | ||||||
Gain on conversion of note receivable | $ | - | $ | - | $ | 1,875 | ||||||
See accompanying notes to unaudited financial statements.
7
SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
| 1. | NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Nature of Operations
SN Strategies Corp. (“the Company”) was incorporated under the laws of the State of Nevada on January 18, 2002 under the original name “Klean Kast Solutions, Inc”. On April 22, 2007, the Company filed amended and restated articles and changed its name to “SN Strategies Corp”.
SN Strategies Corp. is an internet company that specializes in developing social networking applications, known as widgets, which are designed to engage, provide information and gather intelligence from users. A widget is a type of user interface that allows people to interact with a computer and computer-controlled devices that employ graphical icons, visual indicators or special graphical elements, along with text labels or text navigation to represent the information and actions available to a user. The Company is headquartered in Laguna Beach, California.
SN Strategies Corp. is currently a development stage company under the provisions of Statement of Financial Accounting Standards (SFAS) No. 7 “Accounting and Reporting by Development Stage Enterprises”. For the nine months ended September 30, 2008, the Company produced only minimal revenues and will continue to report as a development stage company until significant revenues are produced.
8
SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
| 1. | NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
Basis of Presentation
The unaudited financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. They do not include all information and notes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the financial statements included in the Company’s report on Form 10-KSB of SN Strategies Corp. for the year ended December 31, 2007. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2008 are not necessarily indicative of the results that may be expected for any other interim period or the entire year. For further information, these unaudited financial statements and the related notes should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2007 included in the Company’s report on Form 10-KSB.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. Actual results could materially differ from those estimates.
Cash and Cash Equivalents
For purposes of the balance sheet and statement of cash flows, the Company considers all highly liquid debt instruments purchased with maturity of three months or less to be cash equivalents.
Prepaid Expenses
Prepaid expenses consist of stock transfer agent fees for services to be rendered over the one-year period of the contract and are amortized monthly.
9
SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
| 1. | NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
Fair Value of Financial Instruments
Pursuant to SFAS No. 107, “Disclosures About Fair Value of Financial Instruments”, the Company is required to estimate the fair value of all financial instruments included on its balance sheet. The carrying value of cash, prepaid expense, accounts payable and accrued expenses approximate their fair value due to the short period to maturity of these instruments.
Income Taxes
The Company accounts for income taxes under SFAS 109, “Accounting for Income Taxes”. Under the asset and liability method of SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
Comprehensive Income
The Company applies Statement of Financial Accounting Standards No. 130, “Reporting Comprehensive Income” (SFAS 130). SFAS 130 establishes standards for the reporting and display of comprehensive income or loss, requiring its components to be reported in a financial statement that is displayed with the same prominence as other financial statements. From inception (January 18, 2002) through September 30, 2008, the Company had no other components of comprehensive loss other than the net loss as reported on the statement of operations.
10
SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
| 1. | NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
Segment Reporting
Pursuant to Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information,” (“SFAS No. 131”), the Company is required to disclose certain disclosures of operating segments, as defined in SFAS No. 131. Management has determined that the Company has only one operating segment and therefore does not disclose operating segment information.
Basic and Diluted Income (Loss) Per Share
In accordance with SFAS No. 128, “Earnings Per Share”, basic income (loss) per common share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding. Diluted income (loss) per common share is computed similar to basic income per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. As of September 30, 2008, the Company did not have any equity or debt instruments outstanding that could be converted into common stock.
Issuances Involving Non-Cash Consideration
All issuances of the Company's stock for non-cash consideration have been assigned a dollar amount equaling either the market value of the shares issued or the value of consideration received, whichever is more readily determinable. The majority of the non-cash consideration received pertains to services rendered by officers and have been valued at the estimated value of the services rendered.
Revenue Recognition
The Company provides consulting services. Revenues from these services are to be recognized in accordance with Staff Accounting Bulletin (SAB) No. 101, “Revenue Recognition in Financial Statements,” as amended by SAB No. 104, “Revenue Recognition” when (a) persuasive evidence of an arrangement exists, (b) the services have been provided to the customer, (c) the fee is fixed or determinable, and (d) collectibility is reasonably assured.
11
SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
1. | NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
Recent Accounting Pronouncements
In December 2007, the EITF of the FASB reached a consensus on Issue No. 07-1, Accounting for Collaborative Arrangements (EITF 07-1). The EITF concluded on the definition of a collaborative arrangement and that revenues and costs incurred with third parties in connection with collaborative arrangements would be presented gross or net based on the criteria in EITF 99-19 and other accounting literature. Based on the nature of the arrangement, payments to or from collaborators would be evaluated and its terms, the nature of the entity’s business, and whether those payments are within the scope of other accounting literature would be presented. Companies are also required to disclose the nature and purpose of collaborative arrangements along with the accounting policies and the classification and amounts of significant financial-statement amounts related to the arrangements. Activities in the arrangement conducted in a separate legal entity should be accounted for under other accounting literature; however required disclosure under EITF 07-1 applies to the entire collaborative agreement. This Issue is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, and is to be applied retrospectively to all periods presented for all collaborative arrangements existing as of the effective date. We do not expect this will have a significant impact on our financial statements.
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (SFAS No. 141(R)), which replaces SFAS No. 141, Business Combinations, requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. This Statement also requires the acquirer in a business combination achieved in stages to recognize the identifiable assets and liabilities, as well as the non-controlling interest in the acquiree, at the full amounts of their fair values.
12
SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
| 1. | NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
Recent Accounting Pronouncements (Continued)
SFAS No. 141(R) makes various other amendments to authoritative literature intended to provide additional guidance or to confirm the guidance in that literature to that provided in this Statement. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. We do not expect this will have a significant impact on our financial statements.
In December 2007, FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (SFAS No. 160), which amends Accounting Research Bulletin No. 51, Consolidated Financial Statements, to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements. SFAS No. 160 establishes accounting and reporting standards that require the ownership interests in subsidiaries not held by the parent to be clearly identified, labeled and presented in the consolidated statement of financial position within equity, but separate from the parent’s equity. This statement also requires the amount of consolidated net income attributable to the parent and to the non-controlling interest to be clearly identified and presented on the face of the consolidated statement of income. Changes in a parent’s ownership interest while the parent retains its controlling financial interest must be accounted for consistently, and when a subsidiary is deconsolidated, any retained non-controlling equity investment in the former subsidiary must be initially measured at fair value. The gain or loss on the deconsolidation of the subsidiary is measured using the fair value of any non-controlling equity investment. The Statement also requires entities to provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners. This Statement applies prospectively to all entities that prepare consolidated financial statements and applies prospectively for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. We do not expect this will have a significant impact on our financial statements.
13
SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
| 1. | NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
Recent Accounting Pronouncements (Continued)
In February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115 (SFAS 159), which is effective for fiscal years beginning after November 15, 2007. SFAS 159 permits the Company to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 is expected to expand the use of fair value measurement, which is consistent with the FASB’s long-term measurement objectives for accounting for financial instruments. The Company adopted the provisions of this statement on January 1, 2008. The Company did not elect the Fair Value option for any of its financial assets or liabilities, and therefore, the adoption of SFAS 159 had no impact on the Company’s financial position, results of operations, or cash flows.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measures required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. SFAS No. 157 was effective as of the beginning of the Company’s 2008 year. The provisions of SFAS 157 were adopted January 1, 2008. In February 2008, the FASB staff issued Staff Position No. 157-2 “Effective Date of FASB Statement No. 157” (FSP FAS 157-2). FSP FAS 157-2 delayed the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The provisions of FSP FAS 157-2 are effective for the Company’s fiscal year beginning January 1, 2009.
SFAS 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
14
SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
| 1. | NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
Recent Accounting Pronouncements (Continued)
The three levels of the fair value hierarchy under SFAS 157 are described below:
| Level 1 | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; |
| Level 2 | Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; |
| Level 3 | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). |
2. GOING CONCERN
As shown in the accompanying financial statements, the Company has incurred a net operating loss of $126,563 from inception (January 18, 2002) through September 30, 2008.
The Company is subject to those risks associated with development stage companies. The Company has sustained losses since inception and additional debt or equity financing may be required by the Company to fund its development activities and to support operations. However, there is no assurance that the Company will be able to obtain additional financing. Furthermore, there is no assurance that rapid technological changes, changing customer needs and evolving industry standards will enable the Company to introduce new products on a continual and timely basis so that profitable operations can be attained.
3. INVESTMENT
On May 18, 2007, the Company extended a $25,000 loan to Fliva, Inc. (Fliva) in exchange for a convertible promissory note and a warrant agreement. Under the terms of the convertible promissory note agreement, the note accrues interest at 5% per annum and matures on May 18, 2009. The note may be converted into Fliva’s common stock upon default or upon certain other conditions. Under the terms of the warrant agreement, the Company has the right to purchase 62,500 shares of Fliva’s common stock at $0.04 per share upon certain triggering events. The warrant agreement expires upon the earlier of the warrant execution or May 18, 2011.
15
SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
3. INVESTMENT (Continued)
On November 8, 2007, the Company converted the note receivable balance of $25,000 into 625,000 shares of Fliva’s common stock at the conversion rate of $0.04 per share. In addition, as consideration for converting the note receivable, the warrants were exercised in exchange for accrued interest of $625 resulting in the Company receiving an additional 62,500 shares of Fliva’s common stock for a total value of $27,500.
On November 12, 2007, the Company exchanged its 687,500 shares of Fliva’s common stock for 201,343 shares of common stock of Magic Cow, Inc. pursuant to a Share Exchange Agreement between Fliva and Magic Cow, Inc.
| 4. | FAIR VALUE ACCOUNTING |
The following table sets forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy. As required by SFAS 157, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
| Fair Value at September 30, 2008 | |||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | ||||||||||||||
Assets Investment | $ | 27,500 | $ | - | $ | - | $ | 27,500 | |||||||||
| 27,500 | - | - | 27,500 | ||||||||||||||
| LLiabilities | $ | - | $ | - | $ | - | $ | - | |||||||||
The Company’s investment in Magic Cow, Inc. is classified within Level 3 of the fair value hierarchy because it is a privately held company with no market activity or quoted prices.
5. ACCRUED EXPENSES
Accrued Wages and Compensated Absences
The Company currently does not have any employees. The majority of development costs and services have been provided to the Company by the founders and outside, third-party vendors. As such, there is no accrual for wages or compensated absences as of September 30, 2008.
16
SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
6. CONVERTIBLE NOTE PAYABLE
On January 4, 2008, the Company entered into a convertible promissory note agreement to obtain a loan for $3,000. Under the terms of the promissory note agreement, the principal and any unpaid accrued interest must be repaid by January 4, 2009. The note shall accrue interest at the rate of 10% per annum. The note holder and the Company shall have the right from and after March 4, 2008, and until the maturity date, to convert all or any portion of the outstanding principal balance and any unpaid accrued interest into shares of the Company’s common stock on the basis of $0.10 per share. The note may be prepaid at any time, at the option of the Company, in whole or in part without penalty. Interest expense was $77 and $0 for the three months ended September 30, 2008 and 2007, respectively. Interest expense was $226 and $0 for the nine months ended September 30, 2008 and 2007, respectively.
7. NOTES PAYABLE, RELATED PARTY
On April 15, 2008, the Company entered into a promissory note agreement to obtain a loan for $13,000 with a major shareholder. Under the terms of the promissory note agreement, the principal and any unpaid accrued interest is due and payable on demand. The note accrues interest at the rate of 10% per annum. The note may be prepaid at any time, at the option of the Company, in whole or in part without penalty. At September 30, 2008, the principal balance is $13,000 and accrued interest is $607. Interest expense was $332 and $0 for the three months ended September 30, 2008 and 2007, respectively. Interest expense was $607 and $0 for the nine months ended September 30, 2008 and 2007, respectively.
On July 29, 2008, the Company entered into a promissory note agreement to obtain a loan for $4,500 with a major shareholder. Under the terms of the promissory note agreement, the principal and any unpaid accrued interest is due and payable on demand. The note accrues interest at the rate of 10% per annum. The note may be prepaid at any time, at the option of the Company, in whole or in part without penalty. At September 30, 2008, the principal balance is $4,500 and accrued interest is $79. Interest expense was $79 and $0 for the three months ended September 30, 2008 and 2007, respectively. Interest expense was $79 and $0 for the nine months ended September 30, 2008 and 2007, respectively.
On September 29, 2008, the Company entered into a promissory note agreement to obtain a loan for $6,000 with a major shareholder. Under the terms of the promissory note agreement, the principal and any unpaid accrued interest is due and payable on demand. The note accrues interest at the rate of 10% per annum. The note may be prepaid at any time, at the option of the Company, in whole or in part without penalty. At September 30, 2008, the principal balance is $6,000 and accrued interest is $1. Interest expense was $1 and $0 for the three months ended September 30, 2008 and 2007, respectively.
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SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
| 8. | COMMON STOCK |
The Company is authorized to issue up to 50,000,000 shares of $0.001 par value common stock and 5,000,000 shares of $0.001 par value preferred stock. Each share of common stock shall entitle the holder to one vote, in person or by proxy, on any matter on which action of the stockholders of this corporation is sought. The holders of shares of preferred stock shall have no right to vote such shares, with certain exceptions as determined by the Board of Directors of this corporation or as otherwise provided by the Nevada General Corporation Law, as amended from time to time.
In January 2002, the Company issued 6,000,000 shares of its common stock to its founders in exchange for reimbursement of organizational costs and related expenses. The value of such costs and related expenses totaled $6,000.
In November 2002, the Company performed a private placement and issued 3,755,000 shares of common stock at $0.01 per share for an aggregate total of $37,550.
On April 22, 2007, the Company effected a one for five (1:5) reverse stock split whereby each share of the Company’s common stock outstanding was converted into 0.20 of a share of the Company’s common stock. Accordingly, the outstanding common stock and per share amounts have been retroactively stated to reflect the stock split within the Company’s financial statements, pursuant to SEC Staff Accounting Bulletin, Topic 4C.
On May 18, 2007, the Company performed a private placement and issued 437,500 shares of common stock at $0.08 per share for an aggregate total of $35,000.
On May 31, 2007, the Company performed a private placement and issued 218,750 shares of common stock at $0.08 per share for an aggregate total of $17,500.
On June 7, 2007, the Company performed a private placement and issued 268,750 shares of common stock at $0.08 per share for an aggregate total of $21,500.
In July 2007, the Company submitted its Registration Statement on Form SB-2 for the registration of 1,025,000 shares of its outstanding common stock. On August 6, 2007, the Company’s registration statement was declared effective by the Securities and Exchange Commission.
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SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
9. PROVISION FOR INCOME TAXES
As of September 30, 2008, the Company has recognized the minimum amount of franchise tax required under California corporation law of $800. The Company is not currently subject to further federal or state tax since it has incurred losses since its inception.
As of September 30, 2008, the Company had federal and state net operating loss carry forwards of approximately $124,000, which can be used to offset future federal income tax. The federal and state net operating loss carryforwards expire at various dates through 2028. Deferred tax assets resulting from the net operating losses are reduced by a valuation allowance, when, in the opinion of management, utilization is not reasonably assured.
As of September 30, 2008, the Company had the following deferred tax assets related to net operating losses. A 100% valuation allowance has been established as management believes it is more likely than not that the deferred tax assets will not be realized.
| Federal net operating loss (at 25%) | $ | 31,000 | ||
| State net operating loss (at 8.84%) | 11,000 | |||
| 42,000 | ||||
| Less: valuation allowance | (42,000) | |||
| Net deferred tax assets | $ | - |
The Company’s valuation allowance increased by approximately $19,900 during the nine months ended September 30, 2008.
10. RELATED PARTY TRANSACTIONS
From the Company’s inception through September 30, 2007, the Company utilized office space of an officer and stockholder of the Company at no charge. The Company treated the usage of the office space as additional paid-in capital and charged the estimated fair value rent of $100 per month to operations. The Company recorded total rent expense related to this arrangement totaling $0 and $900 for the nine months ended September 30, 2008 and 2007, respectively.
From October 1, 2007, through September 30, 2008, the Company utilized office space of an officer and stockholder of the Company in exchange for $1,000 per month. Rent expense related to the arrangement totaled $9,000 for the nine months ended September 30, 2008.
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SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
11. CONCENTRATION OF CREDIT RISK
For the nine months ended September 30, 2008, the Company transacted its business with one customer which accounted for 100% of total revenues. Total revenues from this customer were $16,911 for the nine months ended September 30, 2008. Total accounts receivable due from this customer at September 30, 2008 were $-0-.
12. DISCONTINUED OPERATIONS
In 2007, the Company abandoned its waterproof and protective cast cover business. A loss on operations for this business has been reclassified and presented as a single line item in the statements of operations.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation
This following information specifies certain forward-looking statements of management of the company. Forward-looking statements are statements that estimate the happening of future events and are not based on historical fact. Forward-looking statements may be identified by the use of forward-looking terminology, such as “may”, “shall”, “could”, “expect”, “estimate”, “anticipate”, “predict”, “probable”, “possible”, “should”, “continue”, or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements.
The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. We cannot guaranty that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.
Critical Accounting Policies and Estimates. Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources.
These accounting policies are described at relevant sections in this discussion and analysis and in the notes to the financial statements included in our Annual Report on Form 10-Q for the three months ended September 30, 2008.
Liquidity and Capital Resources. We had cash of $2,402 as of September 30, 2008, which equals our total current assets as of that date. Our total assets of $29,902 as of September 30, 2008, included our current assets of $2,402, and other assets which are comprised of an investment of $27,500. That investment is represented by the 201,343 shares of common stock that we now own of Magic Cow, Inc.
From May to June 2007, we raised $74,000 in a private placement in exchange for 925,000 shares of our common stock. We used a significant portion of those proceeds for the loan to Fliva, Inc. Specifically, we entered into a convertible promissory note and warrant agreement with Fliva, Inc. pursuant to which we loaned $25,000 to Fliva, Inc. in exchange for the right to convert those funds into shares of common stock of Fliva, Inc. and the right to purchase additional shares of common stock of Fliva, Inc. On November 8, 2007, we converted the note receivable balance of $25,000 into 625,000 shares of Fliva’s common stock at the conversion rate of $0.04 per share. In addition, as consideration for converting the note receivable, the warrants were exercised in exchange for accrued interest of $625 resulting in us receiving an additional 62,500 shares of Fliva’s common stock. On November 12, 2007, Fliva, Inc. was acquired by Magic Cow, Inc. pursuant to a Share Exchange Agreement, which resulted in our 687,500 shares of common stock of Fliva, Inc. being exchanged for 201,343 shares of common stock of Magic Cow, Inc. We believe that the relationship with Fliva and Magic Cow, Inc. will assist us in the development of our products because the management and development teams are very experienced in the internet industry.
On January 4, 2008, we entered into a convertible promissory note for $3,000 with one of our minority shareholders. The note bears interest of 10% and has a maturity date of January 1, 2009. The conversion price is $0.10 per share. On April 15, 2008, we entered into a promissory note agreement to obtain a loan for $13,000 from one of our principal shareholders. On July 9, 2008, we entered into a promissory note agreement to obtain a loan for $4,500 from the same principal shareholder. Under the terms of those promissory note agreements, the principal and any unpaid accrued interest shall be due and payable on demand. The notes accrue interest at the rate of 10% per annum. We used those funds for working capital.
Our current liabilities were $62,308 as of September 30, 2008, which was represented by accounts payable of $35,008, income taxes payable of $800, $3,000 represented by a convertible note payable and $23,500 of note payable to the related party. We had no other liabilities and no long term commitments or contingencies as of September 30, 2008.
During 2009, we expect to incur significant accounting costs associated with the audit and review of our financial statements. We expect that the legal and accounting costs of being a public company will continue to impact our liquidity and we will need to obtain funds to pay those expenses. Other than the anticipated increases in legal and accounting costs due to the reporting requirements of being a reporting company, we are not aware of any other known trends, events or uncertainties, which may affect our future liquidity. We had no long term liabilities, commitments or contingencies.
In July 2007, we filed a Registration Statement on Form SB-2 for the registration of 1,025,000 shares of our issued and outstanding common stock. On August 6, 2007, our registration statement was declared effective by the Securities and Exchange Commission. The purpose of the SB-2 was to register shares of common stock held by our existing shareholders.
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Results of Operations.
For the three months ended September 30, 2008 as compared to the three months ended September 30, 2007.
Revenues. We had revenues of $8,150 for the three months ended September 30, 2008, as compared to revenues of $1,000 for the three months ended September 30, 2008. Those revenues are related to services that we provide to a sales and marketing company and increased for the current period as compared to the year-ago period because we have expanded our operations. We hope to generate more significant revenues as continue operations and implement our business plan.
Operating Expenses. For the three months ended September 30, 2008, our total operating expenses were $16,972, as compared to $23,770 of total operating expenses for the three months ended September 30, 2007. For the three months ended September 30, 2008, we had legal and professional expenses of $7,343, dues and fees of $2,092, rent of $3,000 and general and administrative expenses of $4,537. In comparison, for the three months ended September 30, 2007, we had legal and professional expenses of $19,015, dues and fees expenses of $3,495, rent expenses of $300 and general and administrative expenses of $960. A significant portion of our total operating expenses is legal and professional fees, which is attributed to the legal expenses and accounting expenses related to the audit and review of our financial statements and other expenses related to being a public company. These expenses decreased as compared to the prior year-ago period since last year we were preparing to file our registration statement. We expect that we will continue to incur significant legal and accounting expenses related to being a public company.
Other Income. For the three months ended September 30, 2008, we also had other expense of $489, which was interest from the convertible promissory note for $3,000 with one of our minority shareholders and the notes payable to our major shareholder. We had other income of $319 for the three months ended September 30, 2007, all of which was represented by our note from Fliva, Inc.
Net Income or Loss. For the three months ended September 30, 2008, our net loss was $9,311. This is in comparison to the three months ended September 30, 2007, where our net loss was $22,451. The decrease in our net loss for three months ended September 30, 2008, was due to the fact that we generated revenues during the period as compared revenues of $1,000 during the three months September 30, 2007. We expect to continue to incur net losses for the foreseeable future and until we generate more significant revenues.
For the nine months ended September 30, 2008 as compared to the nine months ended September 30, 2007.
Revenues. We had revenues of $16,911 for the nine months ended September 30, 2008, as compared to revenues of $1,000 for the nine months ended September 30, 2008. Those revenues have increased because we have provided more services that we provide to a sales and marketing company. We hope to generate more significant revenues as we continue operations and implement our business plan.
Operating Expenses. For the nine months ended September 30, 2008, our total operating expenses were $61,479, as compared to $39,897 of total operating expenses for the nine months ended September 30, 2007. The increase in total operating expenses is primarily due to the increase in rent and general administrative expenses, which were higher in the current period because of the increased expenses attributable to expanding our operations. We expect that we will continue to incur these expenses as we expand our operations and also to incur significant legal and accounting expenses related to being a public company. For the nine months ended September 30, 2008, we had legal and professional expenses of $34,571, dues and fees of $9,254, rent of $9,000 and general and administrative expenses of $8,654. In comparison, for the nine months ended September 30, 2007, we had legal and professional expenses of $31,750, dues and fees expenses of $6,232, rent expenses of $900 and general and administrative expenses of $1,015.
Other Income. For the nine months ended September 30, 2008, we also had other expense of $913, which was interest from the convertible promissory note with one of our minority shareholders and the notes payable to our major shareholder. We had other income of $472 for the three months ended September 30, 2007, all of which was represented by our note from Fliva, Inc.
Net Income or Loss. For the nine months ended September 30, 2008, our loss from continuing operations was $45,481, and after provision for income taxes of $800, our net loss was $46,281. This is in comparison to the nine months ended September 30, 2007, where our loss from continuing operations was $38,425, and after provision for income taxes of $800, our net loss was $39,225. The increase in our net loss for nine months ended September 30, 2008, was due an increase in operating expenses between the two periods as a result of being a public company. We expect to continue to incur net losses for the foreseeable future and until we generate significant revenues.
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Our Plan of Operation for the Next Twelve Months. To effectuate our business plan and continue operations during the next twelve months, we need to raise additional funds. During the next three to six months, our primary objective is to begin several blogs which provide commentary on the dining and entertainment in various cities and geographic areas. We believe that we will need to spend approximately $10,000 to start blogs in several cities and geographic areas. Part of our business strategy is to pay bloggers with shares of our common stock and/or stock options pursuant to a stock option plan. Therefore, we believe that our ability to entice potential new bloggers to work for us is greatly enhanced now that our common stock is eligible for quotation on the OTC Bulletin Board. We believe that we will access to developers who can help us develop our widgets and blogs. We also intend to look for opportunities to work with other companies that will assist us in our development.
During the next six to twelve months, we need to build our user base, monetize our user base and begin generating revenues. In addition, in order to market and promote our services, we will need to raise significant capital. Our failure to market and promote our services will hinder our ability to increase the size of our operations and generate revenues. If we are not able to generate additional revenues that cover our estimated operating costs, our business may ultimately fail.
We believe that the current marketplace of Internet companies that specialize in developing social networking applications is highly fragmented, with literally hundreds of companies located throughout the country. As such, we believe that there is an opportunity for a publicly company to acquire several, smaller and more established Internet companies with already-established social networking applications. Accordingly, we intend to begin researching potential acquisitions or other suitable business partners which will assist us in realizing our business objectives. As of the date of this report, we have not identified any potential acquisition candidates. We hope to use our common stock as payment for any potential acquisitions. We cannot guaranty that we will acquire any other third party, or that in the event that we acquire another entity, this acquisition will increase the value of our common stock. Our acquisition strategy is designed to complement our core business of developing our own social networking applications.
We have cash of $2,402 as of September 30, 2008. In the opinion of management, available funds will not satisfy our working capital requirements for the next twelve months. Our forecast for the period for which our financial resources will be adequate to support our operations involves risks and uncertainties and actual results could fail as a result of a number of factors. We intend to pursue capital through public or private financing as well as borrowings and other sources, such as our officers, director and principal shareholders. We cannot guaranty that additional funding will be available on favorable terms, if at all. If adequate funds are not available, we hope that our officers, director and principal shareholders will contribute funds to pay for our expenses to achieve our objectives over the next twelve months. We hope we will be able to raise additional funds from some of our current shareholders now that we are eligible for quotation on the OTC Bulletin Board.
The economic crisis in the United States and the resulting economic uncertainty and market instability may make it harder for us to raise capital when we need it and have made it difficult for us to assess the impact of the crisis on our operations or liquidity. If we are unable to raise cash, we may be required to cease our operations. Other than as discussed in this quarterly report, we know of no other trends, events or uncertainties that have or are reasonably likely to have a material impact on our short-term or long-term liquidity.
We are not currently conducting any research and development activities other than the development of our website which we expect the total cost to be approximately $1,500. We do not anticipate that we will purchase or sell any significant equipment. In the event that we generate significant revenues and expand our operations, then we may need to hire additional employees or independent contractors as well as purchase or lease additional equipment.
Because we have limited operations and assets, we may be considered a shell company as defined in Rule 12b-2 of the Securities Exchange Act of 1934. Accordingly, we have checked the box on the cover page of this report that specifies we are a shell company.
Off-Balance Sheet Arrangements. We have no off-balance sheet arrangements.
Not applicable.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures. We maintain controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based upon their evaluation of those controls and procedures performed as of September 30, 2008, the date of this report, our chief executive officer and the principal financial officer concluded that our disclosure controls and procedures were effective.
Item 4(T). Controls and Procedures.
Changes in internal controls. There were no changes in our internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits
32. Section 1350 Certifications.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SN Strategies Corp., | |||
| a Nevada corporation | |||
| November 13, 2008 | By: | /s/ Michael Hawks | |
Michael Hawks | |||
| Its: | Principal executive officer | ||
| Principal accounting officer | |||
| President, CEO, Secretary and a director | |||
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