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 MARCH 31, 2009 |
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. xYes oNo
Indicated 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). oYes oNo
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 May 14, 2009, 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
| March 31, 2009 (Unaudited) | December 31, 2008 | |||||||
| Current assets | ||||||||
| Cash | $ | 1,023 | $ | 788 | ||||
| Prepaid expense | - | - | ||||||
| Total current assets | 1,023 | 788 | ||||||
| Other assets | ||||||||
| Investment | 27,500 | 27,500 | ||||||
| Total assets | $ | 28,523 | $ | 28,288 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | 52,933 | $ | 43,058 | ||||
| Income taxes payable | 1,600 | 800 | ||||||
| Convertible note payable | 3,000 | 3,000 | ||||||
| Notes payable, related party | 28,125 | 23,500 | ||||||
| Total current liabilities | 85,658 | 70,358 | ||||||
| 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 March 31, 2009 and December 31, 2008 | 2,876 | 2,876 | ||||||
| Additional paid-in capital | 91,281 | 91,281 | ||||||
| Deficit accumulated during the development stage | (151,292 | ) | (136,227 | ) | ||||
| Total stockholders’ equity (deficit) | (57,135 | ) | (42,070 | ) | ||||
| Total liabilities and stockholders’ equity (deficit) | $ | 28,523 | $ | 28,288 | ||||
See accompanying notes to unaudited financial statements.
2
SN STRATEGIES CORP.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended March 31, | Inception (January 18, 2002) to | |||||||||||
| March 31, | ||||||||||||
| 2009 | 2008 | 2009 | ||||||||||
| Net revenue | $ | 5,419 | $ | 2,962 | $ | 33,287 | ||||||
| Operating expenses | ||||||||||||
| Legal and professional | 12,740 | 21,728 | 101,125 | |||||||||
| Dues and fees | 18 | 3,932 | 18,917 | |||||||||
| Rent | 3,000 | 3,000 | 18,900 | |||||||||
| General and administrative | 3,166 | 1,461 | 20,112 | |||||||||
| Total operating expenses | 18,924 | 30,121 | 159,054 | |||||||||
| Other income (expense) | ||||||||||||
| Interest income (expense), net | (760 | ) | (73 | ) | (1,725 | ) | ||||||
| Loss from continuing operations before income taxes | (14,265 | ) | (27,232 | ) | (127,492 | ) | ||||||
| Provision for income taxes | 800 | 800 | 2,400 | |||||||||
| Loss from continuing operations | (15,065 | ) | (28,032 | ) | (129,892 | ) | ||||||
| Discontinued operations | - | - | (21,400 | ) | ||||||||
| Net loss | $ | (15,065 | ) | $ | (28,032 | ) | $ | (151,292 | ) | |||
| Net loss per common share from continuing operations – basic and diluted | $ | (0.01 | ) | $ | (0.01 | ) | $ | (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 | 2,100,722 | |||||||||
See accompanying notes to unaudited financial statements.
3
SN STRATEGIES CORP.
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY/(DEFICIT)
FOR THE PERIOD FROM INCEPTION (JANUARY 18, 2002) THROUGH MARCH 31, 2009
| 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 | 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 | - | - | 1,200 | - | 1,200 | |||||||||||||||
See accompanying notes to unaudited financial statements.
4
SN STRATEGIES CORP.
(A Development Stage Company)
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY/(DEFICIT)
FOR THE PERIOD FROM INCEPTION (JANUARY 18, 2002) THROUGH MARCH 31, 2009
| Common Stock | ||||||||||||||||||||
Number of Shares | Amount | Additional Paid-In Capital | Deficit Accumulated During Development Stage | Total Stockholders’ Equity (Deficit) | ||||||||||||||||
| Net loss | - | - | - | (3,273 | ) | (3,273 | ) | |||||||||||||
| Balance, December 31, 2003 | 1,951,000 | $ | 1,951 | $ | 10,949 | $ | (12,162 | ) | $ | 738 | ||||||||||
| Additional paid-in capital contributed by related party | - | - | 832 | - | 832 | |||||||||||||||
| Additional paid-in capital in exchange for facilities provided by related party | - | - | 1,200 | - | 1,200 | |||||||||||||||
| Net loss | - | - | - | (3,889 | ) | (3,889 | ) | |||||||||||||
| Balance, December 31, 2004 | 1,951,000 | 1,951 | 12,981 | (16,051 | ) | (1,119 | ) | |||||||||||||
| Additional paid-in capital contributed by related party | - | - | 50 | - | 50 | |||||||||||||||
| Additional paid-in capital in exchange for facilities provided by related party | - | - | 1,200 | - | 1,200 | |||||||||||||||
| Net loss | - | $ | - | $ | - | $ | (2,440 | ) | $ | (2,440 | ) | |||||||||
| Additional paid-in capital in exchange for facilities provided by related party | - | $ | - | $ | 1,200 | $ | - | $ | 1,200 | |||||||||||
| Net loss | - | - | - | (2,909 | ) | (2,909 | ) | |||||||||||||
| 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 | - | $ | - | $ | - | $ | (55,945 | ) | $ | (55,945 | ) | |||||||||
| Balance, December 31, 2008 (audited) | 2,876,000 | 2,876 | 91,281 | (136,227 | ) | (42,070 | ) | |||||||||||||
| Net loss | - | - | - | (15,065 | ) | (15,065 | ) | |||||||||||||
| Balance, March 31, 2009 (unaudited) | 2,876,000 | $ | 2,876 | $ | 91,281 | $ | (151,292 | ) | $ | (57,135 | ) |
See accompanying notes to unaudited financial statements.
5
SN STRATEGIES CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Inception | ||||||||||||
Three Months Ended March 31, | (January 18, 2002) to | |||||||||||
| March 31, | ||||||||||||
| 2009 | 2008 | 2009 | ||||||||||
| Cash flows from operating activities | ||||||||||||
| Net loss | $ | (15,065 | ) | $ | (28,032 | ) | $ | (151,292 | ) | |||
| 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 | - | - | 6,600 | |||||||||
| Changes in operating assets and liabilities | ||||||||||||
| Decrease (increase) in prepaid expenses | - | 2,500 | - | |||||||||
| Increase in accounts payable and accrued expenses | 9,875 | 21,679 | 52,933 | |||||||||
| Increase in income taxes payable | 800 | 800 | 1,600 | |||||||||
| Net cash used in operating activities | (4,390 | ) | (3,053 | ) | (84,159 | ) | ||||||
| Cash flows from investing activities | ||||||||||||
| Promissory note receivable | - | - | (25,000 | ) | ||||||||
| Increase in interest on note receivable | - | - | (625 | ) | ||||||||
| Net cash used in investing activities | - | - | (25,625 | ) | ||||||||
| Cash flows from financing activities | ||||||||||||
| Proceeds from issuance of common stock | - | - | 111,550 | |||||||||
| Distributions to shareholders | - | - | (32,750 | ) | ||||||||
| Capital contributions | - | - | 882 | |||||||||
| Proceeds from notes payable, related party | 4,625 | - | 28,125 | |||||||||
| Proceeds from convertible note payable | - | 3,000 | 3,000 | |||||||||
| Net cash provided by financing activities | 4,625 | 3,000 | 110,807 | |||||||||
| Net (decrease) increase in cash | 235 | (53 | ) | 1,023 | ||||||||
| Cash, beginning of period | 788 | 216 | - | |||||||||
| Cash, end of period | $ | 1,023 | $ | 163 | $ | 1,023 | ||||||
| Supplemental disclosure of cash flow information | ||||||||||||
| Income taxes paid | $ | - | $ | - | $ | 4,000 | ||||||
| Interest paid | $ | - | $ | - | $ | - | ||||||
| Conversion of note receivable and accrued | ||||||||||||
| interest into common stock of long term investment | $ | - | $ | - | $ | 25,625 | ||||||
| Gain on conversion | $ | - | $ | - | $ | 1,875 | ||||||
See accompanying notes to unaudited financial statements.
6
SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2009
(UNAUDITED)
| 1. | NATURE OF OPERATIONS AND BASIS OF PRESENTATION |
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 three months ended March 31, 2009, the Company produced only minimal revenues and will continue to report as a development stage company until significant revenues are produced.
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 Rule 10-01 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-K of SN Strategies Corp. for the year ended December 31, 2008. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2009 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, 2008 included in the Company’s report on Form 10-K.
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.
Recent Accounting Pronouncements
In April 2009, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) Financial Accounting Standard (FAS) 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. Based on the guidance, if an entity determines that the level of activity for an asset or liability has significantly decreased and that a transaction is not orderly, further analysis of transactions or quoted prices is needed, and a significant adjustment to the transaction or quoted prices may be necessary to estimate fair value in accordance with Statement of Financial Accounting Standards (SFAS) No. 157 Fair Value Measurements. This FSP is to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The company will adopt this FSP for its quarter ending June 30, 2009. There is no expected impact on the Company’s financial statements.
In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. The guidance applies to investments in debt securities for which other-than-temporary impairments may be recorded. If an entity’s management asserts that it does not have the intent to sell a debt security and it is more likely than not that it will not have to sell the security before recovery of its cost basis, then an entity may separate other-than-temporary impairments into two components: 1) the amount related to credit losses (recorded in earnings), and 2) all other amounts (recorded in other comprehensive income). This FSP is to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The company will adopt this FSP for its quarter ending June 30, 2009. There is no expected impact on the Company’s financial statements.
In April 2009, the FASB issued FSP FAS 107-1 and Accounting Principles Board (APB) 28-1, Interim Disclosures about Fair Value of Financial Instruments. The FSP amends SFAS No. 107 Disclosures about Fair Value of Financial Instruments to require an entity to provide disclosures about fair value of financial instruments in interim financial information. This FSP is to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The company will include the required disclosures in its quarter ending June 30, 2009.
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, which became effective January 1, 2009 via prospective application to business combinations. This Statement requires that the acquisition method of accounting be applied to a broader set of business combinations, amends the definition of a business combination, provides a definition of a business, requires an acquirer to recognize an acquired business at its fair value at the acquisition date and requires the assets and liabilities assumed in a business combination to be measured and recognized at their fair values as of the acquisition date (with limited exceptions). The company adopted this Statement on January 1, 2009. There was no impact upon adoption, and its effects on future periods will depend on the nature and significance of business combinations subject to this statement.
In April 2009, the FASB issued FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies. This FSP requires that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value if fair value can be reasonably estimated. If fair value cannot be reasonably estimated, the asset or liability would generally be recognized in accordance with SFAS No. 5, “Accounting for Contingencies” and FASB Interpretation No. 14, “Reasonable Estimation of the Amount of a Loss”. Further, the FASB removed the subsequent accounting guidance for assets and liabilities arising from contingencies from SFAS No. 141(R). The requirements of this FSP carry forward without significant revision the guidance on contingencies of SFAS No. 141, “Business Combinations”, which was superseded by SFAS No. 141(R) (see previous paragraph). The FSP also eliminates the requirement to disclose an estimate of the range of possible outcomes of recognized contingencies at the acquisition date. For unrecognized contingencies, the FASB requires that entities include only the disclosures required by SFAS No. 5. This FSP was adopted effective January 1, 2009. There was no impact upon adoption, and its effects on future periods will depend on the nature and significance of business combinations subject to this statement.
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| 2. | GOING CONCERN |
As shown in the accompanying financial statements, the Company has incurred a net operating loss of $151,292 from inception (January 18, 2002) through March 31, 2009. 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. | FAIR VALUE OF FINANCIAL INSTRUMENTS |
Fair Value Measurements
On January 1, 2008, the Company adopted SFAS No. 157 (SFAS 157), Fair Value Measurements. SFAS 157 relates to financial assets and financial liabilities. In February 2008, the FASB issued FASB Staff Position (FSP) No. FAS 157-2, Effective Date of FASB Statement No. 157, which delayed the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on at least an annual basis, until January 1, 2009 for calendar year-end entities.
SFAS 157 defines fair value, establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (GAAP), and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements and are to be applied prospectively with limited exceptions.
SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This standard is now the single source in GAAP for the definition of fair value, except for the fair value of leased property as defined in SFAS 13. SFAS 157 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions, about market participant assumptions, that are developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). 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 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
| • | Level 3 - Inputs that are both significant to the fair value measurement and unobservable. These inputs rely on management's own assumptions about the assumptions that market participants would use in pricing the asset or liability. |
(The unobservable inputs are developed based on the best information available in the circumstances and may include the Company's own data.)
The following table presents the Company's fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of March 31, 2009 and December 31, 2008:
| March 31, 2009 | December 31, 2008 | ||||||||||||||
| Level | Fair Value | Carrying Amount | Fair Value | Carrying Amount | |||||||||||
| Assets | |||||||||||||||
| Cash | 2 | $ | 1,023 | $ | 1,023 | $ | 788 | $ | 788 | ||||||
| Investment | 3 | 27,500 | 27,500 | 27,500 | 27,500 | ||||||||||
| Liabilities | |||||||||||||||
| Accounts payable and accrued expenses | 3 | 54,533 | 54,533 | 43,858 | 43,858 | ||||||||||
| Convertible note | 2 | 3,000 | 3,000 | 3,000 | 3,000 | ||||||||||
| Related party notes | 3 | 28,125 | 28,125 | 23,500 | 23,500 | ||||||||||
8
| 3. | FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued) |
Fair Value Option
On January 1, 2008, the Company adopted SFAS No. 159 (SFAS 159), The Fair Value Option for Financial Assets and Financial Liabilities. SFAS 159 provides a fair value option election that allows entities to irrevocably elect fair value as the initial and subsequent measurement attribute for certain financial assets and liabilities. Changes in fair value are recognized in earnings as they occur for those assets and liabilities for which the election is made. The election is made on an instrument by instrument basis at initial recognition of an asset or liability or upon an event that gives rise to a new basis of accounting for that instrument. The adoption of SFAS 159 did not have a material impact on the Company’s financial statements as the Company did not elect the fair value option for any of its financial assets or liabilities.
4. 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, 2010. 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 $73 for the three months ended March 31, 2009 and 2008, respectively.
5. 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 March 31, 2009, the principal balance is $13,000 and accrued interest is $1,264. Interest expense was $325 and $0 for the three months ended March 31, 2009 and 2008, 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 March 31, 2009, the principal balance is $4,500 and accrued interest is $306. Interest expense was $113 and $0 for the three months ended March 31, 2009 and 2008, 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 March 31, 2009, the principal balance is $6,000 and accrued interest is $305. Interest expense was $150 and $0 for the three months ended March 31, 2009 and 2008, respectively.
On January 16, 2009, the Company entered into a promissory note agreement to obtain a loan for $4,625 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 March 31, 2009, the principal balance is $4,625 and accrued interest is $95. Interest expense was $95 and $0 for the three months ended March 31, 2009 and 2008, respectively.
6. COMMON STOCK
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.
9
7. PROVISION FOR INCOME TAXES
As of March 31, 2009, 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 March 31, 2009, the Company had federal and state net operating loss carryforwards of approximately $146,000 which can be used to offset future federal income tax. The federal and state net operating loss carryforwards expire at various dates through 2029. 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 March 31, 2009, 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%) | $ | 36,500 | |||
| State net operating loss (at 8.84%) | 12,900 | ||||
| 49,400 | |||||
| Less: valuation allowance | (49,400 | ) | |||
| $ | - |
The Company’s valuation allowance increased by approximately $4,700 during the three months ended March 31, 2009.
8. RELATED PARTY TRANSACTIONS
From October 1, 2007, through March 31, 2009, 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 $3,000 and $3,000 for the three months ended March 31, 2009 and 2008, respectively.
9. 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 Quarterly Report on Form 10-Q for the three months ended March 31, 2009.
Liquidity and Capital Resources. We had cash of $1,023 as of March 31, 2009, which equals our total current assets as of that date. Our total assets of $28,523 as of March 31, 2009, included our current assets of $1,023, 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 Adisn, 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. Magic Cow, Inc. changed its name to Adisn, Inc. in March 2008.
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. On September 29, 2008, we entered into a promissory note agreement to obtain a loan for $6,000 with the same principal shareholder. On January 16, 2009, we entered into a promissory note agreement to obtain a loan for $4,625 with 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 $85,658 as of March 31, 2009, which was represented by accounts payable of $52,933, income taxes payable of $1,600, $3,000 represented by a convertible note payable and $28,125 of note payable to the related party. We had no other liabilities and no long term commitments or contingencies as of March 31, 2009.
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 March 31, 2009 as compared to the three months ended March 31, 2008.
Revenues. We had revenues of $5,419 for the three months ended March 31, 2009, as compared to revenues of $2,962 for the three months ended March 31, 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 provided more services. We hope to generate more significant revenues as continue operations and implement our business plan.
Operating Expenses. For the three months ended March 31, 2009, our total operating expenses were $18,924, as compared to $30,121 of total operating expenses for the three months ended March 31, 2008. For the three months ended March 31, 2009, we had legal and professional expenses of $12,740, dues and fees of $18, rent of $3,000 and general and administrative expenses of $3,166. In comparison, for the three months ended March 31, 2008, we had legal and professional expenses of $21,728, dues and fees expenses of $3,932, rent expenses of $3,000 and general and administrative expenses of $1,461. 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 March 31, 2009, we also had other expense of $760, which was interest from the promissory notes with one of our minority shareholders and the notes payable to our major shareholder. We had other expense of $73 for the three months ended March 31, 2008.
Net Income or Loss. For the three months ended March 31, 2009, our net loss was $15,065. This is in comparison to the three months ended March 31, 2008, where our net loss was $28,032. The decrease in our net loss for three months ended March 31, 2009, was due to the fact that we generated somewhat increased revenues during the period as compared to revenues during the three months March 31, 2008, and had decreased operating expenses. However, we expect to continue to incur net losses for the foreseeable future and until we generate more significant revenues.
Our Plan of Operation for the Next Twelve Months. Over the past several months, part of our growth strategy has been to seek acquisitions of other companies or businesses that are operating in a similar space. On December 31, 2008, we signed a term sheet pursuant to which we to agreed to enter into a definitive merger agreement with Visual Network Design Inc. (“VND”). Under the proposed terms, VND would merge with us, or a wholly owned subsidiary to be formed, whereby, upon effectiveness of the merger, the stockholders of VND would hold approximately 92% of our outstanding shares of capital stock and our current stockholders would own approximately 8% of our outstanding shares of capital stock. The term sheet provides, among other things, that the definitive merger agreement would be signed within 20 days of the execution of the term sheet. We and VND agreed that, during such 20-day period, each would deal exclusively with the other with respect to any merger, sale or acquisition involving either party and would not solicit or entertain offers or inquiries from other persons or entities or provide information to, or participate in, any discussions or negotiations with any persons or entities with respect to any proposed transaction. The definitive agreements are to include customary closing conditions satisfactory to the parties and their respective counsel, including the following: (i) consummation of all required definitive instruments and agreements; (ii) obtaining all necessary board, stockholder and third party consents; and (iii) satisfactory completion by the parties of all necessary technical and legal due diligence.
The proposed merger is still pending and we have not entered into any definitive merger agreement with VND. The material terms of the definitive agreements are yet to be fully negotiated and drafted. We cannot guaranty that we will enter into a definitive merger agreement or that the merger transaction with VND will be completed. If we do not complete the merger transaction discussed herein, we will look for another merger or acquisition target. During the next thirty days, our primary objective is to complete the proposed merger with VND. However, we also intend to continue our current business until such time as a merger is completed.
To effectuate our current 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 have cash of $1,023 as of March 31, 2009. 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 are not currently conducting any research and development activities. 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.
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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 March 31, 2009, the date of this report, our chief executive officer and the principal financial officer concluded that our disclosure controls and procedures were effective.
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.
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.
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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 | |||
| May 15, 2009 | By: | /s/ Michael Hawks | |
| Michael Hawks | |||
| Its: | Principal executive officer | ||
| Principal accounting officer | |||
| President, CEO, Secretary and a director | |||
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