UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2010 |
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. Yes x No o
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). Yes o No o
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). Yes x No o |
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 13, 2010, there were 4,500,012 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, 2010 (Unaudited) | December 31, 2009 | |||||||
Current assets | ||||||||
Cash | $ | 1,379 | $ | 1,534 | ||||
Total current assets | 1,379 | 1,534 | ||||||
Other assets | ||||||||
Investment | 27,500 | 27,500 | ||||||
Total assets | $ | 28,879 | $ | 29,034 |
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities | ||||||||
Accounts payable and accrued expenses | $ | 61,043 | $ | 56,561 | ||||
Income taxes payable | 1,600 | 800 | ||||||
Note payable, related party | 7,318 | 7,318 | ||||||
Total current liabilities | 69,961 | 64,679 | ||||||
Stockholders’ equity (deficit) | ||||||||
Preferred stock, $.001 par value; 5,000,000 shares authorized, 0 shares issued and outstanding | - | - | ||||||
Common stock, $.001 par value; 65,849,200 shares authorized, 4,500,012 and 4,500,012 shares issued and outstanding at March 31, 2010 and December 31, 2009, respectively | 4,500 | 4,500 | ||||||
Additional paid-in capital | 132,929 | 132,929 | ||||||
Deficit accumulated during the development stage | (178,511 | ) | (173,074 | ) | ||||
Total stockholders’ equity (deficit) | (41,082 | ) | (35,645 | ) | ||||
Total liabilities and stockholders’ equity (deficit) | $ | 28,879 | $ | 29,034 |
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, | ||||||||||||
2010 | 2009 | 2010 | ||||||||||
Net revenue | $ | 6,968 | $ | 5,419 | $ | 73,199 | ||||||
Operating expenses | ||||||||||||
Legal and professional | 4,298 | 12,740 | 125,089 | |||||||||
Dues and fees | 153 | 18 | 22,179 | |||||||||
Rent | 4,000 | 3,000 | 30,900 | |||||||||
General and administrative | 2,971 | 3,166 | 46,078 | |||||||||
Total operating expenses | 11,422 | 18,924 | 224,246 | |||||||||
Other income (expense) | ||||||||||||
Interest income (expense), net | (183 | ) | (760 | ) | (2,864 | ) | ||||||
Loss from continuing operations before income taxes | (4,637 | ) | (14,265 | ) | (153,911 | ) | ||||||
Provision for income taxes | 800 | 800 | 3,200 | |||||||||
Loss from continuing operations | (5,437 | ) | (15,065 | ) | (157,111 | ) | ||||||
Discontinued operations | - | - | (21,400 | ) | ||||||||
Net loss | $ | (5,437 | ) | $ | (15,065 | ) | $ | (178,511 | ) | |||
Net loss per common share from continuing operations – basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.05 | ) | |||
Net loss per common share from discontinued operations – basic and diluted | $ | - | $ | - | $ | (0.01 | ) | |||||
Weighted average of common shares – basic and diluted | 4,500,000 | 3,787,646 | 2,958,901 |
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, 2010
(UNAUDITED)
Deficit | ||||||||||||||||||||
Common Stock | Accumulated | |||||||||||||||||||
Number of Shares | Amount | Additional Paid-In Capital | During Development Stage | Total Stockholders’ Equity (Deficit) | ||||||||||||||||
Balance, January 18, 2002 | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
Issuance of founder shares for services, January 30, 2002 | 1,580,393 | 1,580 | 4,800 | - | 6,000 | |||||||||||||||
Issuance of common stock, November 1, 2002 | 989,055 | 989 | 36,561 | - | 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 | 2,569,448 | 2,569 | 41,881 | (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, 2010
(UNAUDITED)
Deficit | |||||||||||||
Common Stock | Accumulated | ||||||||||||
Number of Shares | Amount | Additional Paid-In Capital | During Development Stage | Total Stockholders’ Equity (Deficit) | |||||||||
Net loss | - | - | - | (3,273 | ) | (3,273 | ) | ||||||
Balance, December 31, 2003 | 2,569,448 | 2,569 | 10,331 | (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 | 2,569,448 | 2,569 | 12,363 | (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 | ) | ||||||
See accompanying notes to unaudited financial statements.
5
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, 2010
(UNAUDITED)
Deficit | |||||||||||||
Common Stock | Accumulated | ||||||||||||
Number of Shares | Amount | Additional Paid-In Capital | During Development Stage | Total Stockholders’ Equity (Deficit) | |||||||||
Balance, December 31, 2005 | 2,569,448 | 2,569 | 13,613 | (18,491 | ) | (2,309 | ) | ||||||
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 | 2,569,448 | 2,569 | 14,813 | (21,400 | ) | (4,018 | ) | ||||||
Issuance of common stock, May 18, 2007 | 576,181 | 576 | 34,424 | - | 35,000 | ||||||||
Issuance of common stock, May 31, 2007 | 288,090 | 288 | 17,212 | - | 17,500 | ||||||||
Issuance of common stock, June 7, 2007 | 353,939 | 354 | 21,146 | - | 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 | ) |
See accompanying notes to unaudited financial statements.
6
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, 2010
(UNAUDITED)
Deficit | ||||||||||||||||||||
Common Stock | Accumulated | |||||||||||||||||||
Number of Shares | Amount | Additional Paid-In Capital | During Development Stage | Total Stockholders’ Equity (Deficit) | ||||||||||||||||
Balance, December 31, 2007 | 3,787,658 | 3,788 | 90,369 | (80,282 | ) | 13,875 | ||||||||||||||
Net loss | - | - | - | (55,945 | ) | (55,945 | ) | |||||||||||||
Balance, December 31, 2008 | 3,787,658 | 3,788 | 90,369 | (136,227 | ) | (42,070 | ) | |||||||||||||
Conversion of debt, June 19, 2009 | 712,354 | 712 | 42,560 | 43,272 | ||||||||||||||||
Net loss | - | - | - | (36,847 | ) | (36,847 | ) | |||||||||||||
Balance, December 31, 2009 | 4,500,012 | 4,500 | 132,929 | (173,074 | ) | (35,645 | ) | |||||||||||||
Net loss | - | - | - | (5,437 | ) | (5,437 | ) | |||||||||||||
Balance, March 31, 2010 | 4,500,012 | $ | 4,500 | $ | 132,929 | $ | (178,511 | ) | $ | (41,082 | ) |
See accompanying notes to unaudited financial statements.
7
SN STRATEGIES CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Inception | ||||||||||||
Three Months Ended March 31, | (January 18, 2002) to | |||||||||||
March 31, | ||||||||||||
2010 | 2009 | 2010 | ||||||||||
Cash flows from operating activities | ||||||||||||
Net loss | $ | (5,437 | ) | $ | (15,065 | ) | $ | (178,511 | ) | |||
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 | - | - | - | |||||||||
Increase in accounts payable and accrued expenses | 4,482 | 9,875 | 64,190 | |||||||||
Increase in income taxes payable | 800 | 800 | 1,600 | |||||||||
Net cash used in operating activities | (155 | ) | (4,390 | ) | (100,121 | ) | ||||||
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 note payable, related party | - | 4,625 | 44,443 | |||||||||
Proceeds from convertible note payable | - | - | 3,000 | |||||||||
Net cash provided by financing activities | - | 4,625 | 127,125 | |||||||||
Net (decrease) increase in cash | (155 | ) | 235 | 1,379 | ||||||||
Cash, beginning of period | 1,534 | 788 | - | |||||||||
Cash, end of period | $ | 1,379 | $ | 1,023 | $ | 1,379 | ||||||
See accompanying notes to unaudited financial statements.
8
SN STRATEGIES CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Inception | ||||||||||||
Three Months Ended March 31, | (January 18, 2002) to | |||||||||||
March 31, | ||||||||||||
2010 | 2009 | 2010 | ||||||||||
Supplemental disclosure of cash flow information | ||||||||||||
Income taxes paid | $ | - | $ | - | $ | 4,800 | ||||||
Interest paid | $ | - | $ | - | $ | - | ||||||
Conversion of note payables and accrued | ||||||||||||
interest into common stock | $ | - | $ | - | $ | 43,272 | ||||||
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.
9
SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2010
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 Accounting Standards Codification (ASC) 915 “Development Stage Entities”. For the three months ended March 31, 2010, the Company produced only minimal revenues and will continue to report as a development stage company until significant revenues are produced.
The Company has evaluated subsequent events through May 12, 2010, the date these financial statements were issued.
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 annual report on Form 10-K of SN Strategies Corp. for the period ended December 31, 2009. 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 ended March 31, 2010 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 period ended December 31, 2009 included in the Company’s annual 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.
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.
10
SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2010
1. | NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
Fair Value of Financial Instruments
Pursuant to ASC No. 825, “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 ASC No. 740, “Accounting for Income Taxes”. Under the asset and liability method of ASC No. 740, 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 ASC No. 740, 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 ASC No. 220, “Comprehensive Income”. ASC 220 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 March 31, 2010, the Company had no other components of comprehensive loss other than the net loss as reported on the statement of operations.
Segment Reporting
Pursuant to ASC No. 280, “Segment Reporting,” (“ASC No. 280”), the Company is required to disclose certain disclosures of operating segments, as defined in ASC No. 280. Management has determined that the Company has only one operating segment and therefore does not disclose operating segment information.
11
SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2010
1. | NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
Basic and Diluted Income (Loss) Per Share
In accordance with ASC No. 260, “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 March 31, 2010, 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 ASC No. 605, “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
Recent Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (FASB) issued ASC Statement No. 105, the FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (ASC 105). ASC 105 will become the single source authoritative nongovernmental U.S. generally accepted accounting principles (GAAP), superseding existing FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force, and related accounting literature. ASC 105 reorganized the thousands of GAAP pronouncements into roughly 90 accounting topics and displays them using a consistent structure. Also included is relevant SEC guidance organized using the same topical structure in separate sections. The Company adopted ASC 105 on July 1, 2009. The adoption of ASC 105 did not have an impact on the Company’s financial position or results of operations.
12
SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2010
1. | NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
Recent Accounting Pronouncements (continued)
On April 1, 2009, the Company adopted ASC 825-10-65, Financial Instruments – Overall – Transition and Open Effective Date Information (ASC 825-10-65). ASC 825-10-65 amends ASC 825-10 to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements and also amends ASC 270-10 to require those disclosures in all interim financial statements. The adoption of ASC 825-10-65 did not have a material impact on the Company’s results of operations or financial condition.
On April 1, 2009, the Company adopted ASC 855, Subsequent Events (ASC 855). ASC 855 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date – that is, whether that date represents the date the financial statements were issued or were available to be issued. This disclosure should alert all users of financial statements that an entity has not evaluated subsequent events after that date in the set of financial statements being presented. The adoption of ASC 855 did not have a material impact on the Company̵ 7;s results of operations or financial condition.
On July 1, 2009, the Company adopted ASU No. 2009-05, Fair Value Measurements and Disclosures (Topic 820) (ASU 2009-05). ASU 2009-05 provided amendments to ASC 820-10, Fair Value Measurements and Disclosures – Overall, for the fair value measurement of liabilities. ASU 2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using certain techniques. ASU 2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prev ents the transfer of a liability. ASU 2009-05 also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. The adoption of ASU 2009-05 did not have a material impact on the Company’s results of operations or financial condition.
13
SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2010
1. | NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) |
Recent Accounting Pronouncements (Continued)
In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements, (amendments to ASC 605, Revenue Recognition) (ASU 2009-13). ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The amendments eliminate the residual method of revenue allocation and require revenue to be allocated using the relative selling price method. ASU 2009-13 should be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company does not expect adoption of ASU 2009-13 to have a material impact on the Company’s results of operations or financial condition.
2. GOING CONCERN
As shown in the accompanying financial statements, the Company has incurred a net operating loss of $178,511 from inception (January 18, 2002) through March 31, 2010.
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.
14
SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2010
3. | FAIR VALUE ACCOUNTING Determination of Fair Value At March 31, 2010, the Company calculated the fair value of its assets and liabilities for disclosure purposes only. Valuation Hierarchy ASC 820 establishes a three-level valuation hierarchy for the use of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date: |
• | 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, 2010 and December 31, 2009:
March 31, 2010 | December 31, 2009 | ||||||||||||||||
Level | Fair Value | Carrying Amount | Fair Value | Carrying Amount | |||||||||||||
Assets | |||||||||||||||||
Investment | 3 | $ | 27,500 | 27,500 | 27,500 | 27,500 | |||||||||||
Liabilities | |||||||||||||||||
Convertible note | 2 | $ | - | - | $ | 3,000 | $ | 3,000 | |||||||||
Related party notes | 3 | 7,318 | 7,318 | 23,500 | 23,500 |
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SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2010
4. 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 matured on May 18, 2009.
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, valued at $27,500, for 201,343 shares of common stock of Magic Cow, Inc. pursuant to a Share Exchange Agreement between Fliva and Magic Cow, Inc.
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 March 31, 2010.
6. NOTE PAYABLE, RELATED PARTY
On June 26, 2009, the Company entered into a promissory note agreement to obtain a loan for $1,250 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. Upon sixty-one (61) days notice to the Company, all or any portion of the outstanding principal and unpaid accrued interest can be converted into shares of the Company’s common stock at a conversion rate of $0.08 per share. At March 31, 2010, the principal balance is $1,250 and accrued interest is $97. Interest expense was $31 and $0 for the three months ended March 31, 2010 and 2009, respecti vely.
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SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2010
6. NOTE PAYABLE, RELATED PARTY (continued)
On November 5, 2009, the Company entered into a promissory note agreement to obtain a loan for $6,068 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. Upon sixty-one (61) days notice to the Company, all or any portion of the outstanding principal and unpaid accrued interest can be converted into shares of the Company’s common stock at a conversion rate of $0.08 per share. At March 31, 2010, the principal balance is $6,068 and accrued interest is $246. Interest expense was $152 and $0 for the three months ended March 31, 2010 and 2009, res pectively.
7. STOCKHOLDER’S EQUITY
The Company is authorized to issue up to 65,849,000 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 1,580,381 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 989,055 shares of common stock at $0.038 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.
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SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2010
7. STOCKHOLDER’S EQUITY (continued)
On May 18, 2007, the Company performed a private placement and issued 576,181 shares of common stock at $0.06 per share for an aggregate total of $35,000.
On May 31, 2007, the Company performed a private placement and issued 288,090 shares of common stock at $0.06 per share for an aggregate total of $17,500.
On June 7, 2007, the Company performed a private placement and issued 353,939 shares of common stock at $0.06 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.
On June 19, 2009, the Company issued 712,354 shares of its common stock in payment of $43,272 of principal and interest owed to certain note holders.
On July 9, 2009, the Company effected a one for 1.316984 forward stock split whereby each share of the Company’s common stock outstanding was converted into 1.316984 shares 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.
8. PROVISION FOR INCOME TAXES
As of March 31, 2010, 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, 2010, the Company had federal and state net operating loss carryforwards of approximately $177,000 which can be used to offset future federal income tax. The federal and state net operating loss carryforwards expire at various dates through 2030. 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.
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SN STRATEGIES CORP.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
MARCH 31, 2010
8. PROVISION FOR INCOME TAXES (continued)
As of March 31, 2010, 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%) | $ 44,000 | ||
State net operating loss (at 8.84%) | 16,000 | ||
60,000 | |||
Less: valuation allowance | (60,000) | ||
$ - |
The Company’s valuation allowance increased by approximately $2,000 during the three months ended March 31, 2010.
9. 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 $0 for the three months ended March 31, 2010 and 2009, respectively.
From October 1, 2007, through June 15, 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 $-0- and $3,000 for the three months ended March 31, 2010 and 2009, respectively.
10. 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.
11. SUBSEQUENT EVENT
On April 21, 2010, the Company executed a promissory note in the amount of $8,000, with a stockholder. Such note is payable on demand by the stockholder and bears interest of 10% per annum.
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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 accur ate, 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 nine months ended March 31, 2010.
Liquidity and Capital Resources. We had cash of $1,379 as of March 31, 2010, which equals our total current assets as of that date. Our total assets of $28,879 as of March 31, 2010, included our current assets of $1,379, 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.
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Over the last two years, we have entered into several convertible promissory notes with one of our principal shareholders. We used those funds for working capital. On September 19, 2009, the holders of certain promissory notes (“Notes”) surrendered the Notes and converted all unpaid principal and unpaid accrued interest due under the Notes into shares of our $.001 par value common stock as provided in the Notes. As of June19, 2009, the total unpaid principal and unpaid accrued interest due under the Notes was approximately $43,272, which the holders of the Notes converted into 540,898 shares of common stock at a conversion price of $0.08 per share. We issued the shares to the holders of the Notes in a transaction which we believe satisfies the conditions for the exemption from registration and prospectus delivery re quirements of the Securities Act of 1933 (“Act”), which exemption is specified by the provisions of Section 4(2) of that Act.
On June 26, 2009, we entered into a promissory note agreement to obtain a loan for $1,250 with a principal 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 our option, in whole or in part without penalty. March 31, 2010, the principal balance is $1,250 and accrued interest is $97. Interest expense was $31 and $0 for the three months ended March 31, 2010 and 2009, respectively. We used those funds for working capital.
On November 5, 2009, we entered into a promissory note agreement to obtain a loan for $6,068 with a principal 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 our option, in whole or in part without penalty. Upon 61 days notice to us, all or any portion of the outstanding principal and unpaid accrued interest can be converted into shares of our common stock at a conversion rate of $0.08 per share. At March 31, 2010, the principal balance is $6,068 and accrued interest is $246. Interest expense was $152 and $0 for the three months ended March 31, 2010 and 2009, respectively.
On April 21, 2010, we entered into a promissory note agreement to obtain a loan for $8,000, with a principal stockholder. Such note is payable on demand by the stockholder and bears interest of 10% per annum.
Our current liabilities were $69,961 as of March 31, 2010, which was represented by accounts payable of $61,043, income taxes payable of $1,600 and $7,318 of note payable to a related party. We had no other liabilities and no long term commitments or contingencies as of March 31, 2010.
During 2010, we expect to incur significant accounting costs associated with the audit and review of our financial statements. We also 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.
On July 9, 2009, we effected a 1.316984 for one forward stock split whereby each share of our common stock outstanding was converted into 1.316984 shares of our common stock.
Results of Operations.
For the three months ended March 31, 2010 as compared to the three months ended March 31, 2009.
Revenues. We had revenues of $6,968 for the three months ended March 31, 2010, as compared to revenues of $5,419 for the three months ended March 31, 2009. 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.
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Operating Expenses. For the three months ended March 31, 2010, our total operating expenses were $11,422 as compared to $18,924 of total operating expenses for the three months ended March 31, 2009. For the three months ended March 31, 2010, we had legal and professional expenses of $4,298, dues and fees of $153, rent of $4,000 and general and administrative expenses of $2,971. In comparison, for the three months ended March 31, 2009, we had legal and professional expenses of $12,740, dues and fees expenses of $18, rent expenses of $3,000 and general and administrative expenses of $3,166. A large 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 sta tements and other expenses related to being a public company. We expect that we will continue to incur significant legal and accounting expenses related to being a public company.
Other Expense. For the three months ended March 31, 2010, we also had other expense of $183, which was interest from the notes payable to our major shareholder. We had other expense of $760 for the three months ended March 31, 2009.
Net Loss. For the three months ended March 31, 2010, our net loss was $5,437, as compared to the three months ended March 31, 2009, where our net loss was $15,065. The decrease in our net loss for three months ended March 31, 2010, was due primarily to a decrease in legal and professional fees as compared the three months March 31, 2009.
Our Plan of Operation for the Next Twelve Months. Over the last twelve 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”). We were unable to enter into a definitive agreement with VND and we have terminated the term sheet with VND.
We expect that we will continue to explore opportunities to acquire smaller companies with complementary businesses and other companies that may be interested in being acquired by us or entering into a joint venture agreement with us. As of the date of this report, we have identified a potential acquisition and we have conducted informal negotiations with that party. We cannot guaranty that we will acquire or enter into any formal agreement with that party, or that in the event that we acquire that entity, this acquisition will increase the value of our common stock. We hope to use our common stock as payment for any potential acquisitions.
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 $1,379 as of March 31, 2010. 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, 2010, 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
Certification of Principal Executive and Financial Officer, pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange Act of 1934 |
32. | Certification of Principal Executive and Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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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 17, 2010 | By: | /s/ Michael Hawks | |
Michael Hawks | |||
Its: | President, Secretary, Treasurer, CFO, Director (Principal Executive, Financial and Accounting Officer) | ||
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