UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] Quarterly Report pursuant to 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 _____________ to ______________.
Commission File Number 333-145743
BONFIRE PRODUCTIONS, INC.
(Exact name of registrant as specified in its charter)
Nevada 75-3260546
------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
6302 Mesedge Drive
Colorado Springs, CO 80919
(Address of principal executive offices) (zip code)
(719) 598-2469
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the precedibng 12 months (or for such shorter period that the registrant was required to submit and post such files).
[ ]
Yes
[X]
No (Not required by smaller reporting companies.)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer,""accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ X ] (Do not check if a smaller
reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after distribution of securities under a plan confirmed by a court. Yes[ ] 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 practicable date: 6,503,332 Shares of $0.001 par value Common Stock outstanding as of May 15, 2009.
BONFIRE PRODUCTIONS, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
March 31, 2009
(Unaudited)
BALANCE SHEET
STATEMENTS OF OPERATIONS
STATEMENTS OF CASH FLOWS
STATEMENT OF STOCKHOLDERS' EQUITY
NOTES TO FINANCIAL STATEMENTS
BONFIRE PRODUCTIONS, INC.
(A Development Stage Company)
BALANCE SHEET
March 31, June 30,
2009 2008
---- ----
(Unaudited) (Audited)
ASSETS
------
Current assets
Cash $ 14 $ 410
Prepaid expenses 31 31
------------ -------------
Total current assets 45 441
Other assets
Equipment, net 1,532 1,852
Security deposit 200 200
------------ -------------
Total Assets $ 1,777 $ 2,493
============ =============
LIABILITIES & STOCKHOLDERS' EQUITY
----------------------------------
Current liabilities
Accounts payable and accrued liabilities $ 8,397 $ 6,312
Due to related parties 1,900 2,745
Loan payable - related parties - 26,632
------------ ------------
Total current liabilities 10,297 35,689
Total Liabilities 10,297 35,689
------------ ------------
Stockholders' Equity
Capital stock
75,000,000 shares authorized, $0.001 par value
6,503,332 shares issued and outstanding
(June 30, 2008 - 6,503,332) 6,503 6,503
Additional paid in capital 42,047 42,047
Deficit accumulated during the development stage ( 57,070) ( 81,746)
------------- ------------
Total Stockholders' Equity ( 8,520) ( 33,196)
------------- ------------
Total Liabilities and Stockholders' Equity $ 1,777 $ 2,493
============= ============
The accompanying notes are an integral part of these financial statements
BONFIRE PRODUCTIONS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Nine months August 25, 2006
Ended Ended (Inception) through
March 31, March 31, March 31,
2009 2008 2009 2008 2009
---- ---- ---- ---- ----
Revenue $ - $ - $ 7,500 $ - $ 7,500
----------- ------------ ---------- ----------- -------------
Expenses:
Amortization $ 110 $ 25 $ 388 $ 51 $ 464
Audio production - - - - 14,500
General and Administrative 1,861 25,838 19,223 63,362 85,261
------------ ------------ ----------- ----------- -------------
1,971 25,863 19,611 63,723 100,225
Loss from operations ( 1,971) ( 25,863) ( 12,111) ( 63,723) ( 92,725)
Other income (expense)
Interest expense - (241) (336) (729) ( 1,468)
Gain on settlement of amounts due to related party - - 37,123 - 37,123
------------ ------------- ----------- ----------- --------------
Income (loss) before provision for income tax ( 1,971) ( 26,104) 24,676 ( 64,452) ( 57,070)
Provision for income tax
- - - - -
------------ ------------ ------------ ---------- --------------
Net income (loss) $ ( 1,971) $ ( 26,104) $ 24,676 $ ( 64,452) $ ( 57,070)
============ ============= ============ =========== ==============
Net income (loss) per share $ ( 0.000) $ ( 0.01) $ 0.01 ( 0.01)
============ ============= ============ ===========
Weighted average number of common shares outstanding 6,503,332 6,503,332 6,503,332 5,258,969
============ ============= ============ ===========
The accompanying notes are an integral part of these financial statements
BONFIRE PRODUCTIONS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
August 25, 2006
Nine Months Ended (Inception) through
March 31, March 31,
2009 2008 2009
----- ---- ----
Operating Activities:
Net income (loss) $ 24,676 $ ( 64,452) $ ( 57,070)
Adjustment to reconcile net income to net
cash provided by (used for) operating activities:
Amortization 278 51 354
Prepaid expenses - ( 31) ( 31)
Security deposit - ( 200) ( 200)
Accounts payable and accrued liabilities 2,094 3,302 8,439
Accounts payable related parties 2,310 759 5,056
Gain on settlement of amounts due to related party ( 37,123) - ( 37,123)
--------------- -------------- --------------
Net cash provided by (used for)
operating activities ( 7,765) ( 60,841) ( 80,575)
--------------- -------------- -------------
Investing Activities
Purchase of fixed assets - ( 1,929) ( 1,929)
--------------- -------------- -------------
Net cash provided by (used for)
investing activities - ( 1,929) ( 1,929)
--------------- -------------- -------------
Financing Activities:
Loan payable - related party 7,336 729 33,968
Proceeds from issuance of common stock - 45,050 48,550
--------------- -------------- -------------
Net cash provided by (used for)
financing activities 7,336 45,779 80,589
--------------- -------------- -------------
Net Increase (Decrease) In Cash ( 16,991) 14
Cash At The Beginning Of The Period ( 429) 16,523 -
--------------- -------------- -------------
Cash (Bank Indebtedness) At The End
Of The Period $ 14 $ ( 468) $ 14
=============== ============== ==============
Schedule Of Non-Cash Investing And Financing Activities
-------------------------------------------------------
None
Supplemental Disclosure
-----------------------
Cash paid for:
Interest $ - $ - $ -
============== ================ =============
Income Taxes $ - $ - $ -
============== ================ =============
The accompanying notes are an integral part of these financial statements
Deficit
&nb sp; Accumulated
During the
Common Shares Paid In Development
-------------
Number Par Value Capital Stage Total
------ --------- ------- ----- -----
Balances, August 25, 2006 - $ - $ - $ - $ -
Issued for cash:
Common stock December, 2006 - at $0.001 3,500,000 3,500 - - 3,500
Net gain (loss) for the period ended June 30, 2007 - - - ( 10,211) ( 10,211)
---------- ---------- ---------- ------------ -----------
Balances, June 30, 2007 3,500,000 3,500 - ( 10,211) ( 6,711)
Issued for cash:
Common stock November, 2007 - at $0.015 3,003,332 3,003 42,047 - 45,050
Net gain (loss) for the year ended June 30, 2008 - - - ( 71,535) ( 71,535)
---------- ---------- ---------- ------------ ------------
Balances, June 30, 2008 6,503,332 6,503 42,047 ( 81,746) ( 33,196)
Net gain (loss) for the period ended December 31, 2008 - - - 26,647 26,647
---------- ---------- ----------- ------------ ------------
Balances, December 31, 2008 6,503,332 $ 6,503 $ 42,047 $ ( 55,099) $ ( 6,549)
---------- ---------- ----------- ------------ ------------
Net gain (loss) for the period ended March 31, 2009 - - - ( 1,971) ( 1,971)
---------- ---------- ----------- ------------ ------------
Balances, March 31, 2009 6,503,332 $ 6,503 $ 42,047 $ ( 57,070) $ ( 8,520)
========== ========== =========== ============ ============
The accompanying notes are an integral part of these financial statements
The Company was incorporated in the State of Nevada, United States of America on August 25, 2006 and its fiscal year end is June 30. The Company is engaged in recording, publishing and distribution of multicultural stories and fairy tales for children through its website www.bonfiretales.com and other internet retailers.
Going Concern
These financial statements have been prepared on a going concern basis. The Company has a working capital deficiency of $10,252, and has accumulated deficit of $57,070 since inception. Its ability to continue as a going concern is dependent upon the ability of the Company to generate profitable operations in the future and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The outcome of these matters cannot be predicted with any certainty at this time. These factors raise substantial doubt that the company will be able to continue as a going concern. Management plans to continue to provide for its capital needs by the issuance of common stock and related party advances. These financial statements do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.
Unaudited Interim Financial Statements
The accompanying unaudited interim financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q of Regulation S-B. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended June 30, 2008, included in the Company's annual report on Form10KSB filed with the Securities and Exchange Commission. The interim unaudited financial statements should be read in conjunction with those financial statements included in the Form 10KSB. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the nine months ended March 31, 2009 are not necessarily indicative of the results that may be expected for the year ending June 30, 2009.
Note 2 Summary of Significant Accounting Policies The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgement. Actual results may vary from these estimates.
The financial statements have, in management's opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below:
Development Stage Company
The Company complies with Financial Accounting Standard Board Statement ("FAS") No. 7 and The Securities and Exchange Commission Act Guide 7 for its characterization of the Company as development stage.
Revenue Recognition
We recognize revenue from product sales when the following four revenue recognition criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, and collectibility is reasonably assured. Product sales and shipping revenues, net of promotional discounts, rebates, and return allowances, are recorded when the products are shipped and title passes to customers.
Bonfire Productions, Inc.
(A Development Stage Company)
Notes to Financial Statements
March 31, 2009
(Unaudited) - Page 2
Note 2 Summary of Significant Accounting Policies - (cont'd)
Impairment of Long-lived Assets
Capital assets are reviewed for impairment in accordance with FAS No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets", which was adopted effective January 1, 2002. Under FAS No. 144, these assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. An impairment charge is recognized for the amount, if any, which the carrying value of the asset exceeds the fair value.
Technology and Content
Technology and content expenses consist principally of consultants' fees and expenses related to website development, editorial content, and systems support. Technology and content costs are expensed as incurred.
Advertising Costs
The Company's policy regarding advertising is to expense advertising when incurred. The Company had not incurred any advertising expense as of March 31, 2009.
Foreign Currency Translation
The financial statements are presented in United States dollars. In accordance with Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation", since the functional currency of the Company is U.S. dollars, the foreign currency financial statements of the Company's subsidiaries are re-measured into U.S. dollars. Monetary assets and liabilities are re-measured using the foreign exchange rate that prevailed at the balance sheet date. Revenue and expenses are translated at weighted average rates of exchange during the year and stockholders' equity accounts and furniture and equipment are translated by using historical exchange rates. Any re-measurement gain or loss incurred is reported in the income statement.
Stock-based Compensation
The Company has not adopted a stock option plan and has not granted any stock options. Accordingly no stock-based compensation has been recorded to date.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with FAS No. 109 "Accounting for Income Taxes". Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carryforwards 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.
Fair Value of Financial Instruments
The carrying value of the Company's financial instruments consisting of cash, accounts payable and accrued liabilities, agreement payable and due to related party approximate their carrying value due to the short-term maturity of such instruments. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
Recent Accounting Pronouncements
In April 2009, the FASB issued FSP No. 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” (“FSP FAS 157-4”). FSP FAS 157-4 provides guidance on estimating fair value when market activity has decreased and on identifying transactions that are not orderly. Additionally, entities are required to disclose in interim and annual periods the inputs and valuation techniques used to measure fair value. This FSP is effective for interim and annual periods ending after June 15, 2009. The Company does not expect the adoption of FSP FAS 157-4 will have a material impact on its financial condition or results of operation.
Bonfire Productions, Inc.
(A Development Stage Company)
Notes to Financial Statements
March 31, 2009
(Unaudited) - Page 3
Note 2 Summary of Significant Accounting Policies - Recent Accounting Pronouncements (cont'd)
In October 2008, the FASB issued FSP No. FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active,” (“FSP FAS 157-3”), which clarifies application of SFAS 157 in a market that is not active. FSP FAS 157-3 was effective upon issuance, including prior periods for which financial statements have not been issued. The adoption of FSP FAS 157-3 had no impact on the Company’s results of operations, financial condition or cash flows.
In December 2008, the FASB issued FSP No. FAS 140-4 and FIN 46(R)-8, “Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities.” This disclosure-only FSP improves the transparency of transfers of financial assets and an enterprise’s involvement with variable interest entities, including qualifying special-purpose entities. This FSP is effective for the first reporting period (interim or annual) ending after December 15, 2008, with earlier application encouraged. The Company adopted this FSP effective January 1, 2009. The adoption of the FSP had no impact on the Company’s results of operations, financial condition or cash flows.
In December 2008, the FASB issued FSP No. FAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (“FSP FAS 132(R)-1”). FSP FAS 132(R)-1 requires additional fair value disclosures about employers’ pension and postretirement benefit plan assets consistent with guidance contained in SFAS 157. Specifically, employers will be required to disclose information about how investment allocation decisions are made, the fair value of each major category of plan assets and information about the inputs and valuation techniques used to develop the fair value measurements of plan assets. This FSP is effective for fiscal years ending after December 15, 2009. The Company does not expect the adoption of FSP FAS 132(R)-1 will have a material impact on its financial condition or results of operation.
In September 2008, the FASB issued exposure drafts that eliminate qualifying special purpose entities from the guidance of SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” and FASB Interpretation 46 (revised December 2003), “Consolidation of Variable Interest Entities - an interpretation of ARB No. 51,” as well as other modifications. While the proposed revised pronouncements have not been finalized and the proposals are subject to further public comment, the Company anticipates the changes will not have a significant impact on the Company’s financial statements. The changes would be effective March 1, 2010, on a prospective basis.
Note 3 Capital Stock The total number of common shares authorized that may be issued by the Company is 75,000,000 shares with a par value of one tenth of one cent ($0.001) per share and no other class of shares is authorized.
During the period from August 25, 2006 (inception) to June 30, 2007, the Company issued 3,500,000 shares of common stock to its director for total proceeds of $3,500. During the year ended June 30, 2008, the Company issued 3,003,332 shares of common stock at $0.015 per share for total proceeds of $45,050.
To March 31, 2009, the Company has not granted any stock options and has not recorded any stock-based compensation.
Note 4 Related Party Transactions
a) The President of the Company provides consulting services to the Company. During the nine months ended March 31, 2009 consulting services of $Nil (June 30, 2008 - $2,066) were charged to operations.
b) As of March 31, 2009, the Company owed $1,900 to directors of the Company for cash advances provided to the Company. The loan is payable on demand.
c) During the period ended June 30, 2007, the former President of the Company provided a $15,000 loan to the Company. The loan was payable on demand, unsecured, bore interest at 6.45% per annum, and consisted of $15,000 of principal due on or after June 19, 2008, and $1,000 of accrued interest payable as at June 30, 2008
d) During the year ended June 30, 2008, the former President of the Company provided a $10,500 loan to the Company. The loan was payable on demand, unsecured, bore interest at 6.45% per annum, and consisted of $9,500 of principal due on or after April 16, 2009, $1,000 of principal due on or after May 22, 2009 and $133 of accrued interest payable as at June 30, 2008.
e) During the period ended September 30, 2008, the former President of the Company provided a $7,000 loan to the Company. The loan was payable on demand, unsecured, bore interest at 6.45% per annum, and consisted of $7,000 of principal due on or after July 5, 2009, and $336 of accrued interest payable as at August 29, 2008.
f) On August 29, 2008, the amounts due to the former President of the Company were settled and the Company recorded a $37,123 gain on the settlement of amounts due to related party.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Forward Looking Statements
This quarterly report contains forward-looking statements. Forward-looking statements are projections of events, revenues, income, future economic performance or management's plans and objectives for our future operations. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors" and the risks set out below, any of which may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. These risks include, by way of example and not in limitation:
o the uncertainty of profitability based upon our history of losses;
o risks related to failure to obtain adequate financing on a timely basis and on acceptable terms to continue as going concern;
o risks related to our international operations and currency exchange fluctuations;
o risks related to product liability claims;
o other risks and uncertainties related to our business plan and business strategy.
This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements.
Forward looking statements are made based on management's beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common stock" refer to the common shares in our capital stock.
As used in this quarterly report, the terms "we", "us", "our", the "Company" and "Bonfire Productions" mean Bonfire Productions, Inc., unless otherwise indicated.
Our Current Business
We record, market and sell online multicultural children's content in audio format. Our objective is to become a provider of folk stories, fairy tales and traditional stories from around the world. We plan to acquire rights to content, subject to financing, in either the original language or a translated-to-English version and produce audio and video recordings that will be sold in the popular MP3 format online or on CDs and DVDs.
Our business consists of three main areas of activity:
1. Sourcing content:
Our business relies on sourcing unique children's stories from around the world. We intend to accomplish this by using copyright-free material, and obtaining permissions to record printed materials in audio format from publishers and authors of copyrighted content. In order to avoid any violation of copyright law, we intend on hiring, subject to financing, a copyright lawyer on contract basis to consult us on legal matters pertaining to copyrights, rights management and to assist us in obtaining the appropriate permissions for copyrighted content.
2. Audio/Video production:
We have hired a recording studio and recorded and published on our website our first four collections of children's stories from around the world. We have completed development of our website by adding four additional pages dedicated to the stories recorded to date and adding a shopping cart.
3. Marketing and sales of our products
We are selling our audio recordings on our website (www.bonfiretales.com) for use at home and in portable music devices, such as MP3 players. Parents can download individual stories or entire collections of stories and play them for their children at home. We will also sell CD recordings of our stories, both on our website and through other online retailers. We intend to market the website, subject to financing, by placing advertisements on family oriented websites, and parenting magazines.
Our website (www.bonfiretales.com) will serve as a major promotional tool for our products. It lists all the stories that are currently available for purchase. Each story has its own section on the website with a short description of the story's origins. Currently, our website has four sections with stories from around the world. Consumers are able to listen to a 20-second sample of each story before making the decision to purchase.
RESULTS OF OPERATIONS
The following is a discussion and analysis of our results of operation for the nine-month period ended March 31, 2009, and the factors that could affect our future financial condition. This discussion and analysis should be read in conjunction with our unaudited financial statements and the notes thereto included elsewhere in this quarterly report. Our financial statements are prepared in accordance with United States generally accepted accounting principles. All references to dollar amounts in this section are in United States dollars unless expressly stated otherwise.
Financial Data Summary
Nine Months Nine Months
Ended Ended
March 31, March 31,
2009 2008
----- -----
Revenue $ 7,500 $ -
Operating Expenses $ 19,611 $ 63,723
---------------------------------------------------
Net Income (Loss) $ 24,676 $ (64,452)
===================================================
Revenue
Our gross revenue for the nine-month period ended March 31, 2009, was $7,500, compared to $Nil for the same period in fiscal 2008. During the period from August 25, 2006 (Inception) to August 29, 2008, the former President of the Company provided loans to the Company totaling $32,500, plus accrued interest of $1,458. The loans were unsecured, payable on demand and bore interest at 6.45% per annum. On August 29, 2008, the amounts due to the former President of the Company were settled and the Company recorded a $37,123 gain on the settlement of amounts due to related party resulting in the $24,676 net income for the period ended March 31, 2009.
Operating Costs and Expenses
The major components of our expenses for the nine-month period ended March 31, 2009, and 2008, are outlined in the table below:
Nine Months Nine Months
Ended Ended
March 31, March 31,
2009 2008
---- ----
Amortization $ 388 $ 51
General and administrative 19,223 63,362
-----------------------------------------------
$ 19,611 $ 63,723
===============================================
Operating Expenses
The decrease in operating expenses was mainly due to the decrease of $34,139 in general and administrative expenses. These decreases were offset by the increase in amortization expense of $337.
Liquidity and Capital Resources
Working Capital
Nine Months
Ended Year Ended
March 31, June 30,
2009 2008
Current Assets $ 45 $ 441
Current Liabilities (10,297) (35,689)
Working Capital Deficiency $ (10,252) $ (35,248)
Cash Flows
Nine Months Nine Months
Ended Ended
March 31, March 31,
2009 2008
Cash provided by (used for) Operating Activities $ (7,765) $ (60,841)
Cash provided by Investing Activities - (1,929)
Cash provided by Financing Activities 7,336 45,779
---------------------------------------------------------------------------
Net Increase in Cash $ 429 $ 16,991
===========================================================================
We had cash of $14, prepaid expenses of $31 and accounts payable and accrued liabilities of $8,397 and amounts payable to related party of $1900 for a working capital deficiency of $10,252 as of March 31, 2009.
For the next twelve months our specific goal will be to produce, subject to financing, additional collections of children's stories from around the world and begin promotion of our website. We estimate the cost of recording of four additional stories with an average duration of 15-20 minutes with musical effects and casting of at least two voice talent artists to be approximately $14,000.
We plan to dedicate $5,000 to marketing and promotion of our website, subject to financing. In addition, we plan to optimize our website for search engines, and get listed in online directories. We also plan to devote funds for ad placement on parent-oriented websites such as ivillage.com, parenting.com and todaysparent.com, subject to financing.
As well, we anticipate spending an additional $8,000 on professional fees, general administrative costs and expenditures associated with complying with reporting obligations. Total expenditures over the next 12 months are therefore expected to be $27,000.
Cash Used In Operating Activities
Our cash balance of $14 as of March 31, 2009, has decreased by $429 during the nine months ended March 31, 2009 compared to the cash balance of $410 as of June 30, 2008, primarily due to the General and Administrative expenses. The increase in the cash position during the same period in fiscal 2008 was primarily due to the receipt of the proceeds of $45,050 from issuance of our common stock.
Cash From Investing Activities No cash was used for or provided by investing activities during the six-month period ended March 31,2008.
Cash from Financing Activities
To March 31, 2009, the Company has funded its initial operations through the issuance of 6,503,332 shares of capital stock for proceeds of $45,050, loans from former director in the total amount of $32,500 and revenue of $7,500. Due to the "start up" nature of our business, we expect to incur losses as it expands. To date, our cash flow requirements have been primarily met by equity financings. Management expects to keep operating costs to a minimum until cash is available through financing or operating activities. Management plans to continue to seek other sources of financing on favorable terms; however, there are no assurances that any such financing can be obtained on favorable terms, if at all. If we are unable to generate sufficient profits or unable to obtain additional funds for our working capital needs, we may need to cease or curtail operations. Furthermore, there is no assurance the net proceeds from any successful financing arrangement will be sufficient to cover cash requirements during the initial stages of the Company's operations. For these reasons, our independent registered auditors believe that there is substantial doubt that we will be able to continue as a going concern.
Going Concern
The audited financial statements for the year ended June 30, 2008, included in our annual report on the Form 10-KSB filed with Securities and Exchange Commission, have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. Our company has generated $7,500 in revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate substantial earnings in the immediate or foreseeable future. The continuation of our company as a going concern is dependent upon the continued financial support from our shareholders, the ability of our company to obtain necessary equity financing to achieve our operating objectives, and the attainment of profitable operations. As at March 31, 2009, our company has accumulated losses of $57,070 since inception. As we do not have sufficient funds for our planned operations, we will be required to raise additional funds for operations.
Due to the uncertainty of our ability to meet our current operating expenses and the capital expenses noted above, in their report on the annual financial statements for the year ended June 30, 2008, our independent registered auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent registered auditors.
The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
Future Financings
We anticipate that additional funding will be required in the form of equity financing from the sale of our common stock. However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our marketing plan and operations. At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through a loan from our directors to meet our obligations over the next twelve months. We do not have any arrangements in place for any future equity financing.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Management
On August 29, 2008, the Company has accepted the resignation of Alexander Kulyashov from his positions as the Company's President, Chief Executive Officer and as a member of the Company's Board of Directors. Mr. Kulyashov resigned to pursue other interests. Nadezda Maximova, our Chief Financial Officer, was appointed as President and Chief Executive Officer of the Company. In addition, Mrs. Elena Bylbash has been appointed to our Board of Directors.
Mrs. Elena Bylbash, 30, has earned a law degree from St. Petersburg State University. Prior to her appointment, she has been involved with several publishing projects over the past 2 years. Elena Bylbash is not a director or officer of any other public company.
During the period from August 25, 2006 (Inception) to August 29, 2008, the former President of the Company provided loans to the Company totaling $32,500, plus accrued interest of $1,458. The loans were unsecured, payable on demand and bore interest at 6.45% per annum. On August 29, 2008, the amounts due to the former President of the Company were settled and the Company recorded a $37,123 gain on the settlement of amounts due to related party.
Patents and Trademarks
In July 2007, we applied for a U.S. trademark for "Bonfire Tales" with the U.S. Trademark and Patent Office. The serial number for the application was 77241986. The USPTO has registered our trade mark on January 27, 2009. The trade mark registration number is 3,568,273.
Risks and Uncertainties
INDUSTRY RISK FACTORS
1. We may not be able to obtain permissions from publishing houses to produce audio recordings of copyrighted material. Our business involves obtaining rights to record audio productions of copyrighted materials. We have to obtain permission from established publishing houses that are in the business of selling printed books. We may not be successful in obtaining permission from the publishers, which will significantly reduce our ability to obtain content for our productions.
2. We face significant competition from major publishing houses that produce and sell audio books online and in brick and mortar locations. All major publishing houses also produce audio books, which are audio recordings of printed material. The publishing houses are better established and significantly better funded than us. If we are unable to create products that can compete with traditional audio books created by publishing houses, we may not be able to generate revenues and will have to cease operations.
3 Foreign currency exchange rate fluctuations may adversely affect our business. Since we intend to market and sell our products in many different countries, changes in exchange rates can adversely affect our cash flows and results of operations. Furthermore, reported sales and purchases made in non-U.S. currencies, when translated into U.S. dollars for financial reporting purposes, fluctuate due to exchange rate movement. Due to the number of currencies involved, the variability of currency exposures and the potential volatility of currency exchange rates, we cannot predict the effect of exchange rate fluctuations on future sales and operating results.
COMPANY RISK FACTORS
4. There is substantial uncertainty as to whether we will continue operations. If we discontinue operations, you could lose your investment. Our auditors have discussed their uncertainty regarding our business operations in their audit report dated July 14, 2008. This means that there is substantial doubt that we can continue as an ongoing business for the next 12 months. The financial statements do not include any adjustments
that might result from the uncertainty about our ability to continue in business. As such, we may have to cease operations and you could lose your entire investment.
5. We lack an operating history and have losses which we expect to continue into the future. There is no assurance our future operations will result in profitable revenues. If we cannot generate sufficient revenues to operate profitably, our business will fail.
We were incorporated on August 25, 2006 and we have realized minimal revenue of $7,500. We have very little operating history upon which an evaluation of our future success or failure can be made. Our net loss since inception on August 25, 2006 to March 31, 2009 is $57,070.
Based upon current plans, we expect to incur operating losses in future periods because we will be incurring expenses and not generating revenues. We cannot guarantee that we will be successful in generating revenues in the future. Failure to generate revenues will cause us to go out of business.
6. Our future success is dependent on our existing management team, and hiring and assimilating new key employees, and our inability to attract or retain key personnel in the future would materially harm our business and results of operations.
Our future success depends on the continuing efforts and abilities of our current management team. In addition, our future success will depend, in part, on our ability to attract and retain highly skilled employees, including management, technical and sales personnel. The loss of services of any of our key personnel, the inability to attract or retain key personnel in the future, or delays in hiring required personnel could materially harm our business and results of operations. We may be unable to identify and attract highly qualified employees in the future. In addition, we may not be able to successfully assimilate these employees or hire qualified personnel to replace them.
7. Our operating results may prove unpredictable which could negatively affect our operating results. Our operating results are likely to fluctuate significantly in the future due to a variety of factors, many of which are outside of our control. Factors that may cause our operating results to fluctuate significantly include the following:
o our ability to generate enough working capital from future equity sales;
o the level of acceptance by general public and industry insiders of Bonfire Tales products;
o the amount and timing of operating costs and capital expenditures relating to expansion of our business, operations and infrastructure; and
o general economic conditions
If realized, any of these risks could have a material adverse effect on our business, financial condition and operating results.
8. Because our management does not have prior experience in the recording industry, or product marketing and brand development, our business has a higher risk of failure.
Our directors do not have experience in the recording industry, or brand development and marketing of products. As a result, we may not be able to recognize and take advantage of opportunities without the aid of qualified marketing and business development consultants. Our director's decisions and choices may not be well thought out and our operations, earnings and ultimate financial success may suffer irreparable harm as a result.
9. Because we are small and do not have much capital, we must limit our efforts in marketing of our services and products. As a result, opportunities for us to attract new customers who purchase products from our website and generate profit will be severely limited. If we do not make a profit, we may have to suspend or cease operations.
Because we are small and do not have much capital, we must limit our efforts in marketing of our products. Because we will be limiting our marketing activities, we may not be able to attract customers to purchase audio recordings from our website and we may not be able to operate profitably. If we cannot operate profitably, we may have to suspend or cease operations.
10. We do not intend to pay dividends and there will be less ways in which you can make a gain on any investment in Bonfire Productions.
We have never paid any cash dividends and currently do not intend to pay any dividends for the foreseeable future. To the extent that we require additional funding currently not provided for in our financing plan, our funding sources may likely prohibit the payment of a dividend. Because we do not intend to declare dividends, any gain on an investment in Bonfire Productions will need to come through appreciation of the stock's price.
11. Because our former director owns 53.82 % of our outstanding common stock, he could make decisions that may be disadvantageous to other minority shareholders.
Our former President and director, Alexander Kulyashov, owns 53.82% of the outstanding shares of our common stock as of the date of this report. Accordingly, he has a significant influence in determining the outcome of all corporate transactions or other matters, including mergers, consolidations, and the sale of all or substantially all of our assets. He also has the power to prevent or cause a change in control. The interests of our director may differ from the interests of the other stockholders and thus result in corporate decisions that are disadvantageous to other shareholders.
RISK FACTORS RELATING TO OUR COMMON STOCK
12. If a market for our common stock does not develop, shareholders may be unable to sell their shares.
Our common stock is currently quoted on the NASD over the counter bulletin board. However, we can provide investors with no assurance that a liquid public market for our shares will materialize. If no market is ever developed for our shares, it will be difficult for shareholders to sell their stock. In such a case, shareholders may find that they are unable to achieve benefits from their investment.
13. If a market for our common stock develops, our stock prices may be volatile.
If a market for our common stock develops, we anticipate that the market price of our common stock will be subject to wide fluctuations in response to several factors, including:
(1) actual or anticipated variations in our results of operations; (2) our ability or inability to generate new revenues; (3) increased competition; and
(4) conditions and trends in the audio recording and publishing industry.
Further our common stock price may be impacted by factors that are unrelated or disproportionate to our operating performance. These market fluctuations, as well as general economic, political and market conditions, such as recessions, interest rates or international currency fluctuations may adversely affect the market price of our common stock.
14. Penny stock regulations may impose certain restrictions on marketability of our stock.
The Securities and Exchange Commission has adopted regulations which generally define a "penny stock" to be any equity security that has a market price (as defined) of less than $5.00 per share, subject to certain exceptions. As a result, our common stock is subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require delivery, prior to the transaction, of a risk disclosure document mandated by the Commission relating to the penny stock market. The broker-dealer must also disclose the commission payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealers presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the "penny stock" rules may restrict the ability of broker-dealers to sell the Company's securities and may affect the ability of purchasers to sell the Company's securities in the secondary market and the price at which such purchasers can sell any such securities.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4T. Controls and Procedures.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements. Our management, including our Chief Executive Officer and Acting Chief Financial Officer (one individual) assessed the effectiveness of our internal control over financial reporting as of March 31, 2009. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control—Integrated FrameworkBased on our assessment we believe that, as of March 31, 2009, our internal control over financial reporting was not effective based on those criteria. The determination of ineffective internal control is based upon the lack of separation of duties. Our entire management is comprised of one individual. It is impossible to create a system of checks and balances with oversight in this circumstance. It is management’s intention to bring additional people into the management team. Once there are more members of management, responsibilities can be divided and oversight roles created. This annual report does not include an attestation report of the Company’s registered accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC.
Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and acting chief financial officer (one individual), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of March 31, 2009. Based on this evaluation, our chief executive officer and acting chief financial officer have concluded that, as of March 31, 2009, our disclosure controls and procedures were not effective. Our conclusion was based on (1) our lack of systematic accounting and disclosure procedures, (2) the lack of development of our IT systems, (3) the lack of hiring and development of new personnel and (4) the number of adjustments identified by our independent auditors during the course of their review. We attribute all of the identified weaknesses to the formative stage of our organizational development. We currently lack the personnel resources to ensure that our disclosure controls and procedures are adequate. We intend to address the procedural and control issues by adding more formalized accounting procedures.
ITEM 1. LEGAL PROCEEDINGS
ITEM 1A. RISK FACTORS.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
ITEM 5. OTHER INFORMATION.
Subsequent Events
On April 7, 2009 the Company Filed and 8K with the Securities and Exchange Commission as follows:
Item 5.01 Change in Control of Registrant.
On April 7, 2009, funds were disbursed from escrow for the purchase of approximately 54% control of the Company. Three million five hundred thousand (3,500,000) shares were purchased for total consideration of twenty five thousand dollars ($25,000). The shares were purchased pursuant to an Affiliate Stock Purchase Agreement by Tim C. DeHerrera (1,166,667 shares), P. James Voloshin (1,166,667 shares) and Richard A. Luthman (1,166,666 shares). Control was assumed from Alexander Kulyashov pursuant to the Agreement.
As part of the purchase of control, Tim C. DeHerrera consented to act as President, Secretary and Director, P. James Voloshin consented to act as Treasurer and Director, and Richard Luthmann consented to act as Executive Vice President, Chief Legal Officer and Director of the Company.
Exhibit
Number Title of Document
------ -------------------
3.1 Articles of Incorporation *
3.2 Bylaws *
31.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*Incorporated by reference to similarly numbered exhibits filed with the Company's Registration Statement on Form SB-2 on August 28, 2007.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Bonfire Productions, Inc.
