UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
Amendment No. 1 to 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 May 31, 2009
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______to______.
PAY BY THE DAY HOLDINGS, INC.
(Exact name of registrant as specified in Charter
| NEVADA | 333-149552 | |||
(State or other jurisdiction of incorporation or organization) | (Commission File No.) | (IRS Employee Identification No.) |
3651 Lindell Rd. Suite D155
Las Vegas, NV, 89103
(Address of Principal Executive Offices)
_______________
1-800-854-7970
(Issuer Telephone number)
_______________
193 Jardin Drive, 2nd Floor West
Concord, ON L4K 1X5
(Former Name or Former Address if Changed Since Last Report)
Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):
Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer o 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 o No x
State the number of shares outstanding of each of the issuer’s classes of common equity, as of July 20, 2009: 619,000 shares of common stock.
PAY BY THE DAY
FORM 10-Q
May 31, 2009
INDEX
PART I-- FINANCIAL INFORMATION
Item 1. | Financial Statements | |
Item 2. | Management’s Discussion and Analysis of Financial Condition | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |
Item 4T | Control and Procedures |
PART II-- OTHER INFORMATION
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 | |
Item 6. | Exhibits and Reports on Form 8-K |
SIGNATURE
Item 1. Financial Statements
PAY BY THE DAY HOLDINGS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
Unaudited - - See Review Engagement Report
31 MAY 2009
INDEX TO FINANCIAL STATEMENTS
| F-2 | CONSOLIDATED BALANCE SHEETS |
| F-3 | CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS |
| F-4 | CONSOLIDATED STATEMENTS OF CASH FLOWS |
Item 1. Financial Statements
PAY BY THE DAY HOLDINGS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
Unaudited - - See Review Engagement Report
31 MAY 2009
F1
PAY BY THE DAY HOLDINGS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
AS AT
(Expressed in United States Dollars)
| 31 May 2009 (Unaudited) | 31 August 2008 (Audited) | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | 22 | |||||
| Short term investments, at fair value (cost - $5,405) | 30 | 15 | ||||||
| Prepaid and sundry assets | - | 1,514 | ||||||
| Total Current Assets | 30 | 1,551 | ||||||
| Long Term Assets | ||||||||
| Equipment | 5,470 | 5,841 | ||||||
| Total Assets | $ | 5,500 | $ | 7,392 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current Liabilities | ||||||||
| Bank Indebtedness | 11 | |||||||
| Accounts payable and accrued liabilities | $ | 43,774 | $ | 28,010 | ||||
| Advances from shareholder | 14,349 | 18,675 | ||||||
| Advances from related party | 114,111 | 72,654 | ||||||
| Total Current Liabilities | 172,245 | 119,339 | ||||||
| Total Liabilities | 172,245 | 119,339 | ||||||
| Stockholders' Deficit | ||||||||
| Capital stock, $0.001 par value; Authorized 100,000,000; issued and outstanding 619,000 at 31 May 2009 (31 August, 2008 - 619,000) | 619 | 619 | ||||||
| Additional paid-in capital | 36,531 | 36,531 | ||||||
| Accumulated other comprehensive loss | (4,801 | ) | (6,483 | ) | ||||
| Deficit accumulated during the development stage | (199,094 | ) | (142,614 | ) | ||||
| Total Stockholders' Deficit | (166,745 | ) | (111,947 | ) | ||||
| Total Liabilities and Stockholders' Deficit | $ | 5,500 | $ | 7,392 | ||||
The accompanying notes are an integral part to these financial statements.
F2
PAY BY THE DAY HOLDINGS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(Expressed in United States Dollars)
| For the Three Months Ended 31 May 2009 | For the Three Months Ended 31 May 2008 | For the Period from Inception (5 June 2003) to 31 May 2009 | ||||||||||
| SALES | 1,585 | 1,192 | 379,003 | |||||||||
| COST OF GOODS SOLD | 501 | 515 | 262,975 | |||||||||
| GROSS PROFIT | 1,084 | 677 | 116,028 | |||||||||
| EXPENSES | ||||||||||||
| Professional fees | 3,740 | 12,354 | 197,719 | |||||||||
| Office and general | 649 | 158 | 34,120 | |||||||||
| Telecommunications | 1,029 | 1,161 | 30,311 | |||||||||
| Advertising and promotion | 44 | 110 | 31,565 | |||||||||
| Vehicle | - | - | 904 | |||||||||
| Interest and bank charges | 69 | 446 | 16,375 | |||||||||
| Salaries and wages | - | 962 | - | |||||||||
| Travel | - | 20 | - | |||||||||
| Rent | - | - | 27,682 | |||||||||
| Bad debts | - | - | 9,774 | |||||||||
| Depreciation | 388 | 341 | 13,943 | |||||||||
| TOTAL OPERATING EXPENSES | 5,919 | 15,552 | 362,393 | |||||||||
| LOSS FROM OPERATIONS | (4,835 | ) | (14,875 | ) | (246,365 | ) | ||||||
| Realized gain on disposal of available-for-sale securities | - | - | 1,789 | |||||||||
| Foreign exchange gain (loss) | - | (6 | ) | 17,293 | ||||||||
| Gain on extinguishment of debt | - | - | 19,126 | |||||||||
| Loss on disposal of assets | - | - | (2,762 | ) | ||||||||
| Interest income | - | - | 11,821 | |||||||||
| NET LOSS | $ | (4,835 | ) | $ | (14,881 | ) | $ | (199,098 | ) | |||
| Foreign currency translation adjustment | (19,990 | ) | 1,148 | (4 | ) | |||||||
| Unrealized loss on available-for-sale securities, net of tax | 25 | - | (4,797 | ) | ||||||||
| COMPREHENSIVE LOSS | $ | (24,800 | ) | $ | (13,733 | ) | $ | (203,899 | ) | |||
| LOSS PER WEIGHTED NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED | $ | (0.03 | ) | $ | (0.02 | ) | ||||||
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED | 619,000 | 619,000 | ||||||||||
The accompanying notes are an integral part to these financial statements.
F3
PAY BY THE DAY HOLDINGS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(Expressed in United States Dollars)
| For the Nine Months Ended 31 May 2009 | For the Nine Months Ended 31 May 2008 | |||||||
| SALES | 3,279 | 3,377 | ||||||
| COST OF GOODS SOLD | 2,009 | 2,154 | ||||||
| GROSS PROFIT | 1,270 | 1,223 | ||||||
| EXPENSES | ||||||||
| Professional Fees | 45,979 | 65,155 | ||||||
| Office and general | 2,185 | 507 | ||||||
| Telecommunications | 3,302 | 3,116 | ||||||
| Advertising and Promotion | 1,189 | 190 | ||||||
| Vehicle | 196 | - | ||||||
| Interest and bank charges | 264 | 1,223 | ||||||
| Salaries and wages | - | 3,043 | ||||||
| Travel | - | 20 | ||||||
| Freight and delivery | - | 30 | ||||||
| Depreciation | 1,110 | 966 | ||||||
| TOTAL OPERATING EXPENSES | 54,225 | 74,250 | ||||||
| LOSS FROM OPERATIONS | (52,955 | ) | (73,027 | ) | ||||
| Foreign exchange loss | (3,533 | ) | (470 | ) | ||||
| Interest income | 4 | 467 | ||||||
| NET LOSS | $ | (56,484 | ) | $ | (73,030 | ) | ||
| Foreign currency translation adjustment | 1,670 | (4,159 | ) | |||||
| Unrealized loss on available-for-sale securities, net of tax | 12 | - | ||||||
| COMPREHENSIVE LOSS | $ | (54, 802 | ) | $ | (77,189 | ) | ||
| LOSS PER WEIGHTED NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED | $ | (0.09 | ) | $ | (0.14 | ) | ||
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED | 619,000 | 531,6200 | ||||||
The accompanying notes are an integral part to these financial statements.
F4
PAY BY THE DAY HOLDINGS, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Expressed in United States Dollars)
| For the Nine Months Ended 31 May 2009 | For the Nine Months Ended 31 May 2008 | For the Period from Inception (5 June 2003) to 31 May 2009 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
| Net loss | $ | (56,484 | ) | $ | (73,030 | ) | $ | (199,098 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Depreciation | 1,110 | 966 | 13,943 | |||||||||
| Loss on disposal of assets | - | - | 2,762 | |||||||||
| Issuance of common stock for services | - | 1,000 | 1,000 | |||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Prepaid and sundry assets | 1,514 | (843 | ) | - | ||||||||
| Accounts payable and accrued liabilities | 15,764 | 13,445 | 43,774 | |||||||||
| Deferred taxes | - | (92 | ) | - | ||||||||
| NET CASH USED IN OPERATING ACTIVITIES | (38,096 | ) | (58,554 | ) | (137,619 | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
| Available-for-sale securities | (15 | ) | (49 | ) | (30) | |||||||
| Disposition of equipment | - | - | 4,462 | |||||||||
| Acquisition of equipment | (735 | ) | (4,397 | ) | (26,633 | ) | ||||||
| NET CASH USED IN INVESTING ACTIVITIES | (750 | ) | (4,446 | ) | (22,201 | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
| Bank advances | 11 | - | 11 | |||||||||
| Advances from shareholder | (4,326 | ) | (2,687 | ) | 14,349 | |||||||
| Advances from related parties | 41,457 | 35,114 | 114,111 | |||||||||
| Issuance of common stock for cash | - | 35,900 | 36,150 | |||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 37,142 | 68,327 | 164,621 | |||||||||
| EFFECT OF FOREIGN CURRENCY TRANSLATION | 1,670 | (3,390 | ) | (4 | ) | |||||||
| UNREALIZED LOSS ON AVAILABLE-FOR-SALE SECURITIES, NET OF TAX | 12 | - | (4,797 | ) | ||||||||
| NET (DECREASE) INCREASE IN CASH | (22 | ) | 1,937 | - | ||||||||
| CASH, BEGINNING OF PERIOD | 22 | 154 | - | |||||||||
| CASH, END OF PERIOD | $ | - | $ | 2,091 | $ | - | ||||||
The accompanying notes are an integral part to these financial statements.
F5
PAY BY THE DAY HOLDINGS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM THE DATE OF INCEPTION (5 JUNE 2003) TO 31 MAY 2009
(Expressed in United States Dollars)
1. NATURE OF OPERATIONS AND ORGANIZATION
Nature of Operations
Pay by the Day Company Inc. ("PBDC") was incorporated in Canada on 5 June 2003 and was acquired by Pay by the Day Holdings, Inc. (the "Company" or "PBTD") on 31 August 2007. PBTD was incorporated in the State of Nevada on 31 August 2007. The Company is a development stage company whose principal line of business is selling computers and other electronic components through telephone and web orders, which the company then finances through a third party.
Organization
In August 2007, PBDC consummated a Share Exchange Agreement (the "Agreement"), whereby 100% of its shares were acquired by PBTD, a Nevada corporation, in exchange for 200,000 shares of PBTD. As a result of the transaction, the former shareholders of PBDC received 80% ownership of PBTD and the remaining 20% of PBTD was already held by the sole shareholder of PBDC, Jordan Starkman. The merger was therefore accounted for as a recapitalization of PBDC into a shell company. PBTD assets and capital were recorded at historical cost in the recapitalization accounting. The transaction costs associated with the recapitalization were immaterial.
The above transaction has been accounted for as a reverse merger (recapitalization) with PBDC being deemed the accounting acquirer and PBTD being deemed the legal acquirer. Accordingly, the historical financial information presented in the financial statements is that of PBDC (since 5 June 2003 the date of inception) as adjusted to give effect to any difference in the par value of the issuer’s and the accounting acquirer’s stock with an offset to additional paid in capital. The basis of the assets and liabilities of PBDC, the accounting acquirer, has been carried over in the recapitalization. The terms of the Agreement were consummated on 31 August 2007 and PBTD now owns 100% of the equity interests of PBDC.
2. BASIS OF PRESENTATION
The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended 31 May 2009 are not necessarily indicative of the results that may be expected for the year ending 31 August 2009. For further information, refer to the financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended 31 August 2008.
F6
PAY BY THE DAY HOLDINGS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM THE DATE OF INCEPTION (5 JUNE 2003) TO 31 MAY 2009
(Expressed in United States Dollars)
3. RECENT ACCOUNTING PRONOUNCEMENTS
In March 2008, the FASB issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS 161”). SFAS No. 161 expands the disclosure requirements in SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities about an entity’s derivative instruments and hedging activities. Adopted on March 1, 2009, we currently have no derivatives and hedging activities and so the adoption of SFAS No. 161 had no impact on our financial condition, results of operations or cash flows.
In April 2009, FASB issued FSP No. 107-1/APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. Entities shall include disclosures about the fair value of financial instruments whenever it issues summarized financial information for interim reporting periods. Entities shall disclose in the body or in the accompanying notes of its summarized financial information the fair value of all financial instruments for which it is practicable to estimate that value, whether recognized or not recognized in the statement of financial position, as required by Statement 107. Effective for interim periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009, this FSP was adopted and had no impact on our financial condition, results of operations or cash flows.
In April 2009, FASB issued FSP No. 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. This FSP amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of the other-than-temporary impairments on debt and equity securities in the financial statements. The FSP is effective for interim and annual reporting periods ending after June 15, 2009. We currently have no debt securities and so had no impact on our financial condition, results of operations or cash flows.
In May 2009, the FASB issued Statement No. 165, Subsequent Events (“SFAS 165”). SFAS 165 requires entities to disclose the date through which they have evaluated subsequent events and whether the date corresponds with the release of their financial statements. Effective for interim and annual periods ending after June 15, 2009, SFAS 165 will become effective in the next reporting quarter. SFAS 165 should not have an impact on our financial condition, results of operations or cash flows.
In June 2009, the FASB issued Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (“SFAS 168”). SFAS 168 will become the single source of authoritative nongovernmental U.S. generally accepted accounting principles (“GAAP”), superseding existing FASB, American Institute of Certified Public Accountants (“AICPA”), Emerging Issues Task Force (“EITF”), and related accounting literature. SFAS 168 reorganizes the thousands of GAAP pronouncements into roughly 90 accounting topics and displays them using a consistent structure. Also included is relevant Securities and Exchange Commission guidance organized using the same topical structure in separate sections. SFAS 168 will be effective for financial statements issued for reporting periods that end after September 15, 2009. This will have an impact on the Company’s financial statements since all future references to authoritative accounting literature will be references in accordance with SFAS 168.
4. GOING CONCERN
These consolidated financial statements have been prepared assuming the Company will continue on a going-concern basis. The Company has incurred losses since inception and the ability of the Company to continue as a going-concern depends upon its ability to develop profitable operations and to continue to raise adequate financing. Management is actively targeting sources of additional financing to provide continuation of the Company’s operations. In order for the Company to meet its liabilities as they come due and to continue its operations, the Company is solely dependent upon its ability to generate such financing.
F7
PAY BY THE DAY HOLDINGS, INC. AND SUBSIDIARY
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM THE DATE OF INCEPTION (5 JUNE 2003) TO 31 MAY 2009
(Expressed in United States Dollars)
There can be no assurance that the Company will be able to continue to raise funds, in which case the Company may be unable to meet its obligations. Should the Company be unable to realize its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts recorded in these consolidated financial statements.
The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
5. ADVANCES FROM SHAREHOLDER
The advances from shareholder were from the sole director and shareholder, Jordan Starkman. The amount as at 31 May 2009 of $14,349 (31 August 2008 - $18,675) is non-interest bearing, unsecured and has no specific terms of repayment. The carrying value of the advances approximates the market value due to the short-term maturity of the financial instruments.
6. RELATED PARTY TRANSACTIONS
The transactions with related parties were in the normal course of operations and were measured at the exchange value which represented the amount of consideration established and agreed to by the parties. Related party transactions not disclosed elsewhere in these consolidated financial statements are as follows:
| (a) | Accrued or paid management fees to the spouse of Jordan Starkman, the sole director of the Company as at 31 May 2009 were $8,255 (31 August 2008 - $16,755). |
| (b) | Advances from a related company controlled by Jordan Starkman, the sole director of PBTD as at 31 May 2009 were $114,111 (31 August 2008 - $72,654). These advances are non interest bearing, unsecured and with no specific terms of repayment. |
7. SUPPLEMENTAL CASH FLOW INFORMATION
During the periods ended 31 May 2009 and 2008 and the period from inception to 31 May 2009, there were no interest or taxes paid by the Company.
F8
Item 2. Management’s Discussion and Analysis or Plan of Operation
Plan of Operation
The promotion of PBTD CreditPlus is contingent upon if we can successfully obtain financing and will begin with the production of a new 30 second direct response commercials. The campaign will be nationwide with multiple station coverage. We are currently in discussions with a Canadian based media company to produce an infomercial that will air on stations across Ontario. The cost of producing and airing the infomercial is approximately $20,000. We expect the profits generated from the infomercial campaign to fund additional air time slots. PBTD anticipates the production of the infomercial and commercial to begin 6-8 months once the financing is obtained. We produced two 30 second spot commercials in 2004 that aired Canada wide with a focus on Northern Ontario and all of Alberta. The new television advertising campaign will be initiated with the guidance of an advertising agency. We determine the areas of interest and the agency provides us with various rates, time slots available, and the stations catering to our focus area.
We plan to hire 2-3 additional sales people plus 1 administrative staff member. The hiring of additional staff will take place once the funds are raised to advertise more aggressively. Depending on the number of incoming calls to us and the success of the advertising campaign, we may also be required to upgrade our phone system and upgrade our current database to allow for easier access to customer files. Currently, management is able to process applications and handle the incoming calls with our current resources.
We have formed a relationship with Equifax. This allows us to process the credit files and check customers credit scores ourselves prior to sending the application to our third party finance service provider. The cost of running an Equifax file is $10. This is an additional expense to the company that will be added into our customer's purchases. We have also been approved by Equifax to report customer's trade files to Equifax on a monthly basis. There is no fee associated with reporting to Equifax.
The fundamental concept of our business involves the granting of credit by either our third party finance service provider or by PBTD internally. Our relationship with our third party finance service provider is one that will hopefully expedite our growth process by providing an easy application process with a high probability of customer approval rates. They have the ability to finance both A and B level credit on a Conditional Sales Contract program or a 3 year lease contract. A Conditional Sales Contract is commonly known as buying on an installment plan and requires the giving of a promissory note for the purchase price under the contract. It is a type of agreement to sell whereby a seller retains title to the goods sold and delivered to a purchaser until full payment has been made. A conditional buyer has the right of possession of the goods so long as the terms and conditions of the agreement are met. A Conditional Sales Contract is similar to a lease contract except at the end of the term the buyer obtains ownership of the goods as soon as the final payment to the seller is made.
We receive 100% of the transaction amount on “A” credit deals and due to the added risk for “B” credit customers, the payout is 90% of the transaction amount. For example, if the purchase amount is $1,000, our third party service provider pays us 100% of the $1,000 for an “A” credit customer. If the customer has “B” level credit then the payout amount to us is 90% of the $1,000 transaction amount. There is no recourse on transactions rated as an “A” credit deal, however we have 1st payment recourse on “B” credit deals. Once the customer has made there 1st payment, we are no longer liable for the sale amount. We currently have no exposure at this point in time. We are currently being funded on deals once the merchandise has been shipped from our facilities and the customer acknowledges receipt of goods. We currently have a 3-5 hour turn around time for approvals or declines. We are not related to any of our service providers except for the relationships described.
Our business operation relies upon a third party service provider to approve for credit and finance our customer’s purchases. If we encounter difficulty in obtaining customer credit approvals for financing, the company’s business will suffer. Due to our difficulty in obtaining credit approvals, we have reached an agreement with Tanner Financial Services Inc. in July 2008 to accept and process our customer applications.
We believe the relationship with Tanner Financial will increase our approval rates leading to increased sales, as they are a more aggressive lender willing to take on additional risk by financing A, B, and C level credit customers. The terms and conditions of the agreement with Tanner Financial are the same as previous 3rd party finance providers. Furthermore, the company has turned to self-financing and has financed new/off-lease desktop computers and laptops, and consumer electronics for customers willing to put down 50% of the total purchase price of their order. The main selling features and the attractiveness of our financing route is the 0% interest rate and the reporting of the trade to Equifax on a monthly basis, allowing the customers who can afford the 50% down to rebuild or reestablish credit history. The key component is the 50% down payment, and we realize this financing option is not for everybody. The 50% down payment can translate into a $200-$500 down payment which is significant for customers who wish to pay for purchases on a payment plan and for those who cannot afford to make purchases at their local store.
1
We believe we can continue the operation of financing merchandise internally with a limited amount of capital because the 50% down payment required by the customer covers the majority of the cost of the merchandise. We have limited our exposure and risk in case of default by the customer, and there is limited capital required to finance these purchases. As we raise additional capital, we will on a case-by-case basis determine if additional risk is warranted based on the customer’s credit rating.
Results of Operation
For the period from inception through May 31, 2009, we had $379,003in revenue. Cost of goods sold and operating expenses for the period from inception totaled $262,975 and 362,393 respectively and our loss from operations was $246,365 and our net loss was $199,098.
Revenue for the Nine months period ended May 31, 2009 was $3,279compared to $3,377 for the Nine months period ended May 31, 2008. The revenue was generated from the sale of computer and consumer electronics financed through a third party service provider and financed by us.
Operating expenses for the nine months period ended May 31, 2009 were $54,225 compared to $74,250for the nine months period ended May 31, 2008. The decrease in operating expenses during the period ended May 31, 2009 compared to the period ended May31, 2008 is primarily attributed to professional fees. Professional fees for the period ended May 31, 2009 were $45,979 and $65,155for the period ended May 31, 2008. These fees paid in the three months ended May 31, 2008 were attributable to legal, accounting, consulting, and auditing services related to our listing process and quarterly filings.
Net loss was $56,484for the period ended May 31, 2009 and $173,030 for period ended May 31, 2008. The decrease in operating expenses, specifically professional fees during the period ended May 31, 2009 was the main contributing factor for the decreased loss during the period.
The vast majority of our sales consist of computer and electronic products financed through our third party finance service provider and our internal financing program. The profit is generated from the margins on the products sold. We charge 0% interest on our internal financing and CreditPlus card, and we do not have any interest charges revenue. Service fees revenue from our CreditPlus Card is nil. We expect to generate service fees revenue once our CreditPlus advertising campaign begins.
We have experienced a dramatic decrease in sales from fiscal year August 31, 2005 to May 31, 2009. Our slow growth and decrease in sales is attributed to the difficulty in effectively approving customer credit applications. We have also been affected by the current credit market conditions and as a result approval rates have decreased due to the poor credit quality of customers applying for credit.
If our 3rd party finance providers increase the criteria for credit approvals or its parameters for credit approvals, the increased restriction on credit approvals will make customer applications more difficult to finance. In this situation, it is uncertain if we will be able to continue to finance customer‘s purchases through our third party service provider. We may have to enter into additional agreements with multiple 3rd party finance providers, or increase the number of transactions financed internally. Our decrease in sales from inception to date is also attributed to the lack of advertising dollars to fully market the us and our offerings. In addition, over the past two years there has been a significant drop in the selling prices of computers and consumer electronics making these goods easily accessible at local retailers without the need for customer financing. Furthermore, the dramatic drop in retail prices of computers and consumer electronics has reduced our profit margins.
Liquidity and Capital Resources
As of May 31, 2009 we had bank indebtedness of $11.
The initial use of proceeds from our common share sales that occurred between September 2007 and December 2007 was to be split between offering expenses, professional fees, advertising/marketing, and working capital, with 60% of the capital raised going towards advertising/marketing. We raised approximately $26,000 from our intended maximum offering of $100,000 and exercised our right to reassess and reassign our intended use of funds. We have has allocated almost all of our capital raised for legal and accounting/auditor expenses related to the offering and the listing process.
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We are currently seeking funding for our planned expansion and would like to raise a minimum of $200,000 in order to aggressively promote and advertise our brand and CreditPlus program. To achieve our goals, a large portion of the funds raised will be invested in advertising. Our success is contingent upon our customers seeing our ads and calling our 1-800 phone number. There is a distinct correlation between the number of dollars invested in advertising and the number of sales made. The proceeds raised will also be used to fund a greater portion of transactions through our internal financing program. We expect to raise additional funds within the next 6-8 months. A private placement is the most likely scenario for the company to achieve success in raising additional funds for its operations. There are no discussions with any parties at this point in time for additional funding; however, we will attempt to discuss our business plan with various brokers in the US.
We believe we can satisfy our cash requirements for the next twelve months with our expected revenues and if needed an additional loan from the our sole director, Jordan Starkman. However, completion of our plan of operations is subject to attaining adequate revenue. We cannot assure investors that adequate revenues will be generated. In the absence of our projected revenues, we may be unable to proceed with our plan of operations. Even without adequate revenues within the next twelve months, we still anticipate being able to continue with our present activities, but we may require financing to achieve our profit, revenue, and growth goals.
We anticipate that our operational, and general & administrative expenses for the next 12 months will total approximately $15,000. The $15,000 will be financed through our anticipated sales of approximately $15,000 plus if needed, an advance from our sole director, Jordan Starkman. We do not anticipate the purchase or sale of any significant equipment. We also do not expect any significant additions to the number of employees, unless financing is raised. The foregoing represents our best estimate of our cash needs based on current planning and business conditions. The exact allocation, purposes and timing of any monies raised in subsequent private financings may vary significantly depending upon the exact amount of funds raised and our progress with the execution of our business plan.
In the event we are not successful in reaching our initial revenue targets, additional funds may be required, and we may not be able to proceed with our business plan for the development and marketing of our core services. Should this occur, we would likely seek additional financing to support the continued operation of our business. We anticipate that depending on market conditions and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, our auditors have raised substantial doubt about our ability to continue as a going concern. We will need approximately $200,000 to aggressively pursue and implement our growth goals through advertising.
Off-Balance Sheet Arrangements
We do not have any outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are subject to certain market risks, including changes in interest rates and currency exchange rates. We do not undertake any specific actions to limit those exposures.
Item 4T. Controls and Procedures
Evaluation of disclosure controls and procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of May 31, 2009. Based on this evaluation, our principal executive officer and principal financial officers have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that our disclosure and controls are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
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MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements in accordance with United State’s generally accepted accounting principles (US GAAP), including those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US GAAP and that receipts and expenditures are being made only in accordance with authorizations of management and directors of the company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of our internal control over financial reporting. Based on this assessment, Management concluded the Company maintained effective internal control over financial reporting as of May 31, 2009.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
This quarterly report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.
Changes in internal controls
We have not made any changes to our internal controls subsequent to the Evaluation Date. We have not identified any deficiencies or material weaknesses or other factors that could significantly affect these controls, and therefore, no corrective action was taken.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Currently we are not aware of any litigation pending or threatened by or against the Company.
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 a Vote of Security Holders.
None.
Item 5. Other Information.
None
Item 6. Exhibits and Reports of Form 8-K.
(a) Exhibits
31.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of Sarbanes Oxley Act of 2002
32.1 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of Sarbanes Oxley Act of 2002
(b) Reports of Form 8-K
None.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Signature | Title | Date | |
| /s/ Jordan Starkman | President, Chief Executive Officer | August 6, 2009 | |
Chairman of the Board of Directors Chief Financial Officer, Controller, Principal Accounting Officer |
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