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 May 31, 2010
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______to______.
OTEEGEE INNOVATIONS 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)
_______________
(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 o 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 o No o
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, 2010: 77,037,250 shares of common stock.
OTEEGEE INNOVATIONS, INC. (FORMERLY PAY BY THE DAY HOLDINGS, INC.)
FORM 10-Q
May 31, 2010
INDEX
PART I-- FINANCIAL INFORMATION
Item 1. | Financial Statements | F-1 - F-8 |
Item 2. | Management’s Discussion and Analysis or Plan of Operation | 1 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 5 |
Item 4T | Control and Procedures | 5 |
PART II-- OTHER INFORMATION
Item 1 | Legal Proceedings | 6 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 6 |
Item 3. | Defaults Upon Senior Securities | 6 |
Item 4. | (Removed and Reserved) | 6 |
Item 5. | Other Information | 6 |
Item 6. | Exhibits and Reports on Form 8-K | 6 |
SIGNATURE
OTEEGEE INNOVATIONS, INC.
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
31 MAY 2010
OTEEGEE INNOVATIONS, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
AS AT 31 May 2010
(Expressed in United States Dollars)
31 May 2010 (Unaudited) | 31 August 2009 (Audited) | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 12,523 | $ | 33 | ||||
| Available-for-sale securities, at fair value (cost 31 August 2009 - $5,405) | - | 15 | ||||||
| Loan receivable | 17,399 | - | ||||||
| Total Current Assets | 29,922 | 48 | ||||||
| Long Term Assets | ||||||||
| Deferred offering costs | 120,000 | - | ||||||
| Equipment | 3,821 | 5,982 | ||||||
| Total Long Term Assets | 123,821 | 5,982 | ||||||
| Total Assets | $ | 153,743 | $ | 6,030 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 58,508 | $ | 55,788 | ||||
| Convertible note payable | 14,990 | - | ||||||
| Advances from shareholder | 5,764 | 693 | ||||||
| Advances from related party | - | 136,683 | ||||||
| Total Liabilities | 79,262 | 193,164 | ||||||
| Stockholders' Equity (Deficit) | ||||||||
Capital stock, $0.001 par value; Authorized 200,000,000; Issued and outstanding 15,390,000 (31 August 2009 – 7,190,000) | 15,390 | 7,190 | ||||||
| Additional paid-in capital | 396,760 | 79,960 | ||||||
| Accumulated other comprehensive loss | (551 | ) | (7,456 | ) | ||||
| Deficit accumulated during the development stage | (337,118 | ) | (266,828 | ) | ||||
| Total Stockholders' Equity (Deficit) | 74,481 | (187,134 | ) | |||||
| Total Liabilities and Stockholders' Equity (Deficit) | $ | 153,743 | $ | 6,030 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
F-1
OTEEGEE INNOVATIONS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Expressed in United States Dollars)
(Unaudited)
| For the Three Months Ended 31 May 2010 | For the Three Months Ended 31 May 2009 | |||||||
| SALES | 776 | 1,585 | ||||||
| COST OF GOODS SOLD | 25 | 501 | ||||||
| GROSS PROFIT | 751 | 1,084 | ||||||
| EXPENSES | ||||||||
| Interest and bank charges | 147 | 69 | ||||||
| Depreciation | 720 | 388 | ||||||
| Professional fees | 20,912 | 3,740 | ||||||
| Office and general | 382 | 649 | ||||||
| Advertising and promotion | 1,126 | 44 | ||||||
| Vehicle | 122 | - | ||||||
| Rent | 147 | - | ||||||
| Telecommunication | 1,255 | 1,029 | ||||||
| TOTAL OPERATING EXPENSES | 24,811 | 5,919 | ||||||
| LOSS FROM OPERATIONS | (24,060 | ) | (4,835 | ) | ||||
| Foreign exchange gain | (434 | ) | - | |||||
| Realized loss on disposal of available-for-sale securities | (57 | ) | - | |||||
| NET LOSS | $ | (24,551 | ) | $ | (4,835 | ) | ||
| FOREIGN CURRENCY TRANSLATION ADJUSTMENT | 309 | (19,990 | ) | |||||
| UNREALIZED LOSS ON AVAILABLE-FOR-SALE SECURITIES, NET OF DEFERRED TAXES | - | 25 | ||||||
| COMPREHENSIVE LOSS | (24,242 | ) | (24,800 | ) | ||||
| LOSS PER WEIGHTED NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED | (0.02 | ) | (0.03 | ) | ||||
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED | 15,390,000 | 619,000 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-2
OTEEGEE INNOVATIONS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Expressed in United States Dollars)
For the Nine Months Ended 31 May 2010 | For the Nine Months Ended 31 May 2009 | For the Period from Inception (5 June 2003) to 31 May 2010 | ||||||||||
| SALES | 3,840 | 3,279 | 383,879 | |||||||||
| COST OF GOODS SOLD | 2,170 | 2,009 | 265,754 | |||||||||
| GROSS PROFIT | 1,670 | 1,270 | 118,125 | |||||||||
| EXPENSES | ||||||||||||
| Professional fees | 51,814 | 45,979 | 318,610 | |||||||||
| Interest and bank charges | 2,189 | 264 | 18,746 | |||||||||
| Depreciation | 2,162 | 1,110 | 16,791 | |||||||||
| Office and general | 1,800 | 2,185 | 35,369 | |||||||||
| Advertising and promotion | 1,692 | 1,189 | 33,615 | |||||||||
| Rent | 296 | - | 27,978 | |||||||||
| Vehicle | 122 | 196 | 1,109 | |||||||||
| Bad debts | - | - | 9,774 | |||||||||
| Telecommunications | 3,505 | 3,302 | 35,196 | |||||||||
| TOTAL OPERATING EXPENSES | 63,580 | 54,225 | 497,186 | |||||||||
| LOSS FROM OPERATIONS | (61,910 | ) | (52,955 | ) | (379,061 | ) | ||||||
| Foreign exchange loss | (3,504 | ) | (3,533 | ) | 15,556 | |||||||
| Interest income | - | 4 | 11,821 | |||||||||
| Realized loss on disposal of available-for-sale securities | (4,874 | ) | - | (1,796 | ) | |||||||
| Gain on extinguishment of debt | - | - | 19,126 | |||||||||
| Loss on disposal of assets | - | - | (2,762 | ) | ||||||||
| NET LOSS | $ | (70,288 | ) | $ | (56,484 | ) | $ | (337,116 | ) | |||
| Foreign currency translation adjustment | 2,094 | 1,670 | 551 | |||||||||
| Unrealized loss on available-for-sale securities, net of tax | 4,809 | 12 | - | |||||||||
| COMPREHENSIVE LOSS | $ | (63,385 | ) | $ | (54,802 | ) | $ | (337,667 | ) | |||
| LOSS PER WEIGHTED NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED | $ | (0.01 | ) | $ | (0.09 | ) | ||||||
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED | 11,099,890 | 619,000 | ||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
OTEEGEE INNOVATIONS, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in United States Dollars)
For the Nine Months Ended 31 May 2010 | For the Nine Months Ended 31 May 2009 | For the Period from Inception (5 June 2003) to 31 May 2010 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
| Net loss | $ | (70,288 | ) | $ | (56,484 | ) | $ | (337,118 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Depreciation | 2,162 | 1,110 | 16,798 | |||||||||
| Loss on disposal of assets | - | - | 2,762 | |||||||||
| Issuance of common stock for services | - | - | 51,000 | |||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Prepaid and sundry asset | - | 1,514 | - | |||||||||
| Accounts payable and accrued liabilities | 2,712 | 15,764 | 58,501 | |||||||||
| CASH FLOWS USED IN OPERATING ACTIVITIES | (65,414 | ) | (38,096 | ) | (208,057 | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
| Available-for-sale securities | 15 | (15 | ) | - | ||||||||
| Disposition of equipment | - | - | 4,462 | |||||||||
| Acquisition of equipment | - | (735 | ) | (27,836 | ) | |||||||
| CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES | 15 | (750 | ) | (23,374 | ) | |||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
| Proceeds from bank indebtedness | - | 11 | - | |||||||||
| Proceeds from convertible note payable | 14,990 | - | 14,990 | |||||||||
| Loan receivable | (17,399 | ) | - | (17,399 | ) | |||||||
| Advances from (to) stockholder | 5,071 | (4,326 | ) | 5,764 | ||||||||
| Advances from (to) related party | (16,683 | ) | 41,457 | 120,000 | ||||||||
| Issuance of common stock | 85,000 | - | 121,150 | |||||||||
| CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | 70,979 | 37,142 | 244,505 | |||||||||
| EFFECT OF FOREIGN CURRENCY TRANSLATION | 2,101 | 1,670 | (551 | ) | ||||||||
| UNREALIZED LOSS ON AVAILABLE-FOR-SALE SECURITIES, NET OF TAX | 4,809 | 12 | - | |||||||||
| NET INCREASE (DECREASE) IN CASH | 12,490 | (22 | ) | (551 | ) | |||||||
| CASH, BEGINNING OF YEAR | 33 | 22 | - | |||||||||
| CASH, END OF YEAR | $ | 12,523 | $ | - | $ | 12,523 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
OTEEGEE INNOVATIONS, INC. AND SUBSIDIARY
(FORMERLY 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 28 FEBRUARY 2010
(Expressed in United States Dollars)
1. NATURE OF OPERATIONS AND ORGANIZATION
Nature of Operations
Pay by the Day Company Inc. was incorporated in Canada on 5 June 2003 and was acquired by Pay by the Day Holdings, Inc. ("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.
On 22 March 2010, PBTD filed a certificate of amendment to the Company’s articles of incorporation (the “Amendment”) with the Nevada Secretary of State changing the Company’s name to Oteegee Innovations, Inc. (the “Company” or “Oteegee”). The Amendment was a result of a letter of intent entered into on 12 March 2010 to acquire all of the assets of Grail Semiconductor, Inc. and exclusive rights to a number of other independent technologies. The holders of the outstanding common stock of the Company approved the name change on 1 March 2010.
On 6 July 2010, the Company closed a share exchange agreement (the “Agreement”) with Oteegee International Holdings Limited, a company incorporated in Hong Kong (“Oteegee International”). Pursuant to the Agreement, the Company issued 61,647,250 shares of common stock pending the close of the Agreement in exchange for 4,000 common shares representing 40% of Oteegee International. Oteegee International holds the exclusive international marketing and distribution rights to all current and future technologies developed and manufactured by Oteegee IPR Limited. The Company and Oteegee International will respectively handle the North American and International marketing and distribution of the technologies developed and manufactured by Oteegee IPR Limited.
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 and nine month periods ended 31 May 2010 are not necessarily indicative of the results that may be expected for the year ending 31 August 2010. 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 2009.
3. 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.
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 is 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.
F-5
4. RECENT ACCOUNTING PRONOUNCEMENTS
In June 2009 the Financial Accounting Standards Board (“FASB”) issued statement No. 168, The FASB Accounting Standards Codification and The Hierarchy of Generally Accepted Accounting Principles. The Codification became the source of authoritative generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification supersedes all existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature not included in the Codification is nonauthoritative. GAAP is not intended to be changed as a result of this state ment, but will change the way the guidance is organized and presented. During the current year, the Company has implemented the Codification in the consolidated financial statements by providing references to the Accounting Standards Codification (“ASC”) topics.
In April 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-13—Compensation—Stock Compensation (Topic 718),which addresses the classification of an employee share-based payment award with an exercise price denominated in the currency of a market in which the underlying equity security trades. This Update provides amendments to Topic 718 to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The Company expects that the adoption of the amendments in this update will not have any significant impact on its financial position and results of operations.
In April 2010, the FASB issued ASU No. 2010-17—Revenue Recognition—Milestone Method (Topic 605), which provide guidance on the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate. A vendor can recognize consideration that is contingent upon achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. A milestone should be considered substantive in its entirety. An individual milestone may not be bifurcated. The amendments in this Update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. The Company expects that the adoption of the amendments in this up date will not have any significant impact on its financial position and results of operations.
In January 2010, the FASB issued ASU No. 2010-06—Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. This Update amends Subtopic 820-10 that requires new disclosures about transfers in and out of Levels 1 and 2 and activity in Level 3 fair value measurements. This Update also amends Subtopic 820-10 to clarify certain existing disclosures. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010.
January 2010, the FASB issued ASU 2010-02, Consolidation: Accounting and Reporting for Decreases in Ownership of a Subsidiary – A Scope Clarification. ASU 2010-02 amends the Codification to clarify that the scope of the decrease in ownership provisions of ASC 810-10 and related guidance applies to: (i) a subsidiary or group of assets that is a business or nonprofit activity; (ii) a subsidiary that is a business or nonprofit activity that is transferred to an equity method or joint venture; (iii) an exchange of a group of assets that constitutes a business or nonprofit activity for a non-controlling interest in an entity (including an equity-method investee or joint venture); and (iv) a decrease in ownership in a subsidiary that is not a business or nonprofit activity when the substance of the transaction causing the decrease in ownership is not addressed in other authoritative guidance. If no other guidance exists, an entity should apply the guidance in ASC 810-10. The amendments in the update also clarify that the decrease in ownership guidance in ASC 810-10 does not apply to sales of in-substance real estate or conveyances of oil and gas mineral rights, even if these transfers involve businesses.
In January 2010, the FASB issued ASU 2010-01, Equity: Accounting for Distributions to Shareholders with Components of Stock and Cash. ASU 2010-01 amends the Codification to clarify that the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected in earnings per share prospectively and is not a stock dividend. ASU 2010-01 codifies the consensus reached by the Emerging Issues Task Force in Issue No. 09-E, Accounting for Stock Dividends, including Distributions to Shareholders with Components of Stock and Cash.
F-6
In October 2009, the FASB issued ASU 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. This update addressed the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than a combined unit and will be separated in more circumstances that under existing US GAAP. This amendment has eliminated that residual method of allocation. Effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after 15 June 2010. Early adoption is permitted. The Company does not expect the provisions of ASU 2009-13 to have a material effect on the financial position, results of operations or cash flows of the Company.
In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R), (codified by ASU No. 2009-17 issued in December 2009). The standard amends FIN No. 46(R) to require a company to analyze whether its interest in a variable interest entity (“VIE”) gives it a controlling financial interest. A company must assess whether it has an implicit financial responsibility to ensure that the VIE operates as designed when determining whether it has the power to direct the activities of the VIE that significantly impact its economic performance. Ongoing reassessments of whether a company is the primary beneficiary are also required by the standard. SFAS No. 167 amends the criteria to qualify as a primary beneficiary as well as how to determine the existence of a VIE. The standard also eliminates certain exceptions that were available under FIN No. 46(R). This Statement will be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009. Earlier application is prohibited. Comparative disclosures will be required for periods after the effective date. It is expected the adoption of this Statement will have no material effect on the Company’s Consolidated
In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets – an amendment of FASB Statement No. 140, (codified by ASU No. 2009-16 issued in December 2009). SFAS No. 166 limits the circumstances in which a financial asset should be derecognized when the transferor has not transferred the entire financial asset by taking into consideration the transferor’s continuing involvement. The standard requires that a transferor recognize and initially measure at fair value all assets obtained (including a transferor’s beneficial interest) and liabilities incurred as a result of a transfer of financial assets accounted for as a sale. The concept of a qualifying special-purpose entity is removed from SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments o f Liabilities,” along with the exception from applying FIN 46(R), Consolidation of Variable Interest Entities. The standard is effective for the first annual reporting period that begins after November 15, 2009. Earlier application is prohibited. It is expected the adoption of this Statement will have no material effect on the Company’s Consolidated Financial Statements.
5. DEFERRED OFFERING COSTS
The Company defers, as other assets, the direct incremental costs of raising capital until such time as the offering is completed. At the time of the completion of the offering, the costs are charged against the capital raised. Should the offering be terminated, deferred offering costs are charged to operations during the period in which the offering is terminated.
6. CONVERTIBLE NOTE PAYABLE
In September 2009 the Company issued a one year $120,000 convertible note payable in exchange for future services relating to raising financing for the Company, accordingly these amounts have been recorded as deferred offering costs. The convertible note payable matures in twelve months, is unsecured, bears interest at 6% per annum and interest accrues and is payable in cash upon maturity or repayment of the principal prior to the date of maturity, provided that the elected conversion to common shares does not occur. At any time or times on or before 1 September 2010, the note holder shall be entitled to convert any portion of the outstanding and unpaid amount into fully paid and nonassessable shares of common stock at a conversion price of $0.02 per common share. On 20 January 2010 the note payable was converted to 6,000,0 00 shares in the Company at $0.02 per share.
In May 2010 the Company issued a one year convertible note payable in the amount of $14,990. The convertible note payable matures in twelve months, is unsecured, bears interest at 5% per annum and interest accrues and is payable in cash upon maturity or repayment of the principal prior to the date of maturity, provided that the elected conversion to common shares does not occur. At any time or times on or before 26 May 2011, the note holder shall be entitled to convert any portion of the outstanding and unpaid amount into fully paid and nonassessable shares of common stock at a conversion price of $0.75 per common share.
F-7
7. ADVANCES FROM SHAREHOLDER
The advances from shareholder were from the sole director and shareholder, Jordan Starkman. The amount as at 31 May 2010 of $5,764 (31 August 2009 - $693) is non interest bearing, unsecured and due on demand. The carrying value of the advances approximates the market value due to the short term maturity of the financial instruments.
8. LOAN RECEIVABLE
The loan receivable is non-interest bearing, unsecured and is due on demand. The carrying value of the loan approximates the market value due to the short-term maturity of the financial instrument.
9. 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:
In September 2009, Health Advance Corp., which is controlled by Jordan Starkman, the sole director of PBTD, waived repayment of $120,000 of the advances. As a result, the advances were reallocated to additional paid-in capital.
Management fees paid to the spouse of Jordan Starkman, the sole director of the Company for the nine months ended 31 May 2010 were $4,700 (nine months ended 31 August 2009 - $8,100)
10. CAPITAL STOCK
In January 2010 a note payable was converted to 6,000,000 shares in the Company at a price of $0.02 per share as discussed in note 6.
In January 2010 the Company issued 2,000,000 shares for cash at $0.0375 per share.
In February 2010 the Company issued 200,000 shares for accounts payable at $0.05 per share.
On 7 April 2010, the Company affected a 10 or 1 forward split of its issued and outstanding common stock. The Company’s issued and outstanding common shares were therefore increased from 1,539,000 to 15,390,000. All references in the financial statements to the number of shares outstanding and per share amounts of the Company’s common stock have been restated retroactively to reflect the effect of the stock split for all periods presented.
The Company also increased its authorized common shares from 100,000,000 to 200,000,000.
11. SUPPLEMENTAL CASH FLOW INFORMATION
During the periods ended 31 May 2010 and 2009 and for the period from inception to 31 May 2010, there were no interest or taxes paid by the Company.
In February 2010 the Company issued 200,000 shares for accounts payable at $0.05 per share.
In September 2009, Health Advance Corp., which is controlled by Jordan Starkman, the sole director of PBTD, waived repayment of $120,000 of the advances. As a result, the advances were reallocated to additional paid-in capital.
12. SUBSEQUENT EVENT
On 6 July 2010, the Company closed a share exchange agreement with Oteegee International Holdings Limited, a company incorporated in Hong Kong. Pursuant to the Agreement, the Company issued 61,647,250 shares of common stock in exchange for 4,000 common shares representing 40% of Oteegee International.
F-8
Item 2. Management’s Discussion and Analysis or Plan of Operation
Plan of Operation
On March 12, 2010, the Company entered into a non-binding letter of intent (“Letter of Intent”) with Grail Semiconductor, Inc. (“Grail Semiconductor”), pursuant to which the Company will acquire all of the assets of Grail Semiconductor and exclusive rights to a number of other cutting edge independent innovative technologies.
The Letter of Intent provides that the acquisitions are subject to the due diligence of all signatories and the negotiation and execution of definitive agreements and such agreements will be subject to certain conditions including the raising of funds to pursue the Company’s new business model.
The assets to be acquired under the Letter of Intent include the following:
Grail Semiconductor Assets
The Company will acquire the Quantum Inductive Capacitance technology (QIC Chip) of Grail Semiconductor including the exclusive right to pursue claims against various chip manufacturers. (Patent No. US6,642,552)
QIC-Chips
| ▪ | combine the functions of SRAM, DRAM, and FLASH |
| ▪ | operate at speeds faster than SRAM |
| ▪ | have density comparable to or better than DRAM |
| ▪ | are non-volatile and more stable than FLASH |
| ▪ | achieve manufacturing cost advantages comparable to or better than DRAM |
QIC Chip Products
| ▪ | Embedded QIC Memory IP Cores |
| ▪ | Pin compatible QIC Flash Chips |
| ▪ | QIC Solid State Drives (SSDs) |
3D Technology
The inventor of the QIC Chip is developing a hardware and software platform to deliver real-time high-resolution rendering of 3D characters and backgrounds. This technology is to be utilized for myriad high intensity 3D rendering applications including medical scanning.
Energy
Concentrating Solar Collector: A scalable and highly durable stand-alone unit that is designed to be more efficient and less costly than parabolic trough collectors and contemporary solar water heating panels. Unlike photo-voltaic (PV), this resilient technology does not use semiconductors which degenerate over time (patent pending).
Thermo-Electric Generator: A frictionless generator scalable for private homes, factories and power plants, designed to produce grid-compatible A.C. electricity without the cost of an inverter; without consuming water or requiring cooling, and more efficiently and cost effectively than current generators (patent in preparation).
Concentrating Solar Power (CSP) System: The Oteegee Solar Collectors and Thermo-Electric Generators are designed to integrate seamlessly to achieve any desired output capacity, including large power plants. In addition to selling systems, Oteegee plans to establish and operate many small decentralized power plants throughout the world that sell electricity to power companies and consumers (no separate patent necessary).
Hydrogen Generator: A ground-breaking technology designed to create hydrogen from any water source, including ocean and grey water. It can be powered by Oteegee’s CSP system or any power source, to generate and store hydrogen for on-demand electricity during dark hours, and for automotive fuel (patent pending).
Water Generator: A unit employing a design innovation on the Hydrogen Generator that enables small and large scale water desalination and reclamation at a fraction of current costs. This breakthrough technology does not involve reverse osmosis or any other current desalination technology (patent in preparation).
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Sea Water Mining: Rather than returning concentrated brine to the sea, Oteegee plans to mine the processed water for pure sea salt, high potassium fertilizer and rare earth minerals.
Natural Health
The Company will have exclusive rights to proprietary health products and services that combine cutting edge science and natural medicine. The Company will also acquire a unique new technology that allows organic materials to be processed without oxidation or physical damage to the delicate nutrient complexes, allowing the creation of low cost natural organic super-foods and basic foodstuffs (such as powders and oils) that have long shelf lives without added preservatives (patent in preparation).
Operations of Pay By The Day segment
The Company will continue with the Pay By The Day operations and its promotion of PBTD CreditPlus after the acquisition of Grail Semiconductor is completed. The promotion of PBTD CreditPlus is contingent upon the Company successfully obtaining financing and the production of a new 30 second direct response commercial. 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 c ustomer 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 third 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.
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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, 2010, we had $383,879 in revenue. Cost of goods sold and operating expenses for the period from inception totaled $265,754 and $497,186, respectively and our loss from operations was $379,061 and our net loss was $337,116.
Revenue for the three months ended May 31, 2010 was $776 compared to $1,585 for the three months period ended May 31, 2009. The revenue was generated from the sale of computer and consumer electronics and financed by the Company.
Operating expenses for the three months ended May 31, 2010 were $24,811 compared to $5,919 for the three months ended May 31, 2009. The increase in operating expenses during the three months ended May 31, 2010 compared to the three months ended May 31, 2009 is primarily attributed to professional fees. Professional fees for the three months ended May 31, 2010 were $20,912 and $3,740 for the three months ended May 31, 2009. These fees paid in the three months ended May 31, 2010 were attributable to legal, accounting, consulting, and auditing services related to quarterly and audit filings and advisory relating to future planned corporate acquisitions.
Net loss was $24,551 for the three months ended May 31, 2010 and $4,835 for the three months ended May 31, 2009. The increase in operating expenses, specifically professional fees during the period ended May 31, 2010 was a contributing factor for the increased loss during the period.
On July 6, 2010, the Company closed a share exchange agreement with Oteegee International Holdings Limited, a company incorporated in Hong Kong. Pursuant to the Agreement, the Company issued 61,647,250 shares of common stock in exchange for 4,000 common shares representing 40% of Oteegee International. The enterprises business structure and the completion of the Grail Semiconductor acquisition will require additional capital for the Company’s additional plan of operations. We expect revenues to be generated approximately six to twelve months after the successful funding and completion of the acquisition. If the Company is unsuccessful in raising the capital for the business plan, we are uncertain when revenue will be realized.
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, 2010. 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 third 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 third 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 Company 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, 2010 we had a cash balance of $12,523 and a working capital deficit of $49,340.
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Acquisition of Oteegee International Holdings Limited
On July 6, 2010, the Company closed a Share Exchange Agreement (the “Agreement”) with Oteegee International Holdings Limited (“Oteegee International”), a company incorporated in Hong Kong. Pursuant to the Agreement, the Company issued 61,647,250 shares of common stock in exchange for 4,000 common shares representing 40% of Oteegee International. Oteegee International holds the exclusive international marketing and distribution rights to all current and future technologies developed and manufactured by Oteegee IPR Limited. The Company and Oteegee International will respectively handle the North American and International marketing and distribution of the technologies developed and manufactured by Oteegee IPR Limited.
In addition, as defined in the Agreement, the Company must raise $1.5 million within thirty days of the Agreement being executed. The Company expects to raise the required $1.5 million through either a private placement or a convertible debenture.
Acquisition of Grail Semiconductor Inc.
The Company’s Letter of Intent to acquire the assets of Grail Semiconductor and other independent innovative technologies is contingent upon successful due diligence by all signatories and negotiation and execution of definitive agreements. Such agreements are conditional upon the raising of funds to pursue the Company’s new business model. There is no assurance that the company will raise the capital required to complete the acquisition and the Company is currently seeking capital to close its acquisition. The Company is currently negotiating the amount required to close the transaction. Any capital raised will be through the issuance of common shares from the Company’s authorized capital.
In January of 2010 the Company raised $75,000 in cash through a private placement. These funds have been allocated towards legal fees, audit and accounting fees, the reduction of debt and advances to Grail Semiconductor.
In the event the Company is not successful in completing its acquisition, the Company will continue with its prior business model and plan of operation. Our liquidity and capital requirements for our current business plan is discussed below.
Operations of Pay By The Day segment
We are currently seeking funding for our planned expansion and would like to raise a minimum of $100,000 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 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 $25,000. The $25,000 will be financed through our anticipated sales of approximately $10,000 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 $100,000 to aggressively pursue and implement our growth goals through advertising.
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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 President, Chief Executive Officer Chairman of the Board of Directors, Chief Financial Officer, Controller, Principal Accounting Officer (the “Certifying Officer”) we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon that evaluation, the Certifying Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective. We identified material weaknesses discussed below in the Report of management on internal control over financial reporting.
Report of Management on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our internal control over financial reporting includes 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 our assets;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors;
and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Management conducted an evaluation of the effectiveness of our 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. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement to the Company's annual or interim financial statements will not be prevented or detected.
In the course of management's assessment, we have identified the following material weaknesses in internal control over financial reporting:
- Segregation of Duties – As a result of limited resources, we did not maintain proper segregation of incompatible duties. Namely the lack of an audit committee, an understaffed financial and accounting function, and the need for additional personnel to prepare and analyze financial information in a timely manner and to allow review and on-going monitoring and enhancement of our controls. The effect of the lack of segregation of duties potentially affects multiple processes and procedures.
- Maintenance of Current Accounting Records – This weakness specifically affects the payments and purchase cycle and therefore we failed to maintain effective internal controls over the completeness and cut off of accounts payable, expenses and other capital transactions.
- Application of GAAP – We did not maintain effective internal controls relating to the application of generally accepted accounting principles in accounting for transactions in a foreign currency.
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We are in the continuous process of improving our internal control over financial reporting in an effort to eliminate these material weaknesses through improved supervision and training of our staff, but additional effort is needed to fully remedy these deficiencies. Management has engaged a consultant to assist with the financial reporting process in an effort to mitigate some of the identified weaknesses. The Company is still in its development stage and intends on hiring the necessary staff to address the weaknesses once full operations have commenced.
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 interim 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 interim report.
Changes in internal controls
We have not made any changes to our internal controls subsequent to the Evaluation Date.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are currently not involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our company’s or our company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities.
None
Item 4. (Removed and Reserved)
Item 5. Other Information.
None
Item 6. Exhibits.
(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
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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 | July 20, 2010 | |
| Jordan Starkman | Chairman of the Board of Directors Chief Financial Officer, Controller, Principal Accounting Officer |
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