UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| x | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended June 30, 2009
| ¨ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the transition period from _________________ to _________________
Commission file number 333-149184
| NANOTECH ENTERTAINMENT, INC. |
| (Exact name of small business issuer as specified in its charter) |
| Nevada | 20-1379559 |
| (State or jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| PO Box 50729 |
| Henderson, Nevada 89016 |
| (Address of principal executive offices) |
| (408) 642-1559 |
| (Issuer's telephone number) |
| Aldar Group, Inc. |
| 7230 Indian Creek Lane, Suite 201, Las Vegas, NV 89149 |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $0.001
Indicate by check mark if the registrant is a well-season issuer, as defined in Rule 405 of the Securities Act. ¨ Yes x No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
x Yes ¨ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to the reporting requirements for the past 90 days. x Yes ¨ No
Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ | Accelerated filer ¨ |
Non-accelerated filer ¨ | Smaller reporting company x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. ¨ Yes x No
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.
Note – If a determination as to whether a particular person or entity is an affiliate cannot be made without involving unreasonable effort and expense, the aggregate market value of the common stock held by non-affiliates may be calculated on the basis of assumptions reasonable under the circumstances, provided that the assumptions are set forth in this Form.
The aggregate market value of the voting and non-voting common stock of the issuer held by non-affiliates as of October 13, 2009 (last trade date) was approximately $324,300.00 based upon the closing price of the common stock as quoted by NASDAQ OTC Bulletin Board on such date.
State the number of shares outstanding of each of the Issuer’s classes of common equity, as of the last practicable date: 14,437,000 shares of common stock at October 30, 2009.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980). None.
TABLE OF CONTENTS
| PART I |
| | | | |
| Item 1 | | Business | 4 |
| | | | |
| Item 1A | | Risk Factors | 6 |
| | | | |
| Item 1B | | Unresolved Staff Comments | 6 |
| | | | |
| Item 2 | | Properties | 6 |
| | | | |
| Item 3 | | Legal Proceedings | 7 |
| | | | |
| Item 4 | | Submission of Matters to a Vote of Security Holders | 7 |
| | | | |
| PART II |
| | | | |
| Item 5 | | Market for Registrant’s Common Equity, Related Stockholder Matters and | 8 |
| | | Issuer Purchases of Equity Securities | |
| | | | |
| Item 6 | | Selected Financial Data | 10 |
| | | | |
| Item 7 | | Management’s Discussion and Analysis of Financial Condition and | 11 |
| | | Results of Operations | |
| | | | |
| Item 8 | | Financial Statements and Supplementary Data | 14 |
| | | | |
| Item 9 | | Changes in and Disagreements With Accountants and Accounting and | 27 |
| | | Financial Disclosure | |
| | | | |
| Item 9A(T) | | Controls and Procedures | 27 |
| | | | |
| Item 9B | | Other Information | 27 |
| | | | |
| PART III |
| | | | |
| Item 10 | | Directors, Executive Officers and Corporate Governance | 28 |
| | | | |
| Item 11 | | Executive Compensation | 29 |
| | | | |
| Item 12 | | Security Ownership of Certain Beneficial Owners and Management | 30 |
| | | and Related Stockholder Matters | |
| | | | |
| Item 13 | | Certain Relationships and Related Transactions and Director Independence | 30 |
| | | | |
| Item 14 | | Principal Accounting Fees and Service | 31 |
| | | | |
| PART IV |
| | | | |
| Item 15 | | Exhibits, Financial Statement Schedules | 32 |
| | | | |
| SIGNATURES | 33 |
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
All readers of this document and any document incorporated by reference herein are advised that this document and documents incorporated by reference into this document contain forward looking statements and statements of historical facts. Forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially for those indicated by the forward-looking statements. Examples of forward-looking statements include, but are not limited to (i) revenue projections, income (loss), earning (loss) per share, capital expenditures, dividends, capital structure and other financial items, (ii) statements of the plans and objectives of the Company or its management or Board of Directors, including the introduction of new products, or estimates or predictions with regards to customers, suppliers, competitors or regulatory authorities, (iii) statements of future performance, and (iv) statements of assumptions underlying other statements about the Company or its business.
This document and all documents incorporated herein by reference also identify factors which could cause actual results to differ materially from those indicated by the forward-looking statements. Please refer to “Management's Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.”
The cautions outlined made in this statement and elsewhere in this document should not be construed as complete or exhaustive. In many cases, we cannot predict factors which could cause results to differ materially from those indicated by the forward-looking statements. Additionally, many items or factors that could cause actual results to differ materially from forward-looking statements are beyond our ability to control. The Company will not undertake an obligation to further update or change any forward-looking statement, whether as a result of new information, future developments, or otherwise.
PART I
ITEM 1. BUSINESS
General
The Company was originally organized as a Nevada Corporation on July 15, 2004 under the name Aldar Group, Inc. for the purpose of acquiring, selling and breeding thoroughbred horses.
In April, 2009, the Company entered into an Acquisition Agreement (the “Agreement”) with Nanotech Entertainment, Inc. (“NEI”), a Nevada corporation, wherein the Company acquired 100% of NEI’s issued and outstanding common stock through the exchange of 6,480,000 common shares. As a result of the Agreement, the Company changed its name to NanoTech Entertainment, Inc. to better reflect the direction of the newly formed entity.
For accounting purposes, the share exchange transaction was treated as a capital transaction where the Company, as the acquiring corporation, issued stock for the net monetary assets of NEI, as the shell corporation, accompanied by a recapitalization. The accounting is similar in form to a reverse acquisition, except that goodwill or other intangibles are not recorded.
The Company now operates as a virtual manufacturer, developing technology and games, and then licensing such products to third parties for manufacturing and ultimate distribution. The Company’s business model supports relatively low overhead costs and efficiencies in operations in the new global manufacturing economy.
Company Overview
NanoTech Entertainment, Inc. (the “Company” or “We” or “NanoTech”) is a provider of gaming technology for the coin-op arcade, casino gaming and consumer gaming markets. Headquartered in Las Vegas, Nevada, we operate as a virtual manufacturer, developing technology and games, and then licensing them to third parties for manufacturing and distribution. This business model supports extremely low overhead and efficient operations in the new global manufacturing economy.
With an ever-expanding lineup of technology and products, NanoTech is redefining the role of developers and manufacturers in the gaming market. NanoTech's teams is compromised of industry veterans of the gaming industry and have collectively been responsible for dozens of award winning products and multi-million copy selling video games and technology.
Market and Industry
We have experience and products for all aspects of the various gaming industries. By traversing the market from consumer to coin-op to casino, the company may be able to take advantage of all three growth & profitable industries and balance out the seasonal patterns of each.
Even in the unsteady economic climate, the gaming market continues to flourish and expand. In 2008 the arcade industry saw $7.2 Billion in revenue and the consumer market saw $58 Billion with a growth of 19% in 2008. The following are excerpts from other sources:
| | · | “As people cut back on travel and going out, they are turning more to home entertainment, providing a boost to the video game industry” Reuters, April 2, 2009 |
| | · | “"The video game business continues to enjoy robust growth, making it the fastest growing of the many consumer goods categories“ Market Watch, Feb 18, 2009 |
The NanoTech team has won numerous awards in recent years including innovative product of the year in 2005 and 2006 in the arcade industry and innovative product of the year in 2007 in the casino market.
Products
Below is a list of the Company’s current product line with detailed descriptions. For more information on the Company’s products and services you can view our web site at www.NanoTechEnt.com.
MultiPin™ - - There is currently only one Pinball manufacturer left in the world, Stern Pinball. While they supply over 10,000 machines per year to the market, there is a huge demand for new and innovative pinball. MultiPin™ represents the next generation in pinball. By replacing the mechanical parts of a pinball machine with state of the art electronics, MultiPin™ solves two major problems seen by operators of Pinball machines. First, it eliminates any mechanical failures, which are common amongst pinball machines. Secondly, it provides a multi-game platform that can be constantly updated with new games without having to swap out the machine. Our proprietary physics engine and motion sensors allow MultiPin™ to accurately recreate the experience of a mechanical pinball machine, while providing players with a variety of classic and modern pinball games to choose from.
Xtreme Rally Racing™ - An Xtreme Off-Road Racing Experience with no boundaries. Xtreme Rally Racing is an innovative new driving machine that features three modes of game play:
Xtreme Off-Road - Race Head to Head against other players and the computer to checkpoints while driving anywhere on the map with no preset course.
Timed Rally Stages - Classic Rally Racing on real world courses. Players will be able to race in five different countries on real world rally courses.
Xtreme Stadium Racing - Custom Stadiums designed for Xtreme racing including a figure 8 multi-lap course with huge jumps.
NanoNET Online System - Local and Worldwide Head to Head competition in real time against machines located around the world. Remote Operator Control of your machines including diagnostics, accounting reports, and automatic software updates & enhancements downloaded over the net. Link up to 4 Cabinets for local multiplayer action
Pinball Wizard ™ - Consumer Pinball enthusiasts have been growing with the advent of Visual Pinball and now Future Pinball. The official Visual Pinball forum boasts over 155,000 members, and the free version Future Pinball has been downloaded over 1 million times in the past six months, and over 500,000 copies in April 2009. We have created the only input device designed to give these players a way to experience real pinball controls on their personal computer. Based on the technology developed for the MultiPin™ product we have built a controller that lets people play pinball using traditional controls and the ability to “shake” and “nudge” the table.
Mot-Ion™ Adapter - The Mot-Ion adapter is a USB adapter that allows Do It Yourself Pinball enthusiasts to build their own cabinet using real pinball controls providing analog inputs for nudging and bumping. This kit includes everything needed to connect a pinball cabinet to a PC. (I/O Board, Digital Plunger, Wiring Harness)
Opti-Gun™ Adapter - The OptiGun adapter is a USB adapter that allows players to connect Arcade Light Guns to any USB based system. This universal adapter provides a complete solution to implement an arcade game including Gun Inputs, Force Feedback Outputs, digital inputs and built in audio amplifier. The adapter an also be used with PC based emulators such as M.A.M.E. to connect arcade light guns on your home system.
Retr-IO™ Adapter - The Retr-IO adapters provides a standard JAMMA interface for USB based systems. This universal adapter provides a complete solution to implement an arcade game using Joysticks, Trackballs, Spinners, buttons and features digital outputs and built in audio and video amplifiers.
The board works with any PC based system including M.A.M.E and other emulation products. It provides an all in one solution to hooking up traditional arcade controls to your PC, or any USB system. All digital inputs and outputs are interfaced via standard keyboard commands, and appear as mapped keys to your games. The default key mappings match those of many popular PC emulation products. Two Trackballs and two Spinners are supported, and are mapped to the system as mice. The board supports four player standard configurations or two player 4 way joystick and 6 button configurations.
Competition
The Company will compete against established companies with significantly greater financial, marketing, research and development, personnel, and other resources than the Company. Such competition could have a material adverse effect on the Company's profitability.
Government Regulation
There are no government regulations regulating the development and sale of gaming products for coin operated machines.
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
Our principal Nevada executive offices are located at 7230 Indian Creek Lane, Ste 201, Las Vegas NV 89149 and our phone number is 408-642-1559.
ITEM 3. LEGAL PROCEEDINGS
We are not currently involved in any legal proceedings nor do we have any knowledge of any threatened litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
No matters were submitted to a vote of security holders during the fiscal year ended June 30, 2009.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is currently quoted on the Over-the-Counter Bulletin Board (OTCBB) under the symbol “NTEKE”. There has been limited trading of our common stock. Our common stock has been quoted on the OTCBB since September 22, 2008 under the symbol ALDJ. On June 10, 2009, pursuant to a corporate name change and a change in control of the Company, the ticker was changed to NTEK. On October 2, 2009, our symbol was changed to NTEKE for failure to be current in our reporting obligations with the Securities and Exchange Commission. We have thirty days from the change of our symbol to become current with our filings or we will be delisted to the Pink Sheets.
Holders
As of October 30, 2009, we have 14,487,000 Shares of $0.001 par value common stock issued and outstanding. The stock transfer agent for our securities is Stalt, Inc., 671 Oak Grove Avenue, Suite C, Menlo Park, CA 94025.
Dividends
There are no restrictions in our Articles of Incorporation or Bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:
| | 1. | We would not be able to pay our debts as they become due in the usual course of business; or |
| | 2. | Our total assets would be less than the sum of the total liabilities plus the amount that would be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution. |
The Company has not declared any dividends, and does not plan to declare any dividends in the foreseeable future.
Recent Sales of Unregistered Securities
The Company has authorized 75,000,000 shares of common stock with a par value of $.001, and no preferred stock. As of June 30, 2009 and 2008, the Company had issued and outstanding common stock totaling 12,867,000 and 4,533,000, respectively. The following transactions comprised the total shares issued and outstanding as of June 30, 2009:
On August 19, 2004, the Company issued 10,000 shares of common stock at $.001 par value to an Affiliate of the Company for consulting services rendered, valued at $10 per share.
On January 31, 2006, the Company declared and issued a common stock dividend of 1,260,000 shares at $.001 par value to stockholders of record as of January 31, 2006.
On January 30, 2009, the Company issued 10,000 shares of common stock at $.001 par value to a creditor for settlement of debt valued at $1,000.
In March 2009, the Company issued 167,000 shares of common stock at $.10 per share for conversion of $16,700 of convertible debentures.
In April, 2009, the Company issued 20,000 shares of common stock at $.10 per share for conversion of $2,000 of convertible debentures.
In April, 2009, the Company issued 6,480,000 at $.001 par value in accordance with the Agreement (see Note A), wherein AGI acquired 100 percent of NTI. In addition, the Company issued 648,000 at $.001 par value, representing finder fees associated with the Agreement.
In April, 2009, the Company issued 500,000 shares pursuant to the conversion of a loan, for $.001 par value.
In June, 2009, the Company issued 213,000 shares of common stock at $.10 per share for conversion of $21,300 of convertible debentures.
In addition, from July 15, 2004 (“Inception”) through June 30, 2009, the Company has issued 3,559,000 shares of common stock at prices ranging between $.001 par value to $.25 per share, in exchange for cash, totaling $273,300.
All of these offerings were undertaken pursuant to the limited offering exemption from registration under the Securities Act of 1933 as provided in Rule 504 under Regulation D as promulgated by the U.S. Securities and Exchange Commission. These offerings met the requirements of Rule 504 in that: (a) the total of funds raised in the five offerings does not exceed $1,000,000; and (b) the offer and sale of the Shares was not accomplished by means of any general advertising or general solicitation.
The class of persons to whom these offerings were made was "sophisticated investors." As a result, offers were made only to persons that the Company believed, and had reasonable grounds to believe, either (a) have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of the proposed investment, or (b) can bear the economic risks of the proposed investment (that is, at the time of investment, could afford a complete loss). Additionally, sales were made only to persons whom the Company believed, and had reasonable grounds to believe immediately prior to such sale and upon making reasonable inquiry, (a) are capable of bearing the economic risk of the investment, and (b) either personally possess the requisite knowledge and experience, or, together with their offeree's representative, have such knowledge and experience.
Securities Authorized for Issuance under Equity Compensation Plans
We do not have any equity compensation plans and accordingly we have no securities authorized for issuance thereunder.
Purchases of Equity Securities by the Registrant and Affiliated Purchasers
We did not purchase any of our shares of common stock or other securities during the year ended June 30, 2008.
[Balance of Page Intentionally Left Blank]
ITEM 6. SELECTED FINANCIAL DATA
The following table includes select data extracted from, and should be examined in conjunction with, the audited financial statements and footnotes for the years ended June 30, 2009 and 2008 and the period of July 15, 2004 (inception) to June 30, 2009, as found under Item 8 of this annual report.
| | | | | | | | | From | |
| | | | | | | | | Inception | |
| | | | | | | | | (July 15, | |
| | | Year Ended | | | Year Ended | | | 2004) to | |
| | | June 30, | | | June 30, | | | June 30, | |
| | | 2009 | | | 2008 | | | 2009 | |
| | | | | | | | | | |
| Gross Sale | | $ | 28,098 | | | $ | 27,753 | | | $ | 28,098 | |
| | | | | | | | | | | | | |
| Gross Profit | | | 17,768 | | | | 27,753 | | | | 17,76 | |
| | | | | | | | | | | | | |
| Net Loss from Continuing and Discontinued Operations | | | (1,134,467 | ) | | | (475,522 | ) | | | (1,134,467 | ) |
| | | | | | | | | | | | | |
| Net cash provided by financing activities | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Net cash used in operating activities | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Cash on hand | | | 35,536 | | | | 41,801 | | | | 35,536 | |
| | | | | | | | | | | | | |
| Net loss per basic and diluted shares | | | (0.05 | ) | | | (0.04 | ) | | | (0.05 | |
| | | | | | | | | | | | | |
| Weighted average number of common shares outstanding: | | | 6,621,250 | | | | 4,520,000 | | | | 6,621,250 | |
| Basic and Diluted | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Cash dividends declared per common share | | | 0.00 | | | | 0.00 | | | | 0.00 | |
| | | | | | | | | | | | | |
| Property and equipment, net | | | 11,920 | | | | 2,571 | | | | 11,920 | |
| | | | | | | | | | | | | |
| Stockholders’ deficit | | | (1,363,819 | ) | | $ | (475,522 | ) | | | (1,363,819 | ) |
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following plan of operation should be read in conjunction with our financial statements and the notes thereto included elsewhere in this annual report. Statements contained herein which are not historical facts are forward-looking statements, as that term is defined by the Private Securities Litigation Reform Act of 1995, including statements relating to our plans, objectives, expectations and intentions. Although we believe that the expectations reflected in such forward-looking statements are reasonable, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ from those projected. We caution investors that any forward-looking statements made by us are not guarantees of future performance and that actual result may differ materially from those in the forward-looking statements. Such risks and uncertainties include, without limitation: established competitors who have substantially greater financial resources and operating histories, regulatory delays or denials, ability to compete as a start-up company in a highly competitive market, and access to sources of capital.
Results of Operations
We have generated revenues from operations of $55,851 since inception and have incurred $1,567,768 in expenses through June 30, 2009.
The following table provides selected financial data about our company for the year ended June 30, 2009 and 2008, respectively.
| Balance Sheet Data | | June 30, 2009 | | | June 30, 2008 | |
| | | | | | | |
| Cash | | | 35,536 | | | $ | 41,801 | |
| | | | | | | | | |
| Total Current Assets | | | 106,836 | | | $ | 114,377 | |
| | | | | | | | | |
| Total Assets | | | 118,756 | | | $ | 116,948 | |
| | | | | | | | | |
| Total Liabilities | | | 1,482,575 | | | $ | 525,500 | |
| | | | | | | | | |
| Stockholders' Deficit | | | (1,363,819 | ) | | $ | (475,522 | ) |
Plan of Operation
We have developed a plan of operations reflecting our objectives and anticipated growth for the next 12 months and beyond. In our plan, we identify our cash requirements, our new product development, and our required staffing and additional funding requirements to fulfill our business objectives.
Cash Requirements
We estimate that we require a minimum of approximately $250,000 and a maximum of approximately $5,000,000,000 to operate for the next 12 months from the date of this annual report. The minimum of $250,000 is required for operating expenses and general operational overhead. The maximum will be required to fully implement our business plan which will include the following:
| | · | Product Development – This will include programming, engineering and prototype building. |
| | · | Trade Shows – We plan to exhibit our existing products and roll out new product development though several trade shows during calendar year 2010. |
| | · | Prototype Engineering – This will include research and development of new technology to our existing products and any new products to be developed. |
To the extent we are unable to meet our operating expenses, we may borrow funds from our current management or other affiliates, or we may attempt to raise capital from private individuals or institutional investment equity funds. Any funds generated from product sales if any, in our company that exceeds our operating expenses and debt repayments will be used to expand our operations.
We have developed a plan of operations reflecting our objectives and anticipated growth for the next 12 months and beyond. In our plan, we identify our cash requirements, our anticipated operating and product development projections, and our required staffing and additional funding requirements to fulfill our business objectives.
Revenues
The Company has recorded $28,098 in revenues from operations as of June 30, 2009, which was generated from product licensing fees and other related business. These revenues have come mainly from the sale of prototype kits to OEM customers for the MultiPin and XRR games. These sales were for test units while the products are completing the development cycle. We have produced additional revenue from consumer level products that we sell on our web store.
We currently have a purchase order with Cosmic Video in the amount of $85,000 USD for our newly developed product named Xtreme Rally Racing. The purchase order is for fifty (50) units and is conditional on game completion and field test
Operating and General & Administrative Expenses
Operating expenses consisting of office rent, administrative staff, salaries, and other general administrative expenses totaled $1,072,685 and $495,083 for the years ended June 30, 2009 and 2008, respectively. Since inception through June 30, 2008, we have incurred operating expenses totaling $352,386
Income Taxes
The Company does not anticipate having to pay income taxes in the upcoming years due to our absence of net profits.
Capital and Liquidity
As of June 30, 2009 and 2008, we had total current assets of $106,836 and $114,377, and total current liabilities of $1,232,575 and $302,500, respectively.
During the years ended June 30, 2009 and 2008, the Company received $210,439 and $40,000, respectively, in cash from the sale of its common stock, and $250,439 since inception through June 30, 2009. These proceeds are being used for operating and general and administrative expenses to sustain the Company through its development stage until it establishes profitable operations or receives cash from the issuance of additional common stock.
We had cash on hand of $$35,536 and $41,801 as of June 30, 2009 and 2008, respectively. We do not have sufficient cash to meet our short-term expansion needs over the next 12 months, which are to sell our existing products, expand our product development, costs of research and development, trade show presentations, financing of product inventory, development of prototypes, and protection of our intellectual capital through the applications for U.S. patents.
[Balance of Page Intentionally Left Blank]
ITEM 8 Financial Statements and Supplementary Data
NanoTech Entertainment, Inc. and Subsidiaries
(A Development Stage Company)
Consolidated Financial Statements
For the years ended June 30, 2009 and 2008;
and from November 11, 2007 (Inception)
through June 30, 2009
NanoTech Entertainment, Inc.
(A Development Stage Company)
Index to Consolidated Financial Statements
For the Period of November 13, 2007 (Inception)
through June 30, 2009
| Consolidated Balance Sheets | 16 |
| | |
| Consolidated Statements of Operations | 17 |
| | |
| Consolidated Statement of Changes in Stockholders’ Deficit | 18 |
| | |
| Consolidated Statements of Cash Flows | 19 |
| | |
| Notes to Consolidated Financial Statements | 20 |
NanoTech Entertainment, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
| | | June 30, | | | June 30, | |
| | | 2009 | | | 2008 | |
| ASSETS | | | | | | |
| Current assets: | | | | | | |
| Cash | | $ | 35,536 | | | $ | 41,801 | |
| Inventory | | | 8,800 | | | | - | |
| Prepaid expenses | | | 2,500 | | | | - | |
| Prepaid expenses – related party | | | - | | | | 57,576 | |
| Prepaid royalties | | | 60,000 | | | | 15,000 | |
| Total current assets | | | 106,836 | | | | 114,377 | |
| Property and equipment | | | 22,771 | | | | 3,071 | |
| Less: accumulated depreciation | | | (10,851 | ) | | | (500 | ) |
| Net property and equipment | | | 11,920 | | | | 2,571 | |
| Total assets | | $ | 118,756 | | | $ | 116,948 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | | | | | | | | |
| LIABILITIES | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 47,679 | | | $ | - | |
| Accounts payable – related party | | | 67,675 | | | | - | |
| Cash drawn in excess of bank balance | | | 5,174 | | | | - | |
| Accrued liabilities – officers | | | 916,731 | | | | 250,000 | |
| Royalties payable | | | 41,771 | | | | - | |
| Accrued interest | | | 18,044 | | | | - | |
| Accrued interest – related party | | | 9,223 | | | | - | |
| Convertible debentures, net | | | 15,778 | | | | - | |
| Notes payable – current | | | 30,000 | | | | - | |
| Notes payable – current, related party (Note C) | | | 80,500 | | | | 52,500 | |
| Total current liabilities | | | 1,232,575 | | | | 302,500 | |
| Long-Term Liabilities | | | | | | | | |
| Notes payable – noncurrent | | | 250,000 | | | | 250,000 | |
| Total liabilities | | | 1,482,575 | | | | 552,500 | |
| | | | | | | | | |
| STOCKHOLDERS’ DEFICIT | | | | | | | | |
| Common stock, $.001 par value, 75,000,000 shares authorized, 14,437,000 and 6,480,000 shares issued and outstanding as of June 30, 2009 and June 30, 2008, respectively | | | 14,437 | | | | 6,480 | |
| Additional paid-in capital | | | 236,002 | | | | 33,520 | |
| Deficit accumulated during the development stage | | | (1,614,258 | ) | | | (475,552 | ) |
| Total stockholders’ deficit | | | (1,363,819 | ) | | | (435,552 | ) |
| Total liabilities and stockholders’ deficit | | $ | 118,756 | | | $ | 116,948 | |
The accompanying notes are an integral part of these consolidate financial statements.
NanoTech Entertainment, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
| | | | | | From Nov. 11, | | | From Nov. 11, | |
| | | For the year | | | 2007 (Inception) | | | 2007 (Inception) | |
| | | ended June 30, | | | through June 30, | | | through June 30, | |
| | | 2009 | | | 2008 | | | 2009 | |
| Revenues: | | | | | | | | | |
| Sales, net | | $ | 28,098 | | | $ | 27,753 | | | $ | 55,851 | |
| Less: costs of goods sold | | | 10,330 | | | | - | | | | 10,330 | |
| Gross profit | | | 17,768 | | | | 27,753 | | | | 45,521 | |
| | | | | | | | | | | | | |
| Operating Expenses: | | | | | | | | | | | | |
| Selling, general and administrative | | | 1,072,685 | | | | 495,083 | | | | 1,567,768 | |
| | | | | | | | | | | | | |
| Other income / (expenses) | | | | | | | | | | | | |
| Interest expense | | | (79,550 | ) | | | (8,222 | ) | | | (87,772 | ) |
| | | | | | | | | | | | | |
| Net loss before income taxes | | | (1,134,467 | ) | | | (475,552 | ) | | | (1,610,019 | ) |
| | | | | | | | | | | | | |
| Provision for income taxes | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | |
| Net loss before discontinued operations | | | (1,134,467 | ) | | | (475,552 | ) | | | 1,610,019 | |
| | | | | | | | | | | | | |
| Discontinued operations: | | | | | | | | | | | | |
| Loss from discontinued operations, net | | | (4,239 | ) | | | - | | | | (4,239 | ) |
| | | | | | | | | | | | | |
| Net loss available to common stockholders | | $ | (1,138,706 | ) | | $ | (475,552 | ) | | $ | (1,614,258 | ) |
| | | | | | | | | | | | | |
| Continuing operations | | | | | | | | | | | | |
| Basic | | $ | (.05 | ) | | $ | (.04 | ) | | | | |
| Diluted | | $ | (.05 | ) | | $ | (.04 | ) | | | | |
| | | | | | | | | | | | | |
| Discontinued operations | | | | | | | | | | | | |
| Basic | | $ | (.00 | ) | | $ | (.00 | ) | | | | |
| Diluted | | $ | (.00 | ) | | $ | (.00 | ) | | | | |
| | | | | | | | | | | | | |
| Total net loss per share | | | | | | | | | | | | |
| Basic | | $ | (.05 | ) | | $ | (.04 | ) | | | | |
| Diluted | | $ | (.05 | ) | | $ | (.04 | ) | | | | |
| | | | | | | | | | | | | |
| Weighted average shares outstanding | | | | | | | | | | | | |
| Basic | | | 6,621,250 | | | | 4,520,000 | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
NanoTech Entertainment, Inc.
(A Development Stage Company)
Consolidated Statement of Changes in Stockholders’ Deficit
| | | | | | | | | | | | Deficit Accumulated | | | | |
| | | | | | | | | | | | During the | | | | |
| | | Common Stock | | | Additional | | | Development | | | Total | |
| | | Shares | | | Amount | | | Paid-In Capital | | | Stage | | | Stockholders’ Deficit | |
| | | | | | | | | | | | | | | | |
| Balance, Nov. 13, 2007 (Inception) | | | 6,480,000 | | | $ | 6,480 | | | | 33,520 | | | | - | | | $ | 40,000 | |
| Net loss | | | - | | | | - | | | | - | | | | (475,552 | ) | | | (475,552 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance, June 30, 2008 | | | 6,480,000 | | | | 6,480 | | | | 33,520 | | | | (475,552 | ) | | | (435,552 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Effective share issuance in recapitalization on 04/30/2009 | | | 4,533,000 | | | | 4,533 | | | | (150,194 | ) | | | - | | | | (145,661 | ) |
| Conversion of debentures, $.10/share | | | 400,000 | | | | 400 | | | | 39,600 | | | | - | | | | 40,000 | |
| Conversion of loan, $.001/share | | | 500,000 | | | | 500 | | | | - | | | | - | | | | 500 | |
| Settlement of vendor debt, $.10/share | | | 10,000 | | | | 10 | | | | 990 | | | | - | | | | 1,000 | |
| Shares issued as finder fee, $.25/share | | | 648,000 | | | | 648 | | | | 161,352 | | | | - | | | | 162,000 | |
| Shares issued in private placement, $.10/share | | | 270,000 | | | | 270 | | | | 26,730 | | | | - | | | | 27,000 | |
| Shares issued in private placement, $.05/share | | | 1,596,000 | | | | 1,596 | | | | 78,204 | | | | - | | | | 79,800 | |
| Beneficial conversion feature on | | | | | | | | | | | | | | | | | | | | |
| Convertible debentures | | | - | | | | - | | | | 45,800 | | | | - | | | | 45,800 | |
| Net loss | | | - | | | | - | | | | - | | | | (1,138,706 | ) | | | (1,138,706 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance, June 30, 2009 | | | 14,437,000 | | | $ | 14,437 | | | $ | 236,002 | | | $ | (1,614,258 | ) | | $ | (1,363,819 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
NanoTech Entertainment, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
| | | | | | From Nov. 11, | | | From Nov. 11, | |
| | | For the year | | | 2007 (Inception) | | | 2007 (Inception) | |
| | | ended June 30, | | | through June 30, | | | through June 30, | |
| | | 2009 | | | 2008 | | | 2009 | |
| | | | | | | | | | |
| Cash flows from operating activities: | | | | | | | | | |
| Net loss | | $ | (1,138,706 | ) | | $ | (475,552 | ) | | $ | (1,614,258 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | | | | | |
| Depreciation expense | | | 1,727 | | | | 500 | | | | 2,227 | |
| Common stock issued for finder fees | | | 162,000 | | | | - | | | | 162,000 | |
| Stock issued for services | | | - | | | | 20,000 | | | | 20,000 | |
| Amortization of debt discount | | | 31,378 | | | | - | | | | 31,378 | |
| Changes in operating assets and liabilities: | | | | | | | | | | | | |
| Decrease in accounts receivable | | | 572 | | | | - | | | | 572 | |
| Increase in inventory | | | (8,800 | ) | | | - | | | | (8,800 | ) |
| Increase in prepaid expenses | | | (2,500 | ) | | | - | | | | (2,500 | ) |
| Decrease in prepaid expenses – related party | | | 57,576 | | | | (57,576 | ) | | | - | |
| Increase in prepaid royalties | | | (45,000 | ) | | | (15,000 | ) | | | (60,000 | ) |
| Decrease in accounts payable | | | (11,900 | ) | | | - | | | | (11,900 | ) |
| Decrease in accounts payable – related party | | | (5,216 | ) | | | - | | | | (5,216 | ) |
| Increase in accrued liabilities – officers | | | 666,731 | | | | 250,000 | | | | 916,731 | |
| Increase in accrued interest | | | 17,736 | | | | - | | | | 17,736 | |
| Increase in accrued interest – related party | | | 7,523 | | | | - | | | | 7,523 | |
| Increase in royalties payable | | | 41,771 | | | | - | | | | 41,771 | |
| Net cash used in operating activities | | | (225,108 | ) | | | (277,628 | ) | | | (502,736 | ) |
| | | | | | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | | | | | |
| Net cash received in reverse recapitalization | | | 31,769 | | | | - | | | | 31,769 | |
| Additions to property and equipment | | | - | | | | (3,071 | ) | | | (3,071 | ) |
| Cash flows used for investing activities | | | 31,769 | | | | (3,071 | ) | | | (28,698 | ) |
| | | | | | | | | | | | | |
| Cash flows from financing activities | | | | | | | | | | | | |
| Cash drawn in excess of bank balance | | | 5,174 | | | | - | | | | 5,174 | |
| Proceeds from notes payable – related party | | | 25,000 | | | | 52,500 | | | | 77,500 | |
| Repayment of notes payable – related party | | | (2,700 | ) | | | - | | | | (2,700 | ) |
| Proceeds from notes payable | | | 30,000 | | | | 250,000 | | | | 280,000 | |
| Proceeds from issuance of common stock | | | 87,000 | | | | 20,000 | | | | 107,000 | |
| Proceeds from issuance of debentures | | | 21,300 | | | | - | | | | 21,300 | |
| Proceeds from conversion of debentures | | | 21,300 | | | | - | | | | 21,300 | |
| Net cash provided by financing activities | | | 187,074 | | | | 322,500 | | | | 509,574 | |
| | | | | | | | | | | | | |
| Increase (decrease) in cash | | | (6,265 | ) | | | 41,801 | | | | 35,536 | |
| Cash, beginning of period | | | 41,801 | | | | - | | | | - | |
| Cash, end of period | | $ | 35,536 | | | $ | 41,801 | | | $ | 35,536 | |
| | | | | | | | | | | | | |
| Non-cash investing and financing activities | | | | | | | | | | | | |
| Issuance of common stock upon conversion of debentures | | $ | 40,000 | | | $ | - | | | $ | 40,000 | |
| Issuance of common stock upon conversion of loan | | $ | 500 | | | $ | - | | | $ | 500 | |
| Issuance of common stock in settlement of vendor debt | | $ | 1,000 | | | $ | - | | | $ | 1,000 | |
| | | | | | | | | | | | | |
| Supplemental cash flow information: | | | | | | | | | | | | |
| Interest paid in cash | | $ | 21,835 | | | $ | 8,222 | | | $ | 30,057 | |
| Income taxes paid in cash | | $ | - | | | $ | - | | | $ | - | |
The accompanying notes are an integral part of these consolidated financial statements.
NanoTech Entertainment, Inc. and Subsidiaries
(A Development Stage Company)
Notes to Consolidated Financial Statements
NanoTech Entertainment, Inc. (“NTI”) was incorporated under the laws of the state of Nevada on November 11, 2007. In April, 2009, NTI entered into an Acquisition Agreement (the “Agreement”) with Aldar Group, Inc. (“AGI”), a Nevada corporation, wherein AGI acquired 100% of NTI’s issued and outstanding common stock through the exchange of 6,480,000 common shares. As a result of the Agreement, AGI changed its name to NanoTech Entertainment, Inc. to better reflect the direction of the newly formed entity. For accounting purposes, the share exchange transaction was treated as a capital transaction where NTI, as the acquiring corporation, issued stock for the net monetary assets of AGI, as the shell corporation, accompanied by a recapitalization. The accounting is similar in form to a reverse acquisition, except that goodwill or other intangibles are not recorded. All references to the NTI’s common stock have been restated to reflect the equivalent numbers of AGI’s common shares.
The Company operates as a virtual manufacturer, developing technology and games, and then licensing such products to third parties for manufacturing and ultimate distribution. The Company’s business model supports relatively low overhead costs and efficiencies in operations in the new global manufacturing economy.
When we refer in this report to business and financial information for periods prior to the consummation of the reverse acquisition, we are referring to the business and financial information of NTI on a consolidated basis unless the context suggests otherwise.
DEVELOPMENT STAGE COMPANY
The Company is considered to be in the development stage as defined in Statement of Financial Accounting Standards (SFAS) No. 7, “Accounting and Reporting by Development Stage Enterprises”. The Company’s efforts have been devoted primarily to raising capital, borrowing funds and attempting to implement its planned, principal activities.
| | B. | SIGNIFICANT ACCOUNTING POLICIES |
USE OF ESTIMATES
The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s periodic filings with the Securities and Exchange Commission include, where applicable, disclosures of estimates, assumptions, uncertainties and markets that could affect the financial statements and future operations of the Company.
PRINCIPLES OF CONSOLIDATION
The Company’s consolidated financial statements include the financial statements of NanoTech Entertainment, Inc. and those of Aldar Group, Inc. All significant inter-company balances and transactions have been eliminated in consolidation.
NanoTech Entertainment, Inc. and Subsidiaries
(A Development Stage Company)
Notes to Consolidated Financial Statements
| | B. | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. The Company’s cash balances totaled $30,362 and $41,801 as of June 30, 2009 and 2008, respectively.
INVENTORY
The Company’s inventory is stated at cost. Inventory on hand consists entirely of finished goods available and ready for sale.
PROPERTY AND EQUIPMENT
The Company’s property and equipment is comprised of office equipment, horses, and partial interest in a race horse, all of which are stated at cost. Depreciation is calculated over the estimated useful lives ranging from 3 to 7 years using the straight – line method.
REVENUE RECOGNITION
Revenues for product sales are recognized when risks associated with ownership have passed to unaffiliated customers. Typically, this occurs when finished products are shipped.
NET INCOME OR (LOSS) PER SHARE OF COMMON STOCK
The Company has adopted Financial Accounting Standards Board (“FASB”) Statement Number 128, “Earnings per Share,” (“EPS”) which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. The Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding.
RECENT ACCOUNTING PRONOUNCEMENTS
Recent accounting pronouncements that are listed below did not, and are not currently expected to, have a material effect on the Company’s financial statements, but will be implemented in the Company’s future financial reporting when applicable.
In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162.” FASB Statement No. 162, “The Hierarchy of Generally Accepted Accounting Principles,” which became effective on November 13, 2008, identified the sources of accounting principles and the framework for selecting the principles used in preparing the financial statements of nongovernmental entities that are presented in conformity with GAAP.
NanoTech Entertainment, Inc. and Subsidiaries
(A Development Stage Company)
Notes to Consolidated Financial Statements
| | B. | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
Statement 162 arranged these sources of GAAP in a hierarchy for users to apply accordingly. Once the Codification is in effect, all of its content will carry the same level of authority,
effectively superseding Statement 162. In other words, the GAAP hierarchy will be modified to include only two levels of GAAP: authoritative and nonauthoritative. As a result, this Statement replaces Statement 162 to indicate this change to the GAAP hierarchy. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009.
In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R).” This Statement is to improve financial reporting by enterprises involved with variable interest entities. The Board undertook this project to address (1) the effects on certain provisions of FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities,” as a result of the elimination of the qualifying special-purpose entity concept in FASB Statement No. 166, “Accounting for Transfers of Financial Assets,” and (2) constituent concerns about the application of certain key provisions of Interpretation 46(R), including those in which the accounting and disclosures under the Interpretation do not always provide timely and useful information about an enterprise’s involvement in a variable interest entity. This Statement shall be effective as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. Earlier application is prohibited.
In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140.” This Statement is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. The Board undertook this project to address (1) practices that have developed since the issuance of FASB Statement No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” that are not consistent with the original intent and key requirements of that Statement and (2) concerns of financial statement users that many of the financial assets (and related obligations) that have been derecognized should continue to be reported in the financial statements of transferors. This Statement must be applied as of the beginning of each reporting entity’s first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. This Statement must be applied to transfers occurring on or after the effective date.
In May 2009, the FASB issued SFAS No. 165, “Subsequent Events.” The objective of this Statement is to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this Statement sets forth: (1) The period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements. (2) The circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in
NanoTech Entertainment, Inc. and Subsidiaries
(A Development Stage Company)
Notes to Consolidated Financial Statements
| | B. | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
its financial statements. (3) The disclosures that an entity should make about events or transactions that occurred after the balance sheet date. In accordance with this Statement, an entity should apply the requirements to interim or annual financial periods ending after June 15, 2009.
In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts – an interpretation of FASB Statement No. 60.” Diversity exists in practice in accounting for financial guarantee insurance contracts by insurance enterprises under FASB Statement No. 60, “Accounting and Reporting by Insurance Enterprises.” That diversity results in inconsistencies in the recognition and measurement of claim liabilities because of differing views about when a loss has been incurred under SFAS No. 5, “Accounting for Contingencies.”
This Statement requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities. Those clarifications will increase comparability in financial reporting of financial guarantee insurance contracts by insurance enterprises. This Statement requires expanded disclosures about financial guarantee insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements. This Statement is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years.
In March 2008, the FASB issued SFAS No. 161, “Disclosure about Derivative Instruments and Hedging Activities – an amendment to FASB Statement No. 133.” The use and complexity of derivative instruments and hedging activities have increased significantly over the past several years. Constituents have expressed concerns that the existing disclosure requirements in SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, do not provide adequate information about how derivative and hedging activities affect an entity’s financial position, financial performance, and cash flows. Accordingly, this Statement requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51.” This Statement amends ARB No. 51 to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards of the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. SFAS No. 160 is effective for fiscal years, and interim periods with those fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends).
NanoTech Entertainment, Inc. and Subsidiaries
(A Development Stage Company)
Notes to Consolidated Financial Statements
| | B. | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In December 2007, the FASB issued a revision to SFAS No. 141 (revised 2007), “Business Combinations.” The objective of this Statement is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.
| C. | RELATED PARTY TRANSACTIONS |
The Company pays rent expense to two shareholders for the use of property for business purposes. The total amounts paid to the Company’s shareholders for rent for the years ended June 30, 2009 and 2008 totaled 197,860 and 115,547, respectively. These amounts have been recorded in selling, general and administrative expenses for the same periods.
In addition, the Company’s president has provided funding in the form of debt instruments, totaling $75,000 as of June 30, 2009. These amounts have been recorded in notes payable – noncurrent, related party as of the same period’s end.
During the year ended June 30, 2008, the Company entered into promissory notes payable totaling $20,000 with two stockholders. The notes carried 7 percent annual interest and were due in 2011. Interest began accruing in July 2008. In March 2009, the principal, totaling $20,000, and accrued interest, totaling $1,400, were converted to convertible debentures totaling $21,400 (see Note F).
The Company has originated the following notes payable:
| | | June 30, 2009 | | | June 30, 2008 | |
| Note 1, 10.00%, due 2011 | | $ | 250,000 | | | $ | - | |
| Note 2, 20.00%, due 2009 | | | 25,000 | | | | - | |
| Totals | | $ | 275,000 | | | $ | - | |
The notes are interest only, with principal together with any accrued for interest payable upon the respective date of maturity. Of the amount as per above,
The Company has authorized 75,000,000 shares of common stock with a par value of $.001, and no preferred stock. As of June 30, 2009 and 2008, the Company had issued and outstanding
NanoTech Entertainment, Inc. and Subsidiaries
(A Development Stage Company)
Notes to Consolidated Financial Statements
| E. | STOCKHOLDERS’ EQUITY (CONTINUED) |
common stock totaling 12,867,000 and 4,533,000, respectively. The following transactions comprised the total shares issued and outstanding as of June 30, 2009:
On August 19, 2004, the Company issued 10,000 shares of common stock at $.001 par value to an Affiliate of the Company for consulting services rendered, valued at $10 per share.
On January 31, 2006, the Company declared and issued a common stock dividend of 1,260,000 shares at $.001 par value to stockholders of record as of January 31, 2006.
On January 30, 2009, the Company issued 10,000 shares of common stock at $.001 par value to a creditor for settlement of debt valued at $1,000.
In March 2009, the Company issued 167,000 shares of common stock at $.10 per share for conversion of $16,700 of convertible debentures.
In April, 2009, the Company issued 20,000 shares of common stock at $.10 per share for conversion of $2,000 of convertible debentures.
In April, 2009, the Company issued 6,480,000 at $.001 par value in accordance with the Agreement (see Note A), wherein AGI acquired 100 percent of NTI. In addition, the Company issued 648,000 at $.001 par value, representing finder fees associated with the Agreement.
In April, 2009, the Company issued 500,000 shares pursuant to the conversion of a loan, for $.001 par value.
In June, 2009, the Company issued 213,000 shares of common stock at $.10 per share for conversion of $21,300 of convertible debentures.
In addition, from July 15, 2004 (“Inception”) through June 30, 2009, the Company has issued 3,559,000 shares of common stock at prices ranging between $.001 par value to $.25 per share, in exchange for cash, totaling $273,300.
In March 2009, the Company issued convertible debentures bearing interest at 6 percent per annum with a term of two years. The debenture principle and accrued interest may be converted into shares of the Company’s common stock in the first year at a conversion price of $0.10 or in the second year at a price which is 80% of the three lowest closing bid prices during the ten days prior to conversion. During the year ended June 30, 2009, the Company issued debentures totaling $62,358, which amount includes cash received, totaling $40,500, converted notes payable to related parties, totaling $20,000 and corresponding accrued interest, totaling $1,400, and other accrued interest totaling $458. A total of $40,000 of debentures was converted to shares at $0.10 during the same period. At June 30, 2009, the Company has recorded converted debentures principal, totaling $22,358, in notes payable – noncurrent. Since the second year conversion price is indeterminable and the first year conversion price approximates the fair
NanoTech Entertainment, Inc. and Subsidiaries
(A Development Stage Company)
Notes to Consolidated Financial Statements
market value of the Company’s stock, the convertible debentures are considered ‘out of the money,’ so no beneficial conversion feature has been provided for.
The Company recognizes the tax effects of transactions in the year in which such transactions enter into the determination of net income, regardless of when reported for tax purposes. Deferred taxes are provided in the financial statements under SFAS No. 109 to give effect to the resulting temporary differences which may arise from differences in the bases of fixed assets, depreciation methods, allowances, and start-up costs based on the income taxes expected to be payable in future years.
| H. | DISCONTINUED OPERATIONS |
The results of the Agreement in April, 2009 between AGI and NTI, wherein the AGI acquired 100 percent of NTI through the exchange of 6,480,000 shares of common stock, effectively constituting a recapitalization, resulted in losses from the discontinued operations of AGI from the period of May 1, 2009 through June 30, 2009, totaling $15,531.
| | I. | GOING CONCERN CONSIDERATIONS |
The Company’s financial statements have been prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. During the years ended June 30, 2009 and 2008, the Company incurred net losses totaling $324,050 and $195,948, respectively. Moreover, the Company recorded a retained deficit totaling $574,833 and $195,948 as of June 30, 2009 and 2008, respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company's ability to meet its ongoing financial requirements is dependent on management being able to obtain additional equity and/or debt financing, the realization of which is not assured.
Item 9 Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9AT –Controls and Procedures
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and the principal financial officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the period covered by this report. Based on this evaluation, Kevin Murphy (our principal executive officer and principal financial officer) concluded as of the evaluation date that our disclosure controls and procedures were effective such that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, and was made known to us by others within those entities, particularly during the period when this report was being prepared.
Management’s Annual Report on Internal Control Over Financial Reporting.
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The internal control process has been designed, under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.
Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2008, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring, based on the framework in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As of June 30, 2008, management has determined that the Company’s internal control over financial reporting as of June 30, 2008 was effective.
Our internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that accurately and fairly reflect, in reasonable detail, transactions and dispositions of assets; and provide reasonable assurances that: (1) transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States; (2) receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (3) unauthorized acquisitions, use, or disposition of the Company’s assets that could have a material affect on the Company’s financial statements are prevented or timely detected.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparations and presentations. 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.
Changes in Internal Control Over Financial Reporting.
There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the evaluation date. We have not identified any significant deficiencies or material weaknesses in our internal controls, and therefore there were no corrective actions taken.
Item 9B. Other Information
No items required to be reported on Form 8-K during the fourth quarter of the year covered by this report were not previously reported on Form 8-K.
PART III
Item 10. Directors, Executive Officers, and Corporate Governance.
Set forth below is the name and age of each individual who was a director or executive officer of Nanotech Entertainment, Inc. as of September 30, 2008, together with all positions and offices of the Company held by each and the term of office and the period during which each has served:
| NAME | | AGE | | POSITION | | DATES SERVED |
| | | | | | | |
| Robert Dekett | | 55 | | President, Treasurer, Secretary and Director | | May 2009 to Present |
| | | | | | | |
| Kenneth Liebscher | | 65 | | Chief Financial Officer | | October 2008 to Present |
Biographical Information
The following paragraphs set forth brief biographical information for the aforementioned director and executive officer:
Robert DeKett - President, Secretary, Treasurer, and Director - In 1980, Mr. DeKett began his career at Merit Industries, the leading manufacturers of video games, countertop games, and electronic dart games for the coin-op arcade industry and in 1985 designed the first touch screen countertop game which revolutionized the industry. In 1997 he joined Quantum3D as Worldwide Business Development Director - Out-of-Home Entertainment (OHE) to advance their newly created 3Dfx based technology and established distributorships worldwide. In 2002 he joined his colleague David Foley (founder, UltraCade Technologies) as VP of Business Development at UltraCade Technologies where he was responsible for all licensing and negotiations. Mr. DeKett procured licenses from many major Japanese, European and US video game publishers including an exclusive worldwide license with the NTRA for the Breeders’ Cup, with development deals both in the Video Game and Casino Gaming industries. UltraCade also won the coveted Video Game Innovative Product of the Year for its Breeder Cup Arcade game. Mr. DeKett attended St. Vincent College and earned degrees in English BA & Philosophy BA - Summa Cum Laude.
Kenneth Liebscher – Chief Financial Officer – Mr. Liebscher is an international businessman with 36 years of securities and executive management experience. Mr. Liebscher is a graduate of St. George's School, Vancouver, B.C. and also attended the University of British Columbia. In 22 years with the world's largest dental products manufacturer, Dentsply International Inc., Mr. Liebscher held several positions culminating as the Manager of their West Coast Division, headquartered in San Francisco California. Mr. Liebscher was recruited by a major Europe based competitor, Ivoclar Liechtenstein to lead their entry into the North American market and, within two years, became Executive Vice President of Sales and Marketing and helped expand this company's sales to $300,000,000 US before retiring. Mr. Liebscher became a director of a publicly held company called E.T.C. Industries Ltd. in 1992 and became President of its wholly owned subsidiary, THE ELECTRIC CAR COMPANY and, in 1994, led a team that developed the MI 6 prototype electric car from the ground up. Mr. Liebscher has served on the Board of Directors of Belmont Resources Inc., listed on the TSX Venture Exchange (BEA.V) from 1992 to the present. Mr. Liebscher also serves on the Board of Directors of UTEC, Inc., a publicly reporting company.
Involvement in Certain Legal Proceedings
To our knowledge, during the past five years, no present or former director or executive officer of our company: (1) filed a petition under the federal bankruptcy laws or any state insolvency law, nor had a receiver, fiscal agent or similar officer appointed by a court for the business or present of such a person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer within two years before the time of such filing; (2) was convicted in a criminal proceeding or named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting the following activities: (i) acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, associated person of any of the foregoing, or as an investment advisor, underwriter, broker or dealer in securities, or as an affiliated person, director of any investment company, or engaging in or continuing any conduct or practice in connection with such activity; (ii) engaging in any type of business practice; (iii) engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodity laws; (4) was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described above under this Item, or to be associated with persons engaged in any such activity; (5) was found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission to have violated any federal or state securities law and the judgment has not been subsequently reversed, suspended or vacated; (6) was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated.
Compliance with Section 16(a) of the Exchange Act
Because we do not have a class of equity securities registered pursuant to Section 12 of the Exchange Act, our executive officers, directors and persons who beneficially own more than 10% of our common stock are not required to file initial reports of ownership and reports of changes in ownership with the SEC under Section 16(a) of the Exchange Act.
Audit Committee and Audit Committee Financial Expert Disclosure
The Company’s Board of Directors does not have a separately designated audit committee or an “audit committee financial expert.” Audit committee functions are performed by our board of directors. None of our directors are deemed independent. All directors also hold positions as our officers. Our audit committee is responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls, and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditory and any outside advisors engagement by the audit committee.
The Board of Directors does not have an audit committee financial expert at this time due to the fact that the Company has only limited operations and no revenues. We believe the cost related to retaining a financial expert at this time is prohibitive. Further, because of our limited operations, we believe the services of a financial expert are not warranted.
Code of Ethics
We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.
Item 11. Executive Compensation
(a) No officer or director of the Company is receiving any remuneration at this time.
(b) There are no annuity, pension, or retirement benefits proposed to be paid to officers, directors, or employees of the Corporation in the event of retirement at normal retirement date pursuant to any presently existing plan provided or contributed to by the Corporation.
(c) No remuneration is proposed to be paid in the future directly or indirectly by the Corporation to any officer or director under any plan, which presently exists.
Director Compensation
The Director of the Company does not receive compensation at this time.
Item 12 - Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth the beneficial ownership of the Company's officers, directors, and persons who own more than five percent of the Company's common stock as of June 30, 2009. Under relevant provisions of the Exchange Act, a person is deemed to be a "beneficial owner" of a security if he or she has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is also deemed to be a beneficial owner of any securities of which that person has the right to acquire beneficial ownership in 60 days. More than one person may be deemed to be a beneficial owner of the same securities. The percentage ownership of each stockholder is calculated based on 14,437,000 total outstanding shares of our common stock as of June 30, 2009.
Amount and Nature of Beneficial Ownership as of June 30, 2009:
| Name of Individual | | # Shares Beneficially Owned | | | # of Class of Common Stock (1) | |
| | | | | | | |
Robert Dekett President, Treasurer, Secretary and Director PO Box 50729 Henderson, Nevada 89016 | | | 3,000,000 | | | | 20.78 | % |
| | | | | | | | | |
Kenneth Liebscher Chief Financial Officer PO Box 50729 Henderson, Nevada 89016 | | | 0 | | | | 0.00 | % |
| | | | | | | | | |
David Foley 311 Santa Rosa Drive Los Gatos, California 95032 | | | 3,000,000 | | | | 20.78 | % |
| | | | | | | | | |
Greenleaf Forum Investments Kevin Murphy, President 1174 Manitou Drive NW Fox Island, WA 98333 | | | 1,300,000 | | | | 8.98 | % |
| | | | | | | | | |
Takashi and Keiko Yoshida 59 Preston Road Woodside, CA 94062 | | | 1,000,000 | | | | 6.90 | % |
| | | | | | | | | |
Alan Tolson Skiddaw View Sandale Bolton Gate, Cumbria CA5 1DE UK | | | 1,500,000 | | | | 10.36 | % |
| | | | | | | | | |
All Officers and Directors as a Group (2 Person2) | | | 3,000,000 | | | | 20.78 | % |
Item 13 – Certain Relationships and Related Transactions, Director Independence
The Company pays rent expense to two shareholders for the use of property for business purposes. The total amounts paid to the Company’s shareholders for rent for the years ended June 30, 2009 and 2008 totaled 197,860 and 115,547, respectively. These amounts have been recorded in selling, general and administrative expenses for the same periods.
In addition, the Company’s president has provided funding in the form of debt instruments, totaling $75,000 as of June 30, 2009. These amounts have been recorded in notes payable – noncurrent, related party as of the same period’s end.
During the year ended June 30, 2008, the Company entered into promissory notes payable totaling $20,000 with two stockholders. The notes carried 7 percent annual interest and were due in 2011. Interest began accruing in July 2008. In March 2009, the principal, totaling $20,000, and accrued interest, totaling $1,400, were converted to convertible debentures totaling $21,400 (see Note F).
Item 14 – Principal Accountant Fees and Services
Audit Fees: All fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements and the review of interim financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years.
2009: $75,000
2008: $ 8,800
Audit-Related Fees: All fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of the registrant's financial statements and are not reported under Item 9(e)(f1) of Schedule 14A.
2009: $25,000
2008: $ 0
Tax Fees: The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning:
2009: $ 20,000
2008: $ 0
Preparation of the Company’s corporate tax return for the fiscal year ended June 30, 2008 is currently underway.
All Other Fees:
2009: $ 0
2008: $ 0
(5) Our audit committee's pre-approval policies and procedures described in paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X were that the audit committee pre-approve all accounting related activities prior to the performance of any services by any accountant or auditor.
(6) The percentage of hours expended on the principal accountant's engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was 0%.
PART IV
Item 15 – Exhibits, Financial Statement Schedules
The following exhibits are included with this filing:
| Exhibit No.: | | Description: |
| | | |
| 3.1(i) | | Articles of Incorporation and amendments thereto (1) and (2) |
| | | |
| 3.1(ii) | | Bylaws (1) |
| | | |
| 14 | | Code of Ethics (1) |
| | | |
| 31.1 | | Section 302 Certification by Principal Executive Officer and Principal Financial and Accounting Officer (1) |
| | | |
| 32.1 | | Section 906 Certification by Principal Executive Officer and Principal Financial and Accounting Officer (1) |
| (1) | Filed with the Securities and Exchange Commission on February 12, 2008 as an exhibit numbered as indicated above, to the Registrant’s registration statement on Form S-1 (file no. 333-149184 which exhibit is incorporated herein by reference. |
| (2) | Amendment to the Article of Incorporation filed with the Securities and Exchange Commission on Form 8K on May 7, 2009 which exhibit is incorporated herein by reference. |
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
October 30, 2009
| | Nanotech Entertainment, Inc. |
| | |
| By: | |
| | /s/ Robert Dekett |
| | Robert Dekett, President (Principal Executive and Accounting Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates included.
October 30, 2009
| By: | |
| | /s/ Robert Dekett |
| | Robert Dekett, President |
| | Principal Executive Officer |
| | Principal Accounting Officer |
| | Chairman of the Board of Directors |
| By: | |
| | /s/ Kenneth Liebscher |
| | Kenneth Liebscher, CFO |
| | Principal Financial Officer |
