UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURUSANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2009
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission file number 333-150135
NASUS CONSULTING, INC.
(Exact name of registrant as specified in its charter)
| Nevada | | 04-3526451 |
| (State or other jurisdiction of incorporation) | | (I.R.S. employer identification no.) |
258 Southhall Lane, Suite 420, Maitland, FL 32751
(Address of principal executive offices including zip code)
(512) 402-5822
(Registrant’s telephone number, including area code)
Indicate by check mark whether the issuer: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
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 (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes[ ] No[ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large-accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer [ ] | | Accelerated filer [ ] |
| Non-accelerated filer [ ] (Do not check if a smaller reporting company) | | Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes[ ] No[X]
The number of shares outstanding of the Registrant’s common stock as of October 30, 2009 was 22,640,000.
NASUS CONSULTING, INC.
TABLE OF CONTENTS
Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
(A Development Stage Company)
BALANCE SHEETS
ASSETS | | September 30, 2009 | | | December 31, 2008 | |
| | | (Unaudited) | | | (Audited) | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 250,602 | | | $ | 33,979 | |
| Current assets from discontinued operations | | | - | | | | 3,713 | |
| Total current assets | | | 250,602 | | | | 37,692 | |
| | | | | | | | | |
| Long-term assets from discontinued operations, net | | | - | | | | 7,225 | |
| Total long-term assets | | | - | | | | 7,225 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 250,602 | | | $ | 44,917 | |
| | | | | | | | | |
| LIABILITIES & STOCKHOLDERS’ EQUITY (DEFICIT) | | | | | | | | |
| | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | - | | | $ | 213 | |
| Accrued liabilities | | | 9,676 | | | | - | |
| Notes payable, including accrued interest of $1,495 – related party | | | 126,495 | | | | - | |
| Notes payable, including accrued interest of $2,089 – related party | | | 419,789 | | | | - | |
| Total current liabilities | | | 555,960 | | | | 213 | |
| | | | | | | | | |
| Commitments and Contingencies | | | | | | | | |
| | | | | | | | | |
| Stockholders’ equity (deficit): | | | | | | | | |
| Common stock, $0.001 par value; 200,000,000 shares authorized; 22,640,000 shares issued and outstanding | | | 22,640 | | | | 22,640 | |
| Additional paid-in capital | | | 20,150 | | | | 20,150 | |
| Stock subscription payable | | | 4,560 | | | | - | |
| Retained earnings (deficit) | | | (42,790 | ) | | | 1,914 | |
| Deficit accumulated during the development stage | | | (307,918 | ) | | | - | |
| Total stockholders’ equity (deficit) | | | (305,358 | ) | | | 44,704 | |
| | | | | | | | | |
| TOTAL LIABILITIES AND STOCKHOLDERS’EQUITY (DEFICIT) | | $ | 250,602 | | | $ | 44,917 | |
The accompanying notes are an integral part of these consolidated financial statements.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
| | | For the Three Months Ended September 30, | |
| | | 2009 | | | 2008 | |
| | | | | | | |
| Operating expenses: | | | | | | |
| General and administrative | | $ | 238,743 | | | $ | - | |
| Total operating expenses | | | 238,743 | | | | - | |
| | | | | | | | | |
| Interest expense – related parties | | | 3,584 | | | | - | |
| | | | | | | | | |
| Loss from continuing operations | | | (242,327 | ) | | | - | |
| | | | | | | | | |
| Loss from discontinued operations, net of tax | | | - | | | | (9,627 | ) |
| | | | | | | | | |
| Net income (loss) | | $ | (242,327 | ) | | $ | (9,627 | ) |
| | | | | | | | | |
| Basic and diluted earnings (loss) per share: | | | | | | | | |
| Loss from continuing operations | | $ | (0.01 | ) | | $ | - | |
| Income (loss) from discontinued operations | | $ | - | | | $ | - | * |
| Net income (loss) | | $ | (0.01 | ) | | $ | - | * |
| | | | | | | | | |
| Weighted average shares outstanding – basic and diluted | | | 22,640,000 | | | | 22,640,000 | |
* Per share loss is less than $(0.01).
The accompanying notes are an integral part of these consolidated financial statements.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
| | | For the Nine Months Ended September 30, | | | May 27, 2009 (Inception) Through September 30, 2009 | |
| | | 2009 | | | 2008 | | | | |
| | | | | | | | | | |
| Operating expenses: | | | | | | | | | |
| General and administrative | | $ | 306,334 | | | $ | - | | | $ | 306,334 | |
| Total operating expenses | | | 306,334 | | | | - | | | | 306,334 | |
| | | | | | | | | | | | | |
| Interest expense – related parties | | | 3,584 | | | | - | | | | 3,584 | |
| | | | | | | | | | | | | |
| Loss from continuing operations | | | (309,918 | ) | | | - | | | | (309,918 | ) |
| | | | | | | | | | | | | |
| Income (loss) from discontinued operations, net of tax | | | (43,335 | ) | | | 2,997 | | | | - | |
| | | | | | | | | | | | | |
| Net income (loss) | | $ | (353,253 | ) | | $ | 2,997 | | | $ | (309,918 | ) |
| | | | | | | | | | | | | |
| Basic and diluted earnings (loss) per share: | | | | | | | | | | | | |
| Loss from continuing operations | | $ | (0.01 | ) | | $ | - | | | | | |
| Income (loss) from discontinued operations | | $ | - | | | $ | - | * | | | | |
| Net income (loss) | | $ | (0.02 | ) | | $ | - | * | | | | |
| | | | | | | | | | | | | |
| Weighted average shares outstanding – basic and diluted | | | 22,640,000 | | | | 22,640,000 | | | | | |
* Per share earnings is less than $0.01.
The accompanying notes are an integral part of these consolidated financial statements.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
| | | For the Nine Months Ended September 30, | | | May 27, 2009 (Inception) Through September 30, 2009 | |
| | | 2009 | | | 2008 | | | | |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | | |
| Net income (loss) | | $ | (353,253 | ) | | $ | 2,997 | | | $ | (309,918 | ) |
| Adjustments used to reconcile net loss to net cash used in operating activities: | | | | | | | | | | | | |
| Loss from disposition of net assets from discontinued operations | | | 10,435 | | | | - | | | | - | |
| Services exchanged for stock subscription | | | 4,560 | | | | | | | | 4,560 | |
| Depreciation and amortization | | | 722 | | | | 2,167 | | | | - | |
| Changes in operating assets and liabilities: | | | | | | | | | | | | |
| Accounts receivable | | | 317 | | | | (5,941 | ) | | | - | |
| Other current assets | | | (482 | ) | | | - | | | | - | |
| Accounts payable | | | (267 | ) | | | (2,797 | ) | | | - | |
| Accrued interest – related parties | | | 3,584 | | | | | | | | 3,584 | |
| Accrued liabilities | | | 9,676 | | | | - | | | | 9,676 | |
| Net cash used in operating activities | | | (324,708 | ) | | | (3,574 | ) | | | (292,098 | ) |
| | | | | | | | | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | | | | | |
| Proceeds from notes payable - related party | | | 125,000 | | | | - | | | | 125,000 | |
| Proceeds from notes payable – related party | | | 417,700 | | | | | | | | 417,700 | |
| Distribution to former common stockholders | | | (1,369 | ) | | | - | | | | - | |
| Net cash provided by financing activities | | | 541,331 | | | | - | | | | 542,700 | |
| | | | | | | | | | | | | |
| Net increase (decrease) in cash and cash equivalents | | | 216,623 | | | | (3,574 | ) | | | 250,602 | |
| Cash and cash equivalents at beginning of period | | | 33,979 | | | | 46,416 | | | | - | |
| Cash and cash equivalents at end of period | | $ | 250,602 | | | $ | 42,842 | | | $ | 250,602 | |
| | | | | | | | | | | | | |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Cash paid for: | | | | | | | | | | | | |
| Interest | | $ | - | | | $ | - | | | $ | - | |
| Income taxes | | $ | 456 | | | $ | 2,129 | | | $ | - | |
The accompanying notes are an integral part of these consolidated financial statements.
NASUS CONSULTING, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements (Unaudited)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Organization
Nasus Consulting, Inc. (the Company,” “we,” “us,” or “our) is a Nevada corporation incorporated in February 2009 an the successor by merger to a Massachusetts corporation incorporated on August 1, 2000. Prior to May 27, 2009, we provided professional information technology (“IT”) services, including software and hardware installation, data conversion, training, and software product modifications to businesses. On May 27, 2009 (the “Transaction Date”), our principal shareholders and officers, Russell R. Desjourdy and Lynn Desjourdy, together with all of our remaining officers and directors voluntarily resigned from their respective offices and positions effective as of the Transaction date. All of our assets held as of the Transaction date were distributed to Mr. Desjourdy as compensation for the voluntary termination of his employment agreement.
Nature of Operations
Effective as of the Transaction Date, we ceased operating our IT services business, and as a result, we no longer derive any revenues from this business. See further discussion in Note 3. Our new management is presently negotiating the potential purchase or an exclusive licensing arrangement of certain technology from Idea Fabrik SA (“Idea Fabrik”), domiciled in Luxembourg. That technology, if purchased or licensed by us, is intended to serve as the foundation platform for the development of a range of Massively Multiplayer Online ("MMO"), virtual reality experiences for on-line internet entertainment, education and social and business interactive purposes. We are engaged currently in conceptual product design, market analysis, detailed business plan development and testing and evaluation of the some of the additional technologies we believe will be required to develop our potential product offerings. We are using a development license we purchased in this quarter in order to create prototypical demonstration models of specific elements of our intended products. As of the Transaction Date, we are currently a development stage company and have not recorded any revenues to date.
Basis of Presentation
The accompanying unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the unaudited financial statements have been prepared on the same basis as the annual audited financial statements, and reflect all adjustments, consisting only of normal, recurring adjustments, necessary for a fair presentation in accordance with US GAAP. The results of operations for interim periods presented are not necessarily indicative of the operating results for the full year. These unaudited financial statements should be read in connection with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008. The balances as of December 31, 2008 are derived from our audited balance sheet.
Codification of US GAAP
In June 2009, the Financial Accounting Standards Board (the “FASB”) issued Statement No. 168, The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162, hereafter referred to as Accounting Standards Codification (the “Codification,” or “ASC Topic 105”). ASC Topic 105 is the sole source of authoritative US 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 US GAAP for SEC registrants. The Codification supersedes all then-existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature not included in the Codification are nonauthoritative. Following the adoption of the Codification, the FASB will issue Accounting Standards Updates, which the FASB will not consider as authoritative in their own right, but which will serve only to update the Codification, provide background information about the guidance, and provide the bases for conclusions on the change(s) in the Codification. We adopted ASC Topic 105 effective with our consolidated financial statements as of September 30, 2009. The adoption of ASC Topic 105 did not have a material impact on our consolidated financial statements.
NASUS CONSULTING, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements (Unaudited)
Earnings (Loss) per Share
Basic earnings (loss) per share is computed based on the weighted average number of common shares outstanding during the period presented. Diluted earnings (loss) per share is computed using the weighted-average number of common shares outstanding plus the number of common shares that would be issued assuming exercise or conversion of all potentially dilutive common shares had been issued. For all periods presented in this report, we had no outstanding potentially dilutive securities, such as stock purchase warrants, options or convertible equity or convertible debt instruments. Accordingly, basic shares equal diluted shares for all periods presented.
Share-based Compensation
We account for share-based compensation under FASB ASC Topic 718 Compensation – Stock Compensation (“ASC Topic 718”). ASC Topic 718 requires the recognition of equity-based payments to employees in the financial statements and is measured based on the estimated fair value of the award on the grant date. ASC Topic 718 also requires the stock option or stock purchase warrant compensation expense to be recognized over the period during which an employee is required to provide service in exchange for the award (generally the vesting period). For all periods presented in this report, we had no share-based compensation transactions.
Recently Issued Accounting Pronouncements (Not Effective as of the Date of Adoption of the FASB Codification)
The following FASB accounting standards shall remain authoritative until such time that each is integrated into the Codification: (1) FASB Statement No. 166, Accounting for Transfers of Financial Assets - an amendment of FASB Statement No. 140 (“FAS 166”) and FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R) (“FAS 167”)
In June 2009, the FASB issued FAS 166. The objective of FAS 166 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. FAS 166 is effective for fiscal years beginning 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. FAS 166 must be applied to transfers occurring on or after the effective date. The adoption of this statement is not expected to have a material impact on our consolidated financial statements.
In June 2009, the FASB issued FAS 167. The objective of FAS 167 is to improve financial reporting by enterprises involved with variable interest entities, in particular to address: (1) the effects on certain provisions of FASB ASC Topic 810 (“ASC Topic 810”), as a result of the elimination of the qualifying special-purpose entity concept in FAS 166 and (2) constituent concerns about the application of certain key provisions of ASC Topic 810, including those in which the accounting and disclosures do not always provide timely and useful information about an enterprise’s involvement in a variable interest entity. This Statement is effective for fiscal years beginning 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. The adoption of this statement is not expected to have a material impact on our consolidated financial statements.
NASUS CONSULTING, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements (Unaudited)
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with US GAAP, which contemplate our continuation as a going concern, whereby the realization of assets and liquidation of liabilities are in the ordinary course of business. We are currently in the development stage as we have not realized any revenue from our new business that commenced as of the Transaction Date. Our ability to continue our current activities as a going concern will rely solely on our ability to secure additional funding.
As of September 30, 2009, we had an accumulated deficit and a deficit accumulated during the development stage of $42,790 and $309,918, respectively. As of September 30, 2009, we had $250,602 in cash and cash equivalents and, since the Transaction Date, have funded our operations through notes payable, which have totaled $542,700 through September 30, 2009. A director of our board of directors (“Board”) has loaned us $125,000 and Idea Fabrik has loaned us $417,700. See further discussion of these related party notes in Note 4. At present, we believe that we have commitments from these related parties to finance our company through the conceptual design stage, which, at this time, we expect to conclude in the first quarter of 2010. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might be different should we be unable to continue as a going concern.
Management recognizes that we must generate additional cash resources to enable us to continue operations and to develop our intended product offerings. We intend to raise additional financing through debt or equity financings or other means that we deem necessary to bring our products to market. However, there is no assurance that we will be successful in raising sufficient additional capital that is required to execute our product development and commercialization plans.
NOTE 3 – DISCONTINUED OPERATIONS
Effective as of the Transaction Date, we ceased operating our IT services business, and as a result, we no longer derive any revenues from this business.
Operating results for the discontinued operations for the three and nine months ended September 30, 2009 and 2008 were as follows:
| | | Three months ended September 30, | | | Nine months ended September 30, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| | | | | | | | | | | | | |
| Revenue – software services | | $ | | | $ | 95,130 | | | $ | 149,587 | | | $ | 278,529 | |
| Selling, general and administrative expenses | | | - | | | | 108,273 | | | | 182,098 | | | | 274,750 | |
| | | | | | | | | | | | | | | | | |
| Income (loss) from operations | | | - | | | | (13,143 | ) | | | (32,511 | ) | | | 3,779 | |
| | | | | | | | | | | | | | | | | |
| Interest income | | | - | | | | 323 | | | | 67 | | | | 323 | |
| Loss on disposition of net assets | | | - | | | | - | | | | (10,435 | ) | | | - | |
| | | | | | | | | | | | | | | | | |
| Income (loss) before income taxes | | | - | | | | (12,820 | ) | | | (42,879 | ) | | | 4,102 | |
| | | | | | | | | | | | | | | | | |
| Income tax benefit (provision) | | | - | | | | 3,193 | | | | (456 | ) | | | (1,105 | ) |
| | | | | | | | | | | | | | | | | |
| Income (loss) from discontinued operations, net of tax | | $ | - | | | $ | (9,627 | ) | | $ | (43,335 | ) | | $ | 2,997 | |
NASUS CONSULTING, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements (Unaudited)
NOTE 4 – FORWARD STOCK SPLIT
On June 17, 2009, our Board unanimously approved a 20 for 1 forward split (the “Split”) of the issued and outstanding shares of our common stock to the stockholders of record as of July 1, 2009. After the Split, the number of shares of common stock issued and outstanding was 22,640,000. The effect of the Split has been applied retroactively to all common stock share and per share data, and related disclosures in the financial statements for all periods presented in this report.
NOTE 5 – RELATED PARTY DEBT OBLIGATIONS
On June 29, 2009, we executed two unsecured note payable agreements in the principal amounts of $33,000 and $17,000, respectively, with one of the directors on our Board (the “Director Investor”). These notes bear interest at the rate of 8% per annum and all principal and accrued interest are due on June 29, 2010.
On July 8, 2009, we executed an unsecured note payable in the principal amount of $25,000 with the Director Investor. This note bears interest at the rate of 8% per annum and all principal and accrued interest are due on July 8, 2010.
On August 11, 2009, we executed an unsecured note payable in the principal amount of $100,000 with Idea Fabrik. This note bears interest at the rate of 8% per annum and all principal and accrued interest are due on August 11, 2010.
On August 25, 2009, we executed an unsecured note payable in the principal amount of $100,000 with Idea Fabrik. This note bears interest at the rate of 8% per annum and all principal and accrued interest are due on August 25, 2010.
On September 28, 2009, we executed an unsecured note payable in the principal amount of $200,000 with Idea Fabrik. This note bears interest at the rate of 8% per annum and all principal and accrued interest are due on September 28, 2010.
On September 30, 2009, we executed an unsecured note payable in the principal amount of $50,000 with the Director Investor. This note bears interest at the rate of 8% per annum and all principal and accrued interest are due on September 30, 2010.
On September 30, 2009, we executed an unsecured note payable in the principal amount of $17,700 with Idea Fabrik. This note bears interest at the rate of 8% per annum and all principal and accrued interest are due on September 30, 2010.
A detail of the related party notes payable at September 30, 2009 is as follows:
Note Holder | | Principal plus Accrued Interest | | Due Date |
| | | | | |
| Director investor | | $ | 33,675 | | June 29, 2010 |
| Director investor | | | 17,348 | | June 29, 2010 |
| Director investor | | | 25,472 | | July 8, 2010 |
| Director investor | | | 50,000 | | September 30, 2010 |
| | | | 126,495 | | |
| | | | | | |
| Idea Fabrik | | | 101,133 | | August 11, 2010 |
| Idea Fabrik | | | 100,822 | | August 25, 2010 |
| Idea Fabrik | | | 200,134 | | September 28, 2010 |
| Idea Fabrik | | | 17,700 | | September 30, 2010 |
| | | | 419,789 | | |
| | | $ | 546,284 | | |
NASUS CONSULTING, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements (Unaudited)
NOTE 6 – SUBSEQUENT EVENT
On October 5, 2009, we entered into a consulting agreement (the “Consulting Agreement”) to assist us with external communications and investor relations. Under the terms of the Consulting Agreement, we are obligated to pay a fixed monthly fee equal to $35,000. The initial term ("Initial Term") of the Consulting Agreement is for six months and shall automatically renew for consecutive six month periods ("Renewal Period") unless terminated by us no later than ten days prior to the expiration of the Initial Term or any subsequent Renewal Period. We may also terminate the Consulting Agreement at any time upon 30 days written notice.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Information May Prove Inaccurate
Some of the information presented in this Quarterly Report on Form 10-Q constitutes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements that include terms such as “may,” “will,” “intend,” “anticipate,” “estimate,” “expect,” “continue,” “believe,” “plan,” or the like, as well as all statements that are not historical facts. Forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from current expectations. Although we believe our expectations are based on reasonable assumptions within the bounds of our knowledge of our business and operations, there can be no assurance that actual results will not differ materially from expectations.
For additional factors that could affect the validity of our forward-looking statements, you should read the risk factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and the consolidated financial statements contained therein, and the risk factors set forth in Part II, Item 1A of this quarterly report. The forward-looking statements included in this quarterly report are subject to additional risks and uncertainties not disclosed in this quarterly report, some of which are not known or capable of being known by us. The information contained in this quarterly report is subject to change without notice. Readers should review future reports that we file with the SEC. In light of these and other risks, uncertainties and assumptions, actual events or results may be very different from those expressed or implied in the forward-looking statements in this quarterly report or may not occur. We have no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Organization
Nasus Consulting, Inc. (the “Company,” “we,” “us,” or “our”) is a Nevada corporation incorporated in February 2009 and the successor by merger to a Massachusetts corporation incorporated on August 1, 2000. Prior to May 27, 2009, we provided professional information technology (“IT”) services, including software and hardware installation, data conversion, training, and software product modifications to businesses. On May 27, 2009 (the “Transaction Date”), our principal shareholders, Russell R. Desjourdy and Lynn Desjourdy ("Selling Shareholders"), executed an agreement (the “Stock Purchase Agreement”) to sell, transfer, and deliver 16,000,000 (post forward stock split) shares of our common stock representing approximately 71% of the total issued and outstanding shares of our common stock. Under the terms of the Stock Purchase Agreement, each of the Selling Shareholders sold 8,000,000 (post forward stock split) shares of our common stock to two individuals (the "Purchasers") for the total sum of $212,020 that was paid by the Purchasers in cash.
Mr. Desjourdy together with all of our remaining officers and directors voluntarily resigned from their respective offices and positions effective as of the Transaction Date. Further, and in accordance with the terms and conditions of the Stock Purchase Agreement, Mr. Desjourdy voluntarily resigned from his employment with us and, together with all of our officers, directors, employees and other representatives, executed an agreement (the “General Release”) in our favor that released and discharged all claims Mr. Desjourdy may have had against us and all amounts that he may have been owed by us. All of our assets were excluded from the Stock Purchase Agreement and were distributed to Mr. Desjourdy as compensation for the voluntary termination of his employment agreement and execution of the General Release.
Nature of Operations
Effective as of the Transaction Date, we ceased operating our IT services business, and as a result, we no longer derive any revenues from this business. Our new management is presently negotiating the purchase or an exclusive licensing arrangement of certain technology from Idea Fabrik. The technology, if purchased or licensed by us, is intended to serve as the foundation platform for the development of a range of Massively Multiplayer Online ("MMO"), virtual reality experiences for on-line internet entertainment, education, and social and business interactive purposes. We are engaged currently in conceptual product design, market analysis, detailed business plan development and testing and evaluation of the some of the additional technologies we believe will be required to develop our potential product offerings. We are using a development license we purchased in this quarter in order to create prototypical demonstration models of specific elements of our intended products. As of the Transaction Date, we are currently a development stage company and have not recorded any revenues to date.
Business Overview
As a development stage company, we intend to design, develop and bring to market an immersive 3D virtual world that will provide an online, consumer entertainment experience that combines multiplayer gaming, virtual world, and social networking elements; one that will be easy to navigate, experience, and understand – providing for an enjoyable experience for not only experienced and dedicated virtual world or gaming users, but also more social and casual internet users.
We have executive management with more than a decade of micro-cap, public company experience. In addition we have retained a core consulting team in Austin, Texas with strong industry specific credentials. This team is engaged in designing the detailed product development plan, conducting target market evaluations and negotiating the purchase or license of Virtual World Core from Idea Fabrik and leading the development and production of our prototype demonstration models.
We are continuing to take steps to assemble an advisory board of leaders in the MMO, Virtual World, and Digital Media disciplines. We expect this board to play a critical role in helping us develop the full vision of our product strategy and to guide our execution along the way.
Financial Condition, Liquidity and Capital Resources
Our unaudited financial statements as presented in Item 1 of this report have been prepared in conformity with US GAAP, which contemplate our continuation as a going concern, whereby the realization of assets and liquidation of liabilities are in the ordinary course of business. We are currently in the development stage as we have not realized any revenue from our new business that commenced as of the Transaction Date. The capital required to execute our total business vision and objectives is significant, and we are currently in the exploratory stages of raising capital to fund the working capital requirements and product development required to meet our product business objectives. As of September 30, 2009, we had $250,602 in cash and, since the Transaction Date, have funded our operations through short-term notes payable. See further discussion of these notes payable transactions under the heading, “Recent Financings,” included under this item.
At present we believe that we have commitments from our founders and related parties to finance our company through the conceptual design stage, which, at this time, we expect to conclude in the first quarter of 2010. Management recognizes that we must generate additional cash resources to enable us to continue operations and to develop our intended product offerings. We intend to raise additional financing through debt or equity financings or other means that we deem necessary in order to bring our products to market. However, there is no assurance that we will be successful in raising sufficient additional capital that is required to execute our product development and commercialization plans.
Recent Financings
On June 29, 2009, we executed two unsecured note payable agreements in the principal amounts of $33,000 and $17,000, respectively, with one of the directors on our Board (the “Director Investor”). These notes bear interest at the rate of 8% per annum and all principal and accrued interest are due on June 29, 2010.
On July 8, 2009, we executed an unsecured note payable in the principal amount of $25,000 with the Director Investor. This note bears interest at the rate of 8% per annum and all principal and accrued interest are due on July 8, 2010.
On August 11, 2009, we executed an unsecured note payable in the principal amount of $100,000 with Idea Fabrik. This note bears interest at the rate of 8% per annum and all principal and accrued interest are due on August 11, 2010.
On August 25, 2009, we executed an unsecured note payable in the principal amount of $100,000 with Idea Fabrik. This note bears interest at the rate of 8% per annum and all principal and accrued interest are due on August 25, 2010.
On September 28, 2009, we executed an unsecured note payable in the principal amount of $200,000 with Idea Fabrik. This note bears interest at the rate of 8% per annum and all principal and accrued interest are due on September 28, 2010.
On September 30, 2009, we executed an unsecured note payable in the principal amount of $50,000 with the Director Investor. This note bears interest at the rate of 8% per annum and all principal and accrued interest are due on September 30, 2010.
On September 30, 2009, we executed an unsecured note payable in the principal amount of $17,700 with Idea Fabrik. This note bears interest at the rate of 8% per annum and all principal and accrued interest are due on September 30, 2010.
Cash and Cash Flows
Our cash and cash equivalents at September 30, 2009 were $250,602 as compared to $42,842 at September 30, 2008. For the nine months ended September 30, 2009, net cash used in operations was $324,708 as compared to net cash used in operations of $3,574 for the nine months ended September 30, 2008. For the nine months ended September 30, 2009, the primary use of cash from operations was the net loss of $353,253, which was comprised of a loss from continuing operations of $309,918 and a loss from discontinued operations, net of tax, of $43,335. For this same period, the primary sources of cash from operations were the non-cash charge for the disposition of net assets from discontinued operation of $10,435 and an increase in accrued interest and accrued liabilities of $13,260. For the nine months ended September 30, 2008, the primary source of cash from operations was net income of $2,997 and the primary use of cash from operations was an increase in accounts receivable of $5,941.
We had no cash flows from investing activities for the nine months ended September 30, 2009 or 2008. For the nine months ended September 30, 2009, net cash provided by financing activities was $541,331 and was comprised of cash proceeds from notes payable of $542,700 less a distribution of cash of $1,369 to former common stockholders. We had no cash flows from financing activities for the nine months ended September 30, 2008.
Contractual Obligations
Our current obligations are notes payable with related parties that bear interest at 8%, compounded quarterly. All notes are due on or before September 30, 2010 and are listed below:
Note Holder | | Principal plus Accrued Interest | | Due Date |
| | | | | |
| Director investor | | $ | 33,675 | | June 29, 2010 |
| Director investor | | | 17,348 | | June 29, 2010 |
| Director investor | | | 25,472 | | July 8, 2010 |
| Director investor | | | 50,000 | | September 30, 2010 |
| | | | 126,495 | | |
| | | | | | |
| Idea Fabrik | | | 101,133 | | August 11, 2010 |
| Idea Fabrik | | | 100,822 | | August 25, 2010 |
| Idea Fabrik | | | 200,134 | | September 28, 2010 |
| Idea Fabrik | | | 17,700 | | September 30, 2010 |
| | | | 419,789 | | |
| | | $ | 546,284 | | |
Critical Accounting Policies
We prepare our financial statements in accordance with US GAAP. Our significant accounting policies and estimates are disclosed in the notes to our consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, some of which are applicable only to our former business that we discontinued on the Transaction Date. Currently, our business is in development stage, and the number of accounting transactions has been minimal, and involved primarily the recording of operating expenses and interest bearing notes payable.
Results of Operations
Effective on the Transaction Date, we discontinued our IT services business and our reported operating results for the nine months ended September 30, 2009 and 2008 and three months ended September 30, 2008 reflect the operating results for this business as discontinued operations.
For the nine months ended September 30, 2009, we recorded a net loss of $353,253, comprised of a loss from continuing operations of $309,918 and a loss from discontinued operations, net of tax, of $43,335. The loss from continuing operations reflects operating expenses for the period from the Transaction Date through September 30, 2009 (approximately four months), as we have reported no revenues from our current operations since inception. For the nine months ended September 30, 2009, our loss from continuing operations was comprised of general and administrative expenses primarily related to consulting services and software development. For the nine months ended September 30, 2008, our net income was comprised of income from discontinued operations, net of tax, of $2,997.
For the three months ended September 30, 2009, our net loss was $242,327 and was comprised of general and administrative expenses from our current business operations, primarily related to consulting services and software development. For the three months ended September 30, 2008, our net loss was comprised of a loss from discontinued operations, net of tax, of $9,627.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide the information under this item.
Item 4T. Controls and Procedures
Disclosure Controls and Procedures
We are responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive and Financial Officer (the “Certifying Officer”) to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Our Certifying Officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act as of September 30, 2009. Based on this evaluation, our Certifying Officer concluded that our disclosure controls and procedures were effective as of this date at the reasonable assurance level.
Internal Control over Financial Reporting
There was no change in our internal control over financial reporting during the quarter ended September 30, 2009 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION.
Item 1. Legal Proceedings.
None.
The risk factors discussed below are in addition to those set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, and address factors specific to our new business, which commenced on May 27, 2009.
We may be unsuccessful in obtaining the necessary financing to fund our business.
Currently we have cash on hand and are funding the Company on a short-term basis with loans. We will need additional capital to complete the conceptual design stage of our product. If we cannot secure that capital, we will not complete the design stage or be able to secure funding for product development.
If we secure funding to complete the conceptual design stage and move to the development stage, the development cycle for our intended product is long and expensive. If we do not secure adequate financing, we will be unable to complete the product development cycle and recover our investment. If we are delayed in securing the necessary financing, the development timeline will extend and our market penetration strategy may suffer from price erosion, increased competition or other factors.
We may be unable to acquire and create the technologies necessary to support our concept.
Our product development plans involve a high level of execution risk. We intend to integrate and apply known technologies in a manner that we believe has not been attempted by other development companies, and we will be developing and acquiring new technologies that we expect to be essential in delivering our targeted product performance. If we experience difficulty in these efforts, our entire development efforts could fail or, if we experience serious and costly delays in our development timeline, we could be forced to make serious compromises in our product performance that would have negative impact on our financial performance.
We may be unable to execute a licensing agreement with Idea Fabrik.
If we do not execute the license with Idea Fabrik, we may have to abandon our product development strategy or extend our development timeline. In the latter case, our market penetration strategy may suffer from price erosion, increased competition or other factors and we could be forced to make serious compromises in our product performance.
Other competitors may be successful in launching their product platform before we do.
Because of the long development cycle inherent in our product, we are at risk that other competitors may launch similar or better product offerings before we are ready to go to market. There are a number of existing organizations that already appear to have the capital and other resources as well as the experience necessary to pursue the same market opportunity that we are targeting.
We may be subject to new regulatory controls on virtual economies.
As the broader social experience with virtual worlds is still in an early stage, there is risk that, with time, government regulation may emerge that limits or taxes some virtual world activities that are included in our design. This could have the effect of reducing our target available market, increasing the costs of development and support or reducing the revenue potential of the product.
We may have incorrectly assessed our target market.
We may be wrong in our assessment of our target market, which we define as consumer entertainment experience that combines multiplayer gaming, virtual world, and social networking elements. Our product may be viewed as an ineffective compromise by some or all of these target users. This may result in revenues that are too low to recover our investment.
Our revenue model assumptions may be incorrect or not supportable by our target market.
The revenue model in our business plan contains certain specific assumptions about revenue sources from a variety of elements including business advertising and promotion fees, migration from free to paid subscribers, real estate management fees, object creation fees and virtual currency sales. If we fail to secure revenue from any of these elements or if our revenue distribution is materially different than we have planned, our expected financial returns may be affected dramatically and we may be unable to recover our investment.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
The exhibits identified below are filed as part of this report:
EXHIBIT # DESCRIPTION
| 3.1 | Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Registration Statement on Form S-1 filed on April 7, 2008) |
| 3.2 | Bylaws (incorporated by reference to Exhibit 3.2 to the Registrant’s Form 10-K filed on April 8, 2009) |
| 3.3 | Certificate of Amendment to Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 10-K filed on April 8, 2009) |
| 31.1 | Certification of Chief Executive and Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 # |
| 32.1 | Certification of Chief Executive and Chief Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code # |
# Filed herewith
Pursuant to the requirements 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.
| | NASUS CONSULTING, INC. |
| | |
| November 23, 2009 | By: /s/ John Jenkins |
| | John Jenkins |
| | Chief Executive and Financial Officer |
| | (Principal Executive and Financial Officer) |
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