UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2009
[]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ______________
Commission File Number:333-152679
DNA SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Nevada |
| 98-0557273 |
(State or other jurisdiction of incorporation) |
| (IRS Employer Identification Number) |
| ||
Rm 2213-14, 22nd Floor, Jardine House, 1 Connaught Place, Central, Hong Kong | ||
(Address of principal executive offices) | ||
(852) 2802-8663 | ||
(Registrant’s telephone number, including area code) | ||
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 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. [ X ] 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.
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 [ X ] No
As of January 31, 2009, there were 8,500,000 shares of voting common stock, $0.001 par value, of DNA Systems, Inc. issued and outstanding.
- 1 -
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The financial statements of DNA Systems, Inc. (“we”, “us”, “our”, “DNAS” or the “Company”) a Nevada corporation, included herein were prepared, without audit, pursuant to rules and regulations of the Securities and Exchange Commission. Because certain information and notes normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America were condensed or omitted pursuant to such rules and regulations, these financial statements should be read in conjunction with the financial statements and notes thereto included in the audited financial statements of the DNA Systems, Inc., for the fiscal year ended April 30, 2008 included in the Company’s Form S-1 Registration Statement, and all amendments thereto, filed with the Securities and Exchange Commission on July 31, 2008.
DNA SYSTEMS, INC.
CONDENSED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2009
INDEX
Page
Condensed balance sheets
3
Condensed statement of operations and comprehensive loss
4
Condensed statement of cash flows
5
Notes to the condensed financial statements
6 - 10
- 2 -
DNA SYSTEMS, INC.
CONDENSED BALANCE SHEETS
AS OF JANUARY 31, 2009 AND APRIL 30, 2008
| As of |
| As of |
|
| January 31, |
| April 30, |
|
| 2009 |
| 2008 |
|
| (Unaudited) |
| (Audited) |
|
| US$ |
| US$ |
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
Cash and cash equivalents | 849 |
| 7,261 |
|
|
|
|
|
|
Total assets | 849 |
| 7,261 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Accrued audit fee | 4,537 |
| 4,235 |
|
Amount due to a stockholder (Note 9) | 10,181 |
| 898 |
|
|
|
|
|
|
Total liabilities | 14,718 |
| 5,133 |
|
|
|
|
|
|
Stockholders’ (deficit)equity |
|
|
|
|
Common stock - US$0.001 par value (Note 6) : |
|
|
|
|
authorized 65,000,000 shares; issued and outstanding |
|
|
|
|
8,500,000 shares | 8,500 |
| 8,500 |
|
Accumulated deficit | (22,375 | ) | (6,377 | ) |
Accumulated other comprehensive income | 6 |
| 5 |
|
|
|
|
|
|
Total stockholders’ (deficit)equity | (13,869 | ) | 2,128 |
|
|
|
|
|
|
Total liabilities and stockholders’ (deficit)equity | 849 |
| 7,261 |
|
See accompanying notes to the condensed financial statements.
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DNA SYSTEMS, INC.
CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2009
AND FROM INCEPTION ON OCTOBER 25, 2007 THROUGH JANUARY 31, 2008
|
|
|
|
|
|
| From |
|
|
|
|
|
| Nine months |
| inception |
|
| Three months ended |
| ended |
| through |
| ||
| January 31, |
| January 31, |
| January 31, |
| ||
| 2009 |
| 2008 |
| 2009 |
| 2008 |
|
| (Unaudited) |
| (Unaudited) |
| (Unaudited) |
| (Unaudited) |
|
| US$ |
| US$ |
| US$ |
| US$ |
|
|
|
|
|
|
|
|
|
|
Revenue | - |
| - |
| 6,407 |
| - |
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
Formation expenses | - |
| - |
| - |
| - |
|
General and administrative expenses | 6,089 |
| 2,018 |
| 22,405 |
| 2,018 |
|
|
|
|
|
|
|
|
|
|
Loss before income taxes | (6,089 | ) | (2,018 | ) | (15,998 | ) | (2,018 | ) |
Income taxes (Note 4) | - |
| - |
| - |
| - |
|
|
|
|
|
|
|
|
|
|
Net loss | (6,089 | ) | (2,018 | ) | (15,998 | ) | (2,018 | ) |
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
Foreign currency translation adjustment | 6 |
| (16 | ) | 1 |
| (18 | ) |
|
|
|
|
|
|
|
|
|
Total comprehensive loss | (6,083 | ) | (2,034 | ) | (15,997 | ) | (2,036 | ) |
|
|
|
|
|
|
|
|
|
Net loss per share : |
|
|
|
|
|
|
|
|
Basic and diluted (Note 5) | (0.00 | ) | (0.00 | ) | (0.00 | ) | (0.00 | ) |
|
|
|
|
|
|
|
|
|
Weighted average number of |
|
|
|
|
|
|
|
|
outstanding shares : |
|
|
|
|
|
|
|
|
Basic and diluted | 8,500,000 |
| 5,173,913 |
| 8,500,000 |
| 4,808,081 |
|
See accompanying notes to the condensed financial statements.
- 4 -
DNA SYSTEMS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JANUARY 31, 2009
AND FROM INCEPTION ON OCTOBER 25, 2007 THROUGH JANUARY 31, 2008
| Nine |
| From |
|
| months |
| inception |
|
| ended |
| through |
|
| January 31, |
| January 31, |
|
| 2009 |
| 2008 |
|
| (Unaudited) |
| (Unaudited) |
|
| US$ |
| US$ |
|
Cash flows from operating activities |
|
|
|
|
Net loss | (15,998 | ) | (2,018 | ) |
Change in liability |
|
|
|
|
Accrued audit fee | 302 |
| - |
|
|
|
|
|
|
Net cash used in operating activities | (15,696 | ) | (2,018 | ) |
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Proceeds from issuance of common stock | - |
| 8,500 |
|
Advances from a stockholder | 9,283 |
| 898 |
|
|
|
|
|
|
Net cash provided by financing activities | 9,283 |
| 9,398 |
|
|
|
|
|
|
Effect of foreign exchange rate changes |
|
|
|
|
in cash and cash equivalents | 1 |
| (18 | ) |
|
|
|
|
|
Net change in cash and cash equivalents | (6,412 | ) | 7,362 |
|
|
|
|
|
|
Cash and cash equivalents, beginning of period | 7,261 |
| - |
|
|
|
|
|
|
Cash and cash equivalents, end of period | 849 |
| 7,362 |
|
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
Cash paid for : |
|
|
|
|
Income taxes | - |
| - |
|
Interest | - |
| - |
|
See accompanying notes to the condensed financial statements.
- 5 -
DNA SYSTEMS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JANUARY 31, 2009
1.
DESCRIPTION OF BUSINESS
DNA Systems, Inc. (the “Company”) was incorporated in the State of Nevada on October 25, 2007 for the purpose of exploring new business opportunities.
On April 11, 2008, the Company entered into an agreement (the “Agreement”) with DNA Financial Systems (HK) Limited (“DNAF Limited”), a Hong Kong corporation founded in 2005, pursuant to which the Company agreed to provide venues for DNAF Limited to organize conferences, seminars, corporate trainings and programs in line with professional events.
The Company was in the development stage during prior periods. On May 27, 2008, the Company commenced its business and earned US$6,407 (equivalent to HK$50,000) revenue for providing event organizing services to DNAF Limited.
2.
BASIS OF PRESENTATION
The accompanying condensed financial statements are unaudited. These condensed financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with the generally accepted accounting principles in the United States (“U.S. GAAP”) have been omitted pursuant to such SEC rules and regulations: nevertheless, the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed financial statements and the notes hereto should be read in conjunction with the financial statements and notes thereto included in the Company’s financial report for the period ended April 30, 2008.
In the opinion of the management of the Company, the unaudited condensed financial statements for the interim periods presented include all adjustments, including normal recurring adjustments, necessary to fairly present the results of such interim periods and the financial position as of the end of the said period. The results of operations for the interim periods are not necessarily indicative of the results for the full year.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Continuance of operations
These financial statements are prepared on a going concern basis, which has considered the realization of assets and satisfaction of liabilities in the normal course of the Company’s business. As of January 31, 2009, the Company had cash and cash equivalents of US$849, working capital deficit and stockholders’ deficit of US$13,869 and accumulated deficit of US$22,375 respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
Management plans on the continuation of the Company as a going concern include financing the Company’s existing and future operations through additional issuance of common stock and/or advances from the majority stockholder and seeking for profitable business opportunities. However, the Company has no assurance with respect to these plans. The
- 6 -
accompanying condensed financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Cash and cash equivalents
Cash equivalents comprise highly liquid investments with original maturity of three months or less. As of January 31, 2009, cash equivalents consisted of bank balance of US$364 and cash on hand of US$485, which were denominated in Hong Kong dollars (“HKD”).
Concentration of risk
The Company maintains a HKD savings account with a commercial bank in Hong Kong, which is financial instrument potentially subject to concentration of credit risk. During the reporting periods, the Company did not engage in any hedging activities.
Revenue recognition
The Company recognizes revenue from providing event organizing services when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when persuasive evidence of an arrangement exists, the services have been provided to customers, the sales price is fixed or determinable, no significant unfulfilled obligations exist and collectibility is reasonably assured.
Income taxes
The Company accounts for income tax in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of the events that have been included in the condensed financial statements or tax returns. Deferred income taxes are recognized for all significant temporary differences between tax and financial statement bases of assets and liabilities. A valuation allowance is recognized on deferred tax assets when it is more likely than not that these deferred tax assets will not be realized.
Foreign currency translation
The Company keeps cash and cash equivalents and incurred income and expenses in HKD during the reporting periods. Accordingly, HKD is considered to be the Company’s functional currency. Transactions denominated in currencies other than HKD are translated into HKD at the applicable rates of exchange prevailing at the dates of the transactions. Monetary assets and liabilities denominated in other currencies are translated into HKD at the rates of exchange prevailing at the balance sheet date. Exchange gains and losses are included in the determination of net loss.
For financial reporting purposes, HKD has been translated into United States dollars (“US$”) as the reporting currency. Assets and liabilities are translated into US$ at the exchange rate in effect at the period end. Income and expenses are translated at average exchange rate prevailing during the period. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ deficit as “Accumulated other comprehensive income”. Gains and losses resulting from foreign currency translation are included in other comprehensive loss.
Conversion of amounts from HKD into US$ had been made at the exchange rate of US$1.00 = HKD7.7726 for the nine months ended January 31, 2009 and US$1.00 = HKD7.7559 as of January 31, 2009, respectively.
Use of estimates
The preparation of condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in these
- 7 -
condensed financial statements and the accompanying notes during the reporting periods. Actual results could differ from those estimates.
Fair values of financial instruments
Financial instruments include cash and cash equivalents, accrued audit fee and amount due to a stockholder. Management of the Company does not believe that the Company is subject to significant interest, currency or credit risks arising from these financial instruments. The respective carrying values of these financial instruments approximate their fair values since they are short-term in nature or are receivable or payable on demand.
Recently issued accounting pronouncements
In September 2006, the Financial Accounting Standards Board (the “FASB”) issued SFAS 157 “Fair Value Measurement”. SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The adoption of SFAS 157 did not have a material impact on the Company’s financial statements.
In February 2008, the FASB issued FASB Staff Position (“FSP”) SFAS 157-2 “Effective Date of FASB Statement No. 157”. FSP SFAS 157-2 defers the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), to fiscal years, and interim periods within those fiscal years, beginning after November 15, 2008. The Company does not expect a material impact on the Company’s financial statements for adoption of this statement for nonfinancial assets and nonfinancial liabilities.
In February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115”. SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. The requirements of SFAS 159 are effective for financial statements issued for fiscal year beginning after November 15, 2007. The Company did not elect the fair value option described in SFAS 159 for financial instruments and certain other items.
In December 2007, the FASB issued SFAS No. 141 (Revised) “Business Combinations”. SFAS 141 (Revised) establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The guidance will become effective for the fiscal year beginning after December 15, 2008. The management is in the process of evaluating the impact that SFAS 141 (Revised) will have on the Company’s financial statements upon adoption.
In May 2008, the FASB issued SFAS 162 “The Hierarchy of Generally Accepted Accounting Principles”. This statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with U.S. GAAP. SFAS 162 is effective on November 15, 2008. The adoption of the statement did not result in a change in the Company’s current practices.
In March 2008, the Financial Accounting Standards Board (“FASB”) issued SFAS 161 “Disclosure about Derivative Instruments and Hedging Activities”. SFAS No. 161 changes the disclosure requirements for derivative instruments and hedging activities. The guidance will become effective for the fiscal year beginning after November 15, 2008. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year, including any financial statements for an interim period within that fiscal year. This statement encourages, but does not require, comparative disclosures for earlier periods at
- 8 -
initial adoption. The Company is currently evaluating the impact of adopting SFAS No. 161 on its financial statements.
In December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements - an Amendment of ARB No. 51”. SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The guidance will become effective for the fiscal year beginning after December 15, 2008. The management is in the process of evaluating the impact that SFAS 160 will have on the Company’s financial statements upon adoption.
4.
INCOME TAXES
A reconciliation of income taxes at statutory rate is as follows :-
|
|
|
|
|
|
| From |
|
|
|
|
|
| Nine months |
| inception |
|
| Three months ended |
| ended |
| through |
| ||
| January 31, |
| January 31, |
| January 31, |
| ||
| 2009 |
| 2008 |
| 2009 |
| 2008 |
|
| (Unaudited) |
| (Unaudited) |
| (Unaudited) |
| (Unaudited) |
|
| US$ |
| US$ |
| US$ |
| US$ |
|
|
|
|
|
|
|
|
|
|
Loss before income taxes | (6,089 | ) | (2,018 | ) | (15,998 | ) | (2,018 | ) |
|
|
|
|
|
|
|
|
|
Expected benefit at statutory rate of 15% | (913 | ) | (303 | ) | (2,400 | ) | (303 | ) |
Valuation allowance | 913 |
| 303 |
| 2,400 |
| 303 |
|
|
|
|
|
|
|
|
|
|
| - |
| - |
| - |
| - |
|
Recognized deferred income tax asset is as follows :-
|
| As of |
| As of |
|
|
| January 31, |
| April 30, |
|
|
| 2009 |
| 2008 |
|
|
| (Unaudited) |
| (Audited) |
|
|
| US$ |
| US$ |
|
|
|
|
|
|
|
| Operating losses available for future periods | 3,357 |
| 957 |
|
| Valuation allowance | (3,357 | ) | (957 | ) |
|
|
|
|
|
|
|
| - |
| - |
|
As of January 31, 2009, the Company had incurred operating losses of US$22,375 which, if unutilized, will expire through to 2029. Future tax benefits arising as a result of these losses have been offset by a valuation allowance.
5.
NET LOSS PER SHARE
During the reporting periods, the Company did not issue any dilutive instruments. Accordingly, the reported basic and diluted loss per share is the same.
6.
COMMON STOCK
The Company was incorporated on October 25, 2007 with authorized capital of 65,000,000 shares of common stock of US$0.001 par value. On December 7, 2007, 8,500,000 shares of common stock of US$0.001 par value totaling US$8,500 were issued for cash.
- 9 -
7.
STOCK INCENTIVE PLAN
The Company has not established any stock incentive plan since its incorporation.
8.
COMMITMENTS AND CONTINGENCIES
The Company had no commitments or contingent liabilities as of January 31, 2009.
9.
RELATED PARTY TRANSACTIONS
The majority stockholder, who is also the director, advanced US$10,181 to the Company to finance its working capital as of January 31, 2009. The advance is interest-free, unsecured and repayable on demand.
The Company paid management fee of US$1,935 and US$5,790 to a related company for the provision of general administrative services and office premises during the three and nine months ended January 31, 2009 respectively. The related company is controlled by the Company’s director. The Company paid no management fee from inception through January 31, 2008.
- 10 -
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Special Note of Caution Regarding Forward Looking Statements
CERTAIN STATEMENTS IN THIS REPORT INCLUDE FORWARD-LOOKING STATEMENTS THAT INCLUDE RISKS AND UNCERTAINTIES. WE USE WORDS SUCH AS "ANTICIPATES," "BELIEVES," "PLANS," "EXPECTS," "FUTURE," "INTENDS" AND SIMILAR EXPRESSIONS TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THIS FORM ALSO CONTAINS FORWARD-LOOKING STATEMENTS ATTRIBUTED TO CERTAIN THIRD PARTIES RELATING TO THEIR ESTIMATES REGARDING THE OPERATION AND GROWTH OF OUR BUSINESS AND SPENDING. YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH APPLY ONLY AS OF THE DATE HEREOF. WE HAVE BASED THESE FORWARD-LOOKING STATEMENTS ON OUR CURRENT EXPECTATIONS AND PROJECTIONS ABOUT FUTURE EVENTS. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN THIS REPORT. OUR ABILITY TO GENERATE REVENUE IS SUBJECT TO SUBSTANTIAL RISKS.
Overview
DNA Systems, Inc. was incorporated in the State of Nevada on October 25, 2007. Our business operations are oriented towards providing event organizing services to business partners. Our overall objective is to create an event organizing business by building a corporate image as a reliable, trustworthy partner that provides high quality event planning and organizing service to our clients.
On April 11, 2008, DNAS entered into an agreement (the “Agreement”) with DNA Financial Systems (HK) Limited (“DNAF Limited”), a Hong Kong corporation founded in 2005, pursuant to which DNAS agreed to provide venues for DNAF Limited to organize conferences, seminars, corporate trainings and programs in line with professional events; a copy of the Agreement was filed as Exhibit 10.1 to the Company’s registration statement on Form S-1 which was filed with the Securities and Exchange Commission (the “SEC”) on July 31, 2008, and is hereby incorporated by reference. Initially, we will provide the conference room located at our executive office as the venue for the professional events of DNAF Limited.
Under the Agreement, DNAS will provide a comprehensive service for special promotions, business and marketing events. Our team of professionals will handle any event from concept to realization and will address DNAF Limited’s needs and desires, with regard to the venue setting, seating, decorations, refreshments and menus. Furthermore, pursuant to the Agreement, we will facilitate the time schedules and event flow and will serve as a point of contact for the site staff and participants. As stated in the Agreement, DNAF Limited shall pay us for the services rendered. The fees for the services that we provide are dependent upon the size, type and duration of the event. The fees shall be paid on the first of the month following the month in which the event was organized by us. On May 27, 2008, the Company commenced its business and earned US$6,407 in revenue for providing event organizing services to DNAF L imited.
Our president and director, Mr. Wilson Cheung, has several contacts within the Hong Kong business community which we believe will assist us in developing our business operations. Mr. Cheung plans to contact various representatives within the Hong Kong business community who are interested in organizing corporate events, however there is no assurance that we will achieve or sustain profitability on an annual or quarterly basis.
Plan of Operations in the next 12 months
During the next twelve months, the Company expects to continue its efforts to provide event organizing services to business partners. Additionally, as the Company has minimal cash on hand, in
- 11 -
an effort to raise additional funds, on July 31, 2008, the Company filed a registration statement with the SEC for the purpose of registering 200,000 shares of its common stock. The registration statement was declared effective by the SEC on September 10, 2008. The Company is planning to raise additional capital through the sale of 200,000 shares common stock in the next 12 months as its registration statement has been declared effective by the SEC. Through the sale of 200,000 shares of common stock at a price of $0.50 per share, it is expected that the Company will raise an aggregate of $100,000 for operating expenses and business expansion. We plan to use the proceeds, if any, from the offering to develop our business and acquire equipment to improve our efficiency.
The Company plans to allocate 30% of any proceeds received to cover the expenses incurred in the offering. If the offering is 30% or less subscribed, all proceeds will be used to pay the expenses of the offering. If only 75% or 50% of the offering is subscribed, we may allocate 45% or 25% of the proceeds received to working capital, respectively. The remaining 5% and 10% of any proceeds received will be used for future administrative expenses and business development. If the offering is fully subscribed, we plan to allocate 55% of the proceeds received to working capital.
Funds allocated to working capital are intended to be used for hiring more than one employee in the coming 12 months. They will be responsible to organize conferences, seminar, information sessions and corporate training for the potential clients. If we do not obtain enough funds from this offering, we may hire only one marketing professional to assist DNAS’s CEO, Ms. Vivian Poon.
Funds allocated to business development are intended to be used to prepare marketing materials for us to locate new business partners. We hope to build up our corporate reputation and align ourselves with additional business partners to provide our event organizing services to them. The funds allocated to administrative expenses are intended to be used for indirect expenses to maintain the daily operation of the business, such as travel expenses, stationary and postage expenses, and utility expenses.
Management plans to temporarily advance capital to maintain normal operations. Management has agreed to provide temporary financing to the Company, but is not contractually obligated to do so. If we fail to raise additional funding, we may have to delay, scale back or discontinue someor all of our operations.
The Company does not maintain an office and its officers will continuously be stationed at the office of a company controlled by the President, for which the Company has agreed to pay a monthly management fee of approximately US$645 (equivalent to HK$5,000) to the related company for the provision of general administrative services and office premises. It is expected that the Company will not purchase any property in the coming 12 months.
Liquidity and Capital Resources
As of January 31, 2009, our unaudited balance sheet reflects that we have total assets of $849 and total current liabilities of $14,718. The Company has cash and cash equivalents of $849 and accumulated deficit of $22,375. The Company does not have sufficient assets or capital resources to pay its on-going expenses while it is seeking out business opportunities. In an effort to raise additional funds, on July 31, 2008, the Company filed a registration statement with the SEC for the purpose of registering 200,000 shares of its common stock. The registration statement was declared effective by the SEC on September 10, 2008. As of January 31, 2009, the Company had not sold any shares pursuant to the registration statement. The Company has no agreement in place with its stockholder or other persons to pay expenses on its behalf, but it is currently anticipated that the Company will rely on loans from the st ockholder, Mr. Wilson Cheung, to pay any daily operating expenses prior to any fund raising exercise. The Company anticipates that this arrangement will not change until the Company is able to enough generate enough revenue to cover the Company’s operating expenses.
Off Balance Sheet Arrangements
- 12 -
The Company does not have any off-balance sheet arrangements.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable
ITEM 4T.
CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports we file or submit under the Exchange Act 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 principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable assurance of achieving the desired control objectives, and we necessarily are required to apply o ur judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.
Our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of January 31, 2009, and concluded that the disclosure controls and procedures were not effective, because certain deficiencies involved internal controls constituted a material weakness as discussed below. The material weakness identified did not result in the restatement of any previously reported financial statements or any other related financial disclosures, nor does management believe that it had any effect on the accuracy of the Company’s financial statements for the current reporting period.
Management’s Quarterly Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with accounting principles generally accepted. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management, including our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of our internal control over financial reporting. Based on its evaluation, our management concluded that there is a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness relates to the monitoring and review of work performed by our Chief Financial Officer in the preparation of financial statements, footnotes and financial data provided to the Company’s registered public accounting firm in connection with the quarter review. All of the financial reporting is car ried out by our Chief Financial Officer, and we do not have an audit
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committee. This lack of accounting staff results in a lack of segregation of duties and accounting technical expertise necessary for an effective system of internal control.
In order to mitigate this material weakness to the fullest extent possible, at any time, if it appears that any control can be implemented to continue to mitigate such weaknesses, it is immediately implemented. As soon as our finances allow, we will hire sufficient accounting staff and implement appropriate procedures for monitoring and review of work performed by our Chief Financial Officer.
This quarterly report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this quarterly report.
Changes in Internal Control over Financial Reporting
There was no change in the Company's internal control over financial reporting during the quarter ended January 31, 2009, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS.
The Company is not a party to any pending legal proceedings, and no such proceedings are known to be contemplated. No director, officer or affiliate of the Company, and no owner of record or beneficial owner of more than 5.0% of the securities of the Company, or any associate of any such director, officer or security holder is a party adverse to the Company or has a material interest adverse to the Company in reference to pending litigation.
ITEM 1A. RISK FACTORS.
Not Applicable.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5.
OTHER INFORMATION.
None.
ITEM 6.
EXHIBITS.
The following exhibits are filed herewith:
3.1
Articles of Incorporation (herein incorporated by reference from Registration Statement on Form S-1 filed with the Securities and Exchange Commission on July 31, 2008).
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3.2
Bylaws (herein incorporated by reference from Registration Statement on Form S-1 filed with the Securities and Exchange Commission on July 31, 2008).
10.1
Contract with DNA Financial Systems (HK) Limited signed on April 11, 2008 (herein incorporated by reference from Registration Statement on Form S-1 filed with the Securities and Exchange Commission on July 31, 2008).
31.1*
Certifications pursuant to Rule 13a-15(a) or 15d-15(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certifications pursuant to Rule 13a-15(a) or 15d-15(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
* Filed Herewith
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the registrant caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
DNA SYSTEMS, INC.
By: /s/ Wilson Cheung
Wilson Cheung, President and Director
Date: March 17, 2009
In accordance with Section 13 or 15(d) of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
By: /s/ Wilson Cheung
Wilson Cheung, Principal Executive Officer
Date: March 17, 2009
By: /s/ Wilson Cheung
Wilson Cheung, Principal Financial Officer
Date: March 17, 2009
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