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 July 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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Not Applicable.
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 September 14, 2009, there were 8,500,000 shares of voting common stock, $0.001 par value, of DNA Systems, Inc. issued and outstanding.
- 1 -
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The financial statements of DNA Systems, Inc. (“we”, “us”, “our”, “DNAS” or the “Company”) a Nevada corporation, included herein were prepared, without audit, pursuant to rules and regulations of the Securities and Exchange Commission. Because certain information and notes normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America were condensed or omitted pursuant to such rules and regulations, these financial statements should be read in conjunction with the financial statements and notes thereto included in the audited financial statements of the DNA Systems, Inc., for the fiscal year ended April 30, 2009 included in the Company’s Form 10K filed with the Securities and Exchange Commission on July 29, 2009.
DNA SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2009 AND 2008
INDEX
Page
Condensed balance sheets
3
Condensed statements of operations and comprehensive loss
4
Condensed statements of cash flows
5
Notes to condensed financial statements
6 - 10
- 2 -
DNA SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
AS OF JULY 31, 2009 AND APRIL 30, 2009
| As of |
|
| As of |
|
| July 31, |
|
| April 30, |
|
| 2009 |
|
| 2009 |
|
| (Unaudited) |
|
|
|
|
| US$ |
|
| US$ |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
Cash and cash equivalents | 740 |
|
| 818 |
|
|
|
|
|
|
|
Total assets | 740 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Accrued audit fee | 4,516 |
|
| 5,754 |
|
Amount due to a stockholder (Note 7) | 72,598 |
|
| 26,741 |
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit |
|
|
|
|
|
Common stock - US$0.001 par value (Note 4) |
|
|
|
|
|
Authorized 65,000,000 shares; 8,500,000 |
|
|
|
|
|
shares issued and outstanding | 8,500 |
|
| 8,500 |
|
Accumulated deficit during the development stage | (86,019 | ) |
| (40,090 | ) |
Accumulated other comprehensive income (loss) | 1,145 |
|
| (87 | ) |
|
|
|
|
|
|
Total stockholders’ deficit | (76,374 | ) |
| (31,677 | ) |
|
|
|
|
|
|
Total liabilities and stockholders’ deficit | 740 |
|
| 818 |
|
See accompanying notes to condensed financial statements.
- 3 -
DNA SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED JULY 31, 2009 AND 2008
AND FROM INCEPTION ON OCTOBER 25, 2007 THROUGH JULY 31, 2009
| Three months |
|
| Cumulative |
| ||
| ended July 31, |
|
| total since |
| ||
| 2009 |
| 2008 |
|
| inception |
|
| (Unaudited) |
| (Unaudited) |
|
| (Unaudited) |
|
| US$ |
| US$ |
|
| US$ |
|
|
|
|
|
|
|
|
|
Revenue | - |
| 6,407 |
|
| 6,407 |
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
Formation expenses | - |
| - |
|
| 513 |
|
General and administrative expenses | 45,929 |
| 7,330 |
|
| 91,913 |
|
|
|
|
|
|
|
|
|
Loss before income taxes | (45,929 | ) | (923 | ) |
| (86,019 | ) |
Income taxes (Note 2) | - |
| - |
|
| - |
|
|
|
|
|
|
|
|
|
Net loss | (45,929 | ) | (923 | ) |
| (86,019 | ) |
Other comprehensive income (loss) |
|
|
|
|
|
|
|
Foreign currency translation adjustment | 1,232 |
| (4 | ) |
| 1,145 |
|
|
|
|
|
|
|
|
|
Total comprehensive loss | (44,697 | ) | (927 | ) |
| (84,874 | ) |
|
|
|
|
|
|
|
|
Net loss per share : |
|
|
|
|
|
|
|
Basic and diluted (Note 3) | (0.01 | ) | (0.00 | ) |
| (0.01 | ) |
|
|
|
|
|
|
|
|
Weighted average number of shares : |
|
|
|
|
|
|
|
Basic and diluted | 8,500,000 |
| 8,500,000 |
|
| 7,934,211 |
|
See accompanying notes to condensed financial statements.
- 4 -
DNA SYSTEMS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JULY 31, 2009 AND 2008
AND FROM INCEPTION ON OCTOBER 25, 2007 THROUGH JULY 31, 2009
| Three months |
|
| Cumulative |
| ||
| ended July 31, |
|
| total since |
| ||
| 2009 |
| 2008 |
|
| inception |
|
| (Unaudited) |
| (Unaudited) |
|
| (Unaudited) |
|
| US$ |
| US$ |
|
| US$ |
|
|
|
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
Net loss | (45,929 | ) | (923 | ) |
| (86,019 | ) |
Change in liability |
|
|
|
|
|
|
|
Accrued audit fee | (1,238 | ) | 3,664 |
|
| 4,516 |
|
|
|
|
|
|
|
|
|
Net cash (used in) from operating activities | (47,167 | ) | 2,741 |
|
| (81,503 | ) |
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
Proceeds from issuance of common stock | - |
| - |
|
| 8,500 |
|
Advances from a stockholder | 45,857 |
| - |
|
| 72,598 |
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities | 45,857 |
| - |
|
| 81,098 |
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes in cash and |
|
|
|
|
|
|
|
cash equivalents | 1,232 |
| (4 | ) |
| 1,145 |
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents | (78 | ) | 2,737 |
|
| 740 |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period | 818 |
| 7,261 |
|
| - |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period | 740 |
| 9,998 |
|
| 740 |
|
|
|
|
|
|
|
|
|
Supplemental cash flow information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for : |
|
|
|
|
|
|
|
Income taxes | - |
| - |
|
| - |
|
Interest | - |
| - |
|
| - |
|
See accompanying notes to condensed financial statements.
- 5 -
DNA SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JULY 31, 2009 AND 2008
AND FROM INCEPTION ON OCTOBER 25, 2007 THROUGH JULY 31, 2009
1.
NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Corporate information
DNA Systems, Inc. (the “Company”) was incorporated in the State of Nevada on October 25, 2007 for the purpose of exploring new business opportunities. The Company is a development stage company and has not yet generated any significant revenue from its operations.
On April 11, 2008, the Company entered into an 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.
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 Company’s normal course of business. As of July 31, 2009, the Company had cash and cash equivalents of US$740, working capital deficit and stockholders’ deficit of US$76,374 and accumulated deficit during the development stage of US$86,019 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 major stockholder and seeking for profitable business opportunities. However, the Company has no assurance with respect to these plans. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Basis of preparation
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 year ended April 30, 2009.
In the opinion of the management of the Company, the unaudited condensed financial statements for the interim period presented include all adjustments, including normal recurring adjustments, necessary to fairly present the results of such interim period and the financial position as of the end of the said period. The results of operations for the interim period are not necessarily indicative of the results for the full year.
Cash and cash equivalents
- 6 -
Cash equivalents comprise highly liquid investments with original maturity of three months or less. At July 31, 2009, cash equivalents consisted of bank balance of US$254 and cash on hand of US$486.
Concentration of risk
The Company keeps cash in Hong Kong dollar (“HKD”) and maintains a HKD savings account with a commercial bank in Hong Kong, which are financial instruments that are potentially subject to concentration of credit risk. During the reporting periods, the Company did not engage in any hedging activities.
Income taxes
The Company accounts for income tax in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of the events that have been included in the financial statements or tax returns. Deferred income taxes are recognized for all significant temporary differences between tax and financial statement bases of assets and liabilities. A valuation allowance is recognized on deferred tax assets when it is more likely than not that these deferred tax assets will not be realized.
Foreign currency translation
The Company kept cash and cash equivalents and incurred expenses in HKD during the reporting periods and thus HKD is considered to be the Company’s functional currency. Transactions denominated in currencies other than HKD are translated into HKD at the applicable rates of exchange prevailing at the dates of the transactions. Monetary assets and liabilities denominated in other currencies are translated into HKD at the rates of exchange prevailing at the balance sheet date. Exchange gains and losses are included in the determination of net loss.
For financial reporting purposes, HKD has been translated into United States dollars (“US$”) 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 (loss)”. Gains and losses resulting from foreign currency translation are included in other comprehensive loss.
Conversion of amounts from HKD into US$ has been made at the exchange rate of US$1.00 for HKD7.7503 as of July 31, 2009.
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in these financial statements and the accompanying notes during the reporting periods. Actual results could differ from those estimates.
Fair values of financial instruments
The Company’s 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 they are receivable or payable on demand
Recently issued accounting pronouncements
- 7 -
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. SFAS 141 (Revised) is effective for the fiscal year beginning after December 15, 2008. The adoption of SFAS 141 (Revised) had no material impact on the Company’s results of operations, cash flows or financial condition.
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. SFAS 160 is effective for the fiscal year beginning after December 15, 2008. The adoption of SFAS 160 had no material impact on the Company’s results of operations, cash flows or financial condition.
In March 2008, the FASB issued SFAS No. 161 “Disclosures about Derivative Instruments and Hedging Activities - an Amendment to FASB Statement 133”. SFAS 161 provides new disclosure requirements for an entity’s derivative and hedging activities. SFAS 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008. The adoption of SFAS 161 had no material impact on the Company’s results of operations, cash flows or financial condition.
In December 2008, the FASB issued Staff Position (“FSP”) FAS 132(R)-1 “Employers’ Disclosures about Postretirement Benefit Plan Assets”. FSP FAS 132(R)-1 requires additional disclosures in relation to plan assets of defined benefit pension or other postretirement plans. FSP FAS 132(R)-1 is effective for fiscal years ending after December 15, 2009 with early application permitted. The Company is currently evaluating the impact that the adoption of FSP FAS 132(R)-1 will have on its results of operations, cash flows or financial condition.
In April 2009, the FASB issued FSP No. 141R-1 “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies”. FSP 141R-1 amends the provisions in SFAS 141(R) for the initial recognition and measurement, subsequent measurement and accounting, and disclosures for assets and liabilities arising from contingencies in business combinations. FSP 141R-1 eliminates the distinction between contractual and non-contractual contingencies, including the initial recognition and measurement criteria in SFAS 141(R) and instead carries forward most of the provisions in SFAS 141 for acquired contingencies. FSP 141R-1 is effective for contingent assets and contingent liabilities acquired in evaluating the impact of SFAS 141(R).
In April 2009, the FASB issued three related FSP: (i) FSP 157-4 “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability have Significantly Decreased and Identifying Transactions That Are Not Orderly”, (ii) FSP SFAS 115-2 and SFAS 124-2 “Recognition and Presentation of Other-Than-Temporary Impairments”, and (iii) FSP SFAS 107-1 and Accounting Principles Board (APB) 28-1 “Interim Disclosures about Fair Value of Financial Instruments”, each of which is effective for interim and annual periods ending after June 15, 2009. FSP 157-4 provides guidance on how to determine the fair value of assets and liabilities under SFAS 157 Fair Value Measurements, in the current economic environment and reemphasizes that the objective of a fair value measurement remains the determination of an exit price. If we were to conclude that there has been a significant decrease in the volume and level of activity of the asset or liability in relation to normal market activities, quoted market values may not be representative of fair value and we may conclude that a change in valuation technique or the use of multiple valuation techniques may be appropriate. FSP SFAS 115-2 and SFAS 124-2 modify the requirements for recognizing other-than-temporarily impaired debt securities and revise the existing impairment model for such securities by modifying the current intent and ability indicator in determining whether a debt security is other-than-temporarily impaired. FSP SFAS 107 and APB 28-1 enhance the disclosure of instruments under the scope of SFAS 157 for both
- 8 -
interim and annual periods. The adoption of these FSPs had no material impact on the Company’s results of operations, cash flows or financial condition.
In May 2009, the FASB issued Statement No. 165 "Subsequent Events". SFAS 165 modifies the definition of what qualifies as a subsequent event - those events or transactions that occur following the balance sheet date, but before the financial statements are issued, or are available to be issued - and requires companies to disclose the date through which it has evaluated subsequent events and the basis for determining that date. The adoption of SFAS 165 had no material impact on the Company's results of operations, cash flows or financial condition.
In June 2009, the FASB issued SFAS No. 166 “Accounting for Transfers of Financial Assets - an amendment of FASB Statement No. 140”. SFAS 166 improves 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. SFAS No. 166 is 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. The Company is currently evaluating the impact of the adoption of SFAS No. 166 will have on its results of operations, cash flows or fina ncial condition.
In June 2009, the FASB issued Statement No. 167 "Amendments to FASB Interpretation No. 46(R)". Among other items SFAS 167 responds to concerns about the application of certain key provisions of FIN 46(R), including those regarding the transparency of the involvement with variable interest entities. SFAS 167 is 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. The Company is currently evaluating the impact of the adoption of SFAS No. 167 will have on its results of operations, cash flows or financial condition.
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” which establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied in the preparation of financial statements in conformity with generally accepted accounting principles. SFAS No. 168 explicitly recognizes rules and interpretive releases of the SEC under federal securities laws as authoritative GAAP for SEC registrants. SFAS No. 168 will become effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoption of SFAS No. 168 is not expected to have a material impact on the Company’s financial statements.
2.
INCOME TAXES
A reconciliation of income taxes at statutory rate in the United States is as follows :
| Three months |
|
| Cumulative |
| ||
| ended July 31, |
|
| total since |
| ||
| 2009 |
| 2008 |
|
| inception |
|
| (Unaudited) |
| (Unaudited) |
|
| (Unaudited) |
|
| US$ |
| US$ |
|
| US$ |
|
|
|
|
|
|
|
|
|
Loss before income taxes | (45,929 | ) | (923 | ) |
| (86,019 | ) |
|
|
|
|
|
|
|
|
Expected benefit at statutory rate of 15% | (6,889 | ) | (138 | ) |
| (12,903 | ) |
Valuation allowance | 6,889 |
| 138 |
|
| 12,903 |
|
|
|
|
|
|
|
|
|
Income taxes | - |
| - |
|
| - |
|
- 9 -
Recognized deferred income tax assets is as follows :-
|
|
| As of |
|
| As of |
|
|
|
| July 31, |
|
| April 30, |
|
|
|
| 2009 |
|
| 2009 |
|
|
|
| (Unaudited) |
|
|
|
|
|
|
| US$ |
|
| US$ |
|
|
|
|
|
|
|
|
|
Operating losses available for future periods |
|
| 12,903 |
|
| 6,014 |
|
Valuation allowance |
|
| (12,903 | ) |
| (6,014 | ) |
|
|
|
|
|
|
|
|
|
|
| - |
|
| - |
|
As of July 31, 2009, the Company had incurred operating losses of US$86,019 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.
3.
NET LOSS PER SHARE
During the reporting periods, the Company did not have any dilutive instruments. Accordingly, the reported basic and diluted loss per share is the same.
4.
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.
5.
STOCK INCENTIVE PLAN
The Company has not established any stock incentive plan since its incorporation.
6.
COMMITMENTS AND CONTINGENCIES
The Company entered into a sub-lease agreement for the provision of general administrative services and office premises by a related company on May 1, 2009 for a term of one year at a monthly rental of US$2,580. The expected payment as of July 31, 2009 was US$23,220, which will fall due within the next year. The related company is controlled by the Company’s director.
7.
RELATED PARTY TRANSACTIONS
The majority stockholder, who is also the director, advanced US$72,598 to the Company to finance its working capital as of July 31, 2009. The advance is interest-free, unsecured and repayable on demand.
The Company paid management fee of US$15,459 to a related company for the provision of general administrative services and office premises during the period from inception on October 25, 2007 through July 31, 2009. The related company is controlled by the Company’s director.
- 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.
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 an effort to raise additional funds, on July 31, 2008, the Company filed a registration statement with the
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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. The remaining proceeds received from the offering will be used for working capital and future administrative expenses and business development.
Funds allocated to working capital are intended to be used for hiring additional employees 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.
We have no real property and currently operate from office space provided by Easterly Financial Investment Limited. Since May 1, 2008, the Company has paid Easterly a management fee of US$645 for its provision of general administrative services and office premises. The Company will continue to be stationed at Easterly which is controlled by the President, and will continue 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.
Results of Operations
The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our results of operation and financial condition for the fiscal period ended July 31, 2009. The following discussion should be read in conjunction with the Financial Statements and related Notes appearing elsewhere in this Form 10-Q. Our financial statements are stated in US Dollars and are prepared in accordance with generally accepted accounting principals of the United States (“GAAP”).
Results of Operation for DNA Systems, Inc. for the Three Months Ended July 31, 2009 Compared to the Three Months Ended July 30, 2008.
Revenue
Revenue. During the three month period ended July 31, 2009, the Company had revenues of $nil as compared to revenues of $6,407 during the three month period ended July 31, 2008, a decrease of $6,407. The decrease in revenue experienced by the Company was attributable to the fact that the Company did not provide any event planning services during the three months ended July 31, 2009.
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Expenses
Expenses. During the three month period ended July 31, 2009, the Company had operating expenses of $45,929 as compared to expenses of $7,330 during the three month period ended July 31, 2008, an increase of $38,599. The increase in expenses experienced by the Company was primarily attributable to increases experienced by the Company regarding business operations, the exploration of new business opportunities, meeting with potential customers, and locating business partners.
Net Loss
Net Loss. The Company had a net loss of $45,929 for the three month period ended July 31, 2009 as compared to net loss of $923 for the three month period ended July 31, 2008, a change of $45,006. The increase in net loss experienced by the Company was primarily attributable to increases experienced by the Company in its expenses.
Liquidity and Capital Resources
As of July 31, 2009, our unaudited balance sheet reflects that we have total assets of $740, as compared to total assets of $818 as of April 30, 2009, a decrease of $78. As of July 31, 2009, our unaudited balance sheet reflects that we have total liabilities of $77,114, as compared to total liabilities of $32,495 as of April 30, 2009, an increase of $44,619. As of July 31, 2009, the Company has an accumulated deficit of $86,019.
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 July 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 stockholder, 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 e xpenses.
Off Balance Sheet Arrangements
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
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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 our 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 July 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 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 July 31, 2009, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
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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).
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.
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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, Principal Executive Officer, Principal Financial Officer and Director
Date: September 14, 2009
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