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 March 31, 2010
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 333-156352
(Exact name of registrant as specified in its charter)
| Nevada | 88-0492246 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
2373 208th St., Unit F4, Torrance, CA | 90501 |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Copies of Communications to:
Stoecklein Law Group
402 West Broadway, Suite 690
San Diego, CA 92101
(619) 704-1310
Fax (619) 704-0556
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to 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 Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ¨ No ¨
Indicate by check mark whether the registrant is a large 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 ¨
The number of shares of Common Stock, $0.001 par value, outstanding on May 14, 2010, was 31,500,000 shares.
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
| E&M GROUP, INC. (FORMERLY MADISON MANAGEMENT, INC.) | |
| (A DEVELOPMENT STAGE COMPANY) | |
| BALANCE SHEETS | |
| | | | | | | |
| | | | | | | |
| | | March 31, | | | December 31, | |
| | | 2010 | | | 2009 | |
| | | (unaudited) | | | (audited) | |
| ASSETS | | | | | | |
| | | | | | | |
| Current assets: | | | | | | |
| Cash | | $ | 968 | | | $ | 27,057 | |
| Prepaid expenses | | | 2,683 | | | | 1,250 | |
| Deposits | | | 485 | | | | - | |
| Notes receivable - related party | | | 10,000 | | | | 10,000 | |
| Total current assets | | | 14,136 | | | | 38,307 | |
| | | | | | | | | |
| Fixed assets, net | | | 25,053 | | | | - | |
| | | | | | | | | |
| Other assets: | | | | | | | | |
| Notes receivable - related party | | | 1,000 | | | | - | |
| Total other assets | | | 1,000 | | | | - | |
| | | | | | | | | |
| Total assets | | $ | 40,189 | | | $ | 38,307 | |
| | | | | | | | | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' DEFICIT | | | | | | | | |
| | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 7,861 | | | $ | 2,508 | |
| Total current liabilities | | | 7,861 | | | | 2,508 | |
| | | | | | | | | |
| Long-term liabilities: | | | | | | | | |
| Notes payable - related party | | | 74,700 | | | | 49,000 | |
| Total long-term liabilities | | | 74,700 | | | | 49,000 | |
| | | | | | | | | |
| Total liabilities | | | 82,561 | | | | 51,508 | |
| | | | | | | | | |
| Stockholders' deficit: | | | | | | | | |
| Common stock, $0.001 par value, 100,000,000 shares | | | | | | | | |
| authorized, 31,500,000 and 31,500,000 shares issued and outstanding | | | | | | | | |
| as of March 31, 2010 and December 31, 2009, respectively | | | 31,500 | | | | 31,500 | |
| Additional paid-in capital | | | 70,993 | | | | 70,993 | |
| Deficit accumulated during development stage | | | (144,865 | ) | | | (115,694 | ) |
| Total stockholders' deficit | | | (42,372 | ) | | | (13,201 | ) |
| | | | | | | | | |
| Total liabilities and stockholders' deficit | | $ | 40,189 | | | $ | 38,307 | |
The accompanying notes are an integral part of these financial statements.
| E&M GROUP, INC. (FORMERLY MADISON MANAGEMENT, INC.) | |
| (A DEVELOPMENT STAGE COMPANY) | |
| STATEMENT OF OPERATIONS | |
| (unaudited) | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | Inception | |
| | | | | | | | | (March 2, 2001) | |
| | | For the three months ended | | | to | |
| | | March 31, | | | March 31, | |
| | | 2010 | | | 2009 | | | 2010 | |
| | | | | | | | | | |
| Revenue | | $ | - | | | $ | 5,000 | | | $ | 15,000 | |
| Revenue - related party | | | - | | | | - | | | | 38,500 | |
| Total revenue | | | - | | | | 5,000 | | | | 53,500 | |
| | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | |
| General and administrative | | | 23,316 | | | | 5,945 | | | | 47,559 | |
| Consulting fees | | | - | | | | - | | | | 11,100 | |
| Consulting fees - stock based | | | - | | | | - | | | | 22,500 | |
| Consulting fees - related party | | | - | | | | - | | | | 5,000 | |
| Depreciation | | | 211 | | | | - | | | | 211 | |
| Legal and professional fees | | | 8,644 | | | | 28,000 | | | | 110,924 | |
| Total expenses | | | 29,171 | | | | 33,945 | | | | 200,294 | |
| | | | | | | | | | | | | |
| Net operating loss | | | (29,171 | ) | | | (28,945 | ) | | | (146,794 | ) |
| | | | | | | | | | | | | |
| Other income: | | | | | | | | | | | | |
| Forgiveness of debt | | | - | | | | - | | | | 1,929 | |
| Total other income | | | - | | | | - | | | | 1,929 | |
| | | | | | | | | | | | | |
| Net loss | | $ | (29,171 | ) | | $ | (28,945 | ) | | $ | (144,865 | ) |
| | | | | | | | | | | | | |
| Weighted average number of common shares | | | 31,500,000 | | | | 31,500,000 | | | | | |
| outstanding - basic | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Net loss per share - basic | | $ | (0.00 | ) | | $ | (0.00 | ) | | | | |
The accompanying notes are an integral part of these financial statements.
| E&M GROUP, INC. (FORMERLY MADISON MANAGEMENT, INC.) | |
| (A DEVELOPMENT STAGE COMPANY) | |
| STATEMENT OF CASH FLOWS | |
| (unaudited) | |
| | | | | | | | | Inception | |
| | | | | | | | | (March 2, 2001) | |
| | | For the three months ended | | | to | |
| | | March 31, | | | March 31, | |
| | | 2010 | | | 2009 | | | 2010 | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | | |
| Net loss | | $ | (29,171 | ) | | $ | (28,945 | ) | | $ | (144,865 | ) |
| Adjustments to reconcile net loss | | | | | | | | | | | | |
| to net cash used in operating activities: | | | | | | | | | | | | |
| Shares issued for services | | | - | | | | - | | | | 22,500 | |
| Depreciation | | | 211 | | | | - | | | | 211 | |
| Changes in operating assets and liabilities: | | | | | | | | | | | | |
| (Increase) in prepaid expenses | | | (1,433 | ) | | | - | | | | (2,683 | ) |
| (Increase) in deposits | | | (485 | ) | | | - | | | | (485 | ) |
| Increase (decrease) in accounts payable | | | 5,353 | | | | (1,000 | ) | | | 7,861 | |
| | | | | | | | | | | | | |
| Net cash used in operating activities | | | (25,525 | ) | | | (29,945 | ) | | | (117,461 | ) |
| | | | | | | | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | | | | | |
| Proceeds from repayment of notes receivable - related party | | | - | | | | - | | | | 20,000 | |
| Payments for notes receivable - related party | | | (1,000 | ) | | | - | | | | (31,000 | ) |
| Purchase fixed assets | | | (25,264 | ) | | | - | | | | (25,264 | ) |
| | | | | | | | | | | | | |
| Net cash used in investing activities | | | (26,264 | ) | | | - | | | | (36,264 | ) |
| | | | | | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | | | | | |
| Proceeds from sale of common stock, net of offering costs | | | - | | | | - | | | | 9,000 | |
| Proceeds from donated capital | | | - | | | | - | | | | 70,993 | |
| Proceeds from notes payable | | | - | | | | - | | | | 49,000 | |
| Proceeds from notes payable - related party | | | 25,700 | | | | 28,000 | | | | 40,700 | |
| Payments to notes payable - related party | | | - | | | | - | | | | (15,000 | ) |
| | | | | | | | | | | | | |
| Net cash provided by financing activities | | | 25,700 | | | | 28,000 | | | | 154,693 | |
| | | | | | | | | | | | | |
| NET CHANGE IN CASH | | | (26,089 | ) | | | (1,945 | ) | | | 968 | |
| | | | | | | | | | | | | |
| CASH AT BEGINNING OF YEAR | | | 27,057 | | | | 6,559 | | | | - | |
| | | | | | | | | | | | | |
| CASH AT END OF YEAR | | $ | 968 | | | $ | 4,614 | | | $ | 968 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| SUPPLEMENTAL INFORMATION: | | | | | | | | | | | | |
| Interest paid | | $ | - | | | $ | - | | | $ | - | |
| Income taxes paid | | $ | - | | | $ | - | | | $ | - | |
| | | | | | | | | | | | | |
| Non-cash activities: | | | | | | | | | | | | |
| Number of shares issued for services | | | - | | | | - | | | | 22,500,000 | |
| Fair value of shares issued for services | | $ | - | | | $ | - | | | $ | 22,500 | |
The accompanying notes are an integral part of these financial statements.
E&M Group, Inc. (formerly Madison Management, Inc.)
Notes To Financial Statements
(Unaudited)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The condensed interim financial statements included herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.
These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management, are necessary for fair presentation of the information contained therein. It is suggested that these condensed interim financial statements be read in conjunction with the financial statements of the Company for the year ended December 31, 2009 and notes thereto included in the Company’s 10-K filed on March 31, 2010. The Company follows the same accounting policies in the preparation of interim reports.
Results of operations for the interim period are not indicative of annual results.
Use of estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates.
Cash and Cash Equivalents
For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. The carrying value of these investments approximates fair value.
Earnings per share
The Company follows ASC Topic 260. Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.
Concentrations
For the three months ended March 31, 2010 and 2009, one customer accounted for 0% and 100% of sales, respectively.
E&M Group, Inc. (formerly Madison Management, Inc.)
Notes To Financial Statements(Unaudited)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fixed Assets
Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate. The estimated useful lives for significant property and equipment categories are as follows:
Vehicles 5 years
The Company reviews the carrying value of property, plant and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition and other economic factors. Based on this assessment there was no impairment as of March 31, 2010.
Recent pronouncements
Below is a listing of the most recent accounting standards and their effect on the Company.
In May 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-19 (ASU 2010-19), Foreign Currency (Topic 830): Foreign Currency Issues: Multiple Foreign Currency Exchange Rates. The amendments in this Update are effective as of the announcement date of March 18, 2010. The Company does not expect the provisions of ASU 2010-19 to have a material effect on the financial position, results of operations or cash flows of the Company.
In April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-18 (ASU 2010-18), Receivables (Topic 310): Effect of a Loan Modification When the Loan is Part of a Pool That Is Accounted for as a Single Asset-a consensus of the FASB Emerging Task Force. The amendments in this Update are effective for modifications of loans accounted for within pools under Subtopic 310-30 occurring in the first interim or annual period ending on or after July 15, 2010. The amendments are to be applied prospectively. Early application is permitted. The Company does not expect the provisions of ASU 2010-18 to have a material effect on the financial position, results o f operations or cash flows of the Company.
E&M Group, Inc. (formerly Madison Management, Inc.)
Notes To Financial Statements(Unaudited)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent pronouncements (continued)
In April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-17 (ASU 2010-17), Revenue Recognition-Milestone Method (Topic 605): Milestone Method of Revenue Recognition. The amendments in this Update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. If a vendor elects early adoption and the period of adoption is not the beginning of the entity’s fiscal year, the entity should apply the amendments retrospectively from the beginning of the year of adoption. The Company does not expect the provisions of ASU 201 0-17 to have a material effect on the financial position, results of operations or cash flows of the Company.
In April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-16 (ASU 2010-16), Entertainment-Casinos (Topic 924): Accruals for Casino Jackpot Liabilities-a consensus of the FASB Emerging Issues Task. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2010. The amendments should be applied by recording a cumulative-effect adjustment to opening retained earnings in the period of adoption. The Company does not expect the provisions of ASU 2010-16 to have a material effect on the financial position, results of operations or cash flows of the Company.
In April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-15 (ASU 2010-15), Financial Services-Insurance (Topic 944): How Investments held through Separate Accounts Affect an Insurer’s Consolidation Analysis of Those Investments-a consensus of the FASB Emerging Issues Task Force. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2010. Early adoption is permitted. The amendments in this Update should be applied retrospectively to all prior periods upon the date of adoption. The Company does not expect the provisions of ASU 2010-15 to have a material effect on the financial position, results of operations or cash flows of the Company.
In April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-14 (ASU 2010-14), Accounting for Extractive Activities – Oil & Gas - Amendments to Paragraph 932-10-S99-1 (SEC Update). The Amendments are designed to modernize and update the oil and gas disclosure requirements to align them with current practices and changes in technology. The Company does not expect the provisions of ASU 2010-14 to have a material effect on the financial position, results of operations or cash flows of the Company.
E&M Group, Inc. (formerly Madison Management, Inc.)
Notes To Financial Statements(Unaudited)
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent pronouncements (continued)
In April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-13 (ASU 2010-13), Compensation-Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades - a consensus of the FASB Emerging Issues Task Force. The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. Earlier application is permitted. The Company does not expect the provisions of ASU 2010-13 to have a material effect on the financial position, results of operations or cash flows of the Company.
In April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-12 (ASU 2010-12), Income Taxes (Topic 740): Accounting for Certain Tax Effects of the 2010 Health Care Reform Acts. After consultation with the FASB, the SEC stated that it “would not object to a registrant incorporating the effects of the Health Care and Education Reconciliation Act of 2010 when accounting for the Patient Protection and Affordable Care Act”. The Company does not expect the provisions of ASU 2010-12 to have a material effect on the financial position, results of operations or cash flows of the Company.
In March 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-11 (ASU 2010-11), Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives. The amendments in this Update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this Update. The Company does not expect the provisions of ASU 2010-11 to have a material effect on the financial position, results of operations or cash flows of the Company.
In February 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-09 (ASU 2010-09), Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements. This amendment addresses both the interaction of the requirements of this Topic with the SEC’s reporting requirements and the intended breadth of the reissuance disclosure provision related to subsequent events (paragraph 855-10-50-4). All of the amendments in this Update are effective upon issuance of the final Update, except for the use of the issued date for conduit debt obligors. That amendment is effective for interim or annual periods ending after June 15, 2010. The Company does not expect the provisions of ASU 2010-09 to have a material effect on the financial position, results of operations or cash flows of the Company.
E&M Group, Inc. (formerly Madison Management, Inc.)
Notes To Financial Statements(Unaudited)
NOTE 2 – GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. As noted above, the Company is in the development stage and, accordingly, has not yet generated revenues from operations. Since its inception, the Company has been engaged substantially in financing activities and developing its business plan and incurring start up costs and expenses. As a result, the Company incurred accumulated net losses from Inception (March 2, 2001) through the period ended March 31, 2010 of ($144,865). In addition, the Company’s development activities since inception have been financially sustained through debt and equity financing.
The ability of the Company to continue as a going concern is dependent upon its ability to raise additional capital from the sale of common stock and, ultimately, the achievement of significant operating revenues. 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 result from this uncertainty.
NOTE 3 – NOTES RECEIVABLE – RELATED PARTY
Notes receivable consists of the following at:
| | | March 31, 2010 | | December 31, 2008 |
| Note receivable to an entity owned and controlled by officers and directors of the Company, unsecured, 0% interest, due upon demand but cannot be demanded before November 2010 | | $ 10,000 | | $ 10,000 |
| | | | | |
| Note receivable to an entity owned and controlled by officers and directors of the Company, unsecured, 0% interest, due upon demand but cannot be demanded before December 2020 | | 1,000 | | - |
| | | | | |
| Total long term and short term receivable from related party | | $ 11,000 | | $ 10,000 |
Interest income for the three months ended March 31, 2010 and December 31, 2009 was $0 and $0, respectively.
E&M Group, Inc. (formerly Madison Management, Inc.)
Notes To Financial Statements(Unaudited)
NOTE 4 – FIXED ASSETS
Fixed assets consist of the following at:
| | | March 31, 2010 | | December 31, 2009 |
| Vehicles | | $ 25,264 | | $ - |
| Accumulated depreciation | | (211) | | - |
| | | $ 25,053 | | $ - |
Depreciation for the three months ended March 31, 2010 and 2009 was $211 and $0, respectively.
NOTE 5 – NOTES PAYABLE AND NOTES PAYABLE – RELATED PARTY
Notes payable consists of the following at:
| | | March 31, 2010 | | December 31, 2009 |
| Note payable to an officer and director of the Company, unsecured, 0% interest, due upon demand but cannot be demanded before December 2020 | | $ 74,700 | | $ 49,000 |
| | | | | |
| | | $ 74,700 | | $ 49,000 |
Interest expense for the three months ended March 31, 2010 and 2009 was $0 and $0, respectively.
NOTE 6 – STOCKHOLDERS’ EQUITY
Common Stock
The Company was authorized to issue 25,000,000 shares of its $0.001 par value common stock. Holders of shares of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Holders of common stock do not have cumulative voting rights and are entitled to share ratably in dividends, if any. In the event of a liquidation, dissolution or winding up of our Company, the holders of common stock are entitled to share pro rata all assets remaining after payment in full of all liabilities. All of the outstanding shares of common stock are fully paid and non-assessable. Holders of common stock have no preemptive rights to purchase our common stock. There are no conversion or redemption rights or sinking fund provisions with respect to the common stock.
E&M Group, Inc. (formerly Madison Management, Inc.)
Notes To Financial Statements(Unaudited)
Common Stock
On December 11, 2009, the Company amended its articles of incorporation and increased its authorized capital to 100,000,000 shares of it $0.001 par value common stock.
On March 2, 2010, the Company effected a 10-for-1 forward stock split of its $0.001 par value common stock.
All share and per share amounts have been retroactively restated to reflect the splits discussed above.
During the three months ended March 31, 2010, there have been no other issuances of common stock.
NOTE 7 – WARRANTS AND OPTIONS
As of March 31, 2010, there were no warrants or options outstanding to acquire any additional shares of common stock.
NOTE 8 – SUBSEQUENT EVENTS
In April 2010, the Company received $10,500 as a loan from a director of the Company. The unsecured loan bears interest at 0% and are due upon demand, but cannot be demanded before December 2020.
FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.
Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement. Additionally, the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 most likely do not apply to our forward-looking statements as a result of being a penny stock issuer. You should, however, consult further disclosures we make in future filings o f our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to:
| o | increased competitive pressures from existing competitors and new entrants; |
| o | increases in interest rates or our cost of borrowing or a default under any material debt agreements; |
| o | our ability to efficiently and effectively finance our operations, and/or purchase orders; |
| o | deterioration in general or regional economic conditions; |
| o | adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations; |
| o | inability to achieve future sales levels or other operating results; |
| o | the unavailability of funds for capital expenditures and/or general working capital; |
| o | operational inefficiencies in distribution or other systems; |
| o | the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain; |
| o | adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations; |
| o | changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate; |
| o | inability to efficiently manage our operations; |
| o | the inability of management to effectively implement our strategies and business plans; and |
| o | the other risks and uncertainties detailed in this report. |
For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see “Item 1A. Risk Factors” in this document.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this quarterly report. References in the following discussion and throughout this quarterly report to “we”, “our”, “us”, “Madison”, “E&M Group”, “the Company”, and similar terms refer to E&M Group, Inc. (formerly Madison Management, Inc.) unless otherwise expressly stated or the context otherwise requires.
OVERVIEW AND OUTLOOK
We are a development stage company incorporated in the State of Nevada in March 2001. We were formed to provide business development, market development and financial goal-setting to prospective small businesses.
In the three months ended March 31, 2010, we incurred a net loss of $29,171. Since our inception on March 2, 2001 through March 31, 2010, we have generated $53,500 in revenues and have incurred a net loss of $144,865.
As a result of our lack of revenue generation, we plan to re-assess our business plan, and aggressively seek out other business opportunities. In an effort to substantiate stockholder value, we are seeking compatible business opportunities. We can provide no assurance that we will be able to locate compatible business opportunities. We have been in preliminary discussions with a private company interested in a potential merger. As of the date of this filing, there have been no definitive agreements reached with this company. If and when we enter into a definitive agreement with any company, we will file a current report on Form 8-K.
Liquidity and Capital Resources
The following table summarizes total current assets, total current liabilities and working capital at March 31, 2010 compared to December 31, 2009.
| | March 31, 2010 | December 31, 2009 | Increase / (Decrease) |
| $ | % |
| | | | | |
| Current Assets | $14,136 | $38,307 | $(24,171) | (63%) |
| | | | | |
| Current Liabilities | 7,861 | 2,508 | 5,353 | 213% |
| | | | | |
| Working Capital (deficit) | $6,275 | $35,799 | $(29,524) | (82%) |
In November 2009, Donghwan Kim, a Director of the Company, loaned the Company $49,000. The loan bears no interest and is due upon demand but cannot be demanded before December 2020.
During the three months ended March 31, 2010, Donghwan Kim, a Director of the Company, loaned the Company $25,700. The loan bears no interest and is due upon demand but cannot be demanded before December 2020.
In April 2010, Donghwan Kim, a Director of the Company, loaned the Company $10,500. The loan bears no interest and is due upon demand but cannot be demanded before December 2020.
Satisfaction of our cash obligations for the next 12 months.
As of March 31, 2010, our cash balance was $968. Our plan for satisfying our cash requirements for the next twelve months is through sale of shares of our common stock, third party financing, and/or traditional bank financing. We anticipate sales-generated income during that same period of time, but do not anticipate generating sufficient amounts of revenues to meet our working capital requirements. Consequently, we intend to make appropriate plans to insure sources of additional capital in the future to fund growth and expansion through additional equity or debt financing or credit facilities.
Since inception, we have financed our cash flow requirements through issuance of common stock. As we expand our activities, we may, and most likely will, continue to experience net negative cash flows from operations, pending receipt of listing or some form of advertising revenues. Additionally we anticipate obtaining additional financing to fund operations through common stock offerings, to the extent available, or to obtain additional financing to the extent necessary to augment our working capital.
We anticipate that we will incur operating losses in the next twelve months. Our lack of operating history makes predictions of future operating results difficult to ascertain. Our prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets. Such risks for us include, but are not limited to, an evolving and unpredictable business model and the management of growth. To address these risks, we must, among other things, obtain a customer base, implement and successfully execute our business and marketing strategy, respond to competitive developments, and attract, retain and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the f ailure to do so can have a material adverse effect on our business prospects, financial condition and results of operations.
Going Concern
The financial statements included in this filing have been prepared in conformity with generally accepted accounting principles that contemplate the continuance of the Company as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, the Company is in the development stage and, accordingly, has generated minimal revenues from operations. As shown on the accompanying financial statements, the Company has incurred a net loss of $144,865 for the period from inception (March 2, 2001) to March 31, 2010. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its business opportunities.
Summary of product and research and development that we will perform for the term of our plan.
We do not anticipate performing any significant product research and development under our plan of operation. In lieu of product research and development we anticipate maintaining control over our advertising to assist us in determining the allocation of our limited advertising dollars.
Expected purchase or sale of plant and significant equipment.
We do not anticipate the purchase or sale of any plant or significant equipment, as such items are not required by us at this time or in the next 12 months.
Significant changes in the number of employees.
We are a development stage company and currently do not have any employees. We look to our officers and directors who collectively have a varied background in business management, marketing and sales consulting. We do not anticipate hiring employees over the next 12 months. We intend to use the services of consultants to perform various professional services. We believe that this use of third-party service providers may enhance our ability to contain general and administrative expenses.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results or operations, liquidity, capital expenditures or capital resources that is material to investors.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We do not expect to enter into financial instruments for trading or hedging purposes. We do not currently anticipate entering into interest rate swaps and/or similar instruments.
Item 4T. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our Principal Executive Officer, Jooin Kim, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report. Based on his evaluation, Mr. Kim concluded that our disclosure controls and procedures are effective in timely alerting him to material information relating to us required to be included in our periodic SEC filings and in ensuring that information required to be disclosed by us in the reports that we file or submit under the Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
We are not a party to any material legal proceedings.
Item 1A. Risk Factors.
An evaluation of us is extremely difficult. At this stage of our business operations, even with our good faith efforts, potential investors have a high probability of losing their investment.
There is nothing at this time on which to base an assumption that our business operations will prove to be successful or that we will ever be able to operate profitably. Our future operating results will depend on many factors, including our ability to raise adequate working capital, demand and acceptance of our business plan, the level of our competition and our ability to attract and maintain key management and employees.
While Management believes its estimates of projected occurrences and events are within the timetable of its business plan, there can be no guarantees or assurances that the results anticipated will occur.
We are highly dependent on our officers and directors.
We rely heavily on our officers and directors to provide services and for continued business development. It would be difficult to replace our officers and directors at such an early stage of development of the Company. Our business could be materially adversely affected if our officers and directors were to leave and if we were unable to retain qualified replacements.
Potential issuance of additional common stock could dilute existing stockholders.
We are authorized to issue up to 100,000,000 shares of common stock. To the extent of such authorization, our Board of Directors has the ability, without seeking stockholder approval, to issue additional shares of common stock in the future for such consideration as the Board of Directors may consider sufficient. We are not currently seeking additional equity financing, which if sought or obtained may result in additional shares of our common stock being issued. The issuance of additional common stock in the future will reduce the proportionate ownership and voting power of the common stock held by our existing stockholders.
Our auditor’s report reflects the fact that without realization of additional capital, it would be unlikely for us to continue as a going concern.
Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have suffered losses from operations during our operating history and our ability to continue as a going concern is dependent upon obtaining future profitable operations. Additionally, our auditor’s report reflects that the ability of the Company to continue as a going concern is dependent upon its ability to obtain additional sources of capital or borrowings and, ultimately, the achievement of significant operating revenues. Although management believes that the proceeds from the sale of securities, together with funds from operations, will be sufficient to cover anticipated cash requirements, we will be required to seek additional capital to fund future growth and expansion. No assurance can be given that such financing will be available or, if available, that it will be on commercially favorable terms. Moreover, favorable financing may be dilutive to investors.
We will need additional capital in the future to finance our operations, which we may not be able to raise or it may only be available on terms unfavorable to us or our stockholders, which may result in our inability to fund our working capital requirements and harm our operational results.
We believe that current cash on hand and the other sources of liquidity may not be sufficient enough to fund our operations through fiscal 2010. In that event, we would need to raise additional funds to continue our operations.
Additional financing might not be available on terms favorable to us, or at all. If adequate funds were not available or were not available on acceptable terms, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our business or otherwise respond to competitive pressures would be significantly limited.
We may acquire assets or other businesses in the future.
We may consider acquisitions of other assets or other businesses. Any acquisition involves a number of risks that could fail to meet our expectations and adversely affect our profitability. For example:
| · | The acquired assets or business may not achieve expected results; |
| · | We may incur substantial, unanticipated costs, delays or other operational or financial problems when integrating the acquired assets; |
| · | We may not be able to retain key personnel of an acquired business; |
| · | Our management’s attention may be diverted; or |
| · | Our management may not be able to manage the acquired assets or combined entity effectively or to make acquisitions and grow our business internally at the same time. |
If these problems arise we may not realize the expected benefits of an acquisition.
Risks Relating To Our Common Stock
If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board, which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.
Companies trading on the OTC Bulletin Board, such as us, generally must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board. More specifically, FINRA has enacted Rule 6530, which determines eligibility of issuers quoted on the OTC Bulletin Board by requiring an issuer to be current in its filings with the Commission. Pursuant to Rule 6530(e), if we file our reports late with the Commission three times in a two-year period or our securities are removed from the OTC Bulletin Board for failure to timely file twice in a two-year period, then we will be ineligible for quotation on the OTC Bulletin Board. As a result, the market liquidity for our securities could be severely a dversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.
Because our common stock is deemed a low-priced “Penny” stock, an investment in our common stock should be considered high risk and subject to marketability restrictions.
Since our common stock is a penny stock, as defined in Rule 3a51-1 under the Securities Exchange Act, it will be more difficult for investors to liquidate their investment even if and when a market develops for the common stock. Until the trading price of the common stock rises above $5.00 per share, if ever, trading in the common stock is subject to the penny stock rules of the Securities Exchange Act specified in rules 15g-1 through 15g-10. Those rules require broker-dealers, before effecting transactions in any penny stock, to:
| • | Deliver to the customer, and obtain a written receipt for, a disclosure document; |
| • | Disclose certain price information about the stock; |
| • | Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer; |
| • | Send monthly statements to customers with market and price information about the penny stock; and |
| • | In some circumstances, approve the purchaser’s account under certain standards and deliver written statements to the customer with information specified in the rules. |
Consequently, the penny stock rules may restrict the ability or willingness of broker-dealers to sell the common stock and may affect the ability of holders to sell their common stock in the secondary market and the price at which such holders can sell any such securities. These additional procedures could also limit our ability to raise additional capital in the future.
FINRA sales practice requirements may also limit a stockholder's ability to buy and sell our stock.
In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit the ability t o buy and sell our stock and have an adverse effect on the market for our shares.
Our internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transa ctions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
We have a limited number of personnel that are required to perform various roles and duties as well as be responsible for monitoring and ensuring compliance with our internal control procedures. As a result, our internal controls may be inadequate or ineffective, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public. Investors relying upon this misinformation may make an uninformed investment decision.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
We have no recent sales of unregistered securities.
Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities during the quarter covered by this report.
Item 3. Defaults Upon Senior Securities.
None.
Item 5. Other Information.
Item 6. Exhibits.
| | | | Incorporated by reference |
Exhibit number | Exhibit description | Filed herewith | Form | Period ending | Exhibit | Filing date |
| 3(i)(a) | Articles of Incorporation of filed on March 2, 2001 | | S-1 | | 3(i)(a) | 12/19/08 |
| 3(i)(b) | Amended and Restated Articles of Incorporation, filed on December 11, 2009 | | 10-K | 12/31/09 | 3(i)(b) | 3/31/10 |
| 3(i)(c) | Amended and Restated Articles of Incorporation, filed on January 14, 2010 | | 10-K | 12/31/09 | 3(i)(c) | 3/31/10 |
| 3(ii)(a) | Bylaws | | S-1 | | 3(ii)(a) | 12/19/08 |
| 31.1 | Certification of Jooin Kim pursuant to Section 302 of the Sarbanes-Oxley Act | X | | | | |
| 32.1 | Certification of Jooin Kim pursuant to Section 906 of the Sarbanes-Oxley Act | X | | | | |
SIGNATURES
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.
E & M GROUP, INC.
By:/S/ Jooin Kim
Jooin Kim, President
(On behalf of the registrant and as
principal executive officer)
Date: May 19, 2010
