U.S. 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 September 30, 2011
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from
Commission File No. 333-140236
ZENTRIC, INC.
(Exact name of small business issuer as specified in its charter)
| Nevada | | |
| (State or other jurisdiction of Incorporation or organization) | | (I.R.S. Employer Identification No.) |
Unit C2, 802 Southdown Road,
Mississauga, Ontario, Canada, L5J 2Y4
(Address of Principal Executive Offices)
(416) 245-8000
(Issuer’s telephone number)
(Former name, address and fiscal year, if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15 (d) of the Exchange Act subsequent to the distribution of securities under a plan confirmed by a court. Yes o No x
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 (ss.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 o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):
Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer o Smaller Reporting Company x
State the number of shares outstanding of each of the issuer’s classes of common equity, as of November 16, 2011: 99,575,827 shares of common stock.
Transitional Small Business Disclosure Format Yes o No x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes x No
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
| Item 1. | Financial Statements | | | 3 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | | 12 | |
| Item 3 | Quantitative and Qualitative Disclosures About Market Risk | | | 14 | |
| Item 4T. | Control and Procedures | | | 14 | |
PART II-- OTHER INFORMATION
| Item 1 | Legal Proceedings | | | 15 | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | | | 15 | |
| Item 3. | Defaults Upon Senior Securities | | | 15 | |
| Item 4. | Submission of Matters to a Vote of Security Holders | | | 15 | |
| Item 5. | Other Information | | | 15 | |
| Item 6. | Exhibits and Reports on Form 8-K | | | 16 | |
(A Development Stage Company)
BALANCE SHEETS
| | | September 30, 2011 (Unaudited) | | | December 31, 2010 (Audited) | |
| ASSETS |
| Current Assets | | | | | | |
| | | | | | | | |
| | | | | | | | |
| Investments – Available for Sale | | 252,000 | | | - | |
| Total Current Assets | | 252,103 | | | 3,467 | |
| | | | | | | | |
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LIABILITIES AND STOCKHOLDERS' (DEFICIT) |
| | | | | | | | | |
| | | | | | | | |
Accounts payable and accrued liabilities | | | | | | | | |
| | | | | | | | |
Advances from shareholder | | | | | | | | |
| | | | | | | | |
Note payable, net of discount | | | | | | | | |
| | | | | | | | |
| | | | | | | | | |
| | | | | | | | |
Common stock: $0.001 par value, 100,000,000 common shares authorized, 99,575,827 and 60,973,219 common shares outstanding as of September 30, 2011 and December 31, 2010, respectively | | | | | | | | |
Additional paid-in capital | | | | | | | | |
Other Comprehensive Income | | | | | | | | |
Deficit accumulated during the development stage | | | | | | | | |
| | | | | | | | | |
Total Stockholders' Deficit | | | | | | | | |
| | | | | | | | | |
Total Liabilities and Stockholders' Deficit | | | | | | | | |
The accompanying notes are an integral part to these financial statements.
ZENTRIC, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
| | | Three Months Ended September 30, 2011 | | | Three Months Ended September 30, 2010 | | | Nine Months Ended September 30, 2011 | | | Nine Months Ended September 30, 2010 | | | For The Period From July 21 2008 (inception) to September 30, 2011 | |
| REVENUE | | $ | - | | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| EXPENSES | | | | | | | | | | | | | | | | | | | | |
| Office and General | | | 9,029 | | | | 7,950 | | | | 25,604 | | | | 25,859 | | | | 78,255 | |
| Professional fees | | | 1,748 | | | | 1,600 | | | | 6,300 | | | | 6,700 | | | | 58,516 | |
| Interest Expense | | | 1,854 | | | | 6,515 | | | | 11,355 | | | | 16,955 | | | | 41,887 | |
| Consulting and subcontracting | | | 261,900 | | | | - | | | | 272,769 | | | | 136,731 | | | | 1,014,865 | |
| Bank charges | | | 72 | | | | 64 | | | | 207 | | | | 277 | | | | 639 | |
| Loss on conversion of debt | | | - | | | | 73,321 | | | | 41,622 | | | | 73,321 | | | | 114,943 | |
| | | | 274,603 | | | | 89,450 | | | | 357,857 | | | | 259,843 | | | | 1,309,105 | |
| NET LOSS | | $ | (274,603 | ) | | $ | (89,450 | ) | | $ | (357,857 | ) | | $ | (259,843 | ) | | $ | (1,309,105 | ) |
| Other Comprehensive Income | | | | | | | | | | | | | | | | | | | | |
| Unrealized Gain on Available For Sale Securities | | | 18,667 | | | | - | | | | 18,667 | | | | - | | | | - | |
| Total Comprehensive Loss | | $ | (255,936 | ) | | | - | | | $ | (339,190 | ) | | | - | | | $ | (1,309,105 | ) |
| LOSS PER WEIGHTED NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED | | $ | (0.00 | ) | | $ | (0.00 | ) | | $ | (0.01 | ) | | $ | (0.00 | ) | | | | |
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED | | | 90,282,349 | | | | 49,178,000 | | | | 64,428,486 | | | | 49,178,000 | | | | | |
The accompanying notes are an integral part to these financial statements.
ZENTRIC, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
| | | Nine Months Ended September 30, 2011 | | | Nine Months Ended September 30, 2010 | | | For the Period From July 21, 2008 (Inception) to September 30, 2011 | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | | |
| Net loss | | $ | (357,857 | ) | | $ | (259,843 | ) | | $ | (1,309,103 | ) |
| Adjustment to reconcile net loss to net cash used in operating activities: | | | | | | | | | | | | |
| Common stock issued for services | | | 232,500 | | | | - | | | | 819,365 | |
| Interest Payable – related party | | | - | | | | 13,135 | | | | 8,178 | |
| Imputed interest on advance from shareholder | | | 4,556 | | | | 1,838 | | | | 10,146 | |
| Amortization on note discount | | | - | | | | 1,450 | | | | 2,125 | |
| Loss on settlement of debt | | | 41,622 | | | | 73,321 | | | | 114,943 | |
| Changes in operating assets and liabilities: | | | | | | | | | | | | |
| Prepaid Expenses | | | 100 | | | | 4,767 | | | | - | |
| Accounts payable and accrued liabilities | | | 35,525 | | | | 109,151 | | | | 87,348 | |
| NET CASH USED IN OPERATING ACTIVITIES | | | (43,554 | ) | | | (56,181 | ) | | | (266,998 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | | | | | |
| Proceeds from issuance of common stock | | | - | | | | - | | | | 6,795 | |
| Advances from related party | | | 40,290 | | | | 21,474 | | | | 130,288 | |
| Borrowings on debt - related party | | | - | | | | 35,018 | | | | 130,018 | |
| CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES | | | 40,290 | | | | 56,492 | | | | 267,101 | |
| NET (DECREASE) INCREASE IN CASH | | | (3,264 | ) | | | 311 | | | | 103 | |
| CASH, BEGINNING OF PERIOD | | | 3,367 | | | | - | | | | - | |
| CASH, END OF PERIOD | | $ | 103 | | | $ | 311 | | | $ | 103 | |
| | | | | | | | | | | | | |
| SUPLLEMENTAL CASH FLOW INFORMATION | | | | | | | | | | | | |
| Interest paid | | | - | | | | - | | | | - | |
| Income taxes paid | | | - | | | | - | | | | - | |
Non-cash investment and financing activities Forgiveness of related party debt | | | - | | | | 500 | | | | 35,000 | |
| Shares issued as incentive for debt | | | - | | | | - | | | | 2,100 | |
Shares exchange for investment available-for-sale | | | 252,000 | | | | - | | | | 252,000 | |
The accompanying notes are an integral part to these financial statements.
ZENTRIC, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
September 30, 2011 (unaudited)
| 1. | ORGANIZATION AND NATURE OF BUSINESS |
Zentric, Inc. (the "Company"), was incorporated on July 21, 2008, under the laws of the State of Nevada as Constant Environment, Inc. and changed it’s name to Zentric, Inc. on December 16, 2009. The company is an advanced battery technology company based on a new and revolutionary technology that incorporates high voltages dual electrolytes to produce higher voltages and power. The business of “Constant Environment” remains as a division of Zenrtic. The division is a separate business that provides microclimate systems to specialty markets, which have a need to protect and preserve rare and/or valuable items
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America with the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. The Company has had limited revenues and has an accumulated deficit which raises substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.
The Company's ability to continue as a going concern is contingent upon its ability to complete public equity financing and generate profitable operations in the future. Management's plan in this regard is to secure additional funds through equity financing and through loans made by the Company's stockholders.
3. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars. The Company’s fiscal year end is December 31.
Use of Estimates
The preparation of financial statements in conformity with U.S. 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 revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to the deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Interim Financial Statements
These interim financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period.
Marketable Securities
The Company accounts for its marketable securities, which are available for sale, in accordance with Financial Accounting Standards Board (“FASB”) guidance regarding accounting for certain investments in debt and equity securities, which requires that available-for-sale and trading securities be carried at fair value. Unrealized gains and losses deemed to be temporary on available-for-sale securities are reported as other comprehensive income (“OCI”) within shareholders’ deficit. Realized gains and losses and declines in value deemed to be other than temporary on available-for-sale securities are included in “(Gain) loss on short and long-term investments” and “other income” on our statements of operations. Trading gains and losses also are included in “(Gain) loss on Short and long-term investments.” Fair value of the securities is based upon quoted market prices in active markets or estimated fair value when quoted market prices are not available. The cost basis for realized gains and losses on available-for-sale securities is determined on specific identification basis. We classify our available-for-sale securities as short and long-term based upon management’s intent and ability to hold these investments. In addition, throughout 2011, the FASB issued various authoritative guidance and enhanced disclosures regarding fair value measurements and impairments of securities which help in determining fair value when the volume and level of activity for the asset or liability have significant decreased and identifying transactions that are not orderly.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. As at December 31, 2010 and September 30, 2011, there were no cash equivalents.
Financial Instruments
Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 and 825 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 and 825 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The following table presents assets that are measured and recognized at fair value as of September 30, 2011:
| Description | | Level 1 | | | Level 2 | | | Level 3 | | | Total unrealized Gains | |
| Available-for-Sale Securities | | $ | 252,000 | | | $ | - | | | $ | - | | | $ | 18,667 | |
| Totals | | $ | 252,000 | | | $ | - | | | $ | - | | | $ | 18,667 | |
The company recorded an unrealized gain of $18,667 for the nine months ended September 30, 2011 compare to $nil for the nine months ended September 30, 2010.
Loss per Share
The Company computes net loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.
Comprehensive Income
ASC 220, Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As of September 30, 2011 the Company has an “Other Comprehensive income” of $18,667 as a result of unrealized gain from investment available-for-sale.
Recent Accounting Pronouncements
Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment. The guidance in ASU 2011-08 is intended to reduce complexity and costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amendments also improve previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Also, the amendments improve the examples of events and circumstances that an entity having a reporting unit with a zero or negative carrying amount should consider in determining whether to measure an impairment loss, if any, under the second step of the goodwill impairment test. The amendments in this ASU are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued. The adoption of this guidance is not expected to have a material impact on the Company’s financial position or results of operations.
In June 2011, the FASB issued ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”, which is effective for annual reporting periods beginning after December 15, 2011. ASU 2011-05 will become effective for the Company on January 1, 2012. This guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. In addition, items of other comprehensive income that are reclassified to profit or loss are required to be presented separately on the face of the financial statements. This guidance is intended to increase the prominence of other comprehensive income in financial statements by requiring that such amounts be presented either in a single continuous statement of income and comprehensive income or separately in consecutive statements of income and comprehensive income. The adoption of ASU 2011-05 is not expected to have a material impact on our financial position or results of operations.
In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs”, which is effective for annual reporting periods beginning after December 15, 2011. This guidance amends certain accounting and disclosure requirements related to fair value measurements. Additional disclosure requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2) for an entity’s use of a nonfinancial asset that is different from the asset’s highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy. ASU 2011-04 will become effective for the Company on January 1, 2012. We are currently evaluating ASU 2011-04 and have not yet determined the impact that adoption will have on our financial statements.
In April 2011, the FASB issued ASU 2011-02, “Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring”. This amendment explains which modifications constitute troubled debt restructurings (“TDR”). Under the new guidance, the definition of a troubled debt restructuring remains essentially unchanged, and for a loan modification to be considered a TDR, certain basic criteria must still be met. For public companies, the new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructuring occurring on or after the beginning of the fiscal year of adoption. The Company does not expect that the guidance effective in future periods will have a material impact on its financial statements.
Results of operations for the interim periods are not indicative of annual results.
4. RELATED PARTY TRANSACTIONS
Related party transactions are in the normal course of operations and are recorded at amounts established and agreed between the related parties. Related party transactions not disclosed elsewhere in these financial statements are as follows:
The Company have received accumulated cash advanced of $102,326 as of the quarter ended September 30, 2011 from a director and shareholder. This accounts for $95,308 in related party advances and $7,018 in related party borrowing. Interest has been imputed at 7% resulting in interest expense of $4,556 for the 9 months.
5. STOCKHOLDERS’ EQUITY
On July 15, 2009, the Company's board of directors declared a four-for-one forward stock split on the shares of the Company's common stock. Each shareholder of record on August 6, 2009 received four additional shares of common stock for each share of common stock then held. The Company retained the current par value of $0.001 per share for all shares of common stock. All references in the financial statements to the number of shares outstanding, per share amounts, common stock, additional paid-in capital and stock option data of the Company's common stock have been restated retroactively to reflect the effect of the stock split for all periods presented.
On July 27, 2009 we entered into a Loan Agreement with Lucilla Ho wherein she agreed to loan us $20,000 and she received 20,000 shares of our common stock.
On August 7, 2009 we entered into a Loan Agreement with 1456146 Ontario Limited wherein the entity agreed to loan us $50,000 and she received 100,000 shares of our common stock.
On August 15, 2009 the Company entered into a Loan Agreement with Ricky Wu wherein he agreed to loan the Company $20,000 and he will receive 40,000 shares of the Company's common stock.
On March 25, 2010 the Company entered into a Loan Agreement with Lucilla Ho wherein she agreed to loan the Company $25,000 and she will receive 50,000 shares of the Company's common stock as a loan incentive value at $0.01 per share which was the last price that shares was purchased for with cash. The shares issued resulted in a discount which is being amortized straight-line over the term of the note.
On September 30, 2010 the Company received Conversion Notice from note holder to settle outstanding debt of $20,000 principal and $3,799 accrued interest by issuing 1,189,950 shares of common stock at a price of $0.02 per share. The total fair value of the shares was $60,687 based on the closing price per share, resulting in a loss of extinguishment of debt of $36,888. The shares remain unissued as quarter ended.
On September 30, 2010 the Company received Conversion Notice from note holder to settle outstanding debt of $20,000 principal and $3,505 accrued interest by issuing 1,175,250 shares of common stock at a price of $0.02 per share. The total fair value of the shares was $59,938 based on the closing price per share, resulting in a loss of extinguishment of debt of $36,433.
On October 1, 2010, holders of the Company’s notes elected to convert loans into 2,365,219 shares of our common stock for $47,130 of principal and interest. Shares were valued based on fair market value of conversion and as a result the company recorded a loss of $73,321on conversion of debt.
On October 1, 2010, the Company issued 9,200,000 shares of our common stock for $460,000 consulting services. Shares were valued based on fair market value on the date of authorization.
On December 1 2010, the Company’s board of directors declared to issue 230,000 shares of our common stock for $23,000 consulting services. Shares were valued based on fair market value on the date of authorization.
On May 18, 2011 the Company received Conversion Notice from note holder to settle outstanding debt of $25,000 principal and $4,749 accrued interest by issuing 1,983,258 shares of common stock at a price of $0.015 per share. The total fair value of the shares was $41,648 based on the closing price per share, resulting in a loss of extinguishment of debt of $11,899.
On May 18, 2011 the Company received Conversion Notice from note holder to settle outstanding debt of $50,000 principal and $14,903 accrued interest by issuing 4,326,876 shares of common stock at a price of $0.015 per share. The total fair value of the shares was $90,864 based on the closing price per share, resulting in a loss of extinguishment of debt of $25,961.
On May 18, 2011 the Company received Conversion Notice from note holder to settle outstanding debt of $8,000 principal and $1,402 accrued interest by issuing 626,807 shares of common stock at a price of $0.015 per share. The total fair value of the shares was $13,163 based on the closing price per share, resulting in a loss of extinguishment of debt of $3,761.
On July 20, 2011, Zentric, Inc. (“Company”) completed its Share Exchange Agreement with Ontex Holdings Limited, a Hong Kong Company (“Ontex”), pursuant to which the Company agreed to issue to Ontex 10,000,000 shares of common stock. In exchange, Ontex will issue to the Company 2,000,000 shares of Alpha Lujo, Inc. held by Ontex. Alpha Lujo, Inc.’s common stock is publicly traded on the OTC-BB. The share exchange was valued at $140,000 as an investment by the Company. On the same day the Company also completed the Share Exchange Agreement with Alpha Lujo, Inc. (“Alpha Lujo”), pursuant to which the Company agreed to issue to Alpha Lujo 6,666,667 shares of its common stock in exchange for 800,000 shares of common stock of Alpha Lujo. Based on Alpha Lujo’s most recent filing of their period ended March 31, 2011, the company has a total of 200,000,000 shares authorized and 23,244,000 shares issued and outstanding. Based on the 2,800,000 shares the Company received, that equates to 1.4% of total authorized and 12% of total outstanding. In both instances, it is less than 20% of total equity of Alpha Lujo’s shares, therefore, does not warrant consolidation treatment of the two companies and should be accounted for as an investment.
The share exchange was valued at $93,333 as an investment by the Company. The share exchange does not change the control of the Company. The total value of $233,333 as of the July 20, 2011 was value as an investment assets and was mark to market as September 30, 2011 based on the Alpha Lujo, Inc’s fair market value. As of September 30, 2011 the fair market of the total investment was $252,000, this is an increase of $18,667 from the initial value of $233,333. The increase was offset to other comprehensive income.
On July 14, 2011, the Company completed and authorized the issuance of 15,000,000 common shares for services. The total fair value of the common stock was $210,000 based on the closing price of the Company’s stock on the date of grant.
Holders of common stock are entitled to one vote for each share held. There are no restrictions that limit the Company's ability to pay dividends on its common stock. The Company has not declared any dividends since incorporation.
6. NOTE PAYABLE
On July 27, 2009 we entered into a Loan Agreement with a shareholder wherein they agreed to loan us $20,000 bearing 15% interest rate and due in one year. As an incentive to providing the loan to the company, 20,000 shares of common stock was issued at a value of $.01 per share, which was the last price per share that shares was purchased with cash, resulting in a discount of $200 which is being amortized using straight-line during the term of the loan. On September 30, 2010 the Company received Conversion Notice from note holder to settle outstanding debt of $20,000 principal and $3,799 accrued interest by issuing 1,189,950 shares of common stock at a price of $0.02 per share. The total fair value of the shares was $60,687 based on the closing price per share, resulting in a loss of extinguishment of debt of $36,888.
On August 7, 2009 we entered into a Loan Agreement with a shareholder wherein they agreed to loan us $50,000 bearing 15% interest rate and due in two year. As an incentive to providing the loan to the company, 100,000 shares of common stock was issued at a value of $.01 per share, which was the last price that shares was purchased with cash, resulting in a discount of $1,000 which is being amortized using straight-line during the term of the loan.
On August 15, 2009 we entered into a Loan Agreement with a shareholder wherein they agreed to loan us $20,000 bearing 15% interest rate and due in one year. As an incentive to providing the loan to the company, 40,000 shares of common stock was issued at a value of $.01 per share, which was the last price per share that shares was purchased with cash, resulting in a discount of $400 which is being amortized using straight-line during the term of the loan. On September 30, 2010 the Company received Conversion Notice from note holder to settle outstanding debt of $20,000 principal and $3,505 accrued interest by issuing 1,175,250 shares of common stock at a price of $0.02 per share. The total fair value of the shares was $59,938 based on the closing price per share, resulting in a loss of extinguishment of debt of $36,433.
On March 25, 2010 we entered into a Loan Agreement with a shareholder wherein they agreed to loan us $25,000 bearing 15% interest rate due in one year. As an incentive in providing the loan to the company, 50,000 shares of common stock was issued at a value of $0.01 per share, which was the last price that shares was purchased with cash, resulting in a discount of $500 which is being amortized using straight-line during the term of the loan.
On April 20, 2010 we entered into a standard Loan Agreement with a company wherein they agreed to loan us $8,000 bearing 15% interest rate due in one year. The note is currently not convertible to common stock or any other instrument.
On May 18, 2010 the Company received Conversion Notice from note holder to settle outstanding debt of $50,000 principal and $14,903 accrued interest by issuing 4,326,876 shares of common stock at a price of $0.015 per share. The total fair value of the shares was $90,864 based on the closing price per share, resulting in a loss of extinguishment of debt of $25,961.
On May 18, 2010 the Company received Conversion Notice from note holder to settle outstanding debt of $8,000 principal and $1,402 accrued interest by issuing 626,807 shares of common stock at a price of $0.015 per share. The total fair value of the shares was $13,163 based on the closing price per share, resulting in a loss of extinguishment of debt of $3,761.
On July 27, 2010 we entered into a standard Loan Agreement with a company wherein they agreed to loan us $2,018 bearing 15% interest rate due in one year. The note is currently not convertible to common stock or any other instrument.
On October 1, 2010, $47,130 of principal and accrued interest was converted into 2,365,219 shares of our common stock Shares were valued based on fair market value of conversion and as a result the company recorded a loss of $73,321on conversion of debt.
On November 3, 2010 we entered into a Loan Agreement for $5,000 bearing 15% interest rate.
On May 18, 2011 the Company received Conversion Notice from note holder to settle outstanding debt of $25,000 principal and $4,749 accrued interest by issuing 1,983,258 shares of common stock at a price of $0.015 per share. The total fair value of the shares was $41,648 based on the closing price per share, resulting in a loss of extinguishment of debt of $11,899.
On May 18, 2011 the Company received Conversion Notice from note holder to settle outstanding debt of $50,000 principal and $14,903 accrued interest by issuing 4,326,876 shares of common stock at a price of $0.015 per share. The total fair value of the shares was $90,864 based on the closing price per share, resulting in a loss of extinguishment of debt of $25,961.
On May 18, 2011 the Company received Conversion Notice from note holder to settle outstanding debt of $8,000 principal and $1,402 accrued interest by issuing 626,807 shares of common stock at a price of $0.015 per share. The total fair value of the shares was $13,163 based on the closing price per share, resulting in a loss of extinguishment of debt of $3,761.
Interest accrual for all loans outstanding as of December 31, 2010 and September 30, 2011 are $19,118 and $752, respectively.
7. Subsequent Events
There were no subsequent events for the quarter ended September 30, 2011.
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our Financial Statements and notes appearing elsewhere in this report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this report. Our financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Zentric, Inc. (the "Company"), was incorporated on July 21, 2008, under the laws of the State of Nevada as Constant Environment, Inc. and changed it’s name to Zentric, Inc. on December 16, 2009. The company is an advanced battery technology company based on a new and revolutionary technology that incorporates high voltages dual electrolytes to produce higher voltages and power.
Business Division
The business of “Constant Environment” remains as a division of Zenrtic. The division is a separate business that provides microclimate systems to specialty markets, who have a need to protect and preserve rare and/or valuable items.
Employees
Presently our two officers are contributing their services without payment and certain consultants have accepted shares for services.
In the future, we plan to hire five full time employees and two part-time employees. From time to time, we may employ additional independent contractors to support our development, marketing, sales, support and administrative organization. We also intend to hire 2 sales/marketing staff, 1 administrative assistant, and 2 microclimate technicians. Competition for qualified personnel in the industry in which we compete is intense. We believe that our future success will depend in part on our continued ability to attract, hire or acquire and retain qualified employees.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2011 AND SEPTEMBER 30, 2010.
The Company did not generate any revenues for the three months ended September 30, 2011 and September 30, 2010.
Professional fees include legal and accounting fees and filing fees. Professional fees for the three months ended September 30, 2011 and September 30, 2010 was $1,748 and $1,600 respectively.
Consulting and subcontracting fees for the three months ended September 30, 2011 and September 30, 2010 was $261,900 and $nil respectively.
Office and general expense for the three months ended September 30, 2011 and September 30, 2010 was $9,029 and $7,950 respectively.
Interest expense for the three months ended September 30, 2011 and September 30, 2010 was $1,854 and $6,515 respectively.
Bank charges expense for the three months ended September 30, 2011 and September 30, 2010 was $72 and $64 respectively.
Net loss for the three months ended September 30, 2011 and September 30, 2010 was $274,603 and $89,450 respectively. The loss was primarily due to the consulting fees, professional fees and interest expenses.
Loss per share was $0.00 for the three months ended September 30, 2011 and September 30, 2010.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2011, we had a working capital deficiency of $169,398, which represented a working capital decrease of $24,873 as compared to the working capital deficiency position of $194,271 as of December 31, 2010. The decrease is mainly due to the increase of our accounts payable. We did not raise any cash from issuance of common stock.
Cash flows used in operating activities for the nine month period ended September 30, 2011and 2010 was $(43,554) and ($56,181) respectively.
Cash flows used in financing activities for the nine month period ended September 30, 2011 and 2010 was $40,290 and $56,492, respectively, which was due to loans.
On July 27, 2009 the Company entered into a Loan Agreement with Lucilla Ho wherein she agreed to loan the Company $20,000 and she will receive 5,000 shares of the Company’s common stock. On September 30, 2010 holder have choose to convert principal and interest into 1,189,950 shares of common stock at the price of $0.02 per share.
On August 7, 2009 the Company entered into a Loan Agreement with 1456146 Ontario Limited of which Fred Lai is the principal. The 1456146 Ontario Limited agreed to loan the Company $50,000 and 1456146 Ontario Limited will receive 100,000 shares of the Company’s common stock.
On August 15, 2009 the Company entered into a Loan Agreement with Ricky Wu wherein he agreed to loan the Company $20,000 and he will receive 40,000 shares of the Company's common stock. On September 30, 2010 holder have choose to convert principal and interest into 1,175,250 shares of common stock at the price of $0.02 per share.
On March 21, 2010 the Company entered into a Loan Agreement with Lucilla Ho wherein she agreed to loan the Company $25,000 and she will receive 50,000 shares of the Company’s common stock.
On April 20, 2010 we entered into a Loan Agreement with a company wherein they agreed to loan us $8,000 bearing 15% interest rate due in one year.
On July 27, 2010 we entered into a Loan Agreement with a company wherein they agreed to loan us $2,018 bearing 15% interest rate due in one year.
GOING CONCERN
Due to the uncertainty of our ability to meet our current operating and capital expenses, in their report on our audited financial statements for the period ended December 31,2010, our independent registered public accountants included an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our most critical accounting policies, which are those that require significant judgment, include: income taxes and revenue recognition. In-depth descriptions of these can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010. There have been no material changes in our existing accounting policies from the disclosures included in our 2010 Annual Report on Form 10-K.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts. We do not engage in trading activities involving non-exchange traded contracts.
Item 3. Quantitative and Qualitative Disclosures about Market Risks
We conduct our business in United States dollars. Our market risk is limited to the United States domestic, economic and regulatory factors.
Item 4T. Controls and Procedures
Management's evaluation of disclosure controls and procedures
The management of the company is required to maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (one individual) as appropriate, to allow timely decisions regarding required disclosure.
In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of its principal executive officer and principal financial officer, of the Company’s disclosure controls and procedures. Based on their evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures need improvement and were not adequately effective as of September 30, 2011 to cause the information required to be disclosed in reports that the Company files or submits under the Exchange Act to be recorded, processed, summarized and reported within the time periods prescribed by the SEC, and that such information is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate, to ensure timely decisions regarding required disclosure. Management is in the process of identifying deficiencies with respect to the Company’s disclosure controls and procedures and implementing corrective measures.
Changes in Internal Controls
There was no change in our internal controls over financial reporting identified in connection with the requisite evaluation that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. [REMOVED AND RESERVED]
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
| 31.1 | Certification Pursuant to 18 U.S.C Section 1350, As adopted pursuant to Section 302 of the Sabanes-Oxley Act of 2002 |
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| 32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, As adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.INS ** | XBRL Instance Document |
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| 101.SCH ** | XBRL Taxonomy Extension Schema Document |
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| 101.CAL ** | XBRL Taxonomy Extension Calculation Linkbase Document |
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| 101.DEF ** | XBRL Taxonomy Extension Definition Linkbase Document |
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| 101.LAB ** | XBRL Taxonomy Extension Label Linkbase Document |
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| 101.PRE ** | XBRL Taxonomy Extension Presentation Linkbase Document |
________
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
(B) Reports on Form 8-K
Form 8-K Filed on July 16, 2011 reporting the completion of the share exchange agreement.
Form 8-K Filed on May 21, 2011 reporting a share exchange agreement.
Form 8-K Filed on October 19, 2010 reporting a jont venture agreement.
SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
| | ZENTRIC, INC. | |
| | | Registrant | |
| | | | |
| Date: November 16, 2011 | By: | /s/ Jeff Mak | |
| | | Jeff Mak, | |
| | | Chairman, Chief Financial Officer, | |
| | | Principal Accounting Officer and Director | |
