UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2014
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-53780
JOURNAL OF RADIOLOGY, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 27-0491634 |
| (State or other jurisdiction of incorporation or organization | (I.R.S. Employer Identification No.) |
2230 Michigan Avenue Santa Monica, California |
90404 |
| (Address of Principal executive offices) | (Zip Code) |
| Registrant’s telephone number, including area code. | (310) 460-7303 |
| Securities registered under Section 12(b) of the Exchange Act: | None |
| Securities registered under Section 12(g) of the Exchange Act: | Common stock, par value $0.001 per share |
| (Title of Class) |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes¨ Nox
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes¨Nox
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the last 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. Yesx No¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YesxNo¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.¨
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ¨ | Accelerated filer ¨ | |
| Non-accelerated filer ¨ | 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¨ Nox
Aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of December 31, 2013: $93,255
As of September 16, 2014 the registrant had 2,012,550,000 outstanding shares of Common Stock.
Documents incorporated by reference: None.
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TABLE OF CONTENTS
| PART I | Page | |
| Item 1. | Business | 4 |
| Item 1A. | Risk Factors | 4 |
| Item 1B. | Unresolved Staff Comments | 8 |
| Item 2. | Properties | 8 |
| Item 3. | Legal Proceedings | 8 |
| Item 4. | Mine Safety Disclosures | 8 |
| PART II | ||
| Item 5. | Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 8 |
| Item 6. | Selected Financial Data | 9 |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 10 |
| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 12 |
| Item 8. | Financial Statements and Supplementary Data | 12 |
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 12 |
| Item 9A. | Controls and Procedures | 12 |
| Item 9B. | Other Information | 13 |
| PART III | ||
| Item 10. | Directors, Executive Officers and Corporate Governance | 13 |
| Item 11. | Executive Compensation | 14 |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 15 |
| Item 13. | Certain Relationships and Related Transactions and Director Independence | 16 |
| Item 14. | Principal Accountant Fees and Services | 16 |
| PART IV | ||
| Item 15. | Exhibits, Financial Statement Schedules | 17 |
| Signatures | 18 |
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PART I.
Forward-Looking Information
Much of the discussion in this Item is “forward looking”. Actual operations and results may materially differ from present plans and projections due to changes in economic conditions, new business opportunities, changed business conditions, and other developments. Other factors that could cause results to differ materially are described in our filings with the Securities and Exchange Commission.
There are several factors that could cause actual results or events to differ materially from those anticipated, and include, but are not limited to, general economic, financial and business conditions, changes in and compliance with governmental laws and regulations, including various state and federal environmental regulations, our ability to obtain additional financing from outside investors and/or bank and mezzanine lenders, and our ability to generate sufficient revenues to cover operating losses and position us to achieve positive cash flow.
Readers are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. We believe the information contained in this Form 10-K to be accurate as of the date hereof. Changes may occur after that date. We will not update that information except as required by law in the normal course of its public disclosure practices.
ITEM 1. BUSINESS.
Company Overview
Journal of Radiology, Inc. ("the Company") was organized under the laws of the State of Nevada on May 21, 2009. The Company was established as part of the Chapter 11 reorganization of AP Corporate Services, Inc. ("AP"). Under AP's Plan of Reorganization, as confirmed by the U.S. Bankruptcy Court for the Central District of California, the Company was organized to own and develop a professional journal devoted to radiology. Management believes the Company lacks the resources to effectively develop such a journal on its own at this time and is therefore engaged in a search for a strategic partner to assist in the development of the journal, or for a merger or acquisition partner with the resources to take the Company in a new direction and bring greater value to its shareholders.
Employees
Journal of Radiology, Inc. currently has no employees.
Office and Facilities
Our corporate headquarters are located at 2230 Michigan Avenue, Santa Monica, California 90404.
ITEM 1A. RISK FACTORS.
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below before deciding to purchase shares of our common stock. If any of the events, contingencies, circumstances or conditions described in the risks below actually occurs, our business, financial condition or results of operations could be seriously harmed.
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RISK FACTORS CONCERNING OUR BUSINESS
Our business is subject to numerous risk factors, including the following:
We have had little operating history and no revenues or earnings from operations.
We have no assets. We will, in all likelihood, sustain operating expenses without corresponding revenues, at least until the consummation of a business combination. This may result in us incurring a net operating loss that will increase continuously until we can consummate a business combination with a profitable business entity. There is no assurance that we can identify such a business entity and consummate such an agreement or combination.
Our auditor's going concern opinion and the notation in the financial statements indicate that we do not have significant cash or other material assets and we are relying on advances from stockholders, officers and directors to meet our limited operating expenses. We may become insolvent if we are unable to pay our debts in the ordinary course of business as they become due.
Our proposed plan of operation is speculative.
The success of our proposed plan of operation will depend to a great extent on the operations, financial condition and management of the business opportunity which we identify, if any is identified. While management intends to seek business agreement(s) or combination(s) with entities having established operating histories, there can be no assurance that we will be successful in locating candidates meeting such criteria.
We face intense competition for business combination opportunities.
We are and will continue to be an insignificant participant in the business of seeking mergers with, joint ventures with and acquisitions of small private and public entities. A large number of established and well-financed entities, including venture capital firms, are active in mergers and acquisitions of companies that may be our desirable target candidates. Nearly all such entities have significantly greater financial resources, technical expertise and managerial capabilities than we have and, consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. Moreover, we will also compete in seeking merger or acquisition candidates with numerous other small public companies.
Our success is dependent on management that has other full time employment, has limited experience and will only devote limited time (part time) to working for the Company, all of which makes our future even more uncertain.
Aaron Shrira is the President and Chief Executive Officer of the Company and Elana Berman-Shrira is the Secretary and Treasurer and CFO of the Company. Both Mr. Shrira and Ms. Berman-Shrira will serve without pay while maintaining other employment. Although both Mr. Shrira and Ms. Berman-Shrira have considerable business and marketing experience, neither has any experience in the publishing industry or in mergers and acquisitions. Notwithstanding the limited experience and availability of management, loss of the services of either officer would adversely affect development of our business and its likelihood of continuing in operation.
The reporting requirements under federal securities law may delay or prevent us from making certain acquisitions.
Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended, (the "1934 Act"), require companies subject thereto to provide certain information about significant acquisitions, including certified financial statements for the company acquired, covering one, two, or three years, depending on the relative size of the acquisition. The time and additional costs that may be incurred by some target entities to prepare such statements may significantly delay or essentially preclude consummation of an otherwise desirable acquisition by the Company. Acquisition prospects that do not have or are unable to obtain the required audited statements may not be appropriate for acquisition so long as the reporting requirements of the 1934 Act are applicable.
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In addition to the audited financial statements, the time and additional costs that may be incurred by some target entities to prepare and disclose such information may significantly delay or essentially preclude consummation of an otherwise desirable acquisition by the Company.
An acquisition could create a situation wherein we would be required to register under The Investment Company Act of 1940 and thus be required to incur substantial additional costs and expenses.
Although we will be subject to regulation under the 1934 Act, management believes the Company will not be subject to regulation under the Investment Company Act of 1940, insofar as we will not be engaged in the business of investing or trading in securities. In the event we engage in a business combination that results in us holding passive investment interests in a number of entities, we could be subject to regulation under the Investment Company Act of 1940. In such event, we would be required to register as an investment company and could be expected to incur significant registration and compliance costs. We have obtained no formal determination from the Securities and Exchange Commission as to the status of our Company under the Investment Company Act of 1940 and, consequently, any violation of such Act would subject us to material adverse consequences.
A merger, acquisition, or licensing agreement would most likely be exclusive, resulting in a lack of diversification.
Management anticipates that it may be able to participate in only one potential business venture because a business partner might require exclusivity. This lack of diversification should be considered a substantial risk to our shareholders because it will not permit us to offset potential losses from one venture against gains from another.
If we do any business combination, each shareholder will most likely hold a substantially lesser percentage ownership in the Company.
If we enter a business combination with a private concern, that, in all likelihood, would result in the Company issuing securities to shareholders of any such private company. The issuance of our previously authorized and unissued Common Stock would result in reduction in percentage of shares owned by our present and prospective shareholders.
The requirement of audited financial statements may disqualify some business opportunities seeking a business combination with us.
Our management believes that any potential business combination opportunity must provide audited financial statements for review, for the protection of all parties to the business combination. One or more attractive business opportunities may choose to forego the possibility of a business combination with us, rather than incur the expenses associated with preparing audited financial statements.
Our principal shareholders will be able to approve all corporate actions without shareholder consent and will control our Company.
Our principal shareholder, Nadav Elituv, currently beneficially owns approximately 44.7% of our Common Stock. It will have significant influence over all matters requiring approval by our shareholders, but not requiring the approval of the minority shareholders. Because he is the majority shareholder, he will be able to elect all of the members of our board of directors, allowing him to exercise significant control of our affairs and management. In addition, it may transact most corporate matters requiring shareholder approval by written consent, without a duly-noticed and duly-held meeting of shareholders.
If our Common Stock does not meet blue sky resale requirements, certain shareholders may be unable to resell our Common Stock.
The resale of Common Stock must meet the blue sky resale requirements in the states in which the proposed purchasers reside. If we are unable to qualify the Common Stock and there is no exemption from qualification in certain states, the holders of the Common Stock or the purchasers of the Common Stock may be unable to sell them.
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Our shareholders may face significant restrictions on the resale of our Common Stock due to state "blue sky" laws or if we are determined to be a "blank check" company.
There are state regulations that may adversely affect the transferability of our Common Stock. We have not registered our Common Stock for resale under the securities or "blue sky" laws of any state. We may seek qualification or advise our shareholders of the availability of an exemption. We are under no obligation to register or qualify our Common Stock in any state or to advise the shareholders of any exemptions.
Current shareholders, and persons who desire to purchase the Common Stock in any trading market that may develop in the future, should be aware that there might be significant state restrictions upon the ability of new investors to purchase the Common Stock.
Blue sky laws, regulations, orders, or interpretations place limitations on offerings or sales of securities by "blank check" companies or in "blind-pool" offerings, or if such securities represent "cheap stock" previously issued to promoters or others. Our CEO, because he received stock at a price of $.001 for each share, may be deemed to hold "cheap stock." These limitations typically provide, in the form of one or more of the following limitations that such securities are:
(a) Not eligible for sale under exemption provisions permitting sales without registration to accredited investors or qualified purchasers;
(b) Not eligible for the transaction exemption from registration for non-issuer transactions by a registered broker-dealer;
(c) Not eligible for registration under the simplified small corporate offering registration (SCOR) form available in many states;
(d) Not eligible for the "solicitations of interest" exception to securities registration requirements available in many states;
(e) Not permitted to be registered or exempted from registration, and thus not permitted to be sold in the state under any circumstances.
Virtually all 50 states have adopted one or more of these limitations, or other limitations or restrictions affecting the sale or resale of stock of blank check companies or securities sold in "blind pool" offerings or "cheap stock" issued to promoters or others. Specific limitations on such offerings have been adopted in:
| Alaska | Nevada | Tennessee |
| Arkansas | New Mexico | Texas |
| California | Ohio | Utah |
| Delaware | Oklahoma | Vermont |
| Florida | Oregon | Washington |
| Georgia | Pennsylvania | |
| Idaho | Rhode Island | |
| Indiana | South Carolina | |
| Nebraska | South Dakota |
Any secondary trading market which may develop may only be conducted in those jurisdictions where an applicable exemption is available or where the shares have been registered.
Current shareholders and persons who desire to purchase the Common Stock in any trading market that may develop in the future, should be aware that we are under no obligation to register the shares on behalf of our shareholders under the Securities Act of 1933, as amended.
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The Company's officers, directors and majority shareholders have expressed their intentions not to engage in any transactions with respect to the Company's Common Stock except in connection with or following a business combination resulting in us no longer being defined as a blank check issuer. Any transactions in our Common Stock by said shareholders will require compliance with the registration requirements under the Securities Act of 1933, as amended.
Our Common Stock may be subject to significant restriction on resale due to federal penny stock restrictions.
The Securities and Exchange Commission has adopted rules that regulate broker or dealer practices in connection with transactions in penny stocks. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange system). The penny stock rules require a broker or dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document prepared by the Securities and Exchange Commission that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker or dealer also must provide the customer with bid and offer quotations for the penny stock, the compensation of the broker or dealer, and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account. The penny stock rules also require that prior to a transaction in a penny stock not otherwise exempt from such rules, the broker or dealer must make a special written determination that a penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of trading activity in any secondary market for our stock that becomes subject to the penny stock rules, and accordingly, shareholders of our Common Stock may find it difficult to sell their securities, if at all.
ITEM 1B. UNRESOLVED STAFF COMMENTS
We have received no written comments regarding our periodic or current reports from the staff of the SEC that were issued 180 days or more preceding the end of our fiscal year 2014 that remain unresolved.
ITEM 2. PROPERTIES.
The Company owns no real property.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. MINE SAFETY DISCLOSURES
N/A
PART II.
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock is quoted under the symbol “JRRDD” on the OTCBB operated by the Financial Industry Regulatory Authority, Inc. (“FINRA”) and the OTCQB operated by OTC Markets Group, Inc. Few market makers continue to participate in the OTCBB system because of high fees charged by FINRA. Consequently, market makers that once quoted our shares on the OTCBB system may no longer be posting a quotation for our shares. As of the date of this report, however, our shares are quoted by several market makers on the OTCQB. The criteria for listing on either the OTCBB or OTCQB are similar and include that we remain current in our SEC reporting.
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Only a limited market exists for our securities. There is no assurance that a regular trading market will develop, or if developed, that it will be sustained. Therefore, a shareholder may be unable to resell his securities in our company.
The following tables set forth the range of high and low prices for our common stock for the each of the periods indicated as reported by the OTCQB. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
| Fiscal Year Ending June 30, 2014 | ||||
| Quarter Ended | High $ | Low $ | ||
| June 30, 2014 | $0.0003 | $0.0001 | ||
| March 31, 2014 | $0.0004 | $0.0001 | ||
| December 31, 2013 | $0.0002 | $0.0001 | ||
| September 30, 2013 | $0.0003 | $0.0001 | ||
| Fiscal Year Ending June 30, 2013 | ||||
| Quarter Ended | High $ | Low $ | ||
| June 30, 2013 | $0.0017 | $0.0003 | ||
| March 31, 2013 | $0.0200 | $0.0003 | ||
| December 31, 2012 | $0.1750 | $0.0161 | ||
| September 30, 2012 | $0.2000 | $0.0500 | ||
On September 16, 2014, the last sales price per share of our common stock was $0.0001.
Penny Stock
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
ITEM 6. SELECTED FINANCIAL DATA.
Not Applicable.
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Journal of Radiology, Inc. was organized under the laws of the State of Nevada on May 21, 2009. The Company was established as part of the Chapter 11 reorganization of AP Corporate Services, Inc. ("AP"). Under AP's Plan of Reorganization, as confirmed by the U.S. Bankruptcy Court for the Central District of California, the Company was organized to own and develop a professional journal devoted to radiology. Management believes the Company lacks the resources to effectively develop such a journal on its own at this time and is therefore engaged in a search for a strategic partner to assist in the development of the journal, or for a merger or acquisition partner with the resources to take the Company in a new direction and bring greater value to its shareholders.
RESULTS OF OPERATIONS
FISCAL YEAR ENDED JUNE 30, 2014 COMPARED TO THE FISCAL YEAR ENDED JUNE 30, 2013
REVENUES
For the fiscal years ended June 30, 2014 and 2013, we had no revenues. We are completely dependent upon the willingness of our management to fund our initial operations by way of loans from our Chief Executive Officer, shareholders and others. The Company has not realized a profit from its planned operations.
COSTS OF GOODS SOLD
We did not incur cost of sales for the fiscal years ended June 30, 2014 and 2013.
OPERATING COSTS
Administrative expenses were $351 for the fiscal year ended June 30, 2014, compared to $15,832 for the fiscal year ended June 30, 2013 and professional fees were $47,857 for the fiscal year ended June 30, 2014, compared to $58,661 for the fiscal year ended June 30, 2013. The decrease in total administration and professional costs is due to changes in accounting, audit, legal and transfer agent costs related to SEC compliance and investor relation expenses.
During the year ended June 30, 2013, the Company issued 354,000,000 shares of common stock valued at $279,600 for consulting services as follows:
| i) | The Company issued 50,000,000 shares of common stock to Al Kau on March 1, 2013 in exchange for introducing us to potential customers valued at $30,000. |
| ii) | The Company issued 80,000,000 shares of common stock to The Cellular Connection Ltd. on April 10, 2013 in exchange for introducing us to lawyers, accountants and broker-dealers valued at $112,000. |
| iii) | The Company issued 45,000,000 shares of common stock to DC Design on April 26, 2013 in exchange for consulting services related to filing our Forms 10-Q and 10-K valued at $31,500. |
| iv) | The Company issued 65,000,000 shares of common stock to The Cellular Connection Ltd. on April 26, 2013 in exchange for introducing us to lawyers, accountants and broker-dealers valued at $45,500. |
| v) | The Company issued 50,000,000 shares of common stock to Al Kau on April 26, 2013 in exchange for introducing us to potential customers valued at $35,000. |
| vi) | The Company issued 64,000,000 shares of common stock to The Cellular Connection Ltd. on June 17, 2013 in exchange for introducing us to lawyers, accountants and broker-dealers valued at $25,600. |
OTHER INCOME (LOSS)
Other income (loss) includes interest expense of $65,888 and $0 for the years ended June 30, 2014 and 2013, respectively, related to the redeemable secured note due shareholder issued on February 20, 2014. In addition, the face value of the redeemable secured note due shareholder was increased by $11,403 on the issue date of February 20, 2014 and was recorded as a loan inducement fees in the statement of operations.
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NET LOSS
Our net losses for the year ended June 30, 2014 and 2013 was $125,499 and $354,093, respectively. Our losses decreased in the current year primarily because of a decrease in stock-based compensation expense.
LIQUIDITY
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. As of June 30, 2014, we had cash of $215 and total liabilities of $227,398. Our cash flows from operating activities for the fiscal year ended June 30, 2014 resulted in cash used of $52,168. Our current cash balance and cash flow from operating activities will not be sufficient to fund our operations. Our cash flow provided by financing activities for the fiscal year ended June 30, 2014 was $51,823 from advances. The Company has an accumulated deficit at June 30, 2014 of $109,680,493. The deficit reported at June 30, 2014 is largely a result of operating expenses for professional fees, shares issued for consulting services and impairment of licensing rights. These conditions led to our auditor reporting substantial doubt about our ability to continue as a going concern.
Over the next 12 months we expect to expend approximately $50,000 in cash for legal, accounting and related services. Cash used for other expenditures is expected to be minimal. We hope to be able to attract suitable investors for our business plan, which will not require us to use our cash, although there can be no assurances that we will be successful in these efforts.
We expect to be able to secure capital through advances from our Chief Executive Officer in order to pay expenses such as organizational costs, filing fees, accounting fees and legal fees. We believe it will be difficult to secure capital in the future because we have no assets to secure debt and there is currently no trading market for our securities. We will need additional capital in the next twelve months and if we cannot raise such capital on acceptable terms, we may have to curtail our operations or terminate our business entirely.
The inability to obtain financing or generate sufficient cash from operations could require us to reduce or eliminate expenditures for acquiring suitable partners or otherwise curtail or discontinue our operations, which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, to the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If we raise additional funds through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of our common stock and the terms of such debt could impose restrictions on our operations. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we may seek to compensate providers of services by issuing stock in lieu of cash, which may also result in dilution to existing stockholders.
OPERATING CAPITAL AND CAPITAL EXPENDITURE REQUIREMENTS
Our Chief Executive Officer has committed to advancing us an additional $50,000 for certain operating costs in order to start implementing our business plan, the funds are loaned to the Company as required to pay amounts owed by the Company. As such, our operating capital is currently limited to the personal resources of our Chief Executive Officer. The loans from our Chief Executive Officer are unsecured and non-interest bearing and have no set terms of repayment. We anticipate receiving additional capital once we are able to have our securities actively trading on a public exchange. There is no guarantee our stock will develop a market on that public exchange.
PLAN OF OPERATION AND FUNDING
We do not currently engage in enough business activities that provide cash flow. The costs of investigating and analyzing business combinations for the next 12 months and beyond such time will be paid with amounts to be loaned to or invested in us by our stockholders, management or other investors.
During the next twelve months we anticipate incurring costs related to:
(i) filing of Exchange Act reports, and
(ii) costs relating to developing our new business plan
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We believe we will be able to meet these costs through amounts, as necessary, to be loaned to or invested in us by our stockholders, management or other investors.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and related notes are included as part of this report as indexed in the appendix on page F-1 through F-14.
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
As required by Rule 13a-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report, being June 30, 2014. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Based upon that evaluation, including our Chief Executive Officer and Chief Financial Officer, we have concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this annual report.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934). Management has assessed the effectiveness of our internal control over financial reporting as of June 30, 2014 based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of June 30, 2014, our internal control over financial reporting was not effective. Our management identified the following material weaknesses in our internal control over financial reporting, which are indicative of many small companies with small staff: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.
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We plan to take steps to enhance and improve the design of our internal control over financial reporting. During the period covered by this annual report on Form 10-K, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we hope to implement the following changes during our fiscal year ending June 30, 2015: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management; and (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out in (i) and (ii) are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.
Changes in Internal Control over Financial Reporting
There was no change in the Company’s internal control over financial reporting identified in connection with the requisite evaluation that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION.
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The executive officers and directors of the Company as of September 16, 2014 are as follows:
| Name | Age | Position | |
| Aaron Shrira | 72 | President and Director | |
| Elana Berman-Shrira | 64 | Secretary, Treasurer and Director |
Duties, Responsibilities and Experience
Biographical Information
Aaron Shrira, age 72, has been the President and CEO of the Company since its incorporation. He is also the founder, and has been the CEO since 1983, of Reliable Printing Solutions and its affiliates including Century Computer Products, Inc. These companies, based in Santa Monica, California, market toner and ink jet cartridges and related products and employ approximately 130 people. Prior to 1983 Mr. Shrira owned a construction company that built and operated Gasoline Stations. He began his business career in Real Estate, buying and selling real estate investments. Mr. Shrira received his BS degree in Mechanical Engineering from Indiana Institute of Technology. He is married to Elana Berman-Shrira, the other officer and director of the Company.
Elana Berman-Shrira, age 64, has been the Secretary, Treasurer and CFO of the Company since its incorporation. She has been involved in design, manufacturing and distribution of collectable jewelry for both private and public clientele since 1997. In addition she has been actively involved in consulting others in the purchasing of real estate, and the design and renovation/restoration of properties since 1995. Prior to that, Ms. Berman-Shrira received a B.A. in Sociology from California State University, Northridge and worked as a medical social worker for the County of Los Angeles. Subsequently, she earned a Master's Degree from Antioch University in Clinical Psychology. She is married to Aaron Shrira, the other officer and director of the Company.
CONFLICTS OF INTEREST
As noted above, the two members of the Company's management have other business interests, however, these other businesses are not seeking mergers or acquisitions and have entirely different business plans from that of this Issuer. Consequently, there are no known potential conflicts of interest in the different businesses. However there is a potential conflict of interest in the time which the officers and directors devote to this Company and to their other interests. We do not currently have an agreement as to the amount of time that will be devoted to the Company's affairs. Management has stated that it will devote such time as it believes necessary to seeking out potential business combination targets for the Company.
| 13 |
The officers and directors are, so long as they are officers or directors of the Company, subject to the restriction that all opportunities contemplated by the Company's plan of operation which come to their attention, either in the performance of their duties or in any other manner, will be considered opportunities of, and be made available to the Company. A breach of this requirement will be a breach of the fiduciary duties of the officer or director.
However, all directors may still individually take advantage of opportunities if the Company should decline to do so. Except as set forth above, we have not adopted any other conflict of interest policy with respect to such transactions.
ITEM 11. EXECUTIVE COMPENSATION.
Summary of Cash and Certain Other Compensation
The following table provides certain summary information concerning the compensation earned by the named executive officers for the fiscal years ended June 30, 2014 and 2013, for services rendered in all capacities to Journal of Radiology, Inc.:
| Name & Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) |
| Aaron Shrira, President and Director | 2014 | $- | $ - | $ - | $ - | $- | $ - | $ - | $ - |
| 2013 | $- | $ - | $ - | $ - | $- | $ - | $ - | $ - | |
Elana Berman-Shrira, Secretary, Treasurer and Director | 2014 | $- | $ - | $ - | $ - | $- | $ - | $ - | $ - |
| 2013 | $- | $ - | $ - | $ - | $- | $ - | $ - | $ - | |
| 14 |
Director Compensation
The following table provides compensation summary concerning the compensation earned by the named directors for the years ended June 30, 2014 and 2013.
| Name |
Year | Fees Earned or Paid in Cash | Stock Awards | Option Awards | Non-Equity Incentive Plan Compensation | Non-Qualified Deferred Compensation Earnings | All Other Compensation | Total |
| Aaron Shrira, Director | 2014 | $- | $ - | $ - | $ - | $ - | $ - | $- |
2013 | $- | $ - | $ - | $ - | $ - | $ - | $- | |
| Elana Berman-Shrira, Director | 2014 | $- | $ - | $ - | $ - | $ - | $ - | $- |
2013 | $- | $ - | $ - | $ - | $ - | $ - | $- | |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of September 16, 2014, information about the beneficial ownership of our capital stock with respect to each person known by Journal of Radiology, Inc. to own beneficially more than 5% of the outstanding capital stock, each director and officer, and all directors and officers as a group.
| Number of Shares Beneficially Owned | Percentage of Class(2) | ||
| Name and Address(1) | Class | ||
| Aaron Shrira(3) | 180,000,000 | Common | 8.9% |
| President and Director | |||
| Elana Berman-Shrira(3) | - | Common | * |
| Nadav Elituv (4) | 900,000,000 | Common | 44.7% |
All directors and executive officers (2 persons) | 1,080,000,000
| Common
| 53.6%
|
| *Denotes less than 1% | |||
1) Unless noted otherwise, the address for all persons listed is c/o the Company at2230 Michigan Avenue,
Santa Monica, California 90404.
2) The above percentages are based on 2,012,550,000 shares of common stock outstanding as September 16, 2014.
3) Elana Berman-Shrira may be considered the beneficial owner of 180,000,000 shares owned by her husband Aaron Shrira.
| 4) | Represents 900,000,000 shares held by a wholly owned corporation, Imagin8. Address: 53 Theddore PL, Thornhill, Ontario, Canada L4J 8E4 |
“Beneficial ownership” means the sole or shared power to vote or to direct the voting of, a security, or the sole or shared investment power with respect to a security (i.e., thepower to dispose of or to direct the disposition of, a security).
There are no arrangements, known to us, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in control of Journal of Radiology, Inc.
There are no arrangements or understandings among members of both the former and the new control groups and their associates with respect to election of directors or other matters.
| 15 |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
None.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees
The aggregate fees billed by the Company's auditors for the professional services rendered in connection with the audit of the Company's annual financial statements, review of our Form 10 and reviews of the financial statements included in the Company's Forms 10-Qs and Form 10-Ks for fiscal 2014 and 2013 were approximately $16,730 and $13,000, respectively.
Audit-Related Fees
None.
Tax Fees
None.
All Other Fees
None
| 16 |
PART IV.
ITEM 15. EXHIBITS.
| Incorporated by reference | ||||||
| Exhibit | Exhibit Description | Filed herewith | Form | Period ending | Exhibit | Filing date |
| 3.1 | Articles of Incorporation | 10/A#2 | 3.1 | 11/5/2009 | ||
| 3.2 | Bylaws | 10/A #2 | 3.2 | 11/5/2009 | ||
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | X | ||||
| 32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||
| 32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | X | ||||
| 101.INS | XBRL Instance Document | X | ||||
| 101.SCH | XBRL Taxonomy Extension Schema Document | X | ||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | X | ||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | X | ||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | X | ||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Definition | X | ||||
| 17 |
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, thereunto duly authorized.
| JOURNAL OF RADIOLOGY, INC. | ||
| Date: October 6, 2014 | By: | /s/ Aaron Shrira |
Aaron Shrira President and Director (Principal Executive Officer) | ||
| Date: October 6, 2014 | By: | /s/ Elana Berman-Shrira Elana Berman-Shrira Treasurer and Director (Principal Accounting and Financial Officer)
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Date: October 6, 2014 | By: | /s/ Aaron Shrira |
Aaron Shrira President and Director (Principal Executive Officer) | ||
| Date: October 6, 2014 | By: | /s/ Elana Berman-Shrira Elana Berman-Shrira Treasurer and Director (Principal Accounting and Financial Officer)
|
| 18 |
JOURNAL OF RADIOLOGY, INC.
Index to Financial Statements
| Page | |
| Reports of Independent Registered Accounting Firms | F-2/F-3 |
| Balance Sheets as of June 30, 2014 and 2013 | F-4 |
| Statements of Operations for the years ended June 30, 2014 and 2013 | F-5 |
| Statement of Stockholders’ Deficit for the years ended June 30, 2014 and 2013 | F-6 |
| Statements of Cash Flows for the years ended June 30, 2014 and 2013 | F-7 |
| Notes to Financial Statements | F-8 |
| F-1 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Journal of Radiology, Inc.,
We have audited the accompanying balance sheet of Journal of Radiology, Inc. (the “Company”) as of June 30, 2014 and the related statements of operations, stockholders’ deficit and cash flows for the year then ended. Journal of Radiology, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Journal of Radiology, Inc. as of June 30, 2014 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has a shareholders’ deficiency and has experienced recurring operating losses and negative operating cash flows since inception. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1 to the financial statements. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that might result from the outcome of this uncertainty.
/s/ Weinberg and Company, P.A
Los Angeles, California
October 6, 2014
| F-2 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Journal of Radiology, Inc.,
We have audited the accompanying balance sheets of Journal of Radiology, Inc. (A Development Stage Company) (the “Company”) as of June 30, 2013 and 2012 and the related statements of operations, stockholders’ equity (deficit) and cash flows for each of the years then ended and for the period from inception (May 21, 2009) through June 30, 2013. Journal of Radiology, Inc’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Journal of Radiology, Inc. (A Development Stage Company) as of June 30, 2013 and 2012 and the results of its operations and its cash flows for each of the years then ended and for the period from inception (May 21, 2009) through June 30, 2013 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered losses from operations, which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ De Joya Griffith, LLC
Henderson, Nevada
October 08, 2013
| F-3 |
JOURNAL OF RADIOLOGY, INC.
BALANCE SHEETS
| As of June 30, 2014 | As of June 30, 2013 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | 215 | $ | 560 | ||||
| Prepaid expense | 1,375 | — | ||||||
| Total assets | $ | 1,590 | $ | 560 | ||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | 97,601 | $ | 100,186 | ||||
| Advances due shareholder | 14,909 | 19,683 | ||||||
| Due to director | 49,000 | 49,000 | ||||||
| Total current liabilities | 161,510 | 168,869 | ||||||
| Redeemable secured note payable due shareholder, net of debt discount of $13,093 | 65,888 | — | ||||||
Commitments and contingencies
Stockholders’ Deficit: | ||||||||
| Preferred stock; par value $0.01; 49,000,000 shares authorized, no shares issued or outstanding | — | — | ||||||
| Series A Convertible Preferred Stock; par value $0.01; 1,000,000 shares authorized, no shares issued or outstanding | — | — | ||||||
| Common stock; par value $0.001; 5,000,000,000 shares authorized, 2,012,550,000 shares issued and outstanding | 2,012,550 | 2,012,550 | ||||||
| Additional paid-in capital | 107,442,135 | 107,374,135 | ||||||
| Accumulated deficit | (109,680,493 | ) | (109,554,994 | ) | ||||
| Total stockholders’ deficit | (225,808 | ) | (168,309 | ) | ||||
| Total liabilities and stockholders' deficit | $ | 1,590 | $ | 560 | ||||
The accompanying notes are an integral part of these financial statements.
| F-4 |
JOURNAL OF RADIOLOGY, INC.
STATEMENTS OF OPERATIONS
| Year ended June 30, 2014 | Year ended June 30, 2013 | |||||||
| Revenue | $ | — | $ | — | ||||
| Operating costs: | ||||||||
| Professional fees | 47,857 | 58,661 | ||||||
| Administrative expenses | 351 | 15,832 | ||||||
| Stock based compensation for services | — | 279,600 | ||||||
| Loss from operations | (48,208 | ) | (354,093 | ) | ||||
| Other expenses: | ||||||||
| Interest expense | (65,888 | ) | — | |||||
| Loan inducement fee | (11,403 | ) | — | |||||
| (77,291 | ) | — | ||||||
| Net loss | $ | (125,499 | ) | $ | (354,093 | ) | ||
| Net loss per common share-basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | ||
| Weighted average number of common shares outstanding – basic and diluted | 2,012,550,000 | 1,805,876,027 | ||||||
The accompanying notes are an integral part of these financial statements.
| F-5 |
JOURNAL OF RADIOLOGY, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
YEARS ENDED JUNE 30, 2014 AND 2013
| Common Shares | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity (Deficit) | ||||||||||||||||
| Balance July 1, 2012 | 1,781,550,000 | $ | 1,781,550 | $ | 107,325,535 | $ | (109,200,901 | ) | $ | (93,816 | ) | |||||||||
| Fair value of common stock issued for consulting services | 354,000,000 | 354,000 | (74,400 | ) | — | 279,600 | ||||||||||||||
| Cancellation of common stock | (123,000,000 | ) | (123,000 | ) | 123,000 | — | — | |||||||||||||
| Net loss | — | — | — | (354,093 | ) | (354,093 | ) | |||||||||||||
| Balance June 30, 2013 | 2,012,550,000 | 2,012,550 | 107,374,135 | (109,554,994 | ) | (168,309 | ) | |||||||||||||
| Beneficial conversion feature | — | — | 68,000 | 68,000 | ||||||||||||||||
| Net loss | — | — | — | (125,499 | ) | (125,499 | ) | |||||||||||||
| Balance June 30, 2014 | 2,012,550,000 | $ | 2,012,550 | $ | 107,442,135 | $ | (109,680,493 | ) | $ | (225,808 | ) | |||||||||
The accompanying notes are an integral part of these financial statements.
| F-6 |
JOURNAL OF RADIOLOGY, INC.
STATEMENTS OF CASH FLOWS
| For the Year Ended June 30, 2014 | For the Year Ended June 30, 2013 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net loss | $ | (125,499 | ) | $ | (354,093 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities and liabilities: | ||||||||
| Accrued interest expense | 10,981 | — | ||||||
| Amortization of debt discount | 54,907 | — | ||||||
| Loan inducement fee | 11,403 | — | ||||||
| Shares issued for services | — | 279,600 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | — | 11,307 | ||||||
| Prepaid expenses | (1,375 | ) | — | |||||
| Accounts payable and accrued expenses | (2,585 | ) | 11,186 | |||||
| Net cash used in operating activities | (52,168 | ) | (52,000 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Advances from shareholder | 51,823 | 49,406 | ||||||
| Net cash provided by financing activities | 51,823 | 49,406 | ||||||
| Net change in cash | (345 | ) | (2,594 | ) | ||||
| Cash beginning of year | 560 | 3,154 | ||||||
| Cash end of year | $ | 215 | $ | 560 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash paid during period for: | ||||||||
| Interest paid | $ | — | $ | — | ||||
| Income tax paid | $ | — | $ | — | ||||
| Shares issued for purchase of licensing rights | $ | — | $ | 46,693 | ||||
| Exchange of advances from shareholder for redeemable secured note payable due shareholder with beneficial conversion feature | $ | 68,000 | $ | — | ||||
The accompanying notes are an integral part of these financial statements.
| F-7 |
JOURNAL OF RADIOLOGY, INC.
Notes to Financial Statements
June 30, 2014 and 2013
NOTE 1. NATURE AND BACKGROUND OF BUSINESS
Journal of Radiology, Inc. ("the Company") was organized under the laws of the State of Nevada on May 21, 2009. The Company was established as part of the Chapter 11 reorganization of AP Corporate Services, Inc. ("AP"). Under AP's Plan of Reorganization, as confirmed by the U.S. Bankruptcy Court for the Central District of California, the Company was organized to own and develop a professional journal devoted to radiology. Management believes the Company lacks the resources to effectively develop such a journal on its own at this time and is therefore engaged in a search for a strategic partner to assist in the development of the journal, or for a merger or acquisition partner with the resources to take the Company in a new direction and bring greater value to its shareholders.
As the Company’s has not yet commenced any revenue-generating operations, does not have any cash flows from operations, and is dependent on debt and equity funding to finance its operations, the Company is considered a development stage company.
In June 2014, as discussed in Note, 2, the Financial Accounting Standards Board issued new guidance that removed all incremental financial reporting requirements from generally accepted accounting principles in the United States for development stage entities. The Company early adopted this new guidance effective June 30, 2014, as a result of which all inception-to-date financial information and disclosures have been omitted from this report.
GOING CONCERN
The Company's financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company has a shareholders’ deficiency and has experienced recurring operating losses and negative operating cash flows since inception. As reflected in the accompanying financial statements, the Company had a net loss of $125,499 and negative cash flow from operations of $52,168 for the year ended June 30, 2014, and had a stockholders’ deficit $225,808 at June 30, 2014. Currently, the Company does not have significant cash or other material assets, nor does it have operations or a source of revenue sufficient to cover its operation costs and allow it to continue as a going concern. The officers and directors have committed to advancing certain operating costs of the Company. The accompanying 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.
| F-8 |
Management plans to seek a strategic partner to assist in the development of the journal business, or a merger or acquisition partner with the resources to take the Company in a new direction and bring greater value to its shareholders. Management has yet to identify any of these and there is no guarantee that the Company will be able to identify such opportunities in the future.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 revenues and expenses during the reporting period. Actual results could differ from those estimates. The more significant estimates and assumptions by management include, among others, the fair value of shares of common stock issued for services.
CASH AND CASH EQUIVALENTS
Investments with original maturity of three months or less are considered to be cash equivalents.
The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits. At June 30, 2014 and June 30, 2013, the balance did not exceed the federally insured limit.
INCOME TAXES
The Company follows the asset and liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on deferred income tax assets and liabilities of a change in tax rates is recognized as income (loss) in the period that includes the enactment date.
BASIC AND DILUTED LOSS PER SHARE
The Company computes loss per share in accordance with ASC Topic 260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of outstanding common shares during the period. Diluted loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued. Diluted loss per share excludes all potential common shares if their effect is anti-dilutive.
| F-9 |
As of June 30, 2014, the Company had no potential common shares that would have a dilutive effect and accordingly the calculations of basic loss and diluted loss per share are the same. A redeemable secured note payable due shareholder redeemable into 789,810,000 shares of common stock has been excluded from the calculation at June 30, 2014 as the effect would have been anti-dilutive.
STOCK-BASED COMPENSATION
The Company periodically issues stock options and warrants to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for stock option and warrant grants issued and vesting to employees based on the authoritative guidance provided by the FASB whereas the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and warrant grants issued and vesting to non-employees in accordance with the authoritative guidance of the FASB whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date.
The fair value of the Company's common stock option grants are estimated using the Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model, and based on actual experience. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.
In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which are determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
| F-10 |
Level 1 – inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
Level 2 – inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
The estimated fair value of certain financial instruments, including cash and cash equivalents and accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The recorded value of the redeemable secured note payable due shareholder approximates its fair value based upon its effective interest rate.
RECENT ACCOUNTING PRONOUNCEMENTS
On June 10, 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-10 (ASU 2014-10),Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. ASU 2014-10 eliminates the requirement to present inception-to-date information about income statement line items, cash flows, and equity transactions, and clarifies how entities should disclosure the risks and uncertainties related to their activities. ASU 2014-10 also eliminates an exception provided to development stage entities in Consolidations (ASC Topic 810) for determining whether an entity is a variable interest entity on the basis of the amount of investment equity that is at risk. The presentation and disclosure requirements in Topic 915 will no longer be required for interim and annual reporting periods beginning after December 15, 2014, and the revised consolidation standards will take effect in annual periods beginning after December 15, 2015. Early adoption is permitted. The Company adopted the provisions of ASU 2014-10 effective for its financial statements for the annual period ended June 30, 2014, and accordingly, is no longer presenting the inception-to-date financial information and disclosures formerly required.
In August 2014, the FASB issued Accounting Standards Update No. 2014-15 (ASU 2014-15),Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. The ASU applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted.
| F-11 |
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.
NOTE 3. ADVANCES
At June 30, 2013, advances from a shareholder totaled $19,683. During the year ended June 30, 2014, the shareholder advanced an additional $51,823 to the Company. The advances are non-interest bearing, unsecured, and have no specific terms of repayment. On February 20, 2014, $56,597 of advances were exchanged for a secured redeemable note payable due shareholder (see Note 4). As of June 30, 2014, the advances due the shareholder were $14,909.
NOTE 4. REDEEMABLE SECURED NOTE PAYABLE DUE SHAREHOLDER
On February 20, 2014, the Company agreed to exchange advances due to a shareholder aggregating $56,597 (see Note 3), for a redeemable secured note payable due shareholder of $56,597. Also in accordance with the terms of the agreement, the redeemable secured note due shareholder was increased from $56,597 to $68,000, and the difference of $11,403 was recorded as a loan inducement fee. The note bears interest at 20% per annum, and is secured by all the assets of the Company. The note was originally due August 1, 2014 and has been was extended to August 1, 2015.
The Company may prepay the note in readily available funds at anytime prior to the maturity date. The Company has the right to redeem the note into shares of the Company’s common stock at any time prior to the maturity date at a fixed price of $0.0001 per common stock. On February 20, 2014, the closing price of the Company’s common shares was $0.0003. As a result the Company recognized a beneficial conversion feature related to the difference between the redemption price and closing price of the Company’s common stock of $68,000, which is treated as a note discount and being amortized over the initial term of the note from February 20, 2014 to August 1, 2014. During the year ended June 30, 2014, $54,907 of discount amortization is included in interest expense and at June 30, 2014, the unamortized balance of the discount is $13,903. During the year ended June 30, 2013, there was no discount amortization.
At June 30, 2014, the note principal of $68,000 plus accrued interest of $10,981 is due and payable, which are redeemable into 789,810,000 shares of common stock.
NOTE 5. STOCKHOLDERS' EQUITY
During the year ended June 30, 2013, the Company issued 354,000,000 shares of common stock for consulting services valued in aggregate at $279,600 or an average of $0.00079 per share.
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On March 1, 2013, the Company received for no consideration 123,000,000 shares of its common stock for cancellation and the shares were cancelled.
NOTE 6. RELATED PARTY TRANSACTIONS
As of June 30, 2014 and 2013, the Company owed the President and Director of the Company $49,000 and $49,000, respectively for payment of expenses. The advance is non-interest bearing, unsecured, and due on demand.
The President and Director of the Company provides office space and office services to the Company without rent or charge. Management has determined that such costs are immaterial to the financial statements and accordingly, have not been reflected therein.
NOTE 7. WARRANTS AND OPTIONS
On May 21, 2009, the Company issued 5,000,000 warrants exercisable into 5,000,000 shares of the Company's common stock. The warrants were convertible into shares of common stock at exercise prices ranging from $0.033 to $0.167 per share, and all warrants expired January 4, 2014.
The following is a summary of warrants activity during the years ended June 30, 2014 and 2013:
| Number of Shares | Weighted Average Exercise Price | |||||||
| Balance, July 1, 2012 | 5,000,000 | $ | 0.10 | |||||
| Warrants granted and assumed | 0 | |||||||
| Warrants expired | 0 | |||||||
| Balance, June 30, 2013 | 5,000,000 | 0.10 | ||||||
| Warrants granted and assumed | 0 | |||||||
| Warrants expired | (5,000,000 | ) | (0.10 | ) | ||||
| Balance, June 30, 2014 | 0 | $ | 0.00 | |||||
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NOTE 8. INCOME TAXES
Income taxes differ from the amount that would be computed by applying the Federal statutory income tax rates of 34% as follows:
| 2014 | 2013 | |||||||
| Provision for income taxes: | ||||||||
| Net loss | $ | (125,999 | ) | $ | (354,093 | ) | ||
| Adjustments: | ||||||||
| Stock issued for consulting services | — | 279,600 | ||||||
| Tax loss | (125,999 | ) | (74,493 | ) | ||||
| Federal statutory income tax rate | 34 | % | 34 | % | ||||
| 42,840 | 25,328 | |||||||
| Change in valuation allowance | (42,840 | ) | (25,328 | ) | ||||
| $ | — | $ | — | |||||
Deferred tax assets and liabilities consist of the following as of June 30:
| 2014 | 2013 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carry forwards | $ | 102,475 | $ | 59,635 | ||||
| Less valuation allowance | (102,475 | ) | (59,635 | ) | ||||
| Net deferred tax asset | $ | — | $ | — | ||||
The tax years 2009 through 2014 remain open to examination by the major taxing jurisdictions in which the Company operates. The Company expects no material changes to unrecognized tax positions within the next twelve months.
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