UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X. QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 2011
.TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______ to _______
Commission File Number 333-163628
NATIONAL INTELLIGENCE ASSOCIATION, INC.
![[nia10q022811002.gif]](https://capedge.com/proxy/10-Q/0001078782-11-001077/nia10q022811002.gif)
(Exact name of registrant as specified in its charter)
Nevada |
| 27-0310225 |
(State of incorporation) |
| (I.R.S. Employer Identification No.) |
1800 Ravinia Place
Orland Park, IL 60462
(Address of principal executive offices)
(312) 775-9700
(Registrant’s telephone number)
with a copy to:
Carrillo, Huettel & Zouvas, LLP
3033 Fifth Ave. Suite 400
San Diego, CA 92103
Telephone (619) 546-6100
Facsimile (619) 546-6060
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X. No .
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate 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). Yes . No . (Not required)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer | . | Accelerated filer | . |
Non-accelerated filer | . (Do not check if a smaller reporting company) | Smaller reporting company | X. |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes . No X.
As of April 19, 2011, there were 98,840,000 shares of the registrant’s $0.001 par value common stock issued and outstanding.
NATIONAL INTELLIGENCE ASSOCIATION, INC. *
TABLE OF CONTENTS | Page | |
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PART I. FINANCIAL INFORMATION |
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ITEM 1. | FINANCIAL STATEMENTS | 3 |
ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 11 |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 13 |
ITEM 4. | CONTROLS AND PROCEDURES | 13 |
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PART II. OTHER INFORMATION |
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ITEM 1. | LEGAL PROCEEDINGS | 14 |
ITEM 1A. | RISK FACTORS | 14 |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 14 |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 14 |
ITEM 4. | [REMOVED AND RESERVED] | 14 |
ITEM 5. | OTHER INFORMATION | 14 |
ITEM 6. | EXHIBITS | 15 |
Special Note Regarding Forward-Looking Statements
Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of National Intelligence Association, Inc. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
*Please note that throughout this Quarterly Report, except as otherwise indicated by the context, references in this report to “Company”, “NIAS”, “we”, “us” and “our” are references to National Intelligence Association, Inc.
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PART I - FINANCIAL INFORMATION
FINANCIAL STATEMENTS
NATIONAL INTELLIGENCE ASSOCIATION INC.
(A Development Stage Company)
Financial Statements
For the Period Ended February 28, 2011 (unaudited) and August 31, 2010
Balance Sheets (unaudited)
4
Statements of Operations (unaudited)
5
Statements of Cash Flows (unaudited)
6
Notes to the Financial Statements (unaudited)
7
3
NATIONAL INTELLIGENCE ASSOCIATION INC.
(A Development Stage Company)
Balance Sheets
(unaudited)
(The accompanying notes are an integral part of these financial statements)
4
NATIONAL INTELLIGENCE ASSOCIATION INC.
(A Development Stage Company)
Statements of Operations
(unaudited)
| For the Three Months Ended February 28, 2011 $ | For the Three Months Ended February 28, 2010 $ | For the Six Months Ended February 28, 2011 $ | For the Six Months Ended February 28, 2010 $ | Accumulated from May 12, 2009 (Date of Inception) to February 28, 2011 $ |
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Revenues | 28,500 | – | 28,500 | – | 28,500 |
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Operating Expenses |
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Consulting Fees | 5,997 | – | 5,997 | – | 5,997 |
General and Administrative | 12,817 | 960 | 30,104 | 10,628 | 108,331 |
Management Fees | 7,500 | 7,500 | 15,000 | 15,000 | 55,000 |
Payroll and Benefits | 17,496 | – | 17,496 | – | 17,496 |
Professional Fees | 76,912 | 18,000 | 99,620 | 38,750 | 279,943 |
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Total Expenses | 120,722 | 26,460 | 168,217 | 64,378 | 466,767 |
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Net Operating Loss | (92,222) | 26,460 | (139,717) | 64,378 | (438,267) |
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Other Expenses |
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Interest Expense | (237) | – | (237) | – | (2,837) |
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Total Other Expenses | (237) | – | (237) | – | (2,837) |
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Net Loss | (92,459) | (26,460) | (139,954) | (64,378) | (441,104) |
Net Loss per Share – Basic and Diluted | – | – | – | – |
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Weighted Average Shares Outstanding – Basic and Diluted | 92,120,000 | 82,140,000 | 91,778,122 | 64,002,540 |
(The accompanying notes are an integral part of these financial statements)
5
NATIONAL INTELLIGENCE ASSOCIATION INC.
(A Development Stage Company)
Statements of Cashflow
(unaudited)
| For the Six Months Ended February 28, 2011 $ | For the Six Months Ended February 28, 2010 $ | Accumulated from May 12, 2009 (Date of Inception) to February 28, 2011 $ |
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Operating Activities |
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Net loss for the period | (139,954) | (64,378) | (441,104) |
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Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
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Shares issuable for management fees | – | – | 10,000 |
Shares issued for services | 45,000 | – | 45,000 |
Shares issuable for services | 20,000 | – | 20,000 |
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Changes in operating assets and liabilities: |
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Accounts payable | 20,818 | (5,000) | 21,545 |
Accrued Liabilities | 237 | 1,500 | 2,837 |
Due to related parties | 10,000 | 16,000 | 36,760 |
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Net Cash Used In Operating Activities | (43,899) | (51,878) | (304,962) |
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Financing Activities |
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Proceeds from issuance of common shares | – | – | 211,500 |
Proceeds from a related party | 1,650 | – | 2,650 |
Proceeds from notes payable | 5,000 | 10,000 | 100,000 |
Proceeds from notes payable –related | 10,000 | – | 10,000 |
Repayment of notes payable | – | – | (15,000) |
Share issuance costs | – | (1,000) | (1,000) |
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Net Cash Provided By Financing Activities | 16,650 | 19,000 | 308,150 |
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Increase (Decrease) in Cash | (27,249) | (32,878) | 3,188 |
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Cash – Beginning of Period | 30,437 | 34,885 | – |
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Cash – End of Period | 3,188 | 2,007 | 3,188 |
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Supplemental Disclosures |
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Interest paid | – | – | – |
Income tax paid | – | – | – |
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Non-cash investing and financing activities |
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Shares issued for management fees | – | – | 10,000 |
Shares issued for settlement of debt | – | – | 80,000 |
(The accompanying notes are an integral part of these financial statements)
6
NATIONAL INTELLIGENCE ASSOCIATION INC.
(A Development Stage Company)
Notes to the Financial Statements
(unaudited)
1.
Nature of Operations and Continuance of Business
National Intelligence Association Inc. (the “Company”) was incorporated in the State of Nevada on May 12, 2009. The Company is a Development Stage Company, as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915,Development Stage Entities. The Company a security and investigative company, and provides professional security, recovery, investigative, training, and protection services.
Going Concern
These financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As at February 28, 2011, the Company has a working capital deficit of $75,604 and an accumulated deficit of $441,104. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company’s future operations. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
2.
Summary of Significant Accounting Policies
a)
Basis of Presentation
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and are expressed in U.S. dollars. The Company’s fiscal year end is August 31.
b)
Use of Estimates
The preparation of financial statements in conformity with US GAAP 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.
c)
Interim Financial Statements
These interim unaudited 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.
d)
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
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NATIONAL INTELLIGENCE ASSOCIATION INC.
(A Development Stage Company)
Notes to the Financial Statements
(unaudited)
2.
Summary of Significant Accenting Policies(continued)
e)
Basic and Diluted Net 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.
f)
Financial Instruments
Pursuant to ASC 820,Fair Value Measurements and Disclosuresand 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 Company’s financial instruments consist principally of cash, accounts payable and accrued liabilities, and amounts due to related parties. Pursuant to ASC 820 and 825, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
g)
Comprehensive Loss
ASC 220,Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at February 28, 2011 and August 31, 2010, the Company has no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.
h)
Revenue Recognition
The Company recognizes revenue from investigative services. Revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service has been provided, and collectability is reasonably assured. The Company is not exposed to any credit risks as amounts are prepaid prior to performance of services.
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NATIONAL INTELLIGENCE ASSOCIATION INC.
(A Development Stage Company)
Notes to the Financial Statements
(unaudited)
2.
Summary of Significant Accounting Policies(continued)
i)
Recent Accounting Pronouncements
In March 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-11 (ASU 2010-11), “Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives.” The amendments in this Update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this Update. The Company does not expect the provisions of ASU 2010-11 to have a material effect on the financial position, results of operations or cash flows of the Company.
In February 2010, the FASB issued ASU No. 2010-09 “Subsequent Events (ASC Topic 855) “Amendments to Certain Recognition and Disclosure Requirements” (“ASU No. 2010-09”). ASU No. 2010-09 requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement for an SEC filer to disclose a date, in both issued and revised financial statements, through which the filer had evaluated subsequent events. The adoption did not have an impact on the Company’s financial position and results of operations.
In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-06, “Improving Disclosures about Fair Value Measurements.” ASU No. 2010-06 amends FASB Accounting Standards Codification (“ASC”) 820 and clarifies and provides additional disclosure requirements related to recurring and non-recurring fair value measurements and employers’ disclosures about postretirement benefit plan assets. This ASU is effective for interim and annual reporting periods beginning after December 15, 2009. The adoption of ASU 2010-06 did not have a material impact on the Company’s financial statements.
In January 2010, the FASB issued an amendment to ASC 820, Fair Value Measurements and Disclosure, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. This standard, for which the Company is currently assessing the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010. The adoption of this standard is not expected to have a significant impact on the Company’s financial statements.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations
3.
Notes Payable
a)
As at February 28, 2011, the Company owes $5,000 (2010 - $nil) in notes payable to a non-related party. The amounts owing are unsecured, bears interest at 10% per annum, and is due on demand. As at February 28, 2011, accrued interest of $111 (2010 - $nil) is recorded in accrued liabilities.
b)
As at February 28, 2011, the Company owes $10,000 (2010 - $nil) in notes payable to the President and Director of the Company. The amounts owing are unsecured, bears interest at 10% per annum, and is due on demand. As at February 28, 2011, accrued interest of $126 (2010 - $nil) is recorded in accrued liabilities.
4.
Related Party Transactions
As at February 28, 2011, the Company owed $39,410 (2010 - $27,760) to the President and Director of the Company for financing of day-to-day expenditures and management fees incurred on behalf of the Company. The amounts owing are unsecured, non-interest bearing, and due on demand.
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NATIONAL INTELLIGENCE ASSOCIATION INC.
(A Development Stage Company)
Notes to the Financial Statements
(unaudited)
5.
Common Shares
a)
In January 2011, the Company issued 1,800,000 common shares at $0.025 to settle outstanding professional fees valued at $45,000. The shares were valued based on the last issuance price.
b)
In December 2010, the Company authorized the issuance of 800,000 common shares at $0.025 per share to settle professional fees valued at $20,000. As at February 28, 2011, the common shares have not been issued. The shares were valued based on the last issuance price.
6.
Subsequent Events
a)
In April 2011, the Company entered into a consulting agreement with a non-related party for investor relations services for a one year period. Under the terms of the agreement, the Company would pay $35,000 per month, issue 4,000,000 common shares at $0.025 per share for a fair value of $100,000, and issue warrants with a fair value of $50,000. On April 7, 2011, the Company issued the 4,000,000 common shares relating to the agreement.
b)
In April 2011, the Company issued 1,600,000 common shares at $0.025 per share to settle professional fees valued at $40,000, of which 800,000 common shares were authorized for issuance in December 2010. Refer to Note 5(b).
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
RESULTS OF OPERATIONS
Working Capital
| February 28, | November 30, |
| 2011 $ | 2010 $ |
Current Assets | 3,188 | 30,437 |
Current Liabilities | 78,792 | 31,087 |
Working Capital (Deficit) | (75,604) | (650) |
Cash Flows
| Six months Ended | Six months Ended |
| February 28, 2011 $ | February 28, 2010 $ |
Cash Flows from (used in) Operating Activities | (43,899) | (51,878) |
Cash Flows from (used in) Financing Activities | 16,650 | 19,000 |
Net Increase (decrease) in Cash During Period | (27,249) | (32,878) |
Operating Revenues
During the six months ended February 28, 2011, the Company generated $28,500 (2010 - $nil) of revenue related to investigative services.
Operating Expenses and Net Loss
Operating expenses for the three and six month periods ended February 28, 2011 was $120,722 and $168,217 compared with $26,460 and $64,378 for the three and six months ended February 28, 2010. The increase in operating expenses during fiscal 2011 is attributed to an increase in professional fees relating to accounting and legal expenses relating to the S-1 registration process, and an overall increase in general and administrative costs relating to overhead expenses from commencement of operating activity in December 2010.
Net loss for the three and six months ended February 28, 2011 was $92,459 and $139,954 compared with $26,460 and $64,376 for the three and six months ended February 28, 2010.
Liquidity and Capital Resources
As at February 28, 2011, the Company’s cash and total asset balance was $3,188 compared to $30,437 as at August 31, 2010. The decrease in cash is due to general operating costs incurred by the Company with overhead expenses as the Company incurred $43,899 of operating expenditures while being financed by $15,000 of proceeds of notes payable and $1,650 from the President and Director of the Company.
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As at February 28, 2011, the Company had total liabilities of $78,792 compared with total liabilities of $31,087 as at August 31, 2010. The increase in total liabilities is attributed to $15,000 of unsecured, 10% demand notes payable that were issued during the period, an increase of $11,650 owing to related parties comprised of $10,000 in management fees and $1,650 of financing, and $20,818 increase of accounts payable relating to outstanding professional fees owing for services.
As at February 28, 2011, the Company had a working capital deficit of $75,604 compared with $650 as at August 31, 2010. The increase in working capital deficit is due to financing of operating expenditures through the issuance of debt financing and related party amounts, as well as the fact that lack of sufficient cash flows has resulted in an increase in outstanding obligations.
Cashflow from Operating Activities
During the six months ended February 28, 2011, the Company used $43,899 of cash for operating activities compared to the use of $51,878 of cash for operating activities during the six months ended February 28, 2010. The increase in cash used for operating activities is reflective of an increase in general operating expenditures as the Company commenced operations in December 2010 with its first revenue transactions which resulted in a higher overhead cost compared to prior year.
Cashflow from Financing Activities
During the six months ended February 28, 2011, the Company received $16,650 of cash from financing activities compared to $19,000 for the six months ended February 28, 2010. During fiscal 2011, the Company received $15,000 of notes payable which are unsecured, due interest at 10% per annum, and due on demand and $1,650 of additional financing from the President and Director of the Company whereas the Company received $10,000 from issuance of common shares and $10,000 from related parties in fiscal 2010.
We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Future Financings
We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and exploration activities.
Critical Accounting Policies
Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. 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, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in note 1 of the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
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Recently Issued Accounting Pronouncements
In March 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-11 (ASU 2010-11), “Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives.” The amendments in this Update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after issuance of this Update. The Company adoption of provisions of ASU 2010-11 did not have a material effect on the financial position, results of operations or cash flows of the Company.
In February 2010, the FASB issued ASU No. 2010-09 “Subsequent Events (ASC Topic 855) “Amendments to Certain Recognition and Disclosure Requirements” (“ASU No. 2010-09”). ASU No. 2010-09 requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement for an SEC filer to disclose a date, in both issued and revised financial statements, through which the filer had evaluated subsequent events. The adoption did not have an impact on the Company’s financial position and results of operations.
In January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-06, “Improving Disclosures about Fair Value Measurements.” ASU No. 2010-06 amends FASB Accounting Standards Codification (“ASC”) 820 and clarifies and provides additional disclosure requirements related to recurring and non-recurring fair value measurements and employers’ disclosures about postretirement benefit plan assets. This ASU is effective for interim and annual reporting periods beginning after December 15, 2009. The adoption of ASU 2010-06 did not have a material impact on the Company’s financial statements.
In January 2010, the FASB issued an amendment to ASC 820, Fair Value Measurements and Disclosure, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. This standard, for which the Company is currently assessing the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010. The adoption of this standard is not expected to have a significant impact on the Company’s consolidated financial statements.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4.
CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange 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, as appropriate to allow timely decisions regarding required disclosure.
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of February 28, 2011. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective. Please refer to our Annual Report on Form 10-K as filed with the SEC on December 14, 2010, for a complete discussion relating to the foregoing evaluation of Disclosures and Procedures.
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Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting as of February 28, 2011. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") inInternal Control-Integrated Framework. Our management has concluded that, as of February 28, 2011, our internal control over financial reporting is not effective based on these criteria, due to material weaknesses resulting from not having an Audit Committee or financial expert on our Board of Directors and our failure to maintain appropriate cash controls.
Changes In Internal Control and Financial Reporting
Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.
The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
ITEM 1A.
RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
1.
Quarterly Issuances:
During the period ended February 28, 2011, we issued the following shares of our Common Stock:
In January 2011, the Company issued 1,800,000 common shares at $0.025 to settle outstanding professional fees valued at $45,000.
2.
Subsequent Issuances:
On April 7, 2011, the Company issued 4,000,000 common shares for consulting services valued at $100,000.
On April 7, 2011, the Company issued 1,600,000 common shares at $0.025 per share to settle professional fees valued at $40,000.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.
[REMOVED AND RESERVED]
ITEM 5.
OTHER INFORMATION
On February 4, 2011, the Company authorized its existing selling shareholders to continue their Offering for the sale of 1,135,000 shares of the Company’s common stock in accordance with the Company’s Prospectus dated May 19, 2010. The Company extended the Offering for an additional 90 day period from November 9, 2010 until February 7, 2011.
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ITEM 6.
EXHIBITS
The following exhibits are filed with this Quarterly Report on Form 10-Q:
Exhibit |
|
|
Number | Description of Exhibit | Filing |
3.01 | Articles of Incorporation | Filed with the SEC on December 10, 2009 as part of our Registration Statement on Form S-1. |
3.02 | Bylaws | Filed with the SEC on December 10, 2009 as part of our Registration Statement on Form S-1. |
4.01 | 2011 Equity Incentive Plan, | Filed with the SEC on January 25, 2011 as part of our Registration Statement on Form S-8. |
4.02 | Sample Stock Option Agreement | Filed with the SEC on January 25, 2011 as part of our Registration Statement on Form S-8. |
4.03 | Sample Stock Award Agreement for Stock Units | Filed with the SEC on January 25, 2011 as part of our Registration Statement on Form S-8. |
4.04 | Sample Stock Award Agreement for Restricted Stock | Filed with the SEC on January 25, 2011 as part of our Registration Statement on Form S-8. |
10.01 | Management Agreement between James Miller and National Intelligence Association, Inc., dated September 1, 2009 | Filed with the SEC on February 22, 2010 as part of our Amended Registration Statement on Form S-1/A. |
10.02 | Promissory Note between James Miller and National Intelligence Association, Inc., dated November 30, 2009 | Filed with the SEC on February 22, 2010 as part of our Amended Registration Statement on Form S-1/A. |
10.03 | Promissory Note between Darren Wright and National Intelligence Association, Inc., dated March 23, 2010 | Filed with the SEC on June 15, 2010 as part of our Current Report on Form 8-K. |
10.04 | Promissory Note between Andrene Matre and National Intelligence Association, Inc., dated March 23, 2010 | Filed with the SEC on June 15, 2010 as part of our Current Report on Form 8-K. |
10.05 | Promissory Note between Karen Strate and National Intelligence Association, Inc., dated March 24, 2010 | Filed with the SEC on June 15, 2010 as part of our Current Report on Form 8-K. |
10.06 | Consulting Agreement between Greg Farrell and National Intelligence Association, Inc., dated June 17, 2010 | Filed with the SEC on June 22, 2010 as part of our Current Report on Form 8-K. |
10.07 | Consulting Agreement between William Reininger and National Intelligence Association, Inc., dated June 17, 2010 | Filed with the SEC on June 22, 2010 as part of our Current Report on Form 8-K. |
10.08 | Consulting Agreement between C&D Associates, Inc. and National Intelligence Association, Inc., dated July 20, 2010 | Filed with the SEC on July 22, 2010 as part of our Current Report on Form 8-K. |
10.09 | Consulting Agreement between Steven Graff Levine and National Intelligence Association, Inc., dated August 3, 2010 | Filed with the SEC on August 24, 2010 as part of our Current Report on Form 8-K. |
10.10 | Consulting Agreement between Equities Awareness Group and National Intelligence Association, Inc., dated March 31, 2011 | Filed with the SEC on April 12, 2011 as part of our Current Report on Form 8-K. |
10.11 | Promissory Note between Dr. Luis Carrillo and National Intelligence Association, Inc. dated April 12, 2011 | Filed herewith. |
10.12 | Promissory Note between James J. Miller and National Intelligence Association, Inc. dated April 14, 2011 | Filed herewith. |
14.01 | Code of Ethics | Filed with the SEC on December 10, 2009 as part of our Registration Statement on Form S-1. |
31.01 | Certification of Principal Executive Officer Pursuant to Rule 13a-14 | Filed herewith. |
31.02 | Certification of Principal Financial Officer Pursuant to Rule 13a-14 | Filed herewith. |
32.01 | CEO and CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
NATIONAL INTELLIGENCE ASSOCIATION, INC.
Dated: April 19, 2011
By:
/s/ James J. Miller
James J. Miller
President and CEO
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