UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedSeptember 30, 2012
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934
For the transition period from __________ to __________
Commission file number:000-54694
NET PROFITS TEN INC.
(Exact name of registrant as specified in its charter)
| Nevada | 7372 | 77-0716386 |
| (State or other jurisdiction | Primary Standard Industrial | (IRS Employer Identification No.) |
| of Incorporation or organization) | Classification Code Number |
7956 Gen Luna Street
Quiapo Metro, Manila, Philippines
(Address of principal executive offices and zip code)
(209) 694-4885
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for 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 [X] No [ ]
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] |
| (Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
As of November 5, 2012, there were 810,325 shares of the issuer’s common stock outstanding.
Net Profits Ten Inc.
Form 10-Q
For the Three and Nine Months Ended September 30, 2012
INDEX
FORWARD-LOOKING STATEMENTS
This Report on Form 10-Q contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Reference is made in particular to the description of our plans and objectives for future operations, assumptions underlying such plans and objectives, and other forward-looking statements included in this report. Such statements may be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “believe,” “estimate,” “anticipate,” “intend,” “continue,” or similar terms, variations of such terms or the negative of such terms. Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. Such statements address future events and conditions concerning, among others, capital expenditures, earnings, litigation, regulatory matters, liquidity and capital resources, and accounting matters. Actual results in each case could differ materially from those anticipated in such statements by reason of factors such as future economic conditions, changes in consumer demand, legislative, regulatory and competitive developments in markets in which we operate, results of litigation, and other circumstances affecting anticipated revenues and costs, and the risk factors set forth in our Annual Report on Form 10-K filed on March 27, 2012.
As used in this Form 10-Q, “we,” “us,” and “our” refer to Net Profits Ten Inc., which is also sometimes referred to as the “Company.”
YOU SHOULD NOT PLACE UNDUE RELIANCE ON THESE FORWARD LOOKING STATEMENTS
The forward-looking statements made in this report on Form 10-Q relate only to events or information as of the date on which the statements are made in this report on Form 10-Q. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this report and the documents that we reference in this report, including documents referenced by incorporation, completely and with the understanding that our actual future results may be materially different from what we expect or hope.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
NET PROFITS TEN INC.
(A Development Stage Company)
Balance Sheets
(Unaudited)
| September 30, 2012 | December 31, 2011 | |||||
| ASSETS | ||||||
| CURRENT ASSETS | ||||||
| Cash | $ | - | $ | 44 | ||
| Prepaid expenses | 1,650 | - | ||||
| Total Current Assets | 1,650 | 44 | ||||
| PROPERTY AND EQUIPMENT, Net | 1,064 | 2,354 | ||||
| TOTAL ASSETS | $ | 2,714 | $ | 2,398 | ||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||
| CURRENT LIABILITIES | ||||||
| Accounts payable | $ | 6,530 | $ | 193 | ||
| Related-party payables | 64,169 | 33,506 | ||||
| Total Current Liabilities | 70,699 | 33,699 | ||||
| STOCKHOLDERS’ DEFICIT | ||||||
| Preferred stock, 50,000,000 shares authorized at par value of $0.0001, no shares issued and outstanding | - | - | ||||
| Common stock, 100,000,000 shares authorized at par value of $0.0001, 4,808,000 shares issued and outstanding | 481 | 481 | ||||
| Additional paid-in capital | 46,569 | 40,319 | ||||
| Deficit accumulated during the development stage | (115,035 | ) | (72,101 | ) | ||
| Total stockholders’ deficit | (67,985 | ) | (31,301 | ) | ||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 2,714 | $ | 2,398 | ||
The accompanying notes are an integral part of these financial statements.
1
NET PROFITS TEN INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
| From Inception on | |||||||||||||||
| March 24, 2008 | |||||||||||||||
| For the Three Months Ended | For the Nine Months Ended | Through | |||||||||||||
| September 30, | September 30, | September 30, | |||||||||||||
| 2012 | 2011 | 2012 | 2011 | 2012 | |||||||||||
| REVENUE | $ | - | $ | - | $ | - | $ | - | $ | 10,188 | |||||
| OPERATING EXPENSES | |||||||||||||||
| G&A expenses | 31,302 | 4,187 | 41,644 | 16,135 | 121,385 | ||||||||||
| Depreciation and amortization expenses | 475 | 245 | 1,290 | 995 | 3,838 | ||||||||||
| Total operating expenses | 31,777 | 4,432 | 42,934 | 17,130 | 125,223 | ||||||||||
| NET LOSS | $ | (31,777 | ) | $ | (4,432 | ) | $ | (42,934 | ) | $ | (17,130 | ) | $ | (115,035 | ) |
| BASIC AND DILUTED LOSS PER COMMON SHARE | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.00 | ) | |||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – BASIC AND DILUTED | 4,808,000 | 4,808,000 | 4,808,000 | 4,808,000 | |||||||||||
The accompanying notes are an integral part of these financial statements.
2
NET PROFITS TEN INC.
(A Development Stage Company)
Statements of Stockholders' Deficit
(Unaudited)
| Deficit | |||||||||||||||
| Accumulated | |||||||||||||||
| Additional | During the | Total | |||||||||||||
| Common Stock | Paid-in | Development | Stockholders’ | ||||||||||||
| Shares | Amount | Capital | Stage | Deficit | |||||||||||
| Balances at inception on March 24, 2008 | - | $ | - | $ | - | $ | - | $ | - | ||||||
| Common stock issued to founders for services at $0.0001 per share | 4,000,000 | 400 | - | - | 400 | ||||||||||
| Common stock issued for cash at $0.05 per share | 808,000 | 81 | 40,319 | - | 40,400 | ||||||||||
| Loss from inception through December 31, 2008 | - | - | - | (14,319 | ) | (14,319 | ) | ||||||||
| Balances, December 31, 2008 | 4,808,000 | 481 | 40,319 | (14,319 | ) | 26,481 | |||||||||
| Loss for the year ended December 31, 2009 | - | - | - | - | - | ||||||||||
| Balances, December 31, 2009 | 4,808,000 | 481 | 40,319 | (14,319 | ) | 26,481 | |||||||||
| Loss for the year ended December 31, 2010 | - | - | - | (36,316 | ) | (36,316 | ) | ||||||||
| Balances, December 31, 2010 | 4,808,000 | 481 | 40,319 | (50,635 | ) | (9,835 | ) | ||||||||
| Loss for the year ended December 31, 2011 | - | - | - | (21,466 | ) | (21,466 | ) | ||||||||
| Balances, December 31, 2011 | 4,808,000 | 481 | 40,319 | (72,101 | ) | (31,301 | ) | ||||||||
| Forgiveness of debt from former directors | - | - | 6,250 | - | 6,250 | ||||||||||
| Loss for the nine months ended September 30, 2012 | - | - | - | (42,934 | ) | (42,934 | ) | ||||||||
| Balances, September 30, 2012 | 4,808,000 | $ | 481 | $ | 46,569 | $ | (115,035 | ) | $ | (67,985 | ) | ||||
The accompanying notes are an integral part of these financial statements.
3
NET PROFITS TEN INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
| From Inception on | |||||||||
| For the Nine Months Ended | March 24, 2008 Through | ||||||||
| September 30, | September 30, | ||||||||
| 2012 | 2011 | 2012 | |||||||
| OPERATING ACTIVITIES | |||||||||
| Net loss | $ | (42,934 | ) | $ | (17,130 | ) | $ | (115,035 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||
| Depreciation and amortization expenses | 1,290 | 995 | 3,838 | ||||||
| Changes in operating assets and liabilities: | |||||||||
| Prepaid expenses | (1,650 | ) | 131 | (1,650 | ) | ||||
| Accounts payable | 6,337 | (5,825 | ) | 6,530 | |||||
| Net Cash Used in Operating Activities | (36,957 | ) | (21,829 | ) | (106,317 | ) | |||
| INVESTING ACTIVITIES | |||||||||
| Purchase of property and equipment | - | - | (4,902 | ) | |||||
| Net Cash Used in Investing Activities | - | - | (4,902 | ) | |||||
| FINANCING ACTIVITIES | |||||||||
| Proceeds from common stock issuances | - | - | 40,800 | ||||||
| Proceeds from related-party payables | 36,913 | 19,499 | 70,419 | ||||||
| Net Cash Provided by Financing Activities | 36,913 | 19,499 | 111,219 | ||||||
| NET (DECREASE) IN CASH | (44 | ) | (2,330 | ) | - | ||||
| CASH AT BEGINNING OF PERIOD | 44 | 2,392 | - | ||||||
| CASH AT END OF PERIOD | $ | - | $ | 62 | $ | - | |||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | |||||||||
| Cash paid for: | |||||||||
| Interest | $ | - | $ | - | $ | - | |||
| Income Taxes | - | - | - | ||||||
| Forgiveness of debt from former directors | $ | 6,250 | $ | - | $ | 6,250 | |||
The accompanying notes are an integral part of these financial statements.
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NET PROFITS TEN INC.
(A Development Stage Company)
Notes to the Financial Statements
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Net Profits Ten Inc. (the “Company”) was incorporated in the State of Nevada on March 24, 2008. The Company is engaged in offering interactive software products for the creation of an interactive digital yearbook designed for fundraising for the military. During the year ended December 31, 2008, the Company generated revenues from its planned operations; however, the Company is classified as a development stage company since it has earned only nominal amounts of revenue and is devoting most of its efforts to developing its website, finalizing the design and development of its software, and raising capital.
On September 1, 2012, the Company entered into an Asset Purchase Agreement (the “Agreement”) with World Moto (Thailand) Co., Ltd. World Moto a corporation established under the laws of the Kingdom of Thailand. See (Note 4).
Basis of Presentation
The unaudited financial statements as of September 30, 2012 and for the three and nine months ended September 30, 2012 and 2011 and for period from inception (March 24, 2008) through September 30, 2012 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information in accordance with Securities and Exchange Commission (“SEC”) Regulation S-X rule 8-03 and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s last Annual Report filed with the SEC on Form 10-K for the year ended December 31, 2011. In the opinion of management, the unaudited financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include normal recurring adjustments, necessary to present fairly the financial position as of September 30, 2012 and the results of operations and cash flows for the periods then ended. The financial data and other information disclosed in these notes to the interim financial statements related to the period are unaudited. The results for the three month and nine month periods ended September 30, 2012, are not necessarily indicative of the results to be expected for any subsequent quarters or for the entire year ending December 31, 2012. Notes to the unaudited interim financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year as reported in the Form 10-K have been omitted.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Subsequent Events
The Company’s management reviewed all material events through the issuance date of these financial statements for subsequent event disclosure consideration.
Recent Accounting Pronouncements
Management has considered all recent accounting pronouncements issued since the last audit of our financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
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NET PROFITS TEN INC.
(A Development Stage Company)
Notes to the Financial Statements
(Unaudited)
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which contemplate continuation of the Company as a going concern. However, the Company has a working capital deficit of $69,049 at September 30, 2012, has generated revenues of only $10,188 since inception and has an accumulated deficit of $115,035 at September 30, 2012. The Company currently has limited liquidity and has not completed its efforts to establish a stabilized source of revenues sufficient to cover operating costs over an extended period of time. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
Management anticipates that the Company will be dependent, for the near future, on additional investment capital, primarily from its shareholders, to fund operating expenses. The Company intends to position itself so that it may be able to raise additional funds through the capital markets. In light of management’s efforts, there are no assurances that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.
NOTE 3 – RELATED-PARTY PAYABLES
Various expenses of the Company, including general and administrative expenses and professional fees, have been paid for by a related party. The related party payable totals $64,169 at September 30, 2012, bears no interest, is unsecured, and is due upon demand.
On June 28, 2012, a total payable of $6,250 due to certain former directors of the Company was forgiven upon their resignation. This amount was recognized by the Company as contributed capital.
NOTE 4 – ASSET PURCHASE AGREEMENT
On September 1, 2012, the Company entered into an Asset Purchase Agreement (the “Agreement”) with World Moto (Thailand) Co., Ltd., a corporation established under the laws of the Kingdom of Thailand.
Pursuant to the agreement, the Company has agreed to purchase from World Moto substantially all of the intellectual property and certain other specific assets (the “Assets”). The consideration to be paid for the Assets, at the closing, includes the issuance of an aggregate of shares of common stock representing 60% of the outstanding shares of the Company’s common stock immediately after closing and the assumption of certain outstanding debt which will be converted into shares of common stock at the closing.
Prior to the closing, the Company will engage the general services of World Moto for the amount of $17,000 to be paid on September 1, 2012 (paid) and $10,000 to be paid on the first of each month commencing October 1, 2012 ($10,000 paid on October 1, 2012), until the earlier of the closing date or December 1, 2012, for a maximum of $47,000 in the aggregate.
As a condition to the closing, the Company will raise up to $225,000 by selling shares of common stock to investors on a private placement basis, at a price and valuation to be determined. After the closing date, the Company will use its reasonable commercial efforts to raise $1,700,000 in equity capital.
NOTE 5 – SUBSEQUENT EVENTS
Subsequent to our quarter ended September 30, 2012, on November 2, 2012, Mr. Liam, our President, Director and a stockholder, surrendered 3,997,675 shares of the Company’s common stock for cancellation.
6
Item 2. Management’s Discussion and Analysis or Plan of Operations.
Some of the statements contained in this report discuss future expectations, contain projections of results of operations or financial condition, or state other “forward-looking” information. The words “believe,” “intend,” “plan,” “expect,” “anticipate,” “estimate,” “project,” “goal” and similar expressions identify such a statement was made. These statements are subject to known and unknown risks, uncertainties, and other factors that could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on various factors and is derived using numerous assumptions. Factors that might cause or contribute to such a discrepancy include, but are not limited to the risks discussed in this and our other Securities and Exchange Commission (“SEC”) filings. We do not take any responsibility to update forward-looking information to reflect actual results or changes in assumptions or other factors that could affect those statements except as otherwise provided by law. Future events and actual results could differ materially from those expressed in, contemplated by, or underlying such forward-looking statements.
Business Overview
We were incorporated on March 24, 2008 in the State of Nevada. We are focused on marketing and distributing user-friendly interactive yearbook software for the military. We have been doing business as Mil Yearbook. Our offices are currently located at: 7956 Gen Luna Street, Quiapo Metro, Manila, Philippines. Our telephone number is 1-209-694-4885. We have secured a domain name –www.netprofitsten.com, which is functional but requires further development as of the date of this report, which website includes information we do not desire to be incorporated by reference herein.
Objectives
We are in the business of marketing and distributing user-friendly interactive yearbook software for the military. The software is planned to allow our customers to create and burn their own interactive digital memories on CD/DVD, as a “Mil Yearbook“, assuming we are able to complete the design and development of the software. Once a CD/DVD is created, customers will be able to sell this Mil Yearbook as a fundraising venture for their particular organization (see also the flow chart below). They will be able to watch and play with their digital memories on a personal computer or DVD, or sell it to their friends and family. Our software is planned to allow for uploading photos, video, music and text to their Mil Yearbook. The finalization and design and development of our software is subject to certain risks and uncertainties, and we may not be able to execute on our business plan and/or complete the development of the software in the future.
Assuming we are able to complete our business plan and finalize the development and design of our software, the software will enable the military, as well as other military related organizations (including veterans associations, any other Military related organizations as defined below in the description of the Licensing Agreement) to turn their videos, music and digital photos into an interactive yearbook on CD/DVD, which may include pictures and videos featuring vacations, field trips, sporting events, or for military personnel, may include pictures and videos of such personnel’s basic training, special ops, war games and other military activities for their friends and family to view. Our target market is primarily the military, who may desire to capture their military, base or basic training life or events on CD/DVD’s who wish to capture their memories, trips, and events, in a fun and interesting way, and to be able to save those memories to watch and play for years to come. Our software is also intended to serve as a way for groups and organizations to raise money through the sale of the CD/DVD’s created with our software.
Moving forward we plan to complete our website (which is currently functional, but which we plan to further refine and expand) and the development of our product, which is functional, but requires further development to include the processes and modules described below. We currently market our Mil Yearbook product on google.com, but plan to expand such marketing efforts in the future, funding permitting, as described below.
Below is a flow chart describing in greater detail the Company’s planned distribution steps for its Mil Yearbook software:
For example: each CD/DVD costs less than a $1 to produce and the Company believes that each can possibly be sold for approximately $12-$25 per unit, with each CD being sold for approximately $12 and each DVD (which holds more information being sold for $20). The above sample prices represent the Company’s estimates and beliefs of the fair values of the resulting products; however, the Company does not have any evidence that such products will be able to be sold for those prices, and final prices will be determined by individual customers, based on their own estimation of the value of the product created and the ultimate market for such product. Each group will keep 100% of the profits of any sales, and as such, the ultimate price at which customers determine to sell the products will not have any effect on the Company’s revenues.
7
Status of Software Development
We currently have made limited sales of a basic stripped down operational version for our Mil Yearbook software based on the Technology (defined below). The software is however currently being further refined to include additional capabilities which may include a private-chat like feature as well as the ability of the software to be used by multiple parties (i.e., so that more than one person can work on the same project), which the programmer engaged by the Company as provided below under “Material Agreements,” is in the process of completing.
Material Agreements
In June 2010, we entered into an agreement with a programmer, pursuant to which the programmer is to complete the development of the Mil Yearbook software and the Company’s website in consideration for an aggregate of $3,500 which was due and payable by June 14, 2010, and which funds have been paid to date, and $4,500 which was due and payable by December 1, 2010, subject to the programmer completing the development of the Mil Yearbook software as described in the agreement. The Company had not remitted payment to the unrelated third party as of the date of this filing, since the programmer had not completed the development of the software. The Company will remit the $4,500 to the third party upon the completion of the development of the software.
On October 11, 2010, the Company entered into a Licensing Agreement (the “Licensing Agreement”) with RN Consulting Services, d/b/a YearBook Alive Software, an entity controlled by Ruthy Navon, our promoter and former Secretary (“RN Consulting”). The Licensing Agreement amended, replaced and superseded a prior Reseller Agreement entered into between RN Consulting (in the name of Yearbook Alive Software) and the Company on or around March 1, 2008.
Pursuant to the Licensing Agreement, RN Consulting agreed to provide us an exclusive, limited, non-transferable (except in connection with the sale of our products) license to use, market, sell and distribute certain software which RN Consulting owns, which allows users to create and burn interactive digital memories on CD/DVD (the “Technology”) in software and products we sell and plan to sell to the Military (the “License”). “Military” is defined in the Licensing Agreement as military personnel, servicepersons, persons in the military reserves; persons in training for a career in and/or service in the military (including cadets and the ROTC (Reserve Officers’ Training Corp); military organizations (located throughout the world), organizations with functions similar to the military such as the coast guard, national guard or foreign legion); and current, former or retired military personnel.
In December 2010, the Company entered into a First Addendum to the Licensing Agreement, effective as of the effective date of the Licensing Agreement, to clarify and confirm that RN Consulting would provide technical software support to the Company and to customers of the Company, at no cost to the Company.
We have used and plan to continue to use the Technology (which RN Consulting, through YearBook Alive, mainly markets to schools and school related organizations) as a framework on which to add additional modules and functions and to expand the functionality of such Technology in order to better market our products to and make such products more appealing to the Military. The License also provides us the right to use any and all of RN Consulting’s trademarks and tradenames in connection with the marketing, advertising and sale of products during the term of the License.
Pursuant to the Licensing Agreement, no fees were due to RN Consulting under the License until July 31, 2011, subsequent to which we agreed to pay RN Consulting 10% of any of our net sales (i.e., total sales after taxes) related to the use of the Technology, payable monthly in arrears during the term of the License. No sales have occurred to date. The License terminates immediately upon the termination of the Licensing Agreement.
The License remains in effect until the earlier of (a) the mutual written consent of the parties; (b) the occurrence of any act, which by law, would require the License to terminate; (c) the bankruptcy of either party; or (d) upon thirty days written notice by a non-breaching party, upon the material breach of a material obligation of or the gross negligence in connection with the fulfillment of the duties of such party in connection with the Licensing Agreement by the other party, provided that such breaching party does not cure such breach within such 30 day notice period. Upon termination of the License, we are provided the right of ownership to any refinements, additional modules, enhancements or modifications to the Technology which we create, provided that such refinements do not otherwise infringe on the License.
Pursuant to the Licensing Agreement, and in an effort to avoid conflicts of interest and competition between the Company and RN Consulting, we agreed to refer any non-Military customers or potential customers to RN Consulting and RN Consulting agreed to refer any Military customers or potential customers to us. Furthermore, both parties agreed not to compete with the other.
We have earned only minimal revenue to date. We do not anticipate earning significant revenues from our business operations until such time as we are able to successfully market, distribute and sell our interactive military fundraising software called Mil Yearbook. We are presently in the development stage of our business and we can provide no assurance that we will be able to market our interactive digital software to the military, as well as other military organizations who routinely undertake fund raising activities throughout the United States and then Australia and Europe. Accordingly, we must raise cash from sources other than our operations in order to implement our business and marketing plans.
8
However, to date, we have been unable to raise additional funds to implement our operations, and we do not believe that we currently have sufficient resources to do so without additional funding. As a result of the current difficult economic environment and our lack of funding to implement our business plan, our Board of Directors has begun to analyze strategic alternatives available to our Company to continue as a going concern. Such alternatives include raising additional debt or equity financing or consummating a merger or acquisition with a partner that may involve a change in our business plan.
Although our Board of Directors’ preference would be to obtain additional funding to market our interactive digital software to the military, the Board believes that it must consider all viable strategic alternatives that are in the best interests of our stockholders. Such strategic alternatives include a merger, acquisition, share exchange, asset purchase, or similar transaction in which our present management will no longer be in control of our Company and our business operations will be replaced by that of our transaction partner. We believe we would be an attractive candidate for such a business combination due to the perceived benefits of being a publicly registered company, thereby providing a transaction partner access to the public marketplace to raise capital.
Asset Purchase Agreement with World Moto
We have had preliminary discussions with potential business combination partners, and as disclosed in our Current Report on Form 8-K filed on September 10, 2012, we have entered into a definitive agreement to engage in a strategic transaction with World Moto (Thailand) Co. Ltd., as discussed below. However, such transaction has not yet closed. A transaction with World Moto, or any other such business combination and the selection of a partner for such a business combination involves certain risks, including analyzing and selecting a business partner that is compatible to engage in a transaction with us or has business operations that are or will prove to be profitable. If we do not close the transaction with World Moto, are unable to locate another suitable business combination partner and are otherwise unable to raise additional funding, we will likely be forced to cease business operations.
On September 1, 2012, we entered in an Asset Purchase Agreement (the “Agreement”) with World Moto (Thailand) Co., Ltd., a corporation established under the laws of the Kingdom of Thailand, Chris Ziomkowski, the Chief Technical Officer of World Moto and Paul Giles, the Chief Executive Officer of World Moto. Pursuant to the agreement, the Company has agreed to purchase from World Moto substantially all of the intellectual property and certain other specific assets related to World Moto’s Moto-Meters (the “Assets”). As part of the transaction, Messrs. Ziomkowski and Giles will be the continuing management of the Company. Moto-Meters are devices that provide metering of rides on motor scooters and similar types of transportation vehicles and are being developed by World Moto. Pursuant to the Asset Purchase Agreement, we agreed, among other things, to issue to World Moto an aggregate of shares of common stock representing 60% of the outstanding shares of the Company’s common stock immediately after closing the transaction.
As of the date of this Quarterly Report on Form 10-Q, we have not closed the asset purchase transaction underlying the Agreement.
Share Cancellation
Subsequent to our quarter ended September 30, 2012, on November 2, 2012, Mr. Liam, our President, Director and a stockholder, surrendered 3,997,675 shares of the Company’s common stock for cancellation.
Results of Operations
Our results of operations should be read in conjunction with our unaudited financial statements and notes thereto included elsewhere in this report and the audited financial statements and the notes thereto included in our Form 10-K for the year ended December 31, 2011.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2012 COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2011
We generated no revenues for the three months ended September 30, 2012 and 2011. We have generated a total of $10,188 of revenues since inception.
We had operating expenses of $31,777 for the three months ended September 30, 2012, compared to $4,432 in operating expenses for the three months ended September 30, 2011, the increase was due us incurring more consulting and professional expenses during the three months ended September 30, 2012. We had a net loss of $31,777 for the three months ended September 30, 2012 compared to a net loss of $4,432 in 2011.
9
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER 30, 2011
We generated no revenues for the nine months ended September 30, 2012 and 2011. We have generated a total of $10,188 of revenues since inception.
We had operating expenses of $42,934 for the nine months ended September 30, 2012, compared to $17,130 in operating expenses for the nine months ended September 30, 2011, the increase was due us incurring more consulting and professional expenses during the nine months ended September 30, 2012. We had a net loss of $42,934 for the nine months ended September 30, 2012 compared to a net loss of $17,130 in 2011. We anticipate our operating expenses will increase as we implement our business plan.
LIQUIDITY AND CAPITAL RESOURCES
We have raised $400 from the sale of stock to our officer and Directors and $40,400 through a private placement to 38 non-affiliated investors. At September 30, 2012, we had a working capital deficit of $69,049, which represented $1,650 of prepaid expenses offset by $70,699 of current liabilities, $6,530 of accounts payable and $64,169 of advances from related parties, which accrue no interest and are payable on demand. We had a deficit accumulated during the development stage of $115,035 as of September 30, 2012.
We had net cash used in operating activities of $36,957 for the nine months ended September 30, 2012, which mainly consisted of the net loss of $42,934 for the nine months ended September 30, 2012, adjusted by $1,290 of non-cash depreciation expense, $1,650 increase in prepaid expenses, and $6,337 of increase in accounts payable.
We had cash provided by financing activities of $36,913 for the nine months ended September 30, 2012, which was solely due to advances from related party payables.
In the opinion of our management, funds currently available will not satisfy our working capital requirements for the next twelve months. Estimated funding required during the twelve-month period is $40,000. Given our cash position of $Nil as of September 30, 2012, we will experience a shortfall in the next twelve months. How long Net Profits Ten Inc. will be able to satisfy its cash requirements depends on how quickly we can generate revenue and how much revenue can be generated.
In June 2008, we sold an aggregate of 808,000 shares of our common stock for aggregate consideration of $40,400 ($0.05 per share) to 38 offshore investors.
We have not generated significant revenues from our operations to date. We will require additional funds to implement our plans and anticipate the need for approximately $40,000 over the next 12 months to continue our operations and pay expenses associated with us being a public reporting company. These funds may be raised through equity financing, debt financing, or other sources, which may result in the dilution in the equity ownership of our shares. We will also need more funds if the costs of the development of our website are greater than we have budgeted. We will also require additional financing to sustain our business operations if we are not successful in generating significant revenues. We currently do not have any arrangements for further financing and we may not be able to obtain financing when required. Our future is dependent upon our ability to obtain financing.
Our continuation is dependent upon us raising additional capital. In this regard we have raised additional capital through private placements, but we will still require additional funds to continue our operations and plans.
The continuation of our business is dependent upon us obtaining further financing, further development of our software and website, a successful marketing and promotion program, attracting and, further in the future, achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
There are no assurances that we will be able to obtain further funds required for our continued operations. We will pursue various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.
Off-Balance Sheet Arrangements
None.
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Recent Accounting Pronouncements
For the three month period ended September 30, 2012, there were no accounting standards or interpretations issued that are expected to have a material impact on our financial position, operations or cash flows.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1) .
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we have carried out an evaluation of the effectiveness of the design and operation of our Company’s disclosure controls and procedures as of the end of the period covered by this quarterly report, being September 30, 2012. This evaluation was carried out under the supervision and with the participation of our Company’s management, including our President, Principal Executive Officer and Principal Financial Officer. Based upon that evaluation, our President, Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures are not effective as of the end of the period covered by this report due to the material weaknesses described in Management’s Report on Internal Control over Financial Reporting included in our annual report on Form 10-K for the year ended December 31, 2011. This conclusion is based on findings that constituted material weaknesses. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s interim financial statements will not be prevented or detected on a timely basis.
In performing the above-referenced assessment, our management identified the following material weaknesses:
(1) The Company has inadequate segregation of duties consistent with control objectives.
(2) The Company has insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of GAAP and SEC disclosure requirements.
Our management feels the weaknesses identified above have not had any material affect on our financial results. However, we are currently reviewing our disclosure controls and procedures related to these material weaknesses and expect to implement changes in the near term, including identifying specific areas within our governance, accounting and financial reporting processes to add adequate resources to potentially mitigate these material weaknesses.
Our management team will continue to monitor and evaluate the effectiveness of our internal controls and procedures and our internal controls over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Changes in Internal Controls Over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the quarterly period ended September 30, 2012 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within any company have been detected.
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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 any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.
Item 1A. Risk Factors.
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
Item 6. Exhibits.
| Exhibit | Description | |
| No. | ||
| 3.1 (1) | Articles of Incorporation | |
| 3.2 (1) | Bylaws | |
| 10.1 (1) | Programmer Agreement | |
| 10.2 (2) | Independent Contractor Agreement with Ruthy Navon | |
| 10.3 (3) | Licensing Agreement with RN Consulting Services, d/b/a Yearbook Alive Software | |
| 10.4 (4) | First Addendum to License Agreement | |
| 10.5 (5) | Asset Purchase Agreement by and among Net Profits Ten Inc., World Moto (Thailand) Co., Ltd., Chris Ziomkowski, and Paul Giles | |
| 31.1* | ||
| 31.2* | ||
| 32* | ||
| 101.INS | XBRL Instance Document** | |
| 101.SCH | XBRL Taxonomy Extension Schema** | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase** | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase** | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase** | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase** |
* Filed herewith.
** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.
(1) Filed as exhibits to the Company’s Registration Statement on Form S-1, filed with the Commission on June 25, 2010, and incorporated herein by reference.
(2) Filed as an exhibit to the Company’s Registration Statement on Form S-1/A, filed with the Commission on August 13, 2010, and incorporated herein by reference.
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(3) Filed as an exhibit to the Company’s Registration Statement on Form S-1/A, filed with the Commission on October 27, 2010, and incorporated herein by reference.
(4) Filed as an exhibit to the Company’s Registration Statement on Form S-1/A, filed with the Commission on December 16, 2010, and incorporated herein by reference.
(5) Filed as an exhibit to the Company’s Current Report on Form 8-K, filed with the Commission on September 10, 2012, and incorporated herein by reference.
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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.
| NET PROFITS TEN INC. | |
| Dated: November 7, 2012 | By:/s/ Marlon Liam |
| Marlon Liam | |
| President, Chief Executive Officer, Secretary, Treasurer, | |
| Chief Financial Officer and Director | |
| (Principal Executive Officer, Principal Financial Officer and | |
| Principal Accounting Officer) |
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