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 requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. On an on-going basis, management evaluates these estimates and assumptions, including but not limited to those related to revenue recognition and the impairment of long-lived assets, goodwill and other intangible assets. Management bases its estimates on historical experience and various other assumptions 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 that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The Company follows the provisions of ASC 718, “Share-Based Payment.” which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. The Company uses the Black-Scholes pricing model for determining the fair value of stock based compensation.
The Company accounts for non-employee share-based awards based upon ASC 505-50, “Equity-Based Payments to Non-Employees.” ASC 505-50 requires the costs of goods and services received in exchange for an award of equity instruments to be recognized using the fair value of the goods and services or the fair value of the equity award, whichever is more reliably measurable. The fair value of the equity award is determined on the measurement date, which is the earlier of the date that a performance commitment is reached or the date that performance is complete. Generally, our awards do not entail performance commitments. When an award vests over time such that performance occurs over multiple reporting periods, we estimate the fair value of the award as of the end of each reporting period and recognize an appropriate portion of the cost based on the fair value on that date. When the award vests, we adjust the cost previously recognized so that the cost ultimately recognized is equivalent to the fair value on the date the performance is complete.
The Company recognizes the cost associated with share-based awards that have a graded vesting schedule on a straight-line basis over the requisite service period of the entire award.
The Company recognizes revenue on arrangements in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements’ and No. 104, “Revenue Recognition”. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.
Product sales and shipping revenues, net of promotional discounts, rebates, and return allowances, are recorded when the products are shipped and title passes to customers. Retail sales to customers are made pursuant to a sales contract that provides for transfer of both title and risk of loss upon our delivery to the carrier. Return allowances, which reduce product revenue, are estimated using historical experience. Revenue from product sales and services rendered is recorded net of sales taxes. Amounts received in advance for subscription services, are deferred and recognized as revenue over the subscription term.
The most important metric by which we judge the Company’s performance now and in the near term is generating revenues on the top line and sales growth. Our current commitment to develop and deliver quality products means that, for the near future, bottom line profitability will be a poor indicator of our success.
Since investors are certain to be the primary, near term source of liquidity to support our development and marketing efforts, our liquidity will be driven by our ability to attract repeat investments from current shareholders and to find new ones. All investors must fully understand that an investment in our company is of high risk and they can lose their total invested capital.
Our primary marketing challenge for the coming twelve (12) months is to implement and “go live” with our initial networking applications to achieve market awareness and acceptance. Additionally, management is seeking new acquisitions to complement existing products.
Revenues
These forward-looking statements, pertaining to revenues, are based on our management’s current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. You should not rely upon these forward-looking statements as predictions of future events because we cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. As our revenues commence, we plan to invest in marketing and sales by increasing the number of direct sales throughout our web portal to build brand awareness. We expect that in the future, marketing and sales expenses will increase in absolute dollars commencing in the second quarter of 2014. We do not expect our revenues to increase significantly until third quarter of 2014.
General and Administrative Expenses
We expect that general and administrative expenses associated with executive compensation will substantially increase in the future as our products commence their marketing potential. In addition, we believe in the last part of the 2014 fiscal year that the compensation packages required to attract the senior executives of the Company will require management to execute against its business plan which will increase our total expenses, including, but not limited to, general and administrative, legal, accounting, marketing and compensation.
Summary of Condensed Results of Operations
Any measurement and comparison of revenues and expenses from continuing operations should not be considered necessarily indicative or interpolated as the trend to forecast our future revenues and results of operations.
Results for the Three Months Ended November 30, 2013
Revenues. The Company’s revenues for the three months ended November 30, 2013 were $-0-. Additionally, the Company has not had any revenues from inception (June 2, 2008) to November 30, 2013.
Legal and Accounting Expenses.Legal and Accounting expenses for the three months ended November 30, 2013 were $6,550 as compared to $9,170 for the three months ended November 30, 2012. These increase costs of legal and accounting expenses were a direct result of product development commencing an activity phase whereby additional expenses are required.
General and Administrative Expenses. General and administrative expenses for the three months ended November 30, 2013 were $2,225 as compared to $5,953 for the three months ended November 30, 2012. These expenses are normal and reoccurring for our Company as a development stage entity.
Consulting and Software Development. The expense for the three (3) months ended November 30, 2013 was $132,500 as compared to $42,900 for the three (3) months ended November 30, 2012. These increase costs of $89,600 were a direct result of the increased software development activity.
Net Loss. Net loss for the three months ended November 30, 2013 was $141,275 as compared to $59,699 for the three months ended November 30, 2012. The substantial increase of net loss of $81,576 was a result of the entering into the company’s development stage of internet and mobile applications.
Impact of Inflation
We believe that the rate of inflation has had negligible effect on our operations. We believe we can absorb most, if not all, increased non-controlled operating costs by increasing sales prices, whenever deemed necessary and by operating our Company in the most efficient manner possible.
Liquidity and Capital Resources
The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. Since its inception, the Company has been funded by advances from related parties, conversion of debt to common shares and the sale of common shares to related parties and others.
As of November 30, 2013, total current assets were $253.
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As of November 30, 2013, total current liabilities were $427,913, which consisted of $341,588 for accrued expenses and $84,825 of advances from related parties. As of August 31, 2013, total current liabilities were $316,638, which consisted of $265,138 of accrued expenses, $50,000 advances from related parties and $1,500 of accounts payable. We had net working capital deficit of $427,660 as of November 30, 2013, compared to net working deficit capital of $316,385 at August 31, 2013.
During the three months ended November 30, 2013, our operating activities used cash of $-0-. All of our expenses were paid by our officers.
Material Commitments
The Company does not have any material commitments as of November 30, 2013.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements or any anticipate entering into any off-balance 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 investors.
Recent Accounting Pronouncements
The company has adopted all recently issued accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable for a smaller reporting company.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Exchange Act. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on his evaluation as of the end of the period covered by this report, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were not effective such that the information relating to our company, required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting. There have been no changes in our internal control over financial reporting during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceeding.
None.
Item 1A. Risk Factors.
Not required.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Subsequent to November 30, 2014 the Company issued 1,500,000 shares of the common stock in the Company at $0.025 per share for compensation to consultants and officers the total value of shares issued was $37,500.
Subsequent to November 30, 2014 we issued 1,000,000 shares of common stock for cash at $0.025 per share. Total proceeds received were $25,000.
Management believes the above shares of common stock were issued pursuant to the exemption from registration under Section 4(2) of the Securities Act of 1933 as amended.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits
(a) Exhibits
| |
Exhibit No. | Description |
| |
31.1 | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer |
31.2 | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer |
32.1 | Section 1350 Certification of Chief Executive Officer |
32.2 | Section 1350 Certification of Chief Financial Officer |
101 * | XBRL data files of Financial Statements and Notes contained in this Quarterly Report on Form 10-Q. |
* In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.”
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.
| | |
| FIRST LEVEL ENTERTAINMENT GROUP, INC. |
| | |
Date: May 30, 2014 | By: | /s/ Steve Adelstein |
| | Steve Adelstein |
| | Chief Executive Officer |
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