UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10–Q
| (Mark One) |
| [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended February 28, 2014
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ________________
Commission file number: 333-187782
| GLOBAL SYSTEM DESIGNS, INC. | ||
| (Exact name of registrant as specified in its charter) | ||
| Nevada | 46-1669753 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| 24123 Peachland Blvd., C-4, #106, Port Charlotte, FL 33954 | ||
| (Address of principal executive offices) | ||
| 941-613-9858 | ||
| (Registrant’s telephone number, including area code) | ||
| (Former name, former address and former fiscal year, if changed since last report) | ||
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 (Check one).
| 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 [ ] No [X]
As of April 11, 2014 there were 5,825,000 shares of the issuer’s common stock, par value $0.0001, outstanding.
GLOBAL SYSTEM DESIGNS, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 2014
TABLE OF CONTENTS
| Page | |||
| PART I – FINANCIAL INFORMATION | |||
| ITEM 1. | FINANCIAL STATEMENTS | 3 | |
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 14 | |
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 19 | |
| ITEM 4. | CONTROLS AND PROCEDURES | 19 | |
| PART II – OTHER INFORMATION | |||
| ITEM 1. | LEGAL PROCEEDINGS | 20 | |
| ITEM 1A. | RISK FACTORS | 20 | |
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 20 | |
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 20 | |
| ITEM 4. | MINE SAFETY DISCLOSURES | 20 | |
| ITEM 5. | OTHER INFORMATION | 20 | |
| ITEM 6. | EXHIBITS | 21 | |
| SIGNATURES | 22 | ||
2
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC"), and should be read in conjunction with the audited financial statements and notes thereto contained in our company's Annual Report, Form 10-K filed with the SEC on February 28, 2014. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year ended November 30, 2014.
INDEX TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS
For the Period of November 27, 2012 (Date of Inception) to February 28, 2014:
(Unaudited)
| Page | |
| Consolidated Balance Sheets | 4 |
| Consolidated Statements of Operations and Comprehensive Loss | 5 |
| Consolidated Statements of Stockholders' Equity | 6 |
| Consolidated Statements of Cash Flows | 7 |
| Notes to the Consolidated Financial Statements | 8 |
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GLOBAL SYSTEM DESIGNS, INC.
(A Development Stage Company)
Consolidated Balance Sheets
| February 28, | November 30, | |||||||
| 2014 | 2013 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 22,214 | $ | 22,971 | ||||
| Accounts receivable, less allowance of $0 | 5,316 | 7,757 | ||||||
| Prepaid expenses | 1,412 | 12,000 | ||||||
| Total current assets | 28,942 | 42,728 | ||||||
| TOTAL ASSETS | $ | 28,942 | $ | 42,728 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| LIABILITIES | ||||||||
| Current Liabilities | ||||||||
| Accounts Payable and accrued liabilities | $ | 2,960 | $ | 6,324 | ||||
| Total current liabilities | 2,960 | 6,324 | ||||||
| TOTAL LIABILITIES | 2,960 | 6,324 | ||||||
| COMMITMENTS AND CONTINGENCIES (NOTE 7) | - | - | ||||||
| STOCKHOLDERS' EQUITY | ||||||||
| Preferred stock, 15,000,000 shares authorized; par value $0.0001, none issued and outstanding | - | - | ||||||
| Common stock, 100,000,000 shares authorized; par value $0.0001, 5,825,000 shares issued and outstanding | 583 | 583 | ||||||
| Additional paid-in capital | 55,117 | 55,117 | ||||||
| Deficit accumulated during the development state | (29,163 | ) | (19,194 | ) | ||||
| Accumulated other comprehensive loss | (555 | ) | (102 | ) | ||||
| Total Stockholders' Equity | 25,982 | 36,404 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 28,942 | $ | 42,728 | ||||
The accompanying notes to the consolidated financial statements are an integral part of these statements.
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GLOBAL SYSTEM DESIGNS, INC.
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
| November 27, 2012 | ||||||||||||
| (inception) through | ||||||||||||
| Three Months Ended February 28, | February 28, | |||||||||||
| 2014 | 2013 | 2014 | ||||||||||
| REVENUE | $ | 4,825 | $ | - | $ | 11,791 | ||||||
| OPERATING EXPENSES | ||||||||||||
| General and administrative | 128 | 61 | 3,063 | |||||||||
| Professional fees | 14,666 | 3,630 | 37,891 | |||||||||
| Total Operating Expenses | 14,794 | 3,691 | 40,954 | |||||||||
| Net loss from operations | (9,969 | ) | (3,691 | ) | (29,163 | ) | ||||||
| Other Income and Expense | - | - | - | |||||||||
| Provision for income taxes | - | - | - | |||||||||
| Net Loss | $ | (9,969 | ) | $ | (3,691 | ) | $ | (29,163 | ) | |||
| Other Comprehensive Income (Loss): | ||||||||||||
| Foreign currency translation adjustments | (453 | ) | - | (555 | ) | |||||||
| Total Comprehensive Loss | $ | (10,422 | ) | $ | (3,691 | ) | $ | (29,718 | ) | |||
| Basic loss per share | $ | (0.00 | ) | $ | (0.00 | ) | ||||||
| Weighted average number of common shares outstanding | 5,825,000 | 2,322,222 | ||||||||||
The accompanying notes to the consolidated financial statements are an integral part of these statements.
5
GLOBAL SYSTEM DESIGNS, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
Period From November 27, 2012 (Inception) To February 28, 2014
| Deficit | ||||||||||||||||||||||||
| Accumulated | Accumulated | |||||||||||||||||||||||
| Additional | During the | Other | Total | |||||||||||||||||||||
| Common Stock | Paid in | Development | Comprehensive | Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Stage | Loss | Equity | |||||||||||||||||||
| Balance as of November 27, 2012 (Inception) | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||
| Founders' shares issued at $0.001 per share | 950,000 | 95 | 855 | - | - | 950 | ||||||||||||||||||
| Net loss | - | - | - | (950 | ) | - | (950 | ) | ||||||||||||||||
| Balance, November 30, 2012 | 950,000 | 95 | 855 | (950 | ) | - | - | |||||||||||||||||
| Founders' shares issued at $0.002 per share | 2,375,000 | 238 | 4,512 | - | - | 4,750 | ||||||||||||||||||
| Common shares issued for cash at $0.02 per share | 2,500,000 | 250 | 49,750 | - | - | 50,000 | ||||||||||||||||||
| Foreign currency translation adjustments | (102 | ) | (102 | ) | ||||||||||||||||||||
| Net loss | - | - | - | (18,244 | ) | - | (18,244 | ) | ||||||||||||||||
| Balance, November 30, 2013 | 5,825,000 | $ | 583 | $ | 55,117 | $ | (19,194 | ) | $ | (102 | ) | $ | 36,404 | |||||||||||
| Foreign currency translation adjustments | - | - | - | - | (453 | ) | (453 | ) | ||||||||||||||||
Net loss (unaudited) | - | - | - | (9,969 | ) | - | (9,969 | ) | ||||||||||||||||
Balance, February 28, 2014 (unaudited) | 5,825,000 | $ | 583 | $ | 55,117 | $ | (29,163 | ) | $ | (555 | ) | $ | 25,982 | |||||||||||
The accompanying notes to the consolidated financial statements are an integral part of these statements.
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GLOBAL SYSTEM DESIGNS, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
| November 27, 2012 | ||||||||||||
| (inception) through | ||||||||||||
| Three Months Ended February 28, | February 28, | |||||||||||
| 2014 | 2013 | 2014 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||
| Net loss | $ | (9,969 | ) | $ | (3,691 | ) | $ | (29,163 | ) | |||
| Adjustments to reconcile net loss to net cash used by operating activities: | ||||||||||||
| Other comprehensive income (loss) | (453 | ) | - | (555 | ) | |||||||
| Changes in operating activities: | ||||||||||||
| Accounts receivable | 2,441 | - | (5,316 | ) | ||||||||
| Prepaid expenses | 10,588 | - | (1,412 | ) | ||||||||
| Accounts payable and accrued liabilities | (3,364 | ) | - | 2,960 | ||||||||
| Net cash used in operating activities | (757 | ) | (3,691 | ) | (33,486 | ) | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
| Net cash used in Investing Activities | - | - | - | |||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
| Proceeds from issuance of common stock | - | 4,750 | 55,700 | |||||||||
| Net Cash Provided by Financing Activities | - | 4,750 | 55,700 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | - | |||||||||||
| Net decrease in cash and cash equivalents | (757 | ) | 1,059 | 22,214 | ||||||||
| Cash and cash equivalents, beginning of period | 22,971 | - | - | |||||||||
| Cash and cash equivalents, end of period | $ | 22,214 | $ | 1,059 | $ | 22,214 | ||||||
| Supplemental Cash Flow Disclosure: | ||||||||||||
| Cash paid for interest | $ | - | $ | - | $ | - | ||||||
| Cash paid for income taxes | $ | - | $ | - | $ | - | ||||||
The accompanying notes to the consolidated financial statements are an integral part of these statements.
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GLOBAL SYSTEM DESIGNS, INC.
(A Development Stage Company)
Notes to the Financial Statements
February 28, 2014
(Unaudited)
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
System Designs, Inc. (the “Company”) is a Nevada corporation incorporated on November 27, 2012. It is based in Port Charlotte, FL, USA. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America, and the Company’s fiscal year end is November 30.
The Company is a development stage company that intends to operate as an educational and consulting services business focused on green home construction and renovation projects. The Company will produce clear technically sound information products focused on: selecting building materials and products, evaluating and hiring contractors, and carrying out energy efficiency upgrades, repairs, and other construction and renovation projects. The Company will offer consulting services in the areas of building plan evaluation, contract preparation, and research. To date, the Company’s activities have been generally limited to its formation and the raising of equity capital.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Statements
The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments consisting of normal recurring entries necessary for a fair statement of the periods presented for: (a) the financial position; (b) the result of operations; and (c) cash flows, have been made in order to make the financial statements presented not misleading. The results of operations for such interim periods are not necessarily indicative of operations for a full year.
Development Stage Company
The Company is a development stage company as defined by section ASC 915, “Development Stage Entities.” The Company is still devoting substantially all of its efforts on establishing the business and its planned principal operations have recently commenced, however revenues produced are not significant. All losses accumulated since inception have been considered as part of the Company's development stage activities.
Basis of Consolidation
These financial statements include the accounts of the Company and the wholly-owned Canadian subsidiary, Global System Designs Inc. All material intercompany balances and transactions have been eliminated.
Basis of Presentation
The Consolidated Financial Statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Financial Statements have been prepared using the accrual basis of accounting in accordance with Generally Accepted Accounting Principles (“GAAP”) of the United States.
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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 and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ from these good faith estimates and judgments.
Cash and Cash Equivalents
Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. The Company had $22,214 and $22,971 in cash and cash equivalents as of February 28, 2014 and November 30, 2013, respectively.
Net Loss per Share of Common Stock
The Company has adopted ASC Topic 260, “Earnings per Share,” (“EPS”) which requires presentation of basic EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation. In the accompanying financial statements, basic earnings (loss) per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.
The following table sets forth the computation of basic earnings per share, for the periods ended February 28, 2014 and 2013:
| Three Months Ended February 28, | ||||||||
| 2014 | 2013 | |||||||
| Net loss | $ | (9,969 | ) | $ | (3,691 | ) | ||
Weighted average common shares issued and outstanding (Basic) | 5,825,000 | 2,322,222 | ||||||
| Net loss per share, Basic | $ | (0.00 | ) | $ | (0.00 | ) | ||
The Company has no potentially dilutive securities, such as options or warrants, currently issued and outstanding.
Concentrations of Credit Risk
The Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents and related party payables it will likely incur in the near future. The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash and cash equivalents with a particular financial institution may exceed any applicable government insurance limits. The Company’s management plans to assess the financial strength and credit worthiness of any parties to which it extends funds, and as such, it believes that any associated credit risk exposures are limited.
Financial Instruments
The Company follows ASC 820, “Fair Value Measurements and Disclosures”, which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions
9
developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
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.
Share-based Expenses
ASC 718 “Compensation – Stock Compensation” prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, “Equity – Based Payments to Non-Employees.” Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
No share-based expenses were recorded since November 27, 2012 (inception) to February 28, 2014.
Advertising Costs
The Company follows ASC 720, Advertising Costs, and expenses costs as incurred. Advertising expense totaled $0 for the periods ending February 28, 2014 and 2013.
Foreign Currency Translations
The Company’s functional and reporting currency is the U.S. dollar. Our subsidiary’s functional currency is the Canadian dollar. All transactions initiated in Canadian dollars are translated into U.S. dollars in accordance with ASC 830-30, “Translation of Financial Statements,” as follows:
| (i) | Monetary assets and liabilities at the rate of exchange in effect at the balance sheet date. |
| (ii) | Equity at historical rates. |
| (iii) | Revenue and expense items at the average rate of exchange prevailing during the period. |
10
Adjustments arising from such translations are deferred until realization and are included as a separate component of stockholders’ equity as a component of comprehensive income or loss. Therefore, translation adjustments are not included in determining net income (loss) but reported as other comprehensive income.
For foreign currency transactions, the Company translates these amounts to the Company’s functional currency at the exchange rate effective on the invoice date. If the exchange rate changes between the time of purchase and the time actual payment is made, a foreign exchange transaction gain or loss results which is included in determining net income for the period. No significant realized exchange gains or losses were recorded since November 27, 2012 (inception) to February 28, 2014.
Related Parties
The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions. See Note 6.
Commitments and Contingencies
The Company follows ASC 450-20, “Loss Contingencies,” to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. There were no commitments or contingencies as of February 28, 2014 and November 30, 2013.
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.
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As of February 28, 2014, the Company has a net loss from operations of $9,969, an accumulated deficit of $29,163 and has earned only limited revenues since inception. The Company intends to fund the bulk of its operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the year ending November 30, 2014.
The ability of the Company to emerge from the development stage is dependent upon, among other things, obtaining additional financing to continue operations, and development of its business plan. In response to these problems, management intends to raise additional funds through public or private placement offerings.
These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 4 - EQUITY
Preferred Stock
The Company has authorized 15,000,000 preferred shares with a par value of $0.0001 per share. The Board of Directors are authorized to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated as to distinguish the shares thereof from the shares of all other series and classes.
There were no preferred shares issued and outstanding as of February 28, 2014 and November 30, 2013.
11
Common Shares
The Company has authorized 100,000,000 common shares with a par value of $0.0001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.
Since inception (November 27, 2012) to February 28, 2014, the company has issued a total of 5,825,000 common shares for $55,700 cash, as follows:
| · | On November 27, 2012, the company issued to its founder 950,000 shares of common stock at $0.001 per share for $950. |
| · | On January 8, 2013, the company issued to its founders 2,375,000 shares of common stock at $0.002 per share for $4,750. |
| · | During March 2013, the Company issued, to unaffiliated investors, 725,000 shares of common stock at $0.02 per share for $14,500. |
| · | On August 13, 2013, the issued to unaffiliated investors, 1,775,000 shares of common stock at $0.02 per share for $35,500. |
The Company has no stock option plan, warrants or other dilutive securities.
NOTE 5 - PROVISION FOR INCOME TAXES
The Company provides for income taxes under ASC 740, “Income Taxes.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax basis of assets and liabilities and the tax rates in effect when these differences are expected to reverse. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate of 34% to the net loss before provision for income taxes for the following reasons:
February 28, 2014 | November 30, 2013 | |||||||
| Income tax expense at statutory rate | $ | (3,543 | ) | $ | (6,237 | ) | ||
| Valuation allowance | 3,543 | 6,237 | ||||||
| Income tax expense per books | $ | - | $ | - | ||||
Net deferred tax assets consist of the following components as of:
February 28, 2014 | November 30, 2013 | |||||||
| NOL Carryover | $ | 29,718 | $ | 19,194 | ||||
| Valuation allowance | (29,718 | ) | (19,194 | ) | ||||
| Net deferred tax asset | $ | - | $ | - | ||||
Due to the change in ownership provisions of the Income Tax laws of United States of America, net operating loss carry forwards of approximately $29,718 for federal income tax reporting purposes are subject to annual limitations. When a change in ownership occurs, net operating loss carry forwards may be limited as to use in future years. Net operating loss carry forwards begin to expire in 2032.
12
NOTE 6 - RELATED PARTY TRANSACTIONS
Equity
On November 27, 2012 the Company issued 950,000 shares of its common stock to an officer at $0.001 per share for cash totalling $950.
On January 8, 2013 the Company issued 2,375,000 shares of its common stock to its two officers, who are also our directors, at $0.002 per share for cash totalling $4,750.
Other
The controlling shareholder has pledged his support to fund continuing operations during the development stage; however there is no written commitment to this effect. The Company is dependent upon the continued support.
The officers and directors of the Company may be involved in other business activities and may, in the future, become involved in other business opportunities that become available. He may face a conflict in selecting between the Company and other business interests. The Company has not formulated a policy for the resolution of such conflicts.
The Company does not own or lease property or lease office space. The office space used by the Company was arranged by the founder of the Company to use at no charge.
The Company does not have employment contracts with its sole key employee, the controlling shareholder, who is the sole officer and director of the Company.
NOTE 7 – COMMITMENTS AND CONTINGENCIES
The Company has no commitments or contingencies as of February 28, 2014 and November 30, 2013.
From time to time the Company may become a party to litigation matters involving claims against the Company. Management believes that it is adequately insured for its operations and there are no current matters that would have a material effect on the Company’s financial position or results of operations.
NOTE 8 - SUBSEQUENT EVENTS
Management has evaluated subsequent events through the date these financial statements were available to be issued. Based on our evaluation no other events have occurred that require disclosure.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve risks and uncertainties, including, among other things, statements regarding our business strategy, future revenues and anticipated costs and expenses. Such forward-looking statements include, among others, those statements including the words “expects,” “anticipates,” “intends,” “believes” and similar language. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed herein as well as in the “Description of Business – Risk Factors” section in our Annual Report, Form 10-K, as filed on February 28, 2014. You should carefully review the risks described in our Annual Report and in other documents we file from time to time with the Securities and Exchange Commission. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.
Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.
All references in this Form 10-Q to the “Company,” “Global System Designs,” “we,” “us,” or “our” are to Global System Designs, Inc.
Results of Operations
Our operations commenced in November 2013, as such comparative numbers prior to this are not reflective of our results for the period ended February 28, 2014, due to the recent start of these operations.
We have generated $11,791 in revenues and have incurred $40,954 in expenses, since inception (November 27, 2012) through February 28, 2014.
The following table provides selected financial data about our company as at February 28, 2014 and November 30, 2013.
Balance sheet Data:
| Balance Sheet Date | February 28, 2014 | November 30, 2013 | ||||||
| Cash | $ | 22,214 | $ | 22,971 | ||||
| Total Assets | $ | 28,942 | $ | 42,728 | ||||
| Total Liabilities | $ | 2,960 | $ | 6,324 | ||||
| Stockholders’ Equity | $ | 25,892 | $ | 36,404 | ||||
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As at February 28, 2014 our current assets were $22,214 and our current liabilities were $2,960, which resulted in working capital of $25,892. As at February 28, 2014, current assets were comprised of $22,214 in cash, $5,316 in accounts receivable, and $1,412 in prepaid expenses as compared to $42,728 in current assets at November 30, 2013, comprised of $22,971 in cash, $7,757 in accounts receivable and $12,000, in prepaid expenses. At February 28, 2014, current liabilities were comprised of $2,960 in accounts payable and accrued liabilities as compared to $6,324 in accounts payable and accrued liabilities at November 30, 2013. Stockholders' equity was $25,982 and $36,404 as of February 28, 2014 and November 30, 2013, respectively.
The following summary of our results of operations, for the periods ended February 28, 2014 and 2013, and for the period from inception (November 30, 2012) to February 28, 2014, should be read in conjunction with our consolidated financial statements, as included in this Form 10-Q.
| Three Months Ended February 28, | Period from Inception (November 27, 2012) to February 28, | |||||||||||
| 2014 | 2013 | 2014 | ||||||||||
| Revenue | $ | 4,825 | $ | - | $ | 11,791 | ||||||
| Operating Expenses: | ||||||||||||
| General and administrative | 128 | 61 | 3,063 | |||||||||
| Professional fees | 14,666 | 3,630 | 37,891 | |||||||||
| Total Operating Expenses | 14,794 | 3,691 | 40,954 | |||||||||
| Operating and net loss | $ | (9,969 | ) | $ | (3,691 | ) | $ | (29,163 | ) | |||
Revenue
Revenue commenced during November 2013 from our consulting operations through our wholly-owned Canadian subsidiary Global System Designs Inc. We earned revenues of $4,825 for the period ended February 28, 2014, compared to no revenues for the period ended February 28, 2013.
Expenses
Operating expenses for the period year ended February 28, 2014, increased by $11,103 from $3,691 for the period ended February 28, 2013. The increase in expenses can be attributed to increased professional fees. Our professional fees of $14,666 were primarily due to fees related to our recent DTC application.
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Liquidity and Financial Condition
Working Capital
| At | At | |||||||||||
| February 28, | November 30, | Increase | ||||||||||
| 2014 | 2013 | (Decrease) | ||||||||||
| Current Assets | $ | 28,942 | $ | 42,728 | $ | (13,786 | ) | |||||
| Current Liabilities | $ | 2,960 | $ | 6,324 | $ | (3,364 | ) | |||||
| Working Capital | $ | 25,982 | $ | 36,404 | $ | (10,422 | ) | |||||
Cash Flows
| Three Months Ended February 28, | ||||||||
| 2014 | 2013 | |||||||
| Net Cash Used in Operating Activities | $ | (757 | ) | $ | (3,691 | ) | ||
| Net Cash Used in Investing Activities | $ | - | $ | - | ||||
| Net Cash Provided by Financing Activities | $ | - | $ | 4,750 | ||||
| Net Increase in Cash During the Period | $ | (757 | ) | $ | 1,059 | |||
Cash Flow from Operating Activities
During the period ended February 28, 2014, our company used $757 in cash from operating activities compared to the use of $3,691 of cash for operating activities during the period ended February 28, 2013. The decrease in cash used for operating activities was primarily attributed to revenues in the current period.
Cash Flow from Investing Activities
From inception (November 27, 2012) through to February 28, 2014, we did not have any cash flows from investing activities.
Cash Flow from Financing Activities
During the period ended February 28, 2014, our company received $nil in cash in financing activities, compared to cash provided by financing activities of $4,750 for the period ended February 28, 2013, from proceeds from the issuance of common shares to unaffiliated investors.
Plan of Operation
Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital and/or generate sufficient revenues to pay for our expenses. Our only source for cash at this time is modest revenues and investments by others. We must raise cash and/or increase our revenues to stay in business. At this time, however, the Company does not have plans or intentions to raise additional funds by way of the sale of additional securities.
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Global System Designs is a development stage company that has limited operations, limited revenue, no financial backing and limited assets. Our plan is to develop and market educational and advisory services to help homeowners save energy, protect their indoor air quality, and avoid unnecessary impacts on the larger environment. The Company will offer consulting services in the areas of building plan evaluation, contract preparation, and research. Website users will be charged for downloading fact sheets, and consulting fees will be charged for building plan evaluations and other technical advice to clients.
During the next year of operations, the 12 month period from the date of this report, Global System Designs will continue to expand its Canadian operations, concentrate on finishing the development of our website, prospect for USA clients and market our services.
We will also broaden our set of illustrated fact sheets (one to five pages in length) addressing those topics that, based on our experience, are most likely to be in demand by homeowners and owner-builders. These initial fact sheets will serve as a marketing tool to attract users to the website and our consulting services. The initial response to the fact sheets has been good and inquires were made by prospective customers. A number of promising Canadian leads came through that did result in business for the wholly owned Canadian subsidiary. Global System Designs’ President, Paul McDonald, was brought in on a couple of projects that needed green building guidance. The consultations were a success, and this initial interest bodes well for the future. The customers that Paul serviced are well connected in the Canadian building community, and did refer our services to others.
The budget for Google adwords will also be maintained as well as a limited banner advertising effort.
In the event that we do not have sufficient funds, we will endeavor to proceed with our plan of operations by locating alternative sources of financing. Although there are no written agreements in place, one form of alternative financing that may be available to us is self-financing through contributions from the officers and directors. While the officers and directors have generally indicated a willingness to provide services and financial contributions if necessary, there are presently no agreements, arrangements, commitments, or specific understandings, either verbally or in writing, between the officers and directors and Global System Designs.
During the next year of operations, our officers and directors will also provide their labor at no charge. We do not anticipate hiring any staff in the next 12 months of operation, and will rely on the services of an outside contractor for the development of our website.
We are a public entity, subject to the reporting requirements of the Securities Exchange Act of 1934. We will incur ongoing expenses associated with professional fees for accounting, legal and a host of other expenses for annual reports and proxy statements. We estimate that these accounting, legal and other professional costs would be a minimum of $20,000 in the next year and will be higher, in the following years, if our business volume and activity increases. Increased business activity could greatly increase our professional fees for reporting requirements and this could have a significant impact on future operating costs. The difference between having the ability to sustain our cash flow requirements over the next twelve months and the need for additional outside funding will depend on how fast we can generate sales revenue.
At present, we only have enough cash on hand to cover our expected legal and accounting costs for the next 12 months. If we do not have sufficient funds to proceed with the implementation of our business plan, we may have to find alternative sources of funds, like a second public offering, a private placement of securities, or loans from our officers or third parties (such as banks or other institutional lenders). Equity financing could result in additional dilution to then existing shareholders. If we are unable to meet our needs for cash from cash on hand, or possible alternative sources, then we may be unable to continue to maintain, develop or expand our operations.
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Limited Operating History; Need for Additional Capital
There is no historical financial information about us on which to base an evaluation of our performance. We are a development stage company and have generated limited revenues from operations. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in developing our website, and possible cost overruns due to the price and cost increases in supplies and services.
At present, we only have enough cash on hand to cover minimal operating costs for the next 12 months.
If we are unable to meet our needs for cash from either our operations, or possible alternative sources, then we may be unable to continue, develop, or expand our operations.
Liquidity and Capital Resources
To meet our need for cash we raised money from our recent Offering. On April 8, 2013, the Company filed a Prospectus as part of its Registration Statement on Form S-1 which the Company sought to raise $80,000 under the Offering. On September 10, 2013, the Company closed its Offering and will not sell any additional shares under this Prospectus. The Company sold 1,775,000 shares under the Prospectus, raising a total of $35,500.
We received our initial funding of $5,700 through the sale of common stock to our officers and directors. Paul McDonald purchased 950,000 shares of our common stock at $0.001 on November 29, 2012 for $950 and 1,000,000 shares on January 8, 2013 for $2,000. David Rose purchased 1,375,000 shares of our common stock at $0.002 on January 8, 2013 for $2,750. During March, 2013, eight (8) unaffiliated investors purchased 725,000 shares of common stock at $0.02, for $14,500 in a private offering.
Currently we do not have sufficient capital to fund our business development for the next 12 months. We feel we have enough funds to cover our professional fees for the next 12 months.
Our financial statements from November 27, 2012 (date of inception) through the period ended February 28, 2014, reported $11,791 in revenues and a net loss of $29,163.
Critical Accounting Policies
We prepare our financial statements in conformity with GAAP, which requires management to make certain estimates and assumptions and apply judgments. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the financial statements are prepared and actual results could differ from our estimates and such differences could be material. On a regular basis, we review our accounting policies and how they are applied and disclosed in our financial statements.
While we believe that the historical experience, current trends and other factors considered support the preparation of our condensed financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.
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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
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Off-Balance Sheet Arrangements
We do not have any 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 is material to investors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company”, we are not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Management’s Report on Disclosure Controls and Procedures
As of February 28, 2014, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee, (2) lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (3) inadequate segregation of duties consistent with control objectives; and (4) management is dominated by a single individual without adequate compensating controls. The aforementioned material weaknesses were identified by our Chief Executive and Financial Officer in connection with the review of our financial statements as of February 28, 2014.
Management believes that the material weaknesses set forth above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the quarter ended February 28, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against us, 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 shareholder, is an adverse party or has a material interest adverse to our company.
ITEM 1A. RISK FACTORS
An investment in our common stock involves a number of very significant risks. You should carefully consider the risk factors included in the “Risk Factors” section of our annual report on Form 10-K for the fiscal year ended November 30, 2013 filed with the SEC on February 28, 2014 in addition to other information in our annual report on Form 10-K for the fiscal year ended November 30, 2013 filed with the SEC on February 28, 2014 and in this quarterly report in evaluating our company and its business before purchasing shares of our company’s common stock. Our business, operating results and financial condition could be seriously harmed due to any of those risks. You could lose all or part of your investment due to any of these risks.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We did not sell any equity securities which were not registered under the Securities Act of 1933 during the quarter ended February 28, 2014.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
| Exhibit Number | Description | |
| 31.1 | Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer | |
| 32.1 | Section 906 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer | |
| 101.INS* | XBRL Instance Document | |
| 101.SCH* | XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
| * | Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections. |
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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.
GLOBAL SYSTEM DESIGNS, INC. | |
| Dated: April 14, 2014 | /s/ Paul McDonald |
| Paul McDonald | |
| Chief Executive Officer and Chief Financial Officer | |
| (Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer) |
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