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 March 31, 2009
OR
o TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934
From the transition period from ___________ to ____________.
Commission File Number 33-11986-LA
CROWN PARTNERS, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 91-2008803
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)
9680 West Tropicana Suite 113, Las Vegas, Nevada 89147
(Address of principal executive offices)
(702) 448-1543
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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: o
Indicate by check mark whether the Company is a large accelerated filer, an accelerated file, non-accelerated filer, or a smaller reporting company.
Large accelerated filer o Non-accelerated filer o | Accelerated filed o Smaller reporting company x |
Indicate by check mark whether the Company is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x
As of May 13, 2009, there were 54,257,983 shares of Common Stock of the issuer outstanding.
| TABLE OF CONTENTS |
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| PART I: FINANCIAL INFORMATION | | |
| | | |
| Item 1. Financial Statements (Unaudited) | | 3 |
| Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008 | | 3 |
| Consolidated Statements of Operations For the Three Months Ended March 31, 2009 and 2008 | | 4 |
| Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2009 and 2008 | | 5 |
| Notes to Financial Statements | | 6 |
| | | |
| Item 2. Management’s Discussion and Analysis and Plan of Operation | | 10 |
| | | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | | 10 |
| | | |
| Item 4T. Controls and Procedures | | 10 |
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| PART II: OTHER INFORMATION | | |
| | | |
| Item 1. Legal Proceedings | | 10 |
| | | |
| Item 1A. Risk Factors | | |
| | | |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | | 10 |
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| Item 3. Defaults upon Senior Securities | | 11 |
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| Item 4. Submission of Matters to a vote of Security Holders | | 11 |
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| Item 5. Other Information | | 11 |
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| Item 6. Exhibits | | 11 |
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| Signatures | | 12 |
CROWN PARTNERS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| | | March 31, | | | December 31, | |
| | | 2009 | | | 2008 | |
| Assets | | | | | | |
| Current assets | | | | | | |
| Cash | | $ | 5,412 | | | $ | 2,943 | |
| Prepaid expenses | | | 350 | | | | 350 | |
| | | | | | | | | |
| Fixed assets | | | | | | | | |
| Equipment (net) | | | 37,028 | | | | 43,373 | |
| | | | | | | | | |
| Total Assets | | $ | 42,790 | | | $ | 46,666 | |
| | | | | | | | | |
| Liabilities & Stockholders’ Deficit | |
| | | | | | | |
| Current liabilities | | | | | | |
| Accounts payable and accrued expenses | | $ | 36,906 | | | $ | 207,039 | |
| Accounts payable - related party | | | 74,886 | | | | 113,897 | |
| Advances - other | | | 22,689 | | | | 42,689 | |
| Notes payable - related party | | | 53,860 | | | | 51,210 | |
| Salaries payable | | | 4,850 | | | | 23,000 | |
| Note payable | | | 15,700 | | | | 13,700 | |
| Total current liabilities | | | 208,891 | | | | 451,535 | |
| | | | | | | | | |
| Stockholders’ Deficit | |
| | | | | | | | | |
| | | | | | | | |
| shares authorized, no shares issued and outstanding | | | - | | | | - | |
| Common stock, $.001 par value, 5,000,000,000 shares | | | | | | | | |
| authorized, 54,257,983 shares issued and outstanding | | | 54,258 | | | | 54,258 | |
| Additional-paid-in-capital | | | 10,102,647 | | | | 9,784,368 | |
| Accumulated deficit | | | (10,323,006 | ) | | | (10,243,495 | ) |
| Total stockholders’ deficit | | | (166,101 | ) | | | (404,869 | ) |
| | | | | | | | | |
| Total Liabilities & Stockholders' Deficit | | $ | 42,790 | | | $ | 46,666 | |
The accompanying notes are an integral part of the unaudited consolidated financial statements
CROWN PARTNERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Month Periods Ended March 31, 2009 and 2008
(Unaudited)
| | | 2009 | | | 2008 | |
| | | | | | | |
| Service revenue | | $ | 9,004 | | | $ | 572 | |
| Cost of revenues | | | 1,364 | | | | -- | |
| Gross profit | | | 7,640 | | | | 572 | |
| | | | | | | | | |
| Operating expenses: | | | | | | | | |
| General and administrative | | | 263,056 | | | | 77,862 | |
| Depreciation | | | 6,345 | | | | 6,345 | |
| Net loss from operations | | | (261,761 | ) | | | (83,635 | ) |
| | | | | | | | | |
| Other income (expense): | | | | | | | | |
| Interest income | | | -- | | | | 189 | |
| Investment/interest expense | | | (766 | ) | | | (1,075 | ) |
| Realized gain on securities | | | -- | | | | 2,772 | |
| Gain on debt forgiveness | | | 25,175 | | | | -- | |
| Gain on sale of non operating subsidiaries | | | 157,841 | | | | -- | |
| Total other income | | | 182,250 | | | | 1,886 | |
| | | | | | | | | |
| Net Loss | | $ | (79,511 | ) | | $ | (81,749 | ) |
| | | | | | | | | |
| Net loss per share (basic and diluted) | | $ | (0.00 | ) | | $ | (0.00 | ) |
| | | | | | | | | |
| Weighted average shares outstanding (basic and diluted) | | | 54,257,983 | | | | 23,757,983 | |
The accompanying notes are an integral part of the unaudited consolidated financial statements
CROWN PARTNERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Month Periods Ended March 31, 2009 and 2008
(Unaudited)
| | | 2009 | | | 2008 | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
| Net loss | | $ | (79,511 | ) | | $ | (81,749 | ) |
| Adjustments to reconcile net loss to cash | | | | | | | | |
| used in continuing operations: | | | | | | | | |
| Stock issued by subsidiary for services | | | 225,100 | | | | - | |
| Realized gain on marketable securities | | | -- | | | | (2,772 | ) |
| Depreciation expense | | | 6,345 | | | | 6,345 | |
| Gain on debt forgiveness | | | (23,856 | ) | | | - | |
| Gain on debt forgiveness by subsidiary | | | (1,319 | ) | | | - | |
| Gain on sale of subsidiary | | | (157,841 | ) | | | - | |
| Changes in assets and liabilities: | | | | | | | | |
| Accounts payable and accrued liabilities | | | 18,883 | | | | (5,275 | ) |
| Accounts payable - related party | | | 167 | | | | (5,436 | ) |
| Purchases of marketable equity securities | | | -- | | | | (3,660,599 | ) |
| Proceeds from sale of marketable equity securities | | | -- | | | | 3,663,372 | |
| Salaries payable | | | 4,850 | | | | -- | |
| Cash flows used in operating activities | | | (7,182 | ) | | | (86,114 | ) |
| | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | |
| Advances from related parties, net | | | (20,000 | ) | | | 10,309 | |
| Stock sold for cash | | | 25,000 | | | | 22,500 | |
| Note payable - related party | | | 2,650 | | | | (10,000 | ) |
| Borrowings from third party | | | 2,000 | | | | - | |
| Cash flows provided by financing activities | | | 9,650 | | | | 22,809 | |
| Net increase (decrease) in cash | | | 2,468 | | | | (63,305 | ) |
| Cash, beginning of period | | | 2,944 | | | | 180,182 | |
| Cash, end of period | | $ | 5,412 | | | $ | 116,877 | |
| | | | | | | | | |
| | | | | | | | | |
| Supplemental cash flow information: | | | | | | | | |
| Interest paid | | $ | - | | | $ | - | |
| Income taxes paid | | | - | | | | - | |
| | | | | | | | | |
| Common stock issued for accounts payable and accrued liabilities | | | 29,000 | | | | - | |
| Contribution to capital for write off of intercompany payable to non operating subsidiaries that were disposed of | | | 39,179 | | | | - | |
The accompanying notes are an integral part of the unaudited consolidated financial statements
CROWN PARTNERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated interim financial statements of Crown Partners, Inc. (the “Company”) 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 consolidated financial statements and notes thereto contained in the Company’s December 31, 2008 Annual Report filed with the SEC on Form 10-K. 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 interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for the most recent fiscal year end December 31, 2008 as reported on Form 10-K, have been omitted.
Certain prior year amounts have been reclassified to conform with the current year presentation.
NOTE 2 - GOING CONCERN
As shown in the accompanying financial statements, the Company has an accumulated deficit and a working capital deficit as of March 31, 2009. These conditions raise substantial doubt as to our ability to continue as a going concern. Management is trying to raise additional capital through sales of common stock. The consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
NOTE 3 – COMMON STOCK
During the quarter ended March 31, 2009 a subsidiary of the Company issued 2,791,000 shares of common stock at $0.10 per share. The shares were issued as follows:
| | · | 250,000 issued for cash of $25,000 |
| | · | 60,000 issued for accounts payable of $6,000 |
| | · | 230,000 issued for accrued compensation payable of $23,000 |
| | · | 2,251,000 issued for compensation of which 1,810,000 shares valued at $181,000 were issued to four related parties |
Note 4 - CONTINGENCIES
There is pending litigation in Arizona small claims court - Strojnik v. Crown Equity Holdings, Inc. and Crown Partners, Inc. The Company has assessed the outcome of a loss as remote and furthermore the maximum liability in small claims court is $2,500. Crown has not accrued any amounts related to this contingency.
NOTE 5 – SALE OF SUBSIDIARIES
In March, 2009 the Company sold two of its interest in Universal Services and Acquisitions, Inc and Sanitec of Hawaii, Inc. to an independent third party. The sale of the Company’s interest in both entities resulted in a gain of $157,841. Both companies were sold for no consideration other than the buyer’s assumption of the net liabilities of both companies. Both companies have been dormant for some time with neither operating at the time of sale. The liabilities assumed by the buyer that were third party were treated as a gain totaling $157,841 and the liabilities that were related party were treated as contributed capital totaling $39,179.
NOTE 6 – GAIN ON FORGIVENESS OF DEBT
The statute of limitations allows a debtor to write off any debt owed a third party that has not been active for a specific length of time. Statutes of limitation vary by state ranging from 4 to 6 years except for 2 states in which the Company believes it has not done business. The Company has been carrying various accounts payable with gestation of 8 years and more. During the period ending March 31, 2009 the Company elected to write off these various accounts payable totaling $25,175.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
This report contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. The Company’s actual results could differ materially from those set forth on the forward looking statements as a result of the risks set forth in the Company’s filings with the Securities and Exchange Commission, general economic conditions, and changes in the assumptions used in making such forward looking statements.
OVERVIEW
A) General
Crown Partners, Inc. (the “Company” or “Crown”), has been involved in several different businesses. At present, it has one subsidiary.
B) Narrative Description of Business
The Company has one subsidiary of which it is the majority shareholder: Crown Equity Holdings Inc. ("CRWE"). During the period ended March 31, 2009 the Company sold Universal Services & Acquisitions, Inc. ("USV"), and Sanitec Services Ltd. ("SSH") to an independent third party.
The Company owns 64% of CRWE, a Nevada corporation traded on the Electronic Bulletin Board under "CRWE". In 2007, CRWE began selling computer systems for financial traders and is also a licensed reseller for computer components, hardware and software as well as computer accessories. In 2007, the Company continued to advance funds to CRWE to pay CRWE's expenses. The Company anticipates that it will be repaid these advances and loans at the time that CRWE acquires an operating business. In December, 2007, CRWE issued a total of ten million shares of its common stock in satisfaction of approximately $145,000 owed by CRWE to the Company.
The Company owned 90% of the issued and outstanding shares of Universal Services & Acquisitions, Inc. (“USV”), a Colorado corporation. USV is a dormant shell company. The Company sold USV in March 2009 to an independent third party
In November, 2001, the Company acquired Sanitec(TM) Services of Hawaii, Inc. ("SSH"), a privately held Hawaiian corporation, developed to engage in medical waste collection and treatment in Honolulu, Hawaii. The operations of SSH ceased in May, 2005 when SSH was evicted from its plant in Hawaii. The Company sold SSH in March 2009 to an independent third party.
Employees
As of March 31, 2009, the Company had no employees.
RESULTS OF OPERATIONS
For the three months ended March 31, 2009 and 2008, we had revenues of $9,004 and $572, respectively, and a net loss of $79,511 and $81,749, respectively. General and administrative expense was $263,056 for the three months ended March 31, 2009 compared to $77,862 for the same period in 2008. This increase is primarily attributable to an increase in accounting and legal fees as well as to the increased expenses of our subsidiary, Crown Equity Holdings.
The Company realized a gain on debt forgiveness of $25,175 during the period ended March 31, 2009. The gain was due to a write down of accounts payable that has exceeded the statute of limitations. No such gain was recognized during the period in 2008. The Company realized a gain on the sale of subsidiaries of $157,841 during the period ended March 31, 2009. The gain was due to the sale of two subsidiaries to an independent third party. No such gain was recognized during the period in 2008.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2009, the Company had a working capital deficit of approximately $203,129. At March 31, 2009, the Company had current assets of $5,762 which consisted of $5,412 in cash and $350 in prepaid expenses. The current liabilities of the Company at March 31, 2009 were $208,891 which consisted of accounts payable of approximately $36,906, accounts payable to related parties of $74,886, notes payable of $15,700, advances from other of $22,689, salaries payable of $4,850 and a note payable from related party of $53,860.
Crown will attempt to increase its operating liquidity by exploring the availability of outside debt and equity financing, to the extent that such funding is available under reasonable terms and conditions. There can be no assurances that these measures will result in an improvement in Crown's operations or liquidity. To the extent that Crown's operations or liquidity do not improve, Crown may be forced to reduce operations to a level consistent with its available working capital resources. Crown may also have to consider a formal or informal restructuring or reorganization.
The Company's balance sheet as of March 31, 2009 reflects limited assets and extensive liabilities. Further, there exist no agreements or understandings with regard to loan agreements by or with the Officers, Directors, principals, affiliates or shareholders of the Company. As a result of these factors, Crown's independent accountants have expressed substantial doubt about Crown's ability to continue as a going concern. The accompanying consolidated financial statements have been prepared assuming that Crown will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the consolidated financial statements do not purport to represent the realizable or settlement values, nor include any adjustments that might result from the outcome of this uncertainty.
ITEM 3. CONTROLS AND PROCEDURES
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required under this Item.
ITEM 4T: CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Based on their evaluation of our disclosure controls and procedures(as defined in Rule 13a-15e under the Securities Exchange Act of 1934 the "Exchange Act"), our principal executive officer and principal financial officer have concluded that as of the end of the period covered by this quarterly report on Form 10-Q such disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms because of the identification of a material weakness in our internal control over financial reporting which we view as an integral part of our disclosure controls and procedures. The material weakness relates to the lack of segregation of duties in financial reporting, as our financial reporting and all accounting functions are performed by an external consultant with no oversight by a professional with accounting expertise. Our CEO and CFO do not possess accounting expertise and our company does not have an audit committee. This weakness is due to the company’s lack of working capital to hire additional staff. To remedy this material weakness, we intend to engage another accountant to assist with financial reporting as soon as our finances will allow.
Changes in Internal Control over Financial Reporting
Except as noted above, there have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our first quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There is pending litigation in Arizona small claims court - Strojnik v. Crown Equity Holdings, Inc. and Crown Partners, Inc. The Company has assessed the outcome of a loss as remote and furthermore the maximum liability in small claims court is $2,500. Crown has not accrued any amounts related to this contingency.
ITEM 1A. RISK FACTORS.
There have been no material changes to the Company’s risk factors as previously disclosed in our most recent 10-K filing for the year ending December 31, 2008.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
During the quarter ended March 31, 2009 the Company’s subsidiary, Crown Equity Holdings issued 250,000,000 shares of restricted common stock with a value of $ 25,000 ($0.10 per share) for cash
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
There were no reports on Form 8-K filed during the quarter ended March 31, 2009.
ITEM 6. EXHIBITS
EXHIBIT 31.1 Certification of Principal Executive Officer and Principal Financial Officer
EXHIBIT 32 Certification of Compliance to Sarbanes-Oxley
SIGNATURES
In accordance with 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.
CROWN PARTNERS, INC.
| | By: | /s/ Kenneth Bosket | |
| | | Kenneth Bosket, CEO | |
| | | | |
| | By: | /s/ Montse Zaman | |
| | | Montse Zaman, CFO | |
Date: May __, 2009
