UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2006
------------------
[] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to __________
Commission File Number 0-28475
Merilus, Inc.
(Exact name of small business issuer as specified in its charter)
Nevada 87-0635270
------ ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
P.O. Box 581072, Salt Lake City, Utah 84158
(Address of principal executive offices)
(801) 860-2302
------------------------------------------
(Issuer's telephone number)
Check whether the issuer (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 []
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [X] No []
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
11,920,804 shares of $0.001 par value common stock on September 30, 2006
------------------------------------------------------------------------
Transitional Small Business Disclosure Format (Check One): Yes [] No [X]
TABLE OF CONTENTS
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, September 30, 2006 (unaudited) and December 31, 2005
Statements of Operations, for the three and nine month periods ended September
30, 2006 and 2005 (unaudited), and from the date of inception (May 7, 1985)
through September 30, 2006 (unaudited)
Statements of Stockholders' (Deficit), from the date of inception (May 7, 1985)
through September 30, 2006 (unaudited)
Statements of Cash Flows, for the nine month period ended September 30, 2006 and
2005 (unaudited); and from the date of inception (May 7, 1985) through September
30, 2006 (unaudited)
Notes to financial statements (unaudited)
Item 2. Management's Discussion and Analysis or Plan of Operations
Item 3. Controls and Procedures.
Part II - OTHER INFORMATION
Item 6. Exhibits
Exhibit 31 Rule 13a-14(a)/15d-14a(a) Certification - CEO
Exhibit 31 Rule 13a-14(a)/15d-14a(a) Certification - CFO
Exhibit 32 Section 1350 Certification - CEO
Exhibit 32 Section 1350 Certification - CFO
2
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Merilus, Inc.
(a development stage enterprise)
Balance Sheets
September 30, December 31,
2006 2005
(unaudited)
--------------- ---------------
ASSETS:
Current Assets:
Cash and cash equivilents $ 464 $ 3,998
--------------- ---------------
TOTAL ASSETS $ 464 $ 3,998
=============== ===============
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities:
Accounts payable $ 7,355 $ 4,043
Payable to shareholder 16,392 10,106
--------------- ---------------
Total Liabilities 23,747 14,149
--------------- ---------------
Stockholders' (Deficit)
Preferred Stock - $1.00 par value, 1 share authorized,
0 shares issued and outstanding 0 0
Common Stock - $0.001 par value, 100,000,000 shares
authorized, 11,920,804 issued and outstanding at
September 30, 2006 and 11,170,804 at December 31, 2005 11,921 11,171
Additional paid-in capital 3,201,957 3,200,457
Deficit accumulated during the development stage (3,237,161) (3,221,779)
--------------- ---------------
Total Stockholders' (Deficit) (23,283) (10,151)
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $ 464 $ 3,998
=============== ===============
The accompanying notes are an integral part of these financial
statements.
3
Merilus, Inc.
( a development stage enterprise )
Statements of Operations
From the
date
of inception
(May 7,
1985)
For the three months
ended For the nine months ended through
September September September September September
30, 30, 30, 30, 30,
2006 2005 2006 2005 2006
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
-------------- -------------- -------------- -------------- --------------
Revenue $ 0 $ 0 $ 0 $ 0 $ 0
-------------- -------------- -------------- -------------- --------------
Expenses:
General and
administrative 5,170 216 14,897 773 114,810
Loss on investment 0 0 0 0 3,121,853
Interest expense 191 0 485 0 498
-------------- -------------- -------------- -------------- --------------
Net Loss $ (5,361) $ (216) $ (15,382) $ (773) $ (3,237,161)
============== ============== ============== ============== ==============
Net loss per share of
common stock $ (0.00) $ (0.00) $ (0.00) $ (0.00)
============== ============== ============== ==============
Weighted average
number of common
shares outstanding 11,920,804 11,170,804 11,795,804 11,170,804
============== ============== ============== ==============
The accompanying notes are an integral part of these financial
statements.
4
Merilus, Inc.
( a development stage enterprise )
Statements of Stockholders' (Deficit)
From the date of inception (May 7, 1985) through September 30, 2006
Preferred Common Preferred Common Paid in Accumulated
Shares Shares Stock Stock Capital Deficit
---------- ------------- ------------ ------------ ------------- --------------
BALANCE, May 7, 1985 - date of inception 0 0 $ 0 $ 0 $ 0 $ 0
Common Stock issued for cash through
December 1991 ($0.006 / share) 0 3,750,000 0 3,750 18,750 0
Common Stock issued for cash through
December 1992 ($0.005 / share) 0 1,000,000 0 1,000 4,000 0
Common Stock issued for cash through
December 1999 ($0.009 / share) 0 2,000,000 0 2,000 15,500 0
Net Operating Loss from the date of
inception through December 31, 1999 0 0 0 0 (45,500)
---------- ------------- ------------ ------------ ------------- --------------
BALANCE, December 31, 1999 0 6,750,000 0 6,750 38,250 (45,500)
---------- ------------- ------------ ------------ ------------- --------------
Issuance and exercise of warrants for the
purchase of common stock November 2000
($1.00 / share) 0 2,000,000 0 2,000 1,998,000 0
Issuance of preferred stock in trust in
contemplation of acquiring shares of
Merilus Technologies, Inc., December
2000 (Note 2) 1 0 1 0 (1) 0
Net Operating Loss for the year ended
December 31, 2000 0 0 0 0 0 (7,775)
---------- ------------- ------------ ------------ ------------- --------------
BALANCE, December 31, 2000 1 8,750,000 1 8,750 2,036,249 (53,275)
---------- ------------- ------------ ------------ ------------- --------------
The accompanying notes are an integral part of
these financial statements.
5
Merilus, Inc.
( a development stage enterprise )
Statements of Stockholders' (Deficit)
From the date of inception (May 7, 1985) through September 30, 2006 (continued)
Preferred Common Preferred Common Paid in Accumulated
Shares Shares Stock Stock Capital Deficit
---------- ------------- ------------ ------------ ------------- --------------
BALANCE, December 31, 2000 (forward) 1 8,750,000 $ 1 $ 8,750 $ 2,036,249 $ (53,275)
---------- ------------- ------------ ------------ ------------- --------------
Shares of common stock issued for cash
June 2001 ($1.00 / share - Note 2) 0 600,000 0 600 599,400 0
Shares of common stock issued for cash
November 2001 ($0.85 / share - Note 2) 0 182,504 0 183 154,945 0
Shares of common stock issued for legal
services, November 2001 ($0.85 / share -
Note 2) 0 35,000 0 35 29,715 0
Shares of common stock issued for cash
December 2001 ($0.50 / share - Note 2) 0 750,000 0 750 374,250 0
Issuance of shares of common stock
pursuant to an exchange agreement
December 2001 ($0.001 / share - Note 2) 0 828,300 0 828 (828) 0
Issuance of shares of common stock for
services rendered December 2001 ($0.25 /
share - Note 2) 0 25,000 0 25 6,350 0
Termination of trust agreement (Note 2) (1) 0 (1) 0 1 0
Net Operating Loss for the year ended
December 31, 2001 (Note 2) 0 0 0 0 0 (3,157,978)
---------- ------------- ------------ ------------ ------------- --------------
BALANCE, December 31, 2001 0 11,170,804 0 11,171 3,200,082 (3,211,253)
---------- ------------- ------------ ------------ ------------- --------------
The accompanying notes are an integral part of
these financial statements.
6
Merilus, Inc.
( a development stage enterprise )
Statements of Stockholders' (Deficit)
From the date of inception (May 7, 1985) through September 30, 2006 (continued)
Preferred Common Preferred Common Paid in Accumulated
Shares Shares Stock Stock Capital Deficit
---------- ------------- ------------ ------------ ------------- --------------
BALANCE, December 31, 2001 (forward) 0 11,170,804 $ 0 $ 11,171 $ 3,200,082 $ (3,211,253)
---------- ------------- ------------ ------------ ------------- --------------
Net Operating Loss for the year ended
December 31, 2002 0 0 0 0 0 0
---------- ------------- ------------ ------------ ------------- --------------
BALANCE, December 31, 2002 0 11,170,804 0 11,171 3,200,082 (3,211,253)
---------- ------------- ------------ ------------ ------------- --------------
Net Operating Loss for the year ended
December 31, 2003 0 0 0 0 0 (125)
---------- ------------- ------------ ------------ ------------- --------------
BALANCE, December 31, 2003 0 11,170,804 0 11,171 3,200,082 (3,211,378)
---------- ------------- ------------ ------------ ------------- --------------
Net Operating Loss for the year ended
December 31, 2004 0 0 0 0 0 (2,598)
---------- ------------- ------------ ------------ ------------- --------------
BALANCE, December 31, 2004 0 11,170,804 0 11,171 3,200,082 (3,213,976)
---------- ------------- ------------ ------------ ------------- --------------
Payment of accounts payable by
shareholder 0 0 0 0 375 0
Net Operating Loss for the year ended
December 31, 2005 0 0 0 0 0 (7,803)
---------- ------------- ------------ ------------ ------------- --------------
BALANCE, December 31, 2005 0 11,170,804 0 11,171 3,200,457 (3,221,779)
---------- ------------- ------------ ------------ ------------- --------------
Shares of common stock issued for
services, February 2006 ($0.003 / share -
Note 5) (unaudited) 0 750,000 0 750 1,500 0
Net Operating Loss for the period ended
September 30, 2006 (unaudited) 0 0 0 0 0 (15,382)
---------- ------------- ------------ ------------ ------------- --------------
BALANCE, September 30, 2006 (unaudited) 0 11,920,804 $ 0 $ 11,921 $ 3,201,957 $ (3,237,161)
========== ============= ============ ============ ============= ==============
The accompanying notes are an integral part of
these financial statements.
7
Merilus, Inc.
( a development stage enterprise )
Statements of Cash Flows
From the
date
of
inception
(May 7,
1985)
For the nine months
ended through
September 30, September 30, September 30,
2006 2005 2006
(unaudited) (unaudited) (unaudited)
-------------- -------------- --------------
OPERATING ACTIVITIES:
Net loss from operations $ (15,382) $ (773) $ (3,237,161)
Adjustment to reconcile net loss to
net cash position:
Accounts payable 3,313 398 7,355
Payable to officer / director (1,500) 0 0
Payable to shareholder 485 0 498
Loss on investments 3,121,853
-------------- -------------- --------------
Net cash used for operating activities (13,084) (375) (107,455)
-------------- -------------- --------------
INVESTING ACTIVITIES:
Investment in Merilus Technologies, Inc. (Note 2) 0 0 (3,130,128)
-------------- -------------- --------------
Net cash used for investing activities 0 0 (3,130,128)
-------------- -------------- --------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 0 0 3,175,128
Common stock issued for services 2,250 0 38,375
Loans from shareholder 7,300 0 15,894
Donation of capital 0 375 8,650
-------------- -------------- --------------
Net cash provided from financing activities 9,550 375 3,238,047
-------------- -------------- --------------
Net increase (decrease) in cash (3,534) 0 464
Net cash position at start of period 3,998 0 0
-------------- -------------- --------------
Net cash position at end of period $ 464 $ 0 $ 464
============== ============== ==============
The accompanying notes are an integral part of these financial
statements.
8
Merilus, Inc.
(a development stage enterprise)
Notes to Financial Statements
(unaudited)
Note 1: Summary of Significant Accounting Policies
Development stage enterprise
Merilus, Inc. (the "Company") was incorporated under the laws of the State of
Nevada on May 7, 1985. The Company's initial operations proved unsuccessful.
During 1999 the Company forward split its outstanding shares of common stock
on a basis of 200 for 1, and during the year 2000 the Company again forward
split its common stock on a basis of 10 for 1 and amended its articles of
incorporation to authorize the issuance of a preferred class of stock. The
financial statements of the Company retroactively reflect the effects of both of
these forward splits.
During the year 2000 the Company entered into a reorganization agreement
("Agreement") with the intent to acquire all of the issued and outstanding
shares of a development stage enterprise, Merilus Technologies, Inc. ("MTI"), a
British Columbia corporation. During 2001 the Company attempted to complete the
terms of the Agreement; however, the acquisition of MTI was never consummated as
contemplated and in 2003 MTI filed for bankruptcy (See Note 2). Subsequent
thereto the Company became dormant and during 2005, the Company commenced its
efforts to acquire an operating entity.
Going concern
These financial statements have been prepared in contemplation of the Company
continuing as a going concern. However, the Company has not had revenues from
operations in each of the last two fiscal years, is considered a development
stage enterprise as defined by SFAS 7 and is seeking an acquisition or merger
with an operating entity. The Company's ability to meet its ongoing financial
requirements has been dependent on loans from a shareholder. The Company assumes
that this arrangement will continue during the next 12 months; however, no
assurance thereof can be given. A change in these circumstances would have a
material adverse effect on the Company's plan of operations. (See Note 4)
Use of estimates
These financial statements are prepared in conformity with accounting principles
generally accepted in the United States of America and require that management
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities. The use of
estimates and assumptions may also affect the reported amounts of revenues and
expenses. Actual results could differ from those estimates or assumptions.
Net loss per share of common stock
The loss per share of common stock is computed by dividing the net loss during
the period presented by the weighted average number of shares outstanding during
that same period.
Income taxes
The Company has not had any income in prior periods and therefore, no income
taxes have been paid. Management is of the opinion that future taxable income
may not be allowed to offset prior losses and therefore has not established a
deferred tax asset.
9
Revenue recognition
The Company has not had any realizable sources of revenue and consequently, has
not established a policy for the recognition of revenue.
New accounting pronouncements
In May 2005, the FASB issued SFAS No. 154 "Accounting Changes and Error
Corrections - a replacement of APB Opinion No. 20 and FASB Statement No. 3".
This SFAS replaces APB Opinion No. 20, Accounting Changes, and FASB Statement
No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes
the requirements for the accounting for and reporting of a change in accounting
principle. This SFAS applies to all voluntary changes in accounting principle
and also applies to changes required by an accounting pronouncement in the
unusual instance that the pronouncement does not include specific transition
provisions. When a pronouncement includes specific transition provisions, those
provisions should be followed. This SFAS will be effective for the Company for
fiscal years beginning after December 15, 2005. The Company believes that this
SFAS will have no significant impact on its financial statements.
In February 2006, the FASB issued SFAS No. 155 "Accounting for Certain Hybrid
Financial Instruments - an amendment of FASB Statements No. 133 and 140". In
March 2006, the FASB issued SFAS No. 156 "Accounting for Servicing of Financial
Assets - an amendment of FASB Statement No. 140. The Company believes that
neither of these SFAS will have any impact on its financial statements.
Note 2: Reorganization Agreement
During the year 2000 and in contemplation of entering into the Agreement for the
purpose of acquiring all of the issued and outstanding shares of MTI, the
Company issued warrants for the purchase of 2,000,000 shares of its common stock
at an exercise price of $1.00 per share. Upon entering into the Agreement the
warrants were exercised and the Company received $2,000,000, which was given to
MTI in exchange for notes receivable. Pursuant to the Agreement a trust was
established into which the Company issued 1 share of preferred stock that
represented 3,767,500 "exchangeable shares" of the Company's common stock. Upon
surrender by MTI shareholders of their MTI stock, the Company would issue its
common stock to the MTI shareholder. By end of the year 2001, the Company had
issued 828,300 shares of its common stock, which represented approximately 22%
of the exchangeable shares. Subsequent to this issuance, no further shares of
the Company's common stock were issued to MTI shareholders pursuant to the
Agreement and the Company cancelled the preferred share that had been issued.
The 828,300 shares that were issued were valued on the Company's financial
statements at the par value of its common stock or $0.001.
During the year 2001, the Company conducted its operations as though it had
acquired MTI even though its control of MTI was only through the Agreement and
the officers and directors that were elected pursuant thereto. During this year
the Company issued shares of its common stock for the benefit of MTI in the
following amounts: 60,000 shares for services rendered valued at the approximate
fair market value at the time of issuance of $36,125 (per share price ranging
between $0.25 and $1.00); and 1,532,504 shares for cash, valued at the cash
consideration received (per share price ranging between $0.25 and $1.00).
During 2003 MTI filed for bankruptcy in British Columbia, Canada, listing the
Company as an unsecured creditor. The Company has not collected any amounts from
the bankruptcy proceedings and does not anticipate the collection of any
amounts.
Note 3: Related Party Transactions
The Company has received unsecured cash advances from a shareholder that through
September 30, 2006, have amounted to $15,894. The Company signed interest
bearing (6% per annum) promissory notes which are due in full
10
with accrued interest the earlier of December 31, 2006 or within five days of
the merger or acquisition between the Company and another corporation or entity
that has operations. At September 30, 2006 the Company had accrued interest in
the amount of $498 on these notes.
During February 2006 the Company issued 750,000 shares of common stock to its
President in consideration of management services rendered. These services were
valued at $2,250 or at $.003 per share (which amount approximated the market
value during the period when the services were performed).
Note 4: General and Administrative Losses
During the nine month period ended September 30, 2006, the Company incurred
general and administrative losses in the amount of $14,897, comprised of stock
transfer agent fees ($595), legal fees ($7,518); audit fees ($3,800), other
accounting fees ($1,625), management fees ($750); filing fees ($574), and other
expenses ($35). During the nine month period ended September 30, 2005, the
Company incurred general and administrative losses in the amount of $773,
comprised of stock transfer agent fees ($648) and filing fees ($125).
Note 5: Contingent Liabilities
To the extent that the Company was a party to any financial transactions that
were not discharged through MTI's bankruptcy proceedings, including the
obligations associated with the issuance of the one share of preferred stock, or
that may not have been listed as part of MTI's bankruptcy, the Company may have
contingent liabilities. To the best of management's knowledge and belief the
financial statements accurately reflect the financial position of the Company as
of the dates presented and no contingent liabilities exist.
11
Item 2. Management's Discussion and Analysis or Plan of Operations
Special Note Regarding Forward-Looking Statements
This periodic report contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 with respect to
the Plan of Operations provided below, including information regarding the
Company's financial condition, results of operations, business strategies,
operating efficiencies or synergies, competitive positions, growth
opportunities, and the plans and objectives of management. The statements made
as part of the Plan of Operations that are not historical facts are hereby
identified as "forward-looking statements."
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the amounts
reported in the unaudited Condensed Consolidated Financial Statements and
accompanying notes. Management bases its estimates on historical experience and
on various other assumptions that are believed to be reasonable under the
circumstances. Actual results could differ from these estimates under different
assumptions or conditions. The Company believes there have been no significant
changes during the three and nine month periods ended September 30, 2006, to the
items disclosed as significant accounting policies in management's Notes to
Consolidated Financial Statements in the Company's Annual Report on Form 10-KSB
for the year ended December 31, 2005.
Plan of Operations
Overview:
The Company has not received any revenue from operations in each of the last two
fiscal years and is considered a development stage enterprise. The Company's
current operations have consisted of taking such action as management believes
necessary to prepare to seek an acquisition or merger with an operating entity.
The Company has obtained loans from a shareholder and has issued shares of its
common stock to its president for services rendered. The Company may also issue
shares of its common stock to raise equity capital. A shareholder of the Company
has financed the Company's current operations, which have consisted primarily of
maintaining in good standing the Company's corporate status, in fulfilling its
filing requirements with the Securities and Exchange Commission, including the
audit of its financial statements, and in changing the marketplace of its
securities.
The Company has entered into a note agreement on January 31, 2006 with a
shareholder to receive a total of $9,000 pursuant to the following terms:
unsecured promissory note due on or before December 31, 2006, bearing interest
at the rate of six percent per annum and requiring repayment be made in full
with accrued interest within five days of the merger or acquisition between the
Company and another corporation or entity that has operations. In addition, on
December 14, 2005, the Company signed a promissory note payable to this
shareholder in the amount of $4,593.50, having the same terms as previously
described. The Company has received $15,894 as of September 30, 2006, from a
shareholder.
The financial statements contained in this interim report have been prepared
assuming that the Company will continue as a going concern. The Company in not
engaged in any revenue producing activities and has not established any source
of revenue other than described herein. These factors raise substantial doubt
that the Company will be able to continue as a going concern even though
management believes that sufficient funding is available to meet its operating
needs during the next twelve months. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
12
Denny W. Nestripke serves as the Company's sole officer and director, and
therefore he acts as Company's management. Even though Mr. Nestripke is not
being provided any cash compensation, management fees in the amount of $2,250
have been charged to the Company and during February of 2006 Mr. Nestripke
received payment in the form of 750,000 shares of the Company's common stock
valued at $0.003, the prevailing market price during the period that the $2,250
was earned. The services that Mr. Nestripke provided were largely related to the
preparation of financial statements, the preparation and review of filings being
made with the United States Securities and Exchange Commission, other regulatory
filings (such as tax returns), and the performance of other duties associated
with the Company's plan of operations.
Risks associated with the plan of operations:
In its search for a business opportunity, management anticipates that the
Company will incur additional costs for legal and accounting fees to locate and
complete a merger or acquisition. Other than previously discussed, the Company
does not have any revenue producing activities whereby it can meet the financial
requirements of seeking a business opportunity. As of September 30, 2006, the
Company has obligated itself in the amount of $23,747 and may further obligate
itself as it pursues its plan of operations. There can be no assurance that the
Company will receive any benefits from the efforts of management to locate a
business opportunities.
The Company does not propose to restrict its search for a business opportunity
to any particular industry or geographical area and may, therefore, attempt to
acquire any business in any industry. The Company has unrestricted discretion in
seeking and participating in a business opportunity, subject to the availability
of such opportunities, economic conditions, and other factors. Consequently, if
and when a business opportunity is selected, such business opportunity may not
be in an industry that is following general business trends.
The selection of a business opportunity in which to participate is complex and
risky. Additionally, the Company has only limited resources and this fact may
make it more difficult to find any such opportunities. There can be no assurance
that the Company will be able to identify and acquire any business opportunity
which will ultimately prove to be beneficial to the Company and its
shareholders. The Company will select any potential business opportunity based
on management's business judgment. At the present time, only Mr. Nestripke
serves in management and allowing only one individual to exercise his business
judgment in the selection of a business opportunity for the Company presents a
significant risk to the Company's shareholders. The Company may acquire or
participate in a business opportunity based on the decision of management that
potentially could act without the consent, vote, or approval of the Company's
shareholders.
Since its inception, the Company has not generated any revenue and it is
unlikely that any revenue will be generated until such time as the Company
locates a business opportunity to acquire or with which it can merge. However,
the Company is not restricting its search to those business opportunities that
have profitable operations. Even though a business opportunity is acquired that
has revenues or gross income, there is no assurance that profitable operations
or net income will result there from. Consequently, even though the Company may
be successful in acquiring a business opportunity, such acquisition does not
assume that a profitable business opportunity is being acquired or that
shareholders will benefit through an increase in the market price of the
Company's common stock.
The acquisition of a business opportunity, no matter what form it may take, will
almost assuredly result in substantial dilution for the Company's current
shareholders. Inasmuch as the Company only has its equity securities (its common
and preferred stock) as a source to provide consideration for the acquisition of
a business opportunity, the Company's issuance of a substantial portion of its
authorized common stock is the most likely method for the Company to consummate
an acquisition. The issuance of any shares of the Company's common stock will
dilute the ownership percentage that current shareholders have in the Company.
The Company does not intend to employ anyone in the future, unless its present
business operations were to change. Mr. Nestripke does not have a contract to
remain with the Company over any certain time period and may resign his
13
position prior to the time that a business opportunity is located and/or
business reorganization takes place. The common stock issued to Mr. Nestripke is
for services rendered through the filing of this report.
At the present time, management does not believe it is necessary for the Company
to have an administrative office and utilizes the mailing post office box of the
Company's president for business correspondence. The Company intends to
reimburse management for any out of pocket costs other than those associated
with maintaining the post office box.
Liquidity and Capital Resources
As of September 30, 2006, the Company had a negative $23,283 in working capital
with assets of $464 and liabilities of $23,747. If the Company cannot find a
new business, it will have to seek additional capital either through the sale of
its shares of common stock or through a loan from its officer or shareholders.
The Company has only incidental ongoing expenses primarily associated with
maintaining its corporate status and professional fees associated with
accounting and legal costs.
Management anticipates that the Company will incur more costs including legal
and accounting fees to locate and complete a merger or acquisition. At the
present time the Company does not have the assets to meet these financial
requirements. Additionally, the Company does not have substantial assets to
entice potential business opportunities to enter into transactions with the
Company.
It is unlikely that any revenue will be generated until the Company locates a
business opportunity with which to acquire or merge. Management of the Company
will be investigating various business opportunities. These efforts may cost the
Company not only out of pocket expenses for its management but also expenses
associated with legal and accounting costs. There can be no guarantee that the
Company will receive any benefits from the efforts of management to locate
business opportunities.
If and when the Company locates a business opportunity, management of the
Company will give consideration to the dollar amount of that entity's profitable
operations and the adequacy of its working capital in determining the terms and
conditions under which the Company would consummate such an acquisition.
Potential business opportunities, no matter which form they may take, will most
likely result in substantial dilution for the Company's shareholders as it has
only limited capital and no operations.
Results of Operations
For the three and nine months ended September 30, 2006, the Company had a net
loss of $5,361 and $15,382, respectively, compared to a loss for the three and
nine months ended September 30, 2005, of $216 and $773, respectively. The
Company anticipates losses to remain at the present level or slightly higher
until a business opportunity is found. The Company had no revenue during the
nine months ended September 30, 2006. The Company does not anticipate any
revenue until it locates a new business opportunity.
c) Off-balance sheet arrangements.
The Company does not have any off-balance sheet arrangements and it is not
anticipated that the Company will enter into any off-balance sheet arrangements.
Item 3. Controls and procedures
a) Evaluation of disclosure controls and procedures.
The Company=s principal executive and accounting officer has reviewed the
disclosure controls and procedures (as defined in Rule 13a-14(a) / Rule
15d-14(a) of the Exchange Act) in place to assure the effectiveness of such
controls
14
and procedures. This review occurred within 90 days of this Form 10-QSB being
filed. Based on this review, the principal executive and accounting officer
believes that the disclosure controls and procedures are adequate.
b) Changes in disclosure controls and procedures.
There were no changes in the Company's disclosure controls and procedures, or in
factors that could significantly affect those controls and procedures, since the
date of the most recent evaluation.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information.
None
ITEM 6. Exhibits
a) Index of Exhibits:
Exhibit Table # Title of Document Location
3 (i) Articles of Incorporation Incorporated by reference*
3 (i) Amended Articles of Incorporation Incorporated by reference**
3 (i) Amended Articles of Incorporation Incorporated by reference***
3 (ii) Bylaws Incorporated by reference*
3 (ii) Revised Bylaws Incorporated by reference*****
4 Specimen Stock Certificate Incorporated by reference*
10 Promissory Note dated December 14, 2005 Incorporated by reference****
10 Promissory Note dated January 31, 2006 Incorporated by reference****
11 Computation of loss per share Notes to financial statements
31 Rule 13a-14(a)/15d-14a(a) Certification - CEO This filing
31 Rule 13a-14(a)/15d-14a(a) Certification - CFO This filing
32 Section 1350 Certification - CEO This filing
32 Section 1350 Certification - CFO This filing
* Incorporated by reference from the Company's registration statement on Form
10-SB filed with the Commission, SEC file no.000-28475.
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** Incorporated by reference from the Company's definitive 14C filed on July 31,
2000, with the Commission, SEC file no.000-28475.
*** Incorporated by reference from the Company's definitive 14C filed on January
9, 2001, with the Commission, SEC file no.000-28475.
**** Incorporated by reference from the Company's Form 10-KSB, for the year
ended December 31, 2005, filed with the Commission.
***** Incorporated by reference from the Company's Form 10-QSB, for the quarter
ended March 31, 2006, filed with the Commission.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report has been signed on its behalf by the undersigned, thereunto duly
authorized.
Merilus, Inc.
(Registrant)
Dated: November 14, 2006 By: Denny W. Nestripke
----------------- -------------------
Denny W. Nestripke
Chief Executive Officer
Chief Financial Officer
Director
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