SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
Quarterly Report under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended Commission File Number
- - ----------------- ----------------------
March 31, 2005 000-32099
The Art Boutique, Inc.
--------------------------
(Exact name of registrant as specified in its charter)
Wyoming 83-0269496
------- ----------
(State of incorporation) (I.R.S. Employer
Identification No.)
Rooms 1203-8, 12 Floor, Hang Seng Bldg.
77 Des Voeux Road Central, l Hong Kong
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: None
----
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 the filing
requirements for at least the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
12,471,900 as of March 31, 2005
Table of Contents
PART I - FINANCIAL INFORMATION
PAGE
Item 1. Condensed Consolidated Financial Statements
Independent Auditor's Report............................................................ F-1
Balance Sheets March 31, 2005 (unaudited) and December 31,, 2004........................ F-2
Statements of Operations for the Three Months ended March 31, 2005...................... F-3
Statements of Stockholders Equity (Deficit) March 31, 2005 (unaudited).................. F-4
Statements of Cash Flows for the Three Months ended March 31, 2005 ..................... F-5
Notes to Condensed Consolidated Financial Statements (Unaudited)........................ F-6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations... 4
Item 3 Controls and Procedures................................................................. 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings....................................................................... 8
Item 2. Changes in Securities................................................................... 8
Item 3. Defaults upon Senior Securities......................................................... 8
Item 4. Submission of Matters to a Vote of Security Holders..................................... 8
Item 5. Other Information....................................................................... 8
Item 6. Exhibits and Reports on Form 8-K........................................................ 8
Signatures....................................................................................... 9
2
PART I - FINANCIAL INFORMATION
ART BOUTIQUE, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE-MONTHS ENDED MARCH 31, 2005
(UNAUDITED)
3
MICHAEL JOHNSON & CO., LLC
Certified Public Accountants
9175 East Kenyon Ave., Suite 100
Denver, Colorado 80237
Michael B. Johnson C.P.A. Telephone: (303) 796-0099
Member: A.I.C.P.A. Fax: (303) 796-0137
Colorado Society of C.P.A.s
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Art Boutique, Inc.
We have reviewed the accompanying balance sheet of Art Boutique, Inc. (A
Development Stage Company) as of March 31, 2005 and the related statements of
operations for the three-months ended March 31,2005 and 2004, and for the period
May 15, 1984 (inception) to March 31, 2005, stockholders' equity for the period
ended March 31, 2005, cash flows for the three-month period ended March 31, 2005
and 2004 and for the period May 15, 1984 (inception) to March 31, 2005 included
in the accompanying Securities and Exchange Commission Form 10-QSB for the
period ended March 31, 2005. These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquires of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States, the objective
of which is the expression of an opinion regarding the financial statements as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with accounting principles generally accepted in the United States.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the balance sheet as of December 31, 2004, and
the related statements of operations, stockholders' equity and cash flows for
the year then ended (not presented herein). In our report dated April 18, 2005,
we expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying balance sheet as of March
31, 2005 is fairly stated in all material respects in relation to the balance
sheet from which it has been derived.
Michael Johnson & Co., LLC
Denver, Colorado
May 12, 2005
/s/Michael Johnson & Co., LLC
F-1
THE ART BOUTIQUE
(A Development Stage Company
Consolidated Balance Sheets
(Unaudited)
March 31, December 31,
2004 2004
---- ----
ASSETS:
Current Assets:
Cash $ 1,122 $ 5,087
----------------- -------------
Total Current Assets 1,122 5,087
----------------- -------------
Fixed Assets:
Office Equipment (Net) 8,231 7,679
----------------- -------------
Total Fixed Assets 8,231 7,679
----------------- -------------
Other Assets:
Deposits 609 609
Prepaid Expenses 1,217 1,217
----------------- -------------
Total Other Assets 1,826 1,826
----------------- -------------
TOTAL ASSETS $ 11,179 $14,592
================= =============
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 88,000 $ -
Accruals 3,032 -
Notes Payable - Stockholders 760,325 272,320
----------------- -------------
Total Current Liabilities 851,357 272,320
----------------- -------------
Stockholders' Equity:
Common Stock, no par value; 50,000,000 shares authorized;
12,471,900 shares issued and outstanding 433,095 433,095
Deficit accumulated during the development stage (1,273,273) (690,823)
----------------- -------------
Total stockholders' equity (840,178) (257,728)
----------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,179 $14,592
================= =============
See Accountants Review Report
F-2
THE ART BOUTIQUE
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
May 15, 1984
Three-Month Period Ended Inception to
March 31, March 31,
2005 2004 2005
--------------- ---------------- ----------------
Revenue $ - $ - $ 61,102
--------------- ---------------- ----------------
Expenses:
Depreciation 464 378 6,185
Loss from discontinued operations - - 26,331
Acquisition costs - - 2,100
General and administrative 581,991 167,958 1,299,359
--------------- ---------------- ----------------
Total Expenses 582,455 168,336 1,333,975
--------------- ---------------- ----------------
Other Revenue/Expense:
Exchange Rate Gain/Loss (5) (59) 400
--------------- ---------------- ----------------
Net Loss $(582,450) $(168,277) $(1,273,273)
=============== ================ ================
Net Loss per share common stock $ (0.05) $ (0.02)
=============== ================
Weighted average number of
common shares outstanding 12,471,900 12,471,900
=============== ================
* Less than a $.01 per share
See Accountants Review Report
F-3
THE ART BOUTIQUE, INC.
(A Development Stage Company)
Consolidated Stockholders' Equity (Deficit)
March 31, 2005
(Unaudited)
Deficit
Accum. During
Common Stock the Development
# of Shares Amount Stage Totals
----------- ------ ----- ------
Balance - December 31, 1995 471,900 29,795 (29,842) (47)
Net Profit for year - - 47 47
----------------- --------------- ---------------- ----------------
Balance - December 31, 1996 471,900 29,795 (29,795) -
----------------- --------------- ---------------- ----------------
Issued March 14, 1997 4,000,000 1,000 - 1,000
Net Loss for year - - (1,000) (1,000)
----------------- --------------- ---------------- ----------------
Balance - December 31, 1997 4,471,900 30,795 (30,795) -
----------------- --------------- ---------------- ----------------
Net Profit for year - - - -
----------------- --------------- ---------------- ----------------
Balance - December 31, 1998 4,471,900 30,795 (30,795) -
----------------- --------------- ---------------- ----------------
Net Profit for year - - - -
----------------- --------------- ---------------- ----------------
Balance - December 31, 1999 4,471,900 30,795 (30,795) -
----------------- --------------- ---------------- ----------------
Cash for acquisition - 2,300 - 2,300
Net Loss for year - - (2,300) (2,300)
----------------- --------------- ---------------- ----------------
Balance - December 31, 2000 4,471,900 33,095 (33,095) -
----------------- --------------- ---------------- ----------------
Net Loss for year - - (4,608) (4,608)
----------------- --------------- ---------------- ----------------
Balance - December 31, 2001 4,471,900 33,095 (37,703) (4,608)
----------------- --------------- ---------------- ----------------
Net Loss for Year - - (12,683) (12,683)
----------------- --------------- ---------------- ----------------
Balance - December 31, 2002 4,471,900 33,095 (50,386) (17,291)
----------------- --------------- ---------------- ----------------
Issuance of stock for cash 12/03 8,000,000 400,000 - 400,000
Net Loss for Year - - (115,445) (115,445)
----------------- --------------- ---------------- ----------------
Balance - December 31, 2003 12,471,900 433,095 (165,831) 267,264
----------------- --------------- ---------------- ----------------
Net Loss for Year - - (524,992) (524,992)
----------------- --------------- ---------------- ----------------
Balance - December 31, 2004 12,471,900 433,095 (690,823) (257,728)
----------------- --------------- ---------------- ----------------
Net Loss for Period - - (582,450) (582,450)
----------------- --------------- ---------------- ----------------
Balance - March 31, 2004 12,471,900 $ 433,095 $(1,273,273) $ (840,178)
================= =============== ================ ================
See Accountants Review Report
F-4
THE ART BOUTIQUE, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
Indirect Method
May 15, 1984
Three-Month Period Ended (Inception) to
March 31, March 31,
2005 2004 2005
--------------- -------------- ----------------
Cash Flows from Operating Activities:
Net Loss $(582,450) $(168,277) $(1,273,273)
Adjustments to reconcile net loss to net cash used
by operating activities
Stock issued for services - - 1,000
Depreciation 464 379 843
Changes in operating assets and liabilities:
Increase in Accounts Payable and Accruals 91,032 1,138 91,032
(Increase) in Deposits - (730) (609)
(Increase) in Prepaid Expenses - (28,301) (1,217)
--------------- -------------- ----------------
Net Cash Flows Used by Operating Activities (490,954) (195,791) (1,182,224)
--------------- -------------- ----------------
Cash Flows from Investing Activities:
Sale of Equipment (Net) - - -
Acquisition of Fixed Assets (1,016) (4,366) (9,074)
--------------- -------------- ----------------
Net Cash Flows Provided by Investing Activities (1,016) (4,366) (9,074)
--------------- -------------- ----------------
Cash Flows from Financing Activities:
Proceeds from Notes Payable - Stockholders 488,005 - 760,325
Issuance of Common Stock - - 432,095
--------------- -------------- ----------------
Net Cash Flows Provided by Financing Activities 488,005 - 1,192,420
--------------- -------------- ----------------
Net Increase (Decrease) in Cash (3,965) (200,157) 1,122
--------------- -------------- ----------------
Cash at Beginning of Period 5,087 280,054 -
--------------- -------------- ----------------
Cash at End of Period $ 1,122 $ 79,897 $ 1,122
=============== ============== ================
Supplemental Disclosure of Cash Flows Information:
Cash paid for interest $ - $ - $ -
=============== ============== ================
Cash paid for taxes $ - $ - $ -
=============== ============== ================
Supplemental Disclosure of Non-Cash Transactions
Stock issued for services - 4,000,000 Shares $ 1,000
================
See Accountants Review Report
F-5
ART BOUTIQUE, INC.
(A Development Stage Company)
March 31, 2005
Note 1 - Presentation of Interim Information
In the opinion of the management of Art Boutique, Inc., and Key Chance
International, LTD (a wholly owned subsidiary) the accompanying unaudited
financial statements include all normal adjustments considered necessary to
present fairly the financial position as of March 31, 2005 and the results of
operations for the three-months ended March 31, 2005 and 2004 and the period May
15, 1984 (inception) to March 31, 2005, and cash flows for the three-months
ended March 31, 2005 and 2004, and for the period May 15, 1984 (Inception) to
March 31, 2005. Interim results are not necessarily indicative of results for a
full year.
The financial statements and notes are presented as permitted by Form 10-QSB,
and do not contain certain information included in the Company's audited
financial statements and notes for the fiscal year ended December 31, 2004.
Note 2 - Going Concern:
The company's financial statements have been presented on the basis that it is a
going concern, which contemplated the realization of assets and the satisfaction
of liabilities in the normal course of business.
The Company is in the development stage and has not earned any revenue from
operations. The Company's ability to continue as a going concern is dependent
upon its ability to develop additional sources of capital or locate a merger
candidate and ultimately, achieve profitable operations. The accompanying
financial statements do not include any adjustments that might result from the
outcome of these uncertainties. Management is seeking new capital to revitalize
the Company.
F-6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
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Cautionary and Forward Looking Statements
In addition to statements of historical fact, this Form 10-QSB contains
forward-looking statements. The presentation of future aspects of The Art
Boutique, Inc. ("The Art Boutique," the "Company" or "issuer") found in these
statements is subject to a number of risks and uncertainties that could cause
actual results to differ materially from those reflected in such statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis only as of the date hereof.
Without limiting the generality of the foregoing, words such as "may," "will,"
"expect," "believe," "anticipate," "intend," or "could" or the negative
variations thereof or comparable terminology are intended to identify
forward-looking statements.
These forward-looking statements are subject to numerous assumptions, risks
and uncertainties that may cause The Art Boutique, Inc. actual results to be
materially different from any future results expressed or implied by The Art
Boutique in those statements. Important facts that could prevent The Art
Boutique from achieving any stated goals include, but are not limited to, the
following:
Some of these risks might include, but are not limited to, the
following:
(a) volatility or decline of the Company's stock price;
(b) potential fluctuation in quarterly results;
(c) failure of the Company to earn revenues or profits;
(d) inadequate capital to continue or expand its busi-
ness, inability to raise additional capital or financ
-ing to implement its business plans;
(e) failure to achieve a business;
(f) rapid and significant changes in markets;
(g) litigation with or legal claims and allegations by
outside parties;
(h) insufficient revenues to cover operating costs.
4
There is no assurance that the Company will be profitable, the Company
may not be able to successfully develop, manage or market its products and
services, the Company may not be able to attract or retain qualified executives
and technology personnel, the Company's products and services may become
obsolete, government regulation may hinder the Company's business, additional
dilution in outstanding stock ownership may be incurred due to the issuance of
more shares, warrants and stock options, or the exercise of warrants and stock
options, and other risks inherent in the Company's businesses.
The Company undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date hereof.
Readers should carefully review the factors described in other documents the
Company files from time to time with the Securities and Exchange Commission,
including the Quarterly Reports on Form 10-QSB and Annual Report on Form 10-KSB
filed by the Company in 2004 and any Current Reports on Form 8-K filed by the
Company.
OVERVIEW OF OPERATIONS
Subsequent to the change in control of the Company which occurred in October
2003, the new management of the Company has been actively seeking potential
new businesses so as to enable the Company to achieve a sustainable level of
operations.
Various attempts have been made by the Company in trying to achieve such an
objective, including considering the potential acquisitions of certain
businesses in Japan. Unfortunately, no agreements have been entered into by the
Company despite efforts by the management. In November 2004, an opportunity for
the Company to invest in a real estate development project arose whereby the
Company might act as the developer of a land situated in the Airai State in the
Republic of Palau for a resort hotel.
5
Extensive studies and due diligence have been conducted by the Company to
ascertain the feasibility of such a venture, which involved site visits to the
Republic of Palau as well as various conferences in Japan. Presently, the
Company is in the course of concluding the terms and conditions in relation to
the documentation to acquire an interest in the entity which is the lessee of
the real property for the potential project.
Professional and consulting fees and expenses have been incurred in performing
due diligence review, obtaining all necessary financial information, preparation
of documentation as well as conducting negotiations with various parties in
connection with the Company's potential investment in the Pelau project.
The Company has been funded in the past year by loans from shareholders.
RESULTS OF OPERATIONS FOR QUARTER ENDED MARCH 31, 2005 COMPARED TO SAME PERIOD
ENDED MARCH 31, 2004.
The Company had no revenues from operations in the period in 2005 or 2004. The
Company incurred general and administrative expenses in the period in 2005 of
$581,958 compared to $167,958 in the period in 2004. The expenses were incurred
by the company for salaries, consulting accounting, legal, and travel expenses.
The Company had a loss in 2005 in the quarter of ($582,450) compared to a loss
on operations of $168,336 in 2004 in the quarter. The Company had loss per share
in 2005 of ($.05) and loss of ($.02) per share in 2004.
LIQUIDITY AND CAPITAL RESOURCES
The Company had $1,122 in cash capital at the end of the period and about
$10,000 in other assets. The Company will need to either borrow or make private
placements of stock in order to fund operations. No assurance exists as to the
ability to achieve loans or make private placements of stock.
6
NEED FOR ADDITIONAL FINANCING
The Company does not have capital sufficient to meet the Company's cash
needs, including the costs of compliance with the continuing reporting
requirements of the Securities Exchange Act of 1934. The Company will have to
seek loans or equity placements to cover such cash needs. In the event the
Company is able to complete a business combination during this period, lack of
its existing capital may be a sufficient impediment to prevent it from
accomplishing the goal of completing a business combination. There is no
assurance, however, that without funds it will ultimately allow registrant to
carry out its business
The Company will need to raise additional funds to conduct any business
activities in the next twelve months.
No commitments to provide additional funds have been made by management
or other stockholders. Accordingly, there can be no assurance that any
additional funds will be available to the Company to allow it to cover its
expenses as they may be incurred.
Irrespective of whether the Company's cash assets prove to be
inadequate to meet the Company's operational needs, the Company might seek to
compensate providers of services by issuances of stock in lieu of cash.
"GOING CONCERN" QUALIFICATION
The Company's auditor has issued a "going concern" qualification as part of
his opinion in the Audit Report. There is substantial doubt about the ability of
the Company to continue as a "going concern." The Company has no business,
limited capital, debt in excess of $851,357, all of which is current, minimal
cash, nominal other assets, and no capital commitments. The effects of such
conditions could easily be to cause the Company's bankruptcy.
Management hopes to develop its business plan and will need, at which to
seek and obtain funding, via loans or private placements of stock for operations
debt and to provide working capital. Management has plans to seek capital in the
form of loans or stock private placements in the next quarter of approximately
$250,000.
7
ITEM 3. CONTROLS AND PROCEDURES
The Company maintains controls and procedures designed to ensure that it is
able to collect the information it is required to disclose in the reports it
files with the SEC, and process, summarize, and disclose this information within
the time periods specified in the rules of the SEC. The Company's Chief
Executive is responsible for establishing and maintaining these procedures and,
as required by the rules of the SEC, evaluate their effectiveness.
Our Chief Executive Officer, has evaluated the effectiveness of our
disclosure controls and procedures (as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) as of the end of the period covered by this report. The
evaluation included control areas in which we intend to make, changes to improve
and enhance controls. Based on such evaluation, our Chief Executive Officer has
concluded that, as of the end of such period, our disclosure controls and
procedures were not effective and had material weaknesses, in recording stock
issuance for compensation, as well as other areas involving recording of
adjustment in liabilities and assessing impairment of assets.
Material Weakness in Disclosure Controls
A material weakness is a condition in which the design or operation of
one or more of the internal control components does not reduce to a relatively
low level the risk that misstatements caused by error or fraud in amounts that
would be material in relation to the financial statements being audited may
occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions.
The Securities and Exchange Commission rule making for the
Sarbanes-Oxley Act of 2002 Section 404 requires that a company's internal
controls over financial reporting be based upon a recognized internal control
framework. While the Company has an internal control and procedures manual in
place and management believes the controls and procedures are effective the
manual is not based upon a recognized internal control framework, because we
have not found one that fits the limited scope of operations of our small
Company. Accordingly we conclude we have material weaknesses.
During the first half of the Company's fiscal year ending December 31,
2005 management will be revising the Company's internal and controls procedure
document basing this revision upon a model framework created by the Committee of
Sponsoring Organizations of the Treadway Commission (or "COSO") as is
appropriate to our operations. This framework is entitled Internal
Control-Integrated Framework. The COSO Framework, which is the common shortened
title, was published in 1992 and we believe, will satisfy the Securities and
Exchange Commission requirements of Section 404 of the Sarbanes-Oxley Act of
2002.
To address these material weaknesses management is committed to
re-writing its internal controls and procedures manual based upon the Treadway
Commission report as is appropriate to our operations during the first half of
fiscal year ending December 31, 2005.
Except as noted above, there have not been any changes in our internal
control over financial reporting (as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) during our first fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
The Company's auditor has issued a "going concern" qualification as part of his
opinion in the Audit Report. There is substantial doubt about the ability of the
Company to continue as a "going concern." The Company has no revenues, minimal
cash, nominal other assets, and no capital commitments. The effects of such
conditions could easily be to cause the Company's bankruptcy.
Management hopes to develop a business plan and will need to seek and obtain
funding, via loans or private placements of stock, for operations and to provide
working capital. Management has plans to seek capital in the form of loans or
stock private placements in the next quarterof at least $250,000.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) 31 Sarbanes-Oxley Certification
32 Sarbanes-Oxley Certification
(B) Reports on Form 8-K - None
THE ART BOUTIQUE, INC.
(A Development Stage Company)
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.
THE ART BOUTIQUE, INC.
Date: May 12, 2005 /s/ Ronald Lui
-----------------------------
Ronald Lui, CEO