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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2008
|_| 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 333-131722
PAWFECT FOODS, INC.
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(Exact name of Registrant as specified in its charter)
FLORIDA 20-3823853
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
31-51 STEINWAY STREET, LONG ISLAND CITY, NEW YORK 11103
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (718) 545-6406
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 (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 large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of "large accelerated filer", "accelerated filer", "non accelerated
filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer |_| Accelerated filer |_|
Non-accelerated filer |_| Smaller reporting company |X|
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 May 9, 2008, the latest practicable date, there were 2,181,000 shares of
common stock, $.0001 par value, outstanding.
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PAWFECT FOODS, INC.
FORM 10-Q
QUARTERLY REPORT
MARCH 31, 2008
TABLE OF CONTENTS
Page
----
PART I - FINANCIAL INFORMATION 3
ITEM 1. Financial Statements 3
Condensed Financial Statements (Unaudited): 3
Condensed Balance Sheets 3
Condensed Statements of Operations 4
Condensed Statements of Cash Flows 5
Notes to Unaudited Condensed Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk 11
ITEM 4T. Controls and Procedures 11
PART II - OTHER INFORMATION 13
ITEM 6. Exhibits 13
Signatures 14
2
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (UNAUDITED)
PAWFECT FOODS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
ASSETS
March 31, December 31,
2008 2007
---------- ----------
(unaudited)
Current Assets
Cash $ 1,519 $ 1,807
Accounts Receivable 12 --
---------- ----------
Total Current Assets 1,531 1,807
Property and Equipment - Net 2,489 2,658
---------- ----------
Total Assets $ 4,020 $ 4,465
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities
Accounts payable and accrued expenses $ 12,594 $ 11,233
Loans payable- related parties 9,569 4,500
---------- ----------
Total Current Liabilities 22,163 15,733
---------- ----------
Total Liabilities 22,163 15,733
---------- ----------
Commitments and contingencies -- --
Stockholders' (Deficit):
Common stock, $0.001 par value, 50,000,000 shares authorized; 2,181 2,181
2,181,000 shares issued and outstanding
Additional paid-in capital 26,812 26,812
Deficit accumulated during the development stage (47,136) (40,261)
---------- ----------
Total Stockholders' (Deficiency) (18,143) (11,268)
---------- ----------
Total Liabilities and Stockholders' (Deficiency) $ 4,020 $ 4,465
========== ==========
See accompanying notes to financial statements
3
PAWFECT FOODS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 AND CUMULATIVELY
FROM NOVEMBER 15, 2005 (INCEPTION) MARCH 31, 2008
(UNAUDITED)
Cumulative From For the For the
Inception Three Three
(Nov. 15, 2005) Months Ended Months Ended
To March 31, March 31, March 31,
2008 2008 2007
------------ ------------ ------------
REVENUES $ 12 $ 12 $ --
Cost of Sales 19 19 --
------------ ------------ ------------
Gross Profit (7) (7) --
OPERATING EXPENSES 47,128 6,867 3,118
------------ ------------ ------------
Operating (Loss) Before Interest Expense (47,135) (6,874) (3,118)
Other Income/(Expenses) -- -- --
------------ ------------ ------------
(Loss) Before Provision for Income Taxes (47,135) (6,874) (3,118)
Income Taxes -- -- --
------------ ------------ ------------
Net (Loss) $ (47,135) $ (6,874) $ (3,118)
============ ============ ============
Net (Loss) Per Common Share -
Basis and Diluted $ (0.02) $ (0.00) $ (0.00)
============ ============ ============
Weighted Average Shares of Common
Stock Outstanding 2,181,000 2,181,000 2,181,000
============ ============ ============
See accompanying notes to financial statements
4
PAWFECT FOODS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007 AND 2006 AND CUMULATIVELY
FROM NOVEMBER 15, 2005 (INCEPTION) TO MARCH 31, 2008
(UNAUDITED)
Cumulative From
Inception For the
(Nov. 15, 2005) Three Months Ended
to --------------------------
March 31, March 31, March 31,
2008 2008 2007
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (47,135) $ (6,874) $ (3,118)
Adjustments to reconcile net loss to net cash used in
operating activities:
Decrease (increase) in accounts receivable (12) (12)
Depreciation 896 168 168
Changes in operating assets and liabilities:
Increase in accrued liabilities and accounts payable 12,594 1,360 2,850
Increase in loans payable - related parties 9,569 5,069 --
---------- ---------- ----------
Net cash used in operating activities (24,088) (289) (100)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (3,386) -- --
---------- ---------- ----------
Net cash used in investing activities (3,386) -- --
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CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of Common Stock 18,100 -- --
Additional Capital Contribution by Shareholders 8,892 -- --
Proceeds from sale of common stock to founder 2,000 --
---------- ---------- ----------
Net cash provided by financing activities 28,992 -- --
---------- ---------- ----------
Net increase (decrease) in cash 1,518 (289) (100)
Cash and equivalents, beginning of period -- 1,807 1,552
---------- ---------- ----------
Cash and equivalents, end of period $ 1,518 $ 1,518 $ 1,452
========== ========== ==========
See accompanying notes to financial statements
5
PAWFECT FOODS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2008
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
Organization and Operations
---------------------------
The Company was organized under the laws of the State of Florida on November 15,
2005.
The Company is in the development stage. The Company plans to develop a
distribution channel in the pet food industry selling a comprehensive supply of
products utilizing the World Wide Web. The Company currently has no operations.
Current Operations
------------------
The Company is in its development stage. The Company, since it's inception
(November 15, 2005) has not commenced its full operations, nor has generated
sufficient working capital to pursue its business objectives. The accumulated
deficit during its development stage is $47,135 at Mach 31, 2008.
Basis of Accounting
-------------------
The Company's policy is to prepare its financial statements using the accrual
basis of accounting in accordance with generally accepted accounting principles.
The Company has retained December 31 as its annual year-end.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, the 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.
Cash and Equivalent
-------------------
Cash and cash equivalent include cash and cash in banks. The company maintains
cash and cash equivalent balances at a financial institution that is insured by
the federal deposit Insurance
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Corporations up to $100,000. At March 31, 2008, there is no concentration of
credit risk form uninsured bank balances.
Fixed Assets
------------
Fixed assets are recorded at cost. Depreciation is computed on the straight-line
method, based on the estimated useful lives of the assets of generally five or
ten years. Expenditures for maintenance and repairs are charged to operations as
incurred. Depreciation expense was $672 for the year ended December 31, 2007 and
$56 for year ended December 31, 2006.
Recent Accounting Pronouncements
--------------------------------
In September 2006, the FASB issued SFAS No. 157 Fair Value Measurements ("SFAS
No. 157"), which defines fair value, establishes a framework for measuring fair
value in generally accepted accounting principles and expands disclosures about
fair value measurements, SFAS No. 157 is effective for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years. In June
2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in
Income Taxes: An interpretation of FASB Statement No. 109 ("FIN No. 48"). This
interpretation clarifies the accounting for uncertainty in income taxes
recognized in an entity #146s financial statements in accordance with SFAS No.
109. FIN No. 48 prescribes a recognition threshold and measurement principles
for the financial statement recognition and measurement of tax positions taken
or expected to be taken on a tax return. This interpretation is effective for
fiscal years beginning after December 15, 2006. As of March 31, 2008, the
Company does not have any financial liabilities. No gains or losses resulting
from the fair value measurement of financial assets were included in the
Company's earnings. The adoption of SFAS No. 157 has not impacted the Company's
results of operations and financial position.
In February 2007, the FASB issued SFAS No., 159, The Fair Value Option for
Financial Assets and Financial Liabilities, including an amendment to FASB
Statements No. 115 ("SFAS No. 159"), SFAS No. 159 permits entities to choose to
measure many financial instruments, and certain other items, at fair value that
are not currently required to be measured at fair value, SFAS No. 159 is
effective as of the beginning of an entity first fiscal year that begins after
November 15, 2007. The Company has elected not to measure any eligible items at
fair value. Accordingly, the adoption of SFAS No. 159 has not impacted the
Company's results of operations and financial position.
NOTE 2: INCOME TAXES
In February 1992, the Financial Standards Board issued Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Under SFAS No. 109,
deferred assets and liabilities are recognized for the estimated future tax
consequences between the financial statement carrying amounts of the existing
assets and their respective basis.
Deferred assets and liabilities are measured using enacted tax rates in effect
for the year in which temporary differences are expected to be recorded or
settled. Under SFAS No. 109 the effect on
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deferred assets and liabilities of a change in tax rates is recognized in the
period that includes the enactment date.
As of March 31, 2008, the Company had net operating losses (NOL's) of
approximately $47,135 that expire in 15 years commencing in 2007.
Statutory federal income taxes 34%
Valuation allowance (34)
Effective tax rate 0%
No tax benefit is being accrued due to no current expectation of profits.
NOTE 3: CAPITAL TRANSACTIONS
At inception November 15, 2005, 2,000,000 shares of common stock were sold to
the founder for $2,000 cash. In December 2005, the Company offered 181,000
shares of their common stock under Rule 504 of Regulation D and section 4 (2) of
the Securities Act. The Common shares were offered at a per share price of $.10
for the aggregate sum of $18,100. All of the thirty-two (32) investors were of
non-accredited status
NOTE 4: RELATED PARTY LOANS
The Company's former President, Treasurer, Secretary and principal shareholder
loaned the Company an aggregate of $8,253 by paying third party expenses on the
Company's behalf. The advances were unsecured obligations due on demand. On
August 15,2007, effective as of July 17, 2007 Mr. Monahan released the Company
from any obligation to pay back advances made by him to pay third party expenses
incurred by the Company in the aggregate amount of $8,992.
The Company is leasing approximately 70 square feet of office space on a
month-to-month basis from Steinway Group, LLC in L.I.C., New York. This facility
serves as the Company's principal executive and administrative office. Rental
for the facility is approximately $2,400 per annum payable in equal monthly
installments. Mr. Gattini is the Managing Member of Steinway Group, LLC with a
78% ownership interest.
In November 2007 the Company's principal shareholder loaned the Company $4,500
to pay accounting, legal and other fees. The loan was documented in a gird
promissory note in March, 2008. The note provides for 3% annual interest due at
maturity and is due the earlier of: (i) April 1, 2009; (ii) when the company has
raised gross proceeds of $500,000 (not including securities of the Company
purchased by the principal shareholder, additional advances pursuant to the note
or other loans from principal shareholder to the Company), (iii) upon a change
in the ownership of a majority of the outstanding voting stock of the Company;
or (iv) the date that the entire principal amount and interest on the Note
becomes due and payable by reason of acceleration due to the occurrence of an
Event of Default (as defined in the note).
In February 2008, the Company's sole executive officer and director loaned the
Company $5,000 to pay accounting fees and other operating expenses. The loan was
documented in a grid promissory note in March. 2008 The note provides for 3%
annual interest due at maturity and is due the earlier of: (i) April 1, 2009;
(ii) when the Company has raised gross proceeds of
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$500,000 (not including securities of the Company purchased by the principal
shareholder, additional advances pursuant to the note or other loans from
principal shareholder to the Company), (iii) upon a change in the ownership of a
majority of the outstanding voting stock of the Company; or (iv) the date that
the entire principal amount and interest on the Note becomes due and payable by
reason of acceleration due to the occurrence of an Event of Default (as defined
in the note). An additional advance of $5,000 on this note was made to the
Company in May 2008.
NOTE 5: EXECUTIVE COMPENSATION
The Company has retained Mr. Pietro Gattini as the Company's President, Chairman
and Chief Executive Officer and is currently the only Director, Officer and
Employee. Compensation is being accrued at the rate of $500 per month and is to
be paid at the earlier of the Company receiving more than $500,000 of financing
or a change of the ownership of a majority of the Company's outstanding shares.
NOTE 6: COMMITMENTS AND LEASES
The Company is leasing approximately 70 square feet of office space on a
month-to-month basis from Steinway Group, LLC in L.I.C., New York. This facility
serves as the Company's principal executive and administrative office. Rental
for the facility is approximately $2,400 per annum payable in equal monthly
installments. Rent is being accrued and will be payable upon the termination of
the lease.
NOTE 7: SUBSEQUENT EVENT
In May 2008, the Company's sole executive officer and director loaned the
Company an additional $5,000 to pay accounting fees and other operating
expenses. The loan was documented by an endorsement to the grid promissory note
the Company executed in March 2008, described above. As a result of the advance
the principal balance of the note due to the Company's sole executive officer
and director is $10,000 as of May 7, 2008.
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Pawfect Foods, Inc.'s business is to become actively engaged in providing an
online marketplace for premium and holistic pet food, via the Internet. We
maintain a domain name called www.Pawfectfoods.com. We have also obtained a web
hosting provider, to provide us with the necessary disk space capacity for our
website and email capability for the next 12 months. We have also posted our
nearly completed e-commerce website, to introduce ourselves to potential
customers with a modest array of introductory products. Although we had set up a
merchant payment gateway, in 2006, we suspended the account in December 2006
pending our gauging consumer demand and developing reliable sources of supply.
Our new management is considering our current business plan and we determine if
paying the nominal fee to reactivate the account in the near term is advisable.
During the quarter ended March 31, 2008 management reactivated the merchant
payment gateway and has received a nominal sale of $12 and also discovered that
payment gateway was not operating properly and it is currently in the process of
making the necessary adjustments. During the next twelve months we plan to
satisfy our cash requirements with loans from our principal shareholder and
management,
CHANGE IN CONTROL
On July 16, 2007, Charles Monahan, our former President, Treasurer, Secretary
and principal shareholder entered into a Capital Stock Purchase Agreement (the
"Stock Purchase Agreement") with Biotech Initiative of Chelsea, Ltd., a private
investment fund based in London, England. All conditions to the closing were
fulfilled and funds released to Mr. Monahan on July 17, 2007.
Under the Stock Purchase Agreement:
o Biotech Initiative purchased an aggregate of 2,000,000 restricted
shares of our common stock from Mr. Monahan for approximately $624,000
o Mr. Monahan resigned as an officer and director of the Company.
Biotech Initiative, acting in its capacity as our principal shareholder,
appointed Pietro Gattini to serve as sole director, filling the vacancy created
by the resignation of Mr. Monahan. Mr. Gattini also became our President,
Secretary and Treasurer.
The 2,000,000 shares represent approximately 89% of our outstanding shares. The
source of funds for Biotech Initiative's purchase was from its own capital
resources and no funds were borrowed.
We filed a Form 8-K Report reporting this transaction on July 20, 2007.
Mr. Gattini is evaluating our current business plan, prospectus and financial
requirements. He may also consider the acquisition of one or more companies in
either skilled fields of endeavor unrelated activities for potential
acquisitions or merger. There are no agreements or understandings regarding any
such acquisitions. If we enter into any such agreement we will promptly disclose
the terms of the agreement and other information concerning the company by
filing a Report on Form 8-K, including a copy of the agreement as an exhibit.
Such an
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acquisition will require the issuance of a substantial number of shares of our
common stock and financing.
CRITICAL ACCOUNTING POLICIES
Our accounting policies are described in Note 1 of the consolidated financial
statements included in this Quarterly Report on Form 10-Q for the quarter ended
March 31, 2008. The financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America, which
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.
Since we are in the development stage and have had only limited expenditures and
no estimates we do not consider any accounting policy to be critical to the
understanding of our business.
RESULTS OF OPERATIONS
Our financial statements, which are set forth in Item 1 of this report, reflect
our operating results from November 15, 2005 (inception) to March 31, 2008.
During the period from inception to we had no revenue and our expenses totaled
$47,135incurred in for the development and administration of our website based
pet food business and
LIQUIDITY AND CAPITAL RESOURCES
Our operating expenses have been financed with loans from our principal
shareholder, and management. We intend to seek such additional funding through
private financings. There can be no assurance that additional financing will be
available, or, if available, that such additional financing will be available on
terms acceptable to us. If additional funds are raised by issuing debt, we will
incur fixed payment obligations, which could delay the time, if any, when we may
achieve profitability. If adequate funds are not available, we may be required
to curtail our operations.
In the event our management determines that our business plan is not financeable
or viable, we may seek to make an acquisition which will require significant
financing.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required.
ITEM 4T. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures designed to ensure that
information required to be disclosed in our reports filed or submitted under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the SEC. As
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of March 31, 2008, the end of the period covered by this quarterly report on
Form 10-Q, we carried out an evaluation, under the supervision and with the
participation of management, including our Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based
upon that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
During the quarter ended March 31, 2008, there has been no change in our
internal control over financial reporting (as defined in Rule 13a-15(f) under
the Exchange Act) that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 6: EXHIBITS
EXHIBIT NUMBER DOCUMENT DESCRIPTION
31.1 Certificate of Chief Executive Officer and Financial Officer
pursuant to Securities Exchange Act Rules 13a-15(e) and
15d-15(e) as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certificate of Chief Executive Officer and Chief Financial
Officer pursuant to Section 18 U.S.C. Section 1350
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Dated: May 15, 2008 PAWFECT FOODS, INC.
By: /s/ Pietro Gattini
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Pietro Gattini, President (Principal
Executive And Financial Officer)
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