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: June 30, 2008
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
1934
For the transition period from ________________ to __________________
Commission File Number 333-148256
MUSKOKA FLOORING CORPORATION
______________________________________________________
(Exact name of registrant as specified in its charter)
Delaware N/A
_________________________________ ___________________
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2711 Centerville Road, Suite 400 Wilmington, DE 19808
________________________________________________ __________
(Address of principal executive offices) (Zip Code)
(705) 794-9481
____________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a Smaller reporting company [X]
smaller reporting
company)
Indicate by check mark whether the registrant is a shell company (as defined in
rule 12b-2 of the Exchange Act).
Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of June 30, 2008, the registrant
had 1,482,500 shares of common stock, $0.001 par value, issued and outstanding.
TABLE OF CONTENTS
Page
Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements - Unaudited
Balance Sheets as of June 30, 2008 and December 31, 2007 4
Statements of Operations for the six months ended June 30, 2008
and June 30, 2007; the three months ended June 30, 2008 and
June 30, 2007 and cumulative results from inception (July 20, 2005)
to June 30, 2008 5
Statement of Stockholders Equity (Deficit) cumulative from
inception (July 20, 2005) to June 30, 2008 6
Statements of Cash Flows for the six months ended June 30, 2008
and June 30, 2007; for the three months ended June 30, 2008 and
June 30, 2007; and cumulative results from July 20, 2005
(date of inception) to March 31, 2008 7
Notes to Financial Statements for the three months
ended June 30, 2008 8
Item 2. Management's Discussion and Analysis and Plan of Operation 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
Item 4. Controls and Procedures 12
Item 4T. Controls and Procedures 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 1A. Risk Factors 14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits 14
2
MUSKOKA FLOORING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
JUNE 30, 2008
BALANCE SHEETS
STATEMENTS OF OPERATIONS
STATEMENTS OF STOCKHOLDERS' EQUITY
STATEMENTS OF CASH FLOWS
NOTES TO FINANCIAL STATEMENTS
3
MUSKOKA FLOORING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
June 30, 2008 December 31, 2007
(Audited)
___________________________________________________________________________________________________
ASSETS
CURRENT ASSETS
Cash $ 18 $ 7,293
Prepaid Expense 500 950
____________________________
TOTAL CURRENT ASSETS 518 8,243
____________________________
TOTAL ASSETS $ 518 $ 8,243
============================
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 8,500 $ 8,398
Due to related party 2,829 -
____________________________
TOTAL CURRENT LIABILITIES 11,329 8,398
____________________________
TOTAL CURRENT LIABILITIES $ 11,329 $ 8,398
____________________________
STOCKHOLDERS' EQUITY (DEFICIT )
Common stock (Note 3)
Authorized
75,000,000 shares of common stock, $0.0001 par value,
Issued and outstanding
1,482,500 shares of common stock 148 148
Additional paid in capital 29,327 29,327
Deficit accumulated during the development stage (40,285) (29,630)
____________________________
Total Equity (10,811) (155)
____________________________
TOTAL LIABILITIES & EQUITY $ 518 $ 8,243
============================
The accompanying notes are an integral part of these financial statements
4
MUSKOKA FLOORING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(UNAUDITED)
Cumulative
results of
operations from
July 20, 2005
Three months Three months Six months Six months (date of
Ended Ended Ended Ended inception) to
June 30, 2008 June 30, 2007 June 30, 2008 June 30, 2007 June 30, 2008
________________________________________________________________________________________________________________________
EXPENSES
Office and general $ 1,916 $ 19 $ 4,516 $ 89 $ 5,231
Exchange - - - (165) (155)
Professional fees 3,190 8,000 6,139 8,000 35,209
Provision for Income Taxes - - - -
_____________________________________________________________________________________
NET LOSS $ ( 5,106) $ (8,019) $(10,655) $ (7,923) $ (40,285)
=====================================================================================
BASIC NET LOSS PER SHARE $ (0.02) $ (0.03)
===============================
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 1,031,742 1,482,500
===============================
The accompanying notes are an integral part of these financial statements
5
MUSKOKA FLOORING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION (JULY 20, 2005) TO JUNE 30, 2008
(UNAUDITED)
Deficit
Accumulated
Common Stock Additional Share During the
___________________________ Paid-in Subscription Development
Number of shares Amount Capital Receivable Stage Total
____________________________________________________________________________________________________________________________________
Balance at inception on, July 20, 2005 - $ - $ - $ - $ - $ - $ -
_________________________________________________________________________________________
Net Loss, December 31, 2005 - - - - (977) (977)
Common stock issued for cash at $0.015
per share, December 8, 2005 171,600 17 2,557 2,574
Balance, December 31, 2005 171,600 $ 17 $ 2,557 - (977) $ 1,597
_________________________________________________________________________________________
Net Loss, December 31, 2006 - - - - (13,196) (13,196)
Common stock issued for cash at $0.015
per share, February 28, 2006 828,400 83 12,343 (2,557) 9,869
Common stock issued for cash at $0.030
per share, October 31, 2006 482,500 48 14,427 (14,475) -
_________________________________________________________________________________________
Balance, December 31, 2006 1,482,500 $ 148 $ 29,327 $ (17,032) (14,173) $ (1,730)
_________________________________________________________________________________________
Net loss December 31, 2007 - - - - (15,457) (15,457)
Subscriptions received, December 31, 2007 - - - 17,032 17,032
_________________________________________________________________________________________
Balance, December 31, 2007 (Audited) 1,482,500 $ 148 $ 29,327 $ - $ (29,630) $ (155)
_________________________________________________________________________________________
Net loss June 30, 2008 (Unaudited) - - - - (10,655) (10,655)
_________________________________________________________________________________________
Balance, June 30, 2008 (Unaudited) 1,482,500 $ 148 $ 29,327 $ - $ (40,285) $(10,810)
_________________________________________________________________________________________
The accompanying notes are an integral part of these financial statements
6
MUSKOKA FLOORING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Cumulative
results of
operations
from
inception
Three months Three months Six months Six months (July 20,
Ended Ended Ended Ended 2005) to
June 30, 2008 June 30, 2007 June 30, 2008 June 30, 2007 June 30, 2008
____________________________________________________________________________________________________________________________________
OPERATING ACTIVITIES
Net loss $ (5,106) $ (8,019) $ (10,655) $ (7,923) $ (40,286)
Exchange Gain - - - - -
Adjustment to reconcile net loss to net
cash used in operating activities
- accrued liabilities (821) 4,000 102 4,000 8,500
- prepaid expense (500) - 450 - (500)
-shareholder loan (194) - 2,829 - 2,829
____________________________________________________________________________________
NET CASH USED IN OPERATING
ACTIVITIES (6,621) (4,019) (7,274) (3,923) (29,457)
____________________________________________________________________________________
INVESTING ACTIVITIES - - - - -
____________________________________________________________________________________
FINANCING ACTIVITIES - - - - -
Proceeds from sale of common stock - - - - 29,475
Subscription receivable - 4,657 - 17,032 -
Subscriptions received - - - - -
NET CASH PROVIDED BY
FINANCING ACTIVITIES - 4,657 - 17,032 29,475
____________________________________________________________________________________
NET INCREASE (DECREASE) IN CASH (6,621) 638 (7,274) 13,109 18
CASH, BEGINNING OF PERIOD 6,640 12,740 7,292 270 -
____________________________________________________________________________________
CASH, END OF PERIOD $ 18 $ 13,379 $ 18 $ 13,379 $ 18
====================================================================================
NON-CASH AVTIVITIES
Stock issued for services $ - $ - $ -
Stock issued for accounts payable $ - $ - $ -
Stock issued for notes payable $ - $ - $ -
Stock issued for convertible debentures and interest $ - $ - $ -
Convertible debentures issued for services $ - $ - $ -
Warrants issued $ - $ - $ -
Stock issued for penalty on default of convertible debenture $ - $ - $ -
Note payable issued for finance charges $ - $- $-
Forgiveness of not payable and accrued interest $ - $- $-
Stock issued for investment. $ - $- $-
_________________________________________________
Supplemental cash flow information.
Cash paid for:
Interest $ - $ - $ -
=================================================
Income taxes $ - $ - $ -
=================================================
The accompanying notes are an integral part of these financial statements
7
MUSKOKA FLOORING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008
________________________________________________________________________________
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
________________________________________________________________________________
Muskoka Flooring Corporation. (the "Company") is in the initial development
stage and was organized to engage in the business of selling a full line of
hardwood flooring products, materials, tools and accessories over the internet.
GOING CONCERN
The Company commenced operations on July 20, 2005 and has not realized revenues
since inception. The Company has a deficit accumulated to the period ended June
30, 2008 in the amount of $40,286. The ability of the Company to continue as a
going concern is dependent on raising capital to fund its business plan and
ultimately to attain profitable operations. Accordingly, these factors raise
substantial doubt as to the Company's ability to continue as a going concern.
The Company is funding its initial operations by way of Founders shares. As of
June 30, 2008 the Company had issued 1,000,000 founder shares at $0.015 per
share for net proceeds of $15,000 to the Company and issued 482,500 private
placement shares at $0.03 per share for net proceeds $14,475.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
________________________________________________________________________________
ORGANIZATION
The Company was incorporated on July 20, 2005 in the State of Delaware. The
fiscal year end of the Company is December 31.
BASIS OF PRESENTATION
These financial statements are presented in United States dollars and have been
prepared in accordance with United States generally accepted accounting
principals.
DEVELOPMENT STAGE COMPANY
The Company is considered to be in the development stage as defined in Statement
of Financial Accounting Standards No.7.
USE OF ESTIMATES AND ASSUMPTIONS
Preparation of the financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain 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 period. Accordingly,
actual results could differ from those estimates.
FINANCIAL INSTRUMENTS
All significant financial assets, financial liabilities and equity instruments
of the Company are either recognized or disclosed in the financial statements
together with other information relevant for making a reasonable assessment of
future cash flows, interest rate risk and credit risk. Where practical the fair
values of financial assets and financial liabilities have been determined and
disclosed; otherwise only available information pertinent to fair value has been
disclosed.
LOSS PER COMMON SHARE
Basic earnings(loss) per share includes no dilution and is computed by dividing
income (loss) available to common stockholders by the weighted average number of
common shares outstanding for the period. Dilutive earnings (loss) per share
reflect the potential dilution of securities that could share in the earnings of
the Company. Because the Company does not have any potential dilutive
securities, the accompanying presentation is only on the basic loss per share.
8
MUSKOKA FLOORING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008
________________________________________________________________________________
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
________________________________________________________________________________
INCOME TAXES
The Company follows the liability method of accounting for income taxes. Under
this method, deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
balances and tax loss carry forwards. Deferred tax assets and liabilities are
measured using enacted or substantially enacted tax rates expected to apply to
the taxable income in the years in which those differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the date
of enactment or substantive enactment. As at June 30, 2008 the Company had net
operating loss carry forwards, however, due to the uncertainty of realization,
the Company has provided a full valuation allowance for the deferred tax assets
resulting from the loss carry forwards.
STOCK-BASED COMPENSATION
SFAS No. 123 "ACCOUNTING FOR STOCK-BASED COMPENSATION"., as issued by the
Financial Accounting Standards Board ("FASB"), as amended by SFAS No.148
"ACCOUNTING FOR STOCK-BASED COMPENSATION-TRANSITION AND DISCLOSURE", encourages
the use of fair value based method of accounting for the stock-based employee
compensation. SFAS No. 123 allows entities to continue to apply the intrinsic
value method prescribed by Accounting Principles Board Opinion 25, "ACCOUNTING
FOR STOCK ISSUED TO EMPLOYEES" ("APB 25") and related interpretations and
provide pro forma disclosures of net income (loss) and earnings (loss) per
share. Under APB 25, compensation cost is measured based on the excess, if any,
of the quoted market price or the fair value of the company's stock at the grant
date (or a later date where the option has variable terms that depend on events
after the date of grant) over the amount an employee must pay to acquire the
stock. Compensation expense is recognized immediately for past services and
pro-rata for future services over the option-vesting period. SFAS 123 allows but
does not require that compensation cost resulting from the granting of stock
options be measured and reported currently in the income statement and allocated
over the remaining life of the option.
The Company has elected to follow APB 25 and provide the pro forma disclosures
required under SFAS 123 with respect to stock options granted to employees. The
Company will provide pro-forma information and expense information,
respectively, as required by SFAS No. 123 showing the results of applying the
fair value method using the Black-Scholes option pricing model.
The Company accounts for equity instruments issued in exchange for the receipt
of goods or services from other than employees in accordance with SFAS No. 123
and the conclusions reached by the Emerging Issues Task Force in Issue No.
96-18. Costs are measured at the estimated fair market value of the
consideration received or the estimated fair value of the equity instruments
issued, whichever is more reliably measurable. The value of equity instruments
issued for consideration other than employee services is determined on the
earliest of a performance commitment or completion of performance by the
provider of goods or services as defined by EITF 96-18.
The Company has also adopted the provisions of the FASB Interpretation No. 44,
ACCOUNTING OF CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION-AN
INTERPRETATION OF APB OPINION NO. 25 ("Fin 44"), which provides guidance as to
certain applications of APB 25. Fin 44 is generally effective July 1, 2000 with
the exception of certain events occurring after December 15, 1998.
To June 30, 2008 the Company has not adopted a stock option plan and has not
granted any stock options. Accordingly no stock-based compensation has been
recorded to date.
9
MUSKOKA FLOORING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008
________________________________________________________________________________
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
________________________________________________________________________________
RECENT ACCOUNTING PRONOUNCEMENTS
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities". This Statement permits entities to
choose to measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected are reported in earnings. SFAS No. 159 is effective for fiscal years
beginning after November 15, 2007.
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
("SFAS No. 157"). SFAS 155 establishes framework for measuring fair value and
expands disclosures about fair value measurements. The changes to current
practice resulting from the application of this statement relate to the
definition of fair value, the methods used to measure fair value, and the
expanded disclosures about fair value measurements. The statement is effective
for fiscal years beginning after November 15, 2007 and periods with those fiscal
years.
The Financial Accounting Standards Board has issued SFAS No. 155 "ACCOUNTING FOR
CERTAIN HYBRID FINANCIAL INSTRUMENTS AN AMENDMENT OF FASB STATEMENTS NO. 133 AND
140" and No. 156 "ACCOUNTING FOR SERVICING OF FINANCIAL ASSETS - AN AMENDMENT OF
FASB STATEMENT NO. 140", but they will not have a material effect in the
Company's results of operations or financial position.
The adoption of these new pronouncements is not expected to have a material
effect on the Company's financial position or results of operations.
NOTE 3- STOCKHOLDERS EQUITY
________________________________________________________________________________
The Company's capitalization is 75,000,000 common shares with a par value of
$0.0001 per share.
On December 8, 2005, the Company issued 171,600 common shares at $0.015 per
share to the Founding sole director and President of the Company for net cash
proceeds of $2,574 to the Company. On February 28, 2006 the Company issued
828,400 common shares at $0.015 to the succeeding and current sole director and
President for net cash proceeds of $12,426. The Company issued 482,500 shares at
$0.030 per share for net proceeds to the Company of $14,475. Total proceeds to
the Company of $29,475.
NOTE 4 - INCOME TAXES
________________________________________________________________________________
The Company has adopted the FASB No. 109 for reporting purposed. As of June 30,
2008 the Company had a net operating loss carry forwards of approximately
$40,286 that may be available to reduce future years' taxable income and will
expire beginning in 2026. Availability of loss usage is subject to change of
ownership limitations under Internal Revenue Code 382. Future tax benefits which
may arise as a result of these losses have not been recognized in these
financial statements, as their realization is determined not likely to occur and
accordingly, the Company has recorded a valuation allowance for the future tax
loss carryforwards.
NOTE 5 - RELATED PARTY TRANSACTIONS
________________________________________________________________________________
As of June 30, 2008 the Company received advances from a Director in the amount
of $2,829 to pay for general administration expenses. The amounts due to the
related party are unsecured and non-interest bearing with no set terms of
repayment.
10
ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Overview
Muskoka Flooring Corporation ("Muskoka", the "Company", "we", "us, or "our") was
incorporated on July 20, 2005. Muskoka is a development stage corporation
intending to enter into the business of importing hardwood flooring materials
from around the world and reselling them in the United States and Canada.
Muskoka will not manufacture any equipment or goods, but will resell hardwood
flooring and related products from various manufacturers through our proposed
website.
The Company has not generated any revenues from its inception or in the quarter
ended June 30, 2008.
Total expenses for the three months ending June 30, 2008 were $5,106 resulting
in an operating loss for the fiscal quarter of $5,106. The operating loss for
the period is a result of professional fees in the amount of $3,190 and office
and general expenses in the amount of $1,916.
As of June 30, 2008 the Director has advanced $2,829 to the Company. This
amounts is unsecured, non-interest bearing and without specific terms of
repayment.
As at the quarter ended June 30, 2008 the Company had $18 of cash on hand.
Our auditors have issued a going concern opinion. This means that there is
substantial doubt that we can continue as an on-going business for the next
twelve months unless we obtain additional capital to pay our bills. This is
because we have not generated any revenues and no revenues are anticipated until
we begin operations. Our only other source of cash at this time is cash advances
from our Director.
We anticipate that our current cash and cash equivalents will be insufficient to
satisfy our liquidity requirements for the next 12 months. We expect to incur
development and administrative expenses as well as professional fees as we
initiate our business plan and other expenses associated with maintaining our
SEC filings.
Plan of Operation
Muskoka intends to sell a full line of hardwood flooring products, materials,
tools and accessories over the internet. Muskoka will not manufacture any
equipment or goods but will resell hardwood flooring products from various
manufacturers through our website. Our plan is to offer for sale a variety of
exotic hardwood flooring materials imported from Asia, South America and other
regions of the world along with protective coatings, tools and accessories
commonly used in the installation and maintenance of hardwood floors. We plan to
sell these products via our website, (www.muskokaflooring.net).
Our current cash and cash equivalents and cash generated from operations, if
any, will be insufficient to satisfy our liquidity requirements for at least the
next 12 months. We will require additional funds prior to commencing our
business and we will seek to obtain additional capital through private equity
placements, debt or alternative sources of financing. If we are unable to obtain
sufficient additional funding we may be required to reduce the scope of our
business plan, which could harm our business, financial condition and operating
results.
There can be no assurance that we will be successful in raising additional
money, and, thus, be able to satisfy our future cash requirements, which
primarily consist of working capital directed towards the development of the
website and marketing campaigns, as well as legal and accounting fees and other
expenses associated with maintaining our SEC filings. There can be no assurance
that Muskoka will be successful in raising the capital we require. Management
believes that if our financing activities are successful, Muskoka will be able
to generate revenue from online sales of our hardwood flooring goods and
products and achieve liquidity within the following twelve to fourteen months
thereof. However this is based upon speculation and there can be no assurance
that Muskoka will ever be able reach a level of profitability.
11
Over the next 12 months, we intend to become operational by completing the
development of the website which is estimated this to cost approximately $4,500
and allocating approximately $1,000 towards the initial phases of our marketing
plan.
We plan to establish purchasing agreements with various manufacturers and
arrange for the importation and delivery of product on a per sale basis to avoid
the cost of holding inventory. As purchasing agreements are established we will
add their product lines to our website.
Once the website is completed we plan to implement a marketing campaign
specifically directed at potential buyiers in order to bring traffic to our
website. We intend to engage a third party who specializes in attracting traffic
to websites. We expect the cost of this service to be between $200 and $300 per
month for every 50,000 visitors.
We have also allocated $4,000 towards administrative expenses, which includes
general fees to maintain the corporate status of the Company, Transfer Agent
fees, and telephone/postage/printing expenses, as well as any contingencies.
Off Balance Sheet Arrangements
Our officer and director, Mr. Cotton has undertaken to provide the Company with
initial operating capital to sustain our business over the next twelve months,
as expenses are incurred, in the form of a non-secured loan. However, there is
no contract in place or written agreement securing this agreement. Management
believes if we cannot raise sufficient revenues or maintain our reporting status
with the SEC we will have to cease all efforts directed towards the Company. As
such, any investment previously made would be lost in its entirety.
Other than the above described situation the Company does not have any
off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on the Company's financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that are material to investors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities
Act of 1934 and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Based on their most recent evaluation, which was completed within 90 days of the
filing of this Form 10-Q, the Company's Chief Executive Officer and Treasurer
have identified that the lack of segregation of accounting duties as a result of
limited personnel resources is a material weakness of its financial procedures.
Other than for this exception, the Company's Chief Executive Officer and
treasurer believe the Company's disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) are effective to ensure that
information required to be disclosed by the Company in this report is
accumulated and communicated to the Company's management, including its
principal executive officer and principal financial officer, as appropriate, to
allow timely decisions regarding required disclosure. There were no significant
changes in the Company's internal controls or other factors that could
significantly affect these controls subsequent to the date of their evaluation
and there were no corrective actions with regard to significant deficiencies and
material weaknesses.
ITEM 4T. CONTROLS AND PROCEDURES
The management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting, as required by
Sarbanes-Oxley (SOX) Section 404 A. The Company's internal control over
financial reporting is a process designed under the supervision of the Company's
12
Chief Executive Officer and Chief Financial Officer to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of the Company's financial statements for external purposes in accordance with
U.S. generally accepted accounting principles.
As of June 30, 2008 management assessed the effectiveness of the Company's
internal control over financial reporting based on the criteria for effective
internal control over financial reporting established in SEC guidance on
conducting such assessments. Based on that evaluation, they concluded that,
during the period covered by this report, such internal controls and procedures
were not effective to detect the inappropriate application of US GAAP rules as
more fully described below. This was due to deficiencies that existed in the
design or operation of our internal control over financial reporting that
adversely affected our internal controls and that may be considered to be
material weaknesses.
The matters involving internal controls and procedures that the Company's
management considered to be material weaknesses under the standards of the
Public Company Accounting Oversight Board were: (1) lack of a functioning audit
committee and lack of a majority of outside directors on the Company's board of
directors, resulting in ineffective oversight in the establishment and
monitoring of required internal controls and procedures; (2) inadequate
segregation of duties consistent with control objectives; (3) insufficient
written policies and procedures for accounting and financial reporting with
respect to the requirements and application of US GAAP and SEC disclosure
requirements; and (4) ineffective controls over period end financial disclosure
and reporting processes. The aforementioned material weaknesses were identified
by the Company's Chief Financial Officer in connection with the review of our
financial statements as of March 31, 2008 and communicated the matters to our
management.
Management believes that the material weaknesses set forth in items (2), (3) and
(4) above did not have an affect on the Company's financial results. However,
management believes that the lack of a functioning audit committee and lack of a
majority of outside directors on the Company's board of directors, resulting in
ineffective oversight in the establishment and monitoring of required internal
controls and procedures can result in the Company's determination to its
financial statements for the future years.
We are committed to improving our financial organization. As part of this
commitment, we will create a position to segregate duties consistent with
control objectives and will increase our personnel resources and technical
accounting expertise within the accounting function when funds are available to
the Company: i) Appointing one or more outside directors to our board of
directors who shall be appointed to the audit committee of the Company resulting
in a fully functioning audit committee who will undertake the oversight in the
establishment and monitoring of required internal controls and procedures; and
ii) Preparing and implementing sufficient written policies and checklists which
will set forth procedures for accounting and financial reporting with respect to
the requirements and application of US GAAP and SEC disclosure requirements.
Management believes that the appointment of one or more outside directors, who
shall be appointed to a fully functioning audit committee, will remedy the lack
of a functioning audit committee and a lack of a majority of outside directors
on the Company's Board. In addition, management believes that preparing and
implementing sufficient written policies and checklists will remedy the
following material weaknesses (i) insufficient written policies and procedures
for accounting and financial reporting with respect to the requirements and
application of US GAAP and SEC disclosure requirements; and (ii) ineffective
controls over period end financial close and reporting processes. Further,
management believes that the hiring of additional personnel who have the
technical expertise and knowledge will result proper segregation of duties and
provide more checks and balances within the department. Additional personnel
will also provide the cross training needed to support the Company if personnel
turn over issues within the department occur. This coupled with the appointment
of additional outside directors will greatly decrease any control and procedure
issues the company may encounter in the future.
We will continue to monitor and evaluate the effectiveness of our internal
controls and procedures and our internal controls over financial reporting on an
ongoing basis and are committed to taking further action and implementing
additional enhancements or improvements, as necessary and as funds allow.
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There have been no changes in our internal control over financial reporting
identified in connection with the evaluation required by paragraph (d) of Rules
13a-15 or 15d-15 under the Exchange Act that occurred during the registrants
last fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings, and no such
proceedings are known to be contemplated.
No director, officer, or affiliate of the Company and no owner of record or
beneficial owner of more than 5.0% of the securities of the Company, or any
associate of any such director, officer or security holder is a party adverse to
the Company or has a material interest adverse to the Company in reference to
pending litigation.
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Securities
Act of 1934 and are not required to provide the information under this item.
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
3.1 Articles of Incorporation [1]
3.2 By-Laws [1]
31.1 Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Executive Officer
31.2 Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Financial Officer *
32.1 Section 1350 Certification of Chief Executive Officer
32.2 Section 1350 Certification of Chief Financial Officer **
[1] Filed previously with the Commission on December 21, 2007
* Included in Exhibit 31.1
** Included in Exhibit 32.1
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SIGNATURES
Pursuant to the requirements of the Exchange Act or 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
MUSKOKA FLOORING CORPORATION
By: /s/ GORDON COTTON
____________________________________________
Gordon Cotton
President, Secretary Treasurer,
Principal Executive Officer,
Principal Financial Officer and Director
Dated: August 12, 2008
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