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: September 30, 2008
or
[ ] 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 333-148256
MUSKOKA FLOORING CORPORATION
______________________________________________________
(Exact name of registrant as specified in its charter)
Delaware N/A
_______________________________ ____________________
(State or other jurisdiction of (I.R.S. Employer
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 October 20, 2008, the
registrant had 1,482,500 shares of common stock, $0.0001 par value, issued and
outstanding.
TABLE OF CONTENTS
Page
Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements - Unaudited
Balance Sheets as of September 30, 2008 and December 31, 2007............. 4
Statements of Operations for the nine months ended September 30, 2008 and
September 30, 2007; the three months ended September 30, 2008 and
September 30, 2007 and cumulative results from inception (July 20, 2005)
to September 30, 2008..................................................... 5
Statement of Stockholders Equity (Deficit) cumulative from inception
(July 20, 2005) to September 30, 2008..................................... 6
Statements of Cash Flows for the nine months ended September 30, 2008 and
September 30, 2007; for the three months ended September 30, 2008 and
September 30, 2007; and cumulative results from July 20, 2005 (date of
inception) to September 30, 2008.......................................... 7
Notes to Financial Statements for the three months ended September
30, 2008.................................................................. 8
Item 2. Management's Discussion and Analysis and Plan of Operation........ 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk........ 14
Item 4. Controls and Procedures........................................... 14
Item 4T. Controls and Procedures ......................................... 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................. 16
Item 1A. Risk Factors .................................................... 16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds ...... 16
Item 3. Defaults Upon Senior Securities .................................. 16
Item 4. Submission of Matters to a Vote of Security Holders............... 16
Item 5. Other Information................................................. 16
Item 6. Exhibits.......................................................... 16
2
MUSKOKA FLOORING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
SEPTEMBER 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
September 30, 2008 December 31, 2007
(Audited)
___________________________________________________________________________________________________
ASSETS
CURRENT ASSETS
Cash $ 315 $ 7,293
Prepaid Expense 500 950
______________________________
TOTAL CURRENT ASSETS 815 8,243
______________________________
TOTAL ASSETS $ 815 $ 8,243
==============================
LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 9,500 $ 8,398
Due to related party 5,108 -
______________________________
TOTAL CURRENT LIABILITIES 14,608 8,398
______________________________
TOTAL CURRENT LIABILITIES $ 14,608 $ 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 (43,268) (29,630)
______________________________
Total Equity (13,793) (155)
______________________________
TOTAL LIABILITIES & EQUITY $ 815 $ 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 Nine months Nine months (date of
Ended Ended Ended Ended inception) to
September 30, September 30, September 30, September 30, September 30,
2008 2007 2008 2007 2008
________________________________________________________________________________________________________________________
EXPENSES
Office and general $ (482) $ (29) $ (4,930) $ (118) $ (5,659)
Exchange - - (69) 165 100
Professional fees (2,500) (2,000) (8,639) (10,000) (37,709)
Provision for Income Taxes - - - - -
_____________________________________________________________________________________
NET LOSS $ (2,982) $ (2,029) $ (13,638) $ (9,953) $ (43,268)
=====================================================================================
BASIC NET LOSS PER SHARE $ (0.00) $ (0.00)
=============================================
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 1,045,215 1,460,046
=============================================
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 SEPTEMBER 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 September 30, 2008 (Unaudited) - - - - (13,638) (13,638)
_________________________________________________________________________________________
Balance, September 30, 2008 (Unaudited) 1,482,500 $ 148 $ 29,327 $ - $ (43,268) $(13,793)
_________________________________________________________________________________________
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 Nine months Nine months (July 20,
Ended Ended Ended Ended 2005) to
September 30, September 30, September 30, September 30, September 30,
2008 2007 2008 2007 2008
____________________________________________________________________________________________________________________________________
OPERATING ACTIVITIES
Net loss $ (2,982) $ (2,029) $ (13,638) $ (9,952) $ (42,268)
Exchange Gain - - - - -
Adjustment to reconcile net loss to net
cash used in operating activities
- accrued liabilities 1,000 (500) 1,102 3,500 9,500
- prepaid expense - - 450 - (500)
-shareholder loan 2,279 - 5,109 - 5,109
____________________________________________________________________________________
NET CASH USED IN OPERATING
ACTIVITIES 297 (2,529) (6,977) (6,452) (29,159)
____________________________________________________________________________________
INVESTING ACTIVITIES - - - - -
____________________________________________________________________________________
FINANCING ACTIVITIES - - - - -
Proceeds from sale of common stock - - - - 29,475
Subscription receivable - - - 17,032 -
Subscriptions received - - - - -
____________________________________________________________________________________
NET CASH PROVIDED BY
FINANCING ACTIVITIES - - - 17,032 29,475
____________________________________________________________________________________
NET INCREASE (DECREASE) IN CASH 297 (2,529) (6,977) 10,580 315
CASH, BEGINNING OF PERIOD 18 13,379 7,292 270 -
____________________________________________________________________________________
CASH, END OF PERIOD $ 315 $ 10,850 $ 315 $ 10,850 $ 315
====================================================================================
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
SEPTEMBER 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
September 30, 2008 in the amount of $43,268. 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 September 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
SEPTEMBER 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 September 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 September 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
SEPTEMBER 30, 2008
________________________________________________________________________________
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
________________________________________________________________________________
RECENT ACCOUNTING PRONOUNCEMENTS
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No.
163, "Accounting for Financial Guarantee Insurance Contracts-and interpretation
of FASB Statement No. 60". SFAS No. 163 clarifies how Statement 60 applies to
financial guarantee insurance contracts, including the recognition and
measurement of premium revenue and claims liabilities. This statement also
requires expanded disclosures about financial guarantee insurance contracts.
SFAS No. 163 is effective for fiscal years beginning on or after December 15,
2008, and interim periods within those years. SFAS No. 163 has no effect on the
Company's financial position, statements of operations, or cash flows at this
time.
In May 2008, the Financial Accounting Standards Board ("FASB") issued SFAS No.
162, "The Hierarchy of Generally Accepted Accounting Principles". SFAS No. 162
sets forth the level of authority to a given accounting pronouncement or
document by category. Where there might be conflicting guidance between two
categories, the more authoritative category will prevail. SFAS No. 162 will
become effective 60 days after the SEC approves the PCAOB's amendments to AU
Section 411 of the AICPA Professional Standards. SFAS No. 162 has no effect on
the Company's financial position, statements of operations, or cash flows at
this time.
In March 2008, the Financial Accounting Standards Board, or FASB, issued SFAS
No. 161, Disclosures about Derivative Instruments and Hedging Activities--an
amendment of FASB Statement No. 133. This standard requires companies to provide
enhanced disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under Statement 133 and its related interpretations, and (c) how
derivative instruments and related hedged items affect an entity's financial
position, financial performance, and cash flows. This Statement is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged. The Company has not yet
adopted the provisions of SFAS No. 161, but does not expect it to have a
material impact on its consolidated financial position, results of operations or
cash flows.
In December 2007, the SEC issued Staff Accounting Bulletin (SAB) No. 110
regarding the use of a "simplified" method, as discussed in SAB No. 107 (SAB
107), in developing an estimate of expected term of "plain vanilla" share
options in accordance with SFAS No. 123 (R), Share-Based Payment. In particular,
the staff indicated in SAB 107 that it will accept a company's election to use
the simplified method, regardless of whether the company has sufficient
information to make more refined estimates of expected term. At the time SAB 107
was issued, the staff believed that more detailed external information about
employee exercise behavior (e.g., employee exercise patterns by industry and/or
other categories of companies) would, over time, become readily available to
companies. Therefore, the staff stated in SAB 107 that it would not expect a
company to use the simplified method for share option grants after December 31,
2007. The staff understands that such detailed information about employee
exercise behavior may not be widely available by December 31, 2007. Accordingly,
the staff will continue to accept, under certain circumstances, the use of the
simplified method beyond December 31, 2007. The Company currently uses the
simplified method for "plain vanilla" share options and warrants, and will
assess the impact of SAB 110 for fiscal year 2009. It is not believed that this
will have an impact on the Company's consolidated financial position, results of
operations or cash flows.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements--an amendment of ARB No. 51. This statement
amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an
ownership interest in the consolidated entity that should be reported as equity
in the consolidated financial statements. Before this statement was issued,
limited guidance existed for reporting noncontrolling interests. As a result,
considerable diversity in practice existed. So-called minority interests were
reported in the consolidated statement of financial position as liabilities or
in the mezzanine section between liabilities and equity. This statement improves
10
MUSKOKA FLOORING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
________________________________________________________________________________
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
________________________________________________________________________________
comparability by eliminating that diversity. This statement is effective for
fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008 (that is, January 1, 2009, for entities with calendar
year-ends). Earlier adoption is prohibited. The effective date of this statement
is the same as that of the related Statement 141 (revised 2007). The Company
will adopt this Statement beginning March 1, 2009. It is not believed that this
will have an impact on the Company's consolidated financial position, results of
operations or cash flows.
In December 2007, the FASB, issued FAS No. 141 (revised 2007), Business
Combinations.'This Statement replaces FASB Statement No. 141, Business
Combinations, but retains the fundamental requirements in Statement 141. This
Statement establishes principles and requirements for how the acquirer: (a)
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree; (b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase; and (c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. This statement
applies prospectively to business combinations for which the acquisition date is
on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. An entity may not apply it before that date. The
effective date of this statement is the same as that of the related FASB
Statement No. 160, Noncontrolling Interests in Consolidated Financial
Statements. The Company will adopt this statement beginning March 1, 2009. It is
not believed that this will have an impact on the Company's consolidated
financial position, results of operations or cash flows.
In February 2007, the FASB, issued SFAS No. 159, The Fair Value Option for
Financial Assets and Liabilities--Including an Amendment of FASB Statement No.
115. This standard permits an entity to choose to measure many financial
instruments and certain other items at fair value. This option is available to
all entities. Most of the provisions in FAS 159 are elective; however, an
amendment to FAS 115 Accounting for Certain Investments in Debt and Equity
Securities applies to all entities with available for sale or trading
securities. Some requirements apply differently to entities that do not report
net income. SFAS No. 159 is effective as of the beginning of an entities first
fiscal year that begins after November 15, 2007. Early adoption is permitted as
of the beginning of the previous fiscal year provided that the entity makes that
choice in the first 120 days of that fiscal year and also elects to apply the
provisions of SFAS No. 157 Fair Value Measurements. The Company will adopt SFAS
No. 159 beginning March 1, 2008 and is currently evaluating the potential impact
the adoption of this pronouncement will have on its consolidated financial
statements.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements.This
statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles (GAAP), and expands disclosures
about fair value measurements. This statement applies under other accounting
pronouncements that require or permit fair value measurements, the Board having
previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. Accordingly, this statement does not require any
new fair value measurements. However, for some entities, the application of this
statement will change current practice. This statement is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. Earlier application is
encouraged, provided that the reporting entity has not yet issued financial
statements for that fiscal year, including financial statements for an interim
period within that fiscal year. The Company will adopt this statement March 1,
2008, and it is not believed that this will have an impact on the Company's
consolidated financial position, results of operations or cash flows.
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.
11
MUSKOKA FLOORING CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2008
________________________________________________________________________________
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.
12
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 our products 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 inception or in the quarter
ended September 30, 2008.
Total expenses for the three months ending September 30, 2008 were $2,982
resulting in an operating loss for the quarter of $2,982. The operating loss for
the period is a result of professional fees in the amount of $2,500 and office
and general expenses in the amount of $482.
As of September 30, 2008 the Director has advanced $5,108 to the Company. This
amounts is unsecured, non-interest bearing and without specific terms of
repayment.
As at the fiscal quarter ended September 30, 2008 the Company had $815 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 through our internet website. We will not manufacture any
equipment or goods but will instead resell hardwood flooring products from
various manufacturers. Our plan is to offer for sale a variety of exotic
hardwood flooring imported from Asia, South America and other regions of the
world along with protective coatings, tools, materials 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 our 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 we
will be successful in raising the capital we require. Management believes that
if our financing activities are successful, we will be able to generate
sufficient 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.
13
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 buyers in order to bring traffic to our
website. We intend to engage a third party service provider 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, Gordon 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
14
financial reporting is a process designed under the supervision of the Company's
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 September 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 September 30, 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.
15
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: November 10, 2008
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