SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended: August 31, 2011
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number: 333-170016
SOUND KITCHEN ENTERTAINMENT GROUP, INC.
---------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
FLORIDA 90-0599877
------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
7076 Spyglass Avenue
Parkland, FL 33076
--------------------
(Address of principal executive office and zip code)
(954) 599-3672
--------------
(Registrant's telephone number, including area code)
END FUEL CORP.
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Securities Registered Pursuant to Section 12 (B) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
PREFERRED STOCK PAR VALUE $0.001 NONE
COMMON STOCK PAR VALUE $0.001 NONE
Securities Registered Pursuant to Section 12(G) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes |_| No |X|
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes |_| No |X|
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
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 Act). Yes | | No |X|
As of August 31, 2011, the aggregate market value of such shares held by
non-affiliates of the Registrant's common stock was approximately $17,500.
Shares of the Registrant's common stock held by each executive officer and
director have been excluded in that such persons may be deemed to be affiliates
of the Registrant. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
CLASS OF STOCK SHARES AS OF SEPTEMBER 15, 2011
------------------------------- -------------------------------
Common Stock, $0.001 par value 31,500,000
ii
SOUND KITCHEN ENTERTAINMENT GROUP, INC.
FORM 10-K
For the Fiscal Period Ended August 31, 2011
TABLE OF CONTENTS
Page
----
Cautionary Note Regarding Forward-Looking Statements ....................... 3
Availability Of Information ................................................ 4
PART I
Item 1. Business ..................................................... 5
Item 1A. Risk Factors ................................................. 9
Item 1B. Unresolved Staff Comments .................................... 13
Item 2. Properties ................................................... 13
Item 3. Legal Proceedings ............................................ 13
Item 4. Submission Of Matters To A Vote Of Security Holders .......... 13
PART II
Item 5. Market For Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities ........... 13
Item 6. Selected Financial Data ...................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations Results of Operations Year Ended
August 31, 2011 vs. Year Ended August 31, 2010............... 15
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ... 18
Item 8. Financial Statements and Supplementary Data .................. 18
Item 9. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure .................................... 18
Item 9A. Controls and Procedures ...................................... 18
Item 9B. Other Information ............................................ 20
PART III
Item 10. Directors, Executive Officers and Corporate Governance ....... 21
Item 11. Executive Compensation ....................................... 24
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters ............................. 25
Item 13. Certain Relationships and Related Transactions, and Director
Independence ................................................ 27
Item 14. Principal Accounting Fees And Services ....................... 26
PART IV
Item 15. Exhibits - Financial Statement Schedules ..................... 27
OTHER
Signatures ................................................... 28
2
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report on Form 10-K may constitute
"forward-looking" statements as defined in Section 27A of the Securities Act of
1933 (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934
(the "Exchange Act"), the Private Securities Litigation Reform Act of 1995 (the
"PSLRA") or in releases made by the Securities and Exchange Commission ("SEC"),
all as may be amended from time to time. Forward-looking statements include, but
are not limited to, statements that express our intentions, beliefs,
expectations, strategies, predictions or any other statements relating to our
future activities or other future events or conditions. These statements are
based on current expectations, estimates and projections about our business
based, in part, on assumptions made by management. Forward-looking statements
can be identified by, among other things, the use of forward-looking language,
such as the words "plan," "believe," "expect," "anticipate," "intend,"
"estimate," "project," "may," "will," "would," "could," "should," "seeks," or
"scheduled to," or other similar words, or the negative of these terms or other
variations of these terms or comparable language, or by discussion of strategy
or intentions. These statements are not guarantees of future performance and
involve risks, uncertainties and assumptions that are difficult to predict.
Therefore, actual outcomes and results may, and are likely to, differ materially
from what is expressed or forecasted in the forward-looking statements due to
numerous factors, including those described above and those risks discussed from
time to time in this Annual Report on Form 10-K, including the risks described
under "Risk Factors," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in this report and in other documents which
we file with the Securities and Exchange Commission. In addition, such
statements could be affected by risks and uncertainties related to our ability
to raise any financing which we may require for our operations, competition,
government regulations and requirements, pricing and development difficulties,
our ability to make acquisitions and successfully integrate those acquisitions
with our business, as well as general industry and market conditions and growth
rates, and general economic conditions. Any forward-looking statements speak
only as of the date on which they are made, and we do not undertake any
obligation to update any forward-looking statement to reflect events or
circumstances after the date of this report.
This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. These statements are therefore entitled to the protection of the safe
harbor provisions of these laws. These forward-looking statements involve risks
and uncertainties, and relate to future events or our future financial or
operating performance. These statements include, but are not limited to,
statements concerning:
o the anticipated benefits and risks of our business relationships;
o our ability to attract retail and business customers;
o the anticipated benefits and risks associated with our business strategy;
o our future operating results;
o the anticipated size or trends of the market segments in which we compete
and the anticipated competition in those markets;
3
o potential government regulation;
o our future capital requirements and our ability to satisfy our capital
needs;
o the potential for additional issuances of our securities;
o our plans to devote substantial resources to our sales and marketing
teams;
o the possibility of future acquisitions of businesses, products or
technologies;
o our belief that we can attract customers in a cost-efficient manner;
o our belief that current or future litigation will likely not have a
material adverse effect on our business;
o the ability of our online marketing campaigns to be a cost-effective
method of attracting customers;
o our belief that we can internally develop cost-effective branding
campaigns;
o the results of upgrades to our infrastructure and the likelihood that
additional future upgrades can be implemented without disruption of our
business;
o our belief that we can maintain or improve upon customer service levels
that we and our customers consider acceptable;
o our belief that our information technology infrastructure can and will
support our operations and will not suffer significant downtime;
o statements about our community site business and its anticipated
functionality;
o our belief that we can maintain inventory levels at appropriate levels
despite the seasonal nature of our business; and,
o our belief that we can successfully offer and sell a constantly changing
mix of products and services.
AVAILABILITY OF INFORMATION
You may read and copy any materials the Company files with the SEC at the SEC's
Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549.
Copies of such materials also can be obtained free of charge at the SEC's
website, www.sec.gov, or by mail from the Public Reference Room of the SEC, at
prescribed rates. Please call the SEC at 1-800-SEC-0330 for further information
on the operation of the Public Reference Room. The SEC maintains an Internet
site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC. This
information can be accessed at the web site http://www.sec.gov.
4
PART I
ITEM 1. BUSINESS
BACKGROUND AND CORPORATE INFORMATION
------------------------------------
INTRODUCTION
SOUND KITCHEN ENTERTAINMENT GROUP, INC. ("THE COMPANY") is a development stage
company, incorporated in the State of Florida on June 2, 2008 and commenced
operations on July 31, 2010 with the acquisition of thirty-five (35) children's
original songs having each song recorded in over two-hundred (200) individual
children's names.
We commenced our initial public offering on January 27, 2011, pursuant to that
certain Registration Statement on Form S-1 (Commission File No. 333-170016),
which was declared effective by the Securities and Exchange Commission on that
date. We registered 1,000,000 shares of Common Stock for sale by the Company for
an aggregate offering price of $25,000. At August 31, 2011, we have not sold any
shares of Common Stock in the offering.
In August, 2011, we filed Amended and Restated Articles of Incorporation with
the Secretary of State of Florida which:
o changed the name of the corporation to Sound Kitchen Entertainment Group,
Inc.
o increased the number of authorized shares of common stock from 100,000,000
shares to 500,000,000 shares and fixed a par value of $0.001 per share,
o authorized a class of 10,000,000 shares of blank check preferred stock,
par value $0.001 per share, and
o included indemnification provisions customary under Florida law, as well
as election not to be governed by the provisions of the Florida Business
Corporation Act governing affiliated transactions and an election to be
governed by the provisions related to control share acquisitions.
In August, 2011, we elected Russ Regan as our Chief Executive Officer and
Chairman of the Board of Directors. Additionally, we elected Alfred Fernandez
(our former sole officer and director) as our Chief Financial Officer, Secretary
and a Board of Director member.
We have not generated any revenues to date and our activities have been limited
to developing our Business Plan. We will not have the necessary capital to
develop our Business Plan until we are able to secure financing and funding from
the proceeds of our common stock offering. There can be no assurance that such
financing will be available on suitable terms. See "Management's Discussion and
Analysis Plan of Operations" and "Liquidity and Capital Resources." We have no
revenues, have achieved losses since inception, have no operation and have been
issued a going concern opinion, we must rely upon the sale of our securities to
funds operations.
The following description of our business is intended to provide an
understanding of our Company and the direction of our strategy.
5
STRATEGY AND SERVICE
Strategy and Products
We believe that there is a strong need for children's intellectual properties
and products having a personalized approach. Through our intended product line
offering, we intend to create real product awareness that encourage the consumer
to purchase and listen to the music on many occasions with multiple people in
attendance. We intend to distribute our children's products through independent
distributors as our business plan develops in the future. There can be no
assurances that an independent distributor will accept our products once
presented and if this event happens, the Company will fail. Our strategy is
keeping the consumer and user satisfied with creative children's music and
products.
Our products, consisting of our thirty-five (35) songs, having personalization
for approximately 200 children's names, being marketed in three (3) primary
formats consisting of Compact Disc (CD), Video (DVD) and MP3 (Direct Download).
The present strategy of marketing these products to the end user (the consumer's
point of purchase) is through the efforts of independent distributors
specializing in marketing these types of formats. The ultimate consumer will be
able to purchase our products through the normal source of physical retailers
allowing the consumer to purchase inventories of our CD/DVD products and
ecommerce through the internet via direct downloads.
Sales and Marketing
We intend to employ a consultant on or before December 31, 2011, whose
responsibility will be to visit independent distributors and other merchants
throughout the United States and foreign territories to market our children's
intellectual properties and products for the holiday season of 2012. We plan on
commencing a search for this consultant in October, 2011 and have not
interviewed anyone to date for this position. We intend to develop a
non-salaried, sales commission only sales representative organization
responsible to handle specialized foreign territory distributors.
Advertising
We intend to advertise in trade journals, children's consumer magazines, and
various web portals in the future. We will also seek to enter into strategic
arrangements with businesses that we feel are complementary to our business. We
believe that we will also gain interest from other web sites, trade journals and
consumer magazines for public relations.
MANAGEMENT
It is intended that our Chief Executive Officer and Chief Financial Officer will
provide all the labor for the company initially and then hiring either employees
or using independent contractors as sales growth demands.
COMPETITION
There are many competitors for similar children's products and most (if not all)
have more experience and are substantially better financed than us. We believe
the most effective way to be successful against this competition is a
combination of quality products reasonably priced and providing exceptional
customer service. We intend to make ourselves available by phone and email to
customers on a personal level. This type of service is typically lacking with
internet sales.
6
STAFFING
As of September 15, 2011, SOUND KITCHEN ENTERTAINMENT GROUP, INC. has no
permanent staff. Our Chief Executive Officer, Russ Regan and our Chief Financial
Officer, of the company, have the flexibility to work on SOUND KITCHEN
ENTERTAINMENT GROUP, INC. up to 15 hours per week. Both are prepared to devote
more time to our operations as may be required and have not received any fixed
salary except for the issuance of common shares for the year ending August 31,
2011.
EMPLOYEES AND EMPLOYMENT AGREEMENTS
At present, SOUND KITCHEN ENTERTAINMENT GROUP, INC. has no employees other than
its chief executive officer and chief financial officer. There are no employment
agreements in existence. The company presently does not have, pension, health,
annuity, insurance, stock options, profit sharing, or similar benefit plans;
however, the company may adopt plans in the future. There are presently no
personal benefits available to the company's officers and directors.
During the initial implementation of our marketing strategy, the company intends
to hire independent consultants to develop and market its products, rather than
hire full time development, consulting, marketing and administrative employees.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This section of the filing of the Form 10-K for the period ended August 31, 2011
includes a number of forward-looking statements that reflect our current views
with respect to future events and financial performance. Forward-looking
statements are often identified by words like: "believe", "expect", "estimate",
"anticipate", "intend", "project" and similar expressions, or words which, by
their nature, refer to future events. You should not place undue certainty on
these forward-looking statements, which apply only as of the date of this
prospectus. These forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical results or our predictions.
We are a development stage company and have not yet generated or realized any
revenues from business operations. Our auditors have issued a going concern
opinion. This means there is substantial doubt that we can continue as an
on-going business for the next twelve (12) 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 marketing our products to customers.
Accordingly, we must raise cash from sources other than revenues generated such
as from the proceeds of loans, sale of common shares and advances from related
parties.
From inception of operations to August 31, 2011, the company's business
operations have primarily been focused on developing our business plan and
obtaining market research.
7
LIMITED OPERATING HISTORY; NEED FOR ADDITIONAL CAPITAL
There is no historical financial information about us upon which to base an
evaluation of our performance. SOUND KITCHEN ENTERTAINMENT GROUP, INC. was
incorporated in the State of Florida in June, 2008 and commenced operations in
July, 2010; we are a development stage company attempting to enter the
production, development and marketing of children's products. We have not
generated any revenues from our operations and we cannot guarantee the success
in our business operations. Our business is subject to risks inherent in the
establishment of a new business enterprise, including the financial risks
associated with the limited capital resources currently available to us for the
implementation of our business strategies. (See "Risk Factors"). To become
profitable and competitive, we must develop the Business and marketing plans for
execution. Our sole officer and director undertakes to provide us with initial
operating and loan capital to sustain our business plan over the next twelve
(12) month period partially through advances from related parties and sale of
securities. We will also seek alternative financing through means such as
borrowings from institutions or private individuals.
PLAN OF OPERATION
Since inception (June 2, 2008) and commencement of operations (July 31, 2010) to
August 31, 2011, SOUND KITCHEN ENTERTAINMENT GROUP, INC. has spent a total of
$425,300 on the start-up development costs and we have not generated any revenue
from business operations.
The company incurred expenditures of $19,400 for accounting services, the
preparation of audited financial statements, tax returns and legal services. The
company also had expenditures for general administrative costs, $8,400 and
consultants, $397,500. The company issued 15,900,000 common shares having a
value of $0.025 per share as payment of consulting fees for the year ending
August 31, 2011.
Since inception, the majority of the company's time has been spent refining its
business plan, marketing, conducting industry research, and preparing for
additional financing and funding of operations.
OUR CHALLENGES
Our ability to successfully operate our business and achieve our goals and
strategies is subject to numerous challenges and risks as discussed more fully
in the section titled "Risk Factors," including for example:
o any inability to effectively manage rapid growth and accurately project
market demand for our product offerings;
o risks associated with future investments or acquisitions;
o economic, political, regulatory, legal and foreign exchange risks
associated with web-based enterprises;
o any loss of key members of our senior management; and,
o unexpected changes in economic situations or legal environment.
You should read and consider the information set forth in "Risk Factors" and all
other information set forth in this filing.
8
SUMMARY FINANCIAL INFORMATION
The following table sets forth a summary of the financial data for SOUND KITCHEN
ENTERTAINMENT GROUP, INC. for the period ended August 31, 2011 and 2010. This
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our financial
statements and related notes appearing elsewhere in this filing.
12 Months Ended 12 Months Ended
August 31, August 31,
2011 2010
--------------- ---------------
Revenues ................................... $ -- $ --
Operating expenses ......................... 418,916 6,384
Other income/(expense) ..................... (0) (0)
Net loss before taxes ...................... (418,916) (6,384)
Income taxes ............................... -- --
Net (loss) ................................. 418,916) (6,384)
Loss per share - basic and diluted ......... ($.07) ($.001)
As to Balance Sheets: as of as of
August 31, August 31,
2011 2010
--------------- ---------------
Working capital (deficit) .................. $ (10,300) $ (1,384)
Current assets ............................. 100 5000
Total assets ............................... 262,600 267,500
Current liabilities ........................ 10,400 6,384
Total liabilities .......................... 10,400 246,384
TOTAL STOCKHOLDERS' EQUITY.................. 252,200 21,116
OUR ADDRESSES
The address of the Company's principal executive office is 7076 Spyglass Avenue,
Parkland, FL 33076, and our telephone number is (954) 599-3672.
ITEM 1A. RISK FACTORS
An investment in a children's entertainment company with no history of
operations such as ours involves an unusually high amount of risk, unknown and
known, present and potential, including, but not limited to the risks enumerated
below.
Our failure to successfully address the risks and uncertainties described below
would have a material adverse effect on our business, financial condition and/or
results of operations, and the trading price of our common stock may decline and
investors may lose all or part of their investment. We cannot assure you that we
will successfully address these risks or other unknown risks that may affect our
business.
RISKS ASSOCIATED WITH SOUND KITCHEN ENTERTAINMENT GROUP, INC.:
BECAUSE OUR AUDITORS HAVE ISSUED A GOING CONCERN OPINION, THERE IS SUBSTANTIAL
UNCERTAINTY WE WILL CONTINUE ACTIVITIES IN WHICH CASE YOU COULD LOSE YOUR
INVESTMENT.
Our auditors have issued a going concern opinion. This means that there is
substantial doubt that we can continue as an ongoing business for the next
twelve months. As such we may have to cease activities and you could lose your
entire investment.
9
OUR SUCCESS IS DEPENDENT ON CURRENT MANAGEMENT, WHO MAY BE UNABLE TO DEVOTE
SUFFICIENT TIME TO THE DEVELOPMENT OF OUR BUSINESS; THIS POTENTIAL LIMITATION
COULD CAUSE THE BUSINESS TO FAIL.
The Company is heavily dependent on our Chief Executive Officer, Russ Regan. If
something were to happen to him, it would greatly delay the Company's planned
marketing and development of its children's property. Furthermore, there is no
assurance that suitable people could be found to replace Mr. Reagan. In that
instance, the Company may be unable to further its business plan.
Mr. Reagan, our Chief Executive Officer and Chairman of the Board of Directors,
is involved in other business activities and may, in the future, become involved
in other business opportunities. If a specific business opportunity becomes
available, Mr. Reagan may face a conflict in selecting between the Company and
his other business interests. The Company has not formulated a policy for the
resolution of such conflicts.
Additionally, Mr. Reagan is employed outside of SOUND KITCHEN ENTERTAINMENT
GROUP, INC. Mr. Reagan has been and continues to expect to be able to commit
approximately 15 hours per week of his time, to the development of our business
for the next twelve months. If management is required to spend additional time
with his outside employment, he may not have sufficient time to devote to SOUND
KITCHEN ENTERTAINMENT GROUP, INC., and as a result SOUND KITCHEN ENTERTAINMENT
GROUP, INC. would be unable to develop its business plan.
IF WE EXPAND OUR OPERATIONS AND FAIL TO MANAGE THE RESULTING GROWTH EFFECTIVELY,
OUR BUSINESS WILL BE HARMED.
Our plans include obtaining additional children's intellectual properties,
producing and marketing to distributors. Our growth strategy is subject to
significant risks which you should carefully consider before purchasing the
shares we are offering.
Upon completion of this offering, we plan on researching our product lines. Some
products may be slow to achieve profitability or may not become profitable at
all, which will result in losses. There can be no assurance that we will
succeed.
We intend to enter into markets where the climate is favorable to our business.
However, we may be unable to enter such markets successfully. Our systems,
procedures and controls may not be adequate to support the expansion of our
business operations. Significant growth will place managerial demands on all
aspects of our operations. Our future operating results will depend
substantially upon our ability to manage changing business conditions and to
implement and improve our technical, administrative and financial controls and
reporting systems.
WE WILL INCUR INCREASED COSTS AS A RESULT OF BEING A PUBLIC COMPANY
As a public company, we incur significant legal, accounting and other expenses
that a private company does not incur. In addition, the Sarbanes-Oxley Act of
2002, as well as new rules subsequently implemented by the Securities and
Exchange Commission has required changes in corporate governance practices of
public companies. We expect that these new rules and regulations will increase
our legal and financial compliance costs and will make some activities more
time-consuming and costly. For example, as a result of becoming a public
company, we need to create additional board committees and adopt additional
policies regarding internal controls and disclosure controls and procedures. We
will incur additional costs associated with public company reporting
requirements and compliance with the internal controls of Section 404 of the
10
Sarbanes-Oxley Act of 2002. We also expect these new rules and regulations will
make it more difficult and more expensive for us to obtain directors' and
officers' liability insurance. As a result, our general and administrative
expenses will likely increase and it may be more difficult for us to attract and
retain qualified persons to serve on our board of directors or as executive
officers. We are currently evaluating and monitoring developments with respect
to these new rules, and we cannot predict or estimate the amount of additional
costs we may incur or the timing of such costs. Being a public company requires
the additional expenses of an independent Certified Public Accountant, proper
legal representation and the fulfillment of the requirements of the Securities
and Exchange Commission, which we will incur.
OUR CHIEF EXECUTIVE OFFICER LACKS THE EXPERIENCE OF OPERATING A PUBLIC COMPANY
THAT IS A REPORTING COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION OR OTHER
REGULATORY AUTHORITIES
Our chief executive officer and chairman of the board of directors has never
been the operating manager of a publicly held entity, which is required to file
on a timely basis with the Securities and Exchange Commission. Therefore, an
investor should evaluate the high risks associated with management that lacks
prior expertise as regulated by the Securities and Exchange Commission.
WE FACE COMPETITION FROM TRADITIONAL AND INTERNET MEDIA COMPANIES THAT ARE
SUBSTANTIALLY BETTER FUNDED AND HAVING SIGNIFICANTLY MORE KNOWLEDGE AND PRODUCT
AVAILABILITY WHICH COULD HARM OUR OPERATING RESULTS.
Almost all of our competitors and potential competitors presently have
considerably greater financial and other resources, experience in market
penetration than us. Management believes that we may be able to distinguish our
products by introducing new and innovative children's products that are
personalized in an industry that has been catering to the general public.
Similarly, in our children's entertainment business, our competition includes
many companies with significantly greater experience, larger client bases, and
substantially greater financial resources. There are significant barriers to
entry including large capital requirements and the recruitment and retention of
qualified, experienced employees. As our business plan develops, we plan to
engage the services of outside consultants and independent distribution
companies having the experience and knowledge in the area of children's
intellectual properties
We cannot assure you that we will be able to compete in any of our business
areas effectively with current or future competitors or that the competitive
pressures faced by us will not have a material adverse effect on our business,
financial condition and operating results which will cause the Company's
business failure.
IF WE CANNOT OBTAIN INDEPENDENT CONSULTANTS AND DISTRIBUTORS, THE COMPANY WILL
FAIL
We cannot assure you that we will be able to obtain independent consultants and
distributors market our products. Since our management does not have the past
expertise to market our products, the company is relying on independent
consultants and distributors to complete our business plan. Therefore, if the
Company does not obtain independent consultants and/or distributors, the
Company's business plan will not be completed and therefore the Company will
fail.
IF WE COMPLETE A FINANCING THROUGH THE SALE OF ADDITIONAL SHARES OF OUR COMMON
STOCK IN THE FUTURE, THEN SHAREHOLDERS WILL EXPERIENCE DILUTION.
11
The most likely source of future financing presently available to us is through
the sale of shares of our common stock. Any sale of common stock will result in
dilution of equity ownership to our existing shareholder. This means that if we
sell shares of our common stock, more shares will be outstanding and our
existing shareholder will own a smaller percentage of the shares then
outstanding. To raise additional capital we may have to issue additional shares,
which may substantially dilute the interests of the existing shareholder.
Alternatively, we may have to borrow large sums, and assume debt obligations
that require us to make substantial interest and capital payments.
BECAUSE THERE IS NO PUBLIC TRADING MARKET FOR OUR COMMON STOCK, YOU MAY NOT BE
ABLE TO RESELL YOUR STOCK.
There is currently no public trading market for our common stock. Therefore
there is no central place, such as stock exchange or electronic trading system
to resell your shares.
THERE IS CURRENTLY NO MARKET FOR SOUND KITCHEN ENTERTAINMENT GROUP, INC. COMMON
STOCK, BUT IF A MARKET FOR OUR COMMON STOCK DOES DEVELOP, OUR STOCK PRICE MAY BE
VOLATILE.
There is currently no market for Sound Kitchen Entertainment Group, Inc. common
stock. If a market develops, it is anticipated that the market price of Sound
Kitchen Entertainment Group, Inc. common stock will be subject to wide
fluctuations in response to several factors including:
o The ability to complete the development of Sound Kitchen Entertainment
Group, Inc's anticipated marketing plan;
o The market price of the products SOUND KITCHEN ENTERTAINMENT GROUP, INC.
anticipates marketing; and
o The ability to hire and retain competent personal in the future.
SOUND KITCHEN ENTERTAINMENT GROUP, INC. EXPECTS TO APPLY FOR QUOTATION ON THE
OTC BULLETIN BOARD (OTCBB), WE MAY NOT BE APPROVED, AND EVEN IF APPROVED, WE MAY
NOT BE APPROVED FOR TRADING ON THE OTCBB; THEREFORE SHAREHOLDERS MAY NOT HAVE A
MARKET TO SELL THEIR SHARES, EITHER IN THE NEAR TERM OR IN THE LONG TERM, OR
BOTH.
We expect to apply to the OTC Bulletin Board, we may not be approved to trade on
the OTCBB, and we may not meet the requirements for listing on the OTCBB. If we
do not meet the requirements of the OTCBB, our stock may then be traded on the
"Pink Sheets," and the market for resale of our shares would decrease
dramatically, if not be eliminated.
SOUND KITCHEN ENTERTAINMENT GROUP, INC. HAS LIMITED FINANCIAL RESOURCES AT
PRESENT, AND PROCEEDS FROM THE OFFERING MAY NOT BE USED TO FULLY DEVELOP ITS
BUSINESS.
SOUND KITCHEN ENTERTAINMENT GROUP, INC. has limited financial resources at
present; as of August 31, 2011 it had $100 of cash on hand with liabilities of
$10,400. If it is unable to develop its business plan, it may be required to
divert certain proceeds from the sale of Sound Kitchen Entertainment Group,
Inc's stock to general administrative functions. If SOUND KITCHEN ENTERTAINMENT
GROUP, INC. is required to divert some or all of proceeds from the sale of stock
to areas that do not advance the business plan, it could adversely affect its
ability to continue by restricting the Company's ability to become quoted on the
OTCBB; advertise and promote the Company and its products; travel to develop new
marketing, business and customer relationships; and retaining and/or
compensating professional advisors.
12
These risk factors, individually or occurring together, would likely have a
substantially negative effect on Sound Kitchen Entertainment Group, Inc's
business and would likely cause it to fail.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not Applicable.
ITEM 2. PROPERTIES
As of August 31, 2011, the Company did not lease or own any properties.
Currently, the Company utilizes the offices of Steven Adelstein, our consultant
and shareholder, at no cost to the Company.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings, and no such
proceedings are known to be contemplated.
No known 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 15, 2011, the Board of Directors and majority shareholders voted to
amend the bylaws as follows:
o changed the name of the corporation to Sound Kitchen Entertainment Group,
Inc.
o increased the number of authorized shares of common stock from 100,000,000
shares to 500,000,000 shares and fixed a par value of $0.001 per share,
o authorized a class of 10,000,000 shares of blank check preferred stock,
par value $0.001 per share, and
o included indemnification provisions customary under Florida law, as well
as election not to be governed by the provisions of the Florida Business
Corporation Act governing affiliated transactions and an election to be
governed by the provisions related to control share acquisitions.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
MARKET FOR OUR COMMON STOCK
---------------------------
Our common stock is not quoted on any Exchange.
REPORTS TO STOCKHOLDERS
-----------------------
Our shareholders, through our filings on the web, including http://www.sec.gov,
can review all of our period reporting requirements of the Exchange Act
including our annual report for August 31, 2011 and 2010.
13
APPROXIMATE NUMBER OF HOLDERS OF OUR COMMON STOCK
-------------------------------------------------
At August 31, 2011, there were approximately 21 stockholders of record of our
common stock.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
------------------------------------------------------------------
The Company has not adopted any equity compensation plan as of August 31, 2011.
DIVIDEND POLICY
---------------
We currently intend to retain and use any future earnings for the development
and expansion of our business and do not anticipate paying any cash dividends in
the near future.
ITEM 6. SELECTED FINANCIAL DATA
The selected statement of income data for the twelve (12) month period ended
August 31, 2011 and from inception (June 2, 2008) thru August 31, 2011 and
balance sheet data as of August 31, 2011 and 2010 are derived from our audited
financial statements included elsewhere in this Report.
The following selected historical financial information should be read in
conjunction with our financial statements and related notes and the information
contained in Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
TWELVE (12) FROM INCEPTION
MONTHS ENDED (JUNE 2, 2008)
AUGUST 31, THRU AUGUST 31,
STATEMENT OF OPERATIONS DATA: 2011 2011
------------ ---------------
Sales revenue: ............................. $ - $ -
Cost of sales .............................. - -
Gross profit ............................... - -
Expenses:
General and Administrative expenses ..... 7,716 8,400
Consulting Fees ......................... 397,500 397,500
Legal and Accounting..................... 13,700 19,400
Amortization ............................ 0 0
Total operating expenses ............. 418,916 425,300
Loss from Operations ....................... (418,916) (425,300)
Net Loss ................................... $ (418,916) $ (425,300)
Loss per Share - basic and diluted ......... $ (.07)
Weighted average number of shares
outstanding - basic and diluted ........... 6,103,288
AUGUST 31,
BALANCE SHEET DATA: 2011 2010
---------- ----------
Cash and cash equivalents .................. $ 100 $ 5,000
Working capital (deficit) .................. (10,300) (1,384)
Total assets ............................... 262,600 267,500
Total current liabilities .................. 10,400 6,384
Long term liability ........................ 0 240,000
Total liabilities .......................... 10,400 246,384
Total stockholders' equity ................. 252,200 21,116
14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
OUR CORPORATE HISTORY
We were incorporated on June 2, 2008 in the State of Florida and commenced
operations in July, 2010 and we have no subsidiaries. We have not generated any
revenues from inception through August 31, 2011. We intend to commence marketing
operations of our products as a development stage company in the fourth quarter
of the calendar year of 2011. We intend to market as an independent children's
developer of intellectual property and products and sell through independent
distribution channels throughout the United States and foreign territories.
Emphasis will be placed on developing children's intellectual properties with
focus on personalized children's music. Our company owns children's recordings
of thirty-five (35) individual songs having each in over 200 children's names.
Our business plan provides that these recordings be marketed through independent
distributors for CD, videos (DVD) and internet downloads (MP3's). These are just
a few of the intended children's intellectual properties in our line of product
offerings to be developed.
RESULTS OF OPERATIONS
--------------------------------------------------------------------------------
SALES REVENUES
STATEMENT OF OPERATION ITEMS
----------------------------
Results of Operations for the year ended August 31, 2011 compared to the year
ended August 31, 2010.
For the twelve (12) months ended August 31, 2011 and cumulative from June 2,
2008 (inception) through August 31, 2011, we had zero (0) revenues from
operations and a loss from operations of $(418,916) and $(6,384) respectively.
o General and Administrative Expenses
For the twelve (12) months ended August 31, 2011, General and
Administrative expenses increased $7,032 from $684 for the year ending
August 31, 2010 to $7,716 for year ending August 31, 2011. These expenses
for the year ending August 31, 2011 are considered normalized annual
expenses.
o Legal and Accounting Expenses
For the twelve (12) months ended August 31, 2011, Legal and Accounting
expenses increased $8,000 from $5,700 for the year ending August 31, 2010
to $13,700 for year ending August 31, 2011. We incurred increased legal
and accounting fees to be current with our filings with the Securities and
Exchanges Commission.
15
o Consulting, Marketing and Advertising
For the twelve (12) months ended August 31, 2011, consulting, fees
increased $397,500 from $0 for the year ending August 31, 2010. We issued
15,900,000 common shares to various consultants during the twelve (12)
months ending August 31, 2011 as payment for $397,500 of consulting fees.
The common shares issued were valued at $0.025 per common share. Included
in these consulting fees were payments to our chief executive officer as
of August 26, 2011 for prior consulting fees of $62,500. Additionally, we
issued 600,000 common shares to our former chief executive officer (now,
our chief financial officer) for various consulting fees totally $15,000.
As we continuously develop our products, we anticipate these expenses to
increase accordingly.
Balance Sheet Items
-------------------
o INTELLECTUAL PROPERTIES
Intellectual properties at August 31, 2011 were $262,500 as compared to
$262,500 at August 31, 2010. The company shall commence the amortization
of these intellectual properties once the intellectual property is put
into service. The intellectual properties have an estimated useful life to
be amortized over a three (3) year period once the intellectual property
has been put into service. At August 31, 2011, these properties have not
been put into service and are still under development.
o ACCRUED EXPENSES
Accrued expenses at August 31, 2011 were $10,000 as compared to $5,700 at
August 31, 2010, an increase of $4,300. The increase was a result of
accruals for legal and accounting and other normalized expenses for the
period ending August 31, 2011.
o ADVANCES FROM RELATED PARTIES
Advances from related parties were $400 at August 31, 2011 as compared to
$684 at August 31, 2010. From time to time, we borrow or receive advances
from officers, directors and related parties. During the twelve (12)
months ending August 31, 2011, we issued 516,000 common shares at $0.025
per shares totaling $12,900 as repayment of these loans and advances.
LIQUIDITY AND CAPITAL RESOURCES
As of August 31, 2011, we had cash and cash equivalent of $100. The following
table provides detailed information about our net cash flow for August 31, 2011
and from inception (June 2, 2008) thru August 31, 2011.
STATEMENT OF CASH FLOW
TWELVE (12) FROM INCEPTION
MONTHS ENDED (JUNE 2, 2008)
AUGUST 31, THRU AUGUST 31,
2011 2011
------------- ---------------
Net cash (required) in operating activities $ 235,384 $ 234,700
Net cash provided by financing activities .. (240,284) (234,600)
Net cash flow (deficit) .................... (4,900) 100
16
To date, we have funded our cash and liquidity requirements to continue
operations primarily through debt, advances and equity transactions with related
parties. Additionally, we plan to raise funding through equity from our Form S-1
as filed with the Securities and Exchange Commission. However, until operating
revenues increase significantly, we will continue to seek outside funding for
the purpose of normalized operations and the acceleration of expansion of our
operations resulting in additional cash flow. Without receiving any additional
capital investment and/or related loans, management believes we will be unable
to continue current business operations, and continue the current gradual
expansion of our operations.
RECENT ACCOUNTING PRONOUNCEMENTS
Recent accounting pronouncements are described in Note 3 to the Consolidated
Financial Statements.
OFF-BALANCE SHEET ARRANGEMENTS
We do 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 would be material to
investors.
PLAN OF OPERATIONS
We have established through internal marketing research that there is a market
for our products of children's entertainment merchandise.
We are aware that the economic condition has slowed operations substantially in
2011 and 2010 and we anticipate this continuing through 2012 that the U.S.
economy is currently in a state of uncertainty. In addition, we are aware that
business trends relative to the Internet are constantly changing. The
combination of changing trends relative to the Internet and uncertainty
regarding economic growth could have a material impact on our short-term or
long-term liquidity or revenues or income from operations.
OUR BUSINESS
The following description of our business contains forward-looking statements
relating to future events or our future financial or operating performance that
involves risks and uncertainties, as set forth above under "Special Note
Regarding Forward-Looking Statements." Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth in Section 1A under the
heading "Risk Factors" and elsewhere in this Form 10-K.
OUR MARKET PRESENCE
We are a development stage company to market and sell through distribution
channels throughout the United States and foreign territories children's
intellectual properties, including original children's music, videos and discs.
Emphasis will be placed on creating original children's music having a CD format
that is personalized for the child's individual name and download songs on the
internet.
The Company, on July 31, 2010, had acquired intellectual property consisting of
thirty-five (35) children's songs. The intellectual property acquired included
all rights, title and interest and therefore the Company has title of one
hundred percent (100%) ownership to the thirty-five (35) children's songs. We
are currently developing, producing and editing these thirty-five (35) songs in
anticipation of commencing a marketing presence for the holiday season of 2011.
17
Of the current original thirty-five (35) children's songs of which we have in
our children's intellectual portfolio, the initial twelve (12) songs as follows
will be marketed having two-hundred (200) individual children's names:
1) "Wake Up" 7) "Raccoon Advice"
2) "Animal Sounds" 8) "A Smile On Your Face"
3) "Proper Manners" 9) "Sea Captain"
4) "The Fair" 10) "The Ha-Ha Song"
5) "Believe In Yourself" 11) "Family"
6) "The Gift Of Love" 12) " A Little Lullaby"
OUR EMPLOYEES
As of August 31, 2011, SOUND KITCHEN ENTERTAINMENT GROUP, INC. has no permanent
staff. Our officers and directors are prepared to devote time to our operations
as may be required.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We do not use derivative financial instruments and have no foreign exchange
contracts. Our financial instruments consist of cash and cash equivalents, trade
accounts and contracts receivable, accounts payable and long-term obligations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA
The full text of our audited financial statements as of August 31, 2011 and 2010
begins on page F-1 of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
CHANGE IN ACCOUNTANTS
During the fiscal years ended August 31, 2011 and 2010, there were no
disagreements with Lake & Associates CPA LLC on any matter of accounting
principles or practices, financial disclosure, or auditing scope or procedure.
There were no reportable events, as described in Item 304(a)(1)(v) of Regulation
S-K.
ITEM 9A. CONTROLS AND PROCEDURES
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is
defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange
Act of 1934 as a process designed by, or under the supervision of, the company's
principal executive and principal financial officers and effected by the
company's board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of America and
includes those policies and procedures that:
- Pertain to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of the assets of the
company;
18
- Provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America
and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company;
and
- Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the company's assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. All internal control systems,
no matter how well designed, have inherent limitations.
Therefore, even those systems determined to be effective can provide only
reasonable assurance with respect to financial statement preparation and
presentation. Because of the inherent limitations of internal control, there is
a risk that material misstatements may not be prevented or detected on a timely
basis by internal control over financial reporting. However, these inherent
limitations are known features of the financial reporting process. Therefore, it
is possible to design into the process safeguards to reduce, though not
eliminate, this risk.
As of August 31, 2011 management assessed the effectiveness of our internal
control over financial reporting based on the criteria for effective internal
control over financial reporting established in Internal Control--Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission ("COSO") and 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
controls 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 our management
considered to be material weaknesses under the standards of the Public Company
Accounting Oversight Board were: (1) lack of a functioning audit committee due
to a lack of a majority of independent members and a lack of a majority of
outside directors on our 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; and (3) ineffective controls over period end financial disclosure
and reporting processes. The aforementioned material weaknesses were identified
by our sole Officer in connection with the review of our financial statements as
of August 31, 2011.
Management believes any of the matters noted above could result in a material
misstatement in our financial statements in future periods.
MANAGEMENT'S REMEDIATION INITIATIVES
In an effort to remediate the identified material weaknesses and other
deficiencies and enhance our internal controls, we have initiated, or plan to
initiate, the following series of measures:
19
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 us. And, we plan to
appoint one or more outside directors to our board of directors who shall be
appointed to an audit committee resulting in a fully functioning audit committee
who will undertake the oversight in the establishment and monitoring of required
internal controls and procedures such as reviewing and approving estimates and
assumptions made by management when funds are available to us.
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 our Board.
We anticipate that these initiatives will be at least partially, if not fully,
implemented by March 31, 2012. Additionally, we plan to test our updated
controls and remediate our deficiencies by June 30, 2012.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There was no change in our internal controls over financial reporting that
occurred during the period covered by this report, which has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.
ITEM 9B. OTHER INFORMATION.
AMENDMENT TO ARTICLES OF INCORPORATION OR BYLAWS
In August, 2011, we filed, amended and restated Articles of Incorporation with
the Secretary of State of Florida which:
o changed the name of the corporation to Sound Kitchen Entertainment Group,
Inc.
o increased the number of authorized shares of common stock from 100,000,000
shares to 500,000,000 shares and fixed a par value of $0.001 per share,
o authorized a class of 10,000,000 shares of blank check preferred stock,
par value $0.001 per share, and
o included indemnification provisions customary under Florida law, as well
as election not to be governed by the provisions of the Florida Business
Corporation Act governing affiliated transactions and an election to be
governed by the provisions related to control share acquisitions.
DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT
OF CERTAIN OFFICERS
On August 15, 2011, the Board of Directors elected Russ Regan as Chief Executive
Officer and Chairman of the Board of Directors and Alfred Fernandez (our sole
officer and director prior to August 15, 2011) as Chief Financial Officer and a
member of the Board of Directors.
20
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS OF AND CORPORATE GOVERNANCE
Set forth below are the names of our directors, officers and significant
employees, their ages, all positions and offices that they hold with us, the
period during which they have served as such, and their business experience
during at least the last five years. The Directors will serve until the next
annual meeting of the stockholders or until their successors are elected or
appointed and qualified. Executive officers will serve at the Board's
discretion.
Our officers and directors will serve until his successor is elected and
qualified. Our officers are elected by the Board of Directors to a term of one
(1) year and serve until their successor is duly elected and qualified, or until
they are removed from office. The Board of Directors has no nominating, auditing
or compensation committees.
The name, address, age and position of our president, secretary/treasurer, and
director and vice president is set forth below:
Name and Address Age Position(s)
--------------------- --- -----------
Russ Regan 82 Chief Executive Officer
2625 Angelo Drive and Chairman of the Board of Directors
Los Angeles, CA 90077
Alfred Fernandez 47 Chief Financial Officer, Secretary
18775 S.W. 27th Ct and Director
Miramar, FL 33029
The person named above has held his offices/positions since the inception of our
company and is expected to hold his offices/positions until the next annual
meeting of our stockholders.
BIOGRAPHICAL INFORMATION
RUSS REGAN, CHIEF EXECUTIVE OFFICER AND CHAIRMAN OF THE BOARD OF DIRECTORS:
On August 15, 2011, Mr. Regan was elected an officer and director of our
company. For the past five (5) years, Mr. Regan has been, from February, 2007 to
present, the Chief Executive Officer and Director of Clearvision International,
Inc. (CVNI;OTC) and a consultant in the entertainment and recording areas. As
the former president of both U&I Records and 20th Century Records, Mr. Regan has
had many relationships with named artists and affiliations with other companies
including, but not limited to, Gold River Productions, Inc, Seraph Security,
Inc., Tymeless Music Group, Velocity Entertainment, Inc., eWorldEntertainment,
Inc. and Crescent Financial Partners, Inc.
ALFRED FERNANDEZ, CHIEF FINANCIAL OFFICER AND A MEMBER OF THE BOARD OF
DIRECTORS:
On August 15, 2011, Mr. Fernandez was elected Chief Financial Officer of our
company and remains a member of the Board of Directors. Alfred Fernandez, from
July, 2010 to August 15, 2011, has been employed by our company and was the sole
officer and director. Mr. Fernandez also acts as a consultant to several
privately held entities.
21
Mr. Fernandez has served as Chief Financial Officer of MediaNet Group
Technologies, Inc., a publicly held company, from July 2007 to July, 2010. Prior
to joining the MediaNet Group Technologies, Inc., Mr. Fernandez served as Chief
Financial Officer of Money Express Financial Corp., a privately traded
international money service company from 2004 to May 2007. Mr. Fernandez is an
active CPA and has a J.D. from Seton Hall University and a B.A. in Accounting
from Rutgers University.
BOARD COMPOSITION AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors is currently composed of two (2) members. All actions of
the Board of Directors require the approval of a majority of the Directors in
attendance at a meeting at which a quorum is present.
COMMITTEES
Our Board of Directors currently has no committee.
Our Board of Directors has not established any committees, including an Audit
Committee, a Compensation Committee or a Nominating Committee, any committee
performing a similar function. The functions of those committees are being
undertaken by the entire board as a whole. Because we do not have any
independent directors, our Board of Directors believes that the establishment of
committees of the Board would not provide any benefits to our company and could
be considered more form than substance.
AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT
One member of the Board of Directors is an "audit committee financial expert"
within the meaning of Item 401(e) of Regulation S-B. In general, an "audit
committee financial expert" is an individual member of the audit committee or
Board of Directors who:
o understands generally accepted accounting principles and financial
statements,
o is able to assess the general application of such principles in connection
with accounting for estimates, accruals and reserves,
o has experience preparing, auditing, analyzing or evaluating financial
statements comparable to the breadth and complexity to our financial
statements,
o understands internal controls over financial reporting, and
o understands audit committee functions.
INDEPENDENT DIRECTORS
WE DO NOT HAVE ANY INDEPENDENT DIRECTORS AND WE HAVE NOT VOLUNTARILY IMPLEMENTED
VARIOUS CORPORATE GOVERNANCE MEASURES, IN THE ABSENCE OF WHICH, STOCKHOLDERS MAY
HAVE MORE LIMITED PROTECTIONS AGAINST INTERESTED DIRECTOR TRANSACTIONS,
CONFLICTS OF INTEREST AND SIMILAR MATTERS.
22
Recent Federal legislation, including the Sarbanes-Oxley Act of 2002, has
resulted in the adoption of various corporate governance measures designed to
promote the integrity of the corporate management and the securities markets.
Some of these measures have been adopted in response to legal requirements.
Others have been adopted by companies in response to the requirements of
national securities exchanges, such as the NYSE or The NASDAQ Stock Market, on
which their securities are listed. Among the corporate governance measures that
are required under the rules of national securities exchanges are those that
address Board of Directors' independence, audit committee oversight, and the
adoption of a code of ethics. Our Board of Directors is comprised of two (2)
individuals who are also our executive officers.
Our executive officers make decisions on all significant corporate matters such
as the approval of terms of the compensation of our executive officers and the
oversight of the accounting functions.
POLICY REGARDING BOARD ATTENDANCE
Directors are expected to attend Board meetings as frequently as necessary to
properly discharge their responsibilities and to spend the time needed to
prepare for each such meeting.
Our Directors are expected to attend annual meetings of stockholders, but we do
not have a formal policy requiring them to do so.
DIRECTOR COMPENSATION
We do not pay fees to directors for attendance at meetings of the Board of
Directors or of committees; however, we may adopt a policy of making such
payments in the future. We will reimburse out-of-pocket expenses incurred by
directors in attending board and committee meetings. From time to time, the
Board of Directors approves compensation to officers and directors and, from
inception (June 2, 2008) to August 31, 2011, the total compensation to our two
(2) directors was the issuance of 3,600,000 common shares for the twelve (12)
months ended August 31, 2011, having a fair market value of $90,000 classified
for financial presentation under the caption of consulting services.
Under the terms of the Indemnification Agreements, we agreed to indemnify the
independent directors against expenses, judgments, fines, penalties or other
amounts actually and reasonably incurred by the independent directors in
connection with any proceeding if the independent director acted in good faith
and in our best interests. It is our practice to reimburse our directors for
reasonable travel expenses related to attendance at board of directors and
committee meetings.
FAMILY RELATIONSHIPS
Alfred Fernandez, our chief financial officer and director, has voting control
for 2,000,000 common shares for four (4) minor aged children. These children are
the grandchildren of Steven Adelstein, an Affiliate and Consultant to the
company. Additionally, two (2) children are the children of Tammi Shnider, the
daughter of Steven Adelstein who is also an Affiliate of the company.
CODE OF ETHICS
In August 2008, we adopted a Code of Ethics and Business Conduct which is
applicable to our employees and which also includes a Code of Ethics for our
President and principal financial officers and persons performing similar
functions. A code of ethics is a written standard designed to deter wrongdoing
and to promote:
23
o honest and ethical conduct,
o full, fair, accurate, timely and understandable disclosure in regulatory
filings and public statements,
o compliance with applicable laws, rules and regulations,
o the prompt reporting violation of the code, and
o accountability for adherence to the code.
ITEM 11. EXECUTIVE COMPENSATION
We did not pay any fixed salaries from inception (June 2, 2008) to August 31,
2011. On July 31, 2011, the Board of Directors approved consideration to its
then sole director (and officer) for the issuance of 100,000 common shares
valued at $2,500. On August 26, 2011, the Board of Directors approved
consideration for the issuance of 2,500,000 common shares valued at $62,500
($0.025 per common share) to Russ Regan, our now Chief Executive Officer and
Chairman of the Board of Directors for past consulting services and the issuance
of 500,000 common shares to Alfred Fernandez, our now Chief Financial Officer
and member of the Board of Directors for past consulting services.
We do not anticipate beginning to pay salaries until we have adequate funds to
do so. There are no stock option plans, retirement, pension, or profit sharing
plans for the benefit of our officers and director other than as described
herein.
REMUNERATION OF DIRECTORS AND OFFICERS
The following table sets forth the remuneration of our directors and officers
for the period from inception (June 2, 2008) through August 31, 2011.
CAPACITIES IN WHICH AGGREGATE
NAME OF INDIVIDUAL REMUNERATION WAS RECEIVED Amount
------------------ ----------------------------- -----------
Russ Regan Consulting Services $62,500 (1)
Alfred Fernandez Consulting Services $15,000 (2)
(1) For the year ending August 31, 2011, the company issued 2,500,000 common
shares at $0.025 per share for a total of $62,500 representing consulting fees
(2) For the year ending August 31, 2011, the company issued 600,000 common
shares at $0.025 per share for a total of $15,000 representing consulting fees
We have no employment agreements with our Executive Officers and Directors. We
will not pay compensation to Directors for attendance at meetings. We will
reimburse the Directors for reasonable expenses incurred during the course of
their performance.
BONUSES AND DEFERRED COMPENSATION
We do not have any agreements to issue bonuses, deferred compensation or
retirement plans. From time to time, the Board of Directors grants bonuses,
stock issuances and other benefits.
STOCK OPTIONS
The Company does not have any stock option plan.
24
PAYMENT OF POST-TERMINATION COMPENSATION
The Company does not have change-in-control agreements with any of its executive
officers, and the Company is not obligated to pay severance or other enhanced
benefits to executive officers upon termination of their employment.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our bylaws provide for the indemnification of our present and prior directors
and officers or any person who may have served at our request as a director or
officer of another corporation in which we own shares of capital stock or of
which we are a creditor, against expenses actually and necessarily incurred by
them in connection with the defense of any actions, suits or proceedings in
which they, or any of them, are made parties, or a party, by reason of being or
having been director(s) or officer(s) of us or of such other corporation, in the
absence of negligence or misconduct in the performance of their duties. This
indemnification policy could result in substantial expenditure by us, which we
may be unable to recoup.
Insofar as indemnification by us for liabilities arising under the Securities
Exchange Act of 1934 may be permitted to our directors, officers and controlling
persons pursuant to provisions of the Articles of Incorporation and Bylaws, or
otherwise, we have been advised that in the opinion of the SEC, such
indemnification is against public policy and is, therefore, unenforceable. In
the event that a claim for indemnification by such director, officer or
controlling person of us in the successful defense of any action, suit or
proceeding is asserted by such director, officer or controlling person in
connection with the securities being offered, we will, unless in the opinion of
our counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
us is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
At the present time, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of ours in which indemnification
would be required or permitted. We are not aware of any threatened litigation or
proceeding which may result in a claim for such indemnification.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of August 31, 2011 for (a) each of
our directors, (b) each of our executive officers, (c) each stockholder known to
be the beneficial owner of more than 5% of any class of the our voting
securities, and (d) all directors and executive officers as a group. Beneficial
ownership is determined in accordance with Rule 13d-3 under the Securities
Exchange Act of 1934 and does not necessarily bear on the economic incidents of
ownership or the rights to transfer the shares described below. Unless otherwise
indicated, (a) each stockholder has sole voting power and dispositive power with
respect to the indicated shares and (b) the address of each stockholder who is a
director or executive officer is c/o SOUND KITCHEN ENTERTAINMENT GROUP, INC.
7076 Spyglass Avenue, Parkland, FL 33076.
25
Name and Address Percentage of
Beneficial Ownership Number of Shares ownership (1)
-------------------- ---------------- -------------
DIRECTORS AND OFFICERS:
Russ Regan ............................. 2,500,000 8%
2625 Angelo Drive
Los Angeles, CA 90077
Alfred Fernandez (2) ................... 3,600,000 11%
18775 S.W. 27th Ct.
Miramar, FL 33029
All Officers and Directors ............ 6,100,000 19%
as a Group (1 person)
BENEFICIAL OWNER OF MORE THAN 5%:
Tammi Shnider .......................... 9,000,000 29%
3764 Moon Bay Circle
Wellington, FL 33414
Steve Adelstein ........................ 2,700,000 9%
7076 Spyglass Avenue
Parkland, FL 33076
Phillip Johnston, Esq .................. 5,000,000 16%
200 S.W. 1ST AVENUE, 12TH FLOOR,
FORT LAUDERDALE, FL 33301
Blue Horshoe, Trust .................... 2,500,000 8%
690 Hermitage Circle
Palm Beach Gardens, FL 33410
(1) Applicable percentage ownership is based on 31,500,000 shares of common
stock outstanding as of September 15, 2011.
(2) Includes 2,000,000 common shares held in the name of four (4) minor aged
Children related to Tammi Shnider and Steve Adelstein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time, the Company borrows from officers, directors and related
parties. At August 31, 2011 and 2010, these loans were $400 and $684
respectively. The highest amount borrowed for the year ending August 31, 2011
was $12,500.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Lake & Associates CPA LLC is the Company's independent registered public
accounting firm engaged to examine the Company's financial statements for the
fiscal period ended August 31, 2011 and 2010.
26
FEES FOR THE FISCAL PERIOD ENDED AUGUST 31, 2011 AND 2010
AUDIT FEES - Lake & Associates CPA LLC was paid or accrued an aggregate fee of
approximately $10,300 per period for the auditing services for the fiscal period
ended August 31, 2011 and 2010. These fees for auditing services included the
audit of our annual financial statements and for the reviews of the financial
statements included in our quarterly reports on Form 10-Q for the periods ended
November 30, February 28 and May 31.
AUDIT RELATED FEES - Lake & Associates CPA LLC was not paid or no fees were
accrued for assurance and related services that were related to the audit or
review of the Company's financial statements during the fiscal years ended
August 31, 2011 and 2010.
TAX FEES - Lake & Associates CPA LLC was paid or accrued a fee of approximately
$500 for tax compliance, advice, and planning during the fiscal years ended
August 31, 2011 and 2010.
ALL OTHER FEES. Lake & Associates CPA LLC did not bill the Company for any
products or services other than the foregoing during the fiscal years ended
August 31, 2011 and 2010.
BOARD OF DIRECTORS PRE-APPROVAL POLICIES AND PROCEDURES
Although our Board of Directors does not have an Audit Committee, our Board of
Directors has adopted the policy to pre-approve audit and permissible non-audit
services provided by our independent auditors.
PART IV
ITEM 15. EXHIBITS
The Exhibits listed below are filed as part of the S-1 and Amendments as filed
with the Securities and Exchange Commission.
EXHIBIT NO. DOCUMENT DESCRIPTION
----------- --------------------
3.1 Articles of Incorporation (incorporated by reference from
Registration Statement on Form S-1 filed with the Securities and
Exchange Commission on October 19, 2010) and restated and amended
Articles of Incorporation as filed (incorporated by reference on
Form 8-K with the Securities and Exchange Commission on August 25,
2011).
3.2 By-laws incorporated by reference from Registration Statement on
Form S-1 filed with the Securities and Exchange Commission on
October 19, 2010.
31.1* Certification of the Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
31.2* Certification of the Chief Financial Officer pursuant To Section
302 of the Sarbanes-Oxley Act of 2002.
32.1* Certification of the Chief Executive Officer pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2* Certification of the Chief Financial Officer pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
* filed herewith
27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SOUND KITCHEN ENTERTAINMENT GROUP, INC.
Date: October 7, 2011 By: /s/ Russ Regan
------------------
Chief Executive Officer
Chairman of the Board of Directors
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Alfred Fernandez Chief Financial Officer October 7, 2011
-------------------- Member of the Board of Directors
Alfred Fernandez
28
Sound Kitchen Entertainment Group, Inc.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
PAGE
-----------
Report of Independent Registered Public Accounting Firm .......... F-2
Balance Sheet .................................................... F-3
Statements of Operations ......................................... F-4
Statements of Stockholders' Equity/(Deficit) ..................... F-5
Statements of Cash Flows ......................................... F-6
Notes to Financial Statements .................................... F-7 to F-12
F-1
LAKE & ASSOCIATES CPA'S
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Sound Kitchen Entertainment Group, Inc.
We have audited the accompanying balance sheets of Sound Kitchen Entertainment
Group, Inc. (a development stage Company) (the "Company") as of August 31, 2011
and the related statements of operations, stockholders' deficit, and cash flows
for the period June 2, 2008 (inception) through August 31, 2011. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sound Kitchen Entertainment
Group, Inc. (a development stage Company) as of August 31, 2011, and the results
of its operations and its cash flows for the period June 2, 2008 (inception)
through August 31, 2011, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed further in Note 6, the
Company has been in the development stage since its inception (June 2, 2008) and
continues to incur significant losses. The Company's viability is dependent upon
its ability to obtain future financing and the success of its future operations.
These factors raise substantial doubt as to the Company's ability to continue as
a going concern. Management's plan in regard to these matters is also described
in Note 3. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Lake & Associates, CPA's LLC
Lake & Associates, CPA's LLC
Schaumburg, Illinois
September 15, 2011
1905 Wright Boulevard
Schaumburg, IL 60193
Phone: 847.524.0800
Fax: 847.524.1655
F-2
SOUND KITCHEN ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
(Audited)
ASSETS
------
August 31, August 31,
2011 2010
---------- ----------
CURRENT ASSETS:
Cash and equivalents .............................. $ 100 $ 5,000
---------- ----------
Total Current Assets ............................ 100 5,000
---------- ----------
OTHER ASSETS:
Intellectual assets, net .......................... 262,500 262,500
---------- ----------
Total Assets .................................... $ 262,600 $ 267,500
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
-------------------------------------------------
CURRENT LIABILITIES:
Accounts payable .................................. $ -- $ --
Accrued expenses .................................. 10,000 5,700
Loans from related parties ........................ 400 684
---------- ----------
Total Current Liabilities ....................... 10,400 6,384
---------- ----------
LONG TERM LIABILITIES:
Note Payable ...................................... -- 240,000
---------- ----------
Total Long Term Liabilities ..................... -- 240,000
---------- ----------
Total Liabilities ............................... 10,400 246,384
---------- ----------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred Stock, par value $.001;
10,000,000 shares authorized;
0 issued and outstanding at August 31, 2011
and August 31, 2010 ............................. -- --
Common stock, par value $.001;
250,000,000 shares authorized;
31,500,000 shares issued as of August 31, 2011
and 5,500,000 shares issued as of August 31, 2010 31,500 5,500
Additional paid in capital ........................ 646,000 22,000
Deficit accumulated during the development stage .. (425,300) (6,384)
---------- ----------
Total Stockholders' Equity/(Deficit) ............ 252,200 21,116
---------- ----------
Total Liabilities and Stockholders'
Equity/(Deficit) ............................... $ 262,600 $ 267,500
========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
SOUND KITCHEN ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
For the Period June 2, 2008 (inception) through August 31,2011
Cumulative from
June 2, 2008
For the twelve For the twelve (inception)
months ended months ended through
August 31, 2011 August 31, 2010 August 31, 2011
--------------- --------------- ---------------
Net Sales .................... $ -- $ -- $ --
Cost of Sales ................ -- -- --
-------------- -------------- --------------
Gross Profit ................. -- -- --
Operating Expenses:
Legal and Accounting ....... 13,700 5,700 19,400
Consulting ................. 397,500 -- 397,500
General and Administrative . 7,716 684 8,400
Amortization ............... -- -- --
-------------- -------------- --------------
Total Operating Expenses ..... 418,916 6,384 425,300
-------------- -------------- --------------
Operating Loss ............... (418,916) (6,384) (425,300)
-------------- -------------- --------------
Net (loss) before Income Taxes (418,916) (6,384) (425,300)
-------------- -------------- --------------
Provision for Income Taxes ... -- -- --
-------------- -------------- --------------
Net (loss) ................... (418,916) $ (6,384) (425,300)
-------------- ============== ==============
Basic and diluted net loss
per common share ............ $ (0.070) $ (0.001)
============== ==============
Weighted average number of
common shares outstanding ... 6,103,288 5,359,375
============== ==============
The accompanying notes are an integral part of these financial statements.
F-4
SOUND KITCHEN ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY/(DEFICIT)
FROM JUNE 2, 2008 (INCEPTION) THROUGH AUGUST 31, 2011
Accumulated
(Deficit) Total
Par Value of $0.001 Preferred Stock Common Stock Additional During Stockholders'
--------------- ------------------- Paid in Development Equity
Shares Amount Shares Amount Capital Stage (Deficit)
------ ------ ---------- ------- ---------- ----------- -------------
Balance at June 2, 2008
(date of inception) .. -- -- -- -- -- -- --
Common Stock issued
July 30, 2010 ........ -- -- 1,000,000 $ 1,000 $ 4,000 $ -- $ 5,000
Common stock issued
July 31, 2010 ........ -- -- 4,500,000 4,500 18,000 -- 22,500
Net loss for the Period
from June 2, 2008 to
August 31, 2010 ...... -- -- -- -- -- (6,384) (6,384)
------ ------ ---------- ------- ---------- ----------- -------------
Balance at
August 31, 2010 ...... -- -- 5,500,000 5,500 22,000 (6,384) 21,116
Common Stock issued
April 30, 2011 for
debt ................. -- -- 500,000 500 12,000 -- 12,500
Common Stock issued
July 31, 2011 for
services ............. -- -- 1,200,000 1,200 28,800 -- 30,000
Common Stock issued
August 26, 2011 for
services ............. -- -- 14,700,000 14,700 352,800 -- 367,500
Common Stock issued
August 26, 2011 for
conversion of debt ... -- -- 9,600,000 9,600 230,400 -- 240,000
Net Loss for the
12 months ended
August 31, 2011 ...... -- -- -- -- -- (418,916) (418,916)
------ ------ ---------- ------- ---------- ----------- -------------
Balance at
August 31, 2011 ...... -- -- 31,500,000 $31,500 $ 646,000 $ (425,300) $ 252,200
====== ====== ========== ======= ========== =========== =============
The accompanying notes are an integral part of these financial statements.
F-5
SOUND KITCHEN ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
For the Period June 2 2008 (inception) through August 31,2011
Cumulative from
June 2, 2008
For the twelve For the twelve (inception)
months ended months ended through
August 31, 2011 August 31, 2010 August 31, 2011
--------------- --------------- ---------------
OPERATING ACTIVITIES:
Net loss ...................................... $ (418,916) (6,384) (425,300)
Adjustments to reconcile net loss to net cash
used in operating activities:
Increase in amortization
Issuance of common stock for services ....... 397,500 -- 397,500
Issuance of common stock - shareholder note
payable .................................... 252,500 -- 252,500
Changes in operating assets and liabilities:
Increase/(decrease) in accrued expenses ... 4,300 5,700 10,000
--------------- --------------- ---------------
Net cash used in operating activities ... 235,384 (684) 234,700
--------------- --------------- ---------------
FINANCING ACTIVITIES:
Issuance of common stock for cash ............. -- 5,000 5,000
Increase/(decrease) in notes payable .......... (240,000) -- (240,000)
Borrowings from related parties ............... (284) 684 400
--------------- --------------- ---------------
Net cash provided by (used in) financing
activities ............................. (240,284) 5,684 (234,600)
--------------- --------------- ---------------
NET INCREASE IN CASH ............................ (4,900) 5,000 100
--------------- --------------- ---------------
CASH BEGINNING BALANCE .......................... 5,000 -- --
CASH ENDING BALANCE ............................. $ 100 5,000 100
--------------- --------------- ---------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Taxes paid .................................... $ -- $ -- $ --
=============== =============== ===============
Interest paid ................................. $ -- $ -- $ --
=============== =============== ===============
NON-CASH TRANSACTIONS AFFECTING OPERATING,
INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock - shareholder note
payable ...................................... $ 397,500 $ -- 397,500
=============== =============== ===============
Issuance of common stock for services ......... $ 252,500 $ -- 252,500
=============== =============== ===============
Issuance of common stock for acquisition of
intellectual property ........................ $ -- $ 22,500 22,500
=============== =============== ===============
Issuance of Notes payable for acquisition of
intellectual property ........................ $ -- $ 240,000 240,000
=============== =============== ===============
The accompanying notes are an integral part of these financial statements.
F-6
SOUND KITCHEN ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Sound Kitchen Entertainment Group, Inc. ("Company") formerly known as End Fuel
Inc. is in the development stage commencing development operations in April,
2010 and has incurred losses since inception totaling $425,300. The Company was
incorporated on June 2, 2008 in the State of Florida and established a fiscal
year end of August 31st. The Company is a development stage company and is in
the entertainment business presently focusing on children's music.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements present the balance sheet, statements of operations,
stockholders' equity and cash flows of the Company. These financial statements
are presented in United States dollars and have been prepared in accordance with
accounting principles generally accepted in the United States.
DEVELOPMENT STAGE COMPANY
The Company has not earned any revenue from operations. Accordingly, the
Company's activities have been accounted for as those of a "Development Stage
Enterprise" as set forth in ASC Topic 915. Among the disclosures required by ASC
915 are that the Company's financial statements be identified as those of a
development stage company, and that the statements of operations, stockholders'
equity/(deficit) and cash flows disclose activity since the date of the
Company's inception.
USE OF ESTIMATES AND ASSUMPTIONS
Preparation of the financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers highly liquid
financial instruments purchased with a maturity of three months or less to be
cash equivalents.
INTELLECTUAL PROPERTY
The Company, on July 31, 2010, has acquired intellectual property consisting of
thirty-five (35) children's songs. The intellectual property acquired included
all rights, title and interest and therefore the Company has title of one
hundred percent (100%) ownership to the thirty-five (35) children's songs.
The Company has capitalized costs of the acquired intellectual properties
consisting of $262,500 including thirty-five (35) individual children's songs at
August 31, 2011 and 2010. The Company begins amortizing intellectual property
costs, using the straight-line method over the estimated useful life of 3 years,
once it is put into service. At August 31, 2011, the intellectual properties
have not been put into service.
F-7
SOUND KITCHEN ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FAIR VALUE
In accordance with the requirements of ASC Topic 820, the Company has determined
the estimated fair value of financial instruments using available market
information and appropriate valuation methodologies. The fair value of financial
instruments classified as current assets or liabilities approximate their
carrying value due to the short-term maturity of the instruments.
INCOME TAXES
The Company follows the liability method of accounting for income taxes in
accordance with ASC Topic 740. 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. 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. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion
or all of the deferred tax assets will not be realized. 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.
REVENUE AND COST RECOGNITION
The Company has no current source of revenue. The Company recognizes revenue
based on Account Standards Codification ("ASC") 605 "Revenue Recognition" which
contains Securities and Exchange Commission Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements' and No. 104, "Revenue
Recognition". In all cases, revenue is recognized only when the price is fixed
or determinable, persuasive evidence of an arrangement exists, shipment has
occurred, price is fixed or determinable and collectability of the resulting
receivable is reasonably assured. Revenues transacted from on-line platforms are
recognized at the point of sale.
The Cost of Sales includes any labor cost and the amortization of intellectual
property.
ADVERTISING, CONSULTING SERVICES AND MARKETING
The company expenses advertising, consulting services and marketing as incurred.
The company has had advertising, consulting services and marketing expenses of
$397,500 from inception (June 2, 2008) through August 31, 2011.
PROPERTY
The Company does not own or lease any real property.
NET LOSS PER SHARE
Basic loss per share includes no dilution and is computed by dividing loss
available to common stockholders by the weighted average number of common shares
outstanding for the period. Dilutive loss per share reflects the potential
dilution of securities that could share in the losses of the Company. Because
the Company does not have any potentially dilutive securities, the accompanying
presentation is only of basic loss per share.
F-8
SOUND KITCHEN ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOREIGN CURRENCY TRANSLATION
The financial statements are presented in United States dollars. In accordance
with ASC Topic 830, "Foreign Currency Translation", foreign denominated monetary
assets and liabilities are translated to their United States dollar equivalents
using foreign exchange rates which prevailed at the balance sheet date.
Non-monetary assets and liabilities are translated at exchange rates prevailing
at the transaction date. Revenue and expenses are translated at average rates of
exchange during the periods presented. Related translation adjustments are
reported as a separate component of stockholder's equity (deficit), whereas
gains or losses resulting from foreign currency transactions are included in
results of operations.
STOCK-BASED COMPENSATION
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.
SHARE BASED EXPENSES
In accordance with ASC Topic 230, this statement requires a public entity to
expense the cost of employee services received in exchange for an award of
equity instruments. This statement also provides guidance on valuing and
expensing these awards, as well as disclosure requirements of these equity
arrangements. The Company adopted ASC Topic 230 upon creation of the company and
expenses share based costs in the period incurred.
RELATED PARTIES
Related parties, which can be a corporation, individual, investor or another
entity are considered to be related if the party has the ability, directly or
indirectly, to control the other party or exercise significant influence over
the Company in making financial and operating decisions. Companies are also
considered to be related if they are subject to common control or common
significant influence. The Company has these relationships.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company has evaluated all the recent accounting pronouncements through
August 31, 2011 and believes that none of them, including those not yet
effective, will have a material effect on the financial position or results of
operations of the Company.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared in accordance with generally
accepted accounting principles applicable to a going concern. This contemplates
the realization of assets and the liquidation of liabilities in the normal
course of business. Currently, the Company does not have material assets, nor
does it have operations or a source of revenue sufficient to cover its operation
costs and allow it to continue as a going concern. The Company has a deficit
accumulated since inception (June 2, 2008) through August 31, 2011; of
($425,300).The Company will be dependent upon the raising of additional capital
through placement of our common stock in order to implement its business plan.
There can be no assurance that the Company will be successful in either
situation in order to continue as a going concern. The Company has funded its
initial operations, from inception to August 31, 2011, by way of issuing common
shares. As of August 31, 2011, the Company had issued 31,500,000 common shares,
for a total of $677,500. These financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts, or amounts and classification of liabilities that might result from
this uncertainty.
F-9
SOUND KITCHEN ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS
In accordance with ASC Topic 825 and 820 the Company has determined the
estimated fair value of financial instruments using available market information
and appropriate valuation methodologies. The fair value of financial instruments
classified as current assets or liabilities approximate their carrying value due
to the short-term maturity of the instruments.
NOTE 5 - CAPITAL STOCK
In August, 2011, the company filed, amended and restated Articles of
Incorporation with the Secretary of State of Florida which:
o changed the name of the corporation to Sound Kitchen Entertainment Group,
Inc.
o increased the number of authorized shares of common stock from 100,000,000
shares to 500,000,000 shares and fixed a par value of $0.001 per share,
o authorized a class of 10,000,000 shares of blank check preferred stock,
par value $0.001 per share, and
o included indemnification provisions customary under Florida law, as well
as election not to be governed by the provisions of the Florida Business
Corporation Act governing affiliated transactions and an election to be
governed by the provisions related to control share acquisitions.
On July 30, 2010, the then sole officer and director of the Company purchased
1,000,000 shares of the common stock in the Company at $0.005 per share for
$5,000.
On July 31, 2010, eight (8) individuals (including four (4) minor aged children)
purchased 4,500,000 shares of the common stock in the Company at $0.005 per
share for $22,500. These 4,500,000 common shares were issued as consideration
for the deposit of $22,500 on the agreement to purchase intellectual properties.
On April 30, 2011, the Company issued 500,000 shares of the common stock in the
Company at $0.025 per share for $12,500 as payment of debt to related parties.
On July 31, 2011, the Company issued 1,200,000 shares of the common stock in the
Company at $0.025 per share for $30,000 as payment of liabilities for consulting
services rendered.
On August 26, 2011, the Company issued 14,700,000 shares of the common stock in
the Company at $0.025 per share for $367,500 as payment of liabilities for
consulting services rendered.
On August 26, 2011, the Company issued 9,600,000 shares of the common stock in
the Company at $0.025 per share for $240,000 as payment of the liability for the
company's children's library.
As of August 31, 2011 and 2010, the Company has not granted any stock options
and has not recorded any stock-based compensation.
F-10
SOUND KITCHEN ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - INCOME TAXES
We did not provide any current or deferred U.S. federal income tax provision or
benefit for any of the periods presented because we have experienced operating
losses since inception. In accordance with ASC Topic 740 - Accounting for Income
Tax and ASC Topic 605 - Accounting for Uncertainty in Income Taxes, when it is
more likely than not that a tax asset cannot be realized through future income
the Company must allow for this future tax benefit. We provided a full valuation
allowance on the net deferred tax asset, consisting of net operating loss carry
forwards, because management has determined that it is more likely than not that
we will not earn income sufficient to realize the deferred tax assets during the
carry forward period.
The components of the Company's deferred tax asset as of August 31, 2011 and
2010 are as follows:
AUGUST 31, 2011 AUGUST 31, 2010
---------------- ----------------
Net operating loss carry forward ....... $ 425,300 $ 6,384
Times Tax at Statutory rate ............ 35 35
Deferred Tax Asset ..................... 148,850 2,234
Valuation allowance .................... (148,850) (2,234)
Net deferred tax asset ................. $ 0 $ 0
The net federal operating loss carry forward will expire between 2028 and 2030.
This carry forward may be limited upon the consummation of a business
combination under IRC Section 381.
NOTE 7 - RELATED PARTY TRANSACTIONS
During the period from June 2, 2008 (inception) through August 31, 2010 the
former sole officer and director paid incorporation costs of $684 on behalf of
the Company. Additionally, other affiliates and related parties have made
advances from time to time and at August 31, 2011 and 2010, the amounts were
$400 and $684 respectively. These were classified as loans from related parties.
All advances and loans are payable on demand and without interest.
The note payable is with a related party and is discussed further in Note 8.
The Company does not lease or rent any property. Office space and services are
provided without charge by an officer / shareholder. Such costs are immaterial
to the financial statements and accordingly, have not been reflected therein.
The officers and directors of the Company are involved in other business
activities and may, in the future, become involved in other business
opportunities. If a specific business opportunity becomes available, such
persons may face a conflict in selecting between the Company and their other
business interests. The Company has not formulated a policy for the resolution
of such conflicts.
F-11
SOUND KITCHEN ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - NOTE PAYABLE
On July 31, 2010, the company acquired intellectual property for a total cost of
$262,500. At closing, the company executed a promissory note in the amount of
$240,000 having the following salient terms and conditions:
a) The intellectual property secures the promissory note
b) There is no stated interest rate, but interest is calculated as cash flow
is receive by the company from any/all sources at $0.075 per song download
and $0.125 per song from any/all sources including, but not limited to,
compact disc (CD)
c) There are no stated period payments of principle and the promissory note
is due in its entirety July 31, 2015.
d) The promissory note is executed in its entirety to Tammi Shnider as
Trustee representing a total of eight (8) individuals (including four (4)
minor aged children). Tammi Shnider is a related party.
On August 26, 2011, this Note was paid in full with the issuance of 9,600,000
common shares valued at $0.025 per common share.
NOTE 9 - SUBSEQUENT EVENTS
In January, 2011, the company's filing of Form S-1 with the Securities and
Exchange Commission to sell a maximum of 1,000,000 common shares at $0.025 per
share to raise funding of $25,000 became effective. At September 15, 2011, the
Company has not sold any shares and there is no assurance that these common
shares will be sold.
We have evaluated events and transactions that occurred subsequent to August 31,
2011 through September 15, 2011, the date the financial statements were issued,
for potential recognition or disclosure in the accompanying financial
statements. Other than the disclosures above, we did not identify any events or
transactions that should be recognized or disclosed in the accompanying
financial statements.
F-12