SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15 (d) of
Securities Exchange Act of 1934
For Period ended February 28, 2005
Commission File Number 333-119223
M.E.R. CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 20-1575477
(State of Incorporation) (I.R.S. Employer Identification No.)
2300, 10303 Jasper Ave. Edmonton AB Canada T5J 3T8
(Address of Principal Executive Offices) (Zip Code)
(780) 918-0918
(Registrant's telephone number, including area code)
Check 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 [ ]
There were 5,000,000 shares of Common Stock outstanding as of February 28, 2005.
Authorized share capital of the registrant at February 28, 2005: 25,000,000
common shares, par value of $0.001.
The Company recorded $nil revenue for the quarter ended February 28, 2005.
FORWARD-LOOKING STATEMENTS
THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS PREDICTIONS, PROJECTIONS AND OTHER
STATEMENTS ABOUT THE FUTURE THAT ARE INTENDED TO BE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (COLLECTIVELY, "FORWARD-LOOKING STATEMENTS"). FORWARD-LOOKING STATEMENTS
INVOLVE RISKS AND UNCERTAINTIES. A NUMBER OF IMPORTANT FACTORS COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN THE FORWARD-LOOKING
STATEMENTS. IN ASSESSING FORWARD-LOOKING STATEMENTS CONTAINED IN THIS QUARTERLY
REPORT ON FORM 10-QSB, READERS ARE URGED TO READ CAREFULLY ALL CAUTIONARY
STATEMENTS - INCLUDING THOSE CONTAINED IN OTHER SECTIONS OF THIS QUARTERLY
REPORT ON FORM 10-QSB. AMONG SAID RISKS AND UNCERTAINTIES IS THE RISK THAT THE
COMPANY WILL NOT SUCCESSFULLY EXECUTE ITS BUSINESS PLAN, THAT ITS MANAGEMENT IS
ADEQUATE TO CARRY OUT ITS BUSINESS PLAN AND THAT THERE WILL BE ADEQUATE CAPITAL
OR THEY MAY BE UNSUCCESSUFL FOR TECHNICAL, ECONOMIC OR OTHER REASONS.
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Page Number
-----------
Balance Sheets................................................. 3
Statement of Operations........................................ 4
Statement of Stockholder's Equity.............................. 5
Statements of Cash Flows....................................... 6
Notes to the Consolidated Financial Statements................. 7-9
2
M.E.R. CORPORATION
(A Development Stage Company)
BALANCE SHEETS
- --------------------------------------------------------------------------------
February 28, August 31,
2005 2004
-------- --------
(Unaudited)
ASSETS
Current assets $ -- $ --
-------- --------
Total current assets -- --
Other assets -- --
-------- --------
Total assets $ -- $ --
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ -- $ --
-------- --------
Total current liabilities -- --
-------- --------
Stockholders' equity
Common stock Authorized 25,000,000 shares with a par value
of $0.001 Issued and outstanding 5,000,000 shares 5,000 5,000
Additional paid-in capital 6,000 6,000
Deficit accumulated during the development stage (11,000) (11,000)
-------- --------
Total stockholders' equity -- --
-------- --------
Total liabilities and stockholders' equity $ -- $ --
======== ========
The accompanying notes are an integral part of these financial statements.
3
M.E.R. CORPORATION
(A Development Stage Company)
STATEMENT OF OPERATIONS
(Unaudited)
- --------------------------------------------------------------------------------
Cumulative
Amounts From
Date of
Three and Six Incorporation
Month on August 17,
Period Ended 2004 to
February 28, February 28,
2005 2005
---------- ----------
REVENUE $ -- $ --
---------- ----------
OPERATING EXPENSES
Organizational costs -- 11,000
---------- ----------
Loss before income taxes -- --
Provision for income taxes -- --
---------- ----------
Net loss for the period $ -- $ (11,000)
========== ==========
Basic and diluted loss per common share $ --
==========
Weighted average number of common shares
outstanding 5,000,000
==========
The accompanying notes are an integral part of these financial statements.
4
M.E.R. CORPORATION
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
- --------------------------------------------------------------------------------
Deficit
Accumulated
Common Stock Additional During the Total
------------------- Paid in Development Stockholders'
Shares Amount Capital Stage Equity
------ ------ ------- ----- ------
Inception, August 17, 2004 -- $ -- $ -- $ -- $ --
Initial capitalization
Sale of common stock 5,000,000 5,000 6,000 -- 11,000
Net loss for the year -- -- -- (11,000) (11,000)
--------- ------ ------ -------- --------
Balance August 31, 2004 5,000,000 5,000 6,000 (11,000) --
Net loss for the period -- -- -- -- --
--------- ------ ------ -------- --------
Balance February 28, 2005 5,000,000 $5,000 $6,000 $(11,000) $ --
========= ====== ====== ======== ========
The accompanying notes are an integral part of these financial statements.
5
M.E.R. CORPORATION
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Unaudited)
- --------------------------------------------------------------------------------
Cumulative
Amounts From
Date of
Three and Six Incorporation
Month On August 17,
Period Ended 2004 to
February 28, February 28,
2005 2005
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ -- $ (11,000)
---------- ----------
Net cash used in operating activities -- (11,000)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock -- 11,000
---------- ----------
Net cash provided by financing activities -- 11,000
---------- ----------
Change in cash during the period -- --
Cash, beginning of the period -- --
---------- ----------
Cash, end of the period $ -- $ --
========== ==========
Supplemental disclosure with respect to cash flows:
Cash paid for income taxes $ -- $ --
Cash paid for interest $ -- $ --
========== ==========
The accompanying notes are an integral part of these financial statements.
6
M.E.R. CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
FEBRUARY 28, 2005
NOTE 1. GENERAL ORGANIZATION AND BUSINESS
M.E.R. Corporation (the Company) was incorporated under the laws of the state of
Nevada on August 17, 2004. The Company has one sole officer, director and
shareholder. The Company is a blank check company subject to Rule 419. The
Company was organized to acquire or merge with another business or company. The
officer is currently looking for potential merger candidates but currently has
none.
The Company has been in the development stage since inception and has no
operations to date.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES
The Company has no assets or debt as of February 28, 2005. The relevant
accounting policies and procedures are listed below.
Accounting Basis
The basis is generally accepted accounting principles.
Earnings per Share
The basic earnings (loss) per share is calculated by dividing the Company's net
income available to common shareholders by the weighted average number of common
shares during the year. The diluted earnings (loss) per share is calculated by
dividing the Company's net income (loss) available to common shareholders by the
diluted weighted average number of shares outstanding during the year. The
diluted weighted average number of shares outstanding is the basic weighted
number of shares adjusted as of the first of the year for any potentially
dilutive debt or equity.
The Company has not issued any options or warrants or similar securities since
inception.
Dividends
The Company has not yet adopted any policy regarding payment of dividends. No
dividends have been paid during the periods shown.
Income Taxes
The provision for income taxes is the total of the current taxes payable and the
net of the change in the deferred income taxes. Provision is made for the
deferred income taxes where differences exist between the period in which
transactions affect current taxable income and the period in which they enter
into the determination of net income in the financial statements.
Advertising
Advertising is expensed when incurred. There has been no advertising during the
periods.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
7
M.E.R. CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
FEBRUARY 28, 2005
NOTE 3. GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates the realization of
assets and the liquidation of liabilities in the normal course of business.
However the Company has no current source of revenue, or operations. Without
realization of additional capital, it would be unlikely for the Company to
continue as a going concern. It is management's plan to seek a suitable merger
candidate, which would supply the needed cash flow.
NOTE 4. STOCKHOLDERS' EQUITY
Common Stock
On August 17, 2004 (inception), the Company issued 5,000,000 shares of its
$0.001 par value common stock to it sole shareholder for $11,000. This structure
remains unchanged as of the date of these financial statements.
NOTE 5. RELATED PARTY TRANSACTIONS
The officer and director of the Company is involved in other business activities
and may, in the future, become involved in other business opportunities becomes
available. This person 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.
NOTE 6. PROVISION FOR INCOME TAXES
The Company provides for income taxes under Statement of Financial Accounting
Standards NO. 109, Accounting for Income Taxes. SFAS No. 109 requires the use of
an asset and liability approach in accounting for income taxes. Deferred tax
assets and liabilities are recorded based on the differences between the
financial statement and tax bases of assets and liabilities and the tax rates in
effect when these differences are expected to reverse.
SFAS No. 109 requires the reduction of deferred tax assets by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. All of the
expenditures thus far have been to organize the Company and will not be expensed
for tax purposes until the Company has operations.
The provision for income taxes is comprised of the net changes in deferred taxes
less the valuation account plus the current taxes payable as shown in the chart
below.
Net changes in Deferred Tax Benefit less than
valuation account 0
Current Taxes Payable 0
-----
Net Provision for Income Taxes 0
=====
The federal income tax filings are not current with the Company.
8
M.E.R. CORPORATION
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
FEBRUARY 28, 2005
NOTE 7. REVENUE AND EXPENSES
The Company currently has no operations and no revenue.
NOTE 8. OPERATING LEASES AND OTHER COMMITMENTS:
The Company also has no assets or lease obligations.
NOTE 9. SUBSEQUENT EVENTS
The Company has filed a registration statement to conduct a blank check offering
subject to Rule 419 of Regulation C. This offering calls for the sale of 500,000
shares of common stock at a price of $0.10 per share. When completed, the sale
will net the Company $50,000. The Company has not accepted any subscriptions for
this offering as of the date of these financial statements.
NOTE 10. THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
Below is a listing of the most recent accounting standards and their effect on
the Company.
SFAS 148 ACCOUNTING FOR STOCK-BASED COMPENSATION-TRANSITION AND DISCLOSURE
Amends FASB 123 to provide alternative methods of transition for an entity that
voluntarily changes to the fair value based method of accounting for stock-based
employee compensation.
SFAS 149 AMENDMENT OF STATEMENT 133 ON DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES
This Statement amends and clarifies financial accounting and reporting for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities under FASB Statement NO. 133, Accounting for Derivative Instruments
and Hedging Activities.
SFAS 150 FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND
EQUITY
This Statement requires that such instruments be classified as liabilities in
the balance sheet. SFAS 150 is effective for financial instruments entered into
or modified after May 31, 2003.
INTERPRETATION NO. 46 (FIN 46)
Effective January 31, 2003, The Financial Accounting Standards Board requires
certain variable interest entities to be consolidated by the primary beneficiary
of the entity if the equity investors in the entity do not have the
characteristics of a continuing financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. The Company has not invested
in any such entities, and does not expect to do so in the foreseeable future.
The adoption of these new Statements is not expected to have a material effect
on the Company's financial position, results or operations, or cash flows.
9
ITEM 2. MANAGEMENT'S PLAN OF OPERATION
M.E.R. Corporation was incorporated under the laws of the state of Nevada on
August 17, 2004. Our fiscal year end is August 31. Our shares of Common Stock
are currently not quoted for trading on any exchange or dealer network. Our sole
officer and director is the sole stockholder in our Company at present.
We are a development stage corporation, organized to provide a corporate entity
in order to participate in a merger or acquisition with another entity meeting
the requirements of Rule 419 of Regulation C. We are a blank check company and
are subject to certain regulatory requirements imposed by Rule 419 of Regulation
C under the Securities Act. We believe that following this offering certain
opportunities to merge with, or acquire the assets of another corporate entity
may become available to us due primarily to our status as a reporting publicly
held company and to our flexibility in structuring and participating in certain
business combinations, such as mergers and acquisitions. However, we have no
plans, proposals, arrangements, understandings or agreements to participate in
any specific merger or acquisition.
We currently have no revenue from operations, we are in a start-up phase with
our existing assets and we have no significant assets, tangible or intangible.
There can be no assurance that we will generate revenues in the future, or that
we will be able to operate profitably in the future, if at all. We have incurred
net losses in each fiscal year since inception of our operations.
We have never had any bankruptcy, receivership, or similar proceedings, or any
material reclassification, merger, consolidation or purchase of sale of a
significant amount of assets in the ordinary course of business.
Our initial registration statement on Form SB-2 was made effective April 7,
2005. We are currently offering 500,000 shares at $0.10 per share on a "best
efforts", "all-or-none basis." We are offering our securities directly to the
public only through our sole officer and director in those jurisdictions where
sales by such persons are permitted by law. The securities and proceeds of this
offering shall remain in escrow until the closing of this offering and the
closing of a business opportunity, such as a merger or acquisition, but in no
event shall the proceeds remain in escrow for more than 18 months. As of the
date hereof, we have not accepted any subscriptions for our common stock under
this offering.
Decisions as to which business opportunity to participate in will be
unilaterally made by Mr. Mercier, our sole officer and director, who may act
without the consent, vote or approval of our shareholders. We currently have no
plans, proposals, arrangements, understandings or agreements to participate in
any specific business opportunity.
We shall not acquire an interest in any company that Mr. Mercier is affiliated
with as a shareholder, officer or director.
10
We have, and will continue to have following the completion of our offering,
insufficient capital with which to provide the owners of operating businesses
with any substantial cash or other assets. However, Mr. Mercier believes that we
will offer owners of operating businesses the opportunity to acquire a
controlling ownership interest in a public company at substantially less cost
than is required to conduct an initial public offering of securities. The owners
of the operating business will, however, incur significant post-merger or
acquisition registration costs in the event they wish to register a portion of
their shares for subsequent sale. We will also incur significant legal fees and
expenses in connection with the acquisition or merger of an operating business
including:
* the costs of preparing post-effective amendments, interim reports,
quarterly reports, annual reports and proxy materials; and
* legal fees and expenses incurred in the preparation of legal documents
for mergers and acquisitions.
Nevertheless, Mr. Mercier has not conducted market research and is not aware of
statistical data that would support the perceived benefits of a merger or
acquisition transaction for the owners of a business opportunity.
Compensation may be paid or profit transactions may occur in connection with a
merger or acquisition by us by means of a stock exchange transaction or other
similar means, including, but not limited to, payments of business advisory,
legal and accounting fees, sales of current securities, positions and other
methods of payment by which current security holders receive funds, securities
or other assets.
Following the closing of this offering, we must maintain a current registration
statement that may require updating by the filing of a post-effective amendment.
A post-effective amendment is required when facts or events have occurred which
represent a fundamental change in the information contained in the registration
statement, such as the participation in a business opportunity related to a
merger or acquisition. Further, upon the closing of the merger or acquisition,
the successor company would assume significant compliance and reporting
obligations and costs before the Securities and Exchange Commission, including
the filing of a Form 8-K and a registration statement with the SEC in order to
become an Exchange Act reporting company, which may have a material adverse
effect on such company.
PLAN OF OPERATION
Over the next 18 months, or to the date a merger or acquisition of an operating
business is closed, Mr. Mercier, our sole officer and director, intends to fund
our operations and other capital needs, which are anticipated to be minor. This
will enable us to close our common share offering and to possibly identify and
conclude a closing of a merger or acquisition with an operating business. We do
not anticipate requiring any additional funds during the next 18 months. Our
plan of operation encompasses a merger with or acquisition of an operating
business, but we will not know what our cash requirements will be until we close
11
such merger or acquisition. We will not use any of the proceeds of the offering
unless and until we close a merger or acquisition with a qualified operating
business and our investors have reconfirmed their investment in accordance with
the requirements of Rule 419 of Regulation C. Mr. Mercier will bear the expense
to locate and identify an operating business candidate, and those expenditures
are expected to be minor. These expenses will be reimbursed following the
closing of the merger or acquisition, with the consent of the operating
business. Should the operating business have profitable operations, its capital
needs may not require the use of our proceeds that, in such event, will be used
in any manner that the new management deems appropriate. We have no plans,
proposals, arrangements, understandings or agreements to participate in any
specific business merger or acquisition. We have made no arrangements to obtain
future additional financing beyond this 18 months period, if required, and there
can be no assurance that such financing will be available, or that it will be
available on terms acceptable to us.
EVALUATION OF POTENTIAL MERGER OR ACQUISITION OPPORTUNITIES
During this period, the analysis of new business opportunities will be
undertaken by or under the supervision of Mr. Mercier. Mr. Mercier intends to
concentrate on identifying preliminary prospective business opportunities upon
the closing of this offering. He may retain paid outside business advisors to
assist in evaluating business opportunities. Mr. Mercier will not be entitled to
a finder's fee for locating a merger or acquisition candidate. Such advisors, if
any, will not be affiliated with Mr. Mercier or our company. We have no
preliminary plans, proposals, arrangements, understandings or agreements with
any party to borrow funds to increase the amount of capital available to
complete a merger or acquisition.
We will not acquire a business unless the fair value of the acquisition
candidate represents 80% of the maximum offering proceeds. Because we will be
subject to ongoing reporting requirements, we will be required to furnish
certain information about significant acquisitions, including audited financial
statements for the business acquired, covering one, two or three years depending
upon the relative size of the acquisition. Consequently, acquisition prospects
that do not have or are unable to obtain the required audited statements will
not be considered.
The only milestone we are required to meet is to conclude and complete a merger
or acquisition with an operating business within 18 months. During this period,
we are planning to review as many prospects as necessary to complete a
transaction within this milestone, but ultimately the number of prospects we
investigate and evaluate, and the time spent on each prospect, is solely at the
discretion and availability of Mr. Mercier.
STRUCTURING AND CLOSING A MERGER OR ACQUISITION WITH A PROSPECTIVE CANDIDATE
Should we enter into an agreement to acquire or merge with a business candidate
within the deadline milestone noted herein, it will likely be on the basis of a
share exchange using our common stock, due to our lack of cash resources, and
the prerequisite that all cash resources raised under this offering are to be
used subsequent to a merger or acquisition for the operating business.
12
In implementing a structure for a particular business acquisition, we may become
a party to a merger, consolidation, reorganization, joint venture or licensing
agreement with another corporation or entity. We may also purchase stock or
assets of any existing business. On the consummation of a transaction, it is
possible that our present management and shareholders will not be in control of
our company. In addition, Mr. Mercier may, as part of the terms of the
acquisition transaction, resign and be replaced by new management without a vote
of our shareholders.
With respect to any mergers or acquisitions, negotiations with target company
management will be expected to focus on the percentage of our company that
target company shareholders would acquire in exchange for their shareholdings in
the target company. Depending upon, among other things, the target company's
assets and liabilities, our shareholders will in all likelihood hold a lesser
percentage ownership interest in us following any merger or acquisition. The
percentage ownership may be subject to significant reduction in the event we
acquire a target company with substantial assets. Any merger or acquisition
effected by us can be expected to have a significant dilutive effect on the
percentage of shares held by our then existing shareholders, including
purchasers in this offering.
It is unlikely that we will have sufficient funds from the proceeds of our
current offering to undertake any significant development, marketing and
manufacturing of any products or conduct any related operations. Accordingly, we
will, in all likelihood, be required to either seek additional debt or equity
financing or obtain funding from third parties, in exchange for which we would
probably be required to give up a substantial portion of our interest in any
acquired product. There is no assurance that we will be able to either obtain
additional financing or interest third parties in providing funding for the
further development, marketing and manufacturing of any products
We are not currently engaged in any business activities, which provide any cash
flow. The costs of identifying, investigating, and analyzing business
combinations are being paid by our sole officer and director directly. We
currently have nil cash.
ITEM 3. CONTROLS AND PROCEDURES
As of the end of the period covered by this report, we conducted an evaluation,
under the supervision and with the participation of our chief executive officer
and chief financial officer of our disclosure controls and procedures (as
defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon
this evaluation, our chief executive officer and chief financial officer
concluded that our disclosure controls and procedures are effective to ensure
that information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission's rules and forms. There was
no change in our internal controls or in other factors that could significantly
affect these controls or in other factors that could affect these controls
during our last fiscal quarter that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
13
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Pursuant to Rule 601 of Regulation SB, the following exhibits are included
herein or incorporated by reference.
3.1 Articles of Incorporation *
3.2 Bylaws *
10.1 Escrow Agreement *
10.2 Subscription Agreement *
31.1 302 Certification of Chief Executive Officer and Chief Accounting
Officer
32.1 906 Certification of Chief Executive Officer and Chief Accounting
Officer
- ----------
* Incorporated by reference - refer to the company's initial registration
statement
Reports on Form 8-k
None
14
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Company has duly caused this disclosure statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
M.E.R. CORPORATION
Date: April 11, 2005
By: /s/ Ronald Mercier
------------------------------------------
Ronald Mercier, President and Chief Accounting Officer
15