UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report under Section 13 or 15 (d) of
Securities Exchange Act of 1934
For the Period ended March 31, 2008
Commission File Number 333-145876
DESCANSO AGENCY, INC.
(Name of small business issuer in its charter)
Nevada 20-8766002
(State of Incorporation) (IRS Employer ID Number)
4203 Genesee Avenue, Suite 103 #510
San Diego, CA 92117
775-352-4084
(Address and telephone number of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company.
Large accelerated filer [ ] Accelerated Filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do Not Check if a Smaller Reporting Company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
As of March 31, 2008, the registrant had 9,250,000 shares of common stock,
$0.001 par value, issued and outstanding.
ITEM 1. FINANCIAL STATEMENTS.
The un-audited quarterly financial statements for the period ended March 31,
2008 immediately follow.
2
DESCANSO AGENCY, INC.
(A Development Stage Company)
Balance Sheet
Unaudited Audited
March 31, December 31,
2008 2007
-------- --------
ASSETS
CURRENT ASSETS
Cash $ 11,826 $ 27,948
-------- --------
Total Current Assets $ 11,826 $ 27,948
-------- --------
TOTAL ASSETS $ 11,826 $ 27,948
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
LIABILITIES
Loan Payable (From Director) $ 2,090 $ 2,090
-------- --------
TOTAL LIABILITIES $ 2,090 $ 2,090
======== ========
STOCKHOLDERS' EQUITY
50,000,000 shares Common Stock
authorized at $0.001/par value
9,250,000 shares issued and
outstanding @ March 31, 2008 $ 9,250 $ 9,250
Additional Paid-in Capital $ 27,750 $ 27,750
Deficit accumulated $(27,264) $(11,142)
-------- --------
TOTAL STOCKHOLDERS' EQUITY $ 9,736 $ 25,858
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,826 $ 27,948
======== ========
The accompanying notes are an integral part of these financial statements.
3
DESCANSO AGENCY, INC.
(A Development Stage Company)
Statement of Operations
Inception
Three Mos Three Mos (April 3, 2007)
Ending Ending Through
March 31, March 31, March 31,
2008 2007 2008
---------- ---------- ----------
REVENUES
Revenues $ -- $ -- $ --
---------- ---------- ----------
TOTAL REVENUES $ -- $ -- $ --
OPERATING EXPENSE
Administrative Expense $ 16,122 $ -- $ 27,264
---------- ---------- ----------
NET (LOSS) $ (16,122) $ -- $ (27,264)
========== ========== ==========
Basic earnings per share
Weighted average number of
common shares outstanding 6,275,000 -- 6,275,000
The accompanying notes are an integral part of these financial statements.
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DESCANSO AGENCY, INC.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity
Common Additional Deficit Accum
Common Stock Paid-in During
Stock Amount Capital Dev Stage Total
----- ------ ------- --------- -----
Stock issued for cash June 29/07 4,750,000 $ 4,750 $ 14,250 $ 19,000
Stock issued for cash Nov. 2/07 4,500,000 4,500 13,500 18,000
Net (loss) for the year $ (11,142) (11,142)
---------- ------- -------- ---------- ----------
Balance Dec 31, 2007 9,250,000 $ 9,250 $ 27,750 $ (11,142) $ 25,858
---------- ------- -------- ---------- ----------
Net (loss) March 31, 2008 (16,122) (16,122)
---------- ------- -------- ---------- ----------
BALANCE MARCH 31, 2008 9,250,000 $ 9,250 $ 27,750 $ (27,264) $ 9,736
========== ======= ======== ========== ==========
The accompanying notes are an integral part of these financial statements.
5
DESCANSO AGENCY, INC.
(A Development Stage Company)
Statement of Cash Flows
Inception
Three Mos Three Mos (Apr 3, 2007)
Ending Ending Through
March 31, March 31, March 31,
2008 2007 2008
---------- ---------- ----------
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss) $ (16,122) $ -- $ (27,264)
Loan Payable 2,090
---------- ---------- ----------
Total cash provided by (used in) operating activities (16,122) -- (25,174)
========== ========== ==========
CASH FLOW FROM INVESTING ACTIVITIES
Net cash provided by (used in) investing activities -- -- --
---------- ---------- ----------
Total cash provided by (used in) investing activities -- -- --
========== ========== ==========
CASH FLOW FROM FINANCING ACTIVITIES
Issuance of Common Stock -- -- 37,000
---------- ---------- ----------
Total cash provided by (used in financing activities) -- -- 37,000
========== ========== ==========
Net increase (decrease) in cash (16,122) -- 11,826
Cash at beginning of period 27,948 -- --
---------- ---------- ----------
Cash at end of period $ 11,826 $ -- $ 11,826
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
6
DESCANSO AGENCY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS AT MARCH 31, 2008
NOTE 1 - NATURE AND PURPOSE OF BUSINESS
Descanso Agency, Inc. (the "Company") was incorporated under the laws of the
State of Nevada on April 3, 2007. The Company is "a development stage company"
that intends to open travel agencies specializing in Mexican tourism. Its
activities to date have been limited to capital formation, organization and
development of its business plan and limited operations.
NOTE 2 - NATURE OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with maturity
of three months or less to be cash equivalents.
REVENUE RECOGNITION
The Company considers revenue to be recognized at the time the service is
performed.
USE OF ESTIMATES
The preparation of the Company's financial statements requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from these
estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's short-term financial instruments consist of cash and cash
equivalents and accounts payable. The carrying amounts of these financial
instruments approximate fair value because of their short-term maturities.
Financial instruments that potentially subject the Company to a concentration
of credit risk consist principally of cash. During the period the Company did
not maintain cash deposits at financial institution in excess of the $100,000
limit covered by the Federal Deposit Insurance Corporation. The Company does not
hold or issue financial instruments for trading purposes nor does it hold or
issue interest rate or leveraged derivative financial instruments.
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DESCANSO AGENCY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS AT MARCH 31, 2008
NOTE 2 - NATURE OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE
Basic Earnings per Share ("EPS") is computed by dividing net income available to
common stockholders by the weighted average number of common stock shares
outstanding during the year. Diluted EPS is computed by dividing net income
available to common stockholders by the weighted-average number of common stock
shares outstanding during the year plus potential dilutive instruments such as
stock options and warrant. The effect of stock options on diluted EPS is
determined through the application of the treasury stock method, whereby
proceeds received by the Company based on assumed exercises are hypothetically
used to repurchase the Company's common stock at the average market price during
the period. Loss per share is unchanged on a diluted basis since the assumed
exercise of common stock equivalents would have an anti-dilutive effect.
INCOME TAXES
The Company uses the asset and liability method of accounting for income taxes
as required by SFAS No. 109 "Accounting for Income Taxes". SFAS 109 requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying amounts and the tax
basis of certain assets and liabilities. Deferred income tax assets and
liabilities are computed annually for the difference between the financial
statement and tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future, based on enacted tax laws and rates applicable
to the periods in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the tax
payable or refundable for the period, plus or minus the change during the period
in deferred tax assets and liabilities.
Deferred income taxes may arise from temporary differences resulting from income
and expense items reported for financial accounting and tax purposes in
different periods. Deferred taxes are classified as current or non-current,
depending on the classification of the assets and liabilities to which they
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DESCANSO AGENCY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS AT MARCH 31, 2008
NOTE 2 - NATURE OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
relate. Deferred taxes arising from temporary differences that are not related
to an asset or liability are classified as current or non-current depending on
the periods in which the temporary differences are expected to reverse. The
Company had no significant deferred tax items arise during any of the periods
presented.
CONCENTRATION OF CREDIT RISK
The Company does not have any concentration of related financial credit risk.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2006, the FASB issued Interpretation No. 48 ("FIN No 48"), ACCOUNTING
FOR UNCERTAINTY IN INCOME TAXES - an interpretation of FASB Statement 109, which
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with SFAS No. 109, ACCOUNTING
FOR INCOME TAXES: The Interpretation provides a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. Under FIN No. 48,
the Company may recognize the tax benefit from an uncertain tax position only if
it is more likely than not that the tax position will be sustained on
examination by the taxing authorities, based on the technical merits of the
position. The tax benefits recognized in the financial statements from such a
position should be measured based on the largest benefit that has a greater
likelihood of being realized upon ultimate settlement. FIN No. 48 also provides
guidance on de-recognition, classification, interest and penalties, accounting
in interim periods, disclosure, and transition. FIN No. 48 is effective for us
beginning July 1, 2007. We do not expect FIN No. 48 to have a material impact on
our financial statements.
In September 2006, the FASB issued SFAS No. 157, FAIR VALUE MEASUREMENTS, which
defines fair value, establishes a framework for measuring fair value generally
accepted accounting principles, and expands disclosures about fair value
measurements. SFAS No. 157 does not require any new fair value measurements, but
provides guidance on how to measure fair value by providing a fair value
hierarchy used to classify the source of the information. This statement is
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DESCANSO AGENCY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS AT MARCH 31, 2008
NOTE 2 - NATURE OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
effective for us beginning May 1, 2008. We are currently assessing the potential
impact that adoption of SFAS No. 157 would have on our financial statements.
In February 2007, the FASB issued SFAS No. 159, THE FAIR VALUE OPTION FOR
FINANCIAL ASSETS AND FINANCIAL LIABILITIES. SFAS No. 159 gives us the
irrevocable option to carry many financial assets and liabilities at fair
values, with changes in fair value recognized in earnings. SFAS No. 159 is
effective for us beginning July 1, 2008, although early adoption is permitted.
We are currently assessing the potential impact that adoption of SFAS No. 159
will have on our financial statement.
The FASB has replaced SFAS No. 141 with a new statement on Business Combinations
that changes the way minority interest is recorded and modified as a parent's
interest in a subsidiary changes. Currently, this will have no effect on our
financial statements.
NOTE 3 - COMMON STOCK
Transactions, other than employees' stock issuance, are in accordance with
paragraph 8 of SFAS 123. Thus issuances shall be accounted for based on the fair
value of the consideration received. Transactions with employees' stock issuance
are in accordance with paragraphs (16-44) of SFAS 123. These issuances shall be
accounted for based on the fair value of the consideration received or the fair
value of the equity instruments issued, or whichever is more readily
determinable.
On June 28, 2007 the Company issued 3,750,000 shares of common stock to the
Company's sole officer and director, for cash in the amount of $0.004 per share
for a total of $15,000.
On June 29, 2007 the Company sold 1,000,000 shares of its common stock at $0.004
per share to 2 independent investors for proceeds of $4,000.
On October 22, 2007 the Company's offering pursuant to the SB-2 Registration
Statement filed by the company on September 4, 2007, and declared effective on
September 17, 2007, was completed selling 4,500,000 shares to 36 un-affiliated
investors for total proceeds to the company of $18,000.
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DESCANSO AGENCY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS AT MARCH 31, 2008
NOTE 4 - RELATED PARTY TRANSACTIONS
The sole officer and director of the Company may, in the future, become involved
in other business opportunities as they become available, thus he may face a
conflict in selecting between the Company and his other business opportunities.
The Company has not formulated a policy for the resolution of such conflicts.
The director was not paid for any underwriting services that he performed on
behalf of the Company with respect to the Company's SB-2 offering. He will also
not receive any interest on any funds that he may advance to the Company for
offering expenses prior to the offering being closed which will be repaid from
the proceeds of the offering.
While the company is seeking additional capital, the president has advanced
funds to the company to pay for organizational costs incurred. These funds are
interest free with no specific terms of repayment. The balance due to the
president on March 31, 2008 was $2,090.
NOTE 5 - GOING CONCERN
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As shown in the accompanying financial
statements, the Company has no sales and has incurred a net loss of
$27,264 since inception. The future of the Company is dependent upon its ability
to obtain financing and upon future profitable operations form the development
of its travel agencies. The financial statements do not include any adjustments
relating to the recoverability and classifications of recorded assets, or the
amounts of and classification of liabilities that might be necessary in the
event the Company cannot continue in existence.
Management has raised funds through an equity offering pursuant to the Company's
SB-2 registration statement with the U.S. Securities and Exchange Commission.
There is no guarantee that the capital raised will be sufficient or that any
future offerings, if necessary, would be successful.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD-LOOKING STATEMENTS
Statements contained herein which are not historical facts are forward-looking
statements as that term is defined by the Private Securities Litigation Reform
Act of 1995. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, forward-looking statements are
subject to risks and uncertainties that could cause actual results to differ
from those projected. The Company cautions investors that any forward-looking
statements made by the Company are not guarantees of future performance and
actual results may differ materially from those in the forward-looking
statements. Such risks and uncertainties include, without limitation:
established competitors who have substantially greater financial resources and
operating histories, regulatory delays or denials, ability to compete as a
start-up company in a highly competitive market, and access to sources of
capital.
The following discussion and analysis should be read in conjunction with our
financial statements and notes thereto included elsewhere in this Form 10-Q.
Except for the historical information contained herein, the discussion in this
Form 10-Q contains certain forward-looking statements that involve risks and
uncertainties, such as statements of our plans, objectives, expectations and
intentions. The cautionary statements made in this Form 10-Q should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-Q. The Company's actual results could differ materially from
those discussed here.
BUSINESS
Our core business will be establishing a Mexican specialized travel service
company focusing on the fastest growing segment of the travel industry: wedding
and party destination travel. This type of destination travel is defined as
taking the common wedding or party and transporting the entire event and its
hosts and guests to a foreign location. Our specialty will include two types of
destination travelers: small and large travel parties seeking stimulating and
entertaining bachelor and bachelorette locations at larger hotels, and travelers
seeking quiet romantic weddings and holiday getaway short trips at small
boutique hotels. We plan to utilize the extensive operational background in the
travel business of Raul Getino, our founding principal and sole officer and
director, with over eighteen years experience in travel companies, in order to
complete this stage and expand our business plan. Our director has designed and
implemented marketing campaigns for other travel companies utilizing his
extensive knowledge in providing upscale weddings, and specialized romantic
getaways to boutique hotel destinations in Mexico. He has successfully marketed
these specialized wedding and romantic tour packages to travel companies and
wedding planners in Mexico and the United States prior to our incorporation.
During the next twelve months, we expect to take the following steps in
connection with the further development of our business and the implementation
of our plan of operations:
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STAGE I AND II - CORPORATE FORMATION, BUSINESS PLAN AND FUNDING
We have completed our first two structural and business Stages I and II. We
established our corporate existence, completed the required steps to become a
publicly held corporation, raised founder capital, raised investor capital, and
completed our business plan. Office space, equipment, and administrative
services were provided by our sole founding principal. No salaried employees
were engaged during this period. Our founding principal was the Company's only
officer, and he provided the resources to execute our plans in this phase of
operation. No salary was paid to the founding principal or any other employees
and will not be paid until Stage III of our planned development stages and cash
flow from operations allow it. We have completed our registration filings and
secured funding from our public offering.
STAGE III - RENT SPACE, HIRE EMPLOYEES, BEGIN MARKETING
During the next twelve months, we plan to implement our business plan in Stage
III by utilizing our capital to fund the following:
MONTHS 1 THROUGH 4
Pay a rent deposit for an office - $400, pay first director's fee -$300,
purchase furniture, equipment, and computer system - $4,500. Total $5,200.
MONTHS 5 THROUGH 8
Pay office rent - $1,200, pay director's fee - $1,200, begin Internet website
- -$500, begin marketing - $500. Total $3,400
MONTHS 9 THROUGH 12
Pay office rent - $1,200, pay director's fee - $1,200, pay contract travel
agents - $4,000, Internet website development and expense -$2,000, marketing
expense - $1,000. Total $9,400.
TWELVE MONTH TOTAL - $18,000
We expect to operate at a loss during our initial development/operating period.
For customer service and call in sales, we plan to utilize the services of our
founder and two contract agents who will be compensated on a contract basis from
any bookings created exclusively by the agent on an equal commission split. We
will provide our home-based agents with an 800 phone line and internet service
to access our website for sales to the agent's customers and be available to all
customers for customer service. Customer service is expected to be minimal
during this stage due to the automated nature of the website and the anticipated
low level of site usage.
LIQUIDITY AND CAPITAL RESOURCES
Our cash balance at March 31, 2008 was $11,826. Our general and administrative
expenses are expected to average less than $1,500 per month for the next 12
months.
13
We anticipate that our operational, and general & administrative expenses for
the next 12 months will total approximately $18,000. We do not anticipate the
purchase or sale of any significant equipment. We also do not expect any
significant changes in the number of employees; we plan to add two contract
staff personnel. At this time we have not entered into any agreements or
negotiations with a sales and marketing entity to undertake marketing for us.
The foregoing represents our best estimate of our cash needs based on current
planning and business conditions. The exact allocation, purposes and timing of
any expenditure may vary significantly depending upon our progress with the
execution of our business plan.
In the event we are not successful in reaching our initial revenue targets,
additional funds may be required, and we may not be able to proceed with our
business plan for the development and marketing of our core services. Should
this occur, we would likely seek additional financing to support the continued
operation of our business. We anticipate that depending on market conditions and
our plan of operations, we would incur operating losses in the foreseeable
future. We base this expectation, in part, on the fact that we may not be able
to generate enough gross profit from the sale of our travel products and
services to cover our operating expenses.
RESULTS OF OPERATIONS
We have generated no revenues since inception and have incurred $27,264 in
expenses through March 31, 2008.
The following table provides selected financial data about our company for the
year ended March 31, 2008.
Balance Sheet Data: 3/31/08
------------------- -------
Cash $11,826
Total assets $11,826
Total liabilities $ 2,090
Shareholders' equity $ 9,736
There was $39,090 cash provided by financing activities from inception through
March 31, 2008, this consisted of $15,000 from the sale of shares to our
director, $22,000 resulting from the sale of our common stock to 38 independent
investors and $2,090 in a loan from our director.
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 our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
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ITEM 4. CONTROLS AND PROCEDURES.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including
our principal executive officer and principal financial officer, we have
conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities and Exchange Act of 1934, as of the end of the period
covered by this report. Based on this evaluation, our principal executive
officer and principal financial officer concluded as of the evaluation date that
our disclosure controls and procedures were effective such that the material
information required to be included in our Securities and Exchange Commission
reports is recorded, processed, summarized and reported within the time periods
specified in SEC rules and forms relating to our company, particularly during
the period when this report was being prepared.
Additionally, there were no significant changes in our internal controls or in
other factors that could significantly affect these controls subsequent to the
evaluation date. We have not identified any significant deficiencies or material
weaknesses in our internal controls, and therefore there were no corrective
actions taken.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are not currently involved in any legal proceedings and we are not aware of
any pending or potential legal actions.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
There were no sales of unregistered securities during the period covered by this
report.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
There were no defaults upon senior securities during the period covered by this
report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during the period
covered by this report.
ITEM 5. OTHER INFORMATION.
There was no information required to be disclosed on Form 8-K during the period
covered by this report.
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ITEM 6. EXHIBITS.
The following exhibits are included with this quarterly filing. Those marked
with an asterisk and required to be filed hereunder, are incorporated by
reference and can be found in their entirety in our original Form SB-2
Registration Statement, filed under SEC File Number 333-145876, at the SEC
website at www.sec.gov:
Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation*
3.2 Bylaws*
31.1 Rule 13a-14(a)/15d-14(a) Certification
31.2 Rule 13a-14(a)/15d-14(a) Certification
32.1 Certification Pursuant to 18 U.S.C. 1350
SIGNATURES
Pursuant to the requirements 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.
April 28, 2008 Descanso Agency, Inc.
/s/ Raul Getino
------------------------------------------------
By: Raul Getino
(Chief Executive Officer, Chief Financial
Officer, Principal Accounting Officer,
President, Secretary, Treasurer & Sole Director)
16