UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended January 31, 2009
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to ____________
C.E. ENTERTAINMENT, INC.
(Exact name of registrant as specified in charter)
NEVADA 333-147199 98-0528416
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
601 UNION STREET TWO UNION SQUARE
42ND FLOOR
SEATTLE WA 98101
(Address of principal executive offices)
(206) 652-3382
(Registrant's Telephone Number, including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirement for
the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of March 16, 2009, 2,060,000 shares of the issuer's common stock, $0.001 par
value, were outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 3
Item 2. Management's Discussion and Analysis or Plan of Operation 16
Item 3. Quantitative and Qualitative Disclosures about Market Risk 18
Item 4. Controls and Procedures 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 19
Item 6. Exhibits 19
2
C.E. ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
INDEX TO INTERIM FINANCIAL STATEMENTS
JANUARY 31, 2009, AND 2008
(UNAUDITED)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Interim Financial Statements-
Balance Sheets as of January 31, 2009, and July 31, 2008 ............... 4
Statements of Operations for the Three and Six Months Ended
January 31, 2009, and 2008, and Cumulative from Inception ........... 5
Statements of Cash Flows for the Six Months Ended
January 31, 2009, and 2008, and Cumulative from Inception ........... 6
Notes to Interim Financial Statements January 31, 2009, and 2008 ....... 7
3
C.E. ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS (NOTE 2)
AS OF JANUARY 31, 2009, AND JULY 31, 2008
(Unaudited)
January 31, July 31,
2009 2008
-------- --------
ASSETS
CURRENT ASSETS:
Cash $ 2,799 $ 4,960
Prepaid expenses 1 301
-------- --------
Total current assets 2,800 5,261
-------- --------
PROPERTY AND EQUIPMENT:
Website software 5,100 5,100
Less - Accumulated amortization (2,408) (1,558)
-------- --------
Total property and equipment 2,692 3,542
-------- --------
TOTAL ASSETS $ 5,492 $ 8,803
======== ========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES:
Accounts payable - Trade $ 450 $ 7,328
Accrued liabilities 6,275 3,500
Due to related party - Former officer and shareholder 27,250 15,125
-------- --------
Total current liabilities 33,975 25,953
-------- --------
Total liabilities 33,975 25,953
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' (DEFICIT):
Common stock, par value $0.001 per share,
500,000,000 shares authorized; 2,060,000 shares
issued and outstanding in 2009 and 2008 2,060 2,060
Additional paid-in capital 48,940 48,940
(Deficit) accumulated during the development stage (79,483) (68,150)
-------- --------
Total stockholders' (deficit) (28,483) (17,150)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $ 5,492 $ 8,803
======== ========
The accompanying notes to financial statements
are an integral part of these balance sheets.
4
C.E. ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS (NOTE 2) (RESTATED)
FOR THE THREE AND SIX MONTHS ENDED JANUARY 31, 2009, AND 2008,
AND CUMULATIVE FROM INCEPTION (JANUARY 30, 2007) THROUGH JANUARY 31, 2009
(Unaudited)
Three Months Ended Six Months Ended
January 31, January 31, Cumulative
--------------------------- --------------------------- From
2009 2008 2009 2008 Inception
----------- ----------- ----------- ----------- -----------
(Restated) (Restated)
Revenues $ -- $ -- $ -- $ -- $ --
----------- ----------- ----------- ----------- -----------
EXPENSES:
General and administrative -
Legal fees 2,775 10,000 3,775 10,000 27,113
Audit fees 2,000 1,500 3,500 2,750 15,000
Transfer agent fees 300 5,000 651 5,000 12,979
Consulting fees -- -- -- 6,000 7,500
Filing fees -- 2,182 1,158 2,257 4,119
Internet web hosting and research -- -- -- 3,900 3,900
Office rent 941 525 1,399 1,050 4,589
Amortization 425 425 850 708 2,408
Organization costs -- -- -- -- 1,000
Bank fees -- 60 -- 110 875
----------- ----------- ----------- ----------- -----------
Total general and administrative expenses 6,441 19,692 11,333 31,775 79,483
----------- ----------- ----------- ----------- -----------
(LOSS) FROM OPERATIONS (6,441) (19,692) (11,333) (31,775) (79,483)
OTHER INCOME (EXPENSE) -- -- -- -- --
PROVISION FOR INCOME TAXES -- -- -- -- --
----------- ----------- ----------- ----------- -----------
NET (LOSS) $ (6,441) $ (19,692) $ (11,333) $ (31,775) $ (79,483)
=========== =========== =========== =========== ===========
(LOSS) PER COMMON SHARE:
(Loss) per common share - Basic and Diluted $ (0.00) $ (0.01) $ (0.01) $ (0.02)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - BASIC AND DILUTED 2,060,000 2,060,000 2,060,000 2,060,000
=========== =========== =========== ===========
The accompanying notes to financial statements are
an integral part of these statements.
5
C.E. ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (NOTE 2) (RESTATED)
FOR THE SIX MONTHS ENDED JANUARY 31, 2009, AND 2008,
AND CUMULATIVE FROM INCEPTION (JANUARY 30, 2007) THROUGH JANUARY 31, 2009
(Unaudited)
Six Months Ended
January 31, Cumulative
--------------------------- From
2009 2008 Inception
-------- -------- ---------
(Restated)
OPERATING ACTIVITIES:
Net (loss) $(11,333) $(31,775) $(79,483)
Adjustments to reconcile net (loss) to net
cash (used in) operating activities:
Amortization 850 708 2,408
Changes in assets and liabiliites-
Prepaid expenses 300 1,050 (1)
Accounts payable - Trade (6,878) -- 450
Accured liabilities 2,775 (10,750) 6,275
-------- -------- --------
NET CASH (USED IN) OPERATING ACTIVITIES (14,286) (40,767) (70,351)
-------- -------- --------
INVESTING ACTIVITIES:
Web site software development costs -- (5,100) (5,100)
-------- -------- --------
NET CASH (USED IN) INVESTING ACTIVITIES -- (5,100) (5,100)
-------- -------- --------
FINANCING ACTIVITIES:
Issuance of common stock for cash -- -- 51,000
Due to related party - Former officer and shareholder 12,125 -- 27,250
-------- -------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 12,125 -- 78,250
-------- -------- --------
NET INCREASE (DECREASE) IN CASH (2,161) (45,867) 2,799
CASH - BEGINNING OF PERIOD 4,960 46,824 --
-------- -------- --------
CASH - END OF PERIOD $ 2,799 $ 957 $ 2,799
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ -- $ -- $ --
======== ======== ========
Income taxes $ -- $ -- $ --
======== ======== ========
The accompanying notes to financial statements are
an integral part of these statements.
6
C.E. ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
JANUARY 31, 2009, AND 2008
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL ORGANIZATION AND BUSINESS
C.E. Entertainment, Inc. ("C.E. Entertainment" or the "Company") is a Nevada
corporation in the development stage. The Company was incorporated under the
laws of the State of Nevada on January 30, 2007. C.E. Entertainment is engaged
in the sales and marketing of Ukrainian classical music. The Company is in the
process of developing a compact disc of original Ukrainian titles, including
symphony and folk music, for worldwide distribution. The accompanying financial
statements of C.E. Entertainment were prepared from the accounts of the Company
under the accrual basis of accounting.
In addition, in February 2007, the Company commenced a capital formation
activity through a Private Placement Offering ("PPO"), exempt from registration
under the Securities Act of 1933, to raise up to $38,000 through the issuance
760,000 shares of its common stock, par value $0.001 per share, at an offering
price of $0.05 per share. As of March 31, 2007, the Company closed the PPO and
received proceeds of $38,000. The Company also commenced an activity to effect a
Registration Statement on Form SB-2 with the Securities and Exchange Commission
to register 760,000 shares of its outstanding shares of common stock on behalf
of selling stockholders. The Registration Statement on Form SB-2 was filed with
the SEC on November 7, 2007, and declared effective on November 20, 2007. The
Company will not receive any of the proceeds of this registration activity once
the shares of common stock are sold.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The interim financial statements of C.E. Entertainment as of January 31, 2009,
and July 31, 2008, and for the three and six months ended January 31, 2009, and
2008, and cumulative from inception, are unaudited. However, in the opinion of
management, the interim financial statements include all adjustments, consisting
only of normal recurring adjustments, necessary to present fairly the Company's
financial position as of January 31, 2009, and July 31, 2008, and the results of
its operations and its cash flows for the three and six months ended January 31,
2009, and 2008, and cumulative from inception. These results are not necessarily
indicative of the results expected for the fiscal year ending July 31, 2009. The
accompanying financial statements and notes thereto do not reflect all
disclosures required under accounting principles generally accepted in the
United States of America. Refer to the Company's audited financial statements as
of July 31, 2008, filed with the SEC for additional information, including
significant accounting policies.
RESTATEMENT OF FISCAL 2008 FINANCIAL STATEMENTS
During fiscal year 2009, the management of the Company determined that under
Emerging Issues Taskforce Statement 00-2, "ACCOUNTING FOR WEB SITE DEVELOPMENT
COSTS," costs and expenses incurred in fiscal 2008 related to website
development in the amount of $5,100 were erroneously expensed during the six
7
C.E. ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
JANUARY 31, 2009, AND 2008
(UNAUDITED)
months ended January 31, 2008. The accompanying Statements of Operations and
Cash Flows for the six months ended January 31, 2008, have been restated to
correct the error, which resulted in the capitalization of $5,100 in website
development costs, and the recognition of $708 in amortization expense. The
decrease in the net loss for the six months ended January 31, 2008, amounted to
$4,392, which had a nominal impact on loss per share - basic and diluted.
CASH AND CASH EQUIVALENTS
For purposes of reporting within the statement of cash flows, the Company
considers all cash on hand, cash accounts not subject to withdrawal restrictions
or penalties, and all highly liquid debt instruments purchased with a maturity
of three months or less to be cash and cash equivalents.
REVENUE RECOGNITION
The Company is in the development stage and has yet to realize revenues from
operations. Once the Company has commenced operations, it will recognize
revenues when delivery of goods or completion of services has occurred; provided
there is persuasive evidence of an agreement, acceptance has been approved by
its customers, the fee is fixed or determinable based on the completion of
stated terms and conditions, and collection of any related receivable is
probable.
INTERNAL WEB SITE DEVELOPMENT COSTS
Under Emerging Issues Taskforce Statement 00-2, "ACCOUNTING FOR WEB SITE
DEVELOPMENT COSTS" ("EITF 00-2"), costs and expenses incurred during the
planning and operating stages of the Company's web site are expensed as
incurred. Under EITF 00-2, costs incurred in the web site application and
infrastructure development stages are capitalized by the Company and amortized
to expense over the web site's estimated useful life or period of benefit. As of
January 31, 2009, the Company had capitalized $5,100 (July 31, 2008 - $5,100)
and recorded $2,408 (July 31, 2008 - $1,558) in accumulated amortization related
to its internal-use web site development.
COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE
Under Statement of Position 98-1, "ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE
DEVELOPED OR OBTAINED FOR INTERNAL USE" ("SOP 98-1"), the Company capitalizes
external direct costs of materials and services consumed in developing or
obtained internal-use computer software; payroll and payroll-related costs for
employees who are directly associated with and who devote time to the
internal-use computer software project; and, interest costs related to loans
incurred for the development of internal-use software. As of January 31, 2009,
and July 31, 2008, the Company had not undertaken any projects related to the
development of internal-use software.
8
C.E. ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
JANUARY 31, 2009, AND 2008
(UNAUDITED)
COSTS OF COMPUTER SOFTWARE TO BE SOLD OR OTHERWISE MARKETED
Under Statement of Financial Accounting Standards No. 86, "ACCOUNTING FOR THE
COSTS OF COMPUTER SOFTWARE TO BE SOLD, LEASED, OR OTHERWISE MARKETED" ("SFAS No.
86"), the Company capitalizes costs associated with the development of certain
training software products held for sale when technological feasibility is
established. Capitalized computer software costs of products held for sale are
amortized over the useful life of the products from the software release date.
As of January 31, 2009, and July 31, 2008, the Company had not undertaken any
projects related to the development of software products held for sale or to be
otherwise marketed.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates the recoverability of long-lived assets and the related
estimated remaining lives at each balance sheet date. The Company records an
impairment or change in useful life whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable or the useful life has
changed. For the three and six months ended January 31, 2009, and 2008, no
events or circumstances occurred for which an evaluation of the recoverability
of long-lived assets was required.
LOSS PER COMMON SHARE
Basic loss per share is computed by dividing the net loss attributable to the
common stockholders by the weighted average number of shares of common stock
outstanding during the period. Fully diluted loss per share is computed similar
to basic loss per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the
potential common shares had been issued and if the additional common shares were
dilutive. There were no dilutive financial instruments issued or outstanding for
the three and six months ended January 31, 2009, and 2008.
INCOME TAXES
The Company accounts for income taxes pursuant to SFAS No. 109, "ACCOUNTING FOR
INCOME TAXES" ("SFAS No. 109"). Under SFAS 109, deferred tax assets and
liabilities are determined based on temporary differences between the basis of
certain assets and liabilities for income tax and financial reporting purposes.
The deferred tax assets and liabilities are classified according to the
financial statement classification of the assets and liabilities generating the
differences.
The Company maintains a valuation allowance with respect to deferred tax assets.
The Company establishes a valuation allowance based upon the potential
likelihood of realizing the deferred tax asset and taking into consideration the
Company's financial position and results of operations for the current period.
Future realization of the deferred tax benefit depends on the existence of
sufficient taxable income within the carryforward period under the Federal tax
laws.
9
C.E. ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
JANUARY 31, 2009, AND 2008
(UNAUDITED)
Changes in circumstances, such as the Company generating taxable income, could
cause a change in judgment about the realizability of the related deferred tax
asset. Any change in the valuation allowance will be included in income in the
year of the change in estimate.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company estimates the fair value of financial instruments using the
available market information and valuation methods. Considerable judgment is
required in estimating fair value. Accordingly, the estimates of fair value may
not be indicative of the amounts the Company could realize in a current market
exchange. As of January 31, 2009, and July 31, 2008, the carrying value of the
Company's financial instruments approximated fair value due to the short-term
nature and maturity of these instruments.
DEFERRED OFFERING COSTS
The Company defers as other assets the direct incremental costs of raising
capital until such time as the offering is completed. At the time of the
completion of the offering, the costs are charged against the capital raised.
Should the offering be terminated, deferred offering costs are charged to
operations during the period in which the offering is terminated.
COMMON STOCK REGISTRATION EXPENSES
The Company considers incremental costs and expenses related to the registration
of equity securities with the SEC, whether by contractual arrangement as of a
certain date or by demand, to be unrelated to original issuance transactions. As
such, subsequent registration costs and expenses are reflected in the
accompanying financial statements as general and administrative expenses and are
expensed as incurred.
ESTIMATES
The financial statements are prepared on the basis of accounting principles
generally accepted in the United States of America. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities as of January 31, 2009, and July 31, 2008, and expenses
for the three and six months ended January 31, 2009, and 2008, and cumulative
from inception. Actual results could differ from those estimates made by
management.
(2) DEVELOPMENT STAGE ACTIVITIES AND GOING CONCERN
C.E. Entertainment is currently in the development stage, and has limited
operations. The business plan of C.E. Entertainment is to sell and market
classical Ukrainian music through an online internet store.
10
C.E. ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
JANUARY 31, 2009, AND 2008
(UNAUDITED)
During the period from January 30, 2007, through January 31, 2009, C.E.
Entertainment was organized and incorporated, received initial working capital
through the issuance of common stock to Directors and officers at par value for
cash proceeds of $13,000, and completed a capital formation activity to raise up
to $38,000 from the sale of 760,000 shares of common stock through a PPO to
various stockholders. On November 7, 2007, C.E. Entertainment filed a
Registration Statement on Form SB-2 with the SEC to register 760,000 shares of
its common stock for selling stockholders. The Registration Statement was
declared effective by the SEC on November 20, 2007. C.E. Entertainment will not
receive any of the proceeds of this registration activity once the shares of
common stock are sold. C.E. Entertainment also intends to conduct additional
capital formation activities through the issuance of its common stock and to
commence operations.
While management of C.E. Entertainment believes that it will be successful in
its capital formation and planned operating activities, there can be no
assurance that the Company will be able to raise additional equity capital, or
be successful in the development and sale of its planned product, or will be
able to generate sufficient revenues to sustain its operations.
The accompanying financial statements have been prepared in conformity with
accounting principals generally accepted in the United States of America, which
contemplate continuation of C.E. Entertainment as a going concern. C.E.
Entertainment has incurred an operating loss since inception and the cash
resources of the Company are insufficient to meet its planned business
objectives. These and other factors raise substantial doubt about C.E.
Entertainment's ability to continue as a going concern. The accompanying
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
C.E. Entertainment to continue as a going concern.
(3) CHANGE IN MANAGEMENT
On September 9, 2008, Mr. Daschko resigned as the Company's President and
Director. On the same date, the Company appointed Mr. Hornostai to the office of
President and Mr. Ruzhytskiy as a member of the Board of Directors. Mr. Daschko
also sold his interest in the Company of 600,000 shares of common stock to Mr.
Ruzhytskiy which resulted in a change of beneficial ownership in securities.
(4) LOAN FROM FORMER DIRECTOR AND STOCKHOLDER
As of January 31, 2009, a loan from an individual who is a former Director,
president, and stockholder of the Company amounted to $27,250 (July 31, 2008 -
$15,125). The loan was provided for working capital purposes, and is unsecured,
non-interest bearing, and has no terms for repayment.
11
C.E. ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
JANUARY 31, 2009, AND 2008
(UNAUDITED)
(5) COMMON STOCK
On January 30, 2007, C.E. Entertainment issued 1,300,000 shares of common stock
valued at a price of $0.01 per share to Directors and officers for cash proceeds
of $13,000 (See Note 7).
In February 2007, C.E. Entertainment commenced a capital formation activity
through a PPO, exempt from registration under the Securities Act of 1933, to
raise up to $38,000 through the issuance 760,000 shares of its common stock, par
value $0.001 per share, at an offering price of $0.05 per share. As of March 31,
2007, C.E. Entertainment fully subscribed the PPO, and received proceeds of
$38,000. C.E. Entertainment accepted subscriptions from 38 foreign,
non-affiliated investors.
In addition, on November 7, 2007, C.E. Entertainment filed a Registration
Statement on Form SB-2 with the SEC to register 760,000 shares of its common
stock for selling stockholders. The Registration Statement was declared
effective by the SEC on November 20, 2007. C.E. Entertainment will not receive
any of the proceeds of this registration activity once the shares of common
stock are sold. The Company also intends to conduct additional capital formation
activities through the issuance of its common stock and to commence operations.
(6) INCOME TAXES
The provision (benefit) for income taxes for the six months ended January 31,
2009, and 2008, were as follows (assuming a 15% effective tax rate):
Six Months Ended
January 31,
--------------------------
2009 2008
------- -------
Current Tax Provision:
Federal-
Taxable income $ -- $ --
------- -------
Total current tax provision $ -- $ --
======= =======
Deferred Tax Provision:
Federal-
Loss carryforwards $ 1,700 $ 4,766
Change in valuation allowance (1,700) (4,766)
------- -------
Total deferred tax provision $ -- $ --
======= =======
12
C.E. ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
JANUARY 31, 2009, AND 2008
(UNAUDITED)
The Company had deferred income tax assets as of January 31, 2009, and July 31,
2008, as follows:
January 31, July 31,
2008 2008
-------- --------
Loss carryforwards $ 11,922 $ 10,222
Less - Valuation allowance (11,922) (10,222)
-------- --------
Total net deferred tax assets $ -- $ --
======== ========
The Company provided a valuation allowance equal to the deferred income tax
assets for the six months ended January 31, 2009, and 2008, because it is not
presently known whether future taxable income will be sufficient to utilize the
loss carryforwards.
As of January 31, 2009, and July 31, 2008, the Company had approximately
$79,483, and $68,150, respectively, in tax loss carryforwards that can be
utilized in future periods to reduce taxable income, and will begin to expire in
the year 2027.
(7) RELATED PARTY TRANSACTIONS
As described in Note 5, in January 2007, C.E. Entertainment issued 1,300,000
shares of common stock to Directors and officers of the Company for cash
proceeds of $13,000. As described in Note 3, on September 9, 2008, Mr. Daschko
resigned from the positions of President and Director. Mr. Daschko also sold his
interest in the Company of 600,000 shares of common stock to the newly appointed
Director and officer of the Company.
As described in Note 4, as of January 31, 2009, the Company owed $27,250 to an
individual who is a former Director, president, and stockholder of the Company.
(8) RECENT ACCOUNTING PRONOUNCEMENTS
In March 2008, the FASB issued FASB Statement No. 161, "DISCLOSURES ABOUT
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - AN AMENDMENT OF FASB STATEMENT
133" ("SFAS No. 161"). SFAS No. 161 enhances required disclosures regarding
derivatives and hedging activities, including enhanced disclosures regarding
how: (a) an entity uses derivative instruments; (b) derivative instruments and
related hedged items are accounted for under FASB No. 133, "ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES"; and (c) derivative instruments
and related hedged items affect an entity's financial position, financial
performance, and cash flows. Specifically, SFAS No. 161 requires:
- disclosure of the objectives for using derivative instruments be
disclosed in terms of underlying risk and accounting designation;
- disclosure of the fair values of derivative instruments and their
gains and losses in a tabular format;
- disclosure of information about credit-risk-related contingent
features; and
13
C.E. ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
JANUARY 31, 2009, AND 2008
(UNAUDITED)
- cross-reference from the derivative footnote to other footnotes in
which derivative-related information is disclosed.
SFAS No. 161 is effective for fiscal years and interim periods beginning after
November 15, 2008. Earlier application is encouraged. The management of C.E.
Entertainment does not expect the adoption of this pronouncement to have a
material impact on its financial statements.
In May 2008, the FASB issued FASB Statement No. 162, "THE HIERARCHY OF GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES" ("SFAS No. 162"). SFAS No. 162 is intended to
improve financial reporting by identifying a consistent framework, or hierarchy,
for selecting accounting principles to be used in preparing financial statements
that are presented in conformity with U.S. generally accepted accounting
principles ("GAAP") for nongovernmental entities.
Prior to the issuance of SFAS No. 162, GAAP hierarchy was defined in the
American Institute of Certified Public Accountants ("AICPA") Statement on
Auditing Standards ("SAS") No. 69, "THE MEANING OF PRESENT FAIRLY IN CONFORMITY
WITH GENERALLY ACCEPT ACCOUNTING PRINCIPLES." SAS No. 69 has been criticized
because it is directed to the auditor rather than the entity. SFAS No. 162
addresses these issues by establishing that the GAAP hierarchy should be
directed to entities because it is the entity (not the auditor) that is
responsible for selecting accounting principles for financial statements that
are presented in conformity with GAAP.
The sources of accounting principles that are generally accepted are categorized
in descending order as follows:
a) FASB Statements of Financial Accounting Standards and Interpretations,
FASB Statement 133 Implementation Issues, FASB Staff Positions, and
American Institute of Certified Public Accountants (AICPA) Accounting
Research Bulletins and Accounting Principles Board Opinions that are
not superseded by actions of the FASB.
b) FASB Technical Bulletins and, if cleared by the FASB, AICPA Industry
Audit and Accounting Guides and Statements of Position.
c) AICPA Accounting Standards Executive Committee Practice Bulletins that
have been cleared by the FASB, consensus positions of the FASB
Emerging Issues Task Force (EITF), and the Topics discussed in
Appendix D of EITF Abstracts (EITF D-Topics).
d) Implementation guides (Q&As) published by the FASB staff, AICPA
Accounting Interpretations, AICPA Industry Audit and Accounting Guides
and Statements of Position not cleared by the FASB, and practices that
are widely recognized and prevalent either generally or in the
industry.
14
C.E. ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
JANUARY 31, 2009, AND 2008
(UNAUDITED)
SFAS No. 162 is effective 60 days following the SEC's approval of the Public
Company Accounting Oversight Board amendment to its authoritative literature. It
is only effective for nongovernmental entities; therefore, the GAAP hierarchy
will remain in SAS 69 for state and local governmental entities and federal
governmental entities. The management of C.E. Entertainment does not expect the
adoption of this pronouncement to have a material impact on its financial
statements.
In May 2008, the FASB issued FASB Statement No. 163, "ACCOUNTING FOR FINANCIAL
GUARANTEE INSURANCE CONTRACTS" ("SFAS No. 163"). SFAS No. 163 clarifies how FASB
Statement No. 60, "ACCOUNTING AND REPORTING BY INSURANCE ENTERPRISES" ("SFAS No.
60"), applies to financial guarantee insurance contracts issued by insurance
enterprises, including the recognition and measurement of premium revenue and
claim liabilities. It also requires expanded disclosures about financial
guarantee insurance contracts.
The accounting and disclosure requirements of SFAS No. 163 are intended to
improve the comparability and quality of information provided to users of
financial statements by creating consistency. Diversity exists in practice in
accounting for financial guarantee insurance contracts by insurance enterprises
under SFAS No. 60, "ACCOUNTING AND REPORTING BY INSURANCE ENTERPRISES." That
diversity results in inconsistencies in the recognition and measurement of claim
liabilities because of differing views about when a loss has been incurred under
FASB Statement No. 5, "ACCOUNTING FOR CONTINGENCIES" ("SFAS No. 5"). SFAS No.
163 requires that an insurance enterprise recognize a claim liability prior to
an event of default when there is evidence that credit deterioration has
occurred in an insured financial obligation. It also requires disclosure about
(a) the risk-management activities used by an insurance enterprise to evaluate
credit deterioration in its insured financial obligations and (b) the insurance
enterprise's surveillance or watch list.
SFAS No. 163 is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and all interim periods within those fiscal
years, except for disclosures about the insurance enterprise's risk-management
activities. Disclosures about the insurance enterprise's risk-management
activities are effective the first period beginning after issuance of SFAS No.
163. Except for those disclosures, earlier application is not permitted. The
management of C.E. Entertainment does not expect the adoption of this
pronouncement to have material impact on its financial statements.
(9) COMMITMENTS AND CONTINGENCIES
The Company currently has an operating lease commitment for office space with an
unrelated party. The monthly lease rate is $214 plus miscellaneous fees. As of
January 31, 2009, and July 31, 2008, the Company had prepaid rent of $1 and
$301, respectively. For the six months ended January 31, 2009, and 2008, the
Company recorded rent expense of $1,399, and $1,050, respectively.
15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This report on Form 10-Q contains forward-looking statements that involve risks
and uncertainties. You should not place undue reliance on these forward-looking
statements. Our actual results could differ materially from those anticipated in
the forward-looking statements for many reasons, including the risks described
in this report, our Registration Statement on Form SB-2 and other filings we
make from time to time with the Securities and Exchange Commission. Although we
believe the expectations reflected in the forward-looking statements are
reasonable, they relate only to events as of the date on which the statements
are made. We do not intend to update any of the forward-looking statements after
the date of this report to conform these statements to actual results or to
changes in our expectations, except as required by law.
This discussion and analysis should be read in conjunction with the unaudited
interim financial statements and notes thereto included in this Report and the
audited financials in our Annual Report on Form 10-KSB for the year ended July
31, 2008 filed with the Securities and Exchange Commission.
OVERVIEW
We are a development stage company with limited operations and no revenues from
our business activities. Our auditors have issued a going concern opinion. This
means that our registered independent auditors believe there is substantial
doubt that we can continue as an on-going business for the next twelve months.
We do not anticipate that we will generate significant revenues until we have
developed our interactive web site, created an online inventory of music CDs,
and are able to offer music tracks for sale in downloadable fashion.
Accordingly, we must raise cash from sources other than our operations in order
to implement our sales and marketing plan.
In our management's opinion this is a good time to take advantage of the
popularity of classical music and the distribution platform afforded by the
Internet. However, if we are unable to procure the necessary funding to complete
our website development and market our online music store, or if we are unable
to generate revenues in the future for any reason, or if we are unable to make a
reasonable profit in the future, we may have to suspend or cease operations
unless we are able to raise additional capital. At the present time, we have not
made any arrangements to raise additional cash.
On September 9, 2008, Mr. George Daschko resigned from the Board of Directors
and as the Company's President. Simultaneously, Mr. Alexander Hornostai, the
Registrant's current Secretary, Treasurer and Chief Financial Officer was
appointed the Registrant's President, and Mr. Dmitriy Ruzhytskiy was appointed
as member of the Board of Directors to fill the vacancy created by the
resignation of Mr. George Daschko.
PLAN OF OPERATION
Our specific goal is to outsource the development of our website and to launch
our marketing plan. Initially, we plan to commence marketing of our online music
store using the Google CPC advertising program.
We will also distribute our online inventory of music CDs through our website
and third party websites that sell complementary classical music. Third party
websites will be compensated at predetermined commission rates for their sales
of our music products.
RESULTS OF OPERATIONS
NET INCOME (LOSS)
Our net loss for the three and six months ended January 31, 2009, was $6,441 and
$11,333, respectively. During the period from January 30, 2007 (date of
inception), through January 31, 2009, we incurred a net loss of $79,483. This
loss consisted primarily of incorporation costs, legal and accounting fees,
16
transfer agent fees, consulting fees, filing fees, website hosting costs, and
administrative expenses. Since inception, we have sold 2,060,000 shares of
common stock.
EXPENSES
Our expenses for the three and six month periods ended January 31, 2009, were
$6,441 and $11,333, respectively. During the period from January 30, 2007 (date
of inception), through January 31, 2009, we incurred expenses of $79,483. These
expenses were comprised primarily of general and administrative, and legal and
accounting expenses, as well as banking fees.
LIQUIDITY AND CAPITAL RESOURCES
Our balance sheet as of January 31, 2009, reflects assets of $5,492. Cash and
cash equivalents from inception to date have been insufficient to provide the
working capital necessary to operate to date.
We anticipate generating losses and, therefore, may be unable to continue
operations in the future. If we require additional capital, we would have to
issue debt or equity or enter into a strategic arrangement with a third party.
There can be no assurance that additional capital will be available to us. We
currently have no agreements, arrangements, or understandings with any person to
obtain funds through bank loans, lines of credit, or any other sources.
GOING CONCERN CONSIDERATION
Our registered independent auditors included an explanatory paragraph in their
report on our financial statements as of and for the period ended July 31, 2008,
regarding concerns about our ability to continue as a going concern. Our interim
financial statements as of and for the period ended January 31, 2009, contain
additional note disclosures describing the circumstances that lead to this
disclosure by our registered independent auditors.
Due to this doubt about our ability to continue as a going concern, management
is open to new business opportunities which may prove more profitable to the
shareholders of C.E. Entertainment. Historically, we have been able to raise a
limited amount of capital through private placements of our equity stock, but we
are uncertain about our continued ability to raise funds privately. Further, we
believe that our company may have difficulties raising capital until we locate a
prospective business opportunity through which we can pursue our plan of
operation. If we are unable to secure adequate capital to continue our
acquisition efforts, our business may fail and our stockholders may lose some or
all of their investment.
Should our original business plan fail, we anticipate that the selection of a
business opportunity in which to participate will be complex and without
certainty of success. Management believes that there are numerous firms in
various industries seeking the perceived benefits of being a publicly registered
corporation. Business opportunities may be available in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex. We can provide no assurance that we will be
able to locate compatible business opportunities.
PURCHASE OR SALE OF EQUIPMENT
We do not expect to purchase or sell any plant or significant equipment.
REVENUES
We had no revenues for the period from January 30, 2007 (date of inception)
through January 31, 2009.
17
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements.
ITEM 3. QUANITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 4. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES:
Our management evaluated, with the participation of our Chief Executive Officer
and Chief Financial Officer, the effectiveness of the design and operation of
our disclosure controls and procedures as of the end of the period covered by
this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief
Executive Officer and our Chief Financial Officer have concluded that our
disclosure controls and procedures are effective to ensure that information we
are required to disclose in reports that we file or submit under the Securities
Exchange Act of 1934 (i) is recorded, processed, summarized and reported within
the time periods specified in Securities and Exchange Commission rules and
forms, and (ii) is accumulated and communicated to our management, including our
Chief Executive Officer and our Chief Financial Officer, as appropriate, to
allow timely decisions regarding required disclosure. Our disclosure controls
and procedures are designed to provide reasonable assurance that such
information is accumulated and communicated to our management. Our disclosure
controls and procedures include components of our internal control over
financial reporting. Management's assessment of the effectiveness of our
internal control over financial reporting is expressed at the level of
reasonable assurance that the control system, no matter how well designed and
operated, can provide only reasonable, but not absolute, assurance that the
control system's objectives will be met.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING:
There were no changes in our internal control over financial reporting that
occurred during our last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We may be involved from time to time in ordinary litigation, negotiation and
settlement matters that will not have a material effect on our operations or
finances. We are not aware of any pending or threatened litigation against us or
our officers and directors in their capacity as such that could have a material
impact on our operations or finances.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
18
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS
Exhibit
Number Description
------ -----------
3.1 Articles of Incorporation (included as Exhibit 3.1 to the Form
SB-2 filed November 7, 2007, and incorporated herein by
reference).
3.2 By-laws (included as Exhibit 3.2 to the Form SB-2 filed November
7, 2007, and incorporated herein by reference).
31 Certification of the Chief Executive and Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 Certification of Officers pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
19
SIGNATURE
In accordance with the requirements of the Securities Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
C.E. ENTERTAINMENT, INC.
Date: March 16, 2009 By: /s/ Alexander Hornostai
-------------------------------------------------
Name: Alexander Hornostai
Title: President, Treasurer, Secretary, and Director
In accordance with the requirements of the Securities Act of 1933, this
Registration statement was signed by the following persons in the capacities and
on the dates stated:
Date: March 16, 2009 /s/ Alexander Hornostai
---------------------------------------------
Name: Alexander Hornostai
Title: President, Treasurer, Secretary, and Director
(Principal Executive and Financial Officer)
20