UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended October 31, 2013
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________ to _________
000-52929
(Commission File Number)
Guar Global Ltd.
(Exact name of registrant as specified in charter)
Nevada 98-0540833
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
407 E. Louisiana Street, Suite 104, McKinney Texas 75069
(Address of principal executive offices)
(214) 380-9677
(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 has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). 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. See
definitions of "larger accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
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 [ ] No [X]
As of December 13, 2013, 59,000,000 shares of the issuer's common stock, $0.0001
par value, were outstanding.
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 22
Item 3. Quantitative and Qualitative Disclosures About Market Risk 25
Item 4. Controls and Procedures 25
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 1A. Risk Factors 26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 26
Item 3. Defaults Upon Senior Securities 26
Item 4. Mine Safety Disclosures 27
Item 5. Other Information 27
Item 6. Exhibits 27
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Guar Global Ltd.
(A Development Stage Company)
Consolidated Balance Sheets
October 31, 2013 July 31, 2013
---------------- -------------
(Unaudited)
ASSETS
Current assets
Cash $ 51,736 $ 45,289
Prepaid expenses 11,425 11,224
Prepaid harvest 28,656 28,999
Prepaid land lease 30,703 49,712
Crop cultivation 41,268 4,990
---------- ----------
Total current assets 163,788 140,214
---------- ----------
Goodwill 30,675 30,675
---------- ----------
TOTAL ASSETS $ 194,463 $ 170,889
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued liablities $ 42,333 $ 40,600
Interest payable 45,159 26,545
Advances payable 76,815 76,815
Convertible notes payable 795,000 595,000
---------- ----------
Total current liabilities 959,307 738,960
---------- ----------
Total Liabilities 959,307 738,960
---------- ----------
Stockholders' deficit
Preferred stock par value $0.0001: 25,000,000 shares authorized;
none issued or outstanding -- --
Common stock par value $0.0001: 300,000,000 shares authorized;
59,000,000 shares issued and outstanding 5,900 5,900
Additional paid-in capital 42,600 42,600
Deficit accumulated during the development stage (811,984) (616,571)
Accumulated other comprehensive income (loss)
Foreign currency translation gain (loss) (1,360) --
---------- ----------
Total stockholders' deficit (764,844) (568,071)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 194,463 $ 170,889
========== ==========
See accompanying notes to the consolidated financial statements.
3
Guar Global Ltd.
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
For the Period from
Three Months Three Months May 29, 2007
Ended Ended (inception) through
October 31, 2013 October 31, 2012 October 31, 2013
---------------- ---------------- ----------------
Revenues $ -- $ -- $ --
------------ ------------ ------------
Operating expenses
Professional fees 39,913 3,955 262,998
Consulting 99,415 -- 211,320
Travel expense 5,868 -- 61,699
Amortization 17,954 -- 17,954
General and administrative 13,649 1,133 87,559
------------ ------------ ------------
Total operating expenses 176,799 5,088 641,530
------------ ------------ ------------
Loss from operations (176,799) (5,088) (641,530)
------------ ------------ ------------
Other (income) expense
Other income -- -- (7,450)
Foreign currency transaction (gain) loss -- -- 16,535
Interest expense 18,614 -- 45,159
Loss from failed venture -- -- 116,210
------------ ------------ ------------
Other (income) expense, net 18,614 -- 170,454
------------ ------------ ------------
Loss before income tax provision (195,413) (5,088) (811,984)
Income tax provision -- -- --
------------ ------------ ------------
Net loss $ (195,413) $ (5,088) $ (811,984)
============ ============ ============
Net loss per common share:
- Basic and diluted $ (0.00) $ (0.00)
============ ============
Weighted average common shares outstanding
- basic and diluted 59,000,000 73,200,000
============ ============
See accompanying notes to the consolidated financial statements.
4
Guar Global Ltd.
(A Development Stage Company)
Consolidated Statement of Stockholders' Equity (Deficit)
For the Period from May 29, 2007 (Inception) through October 31, 2013
(Unaudited)
Accumulated Other
Comprehensive
income (loss)
Common Stock, Deficit --------------
$0.0001 Par Value Accumulated Foreign Total
---------------------- Additional during the Currency Stockholders'
Number of paid-in Development Translation Equity
Shares Amount Capital Stage gain (loss) (Deficit)
------ ------ ------- ----- ----------- ---------
Balance, May 29, 2007 (inception) -- $ -- $ -- $ -- $ -- $ --
Shares issued for cash at $0.0003
per share on August 1, 2008 48,000,000 4,800 15,200 20,000
Net loss (1,999) -- (1,999)
----------- ------- -------- --------- -------- -----------
Balance, July 31, 2007 48,000,000 4,800 15,200 (1,999) -- 18,001
Shares issued for cash at $0.001
per share on January 24, 2008 25,200,000 2,520 25,980 28,500
Net loss (43,401) -- (43,401)
----------- ------- -------- --------- -------- -----------
Balance, July 31, 2008 73,200,000 7,320 41,180 (45,400) -- 3,100
Net loss (21,813) -- (21,813)
----------- ------- -------- --------- -------- -----------
Balance, July 31, 2009 73,200,000 7,320 41,180 (67,213) -- (18,713)
Net loss (10,046) -- (10,046)
----------- ------- -------- --------- -------- -----------
Balance, July 31, 2010 73,200,000 7,320 41,180 (77,259) -- (28,759)
Net loss (16,690) -- (16,690)
----------- ------- -------- --------- -------- -----------
Balance, July 31, 2011 73,200,000 7,320 41,180 (93,949) -- (45,449)
Net loss (25,284) -- (25,284)
----------- ------- -------- --------- -------- -----------
Balance, July 31, 2012 73,200,000 7,320 41,180 (119,233) -- (70,733)
Common stock cancellation (14,200,000) (1,420) 1,420 -- -- --
Net loss (497,338) -- (497,338)
----------- ------- -------- --------- -------- -----------
Balance, July 31, 2013 59,000,000 5,900 42,600 (616,571) -- (568,071)
Net loss (195,413) -- (195,413)
Foreign currency translational
gain (loss) (1,360) (1,360)
Total comprehensive loss (196,773)
----------- ------- -------- --------- -------- -----------
Balance, October 31, 2013 59,000,000 $ 5,900 $ 42,600 $(811,984) $ (1,360) $ (764,844)
=========== ======= ======== ========= ======== ===========
See accompanying notes to the consolidated financial statements.
5
Guar Global Ltd.
(A Development Stage Company)
Consolidated Statements of Cash Flows
For the Period from
Three Months Three Months May 29, 2007
Ended Ended (inception) through
October 31, 2013 October 31, 2012 October 31, 2013
---------------- ---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (195,413) $ (5,088) $ (811,984)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization -- -- 5,950
Changes in operating assets and liabilities:
Prepaid expenses (327) (45) (827)
Prepaid land lease 18,422 -- 18,422
Accounts payable and accrued liabilities 1,732 (379) 42,332
Interest payable 18,614 -- 45,159
---------- ---------- ----------
Net cash used in operating activities (156,972) (5,512) (700,948)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Pure Guar -- -- (1,692)
Advances to Pure Guar prior to acquisition -- -- (131,426)
Cash acquired from acquisition -- -- 8,018
Crop cultivation (36,308) -- (36,308)
Website development costs -- -- (5,950)
---------- ---------- ----------
Net cash used in investing activities (36,308) -- (167,358)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from stockholder -- -- 76,815
Proceeds from convertible notes payable 200,000 -- 795,000
Proceeds from sale of common stock -- -- 48,500
---------- ---------- ----------
Net cash provided by financing activities 200,000 -- 920,315
---------- ---------- ----------
Effect of exchange rate changes on cash (273) -- (273)
Net change in cash 6,447 (5,512) 51,736
Cash, beginning of period 45,289 5,601 --
---------- ---------- ----------
Cash, end of period $ 51,736 $ 89 $ 51,736
========== ========== ==========
Supplemental disclosure of cash flows information:
Interest paid $ -- $ -- $ --
========== ========== ==========
Income tax paid $ -- $ -- $ --
========== ========== ==========
See accompanying notes to the consolidated financial statements.
6
Guar Global Ltd.
(A Development Stage Company)
October 31, 2013 and 2012
Notes to the Consolidated Financial Statements
(Unaudited)
NOTE 1 - ORGANIZATION AND OPERATIONS
GUAR GLOBAL LTD.
Guar Global Ltd. (the "Company") was incorporated under the laws of the State of
Nevada on May 29, 2007. The Company intends to engage in the cultivation and
sale of the guar bean in India.
AMENDMENTS TO THE ARTICLES OF INCORPORATION
Effective March 14, 2012 the Board of Directors and the majority voting
stockholders adopted and approved a resolution to amend the Company's Articles
of Incorporation to (a) increase the number of shares of authorized common stock
from 20,000,000 to 300,000,000; (b) create 25,000,000 shares of "blank check"
preferred stock, par value $0.0001, per share; (c) change the par value of each
share of common stock from $0.001 per share to $0.0001 per share; and (d)
effectuate a forward split of all issued and outstanding shares of common stock,
at a ratio of thirty-for-one (30:1) (the "Stock Split").
All shares and per share amounts in the financial statements have been adjusted
to give retroactive effect to the Stock Split.
Effective September 24, 2012 the Board of Directors and the majority voting
stockholders approved an amendment to the Company's Articles of Incorporation to
change the name of the Company from "ERE Management, Inc." to "Guar Global
Ltd.".
ACQUISITION OF PURE GUAR INDIA PRIVATE LIMITED
On July 31, 2013, the Company acquired Ninety Nine and 99/100 percent (99.99%)
of the capital stock of Pure Guar India Private Limited, a company organized
under the laws of the Republic of India pursuant to a Stock Purchase Agreement
dated July 31, 2013 (the "Stock Purchase Agreement") by and among the Company,
Pure Guar, and the shareholders of Pure Guar (the "Selling Shareholders"). The
Company paid $1,692.43 to the Selling Shareholder.
PURE GUAR INDIA PRIVATE LIMITED
Pure Guar India Private Limited ("Pure Guar") was incorporated on February 19,
2013 under the laws of India to engage in any lawful business or activity for
which corporations may be organized under the laws of India. Pure Guar intends
to engage in the cultivation and sale of the guar bean in India.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Management of the Company is responsible for the selection and use of
appropriate accounting policies and the appropriateness of accounting policies
and their application. Critical accounting policies and practices are those that
are both most important to the portrayal of the Company's financial condition
and results and require management's most difficult, subjective, or complex
judgments, often as a result of the need to make estimates about the effects of
matters that are inherently uncertain. The Company's significant and critical
accounting policies and practices are disclosed below as required by generally
accepted accounting principles.
BASIS OF PRESENTATION - UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying unaudited interim financial statements and related notes have
been prepared in accordance with accounting principles generally accepted in the
United States of America ("U.S. GAAP") for the interim financial information,
and with the rules and regulations of the United States Securities and Exchange
Commission ("SEC") to Form 10-Q and Article 8 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by U.S. GAAP
7
for complete financial statements. The unaudited interim financial statements
furnished reflect all adjustments (consisting of normal recurring accruals)
which are, in the opinion of management, necessary to a fair statement of the
results for the interim period presented. Unaudited interim results are not
necessarily indicative of the results for the full fiscal year. These financial
statements should be read in conjunction with the audited financial statements
of the Company for the fiscal year ended July 31, 2013 and notes thereto
contained in the Company's Annual Report on Form 10-K filed with the SEC on
November 5, 2013.
DEVELOPMENT STAGE COMPANY
The Company is a development stage company as defined by section 915-10-20 of
the FASB Accounting Standards Codification. The Company is still devoting
substantially all of its efforts on establishing the business and its planned
principal operations have not commenced. All losses accumulated since inception,
have been considered as part of the Company's development stage activities.
FISCAL YEAR-END
The Company elected July 31 as its fiscal year ending date.
USE OF ESTIMATES AND ASSUMPTIONS AND CRITICAL ACCOUNTING ESTIMATES AND
ASSUMPTIONS
The preparation of financial statements in conformity with U.S. GAAP 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 reporting amounts of revenues and
expenses during the reporting period.
Critical accounting estimates are estimates for which (a) the nature of the
estimate is material due to the levels of subjectivity and judgment necessary to
account for highly uncertain matters or the susceptibility of such matters to
change and (b) the impact of the estimate on financial condition or operating
performance is material. The Company's critical accounting estimate(s) and
assumption(s) affecting the financial statements were:
(i) Assumption as a going concern: Management assumes that the Company
will continue as a going concern, which contemplates continuity of
operations, realization of assets, and liquidation of liabilities in
the normal course of business;
(ii) Fair value of long-lived assets: Fair value is generally determined
using the asset's expected future discounted cash flows or market
value, if readily determinable. The Company considers the following to
be some examples of important indicators that may trigger an
impairment review: (i) significant under-performance or losses of
assets relative to expected historical or projected future operating
results; (ii) significant changes in the manner or use of assets or in
the Company's overall strategy with respect to the manner or use of
the acquired assets or changes in the Company's overall business
strategy; (iii) significant negative industry or economic trends; (iv)
increased competitive pressures; (v) a significant decline in the
Company's stock price for a sustained period of time; and (vi)
regulatory changes. The Company evaluates acquired assets for
potential impairment indicators at least annually and more frequently
upon the occurrence of such events;
(iii)Valuation allowance for deferred tax assets: Management assumes that
the realization of the Company's net deferred tax assets resulting
from its net operating loss ("NOL") carry-forwards for Federal income
tax purposes that may be offset against future taxable income was not
considered more likely than not and accordingly, the potential tax
benefits of the net loss carry-forwards are offset by a full valuation
allowance. Management made this assumption based on (a) the Company
has incurred recurring losses, (b) general economic conditions, and
(c) its ability to raise additional funds to support its daily
operations by way of a public or private offering, among other
factors.
These significant accounting estimates or assumptions bear the risk of change
due to the fact that there are uncertainties attached to these estimates or
assumptions, and certain estimates or assumptions are difficult to measure or
value.
Management bases its estimates on historical experience and on various
assumptions that are believed to be reasonable in relation to the financial
statements taken as a whole under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources.
8
Management regularly evaluates the key factors and assumptions used to develop
the estimates utilizing currently available information, changes in facts and
circumstances, historical experience and reasonable assumptions. After such
evaluations, if deemed appropriate, those estimates are adjusted accordingly.
Actual results could differ from those estimates.
RECLASSIFICATION
Certain amounts in the prior period financial statements have been reclassified
to conform to the current period presentation. These reclassifications had no
effect on reported losses.
PRINCIPLES OF CONSOLIDATION
The Company applies the guidance of Topic 810 "Consolidation" of the FASB
Accounting Standards Codification ("ASC") to determine whether and how to
consolidate another entity. Pursuant to ASC Paragraph 810-10-15-10 all
majority-owned subsidiaries--all entities in which a parent has a controlling
financial interest--shall be consolidated except (1) when control does not rest
with the parent, the majority owner; (2) if the parent is a broker-dealer within
the scope of Topic 940 and control is likely to be temporary; (3) consolidation
by an investment company within the scope of Topic 946 of a
non-investment-company investee. Pursuant to ASC Paragraph 810-10-15-8 the usual
condition for a controlling financial interest is ownership of a majority voting
interest, and, therefore, as a general rule ownership by one reporting entity,
directly or indirectly, of more than 50 percent of the outstanding voting shares
of another entity is a condition pointing toward consolidation. The power to
control may also exist with a lesser percentage of ownership, for example, by
contract, lease, agreement with other stockholders, or by court decree. The
Company consolidates all less-than-majority-owned subsidiaries, if any, in which
the parent's power to control exists.
The Company's consolidated subsidiaries and/or entities are as follows:
Date of incorporation
or formation
Name of consolidated State or other jurisdiction of (date of acquisition,
subsidiary or entity incorporation or organization if applicable) Attributable interest
-------------------- ----------------------------- -------------- ---------------------
Guar Global Ltd. The State of Nevada May 29, 2007 100%
Pure Guar India Private Limited The Republic of India February 19, 2013
(July 31, 2013) 99.99%
Guar Innovations Ltd. The State of Washington February 20, 2013 100%
All inter-company balances and transactions have been eliminated.
BUSINESS COMBINATIONS
The Company applies Topic 805 "Business Combinations" of the FASB Accounting
Standards Codification for transactions that represent business combinations to
be accounted for under the acquisition method. Pursuant to ASC Paragraph
805-10-25-1 in order for a transaction or other event to be considered as a
business combination it is required that the assets acquired and liabilities
assumed constitute a business. Upon determination of transactions representing
business combinations the Company then (i) identifies the accounting acquirer;
(ii) identifies and estimates the fair value of the identifiable tangible and
intangible assets acquired, separately from goodwill, if any; (iii) estimates
the business enterprise value of the acquired entities; (iv) allocates the
purchase price of acquired entities to the tangible and intangible assets
acquired and liabilities assumed, based on their estimated fair values at the
date of acquisition. The excess of the liabilities assumed and the purchase
price over the assets acquired is recorded as goodwill and the excess of the
assets acquired over the liabilities assumed and the purchase price is recorded
as a gain from a bargain purchase.
IDENTIFICATION OF THE ACCOUNTING ACQUIRER
The Company used the existence of a controlling financial interest to identify
the acquirer, the entity that obtains control of the acquiree, in accordance
with ASC paragraph 805-20-25-5, and identifies the acquisition date, which is
the date on which it obtains control of the acquiree in accordance with ASC
paragraph 805-20-25-6. The date on which the acquirer obtains control of the
acquiree generally is the date on which the acquirer legally transfers the
consideration, acquires the assets, and assumes the liabilities of the
acquiree--the closing date.
9
INTANGIBLE ASSETS IDENTIFICATION, ESTIMATED FAIR VALUE AND USEFUL LIVES
In accordance with ASC Section 805-20-25 as of the acquisition date, the
acquirer shall recognize, separately from goodwill, the identifiable assets
acquired, the liabilities assumed, and any non-controlling interest in the
acquiree. Recognition of identifiable assets acquired and liabilities assumed is
subject to the conditions specified in ASC paragraphs 805-20-25-2 through 25-3.
The recognized intangible assets of the acquiree are valued through the use of
the market, income and/or cost approach, as appropriate. The Company utilizes
the income approach on a debt-free basis to estimate the fair value of
identifiable assets acquired in the acquiree at the date of acquisition with the
assistance of a third party valuation firm. This method eliminates the effect of
how the business is presently financed and provides an indication of the value
of the total invested capital of the Company or its business enterprise value.
BUSINESS ENTERPRISE VALUATION
The Company utilizes the income approach, discounted cash flows method, to
estimate the business enterprise value with the assistance of a third party
valuation firm. The income approach considers a given company's future sales,
net cash flow and growth potential. In valuing the business enterprise value of
the business acquired, the Company forecasts sales and net cash flow for the
acquiree for five (5) years into the future and uses a discounted net cash flow
method to determine a value indication of the total invested capital of the
acquiree. The basic method of forecasting involves using past experience to
forecast the future. The next step is to discount these projected net cash flows
to their present values. One of the key elements of the income approach is the
discount rate used to discount the projected cash flows to their present values.
Determining an appropriate discount rate is one of the more difficult parts of
the valuation process. The applicable rate of return or discount rate, the rate
investors in closely-held companies require as a condition of acquisition,
varies from time to time, depending on economic and other conditions. The
discount rate is determined after considering the overall risk of the
investment, which includes: (1) operating and financial risk in the business
enterprise or asset; (2) current and projected profitability and growth; (3)
risk of the respective industry; and (4) the equity risk premium relative to
Treasury bonds. The discount rate is also affected by an analyst's judgment
regarding the credibility of the income projections. The discount rate rises as
the projections become increasingly optimistic, or falls as the degree of
certainty increases.
INHERENT RISK IN THE ESTIMATES
Management makes estimates of fair values based upon assumptions believed to be
reasonable. These estimates are based on historical experience and information
obtained from the management of the acquired companies. Critical estimates in
valuing certain of the intangible assets include but are not limited to: future
expected cash flows from revenues, customer relationships, key management and
market positions, assumptions about the period of time the acquired trade names
will continue to be used in the Company's combined portfolio of products and/or
services, and discount rates used to establish fair value. These estimates are
inherently uncertain and unpredictable. Assumptions may be incomplete or
inaccurate, and unanticipated events and circumstances may occur which may
affect the accuracy or validity of such assumptions, estimates or actual
results.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards
Codification for disclosures about fair value of its financial instruments and
has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification
("Paragraph 820-10-35-37") to measure the fair value of its financial
instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards
Codification establishes a framework for measuring fair value in generally
accepted accounting principles (GAAP), and expands disclosures about fair value
measurements. To increase consistency and comparability in fair value
measurements and related disclosures, paragraph 820-10-35-37 of the FASB
Accounting Standards Codification establishes a fair value hierarchy which
prioritizes the inputs to valuation techniques used to measure fair value into
three (3) broad levels. The fair value hierarchy gives the highest priority to
quoted prices (unadjusted) in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. The three (3) levels of fair
value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting
Standards Codification are described below:
10
Level 1 Quoted market prices available in active markets for identical assets
or liabilities as of the reporting date.
Level 2 Pricing inputs other than quoted prices in active markets included in
Level 1, which are either directly or indirectly observable as of the
reporting date.
Level 3 Pricing inputs that are generally observable inputs and not
corroborated by market data.
Financial assets are considered Level 3 when their fair values are determined
using pricing models, discounted cash flow methodologies or similar techniques
and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices
(unadjusted) in active markets for identical assets or liabilities and the
lowest priority to unobservable inputs. If the inputs used to measure the
financial assets and liabilities fall within more than one level described
above, the categorization is based on the lowest level input that is significant
to the fair value measurement of the instrument.
The carrying amounts of the Company's financial assets and liabilities, such as
cash, prepaid expenses, prepaid harvest, prepaid land lease, accounts payable
and accrued liabilities, approximate their fair values because of the short
maturity of these instruments.
Transactions involving related parties cannot be presumed to be carried out on
an arm's-length basis, as the requisite conditions of competitive, free-market
dealings may not exist. Representations about transactions with related parties,
if made, shall not imply that the related party transactions were consummated on
terms equivalent to those that prevail in arm's-length transactions unless such
representations can be substantiated.
CARRYING VALUE, RECOVERABILITY AND IMPAIRMENT OF LONG-LIVED ASSETS
The Company has adopted paragraph 360-10-35-17 of the FASB Accounting Standards
Codification for its long-lived assets. The Company's long-lived assets, which
includes goodwill is reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.
The Company assesses the recoverability of its long-lived assets by comparing
the projected undiscounted net cash flows associated with the related long-lived
asset or group of long-lived assets over their remaining estimated useful lives
against their respective carrying amounts. Impairment, if any, is based on the
excess of the carrying amount over the fair value of those assets. Fair value is
generally determined using the asset's expected future discounted cash flows or
market value, if readily determinable. If long-lived assets are determined to be
recoverable, but the newly determined remaining estimated useful lives are
shorter than originally estimated, the net book values of the long-lived assets
are depreciated over the newly determined remaining estimated useful lives.
The Company considers the following to be some examples of important indicators
that may trigger an impairment review: (i) significant under-performance or
losses of assets relative to expected historical or projected future operating
results; (ii) significant changes in the manner or use of assets or in the
Company's overall strategy with respect to the manner or use of the acquired
assets or changes in the Company's overall business strategy; (iii) significant
negative industry or economic trends; (iv) increased competitive pressures; (v)
a significant decline in the Company's stock price for a sustained period of
time; and (vi) regulatory changes. The Company evaluates acquired assets for
potential impairment indicators at least annually and more frequently upon the
occurrence of such events.
The impairment charges, if any, is included in operating expenses in the
accompanying statements of operations.
CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less at the time of purchase to be cash equivalents.
LEASES
Lease agreements are evaluated to determine whether they are capital leases or
operating leases in accordance with paragraph 840-10-25-1 of the FASB Accounting
Standards Codification ("Paragraph 840-10-25-1"). Pursuant to Paragraph
11
840-10-25-1 A lessee and a lessor shall consider whether a lease meets any of
the following four criteria as part of classifying the lease at its inception
under the guidance in the Lessees Subsection of this Section (for the lessee)
and the Lessors Subsection of this Section (for the lessor): a. Transfer of
ownership. The lease transfers ownership of the property to the lessee by the
end of the lease term. This criterion is met in situations in which the lease
agreement provides for the transfer of title at or shortly after the end of the
lease term in exchange for the payment of a nominal fee, for example, the
minimum required by statutory regulation to transfer title. b. Bargain purchase
option. The lease contains a bargain purchase option. c. Lease term. The lease
term is equal to 75 percent or more of the estimated economic life of the leased
property. d. Minimum lease payments. The present value at the beginning of the
lease term of the minimum lease payments, excluding that portion of the payments
representing executory costs such as insurance, maintenance, and taxes to be
paid by the lessor, including any profit thereon, equals or exceeds 90 percent
of the excess of the fair value of the leased property to the lessor at lease
inception over any related investment tax credit retained by the lessor and
expected to be realized by the lessor. In accordance with paragraphs
840-10-25-29 and 840-10-25-30, if at its inception a lease meets any of the four
lease classification criteria in Paragraph 840-10-25-1, the lease shall be
classified by the lessee as a capital lease; and if none of the four criteria in
Paragraph 840-10-25-1 are met, the lease shall be classified by the lessee as an
operating lease. Pursuant to Paragraph 840-10-25-31 a lessee shall compute the
present value of the minimum lease payments using the lessee's incremental
borrowing rate unless both of the following conditions are met, in which
circumstance the lessee shall use the implicit rate: a. It is practicable for
the lessee to learn the implicit rate computed by the lessor. b. The implicit
rate computed by the lessor is less than the lessee's incremental borrowing
rate. Capital lease assets are depreciated on a straight line method, over the
capital lease assets estimated useful lives consistent with the Company's normal
depreciation policy for tangible fixed assets. Interest charges are expensed
over the period of the lease in relation to the carrying value of the capital
lease obligation.
Operating leases primarily relate to the Company's leases. When the terms of an
operating lease include tenant improvement allowances, periods of free rent,
rent concessions, and/or rent escalation amounts, the Company establishes a
deferred rent liability for the difference between the scheduled rent payment
and the straight-line rent expense recognized, which is amortized over the
underlying lease term on a straight-line basis as a reduction of rent expense.
GOODWILL
The Company follows Subtopic 350-20 of the FASB Accounting Standards
Codification for goodwill. Goodwill represents the excess of the cost of an
acquired entity over the fair value of the net assets at the date of
acquisition. Under paragraph 350-20-35-1 of the FASB Accounting Standards
Codification, goodwill acquired in a business combination with indefinite useful
lives are not amortized; rather, goodwill is tested for impairment annually or
more frequently if events or changes in circumstances indicate the asset might
be impaired.
RELATED PARTIES
The Company follows subtopic 850-10 of the FASB Accounting Standards
Codification for the identification of related parties and disclosure of related
party transactions.
Pursuant to section 850-10-20 the related parties include a) affiliates of the
Company; b) entities for which investments in their equity securities would be
required, absent the election of the fair value option under the Fair Value
Option Subsection of section 825-10-15, to be accounted for by the equity method
by the investing entity; c) trusts for the benefit of employees, such as pension
and profit-sharing trusts that are managed by or under the trusteeship of
management; d) principal owners of the Company; e) management of the Company; f)
other parties with which the Company may deal if one party controls or can
significantly influence the management or operating policies of the other to an
extent that one of the transacting parties might be prevented from fully
pursuing its own separate interests; and g. other parties that can significantly
influence the management or operating policies of the transacting parties or
that have an ownership interest in one of the transacting parties and can
significantly influence the other to an extent that one or more of the
transacting parties might be prevented from fully pursuing its own separate
interests.
The financial statements shall include disclosures of material related party
transactions, other than compensation arrangements, expense allowances, and
other similar items in the ordinary course of business. However, disclosure of
transactions that are eliminated in the preparation of consolidated or combined
financial statements is not required in those statements. The disclosures shall
include: a) the nature of the relationship(s) involved; b) a description of the
transactions, including transactions to which no amounts or nominal amounts were
ascribed, for each of the periods for which income statements are presented, and
12
such other information deemed necessary to an understanding of the effects of
the transactions on the financial statements; c) the dollar amounts of
transactions for each of the periods for which income statements are presented
and the effects of any change in the method of establishing the terms from that
used in the preceding period; and d. amounts due from or to related parties as
of the date of each balance sheet presented and, if not otherwise apparent, the
terms and manner of settlement.
COMMITMENTS AND CONTINGENCIES
The Company follows subtopic 450-20 of the FASB Accounting Standards
Codification to report accounting for contingencies. Certain conditions may
exist as of the date the consolidated financial statements are issued, which may
result in a loss to the Company but which will only be resolved when one or more
future events occur or fail to occur. The Company assesses such contingent
liabilities, and such assessment inherently involves an exercise of judgment. In
assessing loss contingencies related to legal proceedings that are pending
against the Company or un-asserted claims that may result in such proceedings,
the Company evaluates the perceived merits of any legal proceedings or
un-asserted claims as well as the perceived merits of the amount of relief
sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material
loss has been incurred and the amount of the liability can be estimated, then
the estimated liability would be accrued in the Company's consolidated financial
statements. If the assessment indicates that a potentially material loss
contingency is not probable but is reasonably possible, or is probable but
cannot be estimated, then the nature of the contingent liability, and an
estimate of the range of possible losses, if determinable and material, would be
disclosed.
Loss contingencies considered remote are generally not disclosed unless they
involve guarantees, in which case the guarantees would be disclosed. Management
does not believe, based upon information available at this time, that these
matters will have a material adverse effect on the Company's consolidated
financial position, results of operations or cash flows. However, there is no
assurance that such matters will not materially and adversely affect the
Company's business, financial position, and results of operations or cash flows.
REVENUE RECOGNITION
The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards
Codification for revenue recognition. The Company recognizes revenue when it is
realized or realizable and earned. The Company considers revenue realized or
realizable and earned when all of the following criteria are met: (i) persuasive
evidence of an arrangement exists, (ii) the product has been shipped or the
services have been rendered to the customer, (iii) the sales price is fixed or
determinable, and (iv) collectability is reasonably assured.
FOREIGN CURRENCY TRANSACTIONS
The Company applies the guidelines as set out in Section 830-20-35 of the FASB
Accounting Standards Codification ("Section 830-20-35") for foreign currency
transactions. Pursuant to Section 830-20-35 of the FASB Accounting Standards
Codification, foreign currency transactions are transactions denominated in
currencies other than U.S. Dollar, the Company's reporting currency or Indian
Rupee, the Company's functional currency. Foreign currency transactions may
produce receivables or payables that are fixed in terms of the amount of foreign
currency that will be received or paid. A change in exchange rates between the
functional currency and the currency in which a transaction is denominated
increases or decreases the expected amount of functional currency cash flows
upon settlement of the transaction. That increase or decrease in expected
functional currency cash flows is a foreign currency transaction gain or loss
that generally shall be included in determining net income for the period in
which the exchange rate changes. Likewise, a transaction gain or loss (measured
from the transaction date or the most recent intervening balance sheet date,
whichever is later) realized upon settlement of a foreign currency transaction
generally shall be included in determining net income for the period in which
the transaction is settled. The exceptions to this requirement for inclusion in
net income of transaction gains and losses pertain to certain intercompany
transactions and to transactions that are designated as, and effective as,
economic hedges of net investments and foreign currency commitments. Pursuant to
Section 830-20-25 of the FASB Accounting Standards Codification, the following
shall apply to all foreign currency transactions of an enterprise and its
investees: (a) at the date the transaction is recognized, each asset, liability,
revenue, expense, gain, or loss arising from the transaction shall be measured
and recorded in the functional currency of the recording entity by use of the
exchange rate in effect at that date as defined in section 830-10-20 of the FASB
Accounting Standards Codification; and (b) at each balance sheet date, recorded
13
balances that are denominated in currencies other than the functional currency
or reporting currency of the recording entity shall be adjusted to reflect the
current exchange rate.
Net gains and losses resulting from foreign exchange transactions, if any, are
included in the Company's statements of income and comprehensive income (loss).
INCOME TAX PROVISION
The Company accounts for income taxes under Section 740-10-30 of the FASB
Accounting Standards Codification, which requires recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are based on the differences between
the financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the fiscal year in which the differences are expected to
reverse. Deferred tax assets are reduced by a valuation allowance to the extent
management concludes it is more likely than not that the assets will not be
realized. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the fiscal years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
the Statements of Income and Comprehensive Income in the period that includes
the enactment date.
The Company adopted section 740-10-25 of the FASB Accounting Standards
Codification ("Section 740-10-25") with regards to uncertainty income taxes.
Section 740-10-25 addresses the determination of whether tax benefits claimed or
expected to be claimed on a tax return should be recorded in the financial
statements. Under Section 740-10-25, 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 than fifty percent (50%) likelihood of being
realized upon ultimate settlement. Section 740-10-25 also provides guidance on
de-recognition, classification, interest and penalties on income taxes,
accounting in interim periods and requires increased disclosures.
The estimated future tax effects of temporary differences between the tax basis
of assets and liabilities are reported in the accompanying consolidated balance
sheets, as well as tax credit carry-backs and carry-forwards. The Company
periodically reviews the recoverability of deferred tax assets recorded on its
consolidated balance sheets and provides valuation allowances as management
deems necessary.
Management makes judgments as to the interpretation of the tax laws that might
be challenged upon an audit and cause changes to previous estimates of tax
liability. In addition, the Company operates within multiple taxing
jurisdictions and is subject to audit in these jurisdictions. In management's
opinion, adequate provisions for income taxes have been made for all years. If
actual taxable income by tax jurisdiction varies from estimates, additional
allowances or reversals of reserves may be necessary.
UNCERTAIN TAX POSITIONS
The Company did not take any uncertain tax positions and had no adjustments to
unrecognized income tax liabilities or benefits pursuant to the provisions of
Section 740-10-25 for the reporting period ended October 31, 2013 or 2012.
FOREIGN CURRENCY TRANSLATION
The Company follows Section 830-10-45 of the FASB Accounting Standards
Codification ("Section 830-10-45") for foreign currency translation to translate
the financial statements of the foreign subsidiary from the functional currency,
generally the local currency, into U.S. Dollars. Section 830-10-45 sets out the
guidance relating to how a reporting entity determines the functional currency
of a foreign entity (including of a foreign entity in a highly inflationary
economy), re-measures the books of record (if necessary), and characterizes
transaction gains and losses. Pursuant to Section 830-10-45, the assets,
liabilities, and operations of a foreign entity shall be measured using the
functional currency of that entity. An entity's functional currency is the
currency of the primary economic environment in which the entity operates;
normally, that is the currency of the environment, or local currency, in which
an entity primarily generates and expends cash.
14
The functional currency of each foreign subsidiary is determined based on
management's judgment and involves consideration of all relevant economic facts
and circumstances affecting the subsidiary. Generally, the currency in which the
subsidiary transacts a majority of its transactions, including billings,
financing, payroll and other expenditures, would be considered the functional
currency, but any dependency upon the parent and the nature of the subsidiary's
operations must also be considered. If a subsidiary's functional currency is
deemed to be the local currency, then any gain or loss associated with the
translation of that subsidiary's financial statements is included in accumulated
other comprehensive income. However, if the functional currency is deemed to be
the U.S. Dollar, then any gain or loss associated with the re-measurement of
these financial statements from the local currency to the functional currency
would be included in the consolidated statements of income and comprehensive
income (loss). If the Company disposes of foreign subsidiaries, then any
cumulative translation gains or losses would be recorded into the consolidated
statements of income and comprehensive income (loss). If the Company determines
that there has been a change in the functional currency of a subsidiary to the
U.S. Dollar, any translation gains or losses arising after the date of change
would be included within the statement of income and comprehensive income
(loss).
Based on an assessment of the factors discussed above, the management of the
Company determined the relevant subsidiary's local currency to be the functional
currency for its foreign subsidiary.
The financial records of Pure Guar are maintained in their local currency, the
Indian Rupee ("INR"), which is the functional currency. Assets and liabilities
are translated from the local currency into the reporting currency, U.S.
dollars, at the exchange rate prevailing at the balance sheet date. Revenues and
expenses are translated at weighted average exchange rates for the period to
approximate translation at the exchange rates prevailing at the dates those
elements are recognized in the financial statements. Foreign currency
translation gain (loss) resulting from the process of translating the local
currency financial statements into U.S. dollars are included in determining
accumulated other comprehensive income in the statement of stockholders' equity.
Unless otherwise noted, the rate presented below per U.S. $1.00 was the midpoint
of the interbank rate as quoted by OANDA Corporation (www.oanda.com) contained
in its consolidated financial statements. Management believes that the
difference between INR vs. U.S. dollar exchange rate quoted by the Reserve Bank
of India and INR vs. U.S. dollar exchange rate reported by OANDA Corporation
were immaterial. Translations do not imply that the INR amounts actually
represent, or have been or could be converted into, equivalent amounts in U.S.
dollars.
Translation of amounts from INR into U.S. dollars has been made at the following
exchange rates for the respective periods:
October 31, 2013
----------------
Balance sheets 61.0697
Statements of operations and comprehensive
income (loss) 62.6620
COMPREHENSIVE INCOME (LOSS)
The Company has applied section 220-10-45 of the FASB Accounting Standards
Codification ("Section 220-10-45") to present comprehensive income (loss).
Section 220-10-45 establishes rules for the reporting of comprehensive income
(loss) and its components. Comprehensive income (loss), for the Company,
consists of net income and foreign currency translation adjustments and is
presented in the Company's consolidated statements of income and comprehensive
income (loss) and stockholders' equity.
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed pursuant to section 260-10-45 of
the FASB Accounting Standards Codification. Basic net income (loss) per common
share is computed by dividing net income (loss) by the weighted average number
of shares of common stock outstanding during the period. Diluted net income
(loss) per common share is computed by dividing net income (loss) by the
weighted average number of shares of common stock and potentially outstanding
shares of common stock during the period to reflect the potential dilution that
could occur from common shares issuable through contingent shares issuance
arrangement, stock options or warrants.
15
There were no potentially outstanding dilutive shares for the reporting period
ended October 31, 2013 or 2012.
CASH FLOWS REPORTING
The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards
Codification for cash flows reporting, classifies cash receipts and payments
according to whether they stem from operating, investing, or financing
activities and provides definitions of each category, and uses the indirect or
reconciliation method ("Indirect method") as defined by paragraph 230-10-45-25
of the FASB Accounting Standards Codification to report net cash flow from
operating activities by adjusting net income to reconcile it to net cash flow
from operating activities by removing the effects of (a) all deferrals of past
operating cash receipts and payments and all accruals of expected future
operating cash receipts and payments and (b) all items that are included in net
income that do not affect operating cash receipts and payments. The Company
reports the reporting currency equivalent of foreign currency cash flows, using
the current exchange rate at the time of the cash flows and the effect of
exchange rate changes on cash held in foreign currencies is reported as a
separate item in the reconciliation of beginning and ending balances of cash and
cash equivalents and separately provides information about investing and
financing activities not resulting in cash receipts or payments in the period
pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards
Codification.
SUBSEQUENT EVENTS
The Company follows the guidance in Section 855-10-50 of the FASB Accounting
Standards Codification for the disclosure of subsequent events. The Company will
evaluate subsequent events through the date when the financial statements were
issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification,
the Company as an SEC filer considers its financial statements issued when they
are widely distributed to users, such as through filing them on EDGAR.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In January 2013, the FASB issued ASU No. 2013-01, "Balance Sheet (Topic 210):
Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities".
This ASU clarifies that the scope of ASU No. 2011-11, "Balance Sheet (Topic
210): Disclosures about Offsetting Assets and Liabilities." applies only to
derivatives, repurchase agreements and reverse purchase agreements, and
securities borrowing and securities lending transactions that are either offset
in accordance with specific criteria contained in FASB Accounting Standards
Codification or subject to a master netting arrangement or similar agreement.
The amendments in this ASU are effective for fiscal years, and interim periods
within those years, beginning on or after January 1, 2013.
In February 2013, the FASB issued ASU No. 2013-02, "Comprehensive Income (Topic
220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive
Income." The ASU adds new disclosure requirements for items reclassified out of
accumulated other comprehensive income by component and their corresponding
effect on net income. The ASU is effective for public entities for fiscal years
beginning after December 15, 2013.
In February 2013, the Financial Accounting Standards Board, or FASB, issued ASU
No. 2013-04, "Liabilities (Topic 405): Obligations Resulting from Joint and
Several Liability Arrangements for which the Total Amount of the Obligation Is
Fixed at the Reporting Date." This ASU addresses the recognition, measurement,
and disclosure of certain obligations resulting from joint and several
arrangements including debt arrangements, other contractual obligations, and
settled litigation and judicial rulings. The ASU is effective for public
entities for fiscal years, and interim periods within those years, beginning
after December 15, 2013.
In March 2013, the FASB issued ASU No. 2013-05, "Foreign Currency Matters (Topic
830): Parent's Accounting for the Cumulative Translation Adjustment upon
Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign
Entity or of an Investment in a Foreign Entity." This ASU addresses the
accounting for the cumulative translation adjustment when a parent either sells
a part or all of its investment in a foreign entity or no longer holds a
controlling financial interest in a subsidiary or group of assets that is a
nonprofit activity or a business within a foreign entity. The guidance outlines
the events when cumulative translation adjustments should be released into net
income and is intended by FASB to eliminate some disparity in current accounting
practice. This ASU is effective prospectively for fiscal years, and interim
periods within those years, beginning after December 15, 2013.
16
In March 2013, the FASB issued ASU 2013-07, "Presentation of Financial
Statements (Topic 205): Liquidation Basis of Accounting." The amendments require
an entity to prepare its financial statements using the liquidation basis of
accounting when liquidation is imminent. Liquidation is imminent when the
likelihood is remote that the entity will return from liquidation and either (a)
a plan for liquidation is approved by the person or persons with the authority
to make such a plan effective and the likelihood is remote that the execution of
the plan will be blocked by other parties or (b) a plan for liquidation is being
imposed by other forces (for example, involuntary bankruptcy). If a plan for
liquidation was specified in the entity's governing documents from the entity's
inception (for example, limited-life entities), the entity should apply the
liquidation basis of accounting only if the approved plan for liquidation
differs from the plan for liquidation that was specified at the entity's
inception. The amendments require financial statements prepared using the
liquidation basis of accounting to present relevant information about an
entity's expected resources in liquidation by measuring and presenting assets at
the amount of the expected cash proceeds from liquidation. The entity should
include in its presentation of assets any items it had not previously recognized
under U.S. GAAP but that it expects to either sell in liquidation or use in
settling liabilities (for example, trademarks). The amendments are effective for
entities that determine liquidation is imminent during annual reporting periods
beginning after December 15, 2013, and interim reporting periods therein.
Entities should apply the requirements prospectively from the day that
liquidation becomes imminent. Early adoption is permitted.
Management does not believe that any other recently issued, but not yet
effective accounting pronouncements, if adopted, would have a material effect on
the accompanying consolidated financial statements.
NOTE 3 - GOING CONCERN
The consolidated financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates continuity of
operations, realization of assets, and liquidation of liabilities in the normal
course of business.
As reflected in the consolidated financial statements, the Company had a deficit
accumulated during the development stage at October 31, 2013, a net loss and net
cash used in operating activities for the reporting period then ended. These
factors raise substantial doubt about the Company's ability to continue as a
going concern.
While the Company is attempting to commence operations and generate sufficient
revenues, the Company's cash position may not be sufficient to support the
Company's daily operations. While the Company believes in the viability of its
strategy to commence operations and generate sufficient revenues and in its
ability to raise additional funds, there can be no assurances to that effect.
The ability of the Company to continue as a going concern is dependent upon the
Company's ability to further implement its business plan and generate sufficient
revenues and to raise additional funds.
The consolidated financial statements do not include any adjustments related to
the recoverability and classification of recorded asset amounts or the amounts
and classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
NOTE 4 - BUSINESS ACQUISITIONS
(i) ACQUISITION OF PURE GUAR INDIA PRIVATE LIMITED
On July 31, 2013, the Company acquired Ninety Nine and 99/100 percent (99.99%)
of the capital stock of Pure Guar India Private Limited, a company organized
under the laws of the Republic of India ("Pure Guar") pursuant to a Stock
Purchase Agreement dated July 31, 2013 (the "Stock Purchase Agreement") by and
among the Company, Pure Guar, and the shareholders of Pure Guar (the "Selling
Shareholders"). The Company paid $1,692.43 to the Selling Shareholders.
IDENTIFICATION OF THE ACCOUNTING ACQUIRER
The Company used the existence of a controlling financial interest to identify
the acquirer, the entity that obtains control of the acquiree in accordance with
ASC paragraph 805-20-25-5, and identifies the acquisition date, which is the
date on which it obtains control of the acquiree in accordance with ASC
paragraph 805-20-25-6. The management of the Company specifically addressed (i)
the ownership interest of each party after the acquisition; (ii) the members of
17
the board of directors from both companies; and (iii) senior management from
both companies and determined that Guar Global Ltd. was the accounting acquirer
for the merger between Guar Global Ltd. and Pure Guar India Private Limited.
The specific control factors considered to determine which entity was the
accounting acquirer were as follows:
(i) The ownership interest of each party after the acquisition
Common shares of the Company issued and outstanding prior to the Pure Guar
acquisition 73,200,000 100.0%
Common shares of the Company issued to the members of Pure Guar for the
acquisition of all of the issued and outstanding limited liability
company interests in Pure
Guar upon acquisition of Pure Guar -- --%
---------- -----
73,200,000 100.0%
========== =====
(ii) The members of the board of directors from both companies
The members of the board of directors from the Company prior to Pure Guar acquisition 1 100.0%
The members of the board of directors from the Company upon acquisition of Pure Guar -- --%
---------- -----
1 100.0%
========== =====
(iii) Senior management from both companies
Senior management from the Company prior to Pure Guar acquisition 1 100.0%
Senior management from the Company upon acquisition of Pure Guar -- --%
---------- -----
1 100.0%
========== =====
ALLOCATION OF PURCHASE PRICE
The purchase price of Pure Guar has been allocated to the tangible and
intangible assets acquired and liabilities assumed, and any non-controlling
interest in Pure Guar based on their estimated fair values at the date of
acquisition as follows:
Fair Value Fair Market
Book Value Adjustment Value
---------- ---------- -----
Cash $ 8,018 $ -- $ 8,018
Prepaid expenses 10,724 -- 10,724
Prepaid harvest 28,999 -- 28,999
Prepaid land lease 49,712 -- 49,712
Cultivation 4,990 -- 4,990
Advances from Guar Global (131,426) -- (131,426)
Goodwill -- 30,675 30,675
--------- --------- ---------
Total (28,983) 30,675 1,692
Non-controlling interest (--) -- (--)
--------- --------- ---------
Purchase price $ (28,983) $ 30,675 $ 1,692
========= ========= =========
18
Note 5 - Prepaid Expenses
Prepaid expenses consisted of the following:
October 31, 2013 July 31, 2013
---------------- -------------
Prepaid expenses $ 11,425 $ 11,224
======== ========
Prepaid harvest (a) $ 28,656 $ 28,999
======== ========
Prepaid land lease (b)
Total lease payment $ 73,686 $ 74,568
Accumulated amortization (42,983) (24,856)
-------- --------
Prepaid land lease, net $ 30,703 $ 49,712
======== ========
(a) Pure Guar prepaid the seller's estimated portion of the harvest revenue.
The crop has recently been harvested and the exact amount will be
determined shortly.
(b) On April 13, 2013 Pure Guar prepaid INR4,500,000 for a land lease of for a
term of one (1) year expiring April 12, 2014. Pure Guar is amortizing this
amount over the term of the lease.
NOTE 6 - GOODWILL
Goodwill, stated at cost, less accumulated impairment, if any, consisted of the
following:
October 31, 2013
----------------
Acquisition of Pure Guar
Goodwill 30,675
Accumulated impairment (--)
--------
$ 30,675
========
IMPAIRMENT
The Company completed the annual impairment test of goodwill and determined that
there was no impairment as the fair value of goodwill, substantially exceeded
their carrying values at July 31, 2013.
NOTE 7 - CONVERTIBLE NOTES PAYABLE
October 31, 2013 July 31, 2013
---------------- -------------
On November 9, 2012, the Company entered into a convertible note payable in
the amount of $200,000 due on November 9, 2013, bears interest at 10% per
annum and is convertible at $0.25 per share at the discretion of the
holder. $150,000 of the $200,000 received was advanced for a potential
acquisition in Hong Kong. The venture failed and $66,210 of the advance was
written off. The Note is currently past due.
Accrued interest outstanding at October 31, 2013 is $19,507. $200,000 $200,000
On January 16, 2013, the Company entered into a convertible note payable in
the amount of $50,000 due on January 16, 2014, bears interest at 10% per
annum and is convertible at $0.25 per share at the discretion of the
holder. $50,000 received was advanced for a potential acquisition in Hong
Kong. The venture failed and $50,000 advance was written off.
Accrued interest outstanding at October 31, 2013 is $3,945. 50,000 50,000
19
On April 10, 2013 the Company entered into a convertible note payable in the
amount of $195,000 due on April 10, 2014, bears interest at 10% per annum
and is convertible at $0.25 per share at the discretion of the holder.
Accrued interest outstanding at October 31, 2013 is $10,898. 195,000 195,000
On May 9, 2013 the Company entered into a convertible note payable in the
amount of $150,000 due on May 9, 2014, bears interest at 10% per year and
is convertible at $0.25 per share at the discretion of the holder.
Accrued interest outstanding at October 31, 2013 is $7,192. 150,000 150,000
On August 26, 2013 the Company entered into a convertible note payable in the
amount of $200,000 due on August 26, 2014, bears interest at 10% per annum
and is convertible at $0.25 per share at the discretion of the holder.
Accrued interest outstanding at October 31, 2013 is $3,617. 200,000 --
-------- --------
$795,000 $595,000
======== ========
The Company is in the process of negotiating a resolution to the expiration of
note due November 9, 2013.
NOTE 8 - STOCKHOLDERS' EQUITY
SHARES AUTHORIZED
Upon formation the total number of shares of common stock which the Company is
authorized to issue is Twenty Million (20,000,000) shares, par value $0.001 per
share.
Effective March 14, 2012 the Board of Directors and the majority voting
stockholders adopted and approved a resolution to amend its Articles of
Incorporation to (a) increase the number of shares of authorized common stock
from 20,000,000 to 300,000,000; (b) create 25,000,000 shares of "blank check"
preferred stock, par value $0.0001, per share; (c) change the par value of each
share of common stock from $0.001 per share to $0.0001 per share; and (d)
effectuate a forward split of all issued and outstanding shares of common stock,
at a ratio of thirty-for-one (30:1) (the "Stock Split").
All shares and per share amounts in the financial statements have been adjusted
to give retroactive effect to the Stock Split.
COMMON STOCK
On July 16, 2007, the Company issued 48,000,000 shares of its common stock to
Mr. Imperial for cash proceeds of $20,000. On July 17, 2007, Mr. Imperial was
elected to the Board of Directors, and became the President, Secretary, and
Treasurer of the Company.
On January 24, 2008, the Company completed and closed an offering by selling
25,200,000 shares, of the 36,000,000 registered shares, of its common stock, par
value of $0.0001 per share, at an offering price of $0.0017 per share for gross
proceeds of $42,000. Costs associated with this offering were $13,500.
On July 31, 2013, the former president of the Company surrendered 14,200,000
shares of common stock which was cancelled by the Company upon receipt as part
of the acquisition of Pure Guar.
NOTE 9 - RELATED PARTY TRANSACTIONS
FREE OFFICE SPACE
The Company has been provided office space by its Chief Executive Officer at no
cost. The management determined that such cost is nominal and did not recognize
the rent expense in its financial statement.
ADVANCES FROM STOCKHOLDER
From time to time, stockholders of the Company advance funds to the Company for
working capital purpose. Those advances are unsecured, non-interest bearing and
due on demand.
20
EMPLOYMENT AGREEMENT
Effective May 7, 2013, the Board of Directors of the Company appointed Mr.
Michael C. Shores as Chief Executive Officer and Chairman of the Board of
Directors.
In association with this appointment, the Company entered into an employment
agreement (the "Employment Agreement") with Mr. Shores in connection with his
employment as the Chief Executive Officer and Chairman of the Board of Directors
of the Company. Pursuant to the Employment Agreement, Mr. Shores will be
employed as the Chief Executive Officer of the Company for a two (2) year term,
and will receive an initial base salary of $7,000 per month. Mr. Shores will
dedicate between thirty (30%) and seventy (70%) percent of his time to operate
the Company. Either party may terminate the Employment Agreement upon thirty
(30) days written notice or immediately in certain other circumstances. In the
event of termination for no cause (as defined in the Employment Agreement), the
Company will pay Mr. Shores four (4) month severance.
NOTE 10 - SUBSEQUENT EVENTS
The Company has evaluated all events that occurred after the balance sheet date
through the date when the financial statements were issued to determine if they
must be reported. The Management of the Company determined that there were
certain reportable subsequent events to be disclosed as follows:
CONVERTIBLE NOTE PAYABLE
On November 29, 2013 the Company entered into a convertible note payable in the
amount of $100,000 is due on November 29, 2014, bears interest at 10% per annum
and is convertible at $0.25 per share at the discretion of the holder.
EQUITY INCENTIVE PLAN
On November 26, 2013, the Board of Directors of the Company approved its 2013
Equity Incentive Plan expiring November 26, 2023, whereby the Board of Directors
authorized 11,800,000 shares of the Company's common stock to be reserved for
issuance (the "2013 Equity Plan"). The purpose of the 2013 Equity Incentive Plan
is to advance the interests of the Company by providing an incentive to attract,
retain and motivate highly qualified and competent persons who are important to
us and upon whose efforts and judgment the success of the Company is largely
dependent. Grants to be made under the 2013 Equity Incentive Plan are limited to
the Company's employees, directors and consultants.
21
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 WITHIN THE MEANING
OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. REFERENCE IS MADE IN PARTICULAR TO THE DESCRIPTION OF OUR PLANS AND
OBJECTIVES FOR FUTURE OPERATIONS, ASSUMPTIONS UNDERLYING SUCH PLANS AND
OBJECTIVES, AND OTHER FORWARD-LOOKING STATEMENTS INCLUDED IN THIS REPORT. SUCH
STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS
"MAY," "WILL," "EXPECT," "BELIEVE," "ESTIMATE," "ANTICIPATE," "INTEND,"
"CONTINUE," OR SIMILAR TERMS, VARIATIONS OF SUCH TERMS OR THE NEGATIVE OF SUCH
TERMS. SUCH STATEMENTS ARE BASED ON MANAGEMENT'S CURRENT EXPECTATIONS AND ARE
SUBJECT TO A NUMBER OF FACTORS AND UNCERTAINTIES, WHICH COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE DESCRIBED IN THE FORWARD-LOOKING
STATEMENTS. SUCH STATEMENTS ADDRESS FUTURE EVENTS AND CONDITIONS CONCERNING,
AMONG OTHERS, CAPITAL EXPENDITURES, EARNINGS, LITIGATION, REGULATORY MATTERS,
LIQUIDITY AND CAPITAL RESOURCES, AND ACCOUNTING MATTERS. ACTUAL RESULTS IN EACH
CASE COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN SUCH STATEMENTS BY REASON
OF FACTORS SUCH AS FUTURE ECONOMIC CONDITIONS, CHANGES IN CONSUMER DEMAND,
LEGISLATIVE, REGULATORY AND COMPETITIVE DEVELOPMENTS IN MARKETS IN WHICH WE
OPERATE, RESULTS OF LITIGATION, AND OTHER CIRCUMSTANCES AFFECTING ANTICIPATED
REVENUES AND COSTS, AND THE RISK FACTORS SET FORTH IN OUR ANNUAL REPORT ON FORM
10-K FILED ON NOVEMBER 5, 2013.
In this Quarterly Report on Form 10-Q, references to "dollars" and "$" are to
United States dollars and, unless otherwise indicated, references to "we,"
"our," "us," "GGBL," the "Company" or the "Registrant" refer to Guar Global
Ltd., a Nevada corporation and its wholly owned subsidiary Guar Innovations,
Ltd., a Washington corporation ("Guar Innovations") and its majority owned
subsidiary Pure Guar India Private Limited, a company organized under the laws
of the Republic of India ("Pure Guar").
OVERVIEW
We were organized under the laws of the State of Nevada on May 29, 2007 under
the name ERE Management, Inc.
On July 31, 2013, we acquired Ninety Nine 99/100 percent (99.99%) of the capital
stock of Pure Guar pursuant to the Stock Purchase Agreement dated July 31, 2013
by and among the Company, Pure Guar, and the selling shareholder for
consideration of $1,692.43. The remaining 0.01% ownership in Pure Guar is held
by Guar Innovations.
Prior to the stock purchase, we were a development stage company focused on
developing a software product that enables real estate agents with no technical
knowledge to build a website to showcase their listings, and a public reporting
"shell company," as defined in Rule 12b-2 of the Securities Exchange Act of
1934, as amended. As a result of the stock purchase, we acquired the business
and operations of Pure Guar.
Pure Guar is a research-driven development stage company aiming to implement
new, modern strategies that will increase yield of guar crops and produce a high
quality product for the oil and gas. To date, Pure Guar has not generated any
revenue.
Key factors affecting our results of operations include revenues, cost of
revenues, operating expenses and income and taxation.
RESULTS OF OPERATIONS
REVENUES
We had no revenues for the period from May 29, 2007 (date of inception), through
October 31, 2013. We expect to begin earning revenues once the Company has
harvested its initial crops, less any seed used as crop expansion for
Farmer/Partner Cooperative Program.
EXPENSES
Operating expenses for three months ended October 31, 2013 and 2012 were
$176,799 and $5,088, respectively. These expenses consisted of professional fees
of $39,913 and $3,955, consulting fees of $99,415 and $0, travel expenses of
$5,868 and $0, amortization of $17,954 and $0 and general and administrative
expenses of $13,649 and $1,133.
22
NET LOSS
Our net losses for the year ended October 31, 2013 and the year ended October
31, 2012 were $195,413 and $5,088, respectively. Theses net losses were due to
the lack of revenues and increases in expenses discussed above.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
As at October 31, 2013, we have $51,736 in cash and $959,307 in current
liabilities. At such time our total assets were $194,463 and our total
liabilities were $959,307. Our net working capital was, on a pro forma basis,
($795,519).
In 2013, we issued various convertible notes in the form previously filed as
Exhibit 10.1 to our Current Report on Form 8-K filed on August 2, 2013:
(i) on each of April 10, 2013 and May 16, 2013, we issued notes to
Benchmark Solutions Inc. in the aggregate principal amount of
$345,000;
(ii) on August 26, 2013, we issued a note to Rocas Limited in the principal
amount of $200,000; and
(iii)on November 29, 2013, we issued a note to Eastwood Investments LLC in
the principal amount of $100,000.
Each of the notes described above matures on the one-year anniversary of its
issuance and bears interest at the rate of ten percent (10%) per annum. No
payments of principal or interest are due on any note prior to its maturity
date.
CASH TO OPERATING ACTIVITIES
For the three months ended October 31, 2013 and 2012, operating activities used
cash of $156,972 and $5,512, respectively, resulting in a net loss of $195,413
and $5,088, respectively.
CASH TO INVESTING ACTIVITIES
For the three months ended October 31, 2013 and 2012, we expended $36,308 and
$0, respectively, on investing activities.
CASH FROM FINANCING ACTIVITIES
For the three months ended October 31, 2013 and 2012, we raised $200,000 and $0,
respectively, through advances and loan proceeds.
CAPITAL REQUIREMENTS
We will be seeking capital to execute our business plan and reach positive cash
flow from operations. Our base monthly expenses total approximately $70,000 but
this may increase to approximately $100,000 in 2014. In order to successfully
execute our India strategy an additional $400,000 will be required in long-term
financing which will be used for hiring additional personnel, and acquiring raw
materials to fund our Farmer/Partner cooperative program.
These planned agricultural development activities require significant cash
expenditures. We do not expect to generate any revenues from operations until
2014, so we are currently seeking financing and we believe that will provide
sufficient working capital to fund our operations for at least the next 6 to 12
months. Such financing may consists of debt and/or equity financings, which may
result in substantial dilution to our existing stockholders. There are no
assurances that we will be able to raise the required working capital on terms
favorable, or that such working capital will be available on any terms when
needed.
We are a development stage corporation and have not generated any revenues from
operations. Therefore we do not internally generate adequate cash flows to
support our existing operations. Moreover, our historical and existing capital
structure is not adequate to fund our planned growth. We anticipate generating
losses through 2013 and into 2014. We anticipate that we will be able to raise
sufficient amounts of working capital in the near term through debt or equity
23
offerings as may be required to meet short-term obligations, including by
issuing additional common stock through a public offering. There can be no
assurance that we will be successful in procuring the financing we are seeking,
or on terms that are favorable to us. Future cash flows are subject to a number
of variables, including the level of production, economic conditions and
maintaining cost controls. There can be no assurance that operations and other
capital resources will provide cash sufficient to maintain planned or future
levels of capital expenditures.
To meet future objectives, we will need to meet revenue targets and sell
additional equity and debt securities, which most likely will result in dilution
to our current stockholders. We may also seek additional loans where the
incurrence of indebtedness would result in increased debt service obligations
and could require us to agree to operating and financial covenants that would
restrict operations. Any failure to raise additional funds on terms favorable to
us, or at all, could limit our ability to expand business operations and could
harm overall business prospects. In addition, we cannot be assured of
profitability in the future.
OFF-BALANCE SHEET ARRANGEMENTS
We have not entered into any other financial guarantees or other commitments to
guarantee the payment obligations of any third parties. We have not entered into
any derivative contracts that are indexed to our shares and classified as
shareholder's equity or that are not reflected in our consolidated financial
statements. Furthermore, we do not have any retained or contingent interest in
assets transferred to an unconsolidated entity that serves as credit, liquidity
or market risk support to such entity. We do not have any variable interest in
any unconsolidated entity that provides financing, liquidity, market risk or
credit support to us or engages in leasing, hedging or research and development
services with us.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with U.S. GAAP 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 reporting amounts of revenues and
expenses during the reporting period.
The Company's significant estimates and assumptions include the fair value of
financial instruments; income tax rate, income tax provision, deferred tax
assets and valuation allowance of deferred tax assets; the carrying value and
recoverability of long-lived assets, including the values assigned to an
estimated useful lives of website development costs and the assumption that the
Company will be a going concern. Those significant accounting estimates or
assumptions bear the risk of change due to the fact that there are uncertainties
attached to those estimates or assumptions, and certain estimates or assumptions
are difficult to measure or value.
Management bases its estimates on historical experience and on various
assumptions that are believed to be reasonable in relation to the financial
statements taken as a whole under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources.
Management regularly evaluates the key factors and assumptions used to develop
the estimates utilizing currently available information, changes in facts and
circumstances, historical experience and reasonable assumptions. After such
evaluations, if deemed appropriate, those estimates are adjusted accordingly.
Actual results could differ from those estimates.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In January 2013, the FASB issued ASU No. 2013-01, "BALANCE SHEET (TOPIC 210):
CLARIFYING THE SCOPE OF DISCLOSURES ABOUT OFFSETTING ASSETS AND LIABILITIES".
This ASU clarifies that the scope of ASU No. 2011-11, "BALANCE SHEET (TOPIC
210): DISCLOSURES ABOUT OFFSETTING ASSETS AND LIABILITIES." applies only to
derivatives, repurchase agreements and reverse purchase agreements, and
securities borrowing and securities lending transactions that are either offset
in accordance with specific criteria contained in FASB Accounting Standards
Codification or subject to a master netting arrangement or similar agreement.
The amendments in this ASU are effective for fiscal years, and interim periods
within those years, beginning on or after January 1, 2013.
In February 2013, the FASB issued ASU No. 2013-02, "COMPREHENSIVE INCOME (TOPIC
220): REPORTING OF AMOUNTS RECLASSIFIED OUT OF ACCUMULATED OTHER COMPREHENSIVE
INCOME." The ASU adds new disclosure requirements for items reclassified out of
accumulated other comprehensive income by component and their corresponding
effect on net income. The ASU is effective for public entities for fiscal years
beginning after December 15, 2013.
24
In February 2013, the Financial Accounting Standards Board, or FASB, issued ASU
No. 2013-04, "LIABILITIES (TOPIC 405): OBLIGATIONS RESULTING FROM JOINT AND
SEVERAL LIABILITY ARRANGEMENTS FOR WHICH THE TOTAL AMOUNT OF THE OBLIGATION IS
FIXED AT THE REPORTING Date." This ASU addresses the recognition, measurement,
and disclosure of certain obligations resulting from joint and several
arrangements including debt arrangements, other contractual obligations, and
settled litigation and judicial rulings. The ASU is effective for public
entities for fiscal years, and interim periods within those years, beginning
after December 15, 2013.
In March 2013, the FASB issued ASU No. 2013-05, "FOREIGN CURRENCY MATTERS (TOPIC
830): PARENT'S ACCOUNTING FOR THE CUMULATIVE TRANSLATION ADJUSTMENT UPON
DERECOGNITION OF CERTAIN SUBSIDIARIES OR GROUPS OF ASSETS WITHIN A FOREIGN
ENTITY OR OF AN INVESTMENT IN A FOREIGN ENTITY." This ASU addresses the
accounting for the cumulative translation adjustment when a parent either sells
a part or all of its investment in a foreign entity or no longer holds a
controlling financial interest in a subsidiary or group of assets that is a
nonprofit activity or a business within a foreign entity. The guidance outlines
the events when cumulative translation adjustments should be released into net
income and is intended by FASB to eliminate some disparity in current accounting
practice. This ASU is effective prospectively for fiscal years, and interim
periods within those years, beginning after December 15, 2013.
In March 2013, the FASB issued ASU 2013-07, "PRESENTATION OF FINANCIAL
STATEMENTS (TOPIC 205): LIQUIDATION BASIS OF ACCOUNTING." The amendments require
an entity to prepare its financial statements using the liquidation basis of
accounting when liquidation is imminent. Liquidation is imminent when the
likelihood is remote that the entity will return from liquidation and either (a)
a plan for liquidation is approved by the person or persons with the authority
to make such a plan effective and the likelihood is remote that the execution of
the plan will be blocked by other parties or (b) a plan for liquidation is being
imposed by other forces (for example, involuntary bankruptcy). If a plan for
liquidation was specified in the entity's governing documents from the entity's
inception (for example, limited-life entities), the entity should apply the
liquidation basis of accounting only if the approved plan for liquidation
differs from the plan for liquidation that was specified at the entity's
inception. The amendments require financial statements prepared using the
liquidation basis of accounting to present relevant information about an
entity's expected resources in liquidation by measuring and presenting assets at
the amount of the expected cash proceeds from liquidation. The entity should
include in its presentation of assets any items it had not previously recognized
under U.S. GAAP but that it expects to either sell in liquidation or use in
settling liabilities (for example, trademarks). The amendments are effective for
entities that determine liquidation is imminent during annual reporting periods
beginning after December 15, 2013, and interim reporting periods therein.
Entities should apply the requirements prospectively from the day that
liquidation becomes imminent. Early adoption is permitted.
Management does not believe that any other recently issued, but not yet
effective accounting pronouncements, if adopted, would have a material effect on
the accompanying consolidated financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
We carried out an evaluation, under the supervision and with the participation
of our management, including our Chief Executive Officer (who is our Principal
Executive Officer) and our Chief Financial Officer (who is our Principal
Financial Officer and Principal Accounting Officer), of the effectiveness of the
design of our disclosure controls and procedures (as defined by Exchange Act
Rules 13a-15(e) or 15d-15(e)) as of October 31, 2013 pursuant to Exchange Act
Rule 13a-15. Based upon that evaluation, our Principal Executive Officer and
Principal Financial Officer concluded that our disclosure controls and
procedures were not effective as of October 31, 2013 in ensuring that
information required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized, and reported within
the time periods specified in the Securities and Exchange Commission's (the
"SEC") rules and forms. This conclusion is based on findings that constituted
material weaknesses. A material weakness is a deficiency, or a combination of
control deficiencies, in internal control over financial reporting such that
there is a reasonable possibility that a material misstatement of the Company's
interim financial statements will not be prevented or detected on a timely
basis.
In performing the above-referenced assessment, management had concluded that as
of July 31, 2013, there were deficiencies in the design or operation of our
internal control that adversely affected our internal controls which management
considers to be material weaknesses including those described below:
25
i) We have insufficient quantity of dedicated resources and experienced
personnel involved in reviewing and designing internal controls. As a
result, a material misstatement of the interim and annual financial
statements could occur and not be prevented or detected on a timely
basis.
ii) We do not have an audit committee. While not being legally obligated
to have an audit committee, it is the management's view that to have
an audit committee, comprised of independent board members, is an
important entity-level control over our financial statements.
iii) We did not perform an entity level risk assessment to evaluate the
implication of relevant risks on financial reporting, including the
impact of potential fraud-related risks and the risks related to
non-routine transactions, if any, on our internal control over
financial reporting. Lack of an entity-level risk assessment
constituted an internal control design deficiency which resulted in
more than a remote likelihood that a material error would not have
been prevented or detected, and constituted a material weakness.
iv) We have not achieved the optimal level of segregation of duties
relative to key financial reporting functions.
Our management feels the weaknesses identified above have not had any material
affect on our financial results. However, we are currently reviewing our
disclosure controls and procedures related to these material weaknesses and
expect to implement changes in the near term, including identifying specific
areas within our governance, accounting and financial reporting processes to add
adequate resources to potentially mitigate these material weaknesses.
Our management team will continue to monitor and evaluate the effectiveness of
our internal controls and procedures and our internal controls over financial
reporting on an ongoing basis and is committed to taking further action and
implementing additional enhancements or improvements, as necessary and as funds
allow.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. All internal control systems,
no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in our internal controls over financial reporting that
occurred during the quarterly period ended October 31, 2013 that have materially
affected, or are reasonably likely to materially affect, our internal controls
over financial reporting. We believe that a control system, no matter how well
designed and operated, cannot provide absolute assurance that the objectives of
the control system are met, and no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, within any
company have been detected.
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 1A. RISK FACTORS
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
26
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
On November 29, 2013, we issued a convertible note to Eastwood Investments LLC
in the principal amount of $100,000 which matures on November 29, 2013 and bears
interest at the rate of ten percent (10%) per annum. No payments of principal or
interest are due on the note prior to its maturity date.
The holder may exercise its conversion right and convert the outstanding amounts
under the convertible note into the number of shares of common stock determined
by dividing (i) the unpaid principal of the note and any accrued and unpaid
interest by (ii) 80% of the market price of our common stock at the time of
conversion.
In the event of any change of control of the Company, including any
reorganization, merger, sale of all or substantially all of the Company's assets
or any issuance or sale by the Company of more than 50% of the outstanding
voting power of the Company, the note becomes immediately due and payable.
ITEM 6. EXHIBITS
Exhibit
Number Description
------ -----------
3.1(a) Articles of Incorporation (incorporated by reference to the
Registrant's Registration Statement on Form SB-2 (File No. 333-147250)
filed on November 9, 2007).
3.1(b) Certificate of Amendment to Articles of Incorporation (incorporated by
reference to the Registrant's Current Report on Form 8-K filed on April
19, 2012).
3.1(c) Certificate of Change (incorporated by reference to the Registrant's
Current Report on Form 8-K filed on April 19, 2012).
3.1(d) Certificate of Amendment to Articles of Incorporation (incorporated by
reference to the Registrant's Current Report on Form 8-K filed on
October 15, 2012).
3.2 Bylaws (incorporated by reference to the Registrant's Registration
Statement on Form SB-2 (File No. 333-147250) filed on November 9,
2007).
10.1 Guar Global Ltd. 2013 Equity Incentive Plan (incorporated by reference
to the Registrant's Current Report on Form 8-K filed on December 9,
2013)
31.1 Certification of the Principal Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.*
31.2 Certification of the Principal Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.*
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.*
101 Interactive Data File**
----------
* Filed herewith
** Pursuant to Rule 406T of Regulation S-T, these interactive data files are
deemed not filed or part of a registration statement or prospectus for
purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18
of the Securities Exchange Act of 1934 and otherwise are not subject to
liability.
27
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.
GUAR GLOBAL LTD.
Date: December 16, 2013 By: /s/ Michael C. Shores
---------------------------------------------
Michael C. Shores
Chief Executive Officer (principal executive
officer)
By: /s/ Joselito Christopher G. Imperial
---------------------------------------------
Joselito Christopher G. Imperial
President, Treasurer, Secretary and Director
(principal financial officer and principal
accounting officer)
28