UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 9, 2007
CREDIT ONE FINANCIAL, INC.
(Exact name of registrant as specified in its charter)
Florida 000-50320 59-3641205
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
80 Wall Street, Suite 818, New York, NY 10005
(Address of principal executive offices) (Zip Code)
(212) 809-1200
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2 below):
( ) Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
( ) Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
( ) Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
( ) Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01. ENTRY INTO DEFINITIVE MATERIAL AGREEMENTS
On September 24, 2007, Credit One Financial, Inc. (the "Company") entered into
a Project Agreement with Tin Loon Trading Company ("Tin Loon"). Tin Loon is a
company registered in Hong Kong, China, and is primarily engaged in the business
of graphite trading. Pursuant to the agreement, the Company agrees to advance
$100,000 (the "Advance") to Tin Loon. The proceeds of the Advance will be used
exclusively at Tin Loon as working capital for its graphite trading business.
The Advance is not in the nature of a loan to any party or a direct ownership
interest in Tin Loon. Instead, the Advance constitutes consideration for the
rights to receive 60%, or $3,000, whichever is larger, on quarterly basis, of
the net profits from Tin Loon's business activities financed by the Advance (the
"Net Profits"). In the event there is an operating loss, or the Net Profits
is less than $3,000 for a quarter, Tin Loon will pay the Company the minimum
payment of $3,000 for that quarter
On October 5, 2007, the Company entered into a second project agreement with Tin
Loon under the same terms and conditions, except that the amount of the advance
was $500,000, and the payments from Tin Loon to the Company is 60%, or $15,000,
whichever is larger, on quarterly basis, of the net profits from Tin Loon's
business activities financed by the Advance. In the event there is an operating
loss, or the Net Profits is less than $15,000 for a quarter, Tin Loon will pay
the Company the minimum payment of $15,000 for that quarter.
Under the both agreements, the Advance of $600,000 will be fully returned to the
Company, with any accrued Net Profits, within 30 days upon Tin Loon's receipt of
return notice from the Company.
Item 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
The transactions contemplated by the projects agreements as described above
were completed. As a result of the consummation of the above transactions, the
Company has ceased to be a shell company, as such term is defined in Rule 12b-2
under the Securities Exchange Act of 1934, as amended.
Background of the Company
Credit One Credit Financial, Inc. (the "Company") was incorporated in the State
of Florida on September 24, 1999. From inception to May 4, 2006, we were
engaged in market research regarding the cost and availability of non-performing
credit card debt portfolios. We were also engaged in research regarding the
current market price for re-performing portfolios as well as the market prices
offered for portfolios deemed non-collectable at the time of sale.
On May 4, 2006, James H. Bashaw, then our President and CEO, and Richard R.
Cook, then our Secretary, Treasurer and CFO, sold an aggregate of 4,698,238 of
their shares of the Company's common stock to STM 1, LLC. The shares sold by
Messrs. Bashaw and Cook to STM 1, LLC represented 78.55% of our issued and
outstanding shares of common stock. Subsequent to such change in control,
Messrs. Bashaw and Cook resigned from their positions as our directors and
officers.
From May 4, 2006 to July 24, 2007, we changed our business plan from
contemplating the acquisition of non-performing accounts receivable to
attempting to acquire other assets or business operations that will maximize
shareholder value. No specific assets or businesses had been definitively
identified. On July 24, 2007, four principal shareholders of the Company, Guy
Wolf; STM 1, LLC; Antonio Investments, Ltd; and Smart Trading, Ltd, sold a total
of 6,962,438 shares, which represented 89.48% of our capital shares, to ten
persons for a total of $625,000 in cash. Simultaneous with the sale of the
securities, the Company's sole officer and director John Vidaver resigned, and
Dicky Cheung was appointed as our sole officer and director.
Our current business plan is to provide funding, primarily in the form of
advance, to small and medium sized businesses companies, who have good and
feasible business plans, but lacking capital to implement their business plans.
We have not been involved in any bankruptcy, receivership or similar
proceeding.
Description of Business
We are currently engaged in providing project financing, primarily in the form
of advance, to small and medium sized enterprises who have good and feasible
business plans with attractive prospects for profitability, but lacking capital
to implement their business plans. Our advances are on project basis, and
typically the proceeds of the advance will be exclusively used as their working
capital for the proposed project. We do not provide funding for general business
purposes.
Our clients will be typically small and medium-sized independent businesses,
most of whom are located in China, and in some cases, in other countries. Our
focus is providing funding based on the quality of our clients' projects,
ability to pay and the project's profitability. Our funding is generally
secured, case by case, by various form of collateral pledged by clients. Such
collateral includes fixed assets, receivables, inventories, as well as personal
and validity guarantees from our clients' owners.
We generate revenues by raising capital and advancing this capital to small and
medium sized businesses companies. The advances we make are not in the nature
of a loan to any party or a direct ownership interest in a business or project.
Instead, the advances constitute consideration for the rights to receive
payments, the other rights or benefits provided by project agreements. If a
project is profitable, we have the right to receive a percentage of the net
profits generated by the project we financed ("Success Fees"). In the event
that there is an operating loss, or the net profits of the project is less than
a minimum pre-determined amount, a service fee equal to such pre-determined
minimum amount, generally in a range of 8-12% of the total amount we advanced
per annum will be charged ("Minimum Fees").
Success fees are charged and recognized only at conclusion of the project, and
only if such project is profitable. The amount of success fees charged is based
on our analyses of the risks the project involved. If the project is in a loss
position, the amount of the Minimum Fees charged will be based on the time
value of money. The amount of the fee payable on the funds advanced depends
upon the risks of the projects, and length of time the funds are outstanding.
The advances are fully repayable whether the underlying project is lost or
profitable. Minimum Fee payments may be made either monthly or quarterly.
Sales and Marketing
At present we do not have sales and marketing personnel to develop advertising
and sales programs to our target market. We find projects to "invest in" through
business connections of our executive officer. Business opportunities may also
come to our attention from various sources, including professional advisers such
as attorneys and accountants, venture capitalists, members of the financial
community, and others who may present unsolicited proposals. No fees will be
paid to the persons who refer a potential project to us for evaluation.
Project Selection
We believe that selection of projects is the essential ingredient of our
business. We only contract with small businesses that, in our assessment, have
the experience and acumen to implement business plans. Currently we intend to
do business only with whom we have previously contracted business, or who are
referrals from existing business clients.
The funding decisions of the Company are made on basis of risk analysis we
perform internally as to the merits of each project proposed to be financed, the
likelihood of its success, and its estimated value. The decision to advance, as
well as the fees we charge is determined by this risk analysis. In analyzing
prospective business opportunities, we will consider the following factors: (i)
The available technical, financial and managerial resources; (ii) Working
capital and other financial requirements of the target; (iii) The target's
history of operations, if any; (iv) The target's prospects for the future; (v)
The present and expected competition in the target's industry; (vi) The quality
and experience of management services which may be available and the depth of
that management within the target; (vii) The potential for further research,
development or exploration in the target's industry; (viii) Specific risk
factors which may be anticipated to impact the proposed activities of the
project; (ix) The potential for growth or expansion and profit; and (x) Other
relevant factors.
Competition
We compete with numerous companies that provide project funding. We have no
proprietary competitive advantage. Accordingly, we believe that there are no
substantial barriers to competitors entering the market. We may not be able to
compete successfully against competitors with greater financial resources or
access to potential business. Additionally, it is possible that competition may
drive down the return on our advances, which may negatively impact the
viability of our business model.
Given the lack of discoverable information about our competitors, we do not
know how our method of operations and results compare to others in the industry.
However, given the nature of the business opportunity presented within the
industry, and management's belief that the market, though unquantifiable, is
very large, there is always the possibility that new competitors with greater
resources will commence operations and compete directly with us in such a
manner as to harm our operational results and future prospects and reduce our
ability to generate revenues.
Government Regulation
We intend to conduct our business in compliance with any applicable regulations,
and are subject to general state and federal laws governing the conduct of
businesses in general. In regard to our specific line of business, we are
unaware of any state or federal regulations concerning project advances in any
of the states in which we intend to do business in the foreseeable future. In
the event that our activities are deemed to be loans, or in the event that we
decide to extend loans as defined by state law, we intend to comply with any and
all applicable finance and lending regulations. Each state has laws and
regulations governing the business of lending money that differ from state to
state. Therefore, prior to offering our funding services into a new jurisdiction
we must conduct an extensive review of that state's regulatory framework to
ensure compliance with the applicable regulations.
Research and Development
We are not currently conducting any research or development activities. We do
not anticipate conducting such activities in the near future.
Government Contracts
There are no government contracts.
Patents, trademarks, franchises, concessions, royalty agreements or labor
contracts
We don't own any patents, trademarks, copyrights, franchises, concessions,
royalty agreements, or labor contracts.
Employees
In addition to our executive officer, we have one full time employee at this
time. We may hire third party consultants or part-time employees from time to
time. None of our employees are covered by collective bargaining agreements,
and we believe our relationships with our employees to be satisfactory.
Reports to Security Holders
We are subject to the informational requirements of the Securities Exchange Act
of 1934, as amended. In accordance with those regulations, we file periodic
reports, and other information with the Securities and Exchange Commission.
Our reports and other information can be inspected and copied at the public
reference facilities maintained by the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You can obtain information on the
operations of the Public Reference Room by calling the SEC at (800) SEC-0330.
Information also is available electronically on the Internet at
http://www.sec.gov.
We intend to furnish our shareholders with annual reports containing audited
financial statements for each year.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This report contains forward-looking statements that involve risks and
uncertainties. Actual events or results may differ materially from those
indicated in such forward-looking statements. The following discussion of the
financial condition and results of our operations should be read in conjunction
with the financial statements and related notes thereto included elsewhere in
this report.
Overview and Outlook
We were incorporated in the State of Florida on September 24, 1999. From
inception to May 4, 2006, we were engaged in market research regarding the cost
and availability of non-performing credit card debt portfolios. We were also
engaged in research regarding the current market price for re-performing
portfolios as well as the market prices offered for portfolios deemed
non-collectable at the time of sale. From May 4, 2006 to July 24, 2007, our
business plan was changed from contemplating the acquisition of non-performing
accounts receivable to attempting to acquire other assets or business operations
that will maximize shareholder value. No specific assets or businesses had been
definitively identified.
Our current business plan is to provide funding, primarily in the form of
advance, to small and medium sized businesses, who have good and feasible
business plans with attractive prospects for profitability, but lacking capital
to implement their business plans. Our advances are on project basis, and
typically the proceeds of the advance will be exclusively used as their working
capital for the proposed projects.
Our clients will be typically small and medium-sized independent businesses,
most of whom are located in China, and in some cases, in other countries. Our
focus is providing funding based on the quality of our clients' projects,
ability to pay and the project's profitability. Our funding is generally
secured, case by case, by various form of collateral pledged by clients. Such
collateral includes fixed assets, receivables, inventories, as well as personal
and validity guarantees from our clients' owners.
We generate revenues by raising capital and advancing this capital to small and
medium sized businesses companies. The advances we make are not in the nature
of a loan to any party or a direct ownership interest in a business or project.
Instead, the advances constitute consideration for the rights to receive
payments, the other rights or benefits provided by project agreements. If a
project is profitable, we have the right to receive a percentage of the net
profits generated by the project we financed ("Success Fees"). In the event
that there is an operating loss, or the net profits of the project is less than
a minimum pre-determined amount, a service fee equal to such pre-determined
minimum amount, generally in a range of 8-12% of the total amount we advanced
per annum will be charged ("Minimum Fees").
Success fees are charged and recognized only at conclusion of the project, and
only if such project is profitable. The amount of success fees charged is
based on our analyses of the risks the project involved. If the project is in
a loss position, the amount of the Minimum Fees charged will be based on the
time value of money. The amount of the fee payable on the funds advanced
depends upon the risks of the projects, and length of time the funds are
outstanding.
To date we have entered into two project agreements with Tin Loon, a Hong Kong
corporation, to advance it with an aggregate of $600,000. The proceeds of the
advances will be used exclusively in Tin Loon as working capital for its
graphite trading business.
We believe we will not have sufficient cash flow to fund and sustain operations.
Therefore, equity and debt financing from third parties will be pursued.
Management estimates that within next 12 months, we will commence to generate
cash flow sufficient to sustain our operations.
During the quarter ended September 30, 2007, we had placed $100,000, and as of
the date of this report, we have placed an aggregate of $600,000, in funding to
a Hong Kong based small business firm, which as of September 30, 2007 we have
collected $3,000 in fees. Pursuant to the agreements, we expect to collect a
minimum service fee of $18,000 by December 31, 2007.
Results of Operations for the Years Ended December 31, 2006 and 2005
The following overview provides a summary of key information concerning our
financial results for the years ended December 31, 2006 and 2005.
Revenues
Year Ended December 31, Increase (Decrease)
2006 2005 $ %
------------ ---------- -------- --------
Net Revenue $ - $ - $ - -
Revenue: For the fiscal years ended December 31, 2006 and 2005, we had not
conducted any active operations. No revenue has been generated during such
periods.
Operating expenses
Year Ended December 31, Increase (Decrease)
2006 2005 $ %
------------ --------- ---------- --------
<s> <c> <c> <c> <c>
Salary expense $ 42,000 $ - $ 42,000 n/a
General and administrative expenses 65,890 16,759 49,131 293%
------------ --------- ---------- ---------
Total operating expenses $ 107,890 $ 16,759 $ 91,131 544%
Total operating expenses for the year ended December 31, 2006 increased by
$91,131, or approximately 544%, over the year ended December 31, 2005 because
of the overall increase in salary expense and in the general and
administrative area.
Other income (expense)
Year Ended December 31, Increase (Decrease)
2006 2005 $ %
---------- --------- --------- ---------
Interest income $ 237 $ - $ 237 n/a
---------- --------- --------- ---------
Total other income (expense) $ 237 $ - $ 237 n/a
Our total other income in 2006 was $237, which consists of only interest income.
We had no other income or expenses in 2005.
Net (loss)
Year Ended December 31, Increase (Decrease)
2006 2005 $ %
---------- ---------- --------- ---------
Net (loss) $ (107,653) $ (16,759) (90,894) (542)%
For the year ended December 31, 2006, we had a net loss of $107,653, or $0.02
per share, as compared to a net loss of $16,759, or $0.00 per share, for the
same period of the previous year.
Results of Operations for the Six Months Ended June 30, 2007 and 2006
As of the date of this report on Form 8-K, the auditors' reviewed financial
statements of the Company as of September 30, 2007 are not available. We will
file an amendment to this report on this Form 8-K to add such financial
statements on or before November 15, 2007.
The following overview provides a summary of key information concerning our
financial results for the first quarter of 2007 and 2006.
Revenues
Six Months Ended
June 30, Increase (Decrease)
---------------------------------------------
2007 2006 $ %
------------ ---------- --------- ----------
Net Revenue $ - $ - $ - -%
------------ ---------- --------- ----------
Revenue: For the six months ended June 30, 2007 and 2006, we had not conducted
any active operations. No revenue has been generated during such periods.
Operating expenses
Six Months Ended
June 30, Increase (Decrease)
-----------------------------------------------
2007 2006 $ %
------------ ---------- ---------- -----------
<s> <c> <c> <c> <c>
Salary expenses $ 895 $ 13,860 $ (12,965) (93.5)%
General and administrative expenses 32,879 9,354 10,560 45.5%
------------ ---------- ---------- ----------
Total operating expenses $ 33,774 $ 23,214 $ 10,560 45.5%
Total operating expenses for the six month period ended June 30, 2007 increased
by $10,560, or approximately 45.5%, over the six month period ended June 30,
2006 because of increased professional fees and general and administrative
expenses.
Other income (expense)
Six Months Ended
June 30, Increase (Decrease)
----------------------------------------
2007 2006 $ %
---------- --------- --------- --------
Interest income $ 19 $ - $ 19 n/a
----------- --------- --------- --------
Total other income (expense) $ 19 $ - $ 19 n/a
Our total other income for the six months ended June 30, 2007 was $19, which
consists of only interest income. We had no other income or expenses for the
same period of the prior year.
Net loss
Three Months Ended June 30, Increase (Decrease)
-------------------------------------------------
2007 2006 $ %
-------------- -------------- -------- -------
Net Loss $ (33,755) $ (23,214) $ (10,541) (45.4)%
For the six months ended June 30, 2007, we had a net loss of $33,755, or $0.00
per share, as compared to a net loss of $23,214, or $0.00 per share, for the
same period of the previous year.
Operation Plan
During the next twelve months we plan to effectuate our business plan. Demand
for financing remains strong and we look forward to begin satisfying as soon as
we have secured new capital or financing.
We have cash balance of approximately $20,000 as of September 30, 2007. In the
opinion of management, available funds will not satisfy our working capital
requirements for the next twelve months. We will need to raise funds to
continue to implement our business plan. We plan to raise funds through
private placements, either in equity offerings, or interest bearing borrowings.
We may also consider establishing relationships with selected business partners
whose contributions include necessary cash. There is no guarantee that we will
be able to raise additional funds through offerings or other sources. If we
are unable to raise funds, our ability to continue with operations will be
materially hindered.
Liquidity and Capital Resources
We have historically met our capital requirements through the issuance of stock
and by borrowings from our executive officers and directors. On July 26, 2007,
we entered into a promissory note with Dicky Cheng, our President and CEO, for
the principal amount of $20,000. Pursuant to the note we promised to pay to the
order of Dicky Cheung $20,000 together with accrued interest thereon at 5% per
annum in sixty (180) days.
On September 25, 2007, we entered into a Promissory Note with Dicky Cheng for
the principal amount of $100,000. Pursuant to the note we promised to pay to
the order of Dicky Cheung the sum of $100,000 together with accrued interest
thereon at 5% per annum in sixty (60) days. The principal amount of the note,
along with all interest accrued and unpaid thereon, are due and payable in full
within 180 days.
On October 5, 2007, we entered into a Promissory Note with Dicky Cheng for the
principal amount of $500,000. Pursuant to the note we promised to pay to the
order of Dicky Cheung the sum of $500,000 together with accrued interest thereon
at 5% per annum in sixty (60) days. The principal amount of the note, along
with all interest accrued and unpaid thereon, are due and payable in full within
180 days.
We believe that our existing cash and cash equivalent balance and anticipated
funds from operations will not be sufficient to sustain operations and planned
expansion. We intend to raise additional capital in the next twelve months to
fund growth and expansion through additional equity or debt financing. There
can be no assurance that we will be able to obtain additional funding when and
if needed, or that such funding, if available, can be obtained on terms
acceptable to us.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes
in financial condition, revenues or expenses, results or operations, liquidity,
capital expenditures or capital resources that is material to investors.
Going Concern
Our ability to continue as a going concern remains dependent upon successful
operation under our business plan, obtaining additional capital and financing,
and generating positive cash flow from operations. This is because the Company,
due to its financial condition, may have to seek additional capital either
through debt or equity offerings to meet its cash needs. The Company has no
revenue and has little cash. The level of current operations does not sustain
the Company's expenses and the Company has no commitments for obtaining
additional capital. These factors, among others, raise substantial douby about
its ability to continue as a going concern.
Critical Accounting Policies
Our financial statements and related public information are based on the
application of generally accepted accounting principles in the United States
("GAAP"). GAAP requires the use of estimates, assumptions, judgments and
subjective interpretations of accounting principles that may have an impact on
the assets, liabilities, revenue and expense amounts reported. These estimates
can also affect supplemental information contained in our external disclosures
including information regarding contingencies, risk and financial condition.
We believe our use of estimates and underlying accounting assumptions adhere to
GAAP and are consistently applied. We base our estimates on historical
experience and on various assumptions that we believe are reasonable under the
circumstances. Actual results may differ materially from these estimates under
different assumptions or conditions. We continue to monitor significant
estimates made during the preparation of our financial statements.
Our significant accounting policies are summarized in Note 2 to our financial
statements. While all of these significant accounting policies impact our
financial condition and results of operations, we view certain of these policies
as critical. Policies determined to be critical are those policies that have
the most significant impact on our financial statements. Our critical accounting
policies are discussed below.
Revenue Recognition
We recognize revenues in accordance with SEC Staff Accounting Bulletin No. 104,
"Revenue Recognition' ("SAB 104"). Under SAB 104, revenue is recognized at the
point of passage to the customer of title and risk of loss, when there is
persuasive evidence of an arrangement, the sales price is determinable, and
collection of the resulting receivable is reasonably assured. Revenues consist
primarily of success fees and service fees. Success fees are earned on
investments in contracts, which are recognized upon receipt when a project is
completed, and only if such project is profitable. Service fees are recognized
in the period in which the advance has been made.
Recently Issued Accounting Standards
In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"
(SFAS 157). SFAS 157 provides guidance for using fair value to measure assets
and liabilities. SFAS 157 addresses the requests from investors for expanded
disclosure about the extent to which companies measure assets and liabilities at
fair value, the information used to measure fair value and the effect of fair
value measurements on earnings. SFAS 157 applies whenever other standards
require (or permit) assets or liabilities to be measured at fair value, and does
not expand the use of fair value in any new circumstances. SFAS 157 is effective
for financial statements issued for fiscal years beginning after November 15,
2007. We are unable at this time to determine the effect that its adoption of
SFAS 157 will have on its consolidated results of operations and financial
condition.
In July 2006, the FASB issued FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109"
(FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes by
prescribing the recognition threshold a tax position is required to meet before
being recognized in the financial statements. It also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure and transition. The cumulative effects, if any, of applying
FIN 48 will be recorded as an adjustment to retained earnings as of the
beginning of the period of adoption. FIN 48 is effective for fiscal years
beginning after December 15, 2006. We do not expect the adoption of FIN 48 to
have a material impact on its results of operations and financial condition.
In September 2006, the SEC issued Staff Accounting Bulletin No. 108,
"Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements" (SAB 108). SAB 108 provides
guidance on the consideration of the effects of prior year misstatements in
quantifying current year misstatements for the purpose of a materiality
assessment. SAB 108 establishes an approach that requires quantification of
financial statement errors based on the effects of each on a company's balance
sheet and statement of operations and the related financial statement
disclosures. Early application of the guidance in SAB 108 is encouraged in any
report for an interim period of the first fiscal year ending after November 15,
2006. We do not expect the adoption of SAB 108 to have a material impact on its
results of operations and financial condition.
RISK FACTORS
An investment in the Company involves a high degree of risk. Investors should
carefully consider the risks below before making an investment decision. Our
business, financial condition or results of operations could be materially
adversely affected by any of these risks. In such case, the trading price of
our common stock could decline and investors could lose all or part of their
investment. As of the date of this filing, our management is aware of the
following material risks.
Risks Related to Our Business
We are a development-stage company and until recently had no operating history,
which makes it difficult to evaluate our business and prospects.
We were formed in September 1999, and until the closing of project funding
transactions in September and October 2007 had no history of meaningful
operations, which makes it difficult to evaluate our business and prospects. As
an early stage company, we are subject to all the risks, uncertainties, expenses
and difficulties inherent in a new business, and there are no assurances that we
will be successful in realizing revenues or in achieving or sustaining positive
cash flow at any time in the future.
We have historically had losses from operations and losses may continue in the
future, which may cause us to curtail operations.
Since inception we have not been profitable and have lost money on both a cash
and non-cash basis. For the year ended December 31, 2006 and for the six months
ended June 30, 2007, we had incurred net losses of $107,653 and $33,755,
respectively. Our accumulated deficit at June 30, 2007 was $195,459. Future
losses are likely to occur, as we are dependent on spending money to pay for our
operations and implement our business plan. No assurances can be given that we
will be successful in reaching or maintaining profitable operations. If our
losses continue, our ability to operate may be severely impacted or
alternatively we may be forced to terminate our operations.
We have no prior experience in analyzing the business projects we plan to
provide funding assistance, which increases the risk of our inability to expand,
build and operate our business.
Our current board of directors and executive officer are experienced in business
generally but has no prior experience in analyzing the business projects we plan
to provide funding assistance. Due to his lack of experience, our executive
officer may make wrong decisions. Consequently, we may suffer irreparable harm
due to management's lack of experience in the industry. As a result we may have
to suspend or cease operations which will result in the loss of your investment.
Our independent auditors have expressed doubt about our ability to continue as
a going concern, which may hinder our ability to obtain future financing.
We are devoting a significant amount of our present efforts in establishing a
new line of business and we have not yet achieved revenues. In their report
dated March 28, 2007, our independent auditors have expressed doubt about our
ability to continue as a going concern in our financial statements for the
fiscal year ended December 31, 2006. Our ability to continue as a going concern
is a result of recurring losses from operations, a stockholders' deficit, and
requirement for a significant amount of capital financing to proceed with our
business plan. Our ability to continue as a going concern is subject to our
ability to generate a profit and/or obtain necessary funding from outside
sources, including obtaining additional funding from the sale of our securities,
increasing sales or obtaining loans where possible. The going concern
uncertainty in the auditor's report increases the difficulty in meeting such
goals and there can be no assurances that such methods will prove successful.
Our business is capital intensive. If we are not able to obtain adequate fund,
we would be required to limit our operations significantly or cease operations
entirely.
Our business is capital intensive, and our business strategy requires us to
deploy sufficient capital in order to create the scale necessary to generate a
profit. In order to become profitable, we must have sufficient working capital
to build a portfolio of investments in contracts. If adequate funds are not
available, we would be required to limit our operations significantly or cease
operations entirely. We have no immediate means for obtaining additional
financing. There can be no assurance that such additional financing, when and
if necessary, will be available to us on acceptable terms, or at all.
We could fail to attract or retain key personnel, which could be detrimental to
our operations.
Our success largely depends on the efforts and abilities of our officers and
directors, particularly Dicky Cheung, our President and CEO. The loss of his
services could materially harm our business because of the cost and time
necessary to find successors. Such a loss would also divert management
attention away from operational issues. We do not have other key employees who
manage our operations. To the extent that we are smaller than our competitors
and have fewer resources, we may not be able to attract a sufficient number and
quality of staff, when required.
Our operating results may fluctuate significantly, which makes our future
results difficult to predict and could cause our operating results to fall below
expectations.
Our operating results may fluctuate significantly in the future due to a variety
of factors, many of which are outside of our control. As a result, comparing
our operating results on a period-to-period basis may not be meaningful, and,
therefore, prior results are not necessarily indicative of results to be
expected in future periods.
Competition in the business we operate could limit our growth and harm our
operating results.
We are a small company and have little market share in our target market. We
compete with numerous companies that provide project funding. We have no
proprietary competitive advantage. Accordingly, we believe that there are no
substantial barriers to competitors entering the market. We may not be able to
compete successfully against competitors with greater financial resources or
access to potential business. Additionally, it is possible that competition may
drive down the return on our advances, which may negatively impact the viability
of our business model.
Given the lack of discoverable information about our competitors, we do not know
how our method of operations and results compare to others in the industry.
However, given the nature of the business opportunity presented within the
industry, and management's belief that the market, though unquantifiable, is
very large, there is always the possibility that new competitors with greater
resources will commence operations and compete directly with us in such a manner
as to harm our operational results and future prospects and reduce our ability
to generate revenues.
Our directors have other business responsibilities which may cause conflicts of
interest in the allocation of their time and services to our business.
Dicky Cheung, our sole officer, has other management responsibilities and
business interests apart from our business. Therefore, it is possible that a
conflict of interest with regard to his time may arise based on his involvement
in other activities. His other activities will prevent him from devoting full-
time to our operations which could slow our operations and may reduce our
financial results because of the slow down in operations. Mr. Cheung currently
devotes approximately 10-15 hours per week to company matters. Mr. Cheung
intends to limit his role in his other business activities and devote more of
his time to us after we attain a sufficient level of revenue and are able to
provide sufficient officers' salaries.
Our sole officer and director are located outside of the U.S. It is difficult
to effect service of process and enforcement of legal judgments upon us and our
officers and directors.
Our sole officer and director are located outside of the United States. As a
result, it may be difficult to effect service of process within the United
States and enforce judgment of the US courts obtained against us and our
executive officers and directors. Particularly, our shareholders may not be
able to:
o Effect service of process within the United States on us or any of our
executive officers and directors;
o Enforce judgments obtained in U.S. courts against us based upon the
civil liability provisions of the U.S. federal securities laws;
o Enforce, in a court outside of the U.S. judgments of U.S. courts based
on the civil liability provisions of the U.S. federal securities laws; and
o Bring an original action in a court in China to enforce liabilities
against us or any of our executive officers and directors based upon the U.S.
federal securities laws.
Risks Related to Investment in Our Securities
A few of our existing shareholders own a large percentage of our voting stock
and will have a significant influence over matters requiring stockholder
approval and could delay or prevent a change in control.
As of the date of this report, Dicky Cheung, our President, CEO and the sole
director, beneficially own3,882,438 shares, or approximately 49.9%, of our
outstanding common stock. As a result, if acting together with other
shareholders, they may have the ability to determine the outcome of matters
submitted to our stockholders for approval, including the election of directors
and any merger, consolidation or sale of all or substantially all of our assets.
In addition, these persons, if acting together, may have the ability to control
the management and affairs of the Company, which could have a material adverse
effect on the value of the common stock.
There has been low volume and therefore inactive for our common stock, our stock
price may be volatile or may decline regardless of our operating performance,
and you may not be able to resell your shares at or above your stock purchase
price.
If you purchase shares of our common stock, you may not be able to resell those
shares at or above your original purchase price. An active or liquid market in
our common stock may not develop or, if it does develop, it may not be
sustainable. The market price of our common stock may fluctuate significantly
in response to numerous factors, many of which are beyond our control.
Our common stock is listed on the Over-the-Counter Bulletin Board which may make
it more difficult for stockholders to sell their shares and may cause the market
price of our common stock to decrease.
Because our common stock is listed on the OTC Bulletin Board, the liquidity of
our common stock is impaired, not only in the number of shares that are bought
and sold, but also through delays in the timing of transactions, and limited
coverage by security analysts and the news media of us. As a result, prices for
shares of our common stock may be lower than might otherwise prevail if our
common stock was traded on NASDAQ or a national securities exchange, like the
American Stock Exchange.
Because our common stock is deemed a low-priced "Penny" stock, an investment in
our common stock should be considered high risk and subject to marketability
restrictions.
Since our common stock is a penny stock, as defined in Rule 3a51-1 under the
Securities Exchange Act, it will be more difficult for investors to liquidate
their investment even if and when a market develops for the common stock. Until
the trading price of the common stock rises above $5.00 per share, if ever,
trading in the common stock is subject to the penny stock rules of the
Securities Exchange Act specified in rules 15g-1 through 15g-10. Those rules
require broker-dealers, before effecting transactions in any penny stock, to:
o Deliver to the customer, and obtain a written receipt for, a disclosure
document;
o Disclose certain price information about the stock;
o Disclose the amount of compensation received by the broker-dealer or
any associated person of the broker-dealer;
o Send monthly statements to customers with market and price information
about the penny stock; and
o In some circumstances, approve the purchaser's account under certain
standards and deliver written statements to the customer with information
specified in the rules.
Consequently, the penny stock rules may restrict the ability or willingness of
broker-dealers to sell the common stock and may affect the ability of holders to
sell their common stock in the secondary market and the price at which such
holders can sell any such securities. These additional procedures could also
limit our ability to raise additional capital in the future.
We have never declared or paid dividends on our capital stock and we do not
anticipate paying any cash dividends in the foreseeable future.
We have never declared or paid dividends on our common stock and we do not
anticipate paying any cash dividends in the foreseeable future. We currently
intend to retain future earnings, if any, to fund the development and growth
of our business. Any future determination to pay dividends will be at the
discretion of our Board of Directors and will be dependent upon our financial
condition, operating results, capital requirements, applicable contractual
restrictions and other such factors as our Board of Directors may deem
relevant.
PROPERTIES
We lease our corporate office space, approximately 220 square feet, at 80 Wall
Street, Suite 818, New York, NY 10005, under a twelve-month sublease, which
expires on July 30, 2008. The rent is $650 per month. If we require additional
space, we believe that we will be able to obtain such space on commercially
reasonable terms.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information, to the best of our knowledge, about
the beneficial ownership of our common stock as of September 30, 2007 held by
those persons known to beneficially own more than 5% of our capital stock and
by our directors and executive officers.
The percentage of beneficial ownership for the following table is based on
7,781,150 shares of common stock outstanding as of September 30, 2007.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and does not necessarily indicate
beneficial ownership for any other purpose. Under these rules, beneficial
ownership includes those shares of common stock over which the stockholder has
sole or shared voting or investment power. It also includes (unless footnoted)
shares of common stock that the stockholder has a right to acquire within 60
days after September 30, 2007 pursuant to options, warrants, conversions
privileges or other rights.
Security Ownership of Management
Number of Percent of
Shares Beneficially Class Beneficially
Name of Beneficial Owner Owned Owned
- --------------------------- ---------------------- -------------------
Dicky Cheung (1) 3,882,438 49.9%
80 Wall Street, Suite 818
New York, NY 10005
Directors and Officers as a Group 3,382,438 49.9%
- --------------------------------------------------------------------------
(1) Dicky Cheung is our President, CEO, CFO, Secretary and a Director
Security Ownership of Certain Beneficial Owners
Security Ownership of Certain Beneficial Owners
Number of Percent of
Shares Beneficially Class Beneficially
Name of Beneficial Owner Owned Owned
- --------------------------- ---------------------- -------------------
Dicky Cheung 3,882,438 49.9%
80 Wall Street, Suite 818
New York, NY 10005
- --------------------------------------------------------------------------
DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSON
The members of our Board of Directors serve for one year terms and are elected
at the next annual meeting of stockholders, or until their successors have been
elected. The officers serve at the pleasure of the board of directors.
Resignations and Appointments of Officers and Directors
On July 24, 2007, simultaneous with the sale of the majority of the Company's
common stock by four principal shareholders, the Company's sole officer and
director John Vidaver resigned, and Mr. Dicky Cheung was appointed as sole
officer and director of the Company. Mr. Vidaver's resignation was not a result
of any disagreements with the Company.
Directors and Officers
The following table sets forth the name, age, position and term of directorship,
as applicable, of the Company's director and executive officer as of the date
hereof.
Name Age Position
- ------------ ----- ---------------------------------------------------------
Dicky Cheung 36 President, Chief Executive Officer, Chief Financial
Officer, Secretary and Director
Mr. Dicky Cheung has been the Company's President, CEO, CFO, Secretary and the
sole Director since July 24, 2007. Mr. Cheung has been President of Companhhia
Internacional Tek Tat Limitada, a privately held company located in Macau, since
its formation in 2007. Companhia Internacional Tek Tat Limitada is a controlling
shareholder of the Company. Since 2002, Mr. Cheung has been a self-employed
stock and bond investor.
Mr. Cheung has never held any position in a reporting company.
Significant Employees
There are no significant employees other than our executive officers.
Family Relationships
Not applicable.
Involvement in Certain Legal Proceedings
No Executive Officer or Director of the Company has been the subject of any
Order, Judgment, or Decree of any Court of competent jurisdiction, or any
regulatory agency permanently or temporarily enjoining, barring suspending or
otherwise limiting him from acting as an investment advisor, underwriter, broker
or dealer in the securities industry, or as an affiliated person, director or
employee of an investment company, bank, savings and loan association, or
insurance company or from engaging in or continuing any conduct or practice in
connection with any such activity or in connection with the purchase or sale of
any securities.
No Executive Officer or Director of the Company has been convicted in any
criminal proceeding (excluding traffic violations) or is the subject of a
criminal proceeding which is currently pending.
No Executive Officer or Director of the Company is the subject of any pending
legal proceedings.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires our executive officers and directors, and persons who
beneficially own more than 10% of our common stock, to file initial reports of
ownership and reports of changes in ownership with the SEC. Executive officers,
directors and greater than 10% beneficial owners are required by SEC regulations
to furnish us with copies of all Section 16(a) forms they file. Based upon a
review of the copies of such forms furnished to us and written representations
from our executive officers and directors, we believe that, as of the date of
this filing, Mr. Dicky Cheung has not filed his "Initial Statement of Beneficial
Ownership of Securities" on Form 3.
Election of Directors and Officers
Directors are elected to serve until the next annual meeting of stockholders
and until their successors have been elected and qualified. Officers are
appointed to serve until the meeting of the Board of Directors following the
next annual meeting of stockholders and until their successors have been elected
and qualified. Presently, Directors are not compensated for their services.
Audit Committee and Financial Expert
We do not have an Audit Committee. Our directors perform some of the same
functions of an Audit Committee, such as recommending a firm of independent
certified public accountants to audit the annual financial statements; reviewing
the independent auditor independence, the financial statements and their audit
report; and reviewing management's administration of the system of internal
accounting controls. We do not currently have a written audit committee charter
or similar document.
We have no financial expert. We believe the cost related to retaining a
financial expert at this time is prohibitive. Further, because of our start-up
operations, we believe the services of a financial expert are not warranted.
Code of Ethics
A code of ethics relates to written standards that are reasonably designed to
deter wrongdoing and to promote:
o Honest and ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional relationships;
o Full, fair, accurate, timely and understandable disclosure in reports and
documents that are filed with, or submitted to, the Commission and in other
public communications made by an issuer;
o Compliance with applicable governmental laws, rules and regulations;
o The prompt internal reporting of violations of the code to an
appropriate person or persons identified in the code; and
o Accountability for adherence to the code.
We intend to formally adopt a written corporate code of ethics that applies to
our principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions.
Nominating and Compensation Committees
We do not have standing Nominating or Compensation committees. Our Board of
Directors performs the functions that would otherwise be delegated to such
committees. We have elected not to have a Nominating or Compensation Committee
at this time in that we are a development stage company with limited operations
and resources. We anticipate that we will seek qualified independent directors
to serve on the Board and ultimately form standing Audit, Nominating and
Compensation committees.
Director Independence
We are presently not required to comply with the director independence
requirements of any securities exchange, which requires that a majority of a
company's directors be independent. The board of directors of the Company
intends to appoint additional members, each of whom will satisfy such
independence requirements.
Review, approval and ratification of related party transactions
Given our small size and limited financial resources, we had not adopted formal
policies and procedures for the review, approval or ratification of
transactions, such as those described above, with its executive officers,
directors and significant stockholders. Yet, all such transactions were approved
and ratified by our sole director. We intend to establish such policies and
procedures so that such transactions will, on a going-forward basis, be subject
to the review, approval or ratification of our board of directors, or an
appropriate committee thereof.
Indebtedness of Executive Officers and Directors
No executive officer, director or any member of these individuals' immediate
families or any corporation or organization with whom any of these individuals
is an affiliate is or has been indebted to us.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Our common stock has been quoted on the OTC Bulletin Board under the symbol
"COFI.OB" since December 27, 2005. There is not an active trading market for
our shares. The following table sets forth the range of quarterly high and
sales prices of the common stock as reported on the OTC Bulletin Board for the
periods indicated:
Price Information*
Financial Quarter Ended High Low
------------------------------ ---------- ----------
September 30, 2006 0.37 0.33
December 31, 2006 0.35 0.11
March 31, 2007 0.25 0.20
June 30, 2007 0.25 0.20
September 30, 2007 0.27 0.22
-------------------------------------------------------------
* The quotations do not reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.
Record Holders
As of September 30, 2007, we had approximately 48 holders of record of our
common stock.
Dividends
We have not declared or paid any cash dividends on our common stock nor do we
anticipate paying any in the foreseeable future. We expect to retain any future
earnings to finance its operations and expansion. The payment of cash dividends
in the future will be at the discretion of our Board of Directors and will
depend upon our earnings levels, capital requirements, any restrictive loan
covenants and other factors the Board considers relevant.
Purchases of Our Equity Securities
We did not repurchase any shares of our common stock during the year ended
December 31, 2006 and for the nine months ended September 30, 2007.
Securities authorized for issuance under equity compensation plans
We do not have any equity compensation plans.
Transfer Agent
Our transfer agent is Island Stock Transfer of St. Petersburg, Florida.
DESCRIPTION OF SECURITIES
Our articles of incorporation authorize the issuance of 110,000,000 shares of
common stock, $0.001 par value per share, of which 7,781,150 were outstanding
as of September 30, 2007. Holders of common stock have no cumulative voting
rights. Holders of shares of common stock are entitled to share ratably in
dividends, if any, as may be declared, from time to time by the board of
directors in its discretion, from funds legally available to be distributed.
In the event of a liquidation, dissolution or winding up of the Company, the
holders of shares of common stock are entitled to share pro rata all assets
remaining after payment in full of all liabilities. Holders of common stock have
no preemptive rights to purchase our common stock. There are no conversion
rights or redemption or sinking fund provisions with respect to the common
stock. All of the outstanding shares of common stock are validly issued, fully
paid and non-assessable.
EXECUTIVE COMPENSATION
The following tables set forth the compensation of the Company's executive
officers during the last two fiscal years. The remuneration described in the
tables does not include the cost of the Company of benefits furnished to the
named executive officers, including premiums for health insurance and other
benefits provided to such individuals that are extended in connection with the
conduct of the Company's business.
Summary Compensation Table
Change in
Name and Non-Equity Persion Value
Principal Stock Options Incentive Plan and All Other
Position Year Salary Bouns Awards Awards Compensation Nonqualified Compensation Tota
- -------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c> <c> <c> <c> <c>
Dicky Cheung (1)
President, CEO
CFO & 2006 - - - - - - - -
Secretary 2005 - - - - - - - -
Cuy Wolf (2)
former CEO 2006 - - - - - - - -
- -------------------------------------------------------------------------------------------------------------------
(1) Mr. Cheung was appointed our CEO on July 24, 2007.
(2) Mr. Wolf was appointed our CEO on May 4, 2006 and resigned on May 24, 2007.
We also reimbursed Mr. Wolf for automobile and associated expenses, plus a cell
phone.
Outstanding Equity Awards at Fiscal Year End as of 12/31/2006
None
Option/SAR Grants
The Company does not have a stock option plan. No stock options have been
granted or exercised by any of the officers or directors.
Director Compensation
There are presently no arrangements providing for payments to directors for
director services.
Employment Contracts, Termination of Employment, Change-in-Control Arrangements
There are no employment agreements between the Company and its executive
officers. There are no compensatory plans or arrangements, including payments to
be received from the Company, with respect to a named executive officer, if such
plan or arrangement would result from the resignation, retirement or any other
termination of such executive officer's employment with us or form a change in
control or a change in the named executive officer's responsibilities following
a change in control.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
We have had no disagreements with our independent auditors on accounting or
financial disclosures.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
There is no material relationships between us and our current directors and
executive officers other than the transactions and relationships described
below.
Transactions with Related Persons
On September 5, 2006 Guy Wolf, our Chief Executive Officer at that time,
purchased 1,800,000 shares from us for an aggregate purchase price of $90,014.
On July 24, 2007, Companhhia Internacional Tek Tat Limitada, a company
controlled by Dicky Cheung, our President, CEO and a Director, acquired an
aggregate of 3,882,438 shares, or approximately 49.9%, of the Company's issued
and outstanding common stock, from former directors and officers of the Company,
for the aggregate cash purchase price of approximately $349,521.
Parents
None
Promoters and Control Persons
Please refer to the transactions disclosed above "Transactions with Related
Persons."
LEGAL PROCEEDINGS
We are not aware of any pending or threatened legal proceeding that, if
determined in a manner adverse to us, could have a material adverse effect on
our business and operations.
RECENT SALES OF UNREGISTERED SECURITIES
On September 5, 2006, we issued 1,800,000 shares of the Company's common stock
to Guy Wolf, our Chief Executive Officer, for an aggregate purchase price of
$90,014. The shares were issued in reliance upon exemptions from registration
provided by Section 4(2) promulgated under the Securities Act of 1933, as
amended.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES
No director of the Company will have personal liability to us or any of our
stockholders for monetary damages for breach of fiduciary duty as a director
involving any act or omission of any director since provisions have been made
in the articles of incorporation limiting liability. The foregoing provisions
shall not eliminate or limit the liability of a director for:
o any breach of the director's duty of loyalty to us or our stockholders
o acts or omissions not in good faith or, which involve intentional
misconduct or a knowing violation of law
o for any transaction from which the director derived an improper personal
benefit.
The Bylaws of the Company provide for indemnification of our directors,
officers, and employees in most cases for any liability suffered by them or
arising out of their activities as directors, officers, and employees if they
were not engaged in willful misfeasance or malfeasance in the performance of
their duties; provided that in the event of a settlement the indemnification
will apply only when the board of directors approves settlement and
reimbursement as being for our best interests.
We undertake the following:
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to our directors, officers and controlling
persons pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission this type of
indemnification is against public policy as expressed in the Act and is
unenforceable.
In the event that a claim for indemnification against such liabilities, other
than the payment by us of expenses incurred or paid by one of our directors,
officers, or controlling persons in the successful defense of any action, suit
or proceeding, is asserted by one of our directors, officers, or controlling
persons in connection with the securities being registered, we will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification is against public policy as expressed in the Securities Act, and
we will be governed by the final adjudication of such issue.
ITEM 5.06. CHANGE IN SHELL COMPANY STATUS
As a result of the consummation of the transactions described in Items 1.01 and
2.01 of this Current Report, the Company has ceased being a shell company as
such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934,
as amended.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
The Financial Statements of Credit One Financial, Inc. for the year ended
December 31, 2006 and for the six months ended June 30, 2007 and the
accompanying notes thereto.
As of the date of this filing, the auditors' reviewed financial statements of
the Company as of September 30, 2007 are not available. We will file an
amendment to this report on Form 8-K to add such financial statements on or
before November 15, 2007.
CREDIT ONE FINANCIAL, INC.
(A Development Stage Company)
Balance Sheet (Unaudited)
June 30, 2007
ASSETS
Current Assets:
Cash........................................................... $ 3,012
Security Deposit............................................... 550
-------------
Total Current Assets....................................... 3,562
-------------
Total Assets................................................... $ 3,562
=============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable................................................ $ 10,607
Loan payable to related party................................... 20,000
-------------
Total Current Liabilities................................... 30,607
Stockholders' Equity (Deficit):
Common stock: par value $.001; 110,000,000 shares authorized;
7,781,150 shares issued and outstanding....................... 7,781
Additional paid-in capital...................................... 160,633
Deficit accumulated during the development stage................ (195,459)
-------------
Total Stockholders' Equity (Deficit)........................ (27,045)
-------------
Total Liabilities and Stockholders' Equity (Deficit)............ $ 3,562
=============
See notes to financial statements
CREDIT ONE FINANCIAL, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
Three months ended Six months ended Cumulative
June 30, June 30, Since Sept. 24, 1999
------------------------ --------------------- (Inception) to
2007 2006 2007 2006 June 30, 2007
------------ ----------- ---------- ---------- ------------------
<s> <c> <c> <c> <c> <c>
Revenue:
Commissions................................. $ - $ - $ - $ - $ 11,397
Consulting.................................. - - - - 4,881
------------ ----------- ---------- ----------- ------------------
Total revenue........................... - - - - 16,278
Expenses
Consulting expense........................... - - - - 6,892
Commission expense........................... - - - - 6,962
Salary expense............................... - 13,860 895 13,860 42,895
General and administrative expense........... 23,501 433 32,879 9,354 146,101
------------ ------------ ---------- ----------- -----------------
Total expenses.......................... 23,501 14,293 33,774 23,214 202,850
------------ ------------ ---------- ----------- -----------------
Loss from operations......................... (23,501) (14,293) (33,774) (23,214) (186,572)
Other income (expense)
Interest income.............................. - - 19 - 256
Interest expense............................. - - - - (9,143)
------------ ------------ ---------- ----------- -----------------
Total other expense..................... - - 19 - (8,887)
------------ ------------ ---------- ----------- -----------------
Net loss before taxes........................ (23,501) (14,293) (33,755) (23,214) (195,459)
Income tax provision......................... - - - - -
------------ ------------ ---------- ----------- -----------------
Net loss..................................... $ (23,501) $ (14,293) $ (33,755) $ (23,214) $ (195,459)
============ =========== ========== =========== =================
Basic and diluted loss per share............. $ (0.00) $ (0.00) $ (0.00) $ (0.00)
=========== =========== ========== ===========
Weighted average common shares outstanding... 7,781,150 5,981,150 7,781,150 5,981,150
=========== =========== =========== ===========
See notes to financial statements
CREDIT ONE FINANCIAL, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
Six Months Ended June 30, Since Sept. 24, 1999
----------------------------- (Inception) to
2007 2006 June 30, 2007
-------------- -------------- --------------------
<s> <c> <c> <c>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................ $ (33,755) $ (23,214) $ (195,459)
Adjustments to reconcile net income to net cash
used in operating activities:
Non-cash consulting fees paid with common stock... - - 4,000
Non-cash legal fees paid with common stock........ - - 2,500
Non-cash expenses contributed..................... - 75 1,054
Changes in operating assets and liabilities:
Security deposit.................................. - 200 (550)
Increase (decrease) in accounts payable........... 8,290 14,293 10,607
Increase (decrease) in salary payable............. (6,956) - -
-------------- -------------- -----------------
Net cash used in operating activities....... (32,421) (8,646) (177,848)
-------------- -------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock............. - - 152,760
Cash loan from related party....................... 20,000 7,600 20,000
Additional capital contributed by shareholders..... - - 8,100
-------------- -------------- -----------------
Net cash provided by financing activities.. 20,000 7,600 180,860
-------------- -------------- -----------------
Increase (decrease) in cash and cash equivalents.... (12,421) (1,046) 3,012
Cash and cash equivalents, beginning of period...... 15,433 1,066 -
-------------- -------------- ----------------
Cash and cash equivalents, end of period............ $ 3,012 $ 20 $ 3,012
============== ============= ================
SUPPLEMENTAL DISCLOSURE:
Interest paid in cash............................ $ - $ - $ 9,143
============= ============= ===============
Income taxes paid in cash........................ $ - $ - $ -
============= ============= ===============
See notes to financial statements
CREDIT ONE FINANCIAL, INC.
Notes to Financial Statements
June 30, 2007
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
The balance sheet as of June 30, 2007 and the statements of operations and cash
flows for the three- and six months then ended and for the period from
inception, September 24, 1999, to June 30, 2007 have been prepared by Credit One
Financial Inc. ("the Company") and are unaudited. In the opinion of management,
all adjustments, which include normal reconciling adjustments, necessary for a
fair presentation have been made.
These financial statements should be read in conjunction with the audited
financial statements of the Company for the year ended December 31, 2006, as
included in the Company's Form 10-KSB for the year ended December 31, 2006.
The Company was incorporated in the State of Florida on September 24, 1999. The
Company was engaged in market research regarding the cost and availability of
non-performing credit card debt portfolios. It was also engaged in research
regarding the current market price for re-performing portfolios as well as the
market prices offered for portfolios deemed non-collectable at the time of sale.
The Company was exploring avenues for raising capital in order to put its
business plan into effect.
On May 4, 2006, stockholders and officers sold 89.07 percent of their interest
in the Company to an unrelated Purchaser. The sale amounted to 4,698,238 shares
which represent 78.55 percent of the issued and outstanding shares of the
Company. The sellers retained 59,811 shares which represents 1 percent of the
issued and outstanding shares of the Company (See Note 4 for subsequent event
regarding sale of shares to related purchasers).
The shares purchased constitute a controlling interest in the Issuer. The
Purchaser through its control position, has the ability to elect all of the
members of the Board of Directors and has caused the election of the present
Board.
The Purchaser intends that the Issuer will de-emphasize its prior business plan
which contemplated the acquisition of non- performing accounts receivable.
Rather, the Purchaser believes the Board should transition into a new business
plan pursuant to which the Issuer will attempt to acquire other assets or
business operations that will maximize shareholder value. No specific assets or
businesses have been definitively identified and there is no certainty that any
such assets or business will be identified or any transactions will be
consummated.
The Purchaser believes that as an initial step the Issuer should seek additional
investors to purchase stock of the Issuer sufficient to provide the Issuer with
working capital to fund its operations, through the issuance of shares of the
Issuer or otherwise. The Purchaser may acquire additional shares of the Issuer
from the Issuer or existing shareholders. The Purchaser believes that the Issuer
should then seek to establish or acquire businesses or assets with additional
funds raised either via the issuance of shares or debt.
In pursuing the foregoing goals, The Purchaser may seek to expand or change the
composition of the Board, and ask that the Issuer explore changes to its current
capital structure, including issuing additional shares or debt and adopting a
stock option plan.
On September 5, 2006 the Chief Executive Officer of the Company purchased
1,800,000 shares representing 23.1% of the issued and outstanding shares of the
Company.
At its inception on September 24, 1999, the Company was authorized to have
outstanding 1,000 shares of common stock at $1.00 par value per share. On
November 29, 2001, the Company amended its Articles of Incorporation, to
authorize the maximum number of shares to have outstanding at any one time to
be 10,000,000 shares of common stock having a par value of $0.001 per share.
On March 30, 2005, the Company amended its Articles of Incorporation, to
authorize the maximum number of shares to have outstanding at any one time to
be 110,000,000 shares of common stock having a par value of $0.001 per share.
On March 24, 2007, Gulf Wolf resigned from his positions as the Chief Executive
Officer and a director, and Arnon Epstein resigned from his positions as the
Chief Financial Officer, Secretary and a director of the Company.
On May 24, 2007, John E. Vidaver was appointed as the President, Chief Executive
Officer, Chief Financial Officer, Secretary, and the sole director of the
Company, to serve until the election and qualification of his successor(s).
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes" using the asset and liability approach, which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between the carrying amounts
and the tax basis of such assets and liabilities. This method utilizes enacted
statutory tax rates in effect for the year in which the temporary differences
are expected to reverse and gives immediate effect to changes in income tax
rates upon enactment.
Provision for Income Taxes
Deferred income taxes result from temporary differences between the basis of
assets and liabilities recognized for differences between the financial
statement and tax basis thereon, and for the expected future tax benefits to be
derived from net operating losses and tax credit carry forwards. The Company has
approximately $195,459 in net operating losses as of June 30, 2007, and a
valuation allowance equal to the tax benefit of the accumulated net operating
losses has been established since it is uncertain that future taxable income
will be realized during the applicable carry-forward periods. The net operating
loss carryforwards may be limited under the change of control provisions of the
Internal Revenue Code, Section 382.
Earnings Per Share
Earnings Per Share is computed by dividing net income available to common
stockholders by the weighted average number of common stock shares outstanding
during the year. Diluted EPS is computed by dividing net income available to
common stockholders by the weighted average number of common stock shares
outstanding during the year plus potential dilutive instruments such as stock
options and warrants. The effect of stock options on diluted EPS is determined
through the application of the treasury stock method, whereby proceeds received
by the Company based on assumed exercises are hypothetically used to repurchase
the Company's common stock at the average market price during the period. The
Company has no stock options, warrants or other potentially dilutive instruments
outstanding at June 30, 2007.
Recent Accounting Pronouncements
In September 2006, the FASB issued FAS No. 157, "Fair Value Measurements", which
establishes a framework for reporting fair value and expands disclosure about
fair value measurements. FAS 157 is effective for our 2008 fiscal year. We are
currently evaluating the impact of this standard on our financial statements.
In February 2007, the FASB issued FAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities Including an Amendment of FASB
Statement No. 115". FAS 159 is effective for fiscal years beginning after
November 15, 2007. We are currently evaluating the impact of adopting FAS 159
to our financial statements.
NOTE 2 - TRANSACTIONS WITH RELATED PARTIES
On May 10, 2007, the Company issued to Guy Wolf, a demand promissory note, in
the principal amount of $20,000 (the "Note") in consideration for a $20,000
cash loan made by Mr. Wolf to the Company. Interest on the Note accrues at the
rate of Libor plus 2% per year. Pursuant to the terms of the Note, the entire
principal sum and all accrued interest due under the Note shall be paid ten
business days after the Company's receipt of written demand for payment from
Mr. Wolf.
NOTE 3 - GOING CONCERN
The nature of the Company's financial status makes the Company lack the
characteristics of a going concern. This is because the Company, due to its
financial condition, may have to seek loans or the sale of its securities to
raise cash to meet its cash needs. The level of current operations does not
sustain the Company's expenses and the Company has no commitments for obtaining
additional capital.
NOTE 4 - SUBSEQUENT EVENT
On July 24, 2007, four shareholders of the Company, Guy Wolf; STM 1, LLC;
Antonio Investments, Ltd; and Smart Trading, Ltd, sold a total of 6,962,438
shares, representing 89.48% of the Company's capital shares, to ten (10) persons
for a total of $625,000 in cash. Simultaneous with the sale of securities, the
Company's sole officer and director John Vidaver resigned, and appointed
Mr. Dicky Cheung as sole officer and director of the Company.
(b) Pro Forma Financial Information
None
(c) Exhibits
Exhibit No. Exhibit
- -------------------------------------------------------------------------------
3.1 Articles of Incorporation, incorporated by reference herein from
Exhibit 3(i) (A) to our Form 10-SB filed June 25, 2003.
3.2 Amended Articles of Incorporation, incorporated by reference herein
from Exhibit 3(i)(B) to our Form 10-SB filed June 25, 2003.
3.3 Amended Articles of Incorporation, incorporated by reference herein
from Exhibit 3(i)(C) to our Form 10-QSB for the fiscal quarter
ended March 31, 2005.
3.4 By-laws incorporated by reference herein from Exhibit 3(ii) to our
Form 10-SB filed June 25, 2003.
10.1 Stock Purchase Agreement with STM 1, LLC dated May 3, 2006,
incorporated by reference herein from Exhibit 99 to our Form 8-K
filed May 9, 2006.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
CREDIT ONE FINANCIAL, INC.
By: /s/ Dicky Cheung
- ------------------------------------------
Name: Dicky Cheung
Title: President, Chief Executive Officer
and Chief Financial Officer
Date: October 9, 2007