UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
FOR THE QUARTERLY PERIOD ENDED JULY 31, 2007
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________.
COMMISSION FILE NO. 000-32389
PREVENTION INSURANCE.COM
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(Name of small business issuer in its charter)
NEVADA 88-0126444
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2770 SOUTH MARYLAND PARKWAY, SUITE 416, LAS VEGAS, NV89109
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (702) 732-2758
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act. YES [ ] NO [X]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. YES [ ] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
CLASS OUTSTANDING AT SEPTEMBER 14, 2007
- ----------------------------- ---------------------------------
Common stock, $0.01 par value 22,679,362
Transitional Small Business Disclosure Format: Yes [ ] No [X]
PREVENTION INSURANCE.COM
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.............................................1
Condensed Balance Sheet - July 31, 2007 (unaudited).............1
Condensed Statements of Operations - Three months ended
July 31,2007 and 2006 (unaudited)...............................2
Condensed Statements of Cash Flows-Three months ended
July 31,2007 and 2006 (unaudited)...............................3
Notes to Condensed Financial Statements (unaudited).............4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.............................5
ITEM 3. CONTROLS AND PROCEDURES.........................................12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS...............................................13
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.......................13
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.................................13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............13
ITEM 5. OTHER INFORMATION...............................................13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................14
SIGNATURE................................................................15
PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PREVENTION INSURANCE.COM
CONDENSED BALANCE SHEET
JULY 31,
2007
-----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,848
Prepaid expenses 3,000
-----------
Total current assets 4,848
-----------
Total assets $ 4,848
===========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current liabilities:
Accounts Payable $ 32,631
Acquisition Liability 27,000
-----------
Total current liabilities 59,631
-----------
Total liabilities 59,631
Stockholders' (deficit):
Preferred stock, par value $0.01; 10,000,000
shares authorized; 1,000,000 shares issued
and outstanding 10,000
Common stock, par value $0.01; 100,000,000
shares authorized; 21,969,362 shares issued
and outstanding 219,694
Treasury stock, 24,142 shares, at cost (52,954)
Additional paid-in capital 3,690,182
Accumulated deficit (3,921,705)
-----------
Total stockholders' (deficit) (54,783)
-----------
Total liabilities and stockholders' (deficit) $ 4,848
===========
The accompanying notes are an integral part of these condensed financial
statements.
1
PREVENTION INSURANCE.COM
CONDENSED STATEMENTS OF OPERATIONS
(AMOUNTS IN DOLLARS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
----------------------------
JULY 31,
----------------------------
2007 2006
------------ -------------
Operating revenue
Commissions $ 42,167 $ 20,923
------------ -------------
Total Revenue 42,167 20,923
------------ -------------
Operating expenses
General and administrative 21,732 14,648
Accounting and bookkeeping 10,086 3,193
Sales commissions to agents 10,923 9,050
Officers compensation 23,413 22,953
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Total Operating expenses 66,154 49,844
------------ -------------
Loss from Operations (23,987) (28,921)
Other income (expense)
Interest expense (2,699) -
------------ -------------
Total other income (expense) (2,699) -
------------ -------------
Net Loss $ (26,686) $ (28,921)
============ =============
Earnings per common share
Basic and diluted $ (0.00) $ (0.01)
Weighted average common shares outstanding
Basic and diluted 21,833,492 19,569,362
The accompanying notes are an integral part of these condensed financial
statements.
2
PREVENTION INSURANCE.COM
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
-------------------------
JULY 31,
-------------------------
2007 2006
--------- ---------
Cash flows from operating activities:
Net loss $ (26,686) $ (28,921)
--------- ---------
Adjustments to reconcile net income
to net cash provided by operating activities:
Changes in operating assets and liabilities:
(Increase)/Decrease in accounts receivable 5,228 -
(Increase)/Decrease in prepaid expenses (3,000) -
Increase/(Decrease) in accounts payable (379) (325)
--------- ---------
Net cash used in operating activities (24,837) (29,246)
--------- ---------
Cash flows from investing activities: -- --
Net cash provided by investing activities -- --
Cash flows from financing activities:
Proceeds from issuance of common stock 5,000 10,000
Advance from officer/shareholder - 18,500
Increase in acquisition liability 5,000
Bank overdraft - 3,179
--------- ---------
Net cash provided by financing activities 10,000 31,679
--------- ---------
Net change in cash (14,837) 2,433
Cash, beginning of period 16,685 (2,433)
--------- ---------
Cash, end of period $ 1,848 $ -
========= =========
Supplemental cash flow disclosures:
Interest paid $ 45 $ -
Income taxes paid $ - $ -
The accompanying notes are an integral part of these condensed financial
statements.
3
PREVENTION INSURANCE.COM
FORM 10-QSB
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles and pursuant to the
rules and regulations of the Securities and Exchange Commission (the "SEC") and
reflect all adjustments, consisting of normal recurring adjustments, which
management believes are necessary to fairly present the financial position,
results of operations and cash flows of Prevention Insurance.com (the
"Company") for the respective periods presented. The results of operations for
an interim period are not necessarily indicative of the results that may be
expected for any other interim period or the year as a whole. The accompanying
unaudited condensed financial statements should be read in conjunction with the
audited financial statements and notes thereto in the Company's Annual Report
on Form 10-KSB/A for the fiscal year ended April 30, 2007 as filed with the SEC
on September 14, 2007.
Nature of Business
Prevention Insurance.Com (the "Company") was incorporated under the laws of the
State of Nevada in 1975 as Vita Plus Industries, Inc. In March 1999, the
Company sold its remaining inventory and changed its name to Prevention
Insurance.Com. Since 2005, the Company has additionally focused on a second
line of business and has been focused on the development of its ATM machine
sale operations. The Company has been keeping its focus on the second line of
business of ATM machine sales for more than two years. Management does not
feel we have re-entered the development stage as we are continuing to receive
revenue from our ATM machine sale operations. The Company is continually
attempting to organize select independent insurance agencies to create a
nationwide cooperative group of health, life and casualty insurance companies
with the ability to negotiate fees with national insurance companies.
Additionally, this co-op would benefit from national negotiations of
advertising and product development. The Company would receive fees from this
group of agencies for its coordination of activities. The Company is continuing
with its planned expansion of its ATM machine sales division and generating
commissions as a dealer representative and to build that business further.
Reclassifications
Certain amounts in the July 31, 2006 financial statements have been
reclassified to conform to the July 31, 2007 presentation. These
reclassifications had no effect on the previously reported net loss. The
reclassifications were attributable to combining cost of goods sold amounts
with the respective revenue to show the corrected amount of revenues as
previously it was reported as two separate line items, when in actuality it was
a refund due to the payor.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported revenues
and expenses during the reporting periods. Because of the use of estimates
inherent in the financial reporting process, actual results may differ
significantly from those estimates.
Cash and cash Equivalents
The Company maintains cash balances in a non-interest bearing account that
currently does not exceed federally insured limits. For the purpose of the
statements of cash flows, all highly liquid investments with a maturity of
three months or less are considered to be cash equivalents. There were no cash
equivalents as of July 31, 2007 and 2006.
Fair Value of Financial Instruments
The fair value of cash and cash equivalents and accounts payables approximates
the carrying amount of these financial instruments due to their short maturity.
Net Loss Per Share Calculation
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share." Basic net
loss per common share ("EPS") is computed by dividing income available to
commons stockholders by the weighted-average number of common shares
outstanding for the period. Diluted earnings per shares is computed by
dividing net income by the weighted average shares outstanding, assuming all
dilutive potential common shares were issued. Since the fully diluted loss per
share for 2007 and 2006 was anti-dilutive, basic and diluted losses per share
are the same. The weighted-average number of common shares outstanding for
computing basic EPS for the three month period ended July 31, 2007 and July 31,
2006 were 21,833,492 and 19,569,362 respectively.
Revenue Recognition
Commission income from the sale of ATM machines is recognized at the time of
sale.
Stock Based Compensation
In December 2004, SFAS No. 123 (revised 2004), "Share-Based Payment"("SFAS
123(R)") was issued. The Company applies SFAS 123R in accounting for stock
options issued to employees. For stock options and warrants issued to non-
employees, the Company applies SFAS No. 123R, Accounting for Stock-Based
Compensation, which requires the recognition of compensation cost based upon
the fair value of stock options at the grant date using the Black-Scholes
option pricing model.
There were no options issued as stock based compensation to any officers,
directors, or non-employees for the three month period ended July 31, 2007 or
July 31, 2006, respectively.
2. GOING CONCERN
The Company's financial statements are prepared using accounting principles
generally accepted in the United States of America applicable to a "going
concern", which contemplates the realization of assets and the liquidation of
liabilities in the normal course of business. Currently, the Company's only
source of revenue is via commissions from the sale of ATM machines and its
ability to remain a going concern is subject to its ability to raise capital
either from equity or debt and/or its successful operations as a long term
solution to its lack of resources. To date, management has demonstrated the
ability to raise sufficient capital to continue its limited operations. As
shown in the accompanying financial statements, the Company has incurred a net
loss of $26,686 for the three months ended July 31, 2007 and has reported an
accumulated deficit of $3,921,705. The Company is continuing in its plans to
further expand its ATM machine sales division and anticipates the ability to
continue to grow this line of business.
3. STOCKHOLDERS' EQUITY
During the three months ended July 31, 2007, the Company received cash in the
amount of $5,000 from the issuance of 250,000 shares of common stock (an
average of approximately $.02 per share).
4. RELATED PARTY TRANSACTIONS
Officer Compensation for the three months ended July 31, 2007, totaled $23,413.
5. ACQUISITION LIABILTIY
The company has received $27,000 as deposits related to a potential merger
candidate and has recorded this as an acquisition liability on the accompanying
balance sheet. The final terms and requisite due diligence have not yet been
completed and should the merger not go through, the acquisition liability will
convert to a short term note payable.
6. SUBSEQUENT EVENTS
The company sold 710,000 shares of common stock for approximately $10,500
subsequent to July 31, 2007.
4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS AND ASSOCIATED RISKS
We begin Management's Discussion and Analysis of Financial Condition and
Results of Operations with an overview of our description of business,
historical operations, plan of operations, and existing ventures. This
overview is followed by a detailed analysis of our results of operations and
our financial condition as of, and for, the three months ended July 31, 2007.
Certain matters in this Quarterly Report on Form 10-QSB for the three months
ended July 31, 2007 and our other filings with the SEC, including, without
limitation, certain matters discussed in this Management's Discussion and
Analysis of Financial Condition and Results of Operations, constitute "forward-
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, and are subject to the safe harbor created thereby. Those statements
reflect the intent, belief or current expectations of the Company, its
directors or its officers with respect to, among other things, future events
and financial trends affecting the Company.
Such forward-looking statements include statements regarding, among other
things, (a) our projected sales and profitability, (b) our growth strategies,
(c) anticipated trends in our industry, (d) our future financing plans, (e) our
anticipated needs for working capital, (f) our lack of operational experience,
and (g) the benefits related to ownership of our common stock. Forward-looking
statements, which involve assumptions and describe our future plans,
strategies, and expectations, are generally identifiable by use of the words
"may," "will," "should," "expect," "anticipate," "estimate," "believe,"
"intend," or "project" or the negative of these words or other variations on
these words or comparable terminology. This information may involve known and
unknown risks, uncertainties, and other factors that may cause our actual
results, performance, or achievements to be materially different from the
future results, performance, or achievements expressed or implied by any
forward-looking statements. These statements may be found under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business," as well as in this Report generally. Actual events or results may
differ materially from those discussed in forward-looking statements as a
result of various factors, including, without limitation, the risks outlined
under "Risk Factors" and matters described in this Report generally. In light
of these risks and uncertainties, there can be no assurance that the forward-
looking statements contained in this report will in fact occur as projected.
DESCRIPTION OF BUSINESS
Prevention Insurance.com (the "Company") was incorporated in the State of
Nevada on May 7, 1975, to engage in any lawful corporate undertaking,
including, but not limited to, selected mergers and acquisitions. The Company
was originally incorporated under the name Vita Plus, Inc. later we changed our
name to Vita Industries, Inc. and in 1999 again changed it to Prevention
Insurance.com.
HISTORICAL OPERATIONS
Historical Operations: In 1983 we made a public offering of 700,000 shares of
our common stock for our own account. We registered the stock under the
Securities Act of 1933. Upon completion of that offering, we registered the
stock under Section 12 (g) the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"). However, in 1989 we terminated the
registration of our stock under Section 12(g) of the Act because our total
assets had decreased to less than $3,000,000. Our stock was then no longer
quoted on NASDAQ.
From inception until early 1999, our principle business engagement had been the
sale and distribution of our own formulations of specific vitamins and
nutritional supplements, and of various other health and personal care
products. We sold our products through traditional methods: we employed a force
of salespersons at our headquarters in Las Vegas, Nevada and compensated them
on a commission basis; we also sold through a network of independent brokers.
Our sales were made primarily to drug stores and other large retailers.
Beginning in 1983, we also manufactured some of our products. However, after a
period of approximately eight years, we stopped the manufacturing activity
because it did not prove to be profitable. In 1991 we were licensed in Nevada
as an agent for health and life insurance. Historically since 1991 we have not
derived any significant income from sales of insurance policies.
5
During the mid 1990s we developed the concept of reducing insurance costs for
both health and life insurance through prevention measures by emphasizing the
maintenance of good health by members of the insured population. Subsequently,
we began the development of hybrid insurance products incorporating preventive
features with traditional health and life insurance products. Specifically, we
developed two specially formulated preparations of vitamins and nutritional
supplements: Nutra-Prevention Formula and Nutra- Protection. Those are
formulations that emphasize health maintenance by providing multiple vitamins
and a wide range of additional nutritional supplements for daily consumption,
and which we believe provide optimal nutrition necessary for good health. We
had planned to commence negotiations for joint venture arrangements with
insurance companies using those two formulations to offer low-cost, preventive
nutritional products combined with reduced premium rates for specialty
insurance policies, but to date we have not entered into any such joint
ventures.
In 2005, the Company added a second line of business and has been focused on
its development of its ATM machine sale operations. The Company has been
keeping its focus on the second line of business of ATM machine sales for more
than two years. Management does not feel we have re-entered the development
stage as we are continuing to receive revenue from our ATM machine sale
operations.
Effective March 15, 1999, we sold for cash substantially all of our assets
associated with the traditional distribution of vitamin and dietary supplement
formulations, including all inventory of vitamins and nutritional supplements
and substantially all of our furniture and fixtures, and terminated all
business activities associated with the distribution of individual vitamins and
dietary supplements. However, we did retain our insurance agency license, our
newly developed Prevention Insurance website and the ownership rights in the
trademarks for Nutra-Prevention and Nutra-Protection formulas. While the
insurance license has been retained, the Company's main focus has been the ATM
machine sales lines of business. Should an opportunity arise where the Company
is able to capitalize on its experience in insurance we will benefit, but at
this stage the focus of the company is solely on the further expansion of the
line of business devoted to ATM machine sales.
PLAN OF OPERATION
Along with our insurance and ATM sales we will attempt to locate and negotiate
with a business entity for the merger of that target business into the Company.
In certain instances, a target business may wish to become a subsidiary of the
Company or may wish to contribute assets to the Company rather than merge. No
assurances can be given that we will be successful in locating or negotiating
with any target business.
Management believes that there are perceived benefits to being a reporting
company with a class of registered securities. These are commonly thought to
include (1) the ability to use registered securities to make acquisition of
assets or businesses; (2) increased visibility in the financial community; (3)
the facilitation of borrowing from financial institutions; (4) improved trading
efficiency; (5) stockholder liquidity; (6) greater ease in subsequently raising
capital; (7) compensation of key employees through stock options; (8) enhanced
corporate image; and (9) a presence in the United States capital market.
A business entity, if any, which may be interested in a business combination
with us may include (1) a company for which a primary purpose of becoming
public is the use of its securities for the acquisition of assets or
businesses; (2) a company which is unable to find an underwriter of its
securities or is unable to find an underwriter of securities on terms
acceptable to it; (3) a company which wishes to become public with less
dilution of its common stock than would occur normally upon an underwriting;
(4) a company which believes that it will be able to obtain investment capital
on more favorable terms after it has become public; (5) a foreign company which
may wish to gain an initial entry into the United States securities market; (6)
a special situation company, such as a company seeking a public market to
satisfy redemption requirements under a qualified Employee Stock Option Plan;
or (7) a company seeking one or more of the other perceived benefits of
becoming a public company.
6
Management will continue to seek a qualified company as a candidate for a
business combination. We are authorized to enter into a definitive agreement
with a wide variety of businesses without limitation as to their industry or
revenues. It is not possible at this time to predict which company, if any, we
will enter into a definitive agreement or what will be the industry, operating
history, revenues, future prospects or other characteristics of that company.
We have received $27,000 related to a potential merger candidate and have
booked this as an acquisition liability on our balance sheet. The final terms
and requisite due diligence have not yet been completed and should the merger
not go through, the $27,000 will convert to a short term note payable.
We may seek a business opportunity with entities which have recently commenced
operations, or which wish to utilize the public marketplace in order to raise
additional capital in order to expand into new products or markets, to develop
a new product or service, or for other corporate purposes. We may acquire
assets and establish wholly-owned subsidiaries in various businesses or acquire
existing businesses as subsidiaries.
Our management, which in all likelihood will not be experienced in matters
relating to the business of a target business, will rely upon its own efforts
in accomplishing our business purposes.
The analysis of new business opportunities will be undertaken by, or under the
supervision of our officer and director, who is not a professional business
analyst. In analyzing prospective business opportunities, management may
consider such matters as:
* the available technical, financial and managerial resources;
* working capital and other financial requirements; history of operations, if
any;
* prospects for the future;
* nature of present and expected competition;
* the quality and experience of management services which may be
available and the depth of that management;
* the potential for further research, development, or exploration;
* specific risk factors not now foreseeable but which then may be anticipated
to impact our proposed activities;
* the potential for growth or expansion;
* the potential for profit;
* the perceived public recognition or acceptance of products, services, or
trades; name identification and;
* other relevant factors.
Management does not have the capacity to conduct as extensive an investigation
of a target business as might be undertaken by a venture capital fund or
similar institution. As a result, management may elect to merge with a target
business which has one or more undiscovered shortcomings and may, if given the
choice to select among target businesses, fail to enter into an agreement with
the most investment-worthy target business.
7
Following a business combination we may benefit from the services of others in
regard to accounting, legal services, underwritings and corporate public
relations. If requested by a target business, management may recommend one or
more underwriters, financial advisors, accountants, public relations firms or
other consultants to provide such services.
A potential target business may have an agreement with a consultant or advisor
providing that services of the consultant or advisor be continued after any
business combination. Additionally, a target business may be presented to us
only on the condition that the services of a consultant or advisor be continued
after a merger or acquisition. Such preexisting agreements of target businesses
for the continuation of the services of attorneys, accountants, advisors or
consultants could be a factor in the selection of a target business.
In implementing a structure for a particular business acquisition, we may
become a party to a merger, consolidation, reorganization, joint venture, or
licensing agreement with another corporation or entity. We may also acquire
stock or assets of an existing business. On the consummation of a transaction,
it is likely that our present management and stockholders will no longer be in
our control. In addition, it is likely that our officer and director will, as
part of the terms of the acquisition transaction, resign and be replaced by one
or more new officers and directors.
It is anticipated that any securities issued in any such reorganization would
be issued in reliance upon exemption from registration under applicable federal
and state securities laws. In some circumstances however, as a negotiated
element of its transaction, we may agree to register all or a part of such
securities immediately after the transaction is consummated or at specified
times thereafter. If such registration occurs, of which there can be no
assurance, it will be undertaken by the surviving entity after we have entered
into an agreement for a business combination or have consummated a business
combination and we are no longer considered a blank check company. The issuance
of additional securities and their potential sale into any trading market which
may develop in our securities may depress the market value of our securities in
the future if such a market develops, of which there is no assurance.
While the terms of a business transaction to which we may be a party cannot be
predicted, it is expected that the parties to the business transaction will
desire to avoid the creation of a taxable event and thereby structure the
acquisition in a tax-free reorganization under Sections 351 or 368 of the
Internal Revenue Code of 1986, as amended.
Depending upon, among other things, the target business's assets and
liabilities, our stockholders will in all likelihood hold a substantially
lesser percentage ownership interest in the Company following any merger or
acquisition. Any merger or acquisition effected by us can be expected to have a
significant dilutive effect on the percentage of shares held by our
stockholders at such time. We have received $27,000 related to a potential
merger candidate and have booked this as an acquisition liability on our
balance sheet. The final terms and requisite due diligence have not yet been
completed and should the merger not go through, it will convert to a short term
note payable.
No assurances can be given that we will be able to finalize any business
combination, as to the terms of a business combination, or as to the nature of
the target business. As of the date hereof, management has not made any final
decision concerning or entered into any written agreements for a business
combination.
We anticipate that the selection of a business opportunity in which to
participate will be complex and without certainty of success. Management
believes (but has not conducted any research to confirm) that there are
numerous firms seeking the perceived benefits of a publicly registered
corporation. Such perceived benefits may include facilitating or improving the
terms on which additional equity financing may be sought, providing liquidity
for incentive stock options or similar benefits to key employees, increasing
the opportunity to use securities for acquisitions, and providing liquidity for
stockholder and other factors. Business opportunities may be available in many
different industries and at various stages of development, all of which will
make the task of comparative investigation and analysis of such business
opportunities extremely difficult and complex.
8
EXISTING VENTURES
We have become aware that in many instances individual agents, or sometimes
entire agencies, desire to sell their existing books of business. These desires
may arise because an agent wishes to diversify his assets to increase his
return on equity, or wishes to retire or enter some other business, or no
longer wishes to be required to devote time to administrative duties, or the
insurance company for which the agent sells (perhaps as a captive agent)
changes the arrangements under which the agents operate, or for other reasons.
In any of these events, it is often possible for a third person to purchase the
agent's book of business, provided that the purchase can provide a satisfactory
arrangement for the continuing administration of the book.
The acquisition and administration of books of existing business from insurance
agents would provide us with a source of revenues that would be reasonably
predictable (based on such factors as the kinds of policies, the length of time
they have been in effect, the persistency of the business and the collection
experience), if we would make arrangements for effective continuing
administration. We think this could be done at reasonable cost, either by
making arrangements for the administration with another existing agency that is
administering similar business, or directly by employing personnel already
experienced in those administrative activities. If we were to engage directly
in these activities, we could be required to obtain licenses in states other
than Nevada and hire employees who are licensed in Nevada and other states.
We are continually attempting to acquire agencies by using our stock as the
main currency to affect a purchase. At the present time we do not have adequate
resources to purchase for cash any books of insurance business that might be
available. We intend to use exemptions from the registration provisions of the
Securities Act of 1933, as amended, including those provided in Regulation D
adopted there under, to raise cash to be used in such acquisitions and to offer
shares of our common stock, or other securities, in exchange for such books of
business. In this connection, we expect that in the case of any acquisitions of
existing books, the purchase price, either in cash, securities or a combination
thereof, will be negotiated based upon the mix of policies constituting the
books and the history of their administration, among other things.
If we are successful in purchasing agencies and their books, in some instances
we may be able to make arrangements with another existing agency to administer
one or more books for a percentage of the renewal commissions earned in respect
of the policies constituting the books. In any such event, we would have
obtained an income source without the need to incur corresponding operational
costs or overhead expenses.
If we are successful in acquiring a sufficient number of agencies and their
books of business, we could be in a position to negotiate with the insurance
companies that are the issuers of the policies to increase the amounts of
renewal commissions on the policies. The success of any such negotiations will
depend in part upon the identity of the insurance company that is the policy
issuer, the kinds of policies and the amount of business in the books.
We also intend to offer additional insurance products to the owners of policies
constituting the books that are acquired and to prospective new clients. We
would offer those products by traditional means directly as agent, or through
agencies administering books for us, and also by telephone using an 800 number,
and through an Internet web page that is established. Finally, we expect that
through the acquisition of books of existing business we will be able to make
contacts with potential purchasers of specialty insurance products that we
could market in combination with our nutritional products, Nutra-Prevention and
Nutra-Protection. To date, the Company has not been successful in its
efforts to find an acquisition candidate or develop its insurance line of
business.
The Company is continuing with its planned expansion of its ATM machine sales
division and generating commissions as a dealer representative and to build
that business further.
Our activities have been devoted to the planning and expansion of our ATM
machine sale operations. Management does not feel we have re-entered the
development stage as we are continuing to receive revenue from our ATM machine
sale operations.
Presently our only employees are the President, who is full-time, and the
Secretary-Treasurer and one additional employee, all of whom serve as contract
labor.
9
RESULTS OF OPERATIONS
The summary of financial results for the three months ended July 31, 2007
compared to the three months ended July 31, 2006 is as follows:
Revenues. Revenues increased $21,244, or 101.5%, for the three months ended
July 31, 2007, as compared to the corresponding period in the prior year. The
increase was attributable to more ATM sales resulting from the new marketing
program and strategy implemented as of May 1, 2007.
General and Administrative Expenses. General and administrative expenses
increased $7,084, or 48.3%, for the three months ended July 31, 2007, as
compared to the corresponding period in the prior year. The increase was
primarily related to current period increases in professional services, finance
charges, and other normal reoccurring operating expenses.
Accounting and Bookkeeping Expenses. Accounting and bookkeeping expenses
increased $6,893, or 215.9%, for the three months ended July 31, 2007, as
compared to the corresponding period in the prior year. The increase was
attributable to current period increases in costs associated with the
preparation of the financial statements.
FINANCIAL CONDITION
As of July 31, 2007, we had $1,848 cash and cash equivalents and negative net
working capital of $54,783. Our negative net working capital is primarily
attributable to current period increases in accounts payable and deposits
related to a potential merger candidate recorded as an acquisition liability on
the accompanying balance sheet for the three months ended July 31, 2007.
There is substantial doubt about the ability of Prevention Insurance.com to
continue as a going concern as disclosed in the notes of the Company's Annual
Report on Form 10-KSB/A for the fiscal year ended April 30, 2007 as filed with
the SEC on September 14, 2007. These conditions continued through the first
quarter of 2007 resulting in operating losses and liquidity shortages.
We have, and will continue to have, no capital with which to provide the owners
of business opportunities with any cash or other assets. Our stockholders have
agreed that they will advance any additional funds which we need for operating
capital and for costs in connection with searching for or completing an
acquisition or merger. Such advances will be made without expectation of
repayment unless the owners of the business which we acquire or merge with
agree to repay all or a portion of such advances. There is no minimum or
maximum amount such stockholder will advance to us. We will not borrow any
funds for the purpose of repaying advances made by such stockholder, and we
will not borrow any funds to make any payments to our promoters, management or
their affiliates or associates.
Our condition is at present under-capitalized. We have basically been able to
pay off all of our payables as agreed. Revenue to date has been provided by our
ATM equipment sales division, Quick Pay that is selling ATM machines to retail
outlets around the U. S. We have also received a small amount of capital from
existing shareholders through periodic stock sales. We will also be seeking out
private equity capital or a strategic partner as possible sources of financing.
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CASH FLOW SUMMARY
THREE MONTHS ENDED
------------------
JULY 31, INCREASE (DECREASE)
2007 2006 AMOUNT
-------- -------- --------
Cash flows from:
Operating activities $(24,837) $(29,246) $ 4,409
Investing activities - - -
Financing activities 10,000 31,679 (21,679)
During the three month period ended July 31, 2007, cash flows used in operating
activities totaled $24,837, as compared to $29,246 used in operating activities
for the corresponding period in the prior year. The improvement in net cash
flows from operations for the three month period is primarily related to:
- The collection of cash proceeds from accounts receivable offset by an
increase in prepaid expenses.
- The decrease in the current period net loss as compared to the net loss
in the corresponding period in the prior year.
During the three month period ended July 31, 2007, cash flows provided by
financing activities totaled $10,000, as compared to $31,679 provided by
financing activities for the corresponding period in the prior year. This
change is primarily the result of:
- The $5,000 decrease in proceeds received through the issuance of common
stock, $18,500 advances received from Officer/Shareholder, and $3,179 in Bank
Overdraft refunds offset by an increase in the acquisition liability related
to a potential merger candidate.
CONTRACTUAL COMMITMENTS
There were no material changes during the three month periods ended July 31,
2007, to the contractual obligations and commitments disclosed in the Company's
Annual Report on Form 10-KSB/A for the fiscal year ended April 30, 2007 as
filed with the SEC on September 14, 2007.
CRITICAL ACCOUNTING POLICIES
Revenue Recognition
Commission income from the sale of ATM machines is recognized at the time of
sale.
Net Loss Per Share Calculation
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share." Basic net
loss per common share ("EPS") is computed by dividing income available to
commons stockholders by the weighted-average number of common shares
outstanding for the period. Diluted earnings per shares is computed by
dividing net income by the weighted average shares outstanding, assuming all
dilutive potential common shares were issued. Since the fully diluted loss per
share for 2007 and 2006 was anti-dilutive, basic and diluted losses per share
are the same. The weighted-average number of common shares outstanding for
computing basic EPS for the three month period ended July 31, 2007 and July 31,
2006 were 21,833,492 and 19,569,362 respectively.
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Stock Based Compensation
In December 2004, SFAS No. 123 (revised 2004), "Share-Based Payment"("SFAS
123(R)") was issued. The Company applies SFAS 123R in accounting for stock
options issued to employees. For stock options and warrants issued to non-
employees, the Company applies SFAS No. 123R, Accounting for Stock-Based
Compensation, which requires the recognition of compensation cost based upon
the fair value of stock options at the grant date using the Black-Scholes
option pricing model.
There were no options issued as stock based compensation to any officers,
directors, or non-employees for the three month period ended July 31, 2007 or
July 31, 2006, respectively.
FACILITIES AND LEASES
Prevention Insurance.com leases office space under a non-cancelable operating
lease in Las Vegas, Nevada. The lease requires minimum monthly payments of
approximately $500 per month. The lease expires January 31, 2008 with minimum
rent payable for the year of $6,216.
DIVIDENDS
Prevention Insurance.com does not intend to pay dividends in the foreseeable
future.
ITEM 3. CONTROLS AND PROCEDURES.
DISCLOSURE CONTROLS AND PROCEDURES
As required by Rule 13a-15(c) promulgated under the Exchange Act, our
management, with the participation of our Chief Executive Officer/Principle
Financial Officer, evaluated the effectiveness of our internal control over
financial reporting as of July 31, 2007. Management's assessment was based on
criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission in Internal Control-Integrated Framework ("COSO"). Based on this
evaluation our Chief Executive Officer/Principle Financial Officer concluded
that, as of July 31, 2007, our disclosure controls and procedures were not
effective due to the existing weaknesses in our internal control over financial
reporting previously identified and discussed in the 2007 10-KSB/A and below
under "Internal Control Over Financial Reporting -Weakness in Internal Control
Over Financial Reporting Previously Reported."
In view of the fact that the financial information presented in this quarterly
report on Form 10-QSB for the fiscal quarter ended July 31, 2007, was prepared
in the absence of effective internal control over financial reporting, we have
devoted a significant amount of time and resources to the analysis of the
financial statements contained in this report. In particular, we have reviewed
the significant account balances and transactions reflected in the financial
statements contained in this report and otherwise analyzed the transactions
underlying our financial statements to verify the accuracy of the financial
statements. Accordingly, management believes that the financial statements
included in this report fairly present, in all material respects, our financial
condition, results of operations, and cash flows.
Nevertheless, there can be no assurance that either this review process or our
existing disclosure controls and procedures will prevent or detect all errors
and all fraud, if any, or result in accurate and reliable disclosure. A control
system can provide only reasonable and not absolute assurance that the
objectives of the control system are met. Because of the inherent limitations
in all control systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, have been
detected. Additionally, judgments in decision-making can be faulty and
breakdowns in controls can occur because of simple errors or mistakes that are
not detected on a timely basis.
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INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting that includes effective accounting
policies and procedures. Our continuing progress in establishing internal
control over financial reporting is described below.
Certain Changes in Internal Control Over Financial Reporting during the Fiscal
Quarter Ended July 31, 2007
During the quarter ended July 31, 2007, there were no other changes to our
internal control over financial reporting during the three months ended July
31, 2007 that management believes have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
Weaknesses in Internal Control Over Financial Reporting Previously Reported
INEFFECTIVE CONTROLS RELATED TO THE FINANCIAL CLOSING PROCESS
The Company's design and operation of controls with respect to the process of
preparing and reviewing the annual and interim financial statements are
ineffective. Deficiencies identified include the inadequate segregations of
duties, lack of controls over procedures used to enter transactions into the
general ledger, and lack of appropriate review of the reconciliations and
supporting workpapers used in the financial close and reporting process. While
these deficiencies did not result in a material misstatement of the financial
statements, due to the potential pervasive effect on the financial statement
account balances and disclosures and the importance of the annual and interim
financial closing and reporting process, in the aggregate, management has
concluded that there is more than a remote likelihood that a material
misstatement in our annual or interim financial statements could occur and
would not be prevented or detected. Management intends on discussing this
issue with its outside consultants to develop controls which are better
applicable to its industry and size.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no legal proceedings against us and we are unaware of such
proceedings contemplated against us.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
The Company made the following sales of unregistered (restricted) securities of
its common stock during the three months ending July 31, 2007 (Unaudited):
On June 19, 2007, the Company sold a total of 250,000 shares of common stock to
one individual for cash. These shares were valued at $5,000 (an average of
approximately $.02 per share).
No commissions were paid in connection with any of these sales. These sales
were undertaken under Rule 506 of Regulation D under the Securities Act of
1933. Each of the transactions did not involve a public offering and each of
the investors represented that he/she was a "sophisticated" or "accredited"
investor as defined in Rule 502 of Regulation D.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS PURSUANT TO REGULATION S-K:
Exhibit 31.1 Section 302 Certification by President
and Chief Executive Officer
Exhibit 32.1 Section 906 Certification by President
and Chief Executive Officer
B. REPORTS ON FORM 8-K:
Exhibit 31.2 Filed on June 15, 2007,
Item 4.01 Changes in Registrants Certifying Accountants
Exhibit 32.2 Filed on July 25, 2007,
tem 4.01 Changes in Registrants Certifying Accountants
14
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 thereunto authorized.
Date: September 14, 2007 Prevention Insurance.com
By: /s/ Scott Goldsmith
------------------------
Scott Goldsmith, President
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