UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended August 31, 2008
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 333-150061
INNOCENT,INC.
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(Exact name of registrant as specified in its charter)
Nevada 98-0585268
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(State of incorporation) (I.R.S. Employer ID No.)
755 Baywood Drive, Second Floor, Petaluma, CA 94954
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(Address of principal executive officers, including Zip Code)
(707) 658-4650
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(Issuer's Telephone Number)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001
par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No [ ]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by checkmark whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes [X] No [ ]
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained,to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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Indicate by checkmark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer," and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act. Yes[ ] No [X]
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrant's most recently completed second fiscal
quarter:
The aggregate market value of the Company's common shares of voting stock held
by non-affiliates of the Company at August 31, 2008, computed by reference to
the $0.010 Registration Statement per-share price on August 31, 2008, was
$30,000.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:
As of December 4, 2008, there were 7,000,000 shares of common stock, par value
$0.001, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
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TABLE OF CONTENTS
Page No.
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Part I
Item 1. Business 5
Item 1A. Risk Factors 8
Item 2. Properties 12
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Securities Holders 12
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities 13
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operation 14
Item 8. Financial Statements 19
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 33
Item 9A. Controls and Procedures 33
Part III
Item 10. Directors and Executive Officers 33
Item 11. Executive Compensation 35
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 37
Item 13. Certain Relationships and Related Transactions and Director
Independence 38
Item 14. Principal Accounting Fees and Services 39
Part IV
Item 15. Exhibits 39
Signatures 40
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PART I
FORWARD LOOKING STATEMENTS
This annual report contains forward-looking statements. Forward-looking
statements are projections of events, revenues, income, future economic
performance or management's plans and objectives for our future operations. In
some cases, you can identify forward-looking statements by terminology such as
"may", "should", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled "Risk Factors" and the risks set out below, any of which may
cause our or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements. These risks include, by way of example and not in
limitation:
- - the uncertainty of profitability based upon our history of losses;
- - risks related to failure to obtain adequate financing on a timely basis and on
acceptable terms to continue as going concern;
- - risks related to our international operations and currency exchange
fluctuations;
- - risks related to product liability claims;
- - other risks and uncertainties related to our business plan and business
strategy.
This list is not an exhaustive list of the factors that may affect any of our
forward-looking statements. These and other factors should be considered
carefully and readers should not place undue reliance on our forward-looking
statements.
Forward looking statements are made based on management's beliefs, estimates and
opinions on the date the statements are made and we undertake no obligation to
update forward-looking statements if these beliefs, estimates and opinions or
other circumstances should change. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements. Except as
required by applicable law, including the securities laws of the United States,
we do not intend to update any of the forward-looking statements to conform
these statements to actual results.
Our financial statements are stated in United States dollars (US$) and are
prepared in accordance with United States Generally Accepted Accounting
Principles.
In this annual report, unless otherwise specified, all dollar amounts are
expressed in United States dollars and all references to "common stock" refer to
the common shares in our capital stock.
As used in this annual report, the terms "we", "us", "our", the "Company" and
"Innocent" mean Innocent, Inc., unless otherwise indicated.
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ITEM 1. BUSINESS
GENERAL INFORMATION ABOUT OUR COMPANY
We were formed on September 27, 2006. Our plan is to build a diverse portfolio
of grocery product lines and brands produced by small and mid size North
American manufacturers and sell them to Eastern European and Russian Market
through a network of local and national distributors.
We are a development stage company and have limited operations. On October 22,
2007, we entered into a Sales and Distribution Agreement with "OOO Neonovi
Gorod" ("Neon City", distributor), an agency specializing in product
distribution, marketing and advertising in Russia and former CIS countries,
whereby we appointed and granted Neon City a non-exclusive and non-assignable
right to re-sell the products supplied by Innocent.
For the period from September 27, 2006, (Inception) to August 31, 2008, we have
generated $5,063 in revenue and incurred net loss of $62,927. Due to the "start
up" nature of our business, we expect to incur losses as it expands. To date,
our cash flow requirements have been primarily met by equity financings. If we
are unable to generate sufficient profits or unable to obtain additional funds
for our working capital needs, we may need to cease or curtail operations.
Furthermore, there is no assurance the net proceeds from any successful
financing arrangement will be sufficient to cover cash requirements during the
initial stages of the Company's operations. For these reasons, our auditors
believe that there is substantial doubt that we will be able to continue as a
going concern.
INDUSTRY BACKGROUND
General
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Russia's economic advancements over the past several years have increased
consumer incomes and in turn, bolstered the country's developing foodservice and
retail food sectors. In fact, Russia's packaged food market is now the fastest
growing in the world, quickly approaching the US$144 billion mark by some
estimates, and projected to grow by as much as 14% annually over the next few
years. According to A.C. Nielsen, the Russian food industry expanded three times
as fast as the global market in 2006. By 2020, Russia is expected to surpass
France as the largest food and grocery market in Europe.
Russians are increasingly leading busier, more "Westernized" lifestyles, and are
demanding more convenience products, frozen processed food and ready-meals. The
growing presence of freezers and microwaves in households is also helping
support this trend. However, this development is largely focused in wealthier,
urban areas such as Moscow and St. Petersburg, as well as smaller Nizhny
Novgorod, Novosibirsk and Ekaterinburg, while other consumer regions are slower
to follow. Furthermore, average disposable income per capita is projected to
continue to rise (i.e. 40% between 2005 and 2015) and will further help support
this consumer trend.
As Russians in major urban areas enjoy higher incomes and lead busier
lifestyles, time dedicated to traditional meal preparation and dining at home
with family is commonly shifting to consumption of prepared meals or those at
restaurants. The
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upsurge in mid-priced foodservice outlets in Russia over the past few years
reflects this trend. Rising consumer affluence has also driven growth in the
number of restaurants featuring international cuisine; Latin American, Asian,
Middle Eastern and Italian restaurants are increasingly popular, as Russia's
middle class continues to expand.
As Russian incomes rise and the country's middle-class expands, demand for
better quality food and product selection is rising. The emergence of modern
retail formats (e.g. both local and international supermarket and hypermarket
chains) in recent years has also helped drive this consumer trend.
Retail
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Discounters and hypermarkets are currently the fastest growing retail grocery
formats in Russia. Lower-income consumers prefer shopping at discounters due to
their bargain prices, while middle- and upper-income households typically enjoy
shopping at hypermarkets once a week for family groceries. Supermarkets,
warehouse wholesalers and convenience stores are also popular shopping formats.
Major retail food chains operating in Russia include Pyaterochka and
Perekryostok (recently merged under the X5 Retail Group), Metro, Magnit, Dixy
Mart, Seventh Continent and Ramstore. Carrefour recently announced its
intentions to enter the market as well. Retail food outlets are expected to
drive demand for convenience and new and innovative products, value or budget
priced goods, premium and healthy food offerings (demand is currently limited
due to lack of consumer awareness), and international and private label brands
in the long-term.
In 2001, Nowadays, Ramstore, Metro, Cash&Carry, Spar, Pyaterochka, Kopeika, and
Seventh Continent among others, began introducing private label goods into their
product lines. Although consumers are rather doubtful of such products (i.e. due
to perceptions of private labels being of less-quality than branded products,
and for lower-income consumers), additional promotion and product line
expansions are expected to increase sales in the future.
Milk, cheese, water and chilled, ready-made meals are currently the most popular
private label products in the market.
Hotels, Restaurants and Institutions (HRI)
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The Russian HRI market is developing at a rapid pace due to increasing consumer
incomes and a growing tourism industry. This, in turn, has opened a growing
market for premium food imports. The HRI sector reportedly relies on imports to
meet 90% of its food requirements.
Access Issues
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Russia remains a destination of constant trade and investment interest for
foreign investors, and holds potential for foreign companies wanting to
penetrate the developing Eastern European region. To facilitate successful
market entry, exporters are encouraged to develop market entry strategies that
include working with local importers and distributors to develop a presence,
gain valuable market advice, and best position products to meet local tastes,
laws and pricing.
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Russia's transportation infrastructure is most efficient in and centred around
Moscow. However, distribution networks remains largely underdeveloped throughout
the rest of the country. Approximately 90% of goods are distributed by rail;
Russia's highways are not designed to carry large trucking volumes and the
trucking industry still remains in its infancy. The country's vast and rugged
landscape has also delayed the development of a nation-wide highway system.
Russia's port systems also suffer from underinvestment and lack of up-to-date
technology. Reforms and investment across all transportation networks are needed
to ensure Russia's competitiveness on the world stage as a global trading
partner. However, Russia's ongoing transition to a market economy and future WTO
accession are expected to improve market access and the country's business
environment.
As a member of the UN and APEC, Russia implements international accords and
policies from these bodies. However, since Russia is still transitioning to a
market economy, it does hold several import regulations which North American
exporters should be aware of before entering the market:
- Import duties are applied to most goods and typically range from 5% to
20% of products' customs values. However, some commodities,
particularly agri-food products, are subject to specific tariffs that
are calculated by volume, weight or quantity.
- Excise taxes, ranging from 20% to 570%, depending on the commodity
exported, also apply to goods such as alcohol and tobacco products.
Russia typically levies an 18% Value Added Tax (VAT) on imported goods;
however, basic food products are subject to a reduced rate of 10%.
Competition
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The Company's business is subject to significant competition. The food industry
is highly competitive and Eastern European market is dominated by large
multinational companies including among others Nestle, Kraft Foods, Mars, and
Dirol Cadbury and Russian controlled United Confectioneries and SladCo. There
are also a number of local competitors especially in the sauce and condiments
product lines. Multinational competitors have already established their brand
name recognition on Russian market; they have significantly larger marketing
personnel and cash resources than our Company. In addition, large competitors
from the European Union continue to introduce products into Russian and other
CIS markets. Moreover, competition for shelf space in club and grocery stores is
intense and poses great difficulty for smaller food companies and distributors.
Innocent, Inc. will try to offer distinctive products, which address specific
consumer needs. We will target specific group of consumers who have special
dietary needs and are looking for healthy organic and natural products. However
these efforts do not guarantee that our company will be competitive, since
existing large distributors have greater resources to adjust to current market
trends.
Patent,Trademark, License and Franchise Restrictions and Contractual Obligations
- --------------------------------------------------------------------------------
and Concessions
- ---------------
We currently have no pending or provisional patents or trademark applications.
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Research and Development Activities
- -----------------------------------
Other than time spent researching our proposed business we have not spent any
funds on research and development activities to date. We do not currently plan
to spend any funds on research and development activities in the future.
Compliance with Environmental Laws
- ----------------------------------
We are not aware of any environmental laws that have been enacted, nor are we
aware of any such laws being contemplated for the future, that impact issues
specific to our business.
Employees
- ---------
We have no full-time employees at the present time. Our officers and directors,
are responsible for all planning, developing and operational duties, and will
continue to do so throughout the early stages of our growth.
We have no intention of hiring employees until the business has been
successfully launched and we have sufficient, reliable revenue from our
operations. Our officers and directors are planning to do whatever work is
required until our business to the point of having positive cash flow. We do not
expect to hire any employees during the coming fiscal year.
Reports to Securities Holders
- -----------------------------
We provide an annual report that includes audited financial information to our
shareholders. We will make our financial information equally available to any
interested parties or investors through compliance with the disclosure rules for
a small business issuer under the Securities Exchange Act of 1934. We are
subject to disclosure filing requirements including filing Form 10K annually and
Form 10Q quarterly. In addition, we will file Form 8K and other proxy and
information statements from time to time as required. We do not intend to
voluntarily file the above reports in the event that our obligation to file such
reports is suspended under the Exchange Act. The public may read and copy any
materials that we file with the Securities and Exchange Commission, ("SEC"), at
the SEC's Public Reference Room at 100 F Street NE, Washington, DC 20549. The
public may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site
(http://www.sec.gov) that contains reports, proxy and information statements,
and other information regarding issuers that file electronically with the SEC.
ITEM 1A. RISK FACTORS
WE FACE RISKS ASSOCIATED WITH CHANGING INDUSTRY
The food marketing and distribution industry is undergoing accelerated change as
producers, manufacturers, distributors and retailers seek to lower costs and
increase services in a highly competitive environment of relatively static
overall demand. Failure to develop a successful response to changing market
conditions over the long term could have a material adverse effect on the
Company's business and financial condition.
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WE ARE IN A LOW MARGIN BUSINESS AND ITS PROFITABILITY MAY BE NEGATIVELY IMPACTED
BY FOOD PRICE DEFLATION AND OTHER FACTORS.
The food marketing and distribution industry is characterized by relatively high
inventory turnover with relatively low profit margins. The Company intends to
make a significant portion of its sales at prices that are based on the cost
of products it re-sells plus a percentage markup. As a result, the Company's
profit levels may be negatively impacted during periods of food price deflation,
even though its gross profit percentage may remain relatively constant. The food
marketing and distribution industry is sensitive to international, national and
regional economic conditions. The Company's operating results may be adversely
affected by other factors, including difficulties with the collectability of
accounts receivable, inventory control, competitive price pressures, severe
weather conditions and unexpected increases in fuel or other transportation-
related costs. Therefore the Company can provide no assurance that one or more
of these factors will not adversely affect its future operating results.
OUR INTERNATIONAL OPERATIONS INVOLVE MANY RISKS.
We are subject to the risks generally associated with doing business abroad.
These risks include foreign laws and regulations, foreign consumer preferences,
political unrest, disruptions or delays in shipments and changes in economic
conditions in countries to which we sell products. These factors, among others,
may affect our cost of doing business and our ability to sell products. If any
of these or other factors make the conduct of business in Russia undesirable or
impractical, our business may be materially and adversely affected.
WE OPERATE IN VERY COMPETITIVE MARKETS.
Competition in the food marketing and distribution industry is intense. The
Company's primary competitors are multinational food distributors (such as Kraft
Foods, Inc., Nestle, etc.), national food distributors, and regional food
distributors who distribute its product lines in overseas markets. The principal
competitive factors include product price, quality and assortment of product
lines, schedules and reliability of delivery, and the range and quality of
customer services. Our competitors are well established and significantly better
funded than us. Due to limited financing, and fierce competition from
multinational food distributors we may not be able to generate revenues and will
have to cease operations.
BECAUSE WE WILL BE SELLING FOOD PRODUCTS, WE MAY FACE THE RISK OF EXPOSURE TO
PRODUCT LIABILITY CLAIMS.
Innocent, like any other re-seller of food products, faces the risk of exposure
to product liability claims in the event that the use of products re-sold by it
causes injury or illness. With respect to product liability claims, the Company
will seek contractual indemnification and insurance coverage from parties
supplying its products, but this indemnification or insurance coverage is
limited, as a practical matter, to the creditworthiness of the indemnifying
party and the policy limits of any insurance provided by suppliers. If Innocent
will not have adequate insurance or contractual indemnification available,
product liability relating to defective products could materially reduce its net
income and earnings per share.
BECAUSE WE HAVE NO LONG-TERM CONTRACTS WITH SUPPLIES AND DO NOT CONTROL THE
ACTUAL PRODUCTION OF THE PRODUCTS WE RE-SELL, WE MAY BE UNABLE TO MAINTAIN
ADEQUATE INVENTORY OF THE PRODUCTS.
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Innocent intends to obtain all of its food products from third-party suppliers.
The company does not plan to have long-term contracts with its suppliers
committing them to provide products to it. Although the Company's purchasing
volume should provide leverage when dealing with suppliers, suppliers may not
provide the food products and supplies Innocent needs in the quantities it
requests. Because the Company does not control the actual production of the
products it re-sells, the Company is also subject to delays caused by
interruption in production based on conditions outside its control. These
conditions include job actions or strikes by employees of suppliers, weather,
crop conditions, transportation interruptions and natural disasters or other
catastrophic events. Innocent's inability to obtain adequate supplies of its
food products, as a result of any of the foregoing factors or otherwise, could
mean that Innocent could not fulfill its obligations to customers, and customers
may turn to other wholesalers or distributors.
WE MAY BE ADVERSELY AFFECTED BY CURRENCY EXCHANGE RATE FLUCTUATIONS
Although we generally purchase products in U.S. dollars, the cost of these
products, which will be shipped overseas, may be affected by changes in the
value of the relevant currencies. Price increases caused by currency exchange
rate fluctuations may make our products less competitive or have an adverse
effect on our margins. Our international revenues and expenses generally are
derived from sales and operations in foreign currencies, and these revenues and
expenses may be materially affected by currency fluctuations, including amounts
recorded in foreign currencies and translated into U.S. dollars for financial
reporting. As a result, foreign currency fluctuations may have a material
adverse effect on our results of operations and financial condition.
THERE IS SUBSTANTIAL UNCERTAINTY AS TO WHETHER WE WILL CONTINUE OPERATIONS.
If we discontinue operations, you could lose your investment. Our auditors have
discussed their uncertainty regarding our business operations in their audit
report dated November 6, 2008. This means that there is substantial doubt that
we can continue as an ongoing business for the next 12 months. The financial
statements do not include any adjustments that might result from the uncertainty
about our ability to continue in business. As such, we may have to cease
operations and you could lose your entire investment.
WE LACK AN OPERATING HISTORY AND HAVE LOSSESS WHICH WE EXPECT TO CONTINUE INTO
THE FUTURE.
There is no assurance that our future operations will result in profitable
revenues. If we cannot generate sufficient revenues to operate profitably, our
business will fail. We were incorporated on September 27, 2006 and we have
realized revenues of $5,063 during the period from Incorporation on September
27, 2006 to August 31, 2008, while we have incurred net loss of $62,927 in the
same period. We have very little operating history upon which an evaluation of
our future success or failure can be made. Based upon current plans, we expect
to incur operating losses in future periods because we will be incurring
expenses which may exceed expected revenues. We cannot guarantee that we will be
successful in generating revenues in the future. Failure to generate revenues
will cause us to go out of business.
IF WE DO NOT OBTAIN ADDITIONAL FINANCING, OUR BUSINESS MAY FAIL.
Our business plan calls for ongoing expenses in connection with the marketing
and re-
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sale of food product lines. We have generated $5,063 in revenue from operations
to date. In order to expand our business operations, we anticipate that we will
have to raise additional funding. If we are not able to raise the funds
necessary to fund our business expansion objectives, we may have to delay the
implementation of our business plan. We do not currently have any arrangements
for financing. Obtaining additional funding will be subject to a number of
factors, including general market conditions, investor acceptance of our
business plan and initial results from our business operations. These factors
may impact the timing, amount, terms or conditions of additional financing
available to us. The most likely source of future funds presently available to
us is through the sale of additional shares of common stock.
BECAUSE OUR MANAGEMENT DOES NOT HAVE PRIOR EXPERIENCE IN FOOD SALES AND
MARKETING, OUR BUSINESS HAS A HIGHER RISK OF FAILURE.
Our directors do not have experience in food sales and marketing industry. As a
result, we may not be able to recognize and take advantage of opportunities
without the aid of qualified marketing and business development consultants. Our
directors' decisions and choices may not be well thought out and our operations,
earnings and ultimate financial success may suffer irreparable harm as a result.
WE DEPEND ON KEY PERSONNEL
Our future success will depend in part on the continued service of key
personnel, particularly Vera Barinova, our President and Chief Executive
Officer. Our future success will also depend on our ability to attract and
retain key managers, sales people and others. We face intense competition for
these individuals from well established multinational, national and regional
food marketing and distribution companies. We may not be able to attract
qualified new employees or retain existing employees, which may have a material
adverse effect on our results of operations and financial condition.
BECAUSE OUR DIRECTORS OWN 57.14% OF OUR OUTSTANDING STOCK, THEY WILL MAKE AND
CONTROL CORPORATE DECISIONS THAT MAY BE DISADVANTAGEOUS TO MINORITY
SHAREHOLDERS.
Our directors, own approximately 57.14% of the outstanding shares of our common
stock. Accordingly, they will have significant influence in determining the
outcome of all corporate transactions or other matters, including the election
of directors, mergers, consolidations and the sale of all or substantially all
of our assets, and also the power to prevent or cause a change in control.
The interests of these individuals may differ from the interests of the other
stockholders and thus result in corporate decisions that are disadvantageous to
other shareholders.
OUR STOCK IS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SEC'S
PENNY STOCK REGULATIONS AND THE FINRA'S SALES PRACTICE REQUIREMENTS, WHICH MAY
LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL OUR STOCK
Our stock is a penny stock. The Securities and Exchange Commission has adopted
Rule 15g-9 which generally defines "penny stock" to be any equity security that
has a market price (as defined) less than $5.00 per share or an exercise price
of less than $5.00 per share, subject to certain exceptions. Our securities are
covered by the penny stock rules, which impose additional sales practice
requirements on broker-
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dealers who sell to persons other than established customers and "accredited
investors". The term "accredited investor" refers generally to institutions with
assets in excess of $5,000,000 or individuals with a net worth in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their
spouse. The penny stock rules require a broker-dealer, prior to a transaction in
a penny stock not otherwise exempt from the rules, to deliver a standardized
risk disclosure document in a form prepared by the SEC which provides
information about penny stocks and the nature and level of risks in the penny
stock market. The broker-dealer also must provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer
and its salesperson in the transaction and monthly account statements showing
the market value of each penny stock held in the customer's account. The bid and
offer quotations, and the broker-dealer and salesperson compensation
information, must be given to the customer orally or in writing prior to
effecting the transaction and must be given to the customer in writing before or
with the customer's confirmation. In addition, the penny stock rules require
that prior to a transaction in a penny stock not otherwise exempt from these
rules, the broker-dealer must make a special written determination that the
penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in, and limit the marketability of, our common stock.
In addition to the "penny stock" rules promulgated by the Securities and
Exchange Commission, the Financial Industry Regulatory Authority has adopted
rules that require that in recommending an investment to a customer, a
broker-dealer must have reasonable grounds for believing that the investment is
suitable for that customer. Prior to recommending speculative low priced
securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer's financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, the National Association of Securities Dealers believes that
there is a high probability that speculative low-priced securities will not be
suitable for at least some customers. The National Association of Securities
Dealers' requirements make it more difficult for broker-dealers to recommend
that their customers buy our common stock, which may limit your ability to buy
and sell our stock.
ITEM 2. PROPERTIES
We do not hold ownership or leasehold interest in any property.
ITEM 3. LEGAL PROCEEDINGS
We are not currently a party to any legal proceedings, and we are not aware of
any pending or potential legal actions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fiscal year
ended August 31, 2008.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
(a) Market Information
Our shares of common stock commenced quotation on the OTC Bulletin Board under
the symbol INCT on June 3, 2008.
For the periods indicated, the following table presents the range of high and
low bid quotations for the common stock as reported by the OTC Bulletin Board
for the respective market on which our common stock was listed during the
quarter being reported. Prices below reflect inter-dealer prices, without retail
write-up, write-down or commission and may not represent actual transactions.
2008 High Low
---- --------- ---------
First Quarter $ - $ -
Second Quarter $ - $ -
Third Quarter $ - $ -
Fourth Quarter $ 0.20 $ 0.01
(b) Holders of Common Stock
We have 32 shareholders of record, and 7,000,000 shares outstanding as of
December 4, 2008.
(c) Dividends
There are no restrictions in our articles of incorporation or bylaws that
prevent us from declaring dividends. The Nevada Revised Statutes, however, do
prohibit us from declaring dividends where, after giving effect to the
distribution of the dividend:
1. we would not be able to pay our debts as they become due in the usual
course of business; or
2. our total assets would be less than the sum of our total liabilities
plus the amount that would be needed to satisfy the rights of
shareholders who have preferential rights superior to those receiving
the distribution.
We have not declared any dividends, and we do not plan to declare any dividends
in the foreseeable future.
(d) Securities Authorized for Issuance under Equity Compensation Plans
There are no outstanding grants or rights or any equity compensation plan in
place.
13
<page>
Recent Sales of Unregistered Securities
- ---------------------------------------
We completed an offering of 4,000,000 shares of our common stock at a price of
$0.001 per share to our directors Vera Barinova (3,000,000) and Aleksandr
Kryukov (1,000,000), on October 23, 2007. The total amount received from this
offering was $4,000. We completed this offering pursuant to Regulation S of the
Securities Act.
We completed an offering of 3,000,000 shares of common stock at a price of
$0.010 per share to a total of 30 purchasers on October 27, 2007. The total
amount received from this offering was $30,000. We completed this offering
pursuant to Regulation S of the Securities Act.
The offer and sale of all Shares of our common stock listed above were affected
in reliance on the exemptions for sales of securities not involving a public
offering, as set forth in Regulation S promulgated under the Securities Act. The
Investor acknowledged the following: Subscriber is not a United States Person,
nor is the Subscriber acquiring the Shares directly or indirectly for the
account or benefit of a United States Person. None of the funds used by the
Subscriber to purchase the Units have been obtained from United States Persons.
For purposes of this Agreement, "United States Person" within the meaning of
U.S. tax laws, means a citizen or resident of the United States, any former U.S.
citizen subject to Section 877 of the Internal Revenue Code, any corporation, or
partnership organized or existing under the laws of the United States of America
or any state, jurisdiction, territory or possession thereof and any estate or
trust the income of which is subject to U.S. federal income tax irrespective of
its source, and within the meaning of U.S. securities laws, as defined in Rule
902(o) of Regulation S, means:
(i) any natural person resident in the United States; (ii) any partnership or
corporation organized or incorporated under the laws of the United States; (iii)
any estate of which any executor or administrator is a U.S. person; (iv) any
trust of which any trustee is a U.S. person; (v) any agency or branch of a
foreign entity located in the United States; (vi) any non-discretionary account
or similar account (other than an estate or trust) held by a dealer or other
fiduciary for the benefit or account of a U.S. person; (vii) any discretionary
account or similar account (other than an estate or trust) held by a dealer or
other fiduciary organized, incorporated, or (if an individual) resident in the
United States; and (viii) any partnership or corporation if organized under the
laws of any foreign jurisdiction, and formed by a U.S. person principally for
the purpose of investing in securities not registered under the Securities Act,
unless it is organized or incorporated, and owned, by accredited investors (as
defined in Rule 501(a)) who are not natural persons, estates or trusts.
There have been no other issuances of common or preferred stock.
Issuer Purchases of Equity Securities
- -------------------------------------
We did not repurchase any of our equity securities during the years ended August
31, 2008 or 2007.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
14
<page>
Our Current Business
- --------------------
We were formed on September 27, 2006. Our plan is to build a diverse portfolio
of grocery product lines and brands produced by small and mid size North
American manufacturers and sell them to Eastern European and Russian Market
through a network of local and national distributors.
The two key elements of our short term plan (twelve-month period) are to create
our initial portfolio of products we want to sell to the foreign market and do a
test market of these products.
We plan to create a portfolio of grocery products by sourcing them through
industry trade shows, directly contacting North American manufacturers,
searching through food industry publications, ads and referrals. We are planning
to start with two to three products in each of the following categories:
- - Natural and organic products (all-natural and heart healthy snack bars made
with real ingredients like fruits and nuts, high quality organic chocolates,
organic cereals, and energy bars).
- - Gluten free, wheat free, yeast free products (Gluten free cookies, crisps,
baking mixes, cereals, spice blends, etc.)
- - Salt free or low sodium dietary products (Low sodium, low fat and low
calorie sauces, marinades, vinaigrettes, granolas, trial mixes, etc.)
- - Specialty gourmet products that carry uniquely American flavors (dry rubs
and seasoning blends, barbeque sauces, marinades, etc.)
We plan to buy samples and small quantities of chosen products from vendors
throughout the United States and ship them to our distributor ("Neon City") for
testing on the local market. Neon City will utilize their existing contacts to
introduce the products to buyers at local grocery chains as well as to food
service operators. As of date of this report we did two trial shipments to
Russia and have done preliminary testing of several product samples.
Our company will create a list of prospective products based on feedback we will
receive from our distributor. We will obtain all the necessary information about
prospective products we wish to include in our portfolio from the manufacturers
for the purpose of developing a sale support system. We will evaluate the
consumer response to the introduced new products. Then we will develop a more
detailed plan of operations including types of products and next order volumes.
RESULTS OF OPERATIONS
The following is a discussion and analysis of our results of operation for the
year ended August 31, 2008, and the factors that could affect our future
financial condition. This discussion and analysis should be read in conjunction
with our audited financial statements and the notes thereto included elsewhere
in this annual report. Our financial statements are prepared in accordance with
United States generally accepted accounting principles. All references to dollar
amounts in this section are in United States dollars unless expressly stated
otherwise.
15
<page>
Financial Data Summary
- ----------------------
Year September 27, 2006
Ended (Inception) Through
August 31, August 31,
2008 2007
---- ----
Revenue $ 5,063 $ -
General and Administrative Expenses $ 60,154 3,980
--------- ----------
Net Loss $ 58,947 $ 3,980
========= ==========
Revenue
- -------
Our gross revenue for the year ended August 31, 2008, was $5,063, compared to
$Nil for the period from September 27, 2006 (Inception) to August 31, 2007. Our
cost of goods sold for the same year ended August 31, 2008 was $3,755 resulting
in a gross profit of $1,308.
Operating Costs and Expenses
- ----------------------------
The major components of our expenses for the year ended August 31, 2008, and for
the period from September 27, 2006 (Inception) through August 31, 2007, are
outlined in the table below:
Year September 27, 2006
Ended (Inception) Through
August 31, August 31,
2008 2007
---- ----
Accounting and audit fees $ 14,100 $ 3,500
Consulting 13,400 -
General and administrative 20,778 -
Management 2,000 -
Organization costs - 480
Telephone 2,174 -
Travel and promotion 7,702 -
---------- ---------
$ 60,154 $ 3,980
========== =========
Operating Expenses
The increase our operating cost for the year ended August 31, 2008, compared to
the period ended August 31, 2007, was due to the increase in general and
administrative costs, management fees, travel expenses and the increase in
professional fees associated with our reporting obligations under the Securities
Exchange Act of 1934. All these increases are associated to the increase in our
corporate activities and increase in expenses related to implementation of our
business plan.
16
<page>
Liquidity and Capital Resources
- -------------------------------
Working Capital
- ---------------
Year September 27, 2006
Ended (Inception) Through
August 31, August 31,
2008 2007
---- ----
Current Assets $ 3,324 $ -
Current Liabilities 32,584 3,980
Working Capital Deficiency $ (29,260) $ (3,980)
Cash Flows
- ----------
Year September 27, 2006
Ended (Inception) Through
August 31, August 31,
2008 2007
---- ----
Cash used in Operating Activities $ 42,067 $ -
Cash used by Investing Activities - -
Cash provided by Financing Activities 42,101 -
Net Increase in Cash $ 34 $ -
We had cash of $34, accounts receivable of $2,940, accounts payable and accrued
liabilities of $24,483 and loan payable of $8,101 for a working capital
deficiency of $29,260 as of August 31, 2008.
We expect spending approximately $10,000, subject to financing, on the initial
testing of new products in the foreign market. As well, we anticipate spending
an additional $10,000 on professional fees, general administrative costs and
expenditures associated with complying with reporting obligations. Total
expenditures over the next 12 months are therefore expected to be $20,000. We
also expect spending approximately $15,000 in inventory purchasing, subject to
financing and securing customers' orders. Accordingly, we will need to obtain
additional financing in order to complete our full business plan.
Cash Used In Operating Activities
- ---------------------------------
We used cash in operating activities in the amount of $42,067 during the year
ended August 31, 2008 and $Nil during the period ended August 31, 2007. Cash
used in operating activities was funded by cash from financing activities.
17
<page>
Cash From Investing Activities
- ------------------------------
No cash was used or provided in investing activities during the year ended
August 31, 2008.
Cash from Financing Activities
- ------------------------------
To August 31, 2008, the Company has mostly funded its initial operations through
the issuance of 7,000,000 shares of capital stock for proceeds of $34,000.
Due to the "start up" nature of our business, we expect to incur losses as it
expands. To date, our cash flow requirements have been primarily met by equity
financings. Management expects to keep operating costs to a minimum until cash
is available through financing or operating activities. Management plans to
continue to seek other sources of financing on favorable terms; however, there
are no assurances that any such financing can be obtained on favorable terms, if
at all. If we are unable to generate sufficient profits or unable to obtain
additional funds for our working capital needs, we may need to cease or curtail
operations. Furthermore, there is no assurance the net proceeds from any
successful financing arrangement will be sufficient to cover cash requirements
during the initial stages of the Company's operations. For these reasons, our
auditors believe that there is substantial doubt that we will be able to
continue as a going concern.
Going Concern
- --------------
The audited financial statements for the year ended August 31, 2008, included in
this annual report, have been prepared on a going concern basis, which implies
that our company will continue to realize its assets and discharge its
liabilities and commitments in the normal course of business. Our company has
generated $5,063 in revenues since inception and has never paid any dividends
and is unlikely to pay dividends or generate substantial earnings in the
immediate or foreseeable future. The continuation of our company as a going
concern is dependent upon the continued financial support from our shareholders,
the ability of our company to obtain necessary equity financing to achieve our
operating objectives, and the attainment of profitable operations. As at August
31, 2008, our company has accumulated losses of $62,927 since inception. As we
do not have sufficient funds for our planned operations, we will be required to
raise additional funds for operations.
Due to the uncertainty of our ability to meet our current operating expenses and
the capital expenses noted above, in their report on the annual financial
statements for the year ended August 31, 2008, our independent auditors included
an explanatory paragraph regarding concerns about our ability to continue as a
going concern. Our financial statements contain additional note disclosures
describing the circumstances that lead to this disclosure by our independent
auditors.
The continuation of our business is dependent upon us raising additional
financial support. The issuance of additional equity securities by us could
result in a significant dilution in the equity interests of our current
stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments.
18
<page>
Future Financings
- -----------------
We anticipate that additional funding will be required in the form of equity
financing from the sale of our common stock. However, we cannot provide
investors with any assurance that we will be able to raise sufficient funding
from the sale of our common stock to fund our marketing plan and operations. At
this time, we cannot provide investors with any assurance that we will be able
to raise sufficient funding from the sale of our common stock or through a loan
from our directors to meet our obligations over the next twelve months. We do
not have any arrangements in place for any future equity financing.
Off-Balance Sheet Arrangements
- ------------------------------
We have no significant off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to
stockholders.
ITEM 8. FINANCIAL STATEMENTS
Index to the Audited Financial Statements Page
- ----------------------------------------- ----
Report of Independent Registered Certified Public Accounting Firm F-2
Balance Sheets F-3
Statement of Operations F-4
Statement of Cash Flows F-5
Statement of Stockholders' Equity F-6
Notes to the Financial Statements F-7
19
<page>
INNOCENT, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
August 31, 2008
BALANCE SHEET
STATEMENTS OF OPERATIONS
STATEMENTS OF CASH FLOWS
STATEMENTS OF STOCKHOLDERS' EQUITY
NOTES TO FINANCIAL STATEMENTS
<page>
MOORE & ASSOCIATES, CHARTERED
ACCOUNTANTS AND ADVISORS
------------------------
PCAOB REGISTERED
To the Board of Directors
Innocent Inc.
(A Development Stage Company)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
We have audited the accompanying balance sheets of Innocent Inc. (A Development
Stage Company) as of August 31, 2008 and August 31, 2007, and the related
statements of operations, stockholders' equity and cash flows for the year ended
August 31, 2008 and from inception on September 27, 2006 through August 31, 2008
and 2007. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Innocent Inc. (A Development
Stage Company) as of August 31, 2008 and August 31, 2007, and the related
statements of operations, stockholders' equity and cash flows for the year ended
August 31, 2008 and from inception on September 27, 2006 through August 31, 2008
and 2007, in conformity with accounting principles generally accepted in the
United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has an accumulated deficit of $62,927, which
raises substantial doubt about its ability to continue as a going concern.
Management's plans concerning these matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Moore & Associates, Chartered
Moore & Associates Chartered
Las Vegas, Nevada
November 6, 2008
6490 West Desert Inn Rd, Las Vegas, NV 89146 (702) 253-7499 Fax (702) 253-7501
------------------------------------------------------------------------------
F-2
<page>
INNOCENT, INC.
(A Development Stage Company)
BALANCE SHEETS
August 31, 2008, and 2007
2008 2007
---- ----
ASSETS
------
Current assets
Cash $ 34 $ -
Accounts receivable 2,940 -
Prepaid expenses 350 -
--------- ---------
Total current assets 3,324 -
--------- ---------
Security deposit 333 -
--------- ---------
Total assets $ 3,657 $ -
========= =========
LIABILITIES & STOCKHOLDERS'EQUITY
---------------------------------
Current liabilities
Accounts payable and accrued liabilities $ 24,483 $ 3,980
Loan payable - related party 8,101 -
--------- ---------
Total current liabilities 32,584 3,980
--------- ---------
Stockholders' Equity
Common stock $0.001 par value;
75,000,000 shares authorized;
7,000,000 shares and 4,000,000 issued
and outstanding 7,000 4,000
Additional paid-in capital 27,000 -
Subscription Receivable - ( 4,000)
Deficit accumulated during the development stage ( 62,927) ( 3,980)
--------- ---------
Total Stockholders' Equity ( 28,927) ( 3,980)
--------- ---------
Total Liabilities and Stockholders' Equity $ 3,657 $ -
========= =========
The accompanying notes are an integral part of these financial statements
F-3
<page>
INNOCENT, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<table>
<caption>
Year September 27,2006 September 27,2006
Ended (Inception) Through (Inception) Through
August 31, August 31, August 31,
2008 2007 2008
---- ---- ----
<s> <c> <c> <c>
Sales $ 5,063 $ - $ 5,063
Cost of sales 3,755 - 3,755
------------ ----------- ---------
Gross profit 1,308 - 1,308
------------ ----------- ---------
Operating Expenses:
Accounting and audit fees $ 14,100 $ 3,500 $ 17,600
Consulting 13,400 - 13,400
General and administrative 20,778 - 20,778
Management 2,000 - 2,000
Organization costs - 480 480
Telephone 2,174 - 2,174
Travel and promotion 7,702 - 7,702
----------- ----------- ---------
60,154 3,980 64,134
----------- ----------- ---------
Loss from operations ( 58,846) - ( 62,826)
Other income (expense)
Interest expense ( 101) - ( 101)
----------- ----------- ---------
Income (loss) before provision for income tax ( 58,947) ( 3,980) ( 62,927)
Provision for income tax - - -
----------- ----------- ---------
Net income (loss) $( 58,947) $( 3,980) $( 62,927)
=========== =========== =========
Net Earnings (loss) per share $( 0.01) $( 0.00)
=========== ===========
Weighted average number of common shares
outstanding 5,824,658 4,000,000
=========== ===========
</table>
The accompanying notes are an integral part of these financial statements
F-4
<page>
INNOCENT, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<table>
<caption>
Year September 27,2006 September 27,2006
Ended (Inception) Through (Inception) Through
August 31, August 31, August 31,
2008 2007 2008
---- ---- ----
<s> <c> <c> <c>
Operating Activities:
Net income (loss) $( 58,947) $( 3,980) $( 62,927)
Adjustment to reconcile net income to net cash
provided by (used for) operating activities:
Accounts receivable ( 2,940) - ( 2,940)
Prepaid expenses ( 350) - ( 350)
Security deposit ( 333) - ( 333)
Accounts payable and accrued liabilities 20,503 3,980 24,483
----------- ----------- ---------
Net cash provided by (used for) operating
activities ( 42,067) - ( 42,067)
----------- ----------- ---------
Financing Activities:
Proceeds from issuance of common stock 34,000 - 34,000
Loan payable - related party 8,101 - 8,101
----------- ----------- ---------
Net cash provided by (used for) financing 42,101 - 42,101
activities
----------- ----------- ---------
Net Increase (Decrease) In Cash 34 - 34
Cash At The Beginning Of The Period - - -
----------- ----------- ---------
Cash At The End Of The Period $ 34 $ - $ 34
=========== =========== =========
Schedule Of Non-Cash Investing And Financing
Activities - None
Supplemental Disclosure
Cash paid for:
Interest $ - $ - $ -
=========== =========== =========
Income Taxes $ - $ - $ -
=========== =========== =========
</table>
The accompanying notes are an integral part of these financial statements
F-5
<page>
INNOCENT, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
September 27, 2006 (Inception) Through August 31, 2008
<table>
<caption>
Deficit
Accumulated
Common Shares Additional During the
---------------------- Paid-in Subscription Development
Number Par Value Capital Receivable Stage Total
------ --------- ------- ---------- ----- -----
<s> <c> <c> <c> <c> <c> <c>
Balances, September 27, 2006,
Common stock subscription at $0.001 4,000,000 $ 4,000 $ - $( 4,000) $ - $ -
Net gain (loss) for the period ended
August 31, 2007 - - - - ( 3,980) ( 3,980)
--------- -------- -------- --------- --------- --------
Balances, August 31, 2007 4,000,000 4,000 - ( 4,000) ( 3,980) ( 3,980)
--------- -------- -------- --------- --------- --------
Issued for cash:
Subscription paid for - - - 4,000 - 4,000
Common stock October, 2007 - at $0.010 3,000,000 3,000 27,000 - 30,000
Net gain (loss) for the year ended August 31, 2008 - - - - ( 58,947) (58,947)
--------- -------- -------- -------- --------- --------
Balances, August 31, 2008 7,000,000 $ 7,000 $ 27,000 $ - $( 62,927) $(28,927)
========= ======== ======== ======== ========= =======
</table>
The accompanying notes are an integral part of these financial statements
F-6
<page>
INNOCENT, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
August 31, 2008
Note 1 Nature and Continuance of Operations
------------------------------------
Organization
------------
The Company was incorporated in the State of Nevada, United States
of America on September 27, 2006, and its fiscal year end is
August 31. The Company is engaged in sales of new food products
produced or developed by North American companies to foreign
markets.
Going Concern
-------------
These financial statements have been prepared on a going concern
basis. The Company has a working capital deficiency of $29,260,
and has accumulated deficit of $62,927 since inception. Its
ability to continue as a going concern is dependent upon the
ability of the Company to generate profitable operations in the
future and/or to obtain the necessary financing to meet its
obligations and repay its liabilities arising from normal business
operations when they come due. The outcome of these matters cannot
be predicted with any certainty at this time. These factors raise
substantial doubt that the company will be able to continue as a
going concern. Management plans to continue to provide for its
capital needs by the issuance of common stock and related party
advances. These financial statements do not include any
adjustments to the amounts and classification of assets and
liabilities that may be necessary should the Company be unable to
continue as a going concern.
Note 2 Summary of Significant Accounting Policies
------------------------------------------
The financial statements of the Company have been prepared in
accordance with generally accepted accounting principles in the
United States of America. Because a precise determination of many
assets and liabilities is dependent upon future events, the
preparation of financial statements for a period necessarily
involves the use of estimates which have been made using careful
judgement. Actual results may vary from these estimates.
Development Stage Company
-------------------------
The Company complies with Financial Accounting Standard Board
Statement ("FAS") No. 7 and The Securities and Exchange Commission
Act Guide 7 for its characterization of the Company as development
stage.
Revenue Recognition
-------------------
Sales are recognized when revenue is realized or realizable and
has been earned. The Company's policy is to recognize revenue when
risk of loss and title to the product transfers to the customer.
Net sales is comprised of gross revenues less expected returns,
trade discounts and customer allowances, which include costs
associated with off-invoice mark-downs and other price reductions,
as well as trade promotions and coupons. These incentive costs are
recognized at the later of the date on which the Company
recognizes the related revenue or the date on which the Company
offers the incentive.
F-7
<page>
Innocent, Inc.
(A Development Stage Company)
Notes to the Financial Statements
August 31, 2008 - Page 2
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
Impairment of Long-lived Assets
-------------------------------
Capital assets are reviewed for impairment in accordance with FAS
No. 144, "Accounting for the Impairment or Disposal of Long-lived
Assets", which was adopted effective January 1, 2002. Under FAS
No. 144, these assets are tested for recoverability whenever
events or changes in circumstances indicate that their carrying
amounts may not be recoverable. An impairment charge is recognized
for the amount, if any, which the carrying value of the asset
exceeds the fair value.
Advertising and Promotion
-------------------------
The Company's expenses all advertising and promotion costs as
incurred. Advertising and promotion costs for the periods ended
August 31, 2008 and 2007 were $0.
Research and Development
------------------------
Research and development expenditures are expensed as incurred.
Foreign Currency Translation
----------------------------
The financial statements are presented in United States dollars.
In accordance with Statement of Financial Accounting Standards No.
52, "Foreign Currency Translation", since the functional currency
of the Company is U.S. dollars, the foreign currency financial
statements of the Company's subsidiaries are re-measured into U.S.
dollars. Monetary assets and liabilities are re-measured using the
foreign exchange rate that prevailed at the balance sheet date.
Revenue and expenses are translated at weighted average rates of
exchange during the year and stockholders' equity accounts and
furniture and equipment are translated by using historical
exchange rates. Any re-measurement gain or loss incurred is
reported in the income statement.
Net Loss per Share
------------------
Basic loss per share includes no dilution and is computed by
dividing loss available to common stockholders by the weighted
average number of common shares outstanding for the period.
Dilutive losses per share reflects the potential dilution of
securities that could share in the losses of the Company. Because
the Company does not have any potentially dilutive securities, the
accompanying presentation is only of basic loss per share.
Stock-based Compensation
------------------------
The Company has not adopted a stock option plan and has not
granted any stock options. Accordingly no stock-based compensation
has been recorded to date.
F-8
<page>
Innocent, Inc.
(A Development Stage Company)
Notes to the Financial Statements
August 31, 2008 - Page 3
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
Income Taxes
------------
The Company uses the asset and liability method of accounting for
income taxes in accordance with FAS No. 109 "Accounting for Income
Taxes". Under this method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
temporary differences between the financial statements carrying
amounts of existing assets and liabilities and loss carryforwards
and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary
differences are expected to be recovered or settled.
Fair Value of Financial Instruments
-----------------------------------
The carrying value of the Company's financial instruments
consisting of cash, accounts payable and accrued liabilities,
agreement payable and due to related party approximate their
carrying value due to the short-term maturity of such instruments.
Unless otherwise noted, it is management's opinion that the
Company is not exposed to significant interest, currency or credit
risks arising from these financial instruments.
Recent Accounting Pronouncements
--------------------------------
In September 2006, the FASB issued SFAS No. 157, "Fair Value
Measures". This Statement defines fair value, establishes a
framework for measuring fair value in generally accepted
accounting principles (GAAP), expands disclosures about fair value
measurements, and applies under other accounting pronouncements
that require or permit fair value measurements. SFAS No. 157 does
not require any new fair value measurements. However, the FASB
anticipates that for some entities, the application of SFAS No.
157 will change current practice. SFAS No. 157 is effective for
financial statements issued for fiscal years beginning after
November 15, 2007, which for the Company would be the fiscal year
beginning February 1, 2008. The Company is currently evaluating
the impact of SFAS No. 157 but does not expect that it will have a
material impact on its financial statements.
In September 2006, the FASB issued SFAS No. 158, "Employers'
Accounting for Defined Benefit Pension and Other Postretirement
Plans." This Statement requires an employer to recognize the over
funded or under funded status of a defined benefit post retirement
plan (other than a multiemployer plan) as an asset or liability in
its statement of financial position, and to recognize changes in
that funded status in the year in which the changes occur through
comprehensive income. SFAS No. 158 is effective for fiscal years
ending after December 15, 2006 which for the Company would be
February 1, 2007. The Company does not expect that the
implementation of SFAS No. 158 will have any material impact on
its financial position and results of operations.
In September 2006, the SEC issued Staff Accounting Bulletin
("SAB") No. 108, "Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year
Financial Statements." SAB No. 108 addresses how the effects of
prior year uncorrected misstatements should be considered when
quantifying misstatements in
F-9
<page>
Innocent, Inc.
(A Development Stage Company)
Notes to the Financial Statements
August 31, 2008 - Page 4
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
Recent Accounting Pronouncements - (cont'd)
---------------------------------
current year financial statements. SAB No. 108 requires companies
to quantify misstatements using a balance sheet and income
statement approach and to evaluate whether either approach results
in quantifying an error that is material in light of relevant
quantitative and qualitative factors. SAB No. 108 is effective for
periods ending after November 15, 2006 which for the Company would
be February 1, 2007. The Company is currently evaluating the
impact of adopting SAB No. 108 but does not expect that it will
have a material effect on its financial statements.
In February 2007, the FASB issued SFAS No. 159, "The Fair Value
Option for Financial Assets and Financial Liabilities". This
Statement permits entities to choose to measure many financial
assets and financial liabilities at fair value. Unrealized gains
and losses on items for which the fair value option has been
elected are reported in earnings. SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007. The Company is
currently assessing the impact of SFAS No. 159 on its financial
position and results of operations.
In December 2007, the FASB issued two new statements: (a.) SFAS
No. 141(revised 2007), Business Combinations, and (b.) No. 160,
Noncontrolling Interests in Consolidated Financial Statements.
These statements are effective for fiscal years beginning after
December 15, 2008 and the application of these standards will
improve, simplify and converge internationally the accounting for
business combinations and the reporting of noncontrolling
interests in consolidated financial statements. The Company is in
the process of evaluating the impact, if any, on SFAS 141 (R) and
SFAS 160 and does not anticipate that the adoption of these
standards will have any impact on its consolidated financial
statements.
(a.) SFAS No. 141 (R) requires an acquiring entity in a business
combination to: (i) recognize all (and only) the assets acquired
and the liabilities assumed in the transaction, (ii) establish an
acquisition-date fair value as the measurement objective for all
assets acquired and the liabilities assumed, and (iii) disclose to
investors and other users all of the information they will need to
evaluate and understand the nature of, and the financial effect
of, the business combination, and, (iv) recognize and measure the
goodwill acquired in the business combination or a gain from a
bargain purchase.
(b.) SFAS No. 160 will improve the relevance, comparability and
transparency of financial information provided to investors by
requiring all entities to: (i) report noncontrolling (minority)
interests in subsidiaries in the same manner, as equity but
separate from the parent's equity, in consolidated financial
statements, (ii) net income attributable to the parent and to the
non-controlling interest must be clearly identified and presented
on the face of the consolidated statement of income, and (iii) any
changes in the parent's ownership interest while the parent
retains the controlling financial interest in its subsidiary be
accounted for consistently.
F-10
<page>
Innocent, Inc.
(A Development Stage Company)
Notes to the Financial Statements
August 31, 2008 - Page 5
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
Recent Accounting Pronouncements - (cont'd)
---------------------------------
In March 2008, the FASB issued SFAS No. 161, Disclosures About
Derivative Instruments and Hedging Activities - an amendment of
FASB Statement No. 133 ("SFAS No. 161"). SFAS No. 161 expands
quarterly disclosure requirements in SFAS No. 133 about an
entity's derivative instruments and hedging activities. SFAS No.
161 is effective for fiscal years beginning after November 15,
2008. The adoption of SFAS No. 161 is not expected to have a
material impact on the Company's financial condition, results of
operations or cash flows.
In May 2008, the FASB issued FASB Statement No. 162, "The
Hierarchy of Generally Accepted Accounting Principles" ("SFAS No.
162"). SFAS No. 162 identifies the sources of accounting
principles and the framework for selecting the principles used in
the preparation of financial statements of nongovernmental
entities that are presented in conformity with generally accepted
accounting principles in the United States of America. The sources
of accounting principles that are generally accepted are
categorized in descending order as follows:
a) FASB Statements of Financial Accounting Standards and
Interpretations, FASB Statement 133 Implementation Issues, FASB
Staff Positions, and American Institute of Certified Public
Accountants (AICPA) Accounting Research Bulletins and Accounting
Principles Board Opinions that are not superseded by actions of
the FASB.
b) FASB Technical Bulletins and,if cleared by the FASB,AICPA Industry
Audit and Accounting Guides and Statements of Position.
c) AICPA Accounting Standards Executive Committee Practice Bulletins
that have been cleared by the FASB, consensus positions of the
FASB Emerging Issues Task Force (EITF), and the Topics discussed
in Appendix D of EITF Abstracts (EITF D-Topics).
d) Implementation guides (Q&As) published by the FASB staff, AICPA
Accounting Interpretations, AICPA Industry Audit and Accounting
Guides and Statements of Position not cleared by the FASB, and
practices that are widely recognized and prevalent either
generally or in the industry.
On May 26,2008, the FASB issued FASB Statement No.163, "Accounting
for Financial Guarantee Insurance Contracts" ("SFAS No.163"). SFAS
No. 163 clarifies how FASB Statement No.60, " Accounting and
Reporting by Insurance Enterprises" ("SFAS No. 60"), applies to
financial guarantee insurance contracts issued by insurance
enterprises, including the recognition and measurement of premium
revenue and claim liabilities. It also requires expanded
disclosures about financial guarantee insurance contracts.
F-11
<page>
Innocent, Inc.
(A Development Stage Company)
Notes to the Financial Statements
August 31, 2008 - Page 6
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
Recent Accounting Pronouncements - (cont'd)
---------------------------------
The accounting and disclosure requirements of SFAS No. 163 are
intended to improve the comparability and quality of information
provided to users of financial statements by creating consistency.
Diversity exists in practice in accounting for financial guarantee
insurance contracts by insurance enterprises under SFAS No. 60,
"Accounting and Reporting by Insurance Enterprises." That
diversity results in inconsistencies in the recognition and
measurement of claim liabilities because of differing views about
when a loss has been incurred under FASB Statement No. 5,
"Accounting for Contingencies" ("SFAS No. 5"). SFAS No. 163
requires that an insurance enterprise recognize a claim liability
prior to an event of default when there is evidence that credit
deterioration has occurred in an insured financial obligation. It
also requires disclosure about (a) the risk-management activities
used by an insurance enterprise to evaluate credit deterioration
in its insured financial obligations and (b) the insurance
enterprise's surveillance or watch list. SFAS No. 163 is effective
for financial statements issued for fiscal years beginning after
December 15, 2008, and all interim periods within those fiscal
years, except for disclosures about the insurance enterprise's
risk-management activities. Disclosures about the insurance
enterprise's risk-management activities are effective the first
period beginning after issuance of SFAS No. 163. Except for those
disclosures, earlier application is not permitted. The management
of Innocent does not expect the adoption of this pronouncement to
have material impact on its financial statements.
Note 3 Stockholders' Equity
--------------------
The total number of common shares authorized that may be issued by
the Company is 75,000,000 shares with a par value of one tenth of
one cent ($0.001) per share and no other class of shares is
authorized.
During the period from September 27, 2006 (inception) to May 31,
2008, the Company issued 4,000,000 shares of common stock at
$0.001 per share to its directors for total proceeds of $4,000 and
3,000,000 shares of common stock at $0.010 per share for total
proceeds of $30,000.
To August 31, 2008, the Company has not granted any stock options
and has not recorded any stock-based compensation.
Note 4 Related Party Transactions
--------------------------
a) The President of the Company provides management services to
the Company. During the year ended August 31, 2008 management
services of $2,000 (August 31, 2007 - $Nil) were charged to
operations.
b) A director of the Company provides consulting services to the
Company. During the period ended August 31, 2008 consulting
services of $3,400 (August 31, 2007 - $Nil) were charged to
operations.
F-12
<page>
Innocent, Inc.
(A Development Stage Company)
Notes to the Financial Statements
August 31, 2008 - Page 7
Note 4 Related Party Transactions - (cont'd)
--------------------------
c) During the year ended August 31, 2008, the President of the
Company provided a $8,000 loan to the Company. The loan is
payable on demand, unsecured, bears interest at 6.75% per
annum and consists of $8,000 of principal, and $101 of accrued
interest payable as of August 31, 2008.
Note 5 Income Taxes
-------------
The significant components of the Company's deferred tax assets
are as follows:
August 31, August 31,
2008 2007
---- ----
Deferred Tax Assets
Non-capital loss carryforward $ 9,439 $ 597
Less: valuation allowance for
deferred tax asset ( 9,439) ( 597)
--------- --------
$ - $ -
========= ========
There were no temporary differences between the Company's tax and
financial bases that result in deferred tax assets, except for the
Company's net operating loss carryforwards amounting to
approximately $62,927 at August 31, 2008 (August 31, 2007 -
$3,980) which may be available to reduce future year's taxable
income.
These carryforwards will expire, if not utilized, commencing in
2027. Management believes that the realization of the benefits
from these deferred tax assets appears uncertain due to the
Company's limited operating history and continuing losses.
Accordingly a full, deferred tax asset valuation allowance has
been provided and no deferred tax asset benefit has been recorded.
F-13
<page>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls
- ---------------------------------
We evaluated the effectiveness of our disclosure controls and procedures as of
the end of the 2008 fiscal year. This evaluation was conducted with the
participation of our chief executive officer and our principal accounting
officer.
Disclosure controls are controls and other procedures that are designed to
ensure that information that we are required to be disclosed in the reports we
file pursuant to the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported.
Limitations on the Effective of Controls
- ----------------------------------------
Our management does not expect that our disclosure controls or our internal
controls over financial reporting will prevent all error and fraud. A control
system, no matter how well conceived and operated, can provide only reasonable,
but no absolute, assurance that the objectives of a control system are met.
Further, any control system reflects limitations on resources, and the benefits
of a control system must be considered relative to its costs. These limitations
also include the realities that judgments in decision-making can be faulty and
that breakdowns can occur because of simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by
collusion of two or more people or by management override of a control. A design
of a control system is also based upon certain assumptions about potential
future conditions; over time, controls may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and may not be detected.
Conclusions
- -----------
Based upon their evaluation of our controls, the chief executive officer and
principal accounting officer have concluded that, subject to the limitations
noted above, the disclosure controls are effective providing reasonable
assurance that material information relating to us is made known to management
on a timely basis during the period when our reports are being prepared. There
were no changes in our internal controls that occurred during the quarter
covered by this report that have materially affected, or are reasonably likely
to materially affect our internal controls.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
Our executive officers and directors and their respective ages as of the date of
this annual report are as follows:
33
<page>
Executive Officers and Directors:
- -------------------------------------------------------------------------------
Name Age Position
- -------------------------------------------------------------------------------
Vera Barinova 51 President, Chief Executive Officer,
and Director
Aleksandr Kryukov 22 Chief Financial Officer, Secretary
Treasurer and Director
The directors will serve as directors until our next annual shareholder meeting
or until a successor is elected who accepts the position. Directors are elected
for one-year terms. Officers hold their positions at the will of the Board of
Directors, absent any employment agreement. There are no arrangements,
agreements or understandings between non-management shareholders and management
under which non-management shareholders may directly or indirectly participate
in or influence the management of Innocent's affairs.
Vera Barinova - President, Chief Executive Officer
- --------------------------------------------------
Mrs. Vera Barinova earned her engineering degree from Moscow College of
Manufacturing in 1979. After graduation she worked as an engineer-technologist
in various food processing facilities. Currently Mrs. Barinova provides
business development consulting services to private companies.
Aleksandr Kryukov - Secretary, Chief Financial Officer
- ------------------------------------------------------
Mr. Aleksandr Kryukov earned a bachelor degree in Economics from Siberian
University of Commerce in 2007. He works as an accountant in Torgovy Dom Imports
in Novosibirsk, Russia.
CODE OF ETHICS
We have not yet adopted a code of ethics that applies to our principal executive
officers, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, since we have been focusing
our efforts on obtaining financing for the company. We expect to adopt a code by
the end of the current fiscal year.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and
executive officers, and persons who own more than ten percent of our common
stock, to file with the Securities and Exchange Commission initial reports of
ownership and reports of changes of ownership of our common stock. Officers,
directors and greater than ten percent stockholders are required by SEC
regulation to furnish us with copies of all Section 16(a) forms they file.
Based solely on our review of the copies of such forms received by us, or
written representations from certain reporting persons, we believe that all
filing requirements applicable to our officers, directors and greater than ten
percent beneficial owners were complied with, with the exception of the
following:
34
<page>
<table>
<caption>
- --------------------------------------------------------------------------------------------
Number of Late Number of Transactions Not Failure to File
Name Reports Reported on a Timely Basis Requested Forms
- --------------------------------------------------------------------------------------------
<s> <c> <c> <c>
Vera Barinova 1(1) 1 Nil
- --------------------------------------------------------------------------------------------
Aleksandr Kryukov 1(1) 1 Nil
- --------------------------------------------------------------------------------------------
</table>
(1) The named officer, director or greater than 10% stockholder, as
applicable, filed a late Form 3 - Initial Statement of Beneficial
Ownership of Securities.
ITEM 11: EXECUTIVE COMPENSATION
The following summary compensation table sets forth information concerning
compensation for services rendered in all capacities during 2008 and 2007
awarded to, earned by or paid to our executive officers.
SUMMARY COMPENSATION TABLE
<table>
<caption>
- -------------------------------------------------------------------------------------------------------------------------------
Change in
Pension
Value and
Non-Equity Nonqualified
Incentive Deferred
Name and Stock Option Plan Compensation All Other
Principal Salary Bonus Awards Awards Compensation Earnings Compensation Total
Position Year ($) ($) ($) ($) ($) ($) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
- --------------------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c> <c> <c> <c> <c>
Vera Barinova,Chief Executive Officer 2008 $ 0 0 0 0 0 0 2,000 $ 2,000
2007 $ 0 0 0 0 0 0 0 0
- --------------------------------------------------------------------------------------------------------------------------------
Aleksandr Kryukov, Chief Financial Officer 2008 $ 0 0 0 0 0 0 3,400 $ 3,400
2007 $ 0 0 0 0 0 0 0 0
- --------------------------------------------------------------------------------------------------------------------------------
</table>
35
<page>
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END TABLE
<table>
<caption>
- ----------------------------------------------------------------------------------------------------------------------------------
| Option Awards | Stock Awards |
------------------------------------------------------------------- --------------------------------------------
Name Number of Number of Equity Option Option Number Market Equity Equity
(a) Securities Securities Incentive Exercise Expiration of Shares Value of Incentive Incentive
Underlying Underlying Plan Price Date or Units Shares or Plan Plan
Unexercised Unexercised Awards: ($) (f) of Stock Units Awards: Awards:
Options Options Number of (e) That Have of Stock Number Market
(#) (#) Securities Not That Have of or Payout
(Exercisable) (Unexercisable) Underlying Vested Not Unearned Value of
(b) (c) Unexercised (#) Vested Shares, Unearned
Unearned (g) ($) Units or Shares,
Options (h) Other Units or
(#) Rights Other
(d) That Rights
Have Not That
Vested Have Not
(#) Vested
(i) ($)
(j)
- -----------------------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c> <c> <c> <c> <c>
Vera Barinova 0 0 0 0 N/A 0 $ 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Aleksandr Kryukov 0 0 0 0 N/A 0 $ 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
</table>
DIRECTOR COMPENSATION TABLE FOR FISCAL 2008
<table>
<caption>
- -----------------------------------------------------------------------------------------------------------------------------------
Name Fees Stock Option Non-Equity Change in All Other Total
(a) Earned Awards Awards Incentive Plan Pension Value Compensation ($)
or Paid ($) ($) Compensation and ($) (h)
in (c) (d) ($) Nonqualified (g)
Cash (e) Deferred
($) Compensation
(b) Earnings
($)
(f)
- -----------------------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c> <c> <c> <c>
Vera Barinova 2,000 0 0 0 0 0 $ 2,000
- -----------------------------------------------------------------------------------------------------------------------------------
Alla Karmazina 3,400 0 0 0 0 0 $ 3,400
- -----------------------------------------------------------------------------------------------------------------------------------
</table>
36
<page>
Option Grants in 2008
- ---------------------
No options were granted during 2008.
Aggregated Option Exercises in 2008 and 2008 Year-End Option Values
- ---------------------------------------------------------------------
No options were exercised by our Officers or Directors during 2008.
Stock Incentive Plan - Awards in 2008
- -------------------------------------
During 2008, no shares, options or other rights were granted to any of our
employees or Officers.
Director Compensation
- ---------------------
No options were granted or payments made in compensation for services rendered
to any Innocent directors, with the exception of a $2,000 incurred with the
Company's President, Vera Barinova, for management services provided during the
year and $3,400 incurred with the Company's CFO, Aleksandr Kryukov, for
consulting services provided during the year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding the beneficial ownership of
our shares of common stock at December 4, 2008, by (i) each person known by us
to be the beneficial owner of more than 5% of our outstanding shares of common
stock, (ii) each of our directors, (iii) our executive officers, and (iv) by all
of our directors and executive officers as a group. Each person named in the
table, has sole voting and investment power with respect to all shares shown as
beneficially owned by such person and can be contacted at our executive office
address.
- --------------------------------------------------------------------------------
Amount and
Nature of
Title of Class Name of Beneficial Percent of
Owner Ownership Class
(1) (%)
- --------------------------------------------------------------------------------
Common Vera Barinova 3,000,000 42.86
President, CEO,
Common Aleksandr Kryukov
Secretary, CFO, Treasurer 1,000,000 14.29
and Director
Common All Officers and 4,000,000 57.15
Directors as a Group
that consists of two
persons
- --------------------------------------------------------------------------------
1 Includes shares that could be obtained by the named individual within the
next 60 days.
37
<page>
The percent of class is based on 7,000,000 shares of common stock issued and
outstanding as of the date of this annual report.
The Company has no securities authorized for issuance under equity compensation
plans.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
During the fiscal year ended August 31, 2008:
a) The President of the Company provides management services to
the Company. During the year ended August 31, 2008 management
services of $2,000 (August 31, 2007 - $Nil) were charged to
operations.
b) A director of the Company provides consulting services to the
Company. During the period ended August 31, 2008 consulting
services of $3,400 (August 31, 2007 - $Nil) were charged to
operations.
c) During the year ended August 31, 2008, the President of the
Company provided a $8,000 loan to the Company. The loan is
payable on demand, unsecured, bears interest at 6.75% per
annum and consists of $8,000 of principal, and $101 of accrued
interest payable as of August 31, 2008.
Otherwise, neither our directors and officers, nor any proposed nominee for
election as a director, nor any person who beneficially owns, directly or
indirectly, shares carrying more than 10% of the voting rights attached to all
of our outstanding shares, nor any promoter, nor any relative or spouse of any
of the foregoing persons has any material interest, direct or indirect, in any
transaction since our incorporation or in any presently proposed transaction
which, in either case, has or will materially affect us.
Our management is involved in other business activities and may, in the future
become involved in other business opportunities. If a specific business
opportunity becomes available, such persons may face a conflict in selecting
between our business and their other business interests. In the event that a
conflict of interest arises at a meeting of our directors, a director who has
such a conflict will disclose his interest in a proposed transaction and will
abstain from voting for or against the approval of such transaction.
None of our directors is independent, as described in the standards for
independence set forth in the Rules of the American Stock Exchange.
Director Independence
- ---------------------
Our common stock is quoted on the OTC bulletin board interdealer quotation
system, which does not have director independence requirements. Under NASDAQ
rule 4200(a)(15), a director is not considered to be independent if he or she is
also an executive officer or employee of the corporation. Our director, Vera
Barinova, is also our chief executive officer, and our director, Aleksandr
Kryukov, is also our chief financial officer. As a result, we do not have any
independent directors.
38
<page>
As a result of our limited operating history and limited resources, our
management believes that we will have difficulty in attracting independent
directors. In addition, we would be likely be required to obtain directors and
officers insurance coverage in order to attract and retain independent
directors. Our management believes that the costs associated with maintaining
such insurance is prohibitive at this time.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Our principal accountants, Moore & Associates, Chartered Accountants and
Advisors, billed the following fees for the services indicated:
Fiscal year-ended
August 31, 2008 August 31, 2007
- --------------------------------------------------------------------------------
Audit fees $3,500 $ 3,500
Audit-related fees Nil Nil
Tax fees Nil Nil
All other fees $4,500 Nil
- --------------------------------------------------------------------------------
Audit fees consist of fees related to professional services rendered in
connection with the audit of our annual financial statements. All other fees
relate to professional services rendered in connection with the review of the
quarterly financial statements.
Our policy is to pre-approve all audit and permissible non-audit services
performed by the independent accountants. These services may include audit
services, audit-related services, tax services and other services. Under our
audit committee's policy, pre-approval is generally provided for particular
services or categories of services, including planned services, project based
services and routine consultations. In addition, the audit committee may also
pre-approve particular services on a case-by-case basis. Our audit committee
approved all services that our independent accountants provided to us in the
past two fiscal years.
PART IV
ITEM 15. EXHIBITS
(a) The following exhibits are included as part of this report:
Exhibit
Number Title of Document
- ------ -----------------
3.1 Articles of Incorporation*
3.2 Bylaws*
23.1 Consent of Independent Registered Public Accounting Firm
31.1 Sec.302 Certification of CEO
31.2 Sec.302 Certification of CFO
32.1 Sec.906 Certification of CEO
32.2 Sec.906 Certification of CFO
*Incorporated by reference to similarly numbered exhibits filed with the
Company's Registration Statement on Form S-1 on April 3, 2008.
39
<page>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
December 4, 2008 Innocent, Inc.
/s/ Vera Barinova
----------------------------------------
Vera Barinova President, Chief Executive
Officer and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
/s/ Vera Barinova
- -------------------------------
Vera Barinova
President, Chief Executive
Officer, and Director
Dated: December 4, 2008
/s/ Aleksandr Kryukov
- -----------------------------
Aleksandr Kryukov
Chief Financial Officer, Secretary
Treasurer, principal accounting
officer and Director
Dated: December 4, 2008
40