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 November 30, 2008
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to ____________
Commission files number 333-152012
INCOMING, INC.
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(Exact name of registrant as specified in its charter)
Nevada Pending
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(State of incorporation) (I.R.S. Employer ID No.)
8300 N. Hayden Road, Suite 207
Scottsdale, Arizona 85258
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(Address of principal executive officers, including Zip Code)
(480) 945-3477
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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 [X]
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. [ ]
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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 November 30, 2008, was $Nil.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date:
As of February 25, 2009, there were 8,570,000 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 9
Item 2. Properties 17
Item 3. Legal Proceedings 17
Item 4. Submission of Matters to a Vote of Securities Holders 17
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities 17
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operation 19
Item 8. Financial Statements 23
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 38
Item 9A. Controls and Procedures 38
Part III
Item 10. Directors and Executive Officers 38
Item 11. Executive Compensation 40
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters 42
Item 13. Certain Relationships and Related Transactions and Director
Independence 43
Item 14. Principal Accounting Fees and Services 44
Part IV
Item 15. Exhibits 44
Signatures 45
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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;
- 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
"Incoming" mean Incoming, Inc., unless otherwise indicated.
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ITEM 1. BUSINESS
GENERAL INFORMATION ABOUT OUR COMPANY
We were formed on December 22, 2006. Our plan is to build an apparel and
footwear portfolio of Urban Streetwear and Hip Hop American labels in Urban
Fashion industry for export and distribution in Eastern European and Russian
markets. Our goal is to uniquely position ourselves as a niche dealer and
distributor of American Urban Streetwear and Hip Hop clothing labels in the
Eastern European market. We plan to specialize in distribution and selling of
apparel brands consisting of Urban Streetwear, Hip Hop Clothing, Snowboard and
Skateboarding Apparel and Hipster-inspired all American clothing brands. Our
target market is fashion minded urban consumers in their twenties and early
thirties living in major urban areas of Eastern Europe.
We have entered into an agreement with OOO Propaganda (the "Propaganda", or
Distributor), a distributor located in Russian Federation where Propaganda was
granted the non-exclusive and non-assignable right to re-sell products supplied
by Incoming, Inc.
Our target market is fashion minded urban consumers, in their twenties and early
thirties, living in major urban areas of such fashion driven cities as Moscow,
Saint Petersburg, Yekaterinburg, etc.
We have generated $3,254 in revenues, and have incurred $32,839 in losses since
our inception on December 22, 2006, and have relied upon the sale of our
securities in unregistered private placement transactions and loans and cash
advances from our President, Mr. Yury Nesterov, to fund our operations. We are a
development stage company and we do not expect to generate sufficient revenue
for the next twelve months which would be enough to sustain our operations.
Accordingly, for the foreseeable future, we will continue to be dependent on
additional financing in order to maintain our operations and continue with our
corporate activities. Due to the uncertainty of our ability to meet our
financial obligations and to pay our liabilities as they become due, in their
report on our financial statements for the period from inception (December 22,
2006) to November 30, 2008, our independent auditors included additional
comments indicating concerns about our ability to continue as a going concern.
Our financial statements contain additional note disclosures describing the
circumstances that led to this disclosure by our independent auditors. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Market and Industry Overview
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Industry
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Hip-hop fashion is a distinctive style of dress originating with the
African-American and Latino youth in major cities in the United States. Each
city contributed various elements to its overall style seen worldwide today. Hip
hop fashion complements the expressions and attitudes of hip hop culture in
general. Hip hop fashion has changed significantly during its history, and today
it is a prominent part of popular fashion as a whole across the world and for
all ethnicities. Hip-hop's foundation, built on sampling, storytelling, cultural
references, and competitive attitude, encouraged an entire generation to express
themselves.
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In the 1990s and beyond, many hip hop artists and executives started their own
fashion labels and clothing lines. Notable examples include Wu-Tang Clan
(Wu-Wear), Russell Simmons (Phat Farm), Kimora Lee Simmons (Baby Phat), Diddy
(Sean John), Apple Bottom Jeans (Nelly), Damon Dash and Jay-Z (Rocawear), 50
Cent (G-Unit Clothing), Eminem (Shady Limited), 2Pac (Makaveli) and OutKast
(OutKast Clothing). Other prominent hip hop fashion companies have included
brands such as Karl Kani and FUBU, Ecko, Dickies, Girbaud, Enyce, Famous Stars
and Straps, Bape, LRG, Timberland Boots, and Akademiks.
Today, Hip hop clothing is produced by popular and successful designers. Hip hop
fashion is worn by a significant percentage of young people around the world,
with a significant number of retailers that are dedicated to the sale of hip hop
inspired fashions.
Due to the recent trend in hip hop fashion to revert back to the "old school",
the clothing is becoming similar to early 80's form of dressing. It has geared
toward a more hipster-inspired style of dressing (so-called "prep-hop"), which
may include items such as polo shirts, sport coats, woven button shirts, large
ornamental belt buckles, cufflinks, skull and skeleton decorations, elaborately
decorated zip-up hoodies, trucker hats, tighter-fitting "vintage style" t-shirts
with shorter arm sleeves, Lumberjack button ups or plaid designed shirts, Snow
Inspired Fashions and tighter denim jeans. Shorter length t-shirts have become
involved in recent trends, in order to expose decorated belts and belt buckles
and biker chains. Although the "baggy" style of dress remains relevant, some hip
hoppers forego that particular style, opting for colorful fitted prep-hop and
hipster-inspired clothing as exemplified by the growing influence of rappers
such as Kanye West, Common, will.i.am, and Andre 3000, as well as the
tighter-fitting skater influenced styles in the case of Pharrell. 80's trends
have reemerged, such as Members Only jackets, huge oversized chains and large
eyeglasses.
The streetwear style is very close to hip-hop culture, urban, skaters and even
surf, meaning it sports a lot of wide influences. Traditionally, denim is a
large part of streetwear culture because it is easy to maintain (it won't stain
and is a strong material) and so are caps.
Another integral part of what streetwear is and what it means is that it is a
very popular fashion genre, but even as it grows in stature, it still remains
something underground. One factor that has helped this is the fact that many of
the well known streetwear brands have not given in to a buyout by the giants of
the clothing industry; this would undoubtedly bring those brands to the
mainstream. Shops that sell streetwear also show close alliance to the
independent brands by not selling well known brands, and sticking to their
independent brands.
Through the years streetwear has developed and has been molded by its past and
through pioneers like Shawn Stussy, the influence of the hip hop culture and the
input of Japanese designers. However, through this sculpting and change,
streetwear has managed to keep to its roots.
The core of streetwear has always been, and likely will always be, the graphic
tee. It is through this medium that one can truly see what sets street fashion
apart from the generic looking tees of the mainstream. This is evident in the
originality and creativity found in the graphics. Rather than simply branding
the shirt, streetwear companies have blessed their products with clever phrases
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and /or images that bestow emotional appeal upon the shirt, distinctly absent
from the larger brands.
A second characteristic, which was truer today than ten years ago due to the
advent of the internet, is a degree of exclusivity. True streetwear is the
domain of specialty boutiques and not found in the mall. Traditionally
streetwear has been reserved for those with their ear to the ground and by the
time a once exclusive label reached the mainstream, those in the know had long
since moved onto the next one. It is this concept of exclusivity which
essentially disqualifies brands with street origins that are readily available
in malls and places like Athletes World.
Finally, streetwear companies dare to tread where no others will and are
continually pushing the boundaries of what some folk would consider "decency."
This is evident even in the graphics and sayings that express political
opinions, social commentary and elements of a more risque nature. Essentially,
streetwear companies aim to stay true to themselves by not compromising their
values out of fear of upsetting the general public. It is this radical attitude
that separates streetwear from the generic fashion designed for the masses.
Examples of established men and women Hip-Hop clothing brands are LRG, Coogi,
Baby Phat, Apple Bottoms, Luxurie by LRG, Pastry Shoes, and Sean John, Rocawear,
Akademiks, G Unit, New Era, Champion Sports, Phat Farm, Vokal, Unk, Drunknmunky,
Ecko, Majestic, Triple Five Soul, King Apparel, Zoo York, Elko Unlimited, Lugz
and Mecca USA to name a few.
Newer urban streetwear and hip hop brands are Crown Holder, Dereon, Sneak Tip,
The Originators, Junkfood Clothing, Nostic, and Black label, Crooks & Castles,
Hundreds, 10 Deep, Know1edge, N4E1 - Not For Everyone, Franco Shade and 3Sixteen
among others.
Market
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In the past eight years Russia has become a consumer power. The economy is
growing at an annual rate of 6.9% since 2003, with Russian and other Eastern
European elites already overtaking Western Europeans in terms of conspicuous
consumption, the consumer potential - and with it the scope of Western brands-
is boundless once wealth trickles down to the bulk of consumers.
Russia has experienced a strong growth of retail trade that goes in hand with
its rising consumer income and expenditure. In 2007, Russia was ranked one of
the world's largest retail markets. Russian consumers have a higher purchasing
power since the majority of the population owns a house without the burden of
mortgage repayments, having inherited their housing from the state following the
collapse of communism. Per capita spending on clothing and footwear has grown by
almost 30% since 2000.
The style of clothes worn in Russia is similar to the rest of Europe, with young
people following fashion trends. Celebrities, particularly those on TV, always
signal the latest fashion trends. The population at large buys clothes and
footwear in specialized shops, paying attention to latest world fashion trends.
The luxury segment of the Russian clothing and footwear market is highly
developed, making it one of the most dynamic luxury markets in the world. The
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majority of the global luxury brands which have already established a strong
presence in Russia are now launching their own distribution networks. For the
last five years, luxury brands like Louis Vuitton, Salvatore Ferragamo and
Burberry are expanding in Russia.
The steady growth in personal incomes, as well as ongoing real ruble
appreciation, is forecasted to increase the size of the retail market. Market
research reveals that the Russian market of apparel consumption grows annually
by 25%. The market capacity in the average price sector made 12-13 billion US
dollars, of which 40% fell on Moscow, and 17% on St. Petersburg. The sales of
premium-class garments reached 2.5-3 billion US dollars, while the sales of de
luxe attire were estimated at 1.5 billion US dollars.
The business profitability in the Russian apparel market remains attractive. The
share of the foreign presence in the local market annually grows by 4-4.5% in
capital cities, and has good prospects in the regions. Now, Russian regions are
just starting to develop in response to the growing incomes of the local
population. Hence, the Russian market holds a potential to upsurge its consumer
activity.
The medium priced segment of Russian clothing and footwear market is evolving
constantly as this segment is addressing apparel needs of majority of youth
(students and young professionals). With the increasing influence of Western
culture including Hollywood movies and American music on younger Russians there
is a growing influence of hip hop and rap music on youth culture in Eastern
Europe as well as growing popularity of snowboarding and skateboarding
activities.
Just a few years ago, the eastern edge of Europe was terra incognita on
hip-hop's world map. Today, European rappers also "feature" each other on songs
and even provide cross-border assists when necessary. Music isn't the only thing
that hip-hop imported from the U.S., its country of origin. Along came in hip
hop inspired fashion with gold chains and baggy pants, hoodies and tracksuits.
Patent, Trademark,License and Franchise Restrictions and Contractual Obligations
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and Concessions
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We currently have no pending or provisional patents or trademark applications.
Research and Development Activities
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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
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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.
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Employees
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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
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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
INDUSTRY RISK FACTORS
=====================
We operate in very competitive markets and may be unable to compete effectively
in the worldwide "Urban Fashion" retailing industry.
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Competition in the Urban Fashion retailing industry is intense. We face a
variety of competitive challenges from domestic and international apparel
retailers, including a number of competitors that have substantially greater
financial and marketing resources than we do. 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. Due to
limited financing, and fierce competition from multinational wholesalers and
retailers we may not be able to generate revenues and will have to cease
operations. In addition, it is possible that mass-market discount retailers will
increase their investment and enclose Urban Streetwear and Hip Hop clothing in
their retail operations, thereby achieving greater market penetration and
placing additional competitive pressures on our business.
The wholesale apparel market is highly competitive with few barriers to entry.
We compete against a diverse group of wholesalers and retailers offering casual
wear and streetwear apparel of European brands such as Scotch& Soda, Broadway
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"NYC Fashion", No Excess, 4you, Aigle, as well as products by local fashion
designers and companies; including B.O. Connections, Befree, and Canoe, among
many others.
The level of competition we face from these and other brands varies depending
on the product segment, as many of our competitors do not offer Hip Hop clothing
brands. Our greatest competition is generally in women's apparel, skateboarding
and snowboarding apparel segments. Many of our competitors are larger than us
and have substantially greater resources than us and, as a result, may be able
to adapt more quickly to changing market conditions and exploit new
opportunities and supply their products more quickly and effectively than us.
Many of these brands have better name recognition among consumers and purchase
significantly more merchandise from vendors.
We rely on third parties to manufacture and distribute the products we re-sell.
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We will depend on the Urban Streetwear and Hip Hop clothing brand suppliers to
manufacture and supply the merchandise that we will be re-selling. If these
brand manufacturers are unable to secure sufficient supplies of raw materials,
or maintain adequate manufacturing and shipping capacity, they may be unable to
provide us with timely delivery of products of acceptable quality. In addition,
if the prices charged by these brand manufacturers increase for reasons such as
increases in the price of raw materials, increases in labor costs or currency
fluctuations, our cost of inventory would increase, adversely affecting our
results of operations. We will depend on third parties to transport and deliver
merchandise. Due to the fact that we do not have any independent transportation
or delivery capabilities of our own, if these third parties are unable to
transport or deliver our merchandise for any reason, or if they increase the
price of their services, including as a result of increases in the cost of fuel,
our operations and financial performance may be adversely affected.
We currently do not have long-term agreements with any of our potential brand
manufacturers, and any of these manufacturers may unilaterally terminate their
relationship with us at any time in the future. There is also substantial
competition among wholesalers for quality brand manufacturers. To the extent we
are unable to secure or maintain relationships with quality brand manufacturers,
our business could be harmed.
We may be unable to keep up with constantly changing fashion trends.
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Our success depends, in large part, upon our ability to gauge the evolving
fashion tastes of our consumers and to provide merchandise that satisfies such
fashion tastes in a timely manner. The worldwide Urban Fashion industry
fluctuates according to changing fashion tastes and seasons, and merchandise
usually must be ordered well in advance of the season, frequently before
consumer fashion tastes are evidenced by consumer purchases. In addition, the
cyclical nature of the worldwide clothing and footwear retailing industry also
requires us to secure significant level of inventory, especially prior to peak
selling seasons when all fashion retailers build up their inventory levels. As a
result, if we fail to properly gauge the fashion tastes of consumers, or to
respond in a timely manner, this failure could adversely affect consumer
acceptance of merchandise we re-sell and leave us with inventory deficiency or
inventory surplus. If that occurs, we may be forced to seek additional suppliers
to fill in the inventory deficit or to rely on markdowns or promotional sales to
dispose of excess, slow-moving inventory, which would negatively impact
financial results.
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The results of our wholesale businesses will be affected by the buying plans of
our customers, which will include smaller independent retailers and boutique
stores. Our customers may not inform us of changes in their buying plans until
it is too late for us to make the necessary adjustments to our product lines and
marketing strategies. While we believe that purchasing decisions in many cases
are made independently by individual stores or store chains, we are exposed to
decisions by the controlling owner of a store, to decrease the quantity of
merchandise purchased from us. In addition, the retail industry periodically
experiences consolidation. We face a risk that our customers may consolidate,
restructure, reorganize or realign in ways that could decrease the number of
stores or the amount of shelf space that carry our merchandise.
The worldwide fashion retailing industry is heavily influenced by general
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economic cycles.
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Fashion retailing is a cyclical industry that is heavily dependent upon the
overall level of consumer spending. Purchases of apparel, footwear and related
goods tend to be highly correlated with the cycles of the levels of disposable
income of our consumers. As a result, any substantial deterioration in general
economic conditions could adversely affect our net sales and results of
operations.
Downturns, or the expectation of a downturn, in general economic conditions
could adversely affect consumer spending patterns, our sales and our results of
operations. Because apparel generally is a discretionary purchase, declines in
consumer spending patterns may have a more negative effect on apparel retailers
than other retailers. Therefore, we may not be profitable if there is a decline
in consumer spending patterns.
Our international operations are subject to political and economic risks.
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We expect that most of our sales will be generated outside the United States. We
will be accordingly subject to a number of risks relating to doing business
internationally, any of which could significantly harm our business, including:
- political and economic instability;
- inflation;
- exchange controls and currency exchange rates;
- foreign tax treaties and policies; and
- restrictions on the transfer of funds to and from foreign countries.
Our financial performance on a U.S. dollar denominated basis is also subject to
fluctuations in currency exchange rates. These fluctuations could cause our
results of operations to vary materially. From time to time, we may enter into
agreements seeking to reduce the effects of our exposure to currency
fluctuations, but these agreements may not be effective in reducing our exposure
to currency fluctuations or may not be available at a cost effective price. We
are not currently entered into any of these agreements.
COMPANY RISK FACTORS
====================
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There is substantial uncertainty as to whether we will continue operations. If
we discontinue operations, you could lose your investment.
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Our auditors have discussed their uncertainty regarding our business operations
in their audit report dated February 23, 2009. 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 losses which we expect to continue into the
future. There is no assurance 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 December 22, 2006 ("inception") and
we have realized minimal revenues of $3,524 from inception to November 30, 2008.
We have very little operating history upon which an evaluation of our future
success or failure can be made. Our net loss since inception on December 22,
2006 to November 30, 2008, is $32,839. Based upon current plans, we expect to
incur operating losses in future periods because we will be incurring expenses
and not generating sufficient revenues to cover these expenses. 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.
We may need additional funds to complete further development of our business
plan to achieve a sustainable sales level where ongoing operations can be funded
out of revenues. There is no assurance that any additional financing will be
available, or if available, on terms that will be acceptable to us. If we are
not able to obtain needed financing, we may have to cease operations and
investors will lose all of their investment.
We depend on key personnel.
- ---------------------------
Our future success will depend in part on the continued service of key
personnel, particularly Yury Nesterov, 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
wholesale and retail 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 management does not have prior experience in apparel wholesale, our
business has a higher risk of failure.
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Our directors do not have experience in the apparel wholesale industry. As a
result, we may not be able to recognize and take advantage of opportunities
without the aid of qualified marketing, sales 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.
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Because our directors own 52.5% of our outstanding common stock, they could make
and control corporate decisions that may be disadvantageous to other minority
shareholders.
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Our directors, Yury Nesterov and Elena Djafarova, own 52.5% of the outstanding
shares of our common stock as of the date of this annual report. Accordingly,
they will have a significant influence in determining the outcome of all
corporate transactions or other matters, including mergers, consolidations, and
the sale of all or substantially all of our assets. They will also have the
power to prevent or cause a change in control. The interests of our directors
may differ from the interests of the other stockholders and thus result in
corporate decisions that are disadvantageous to other shareholders.
We do not intend to pay dividends and there will be less ways in which you can
make a gain on any investment in Incoming, Inc.
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We have never paid any cash dividends and currently do not intend to pay any
dividends for the foreseeable future. To the extent that we require additional
funding currently not provided for in our financing plan, our funding sources
may likely prohibit the payment of a dividend. Because we do not intend to
declare dividends, any gain on an investment in Incoming will need to come
through appreciation of the stock's price.
Failure to achieve and maintain effective internal controls in accordance with
section 404 of the Sarbanes-Oxley Act could have a material adverse effect on
our business and operating results.
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It may be time consuming, difficult and costly for us to develop and implement
the additional internal controls, processes and reporting procedures required by
the Sarbanes-Oxley Act. We may need to hire additional financial reporting,
internal auditing and other finance staff in order to develop and implement
appropriate additional internal controls, processes and reporting procedures. If
we are unable to comply with these requirements of the Sarbanes-Oxley Act, we
may not be able to obtain the independent accountant certifications that the
Sarbanes-Oxley Act requires of publicly traded companies.
If we fail to comply in a timely manner with the requirements of Section 404 of
the Sarbanes-Oxley Act regarding internal control over financial reporting or to
remedy any material weaknesses in our internal controls that we may identify,
such failure could result in material misstatements in our financial statements,
cause investors to lose confidence in our reported financial information and
have a negative effect on the trading price of our common stock.
Pursuant to Section 404 of the Sarbanes-Oxley Act and current SEC regulations,
beginning with our annual report on Form 10-K for our fiscal period ending
November 30, 2007, we will be required to prepare assessments regarding internal
controls over financial reporting and beginning with our annual report on Form
10-K for our fiscal period ending November 30, 2008, furnish a report by our
management on our internal control over financial reporting. We have begun the
process of documenting and testing our internal control procedures in order to
13
<page>
satisfy these requirements, which is likely to result in increased general and
administrative expenses and may shift management time and attention from
revenue-generating activities to compliance activities. While our management is
expending significant resources in an effort to complete this important project,
there can be no assurance that we will be able to achieve our objective on a
timely basis. There also can be no assurance that our auditors will be able to
issue an unqualified opinion on management's assessment of the effectiveness of
our internal control over financial reporting. Failure to achieve and maintain
an effective internal control environment or complete our Section 404
certifications could have a material adverse effect on our stock price.
In addition, in connection with our on-going assessment of the effectiveness of
our internal control over financial reporting, we may discover "material
weaknesses" in our internal controls as defined in standards established by the
Public Company Accounting Oversight Board, or the PCAOB. A material weakness is
a significant deficiency, or combination of significant deficiencies, that
results in more than a remote likelihood that a material misstatement of the
annual or interim financial statements will not be prevented or detected. The
PCAOB defines "significant deficiency" as a deficiency that results in more than
a remote likelihood that a misstatement of the financial statements that is more
than inconsequential will not be prevented or detected.
In the event that a material weakness is identified, we will employ qualified
personnel and adopt and implement policies and procedures to address any
material weaknesses that we identify. However, the process of designing and
implementing effective internal controls is a continuous effort that requires us
to anticipate and react to changes in our business and the economic and
regulatory environments and to expend significant resources to maintain a system
of internal controls that is adequate to satisfy our reporting obligations as a
public company. We cannot assure you that the measures we will take will
remediate any material weaknesses that we may identify or that we will implement
and maintain adequate controls over our financial process and reporting in the
future. Any failure to complete our assessment of our internal control over
financial reporting, to remediate any material weaknesses that we may identify
or to implement new or improved controls, or difficulties encountered in their
implementation, could harm our operating results, cause us to fail to meet our
reporting obligations or result in material misstatements in our financial
statements. Any such failure could also adversely affect the results of the
periodic management evaluations of our internal controls and, in the case of a
failure to remediate any material weaknesses that we may identify, would
adversely affect the annual auditor attestation reports regarding the
effectiveness of our internal control over financial reporting that are required
under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls could
also cause investors to lose confidence in our reported financial information,
which could have a negative effect on the trading price of our common stock.
RISK FACTORS RELATING TO OUR COMMON STOCK
=========================================
There is no public (trading) market for our common stock and there is no
assurance that the common stock will ever trade on a recognized exchange or
dealers' network; therefore, our investors may not be able to sell their shares.
- --------------------------------------------------------------------------------
14
<page>
Our common stock is not listed on any exchange or quoted on any similar
quotation service, and there is currently no public market for our common stock.
We have not taken any steps to enable our common stock to be quoted on the OTC
Bulletin Board, and can provide no assurance that our common stock will ever be
quoted on any quotation service or that any market for our common stock will
ever develop. As a result, stockholders may be unable to liquidate their
investments, or may encounter considerable delay in selling shares of our common
stock. Neither we nor our selling stockholders have engaged an underwriter for
this offering, and we cannot assure you that any brokerage firm will act as a
market maker of our securities. A trading market may not develop in the future,
and if one does develop, it may not be sustained. If an active trading market
does develop, the market price of our common stock is likely to be highly
volatile due to, among other things, the nature of our business and because we
are a new public company with a limited operating history. Further, even if a
public market develops, the volume of trading in our common stock will
presumably be limited and likely be dominated by a few individual stockholders.
The limited volume, if any, will make the price of our common stock subject to
manipulation by one or more stockholders and will significantly limit the number
of shares that one can purchase or sell in a short period of time. The market
price of our common stock may also fluctuate significantly in response to the
following factors, most of which are beyond our control:
- variations in our quarterly operating results;
- changes in general economic conditions and in the Urban Fashion
retailing industry;
- announcements by us or our competitors of significant new contracts,
acquisitions, strategic partnerships or joint ventures, or capital
commitments;
- loss of a major customer, partner or joint venture participant; and
- the addition or loss of key managerial and collaborative personnel.
The equity markets have, on occasion, experienced significant price and volume
fluctuations that have affected the market prices for many companies' securities
and that have often been unrelated to the operating performance of these
companies. Any such fluctuations may adversely affect the market price of our
common stock, regardless of our actual operating performance. As a result,
stockholders may be unable to sell their shares, or may be forced to sell them
at a loss.
Once publicly trading, the application of the "Penny Stock" rules could
adversely affect the market price of our common shares and increase your
transaction costs to sell those shares.
- --------------------------------------------------------------------------------
The Securities and Exchange Commission has adopted Rule 3A51-1,which establishes
the definition of a "Penny Stock",for the purposes relevant to us, as any equity
security that has market price of less than $5.00 per share or within an
exercise price of less than $5.00 per share, subject to certain exceptions.
For any transaction involving a penny stock, unless exempt, Rule 15G-9 require:
- that a broker or dealer approve a person's account for transactions
in penny stocks; and
- the broker or dealer receive from the investor a written agreement to
the transaction, setting forth the identity and quantity of the penny
stock to be purchased.
15
<page>
In order to approve a person's account for transactions in penny stocks, the
broker or dealer must:
- obtain financial information and investment experience objectives of
the person; and
- make a reasonable determination that the transactions in penny stocks
are suitable for that person and the person has sufficient knowledge
and experience in financial matters to be capable of evaluating the
risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prescribed by the SEC relating to the penny stock
market, which, in highlight form:
- sets forth the basis on which the broker or dealer made the suitability
determination; and
- that the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
- Generally, brokers may be less willing to execute transactions in
securities subject to the "penny stock" rules. This may make it more
difficult for investors to dispose of our common stock and cause a
decline in the market value of our stock.
Volatility in our common share price may subject us to securities litigation,
thereby diverting our resources that may have a material effect on our
profitability and results of operations.
- --------------------------------------------------------------------------------
We expect the market for our common shares to be characterized by significant
price volatility when compared to seasoned issuers, and we expect that our share
price will continue to be more volatile than a seasoned issuer for the
indefinite future. In the past, plaintiffs have often initiated securities class
action litigation against a company following periods of volatility in the
market price of its securities. We may in the future be the target of similar
litigation. Securities litigation could result in substantial costs and
liabilities and could divert management's attention and resources.
You could be diluted from our future issuance of capital stock and derivative
securities.
- --------------------------------------------------------------------------------
As of February 25, 2009, we had 8,570,000 shares of common stock outstanding and
no shares of preferred stock outstanding. We are authorized to issue up to
75,000,000 shares of common stock and no shares of preferred stock. To the
extent of such authorization, our Board of Directors will have the ability,
without seeking stockholder approval, to issue additional shares of common stock
or preferred stock in the future for such consideration as the Board of
Directors may consider sufficient. The issuance of additional common stock or
preferred stock in the future may reduce your proportionate ownership and voting
power.
16
<page>
We will incur increased costs as a result of being a public company, which could
affect our profitability and operating results.
- --------------------------------------------------------------------------------
The Sarbanes-Oxley Act of 2002 and the new rules subsequently implemented by the
Securities and Exchange Commissions, the NASDAQ National Market and the Public
Company Accounting Oversight Board have imposed various new requirements on
public companies, including requiring changes in corporate governance practices.
We expect these rules and regulations to increase our legal and financial
compliance costs and to make some activities more time-consuming and costly.
These costs could affect profitability and our results of operations.
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 November 30, 2008.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.
(a) Market Information
Our common stock is not listed on any exchange or quoted on any similar
quotation service, and there is currently no public market for our common stock.
As of the date of this annual report we have not taken any steps to enable our
common stock to be quoted on the OTC Bulletin Board, and can provide no
assurance that our common stock will ever be quoted on any quotation service or
that any market for our common stock will ever develop.
(b) Holders of Common Stock
We have 34 shareholders of record, and 8,570,000 shares outstanding as of
February 25, 2009.
(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
17
<page>
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.
Recent Sales of Securities
- --------------------------
Unregistered Securities
- -----------------------
We completed an offering of 4,500,000 shares of our common stock at a price of
$0.001 per share to our directors Yury Nesterov (3,000,000) and Elena Djafarova
(1,500,000), on November 27, 2007. The total amount received from this offering
was $4,500. We completed this offering pursuant to Regulation S of the
Securities Act.
Registered Securities
- ---------------------
We have filed a Registration Statement on the Form S-1 with the Securities and
Exchange Commission to register minimum of 4,000,000 and maximum of 15,000,000
shares of common stock, which become effective on July 11, 2008. As of the date
of this annual report we have sold 4,070,000 shares of our common stock pursuant
to this Registration Statement for total proceeds of $40,700.
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 the Private Placement Subscription 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;
18
<page>
(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
November 30, 2008 or 2007.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Our Current Business
- --------------------
We were formed on December 22, 2006. Our plan is to build an apparel and
footwear portfolio of Urban Streetwear and Hip Hop American labels in Urban
Fashion industry for export and distribution in Eastern European and Russian
markets. Our goal is to uniquely position ourselves as a niche dealer and
distributor of American Urban Streetwear and Hip Hop clothing labels in the
Eastern European market. We plan to specialize in distribution and selling of
apparel brands consisting of Urban Streetwear, Hip Hop Clothing, Snowboard and
Skateboarding Apparel and Hipster-inspired all American clothing brands. Our
target market is fashion minded urban consumers in their twenties and early
thirties living in major urban areas of Eastern Europe.
We plan to create our portfolio of apparel labels by sourcing them through
industry trade shows, directly contacting North American label manufacturers,
searching through apparel industry publications, ads and referrals. We are
planning to create two separate segments of our portfolio:
- -Hip Hop apparel including footwear and accessories with focus on providing
customers with a selection of high-end, contemporary apparel and accessories, at
a medium to higher price points that are generally a better fit for department
stores, chain stores and boutiques. This segment represent an apparel that
appear to be more mainstream and will be targeting younger men and women in the
eighteen to thirty five years old age category.
- -Urban Streetwear including footwear and accessories that will cater to
consumers in major urban areas who are shopping less in department stores and
more in other channels, such as specialty shops, boutiques and mid-tier
locations where uniqueness and value is perceived to be higher. This is a niche
urban casual apparel segment that holds a higher degree of exclusivity,
perceived to be edgier and appeal to a younger audience.
19
<page>
We will evaluate the consumer response to the introduced new merchandise by
working closely with the Distributor and deciding on whether to keep or adjust
our product lines. 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 November 30, 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.
Financial Data Summary
- ----------------------
Year December 22, 2006
Ended (Inception) Through
November 30, November 30,
2008 2007
------ -----
Revenue $ 3,524 $ -
General and Administrative Expenses $ 26,071 $ 7,192
Net Loss $ 25,582 $ 7,257
------------ -----------
Revenue
- -------
We have generated $3,254 and $Nil in revenues during the year ended November 30,
2008, and 2007 and incurred losses for the same years of $25,582 and $7,257
respectively.
Operating Costs and Expenses
- ----------------------------
The major components of our expenses for the year ended November 30, 2008, and
for the period from December 22, 2006, (Inception) through November 30, 2007,
are outlined in the table below:
Year December 22, 2006
Ended (Inception) Through
November 30, November 30,
2008 2007
---- ----
Amortization $ 177 $ -
Accounting and audit fees 11,000 3,500
General and administrative 8,039 740
Legal fees 520 -
Management 2,000 2,000
Organization costs - 530
Rent 2,838 422
Transfer agent 1,497 -
---------- ----------
$ 26,071 $ 7,192
========== ==========
20
<page>
Operating Expenses
The increase our operating cost for the year ended November 30, 2008, compared
to the period from inception to November 30, 2007, was due to the increase in
amortization expenses, general and administrative costs, legal fees, rent,
transfer agent fees and the increase in professional fees associated with our
reporting obligations under the Securities Exchange Act of 1934. All these
increases are associated with the increase in our corporate activities and
increase in expenses related to implementation of our business plan.
Liquidity and Capital Resources
- -------------------------------
Working Capital
- ---------------
December 22, 2006
Year Ended (Inception) Through
November 30, November 30,
2008 2007
---- ----
Current Assets $ 10,319 $ 12,480
Current Liabilities 39,661 16,417
------------ ------------
Working Capital Deficiency $ (29,342) $ (3,937)
============ ============
Cash Flows
- ----------
December 22, 2006
Year Ended (Inception) Through
November 30, December 30,
2008 2007
---- ----
Cash used in Operating Activities $ 12,238 $ 905
Cash used by Investing Activities $ - $ 1,180
Cash provided by Financing Activities* $ 690 $ 14,565
Net Increase (Decrease) in Cash $ (11,548) $ 12,480
------------ -----------
* - Excludes share subscription funds of $9,400 received by the Company
as of November 30, 2008.
On July 11, 2008, the Company's Registration Statement on the Form S-1 became
effective. As of November 30, 2008, the Company has received and held in escrow
$9,387 of share subscription funds. As a result, as of November 30, 2008, we had
current assets consisting of cash of $932, and "restricted" cash of $9,387 held
in escrow. As of November 30, 2008, we also had current liabilities totaling
$39,661 consisting of trade accounts payable and accrued liabilities of $13,889,
amounts due to related party of $5,630, notes payable due to related party of
$10,742 and escrow liability of $9,400 for a working capital deficiency of
$29,342. The escrow liability represents share subscription funds received by
21
<page>
the Company to November 30, 2008. Subsequent to November 30, 2008, the Company
has completed the Offering and issued 4,070,000 shares of common stock at $0.010
per share for total proceeds of $40,700. The $9,400 held in escrow as of
November 30, 2008, was part of these proceeds of $40,700.
In the future, in addition to equity financing, we may rely on loans from our
Directors and officers to continue our operations; however, there are no
assurances that our Directors will provide us with any additional funds.
Currently, we do not have any arrangements for additional financing. If we are
not able to obtain needed financing, we may have to cease operations.
Cash Used In Operating Activities
- ---------------------------------
We used cash in operating activities in the amount of $12,238 during the year
ended November 30, 2008 and $905 during the period from inception to November
30, 2007. Cash used in operating activities was funded by cash from financing
activities and revenues generated during the year.
Cash Used In Investing Activities
- ---------------------------------
We did not use cash in investing activities during the year ended November 30,
2008. We used $1,180 during the period from inception to November 30, 2007.
These funds were used for purchasing of computer and office equipment. Cash used
in investing activities in fiscal 2007 was funded by cash from financing
activities received by the Company in the same year.
Cash from Financing Activities
- ------------------------------
To November 30, 2008, the Company has mostly funded its initial operations
through the issuance of 4,500,000 shares of capital stock for proceeds of
$4,500, loans and cash advances from Directors totaling $16,372, and revenues of
$3,524.
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 and cash advances from the Company's Directors. 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 registered 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 November 30, 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
22
<page>
liabilities and commitments in the normal course of business. Our company has
generated $3,524 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
November 30, 2008, our company has accumulated losses of $32,839 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 November 30, 2008, our independent registered
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 registered 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.
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 Public Accounting Firm F-2
Balance Sheets F-3
Statements of Operations F-4
Statement of Stockholders' Equity F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7
23
<page>
INCOMING, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
November 30, 2008
BALANCE SHEET
STATEMENT OF OPERATIONS
STATEMENT OF CASH FLOWS
STATEMENT OF STOCKHOLDERS' EQUITY
NOTES TO FINANCIAL STATEMENTS
<page>
RONALD R. CHADWICK, P.C.
Certified Public Accountant
2851 South Parker Road, Suite 720
Aurora, Colorado 80014
Telephone (303)306-1967
Fax (303)306-1944
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
Board of Directors
Incoming, Inc.
Scottsdale, Arizona
I have audited the accompanying balance sheet of Incoming, Inc. (a development
stage company) as of November 30, 2008 and 2007 and the related statements of
operations, stockholders' equity and cash flows for the year ended November 30,
2008, the period from December 22, 2006 (inception) through November 30, 2007,
and for the period from December 22, 2006 (inception) through November 30, 2008.
These financial statements are the responsibility of the Company's management.
My responsibility is to express an opinion on these financial statements based
on my audit.
I conducted my audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit 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. I believe that my audit provides a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Incoming, Inc. as of November 30,
2008 and 2007 and the related statements of operations, stockholders' equity and
cash flows for the year ended November 30, 2008, the period from December 22,
2006 (inception) through November 30, 2007, and for the period from December 22,
2006 (inception) through November 30, 2008 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 suffered recurring losses from operations
that raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to 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.
Aurora, Colorado /s/ Ronald R. Chadwick, P.C.
February 23, 2009 RONALD R. CHADWICK, P.C.
F-2
<page>
INCOMING, INC.
(A Development Stage Company)
BALANCE SHEETS
November 30, November 30,
2008 2007
---- ----
ASSETS
------
Current assets
Cash $ 932 $ 12,480
Cash restricted (escrow) 9,387 -
---------- ---------
Total current assets 10,319 12,480
Property and equipment, net 1,003 1,180
---------- ---------
Total assets $ 11,322 $ 13,660
========== =========
LIABILITIES & STOCKHOLDERS'EQUITY
---------------------------------
Current liabilities
Accounts payable and accrued liabilities $ 13,889 $ 5,822
Due to related parties 5,630 530
Notes payable related parties 10,742 10,065
Escrow - share subscriptions 9,400 -
---------- ---------
Total current liabilities 39,661 16,417
---------- ---------
Capital stock $0.001 par value;
75,000,000 shares authorized;
4,500,000 shares issued and outstanding 4,500 4,500
Deficit accumulated during the development
stage ( 32,839) ( 7,257)
---------- ---------
Total Stockholders' Equity ( 28,339) ( 2,757)
---------- ---------
Total Liabilities and Stockholders' Equity $ 11,322 $ 13,660
========== =========
The accompanying notes are an integral part of these financial statements
F-3
<page>
INCOMING, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<table>
<caption>
Year December 22, 2006 December 22, 2006
Ended (Inception) Through (Inception) Through
November 30, November 30, November 30,
2008 2007 2008
---- ---- ----
<s> <c> <c> <c>
Sales $ 3,524 $ - $ 3,524
Cost of sales 2,358 - 2,358
----------- ----------- ----------
Gross profit 1,166 - 1,166
----------- ----------- ----------
Expenses:
Amortization 177 - 177
Accounting and audit fees 11,000 3,500 14,500
General and administrative 8,039 740 8,779
Legal 520 - 520
Management 2,000 2,000 4,000
Organization costs - 530 530
Rent 2,838 422 3,260
Transfer agent 1,497 - 1,497
----------- ----------- ----------
26,071 7,192 33,263
----------- ----------- ----------
Loss from operations ( 24,905) ( 7,192) ( 32,097)
Other income (expense)
Interest expense ( 677) ( 65) ( 742)
----------- ----------- ----------
Income (loss) before provision for income tax ( 25,582) ( 7,257) ( 2,839)
Provision for income tax - - -
----------- ----------- ----------
Net income (loss) $ ( 25,582) $ ( 7,257) $ ( 32,839)
=========== =========== ==========
Net income (loss) per share $ ( 0.01) $ ( 0.02)
=========== ===========
Weighted average number of common
shares outstanding 4,500,000 446,064
=========== ===========
</table>
The accompanying notes are an integral part of these financial statements
F-4
<page>
INCOMING, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<table>
<caption>
Year December 22, 2006 December 22, 2006
Ended (Inception) Through (Inception) Through
November 30, November 30, November 30,
2008 2007 2008
---- ---- ----
<s> <c> <c> <c>
Cash Flows From Operating Activities:
Net income (loss) $ ( 25,582) $ ( 7,257) $ ( 32,839)
Adjustment to reconcile net income to net cash
provided by (used for) operating activities:
Amortization 177 - 177
Accounts payable and accrued liabilities 8,067 5,822 13,889
Accounts payable related parties 5,100 530 5,630
----------- ----------- ----------
Net cash provided by (used for) operating
activities ( 12,238) ( 905) ( 13,143)
----------- ----------- ----------
Cash Flows From Investing Activities
Purchase of fixed assets - ( 1,180) ( 1,180)
----------- ----------- ----------
Net cash provided by (used for) investing
activities - ( 1,180) ( 1,180)
----------- ----------- ----------
Cash Flows From Financing Activities:
Loan payable - related party 677 10,065 10,742
Proceeds from issuance of common stock - 4,500 4,500
Cash restricted (escrow) ( 9,387) - ( 9,387)
Escrow liability - share subscriptions 9,400 - 9,400
----------- ----------- ----------
Net cash provided by (used for) financing
activities 690 14,565 15,255
----------- ----------- ----------
Net Increase (Decrease) In Cash ( 11,548) 12,480 932
Cash At The Beginning Of The Period 12,480 - -
----------- ----------- ----------
Cash At The End Of The Period $ 932 $ 12,480 $ 932
=========== =========== ==========
Cont'd
</table>
The accompanying notes are an integral part of these financial statements
F-5
<page>
INCOMING, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS Cont'd
Schedule Of Non-Cash Investing And Financing
- --------------------------------------------
Activities
- ----------
None
Supplemental Disclosure
- -----------------------
<table>
<caption>
Year December 22, 2006 December 22, 2006
Ended (Inception) Through (Inception) Through
November 30, November 30, November 30,
2008 2007 2008
---- ---- ----
<s> <c> <c> <c>
Cash paid for:
Interest $ - $ - $ -
=========== ============ ==========
Income Taxes $ - $ - $ -
=========== ============ ==========
</table>
The accompanying notes are an integral part of these financial statements
F-6
<page>
INCOMING, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
December 22, 2006 (Inception) Through November 30, 2008
<table>
<caption>
Deficit
Accumulated
Common Shares During the
------------------------ Development
Number Par Value Stage Total
--------- ----------- ----- -----
<s> <c> <c> <c> <c>
Balances, December 22, 2006 - $ - $ - $ -
Issued for cash:
Common stock November, 2007 - at $0.001 4,500,000 4,500 - 4,500
Net gain (loss) for the period ended November 30, 2007 - - ( 7,257) ( 7,257)
--------- ---------- --------- ---------
Balances, November 30, 2007 4,500,000 4,500 ( 7,257) ( 2,757)
Net gain (loss) for the year ended November 30, 2008 - - ( 25,582) ( 25,582)
--------- ---------- --------- ---------
Balances, November 30, 2008 4,500,000 $ 4,500 $( 32,839) $( 28,339)
========= ========== ========= =========
</table>
The accompanying notes are an integral part of these financial statements
F-7
<page>
INCOMING, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
November 30, 2008
Note 1 Nature and Continuance of Operations
------------------------------------
Organization
------------
The Company was incorporated in the State of Nevada, United States
of America on December 22, 2006, and its fiscal year end is
November 30. The Company is engaged in distribution of American
Urban Streetwear and Hip Hop clothing labels in the Eastern
European market.
Going Concern
-------------
These financial statements have been prepared on a going concern
basis. The Company has a working capital deficiency of $29,342,
and has accumulated deficit of $32,839 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. The Company to date has funded its initial
operations through the issuance of 4,500,000 shares of capital
stock for the net proceeds of $4,500 and loans from director in
the amount of $10,000. 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.
The financial statements have, in management's opinion, been
properly prepared within reasonable limits of materiality and
within the framework of the significant accounting policies
summarized below:
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.
F-8
<page>
Incoming, Inc.
(A Development Stage Company)
Notes to the Financial Statements
November 30, 2008 - Page 2
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
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.
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 period ended
November 30, 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 reflect 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.
F-9
<page>
Incoming, Inc.
(A Development Stage Company)
Notes to the Financial Statements
November 30, 2008 - Page 3
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
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.
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.
F-10
<page>
Incoming, Inc.
(A Development Stage Company)
Notes to the Financial Statements
November 30, 2008 - Page 4
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
Recent Accounting Pronouncements - (cont'd)
---------------------------------
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 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-11
<page>
Incoming, Inc.
(A Development Stage Company)
Notes to the Financial Statements
November 30, 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.
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
F-12
<page>
Incoming, Inc.
(A Development Stage Company)
Notes to the Financial Statements
November 30, 2008 - Page 6
Note 2 Summary of Significant Accounting Policies - (cont'd)
------------------------------------------
Recent Accounting Pronouncements - (cont'd)
---------------------------------
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 Incoming does not expect the adoption
of this pronouncement to have material impact on its financial
statements.
Note 3 Capital Stock - Note 6
-------------
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 December 22, 2006 (inception) to November
30, 2007, the Company issued 4,500,000 shares of common stock to
its directors for total proceeds of $4,500.
On July 11, 2008, the Company's Registration Statement on the Form
S-1 became effective. As of November 30, 2008, the Company has
received and held in escrow $9,387 of share subscription funds. As
of November 30, 2008, the Company has not issued any shares of
common stock pursuant to this Registration Statement.
To November 30, 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 November 30, 2008,
management services of $2,000 (November 30, 2007 - $2,000)
were charged to operations.
b) During the period ended November 30, 2007, the President of
the Company provided a $10,000 loan to the Company. The loan
payable is payable on demand, unsecured, bears interest at
6.75% per annum and consists of $10,000 of principal, and $742
of accrued interest payable.
c) As at November 30, 2008, the Company owed $5,630 (November 30,
2007, - $530) to the President of the Company for cash
advances and expenses incurred on behalf of the Company.
F-13
<page>
Incoming, Inc.
(A Development Stage Company)
Notes to the Financial Statements
November 30, 2008 - Page 7
Note 5 Income Taxes
------------
The significant components of the Company's deferred tax assets
are as follows:
2008 2007
---- ----
Deferred Tax Assets
Non-capital loss carryforward $ 4,926 $ 1,089
Less: valuation allowance for deferred
tax asset ( 4,926) ( 1,089)
--------- --------
$ - $ -
========= ========
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 $32,839 at November 30, 2008 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.
Note 6 Subsequent Event - Note 3
----------------
On July 11, 2008, the Company's Registration Statement on the Form
S-1 became effective. As of November 30, 2008, the Company has
received and held in escrow $9,387 of share subscription funds.
Subsequent to November 30, 2008, the Company has completed the
Offering and issued 4,070,000 shares of common stock at $0.010 per
share for total proceeds of $40,700.
F-14
<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 Effectiveness 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
Directors, Executive Officers and Control Persons
- -------------------------------------------------
Our executive officers and Directors and their respective ages as of the date of
this Prospectus are as follows:
38
<page>
- --------------------------------------------------------------------------------
Name Age Position
- --------------------------------------------------------------------------------
Yury Nesterov 53 President, Chief Executive
Officer, Director
Elena Djafarova 33 Secretary, Treasurer, Chief
Financial Officer, 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 Incoming's affairs.
Yury Nesterov, President
- ------------------------
Since December 22, 2006, Mr.Nesterov has been our President, Chief Executive
Officer, and a director of the Company. In the past he worked as a manager at a
shoe manufacturing company in Toronto. In the past five years Mr.Nesterov held
various contract positions with private companies in North America and Russia.
Mr.Nesterov is not an officer or director of any other reporting company.
Elena Djafarova, Director
- -------------------------
Elena Djafarova holds a position as a merchandiser at Avangard-Moda clothing
store in Moscow, Russia. In the past Ms. Djafarova owned and operated clothing
boutique store in Kishinev, Moldova.
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
39
<page>
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:
- --------------------------------------------------------------------------------
Number of Late Number of Transactions Not Failure to File
Name Reports Reported on a Timely Basis Requested Forms
- --------------------------------------------------------------------------------
Yury Nesterov 1(1) 1 Nil
Elena Djafarova 1(1) 1 Nil
- --------------------------------------------------------------------------------
(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>
Yury Nesterov,Chief Executive Officer 2008 $ 0 0 0 0 0 0 2,000 2,000
2007 $ 0 0 0 0 0 0 2,000 2,000
- --------------------------------------------------------------------------------------------------------------------------------
Elena Djafarova, Chief Financial Officer 2008 $ 0 0 0 0 0 0 0 0
2007 $ 0 0 0 0 0 0 0 0
- --------------------------------------------------------------------------------------------------------------------------------
</table>
40
<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>
Yury Nesterov 0 0 0 0 N/A 0 $ 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Elena Djafarova 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>
Yury Nesterov 2,000 0 0 0 0 0 $ 2,000
- -----------------------------------------------------------------------------------------------------------------------------------
Elena Djafarova 0 0 0 0 0 0 $ 0
- -----------------------------------------------------------------------------------------------------------------------------------
</table>
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<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 Incoming directors.
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 February 25, 2009, 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 Yury Nesterov 3,000,000 35.00
President, CEO,
Common Elena Djafarova
Secretary, CFO, Treasurer 1,500,000 17.50
and Director
Common All Officers and 4,500,000 52.50
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.
The percent of class is based on 8,570,000 shares of common stock issued and
outstanding as of the date of this annual report.
42
<page>
The Company has no securities authorized for issuance under equity compensation
plans.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The following describes certain relationship and related transactions for the
year ended November 30, 2008, and for the period from inception to November 30,
2007:
a) The President of the Company provides management services to
the Company. During the year ended November 30, 2008,management
services of $2,000 (November 30, 2007 - $2,000) were charged to
operations.
b) During the period ended November 30, 2007, the President of
the Company provided a $10,000 loan to the Company. The loan
payable is payable on demand, unsecured, bears interest at
6.75% per annum and consists of $10,000 of principal, and $742
of accrued interest payable as of November 30, 2008.
c) As at November 30, 2008, the Company owed $5,630 (November 30,
2007, - $530) to the President of the Company for cash
advances and expenses incurred on behalf of the Company.
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
- ---------------------
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, Yury Nesterov, is also our chief executive officer, and our director,
Elena Djafarova, is also our chief financial officer. As a result, we do not
have any independent directors. 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.
43
<page>
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Our principal independent registered accountant, Ronald R. Chadwick, P.C. billed
the following fees for the services indicated:
Fiscal year-ended
November 30, 2008 November 30, 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*
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 June 30, 2008.
44
<page>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on February 25, 2009.
Incoming, Inc.
/s/ Yury Nesterov
----------------------------------------
Yury Nesterov President, Chief Executive
Officer and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934 this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
/s/ Yury Nesterov
- -------------------------------
Yury Nesterov
President, Chief Executive
Officer, and Director
(Principal Executive Officer)
Dated: February 25, 2009
/s/ Elena Djafarova
- -----------------------------
Elena Djafarova
Chief Financial Officer, Secretary
Treasurer, principal accounting
officer and Director
Dated: February 25, 2009
45