ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The following discussion should be read in conjunction with our audited
financial statements and the related notes that appear elsewhere in this annual
report. The following discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
7
materially from those discussed in the forward looking statements. Factors that
could cause or contribute to such differences include those discussed below and
elsewhere in this annual report.
Our consolidated financial statements are stated in United States dollars and
are prepared in accordance with United States generally accepted accounting
principles.
APPLICATION OF CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with United States
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year.
The more significant areas requiring the use of estimates include asset
impairment, stock-based compensation, and future income tax amounts. Management
bases its estimates on historical experience and on other assumptions considered
to be reasonable under the circumstances. However, actual results may differ
from the estimates.
GENERAL ORGANIZATION AND BUSINESS
Guar Global Ltd. ("GUAR" or the "Company") is a Nevada corporation in the
development stage. The Company was incorporated under the laws of the State of
Nevada on May 29, 2007. The business plan of GUAR is to develop software,
specializing in providing sales tool solutions for the real estate industry.
More specifically, GUAR has developed an online Content Management System
("CMS") that enables real estate agents to easily build a website to showcase
their listings. In addition, there are several opportunities GUAR plans to
consider for future developments to enhance the Real Estate CMS. The
accompanying financial statements of GUAR Global Ltd. were prepared from the
accounts of the Company under the accrual basis of accounting.
In 2007, GUAR commenced a capital formation activity to effect a Registration
Statement on Form SB-2 with the Securities and Exchange Commission, and raise
capital of up to $60,000 from a self-underwritten offering of 48,000,000 shares
of newly issued common stock in the public markets. The Registration Statement
on Form SB-2 was filed with the SEC on November 9, 2007, and declared effective
on November 21, 2007. On January 24, 2008, the Company completed an offering of
its registered common stock as explained in Note 3.
CASH AND CASH EQUIVALENTS
For purposes of reporting within the statements of cash flows, the Company
considers all cash on hand, cash accounts not subject to withdrawal restrictions
or penalties, and all highly liquid investments instruments purchased with a
maturity of three months or less to be cash and cash equivalents.
REVENUE RECOGNITION
The Company is in the development stage and has yet to realize revenues from
operations. It plans to realize revenues from product sales when the products
are delivered to customers, and collection is reasonably assured. For product
support and product software updates, GUAR plans to realize revenues when
completion of services have occurred, provided there is persuasive evidence of
an agreement, acceptance has been approved by its customers, the fee is fixed or
determinable based on the completion of stated terms and conditions, and
collection of any related receivable is probable.
INTERNAL WEBSITE DEVELOPMENT COSTS
Under FASB ASC 350-50, WEBSITE DEVELOPMENT COSTS, costs and expenses incurred
during the planning and operating stages of the Company's website are expensed
as incurred. Under ASC 350-50, costs incurred in the website application and
infrastructure development stages are capitalized by the Company and amortized
to expense over the website's estimated useful life or period of benefit. As of
July 31, 2012, the Company had capitalized $5,950 (July 31, 2011- $5,950)
related to its website cost and recorded $5,950 (July 31, 2011 - $5,950) in
accumulated amortization.
8
COSTS OF COMPUTER SOFTWARE DEVELOPED OR OBTAINED FOR INTERNAL USE
Under ASC 350-40, INTERNAL USE SOFTWARE, the Company capitalizes external direct
costs of materials and services consumed in developing or obtained internal-use
computer software, payroll, and payroll-related costs for employees who are
directly associated with and who devote time to internal-use computer software
project; and, interest costs related to loans incurred for the development of
internal-use software. As of July 31, 2012, and 2011, the Company had not
undertaken any project related to the development of internal-use software.
COSTS OF COMPUTER SOFTWARE TO BE SOLD OR OTHERWISE MARKETED
Under ASC 985-20, COST OF SOFTWARE TO BE SOLD, LEASED OR MARKETED, the Company
capitalizes costs associated with the development of certain software products
held for sale when technological feasibility is established. Capitalized
computer software costs of products held for sale are amortized over the useful
life of the products from the software release date.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates the recoverability of long-lived assets and the related
estimated remaining lives at each balance sheet date. GUAR records an impairment
or change in useful life whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable or the useful life has changed.
For the years ended July 31, 2012, and 2011, no events or circumstances occurred
for which an evaluation of the recoverability of long-lived assets was required.
LOSS PER COMMON SHARE
Basic loss per share is computed by dividing the net loss attributable to the
common stockholders by the weighted average number of shares of common stock
outstanding during the period. Diluted loss per share is computed similar to
basic loss per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the
potential common shares had been issued and if the additional common shares were
dilutive. There were no dilutive financial instruments issued or outstanding for
the years ended July 31, 2012, and 2011.
DEFERRED OFFERING COSTS
The Company defers as other assets the direct incremental costs of raising
capital until such time as the offering is completed. At the time of the
completion of the offering, the costs are charged against the capital raised.
Should the offering be terminated, deferred offering costs are charged to
operations during the period in which the offering is terminated. As of July 31,
2008, GUAR reclassified deferred offering costs of $13,500 to additional paid-in
capital.
INCOME TAXES
Income taxes are provided in accordance with FASB ASC 740, INCOME TAXES. Under
FASB ASC 740-10-25, deferred tax assets and liabilities are determined based on
temporary differences between the bases of certain assets and liabilities for
income tax and financial reporting purposes. The deferred tax assets and
liabilities are classified according to the financial statement classification
of the assets and liabilities generating the differences.
The Company maintains a valuation allowance with respect to deferred tax assets.
GUAR establishes a valuation allowance based upon the potential likelihood of
realizing the deferred tax asset and taking into consideration the Company's
financial position and results of operations for the current period. Future
realization of the deferred tax benefit depends on the existence of sufficient
taxable income within the carryforward period under the Federal tax laws.
Changes in circumstances, such as the Company generating taxable income, could
cause a change in judgment about the realizability of the related deferred tax
asset. Any change in the valuation allowance will be included in income in the
year of the change in estimate.
9
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company estimates the fair value of financial instruments using the
available market information and valuation methods. Considerable judgment is
required in estimating fair value. Accordingly, the estimates of fair value may
not be indicative of the amounts GUAR could realize in a current market
exchange. As of July 31, 2012, and 2011, the carrying value of financial
instruments approximated fair value due to the short-term nature and maturity of
these instruments.
CONCENTRATION OF RISK
As of July 31, 2012, and 2011, the Company maintained its cash account at one
commercial bank. The balance in the account was subject to FDIC coverage.
ESTIMATES
The financial statements are prepared on the basis of accounting principles
generally accepted in the United States of America. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities as of July 31, 2012, and 2011, and expenses for the years
ended July 31, 2012, and 2011, and cumulative from inception. Actual results
could differ from those estimates made by management.
EXECUTIVE OVERVIEW
We are a development stage company with limited operations and no revenues from
our business operations. Our registered independent auditors have issued a going
concern opinion. This means that our registered independent auditors believe
there is substantial doubt that we can continue as an on-going business for the
next 12 months. We do not anticipate that we will generate significant revenues
until we have implemented our marketing plan to generate customers. Accordingly,
we must raise cash from sources other than our operations in order to implement
our marketing plan.
In our management's opinion, there is a need for software that allows real
estate agents with no technical knowledge to build websites and post their
listings and to maintain and update the websites with new product listings
easily and quickly. We are focused on developing such CMS software products and
offering them to independent and non-independent real estate agents.
As of January 24, 2008, we completed the sale of 25,200,000 shares of our common
stock pursuant to the terms of the SB-2 Registration Statement that went
effective on November 21, 2007, and we generated $42,000 in gross proceeds. We
used these proceeds to fund our operations in our last fiscal year. If we are
unable to generate revenues going forward , or if we are unable to make a
reasonable profit , we may have to suspend or cease operations. At the present
time, we have not made any arrangements to raise additional cash. We may seek to
obtain additional funds through a second public offering, private placement of
securities, or loans. Other than as described in this paragraph, we have no
other financing plans at this time.
RECENT DEVELOPMENTS
During the previous twelve months, the company completed the development of its
website.
PLAN OF OPERATION
Over the next twelve months, subject to obtain financing, we plan to:
* Commence marketing of our software product via direct distribution
channels;
* Generate sales of our product;
* If we commence a successful sales campaign, we will continue to
develop and update the website and we will hire a sales and marketing
person to increase our sales;
* Initiate discussions with third party websites to sell complementary
software programs; and
10
* If we are unable to raise additional financing through a private
placement, we will approach our Directors to provide us with a loan.
Due to a lack of financing, the Company has not been able continue with any
research and product development activities.
OFF BALANCE SHEET TRANSACTIONS
We have had no off balance sheet transactions.
SIGNIFICANT EQUIPMENT
We do not intend to purchase any significant equipment for the next twelve
months.
RESULTS OF OPERATIONS
REVENUES
We had no revenues for the period from May 29, 2007 (date of inception), through
July 31, 2012.
EXPENSES
Our expenses for the twelve month period ended July 31, 2012 and 2011 were
$25,284 and $16,690, respectively. During the period from May 29, 2007 (date of
inception), through July 31, 2012, we incurred expenses of $126,683. These
expenses were comprised primarily of office rent, legal expenses, accounting
expenses, SEC filing fees, transfer agent fees, as well as bank fees.
NET INCOME (LOSS)
Our net loss for the twelve-month period ended July 31, 2012 and 2011 was
$25,284 and $16,690, respectively. During the period from May 29, 2007 (date of
inception), through July 31, 2012, we incurred a net loss of $119,233. This loss
consisted of office rent, legal expenses, accounting expenses, SEC filing fees,
transfer agent fees, as well as bank fees. Since inception, we have sold
73,200,000 shares of common stock.
PURCHASE OR SALE OF EQUIPMENT
We do not expect to purchase or sell any plant or significant equipment.
LIQUIDITY AND CAPITAL RESOURCES
Our balance sheet as of July 31, 2012 reflects assets of $5,901, of which $5,601
are in the form of cash. Since inception, we have sold 73,200,000 shares of
common stock with gross proceeds of $48,500. However, cash resources provided
from our capital formation activities have, from inception, been insufficient to
provide the working capital necessary to operate our Company.
We anticipate generating losses in the near term, and therefore, may be unable
to continue operations in the future. We require additional capital, and we may
have to issue debt or equity or enter into a strategic arrangement with a third
party to obtain such capital. There can be no assurance that additional capital
will be available to us. We currently have no agreements, arrangements, or
understandings with any person to obtain funds through bank loans, lines of
credit, or any other sources.
11
GOING CONCERN CONSIDERATION
Our registered independent auditors included an explanatory paragraph in their
report on the accompanying financial statements 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 registered independent auditors.
Due to this doubt about our ability to continue as a going concern, management
is open to new business opportunities which may prove more profitable to the
shareholders of Guar Global Ltd. In the past, we have been able to raise a
limited amount of capital through private placements of our equity stock, but we
are uncertain about our continued ability to raise funds privately. Further, we
believe that our company may have difficulties raising capital unless we locate
a prospective new business opportunity through which we can pursue a new plan of
operation. If we are unable to secure adequate capital to implement our current
business plan or to continue our efforts to acquire a new business opportunity,
our business may fail and our stockholders may lose some or all of their
investment.
Should our original business plan fail, we anticipate that the selection of a
business opportunity in which to participate will be complex and without
certainty of success. Management believes that there are numerous firms in
various industries seeking the perceived benefits of being a publicly registered
corporation. Business opportunities may be available in many different
industries and at various stages of development, all of which will make the task
of comparative investigation and analysis of such business opportunities
extremely difficult and complex. We can provide no assurance that we will be
able to locate compatible business opportunities.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Guar Global Ltd.
(Formerly ERE Management, Inc.)
(A Development Stage Company)
Las Vegas, Nevada
We have audited the accompanying balance sheets of Guar Global Ltd. (formerly
ERE Management, Inc.), a development stage company, (the "Company") as of July
31, 2012 and 2011 and the related statements of operations, stockholders' equity
(deficit) and cash flows for the fiscal years then ended and for the period from
May 29, 2007 (inception) through July 31, 2012. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of July 31, 2012
and 2011 and the results of its operations and its cash flows for the fiscal
years then ended and for the period from May 29, 2007 (inception) through July
31, 2012 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 3 to the
financial statements, the Company had a deficit accumulated during the
development stage at July 31, 2012 and had a net loss and net cash used in
operating activities for the fiscal year then ended, with no revenues earned
since inception. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regards to these
matters are also described in Note 3. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ Li & Company, PC
---------------------------------------
Li & Company, PC
Skillman, New Jersey
October 29, 2012
|
13
Guar Global Ltd.
(Formerly ERE Management, Inc.)
(A Development Stage Company)
Balance Sheets
July 31, July 31,
2012 2011
---------- ----------
ASSETS
CURRENT ASSETS
Cash $ 5,601 $ 2,426
Prepaid exenses 300 --
---------- ----------
TOTAL CURRENT ASSETS 5,901 2,426
---------- ----------
TOTAL ASSETS $ 5,901 $ 2,426
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 482 $ 823
Accrued expenses 9,317 10,217
Advances from stockholder 66,835 36,835
---------- ----------
TOTAL CURRENT LIABILITIES 76,634 47,875
---------- ----------
TOTAL LIABILITIES 76,634 47,875
---------- ----------
STOCKHOLDERS' DEFICIT
Common stock: $0.0001 par value: 300,000,000 shares authorized;
73,200,000 shares issued and outstanding 7,320 7,320
Additional paid-in capital 41,180 41,180
Deficit accumulated during the development stage (119,233) (93,949)
---------- ----------
TOTAL STOCKHOLDERS' DEFICIT (70,733) (45,449)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 5,901 $ 2,426
========== ==========
|
See accompanying notes to the financial statements.
14
Guar Global Ltd.
(Formerly ERE Management, Inc.)
(A Development Stage Company)
Statements of Operations
For the Period from
For the For the May 29, 2007
Fiscal Year Fiscal Year (inception)
Ended Ended through
July 31, July 31, July 31,
2012 2011 2012
------------ ------------ ------------
REVENUES $ -- $ -- $ --
------------ ------------ ------------
OPERATING EXPENSES
Professional fees 23,197 14,427 103,728
Rent 1,846 1,768 9,455
Amortization -- 495 5,950
General and administrative 241 -- 7,550
------------ ------------ ------------
TOTAL OPERATING EXPENSES 25,284 16,690 126,683
------------ ------------ ------------
Loss from operations (25,284) (16,690) (126,683)
------------ ------------ ------------
Other income (expense) -- -- 7,450
------------ ------------ ------------
Loss before income tax provision (25,284) (16,690) (119,233)
Income tax provision -- -- --
------------ ------------ ------------
NET LOSS $ (25,284) $ (16,690) $ (119,233)
============ ============ ============
NET LOSS PER COMMON SHARE:
- BASIC AND DILUTED $ (0.00) $ (0.00)
=========== ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
- BASIC AND DILUTED 73,200,000 73,200,000
=========== ============
|
See accompanying notes to the financial statements.
15
Guar Global Ltd.
(Formerly ERE Management, Inc.)
(A Development Stage Company)
Statement of Stockholders' Equity (Deficit)
For the Period from May 29, 2007 (Inception) through July 31, 2012
Deficit
Common Stock, $0.0001 Par Value Accumulated Total
------------------------------- Additional During the Stockholders'
Number of Paid-in Development Equity
Shares Amount Capital Stage (Deficit)
------ ------ ------- ----- ---------
Balance, May 29, 2007
(inception) -- $ -- $ -- $ -- $ --
Shares issued for cash
at $0.0003 per share
on August 1, 2008 48,000,000 4,800 15,200 -- 20,000
Net loss (1,999) (1,999)
----------- ----------- ----------- ----------- -----------
Balance, July 31, 2007 48,000,000 4,800 15,200 (1,999) 18,001
Shares issued for cash
at $0.001 per share
on January 24, 2008 25,200,000 2,520 25,980 -- 28,500
Net loss (43,401) (43,401)
----------- ----------- ----------- ----------- -----------
Balance, July 31, 2008 73,200,000 7,320 41,180 (45,400) 3,100
Net loss (21,813) (21,813)
----------- ----------- ----------- ----------- -----------
Balance, July 31, 2009 73,200,000 7,320 41,180 (67,213) (18,713)
Net loss (10,046) (10,046)
----------- ----------- ----------- ----------- -----------
Balance, July 31, 2010 73,200,000 7,320 41,180 (77,259) (28,759)
Net loss (16,690) (16,690)
----------- ----------- ----------- ----------- -----------
Balance, July 31, 2011 73,200,000 7,320 41,180 (93,949) (45,449)
Net loss (25,284) (25,284)
----------- ----------- ----------- ----------- -----------
Balance, July 31, 2011 73,200,000 $ 7,320 $ 41,180 $ (119,233) $ (70,733)
=========== =========== =========== =========== ===========
|
See accompanying notes to the financial statements.
16
Guar Global Ltd.
(Formerly ERE Management, Inc.)
(A Development Stage Company)
Statements of Cash Flows
For the Period from
For the For the May 29, 2007
Fiscal Year Fiscal Year (inception)
Ended Ended through
July 31, July 31, July 31,
2012 2011 2012
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (25,284) $ (16,690) $ (119,233)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization -- 495 5,950
Changes in operating assets and liabilities:
Prepaid expenses (300) -- (300)
Accounts payable (341) (687) 482
Accrued liabilities (900) 4,000 9,317
---------- ---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (26,825) (12,882) (103,784)
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Website development -- -- (5,950)
---------- ---------- ----------
NET CASH USED IN INVESTING ACTIVITIES -- -- (5,950)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from stockholder 30,000 15,000 66,835
Proceeds from sale of common stock -- -- 48,500
---------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 30,000 15,000 115,335
---------- ---------- ----------
Net change in cash 3,175 2,118 5,601
Cash, beginning of period 2,426 308 --
---------- ---------- ----------
CASH, END OF PERIOD $ 5,601 $ 2,426 $ 5,601
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Interest aid $ -- $ -- $ --
========== ========== ==========
Income tax paid $ -- $ -- $ --
========== ========== ==========
|
See accompanying notes to the financial statements.
17
Guar Global Ltd.
(Formerly ERE Management, Inc.)
(A Development Stage Company)
July 31, 2012 and 2011
Notes to the Financial Statements
NOTE 1 - ORGANIZATION AND OPERATIONS
ERE MANAGEMENT, INC.
ERE Management, Inc. ("ERE"), a development stage company, was incorporated
under the laws of the State of Nevada on May 29, 2007. Initial operations have
included organization and incorporation, target market identification, marketing
plans, and capital formation. A substantial portion of the Company's activities
has involved developing a business plan and establishing contacts and visibility
in the marketplace. The Company has generated no revenues since inception. The
business plan of ERE is to develop software, specializing in providing sales
tool solutions for the real estate industry. More specifically, ERE has
developed an online Content Management System ("CMS") that enables real estate
agents to build a website to showcase their listings.
AMENDMENT TO THE ARTICLES OF INCORPORATION
Effective March 14, 2012 the Board of Directors and the majority voting
stockholders adopted and approved a resolution to amend its Articles of
Incorporation to (a) increase the number of shares of authorized common stock
from 20,000,000 to 300,000,000; (b) create 25,000,000 shares of "blank check"
preferred stock, par value $0.0001, per share; (c) change the par value of each
share of common stock from $0.001 per share to $0.0001 per share; and (d)
effectuate a forward split of all issued and outstanding shares of common stock,
at a ratio of thirty-for-one (30:1) (the "Stock Split").
All shares and per share amounts in the financial statements have been adjusted
to give retroactive effect to the Stock Split.
AMENDMENT TO THE ARTICLES OF INCORPORATION
Effective September 24, 2012 the Board of Directors and the majority voting
stockholders approved an amendment to the Company's Articles of Incorporation to
change the name of the Company from "ERE Management, Inc." to "Guar Global Ltd."
(the "Company").
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Company's financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America ("U.S.
GAAP").
DEVELOPMENT STAGE COMPANY
The Company is a development stage company as defined by section 915-10-20 of
the FASB Accounting Standards Codification. The Company is still devoting
substantially all of its efforts on establishing the business and its planned
principal operations have not commenced. All losses accumulated since inception
have been considered as part of the Company's development stage activities.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reporting amounts of revenues and
expenses during the reporting period.
18
The Company's significant estimates and assumptions include the fair value of
financial instruments; income tax rate, income tax provision, deferred tax
assets and valuation allowance of deferred tax assets; the carrying value and
recoverability of long-lived assets, including the values assigned to an
estimated useful lives of website development costs and the assumption that the
Company will be a going concern. Those significant accounting estimates or
assumptions bear the risk of change due to the fact that there are uncertainties
attached to those estimates or assumptions, and certain estimates or assumptions
are difficult to measure or value.
Management bases its estimates on historical experience and on various
assumptions that are believed to be reasonable in relation to the financial
statements taken as a whole under the circumstances, the results of which form
the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources.
Management regularly evaluates the key factors and assumptions used to develop
the estimates utilizing currently available information, changes in facts and
circumstances, historical experience and reasonable assumptions. After such
evaluations, if deemed appropriate, those estimates are adjusted accordingly.
Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards
Codification for disclosures about fair value of its financial instruments and
has adopted paragraph 820-10-35-37 of the FASB Accounting Standards Codification
("Paragraph 820-10-35-37") to measure the fair value of its financial
instruments. Paragraph 820-10-35-37 of the FASB Accounting Standards
Codification establishes a framework for measuring fair value in generally
accepted accounting principles (GAAP), and expands disclosures about fair value
measurements. To increase consistency and comparability in fair value
measurements and related disclosures, paragraph 820-10-35-37 of the FASB
Accounting Standards Codification establishes a fair value hierarchy which
prioritizes the inputs to valuation techniques used to measure fair value into
three (3) broad levels. The fair value hierarchy gives the highest priority to
quoted prices (unadjusted) in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. The three (3) levels of fair
value hierarchy defined by paragraph 820-10-35-37 of the FASB Accounting
Standards Codification are described below:
Level 1 Quoted market prices available in active markets for identical assets
or liabilities as of the reporting date.
Level 2 Pricing inputs other than quoted prices in active markets included in
Level 1, which are either directly or indirectly observable as of the
reporting date.
Level 3 Pricing inputs that are generally observable inputs and not
corroborated by market data.
Financial assets are considered Level 3 when their fair values are determined
using pricing models, discounted cash flow methodologies or similar techniques
and at least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted prices
(unadjusted) in active markets for identical assets or liabilities and the
lowest priority to unobservable inputs. If the inputs used to measure the
financial assets and liabilities fall within more than one level described
above, the categorization is based on the lowest level input that is significant
to the fair value measurement of the instrument.
The carrying amounts of the Company's financial assets and liabilities, such as
cash, prepaid expenses, accounts payable and accrued expenses, approximate their
fair values because of the short maturity of these instruments.
Transactions involving related parties cannot be presumed to be carried out on
an arm's-length basis, as the requisite conditions of competitive, free-market
dealings may not exist. Representations about transactions with related parties,
if made, shall not imply that the related party transactions were consummated on
terms equivalent to those that prevail in arm's-length transactions unless such
representations can be substantiated.
It is not, however, practical to determine the fair value of advances from
stockholders, if any, due to their related party nature.
19
FISCAL YEAR-END
The Company elected July 31 as its fiscal year ending date.
CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities of three
months or less at the time of purchase to be cash equivalents.
RELATED PARTIES
The Company follows subtopic 850-10 of the FASB Accounting Standards
Codification for the identification of related parties and disclosure of related
party transactions.
Pursuant to section 850-10-20 the related parties include a) affiliates of the
Company; b) entities for which investments in their equity securities would be
required, absent the election of the fair value option under the Fair Value
Option Subsection of section 825-10-15, to be accounted for by the equity method
by the investing entity; c) trusts for the benefit of employees, such as pension
and profit-sharing trusts that are managed by or under the trusteeship of
management; d) principal owners of the Company; e) management of the Company; f)
other parties with which the Company may deal if one party controls or can
significantly influence the management or operating policies of the other to an
extent that one of the transacting parties might be prevented from fully
pursuing its own separate interests; and g. other parties that can significantly
influence the management or operating policies of the transacting parties or
that have an ownership interest in one of the transacting parties and can
significantly influence the other to an extent that one or more of the
transacting parties might be prevented from fully pursuing its own separate
interests.
The financial statements shall include disclosures of material related party
transactions, other than compensation arrangements, expense allowances, and
other similar items in the ordinary course of business. However, disclosure of
transactions that are eliminated in the preparation of consolidated or combined
financial statements is not required in those statements. The disclosures shall
include: a) the nature of the relationship(s) involved; b) a description of the
transactions, including transactions to which no amounts or nominal amounts were
ascribed, for each of the periods for which income statements are presented, and
such other information deemed necessary to an understanding of the effects of
the transactions on the financial statements; c) the dollar amounts of
transactions for each of the periods for which income statements are presented
and the effects of any change in the method of establishing the terms from that
used in the preceding period; and d. amounts due from or to related parties as
of the date of each balance sheet presented and, if not otherwise apparent, the
terms and manner of settlement.
COMMITMENTS AND CONTINGENCIES
The Company follows subtopic 450-20 of the FASB Accounting Standards
Codification to report accounting for contingencies. Certain conditions may
exist as of the date the consolidated financial statements are issued, which may
result in a loss to the Company but which will only be resolved when one or more
future events occur or fail to occur. The Company assesses such contingent
liabilities, and such assessment inherently involves an exercise of judgment. In
assessing loss contingencies related to legal proceedings that are pending
against the Company or unasserted claims that may result in such proceedings,
the Company evaluates the perceived merits of any legal proceedings or
unasserted claims as well as the perceived merits of the amount of relief sought
or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material
loss has been incurred and the amount of the liability can be estimated, then
the estimated liability would be accrued in the Company's consolidated financial
statements. If the assessment indicates that a potentially material loss
contingency is not probable but is reasonably possible, or is probable but
cannot be estimated, then the nature of the contingent liability, and an
estimate of the range of possible losses, if determinable and material, would be
disclosed.
Loss contingencies considered remote are generally not disclosed unless they
involve guarantees, in which case the guarantees would be disclosed. Management
does not believe, based upon information available at this time, that these
matters will have a material adverse effect on the Company's consolidated
financial position, results of operations or cash flows. However, there is no
assurance that such matters will not materially and adversely affect the
Company's business, financial position, and results of operations or cash flows.
20
REVENUE RECOGNITION
The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards
Codification for revenue recognition. The Company recognizes revenue when it is
realized or realizable and earned. The Company considers revenue realized or
realizable and earned when all of the following criteria are met: (i) persuasive
evidence of an arrangement exists, (ii) the product has been shipped or the
services have been rendered to the customer, (iii) the sales price is fixed or
determinable, and (iv) collectability is reasonably assured.
INCOME TAX PROVISION
The Company adopted the provisions of paragraph 740-10-25-13 of the FASB
Accounting Standards Codification. Paragraph 740-10-25-13.addresses the
determination of whether tax benefits claimed or expected to be claimed on a tax
return should be recorded in the financial statements. Under paragraph
740-10-25-13, the Company may recognize the tax benefit from an uncertain tax
position only if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on the technical
merits of the position. The tax benefits recognized in the financial statements
from such a position should be measured based on the largest benefit that has a
greater than fifty percent (50%) likelihood of being realized upon ultimate
settlement. Paragraph 740-10-25-13 also provides guidance on de-recognition,
classification, interest and penalties on income taxes, accounting in interim
periods and requires increased disclosures. The Company had no material
adjustments to its liabilities for unrecognized income tax benefits according to
the provisions of paragraph 740-10-25-13.
The estimated future tax effects of temporary differences between the tax basis
of assets and liabilities are reported in the accompanying consolidated balance
sheets, as well as tax credit carry-backs and carry-forwards. The Company
periodically reviews the recoverability of deferred tax assets recorded on its
consolidated balance sheets and provides valuation allowances as management
deems necessary.
Management makes judgments as to the interpretation of the tax laws that might
be challenged upon an audit and cause changes to previous estimates of tax
liability. In addition, the Company operates within multiple taxing
jurisdictions and is subject to audit in these jurisdictions. In management's
opinion, adequate provisions for income taxes have been made for all years. If
actual taxable income by tax jurisdiction varies from estimates, additional
allowances or reversals of reserves may be necessary.
UNCERTAIN TAX POSITIONS
The Company did not take any uncertain tax positions and had no adjustments to
unrecognized income tax liabilities or benefits pursuant to the provisions of
Section 740-10-25 for the fiscal year ended July 31, 2012 or 2011.
NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed pursuant to section 260-10-45 of
the FASB Accounting Standards Codification. Basic net income (loss) per common
share is computed by dividing net income (loss) by the weighted average number
of shares of common stock outstanding during the period. Diluted net income
(loss) per common share is computed by dividing net income (loss) by the
weighted average number of shares of common stock and potentially outstanding
shares of common stock during the period to reflect the potential dilution that
could occur from common shares issuable through contingent shares issuance
arrangement, stock options or warrants.
There were no potentially outstanding dilutive shares for the fiscal year ended
July 31, 2012 or 2011.
CASH FLOWS REPORTING
The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards
Codification for cash flows reporting, classifies cash receipts and payments
according to whether they stem from operating, investing, or financing
activities and provides definitions of each category, and uses the indirect or
reconciliation method ("Indirect method") as defined by paragraph 230-10-45-25
of the FASB Accounting Standards Codification to report net cash flow from
operating activities by adjusting net income to reconcile it to net cash flow
from operating activities by removing the effects of (a) all deferrals of past
operating cash receipts and payments and all accruals of expected future
21
operating cash receipts and payments and (b) all items that are included in net
income that do not affect operating cash receipts and payments. The Company
reports the reporting currency equivalent of foreign currency cash flows, using
the current exchange rate at the time of the cash flows and the effect of
exchange rate changes on cash held in foreign currencies is reported as a
separate item in the reconciliation of beginning and ending balances of cash and
cash equivalents and separately provides information about investing and
financing activities not resulting in cash receipts or payments in the period
pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards
Codification.
SUBSEQUENT EVENTS
The Company follows the guidance in Section 855-10-50 of the FASB Accounting
Standards Codification for the disclosure of subsequent events. The Company will
evaluate subsequent events through the date when the financial statements were
issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification,
the Company as an SEC filer considers its financial statements issued when they
are widely distributed to users, such as through filing them on EDGAR.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-08
In September 2011, the FASB issued the FASB Accounting Standards Update No.
2011-08 "INTANGIBLES--GOODWILL AND OTHER: TESTING GOODWILL FOR IMPAIRMENT" ("ASU
2011-08"). This Update is to simplify how public and nonpublic entities test
goodwill for impairment. The amendments permit an entity to first assess
qualitative factors to determine whether it is more likely than not that the
fair value of a reporting unit is less than its carrying amount as a basis for
determining whether it is necessary to perform the two-step goodwill impairment
test described in Topic 350. Under the amendments in this Update, an entity is
not required to calculate the fair value of a reporting unit unless the entity
determines that it is more likely than not that its fair value is less than its
carrying amount.
The guidance is effective for interim and annual periods beginning on or after
December 15, 2011. Early adoption is permitted.
FASB ACCOUNTING STANDARDS UPDATE NO. 2011-11
In December 2011, the FASB issued the FASB Accounting Standards Update No.
2011-11 "BALANCE SHEET: DISCLOSURES ABOUT OFFSETTING ASSETS AND LIABILITIES"
("ASU 2011-11"). This Update requires an entity to disclose information about
offsetting and related arrangements to enable users of its financial statements
to understand the effect of those arrangements on its financial position. The
objective of this disclosure is to facilitate comparison between those entities
that prepare their financial statements on the basis of U.S. GAAP and those
entities that prepare their financial statements on the basis of IFRS.
The amended guidance is effective for annual reporting periods beginning on or
after January 1, 2013, and interim periods within those annual periods.
FASB ACCOUNTING STANDARDS UPDATE NO. 2012-02
In July 2012, the FASB issued the FASB Accounting Standards Update No. 2012-02
"INTANGIBLES--GOODWILL AND OTHER (TOPIC 350) TESTING INDEFINITE-LIVED INTANGIBLE
ASSETS FOR IMPAIRMENT" ("ASU 2012-02").
This Update is intended to reduce the cost and complexity of testing
indefinite-lived intangible assets other than goodwill for impairment. This
guidance builds upon the guidance in ASU 2011-08, entitled TESTING GOODWILL FOR
IMPAIRMENT. ASU 2011-08 was issued on September 15, 2011, and feedback from
stakeholders during the exposure period related to the goodwill impairment
testing guidance was that the guidance also would be helpful in impairment
testing for intangible assets other than goodwill.
The revised standard allows an entity the option to first assess qualitatively
whether it is more likely than not (that is, a likelihood of more than 50
percent) that an indefinite-lived intangible asset is impaired, thus
22
necessitating that it perform the quantitative impairment test. An entity is not
required to calculate the fair value of an indefinite-lived intangible asset and
perform the quantitative impairment test unless the entity determines that it is
more likely than not that the asset is impaired.
This Update is effective for annual and interim impairment tests performed in
fiscal years beginning after September 15, 2012. Earlier implementation is
permitted.
OTHER RECENTLY ISSUED, BUT NOT YET EFFECTIVE ACCOUNTING PRONOUNCEMENTS
Management does not believe that any other recently issued, but not yet
effective accounting pronouncements, if adopted, would have a material effect on
the accompanying financial statements.
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern, which contemplates continuity of
operations, realization of assets, and liquidation of liabilities in the normal
course of business.
As reflected in the accompanying financial statements, the Company had a deficit
accumulated during the development stage at July 31, 2012, and a net loss and
net cash used in operating activities for the fiscal year then ended,
respectively, with no revenues earned since inception. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
While the Company is attempting to commence operations and generate revenues,
the Company's cash position may not be significant enough to support the
Company's daily operations. Management intends to raise additional funds by way
of a public or private offering. Management believes that the actions presently
being taken to further implement its business plan and generate revenues provide
the opportunity for the Company to continue as a going concern. While the
Company believes in the viability of its strategy to increase revenues and in
its ability to raise additional funds, there can be no assurances to that
effect. The ability of the Company to continue as a going concern is dependent
upon the Company's ability to further implement its business plan and generate
revenues.
The financial statements do not include any adjustments related to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
NOTE 4 - RELATED PARTY TRANSACTIONS
FREE OFFICE SPACE
The Company has been provided office space by its Chief Executive Officer at no
cost. The management determined that such cost is nominal and did not recognize
the rent expense in its financial statement.
ADVANCES FROM STOCKHOLDER
From time to time, stockholders of the Company advance funds to the Company for
working capital purpose. Those advances are unsecured, non-interest bearing and
due on demand.
NOTE 5 - STOCKHOLDERS' EQUITY
SHARES AUTHORIZED
Upon formation the total number of shares of common stock which the Company is
authorized to issue is Twenty Million (20,000,000) shares, par value $0.001 per
share.
Effective March 14, 2012 the Board of Directors and the majority voting
stockholders adopted and approved a resolution to amend its Articles of
Incorporation to (a) increase the number of shares of authorized common stock
from 20,000,000 to 300,000,000; (b) create 25,000,000 shares of "blank check"
23
preferred stock, par value $0.0001, per share; (c) change the par value of each
share of common stock from $0.001 per share to $0.0001 per share; and (d)
effectuate a forward split of all issued and outstanding shares of common stock,
at a ratio of thirty-for-one (30:1) (the "Stock Split").
All shares and per share amounts in the financial statements have been adjusted
to give retroactive effect to the Stock Split.
COMMON STOCK
On July 16, 2007, the Company issued 48,000,000 shares of its common stock to
|
Mr. Imperial for cash proceeds of $20,000. On July 17, 2007, Mr. Imperial was
elected to the Board of Directors, and became the President, Secretary, and
Treasurer of the Company.
On January 24, 2008, the Company completed and closed an offering by selling
25,200,000 shares, of the 36,000,000 registered shares, of its common stock, par
value of $0.0001 per share, at an offering price of $0.0017 per share for gross
proceeds of $42,000. Costs associated with this offering were $13,500.
NOTE 6 - INCOME TAXES
DEFERRED TAX ASSETS
At July 31, 2012, the Company had net operating loss ("NOL") carry-forwards for
Federal income tax purposes of $119,233 that may be offset against future
taxable income through 2032. No tax benefit has been reported with respect to
these net operating loss carry-forwards in the accompanying financial statements
because the Company believes that the realization of the Company's net deferred
tax assets of approximately $40,539 was not considered more likely than not and
accordingly, the potential tax benefits of the net loss carry-forwards are fully
offset by a valuation allowance of $40,539.
Deferred tax assets consist primarily of the tax effect of NOL carry-forwards.
The Company has provided a full valuation allowance on the deferred tax assets
because of the uncertainty regarding its realizability. The valuation allowance
increased approximately $8,596 and $5,675 for the fiscal years ended July 31,
2012 and 2011, respectively.
Components of deferred tax assets are as follows:
July 31, July 31,
2012 2011
-------- --------
Net deferred tax assets - Non-current:
Expected income tax benefit from NOL
carry-forwards $ 40,539 $ 31,943
Less: Valuation allowance (40,539) (31,943)
-------- --------
Deferred tax assets, net of valuation allowance $ -- $ --
======== ========
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INCOME TAXES IN THE STATEMENTS OF OPERATIONS
A reconciliation of the federal statutory income tax rate and the effective
income tax rate as a percentage of income before income taxes is as follows:
For the Fiscal For the Fiscal
Year Ended Year Ended
July 31, July 31,
2012 2011
-------- -------
Federal statutory income tax rate 34.0% 34.0%
Change in valuation allowance on net operating
loss carry-forwards (34.0) (34.0)
-------- -------
Effective income tax rate 0.0% 0.0%
======== =======
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NOTE 7 - SUBSEQUENT EVENTS
The Company has evaluated all events that occurred after the balance sheet date
through the date when the financial statements were issued to determine if they
must be reported. The Management of the Company determined that there were no
reportable subsequent events to be disclosed.
24
ITEM 9A(T). CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including
our principal executive officer and the principal financial officer, we are
responsible for conducting an evaluation of the effectiveness of the design and
operation of our internal controls and procedures, as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the
fiscal year covered by this report. Disclosure controls and procedures means
that the material information required to be included in our Securities and
Exchange Commission reports is recorded, processed, summarized and reported
within the time periods specified in SEC rules and forms relating to our
company, including any consolidating subsidiaries, and was made known to us by
others within those entities, particularly during the period when this report
was being prepared. Based on this evaluation, our principal executive officer
and principal financial officer concluded as of the evaluation date that our
disclosure controls and procedures were not effective as of July 31, 2012.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting. Internal control over financial reporting is
defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange
Act of 1934 as a process designed by, or under the supervision of, the company's
principal executive and principal financial officers and effected by the
company's board of directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the United States of America and
includes those policies and procedures that:
* Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of the
assets of the company;
* Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with accounting principles generally accepted in the United States of
America and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and
directors of the company; and
* Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the company's
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. All internal control systems,
no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation. Because of the
inherent limitations of internal control, there is a risk that material
misstatements may not be prevented or detected on a timely basis by internal
control over financial reporting. However, these inherent limitations are known
features of the financial reporting process. Therefore, it is possible to design
into the process safeguards to reduce, though not eliminate, this risk.
25
As of July 31, 2012, our principal executive officer and principal financial
officer assessed the effectiveness of our internal control over financial
reporting based on the criteria for effective internal control over financial
reporting established in Internal Control--Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and
SEC guidance on conducting such assessments. Based on that evaluation, he
concluded that, as of the end of the period covered by this report, such
internal controls and procedures were not effective to detect the inappropriate
application of US GAAP rules as more fully described below. This was due to
deficiencies that existed in the design or operation of our internal controls
over financial reporting that adversely affected our internal controls and that
may be considered to be material weaknesses.
The matters involving internal controls and procedures that our principal
executive officer and principal financial officer considered to be material
weaknesses under the standards of the Public Company Accounting Oversight Board
were: (1) lack of a functioning audit committee due to a lack of a majority of
independent members and a lack of a majority of outside directors on our board
of directors, resulting in ineffective oversight in the establishment and
monitoring of required internal controls and procedures; (2) inadequate
segregation of duties consistent with control objectives; and (3) ineffective
controls over period end financial disclosure and reporting processes. The
aforementioned material weaknesses were identified by our principal executive
officer and principal financial officer in connection with the audit of our
financial statements as of July 31, 2012.
Our principal executive officer and principal financial officer believes that
the material weaknesses set forth in items (2) and (3) above did not have an
effect on our financial results. However, our principal executive officer and
principal financial officer believes that the lack of a functioning audit
committee and the lack of a majority of outside directors on our board of
directors results in ineffective oversight in the establishment and monitoring
of required internal controls and procedures, which could result in a material
misstatement in our financial statements in future periods.
This annual report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the SEC that
permit the Company to provide only the management's report in this annual
report.
MANAGEMENT'S REMEDIATION INITIATIVES
In an effort to remediate the identified material weaknesses and other
deficiencies and enhance our internal controls, we have initiated, or plan to
initiate, the following series of measures:
We intend to create a position to segregate duties consistent with control
objectives and will increase our personnel resources and technical accounting
expertise within the accounting function when funds are available to us. And, we
plan to appoint one or more outside directors to our board of directors who
shall be appointed to an audit committee resulting in a fully functioning audit
committee who will undertake the oversight in the establishment and monitoring
of required internal controls and procedures such as reviewing and approving
estimates and assumptions made by management when funds are available to us.
Management believes that the appointment of one or more outside directors, who
shall be appointed to a fully functioning audit committee, will remedy the lack
of a functioning audit committee and a lack of a majority of outside directors
on our Board.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There was no change in our internal controls over financial reporting that
occurred during the period covered by this report, which has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.
