Quarterly Report — Small Business — Form 10-QSB Filing Table of Contents
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Check
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 o No x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes x No o
As
of
November 12, 2007, 12,400,000 shares of common stock, par value
$0.0001
per
share, were outstanding.
Transitional
Small Business Disclosure Format (Check One): Yes o
No x
The
accompanying notes are an integral part of these financial
statements.
6
WATCHTOWER,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE
1
– Organization
and Basis of Presentation
Watchtower,
Inc. (“the Company”) was incorporated on February 20, 2007 under the laws of the
State of Nevada. The Company has selected December 31 as its fiscal year.
The
Company has not yet generated revenues from planned principal operations and
is
considered a development stage company as defined in Statement of Financial
Accounting Standards (“SFAS”) No. 7. The Company intends to market and resell
agricultural based bio-diesel fuels. There is no assurance, however, that the
Company will achieve its objectives or goals.
In
the
opinion of the Company’s management, the accompanying unaudited condensed
financial statements contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the information set forth
therein. These financial statements are condensed and therefore do not include
all of the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial statements.
Results
of operations for interim periods are not necessarily indicative of the results
of operations for a full year.
The
Company is a development stage company and has not commenced planned principal
operations. The Company had no revenues and incurred a net loss of $4,103 for
the three months ended September 30, 2007 and a net loss of $6,268 for the
period February 20, 2007 (inception) to September 30, 2007. These factors raise
substantial doubt about the Company’s ability to continue as a going concern.
There
can
be no assurance that sufficient funds will be generated during the next year
or
thereafter from operations or that funds will be available from external sources
such as debt or equity financings or other potential sources. The lack of
additional capital could force the Company to curtail or cease operations and
would, therefore, have a material adverse effect on its business. Furthermore,
there can be no assurance that any such required funds, if available, will
be
available on attractive terms or that they will not have a significant dilutive
effect on the Company's existing stockholders.
The
Company is attempting to address its lack of liquidity by raising additional
funds, either in the form of debt or equity or some combination thereof. The
Company has raised net proceeds of approximately $20,000 through an offering
of
its common stock during the quarter ended September 30, 2007. There can be
no
assurances that the Company will be able to raise the additional funds it
requires.
The
accompanying condensed financial statements do not include any adjustments
related to the recoverability or classification of asset-carrying amounts or
the
amounts and classifications of liabilities that may result should the Company
be
unable to continue as a going concern.
NOTE
2
-Summary
of Significant Accounting Policies
Cash
and Cash Equivalents
The
Company considers all highly-liquid investments purchased with a maturity of
three months or less to be cash equivalents.
7
WATCHTOWER,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE
2
-Summary
of Significant Accounting Policies
(Continued)
Revenue
Recognition
The
Company utilizes the accrual method of accounting.
Advertising
Costs
Advertising
costs will be charged to operations when incurred. The Company did not incur
any
advertising costs during the period ended September 30, 2007.
Income
Taxes
The
Company accounts for income taxes using the asset and liability method described
in SFAS No. 109, “Accounting For Income Taxes”, the objective of which is to
establish deferred tax assets and liabilities for the temporary differences
between the financial reporting and the tax bases of the Company’s assets and
liabilities at enacted tax rates expected to be in effect when such amounts
are
realized or settled. A valuation allowance related to deferred tax assets is
recorded when it is more likely than not that some portion or all of the
deferred tax assets will not be realized.
Loss
Per Share
The
computation of loss per share is based on the weighted average number of common
shares outstanding during the period presented. Diluted loss per common share
is
the same as basic loss per common share as there are no potentially dilutive
securities outstanding (options and warrants).
Research
and Development
Research
and development costs will be charged to expense in the period incurred. The
Company did not incur any research and development costs during the period
ended
September 30, 2007.
Accounting
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosures of contingent assets and liabilities at the date
of
the financial statements, and the reported amount of revenues and expenses
during the reported period. Actual results could differ from those
estimates.
Fair
Value of Financial Instruments
The
carrying value of cash and accounts payable approximates fair value because
of
the immediate or short-term maturity of these financial
instruments.
Research
and Development
Research
and development costs will be charged to expense as incurred. The Company did
not incur any research and development costs during the period ended September30, 2007.
8
WATCHTOWER,
INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Recently
Issued Accounting Pronouncements
SAB
108
In
September 2006, the SEC staff issued Staff Accounting Bulletin No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements (SAB 108). SAB 108 was issued
in order to eliminate the diversity in practice surrounding how public companies
quantify financial statement misstatements. SAB 108 requirements that
registrants quantify errors using both a balance sheet and income statement
approach and evaluate whether either approach results in a misstated amount
that, when all relevant quantitative and qualitative factors are considered,
is
material. The Company has considered the SAB 108 to be not
material.
SFAS
157
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No.
157, Fair Value Measurements (SFAS 157). SFAS 157 provides a common definition
of fair value and establishes a framework to make the measurement of fair value
in generally accepted accounting principles more consistent and comparable.
SFAS
157 also requires expanded disclosures to provide information about the extent
to which fair value is used to measure assets and liabilities, the methods
and
assumptions used to measure fair value, and the effect of fair value measures
on
earnings. SFAS 157 is effective for the Company’s year end 2008, although early
adoption is permitted. The Company has considered SFAS 157 to be not
material.
NOTE
3
-Common
Stock
In
February 2007 the Company issued 8,000,000 shares of common stock valued at
$800
to the Founders of the Company for services.
In
April
2007 the Company sold 3,500,000 shares of common stock for $35,000 to private
investors.
On
August24, 2007the Company sold 900,000 shares of common stock pursuant to its public
offering for gross proceeds of $45,000. Expenses of the public offering amounted
to $25,000.
Note
4
-Preferred
Stock
The
Company’s Board of Directors may, without further action by the Company’s
stockholders, from time to time, direct the issuance of any authorized but
unissued or unreserved shares of preferred stock in series and at the time
of
issuance, determine the rights, preferences and limitations of each series.
The
holders of preferred stock may be entitled to receive a preference payment
in
the event of any liquidation, dissolution or winding-up of the Company before
any payment is made to the holders of the common stock. Furthermore, the board
of directors could issue preferred stock with voting and other rights that
could
adversely affect the voting power of the holders of the common
stock.
9
Item
2. Management’s
Discussion and Analysis or Plan of Operations.
As
used
in this Form 10-QSB, references to the “Watchtower,”“Company,””we,”“our” or
“us” refer to Watchtower, Inc., unless the context otherwise
indicates.
This
Management’s Discussion and Analysis or Plan of Operations should be read in
conjunction with the financial statements and the notes thereto.
Forward-Looking
Statements
This
Quarterly Report on Form 10-QSB contains forward-looking statements which relate
to future events or our future financial performance. 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 that 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.
While
these forward-looking statements, and any assumptions upon which they are based,
are made in good faith and reflect our current judgment regarding the direction
of our business, actual results will almost always vary, sometimes materially,
from any estimates, predictions, projections, assumptions or other future
performance suggested herein.
For
a
description of such risks and uncertainties refer to our Registration Statement
on Form SB-2 (Registration No. 333-144943) filed with the Securities and
Exchange Commission (the “SEC”) on July 27, 2007, as amended on August 1, 2007
and August 7, 2007 (the “Registration Statement”). Except as required under the
federal securities laws and the rules and regulations of the Securities and
Exchange Commission, we do not have any intention or obligation to update
publicly any forward-looking statements or risk factors included herein, whether
as a result of new information, future events, changes in assumptions or
otherwise.
Overview
Watchtower
was incorporated on February 20, 2007 under the laws of the State of Nevada.
We
have not generated any revenue to date and our operations have been limited
to
organizational, start-up, and fund raising activities. We are focused on
becoming involved in the growing market for renewable and environmentally
sustainable energy and intend to market and resell agricultural based bio-diesel
fuels. Bio-diesel is fuel made from vegetable oils or animal fats which can
be
used in existing diesel engines. Our goal is to source various available
agri-biodiesel fuel products from many producers internationally and offer
renewable alternatives to petroleum based fuels in the United States.
Our
objective is to purchase agri-diesel from foreign producers and ship the fuel
to
the United States. There, the company will store the fuel and ultimately sell
and ship to the entire continental United States. Ultimately our goal is to
become an industry leader in the marketing and reselling of agri-biodiesel
fuels
in the United States.
10
In
April
2007, we raised an aggregate of $35,000 from 39 investors in a private
placement. These funds were used by us primarily in connection with the
preparation of out Registration Statement relating to (i) the resale of
3,500,000 shares of our common stock, par value $0.0001 per share which were
issued and outstanding and offered and sold by the holders thereof, and (ii)
the
sale of up to 5,000,000 shares of common stock, par value $0.0001 per share,
to
be offered and sold by us. The 5,000,000 shares offered by the Company were
offered and sold at a price of $0.05 per share on a "best efforts basis" by
our
directors and officers.
On
August 24, 2007, we concluded and terminated our public offering held in
accordance with the Registration Statement on Form SB-2, which was declared
effective by the SEC on August 20, 2007. Although pursuant to the Registration
Statement the offering could have remained open for as long as 180 business
days
after the date of the prospectus, we terminated the offering because we believed
that additional funds would not have been raised pursuant to the offering.
Prior
to the conclusion of the offering, the Company had sold to 9 persons an
aggregate of 900,000 shares of its common stock for a purchase price of $0.05
per share, amounting in the aggregate to $45,000. We incurred expenses of
$25,000 in connection with this offering.
We
currently have no employees other than our officers, who are also our directors.
Plan
of Operation
Our
products are intended to be utilized as an alternative fuel or as an additive
to
traditional fuel to the entire U.S. population. Consequently it our goal to
have
our fuel be easy to obtain and competitively priced to our target market. For
the goals to be realized, a comprehensive business plan must be established,
a
qualified management team must be retained, strong supplier relationships must
be established, shipping contracts secured, storage facilities leased and
delivery to end reseller procured. Additionally, a substantial marketing plan
would have to be developed. As this would require considerable time and
financial resources, we intend to approach these goals in an incremental
fashion. Over the course of the next twelve month period we plan to do the
following:
·
Phase
I - Over the course of a twelve month period we plan to focus our
efforts
on the development of a comprehensive business and marketing plan
to
assist us with a successful entry into the agri-diesel market place.
We
recognize that our current management and Board of Directors do not
have
sufficient business planning experience to create and execute an
effective
business plan. Accordingly, it is our intention to seek out a consulting
firm(s) that specializes in this arena. Additionally, we will utilize
this
time period to actively seek out qualified individuals who can assume
key
management positions to assist the company in attaining its’ stated goals.
·
Phase
II -
A)
Establish
Supplier Relationships - Bio-diesel
fuels are produced in many different countries spanning the globe. These areas
include Malaysia, Asia, South America and Europe. In order to be able to meet
the demands of the U.S. market, it will be imperative that we establish strong
supplier relations from various regions of the world. This will allow us to
meet
demand as well as mitigate any minor supply issues that are sure to arise from
time to time for any number of reasons including climate and/or political
issues. Suppliers will be identified and selected based on the quality of their
product, volume capacity and ability to deliver the product in a timely fashion.
As bio-diesel grows as an industry, we expect the need to constantly monitor
new
suppliers that will appear on the market to ensure our competitiveness in the
industry.
B)
Secure
Distribution- Distribution
of bio-diesel is complex due to the many challenges that the industry faces.
Shipping the fuel to the U.S. is the first leg of the journey. Once the fuel
is
in the U.S. it must be stored at a facility until arrangements can be made
to
distribute the fuel to the reseller by rail, water or road. As fuel storage
facilities are limited, it is imperative for us to obtain agreements with
storage facilities in the various port cities that have fuel storage facilities.
Once storage facilities are procured, distribution to the reseller by rail,
water or road must be arranged. Each delivery method has challenging issues
that
must be anticipated. Rail challenges include a limited number of railcars and
high incidence of service delays by the railways. Barge resources and increased
security at U.S. ports are issued that must be navigated and due to the weight
of the fuel, truck capacity is limited. Due to the limitations of each
transportation mode, it is necessary to utilize all three to
optimization.
11
·
Phase
III - Marketing-
Once
the agri-diesel has been obtained from the supplier and shipped to
the
U.S. it will be sold and delivered to two distinct groups, users
and
resellers of agri-diesel fuels. We will first attempt to form agreements
with blue chip customers. These are generally customers that can
guarantee
a significant need for agri-diesel fuel. This would include various
major
cruise lines, maritime fueling companies and other large industry
users of
fuel. By obtaining these relationships we hope to build a solid base
of
loyal business clientele. In addition to business clientele, we hope
to
forge relationships with branded and unbranded fuel resellers. As
agri-diesel can be blended with petroleum fuel on any level without
engine
modification, our aim is to provide the agri-fuel as a cost benefit
to the
resellers by allowing them to sell additional fuel at a cheaper cost.
Establishing these relationships are vital to our
success.
Our
balance sheet as of September 30, 2007 reflects cash assets in the amount of
$49,989. Cash and cash equivalents from inception to date have been sufficient
to provide the operating capital necessary to operate to date.
We
do not
have sufficient resources to effectuate our business. We expect to incur a
minimum of $100,000 in expenses during the next twelve months of operations.
We
estimate that this will be comprised mostly of professional fees including;
$25,000 towards procurement of office facilities and equipment, $15,000 towards
the procurement of marketing materials and website, $10,000 towards the planning
of a comprehensive marketing campaign and $15,000 towards travel expenses.
Additionally, $35,000 will be needed for general overhead expenses such as
for
salaries, corporate legal and accounting fees, office overhead and general
working capital. Accordingly, we will have to raise the funds to pay for these
expenses.
We
may
have to issue debt or equity or enter into a strategic arrangement with a third
party. 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.
Going
Concern Consideration
We
incurred a net loss of $4,103 during the quarter ended September 30,
3007.
The
Company is a development stage company and has not commenced planned principal
operations. The Company had no revenues and incurred a net loss of $4,103 for
the quarter ended September 30, 2007 and a net loss of $6,268 for the period
of
February 20, 2007 (inception) to September 30, 2007. These factors raise
substantial doubt about the Company’s ability to continue as a going
concern.
The
financial statements contained herein for the period ending September 30, 2007,
have been prepared on a “going concern” basis, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. For the reasons discussed herein and in the footnotes to our
financial statements included herein, there is a significant risk that we will
be unable to continue as a going concern. Our audited financial statements
included in our Registration Statement on Form SB-2 (Registration No.
333-144943) for the period ending June 30, 2007, contain additional note
disclosures describing the circumstances that lead to this disclosure by our
independent auditors.
Off-Balance
Sheet Arrangements
We
have
no off-balance sheet arrangements.
12
Item
3. Controls and Procedures.
Evaluation
of Disclosure Controls and Procedures
Our
disclosure controls and procedures are designed to ensure that information
required to be disclosed in reports that we file or submit under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported within
the
time periods specified in the rules and forms of the United States Securities
and Exchange Commission. Our principal executive and financial officer has
reviewed the effectiveness of our “disclosure controls and procedures” (as
defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c))
within the end of the period covered by this Quarterly Report on Form 10-QSB
and
has concluded that the disclosure controls and procedures are effective to
ensure that material information relating to the Company is recorded, processed,
summarized, and reported in a timely manner. There were no significant changes
in our internal controls or in other factors that could significantly affect
these controls subsequent to the last day they were evaluated by our principal
executive and financial officer.
Changes
in Internal Controls over Financial Reporting
There
have been no changes in the Company's internal control over financial reporting
during the last quarterly period covered by this report that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.
PART
II
OTHER
INFORMATION
Item
1. Legal
Proceedings.
There
are
no pending legal proceedings to which the Company is a party or in which any
director, officer or affiliate of the Company, any owner of record or
beneficially of more than 5% of any class of voting securities of the Company,
or security holder is a party adverse to the Company or has a material interest
adverse to the Company. The Company’s property is not the subject of any pending
legal proceedings.
Item
2. Unregistered
Sales of Equity Securities and Use of Proceeds.
None.
Use
of Proceeds
On
August24, 2007, we concluded and terminated our public offering held in accordance
with the Registration Statement filed on Form SB-2 (Registration No.
333-144943), which was declared effective by the SEC on August 20, 2007.
Although pursuant to the Registration Statement the offering could have remained
open for as long as 180 business days after the date of the prospectus, we
terminated the offering because we believed that additional funds would not
have
been raised pursuant to the offering. Prior to the conclusion of the offering,
the Company had sold to 9 persons an aggregate of 900,000 shares of its common
stock for a purchase price of $0.05 per share, amounting in aggregate to
$45,000. We incurred expenses of $25,000 in connection with this offering.
The
net proceeds of the offering will be used for working capital.
Item
3. Defaults Upon Senior Securities.
None.
Item
4. Submission of Matters to a Vote of Security Holders.
There
was
no matter submitted to a vote of security holders during the fiscal quarter
ended September 30, 2007.
Item
5. Other Information.
None.
Item
6. Exhibits
Exhibit No.
Description
31.1
Rule
13a-14(a)/15d14(a) Certification of Yisroel Guttfreund (Attached
Hereto)
32.1
Section
1350 Certifications (Attached
Hereto)
13
SIGNATURES
In
accordance with to requirements of the Exchange Act, the registrant caused
this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
