Quarterly Report — Small Business — Form 10-QSB Filing Table of Contents
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10QSB — Quarterly Report for Period Ended 2/29/2008
(Exact
Name of Small Business Issuer as specified in its charter)
Colorado
20-2776793
(State
or other jurisdiction
(IRS
Employer File Number)
of
incorporation)
6890 West
44th Ave. # 3
Wheat
Ridge, Colorado
80033
(Address
of principal executive offices)
(zip
code)
(303)
539-9381
(Registrant's
telephone number, including area code)
Securities
to be Registered Pursuant to Section 12(b) of the Act: None
Securities
to be Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.0.001 per
share par value
Indicate
by check mark whether the Registrant (1) has filed all Reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes: [X] No: [ ]
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act): Yes [ ] No
[X].
The
aggregate market value of the voting stock held by nonaffiliates computed by
reference to the price at which the stock was sold, or the average bid and asked
prices of such stock, as of April 9, 2008 was approximately
$358,000. The number of shares outstanding of the Registrant's common
stock, as of the latest practicable date, March 31, 2008, was
4,146,600.
FORM
10-QSB
Recycle
Tech, Inc.
TABLE OF
CONTENTS
Page
PART
I FINANCIAL INFORMATION
Item
1. Financial Statements for the period ended February 29,2008
Balance Sheet
(Unaudited)
5
Statements of
Operations (Unaudited)
6
Statements of
Cash Flows (Unaudited)
7
Notes to
Consolidated Financial Statements (Unaudited)
9
Item
2. Management’s Discussion and Analysis and Plan of
Operation
11
Item
3. Controls and Procedures
19
PART
II OTHER INFORMATION
Item
1. Legal Proceedings
19
Item
2. Changes in Securities
19
Item
3. Defaults Upon Senior Securities
19
Item
4. Submission of Matters to a Vote of Security Holders
19
Item
5. Other Information
19
Item
6. Exhibits and Reports on Form 8-K
19
Signatures
20
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2 -
PART
I. FINANCIAL INFORMATION
For
purposes of this prospectus, unless otherwise indicated or the context otherwise
requires, all references herein to “Recycle Tech,”“we,”“us,” and “our,” refer
to Recycle Tech, Inc., a Colorado corporation.
Schedule
Of Non-Cash Investing And Financing Activities
None
Supplemental
Disclosure
Cash
paid for interest
$
-
$
-
Cash
paid for income taxes
$
-
$
-
The
accompanying notes are an integral part of the financial
statements.
-
8 -
RECYCLE
TECH, INC.
NOTES
TO FINANCIAL STATEMENTS
(Unaudited)
NOTE
1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
Recycle
Tech, Inc. (the “Company”), was incorporated in the State of Colorado on May 3,2005. The Company sells computer hardware and consulting services to a customer
base of businesses and individuals.
Basis of
Presentation
The
accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10-QSB and do not include all of the information
and disclosures required by generally accepted accounting principles for
complete financial statements. All adjustments which are, in the opinion of
management, necessary for a fair presentation of the results of operations for
the interim periods have been made and are of a recurring nature unless
otherwise disclosed herein. The results of operations for such interim periods
are not necessarily indicative of operations for a full year.
Cash and cash
equivalents
The
Company considers all highly liquid investments with an original maturity of
three months or less as cash equivalents.
Accounts
receivable
The
Company reviews accounts receivable periodically for collectability and
establishes an allowance for doubtful accounts and records bad debt expense when
deemed necessary.
Property and
equipment
Property
and equipment are recorded at cost and depreciated under accelerated methods
over each item's estimated useful life.
Inventories
Inventories,
consisting of used computer hardware, are stated at the lower of cost or market
(first-in, first-out method). Costs capitalized to inventory include the
purchase price, transportation costs, and any other expenditures incurred in
bringing the goods to the point of sale and putting them in saleable condition.
Costs of good sold include those expenditures capitalized to
inventory.
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9 -
RECYCLE
TECH, INC.
NOTES
TO FINANCIAL STATEMENTS
(Unaudited)
NOTE
1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued):
Revenue
recognition
Revenue
is recognized on an accrual basis as earned under contract terms. Specifically,
revenue from product sales is recognized when delivery occurs, and service
revenue when services are rendered. Sales returns and allowances are recorded as
estimated based on percentage past return experience, and reviewed and recorded
periodically, generally on a quarterly basis. Warranty liability is also
estimated periodically based on factors such as past warranty expense experience
and supplier warranty coverage.
Use of
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect 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 reporting period. Actual results
could differ from those estimates.
Income
tax
The
Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (“SFAS 109”). Under SFAS 109 deferred taxes are provided on a
liability method whereby deferred tax assets are recognized for deductible
temporary differences and operating loss carryforwards and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
Net income (loss) per
share
The net
income (loss) per share is computed by dividing the net income (loss) by the
weighted average number of shares of common outstanding. Warrants, stock
options, and common stock issuable upon the conversion of the Company's
preferred stock (if any), are not included in the computation if the effect
would be anti-dilutive and would increase the earnings or decrease loss per
share.
Financial
Instruments
The
carrying value of the Company’s financial instruments, including cash and cash
equivalents and accrued payables, as reported in the accompanying balance sheet,
approximates fair value.
-
10 -
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND PLAN OF
OPERATION
The
following discussion of our financial condition and results of operations should
be read in conjunction with, and is qualified in its entirety by, the
consolidated financial statements and notes thereto included in, Item 1 in this
Quarterly Report on Form 10-QSB. This item contains forward-looking
statements that involve risks and uncertainties. Actual results may
differ materially from those indicated in such forward-looking
statements.
You should carefully consider the
risks and uncertainties described below and the other information in this
document before deciding to invest in shares of our common
stock.
The occurrence of any of the
following risks could materially and adversely affect our business, financial
condition and operating result. In this case, the trading price of our common
stock could decline and you might lose all or part of your
investment.
We
have a limited operating history.
We
began operations in May, 2005. Since the inception of our current business
operations, we have been engaged in operations, including developing a strategic
operating plan, entering into contracts, hiring personnel, developing processing
technology, raising private capital and seeking acquisitions. We have no
production facilities. Accordingly, we have a limited relevant operating history
upon which an evaluation of our performance and future prospects can be
made.
We
have had a history of net losses.
We have a
history of net losses. We had a net loss of $5,473 for the three months
ended February 29, 2008. We had a net loss of $ 36,980 for the nine months ended
February 29, 2008. We have a stockholders’ deficit of $49,626 at February 29,2008. We may to continue to incur net losses for the foreseeable future as we
continue to further develop our business. Our ability to generate and sustain
significant additional sales or achieve profitability will depend upon the
factors discussed elsewhere in this “Risk Factors” section. We cannot assure you
that we will achieve or sustain profitability or that our operating losses will
not increase in the future. If we do achieve profitability, we cannot be certain
that we can sustain or increase profitability on a quarterly or annual basis in
the future.
-
11 -
Because
we have a history of losses and have a working capital deficit, our accountants
have expressed doubts about our ability to continue as a going
concern.
For the
fiscal years ended May 31, 2006 and 2007, our accountants have expressed doubt
about our ability to continue as a going concern as a history of losses and a
working capital deficit. Our ability to achieve and maintain profitability and
positive cash flow is dependent upon our ability to generate sales from the sale
of our products and services.
Based upon current plans, we may incur operating losses in future periods
because we will be incurring expenses and not generating sufficient sales.
We cannot guarantee that we will be successful in generating sufficient sales or
other funds in the future to cover these operating costs. Failure to generate
sufficient sales will cause us to go out of business.
Based upon current plans, we may incur operating losses in future periods
because we will be incurring expenses and not generating sufficient
sales. We cannot guarantee that we will be successful in generating
sufficient sales or other funds in the future to cover these operating costs.
Failure to generate sufficient sales will cause us to go out of
business.
We
may be forced to continue to borrow money from our principal shareholder and
President, Mr. Capra, which will increase our debt and make repayment more
difficult.
In the past we have borrow money for operations from our
principal shareholder and President, Mr. Capra, and may be required to do so in
the future if our business does not generate enough sales in 2007. Mr.
Capra has
committed to funding our working capital needs until December 2007, but our
increased debt to it could make repayment more difficult.
If
we default in the repayment of advances owed our shareholder and President, Mr.
Capra, we could be unable to continue as a viable business.
As
of February 29, 2008, we owed our shareholder and President, Mr. Capra, a total
of $12,000 for a loan and $19,766 for financing trade accounts, including
accrued interest. Principal and interest on our debt to Mr. Capra is currently
due. If Mr. Capra demands payment and we default, we could be unable to continue
as a viable business.
We
may need to raise additional funds in order to achieve our business
objectives.
We
may need additional capital expenditures and investments over the
next twelve months related to our growth. We will use additional loans from
Mr. Capra, if necessary and will cash on hand to fund corporate
overhead.
We are evaluating debt and equity placements at the corporate level. At the
present time, except for Mr. Capra, we have no commitments for any additional
financing, and there can be no assurance that, if needed, additional capital
will be available to use on commercially acceptable terms or at all. Our failure
to raise capital as needed would significantly restrict our growth and hinder
out ability to compete. We may need to curtail expenses, reduce planned
investments and development and forgo business opportunities. Additional equity
financings are likely to be dilutive to holders of our common stock and debt
financing, if available, may involve significant payment obligation and
covenants that restrict how we operate our business.
We
are dependent upon our officers and the loss of any of these persons could
adversely affect our operations and results. Neither works for us on a
full-time basis and have other business ventures
We believe that the implementation of our proposed expansion strategy and
execution of our business plan will depend to a significant extent upon the
efforts and abilities of our officers, Messrs Capra and Kasel. Our failure to
retain our officers or directors to attract and retain qualified personnel,
could adversely affect our operations and results. We do not currently carry
key-man life insurance on any of our officers. See “Management.”
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12 -
Neither
works for us on a full-time basis and each has other business
ventures
Neither Mr.
Capra or Kasel works for us on a full-time basis and each has other business
ventures. These other arrangements could create a potential conflict with
respect to allocation of time to our operations. Each of our officers and
directors is aware of their responsibilities with respect to us and plan to
operate our Company in such a manner as to minimize the effect of any potential
conflict.
Because we are
smaller and have fewer financial and other resources than many recycling
companies, we may not be able to successfully compete in the very competitive
recycling industry.
We
believe that there is significant competition among existing recyclers of
computers and computer products. Our business faces competition from a number of
competitors that can recycle significantly greater volumes of computers and
computer products than we can or expect to and competitors that have the
financial and other resources that would enable them to expand their operations
rapidly if they chose to. These competitors may be able to achieve substantial
economies of scale and scope, thereby substantially reducing their fixed
production costs and their marginal costs. If these producers are able to
substantially reduce their marginal costs, we may be not be able to recycle and
produce products at a cost that allows us to operate profitably. Even if we are
able to operate profitably, these other competitors may be substantially more
profitable than us, which may make it more difficult for us to raise any
financing necessary for us to achieve our business plan and may have a
materially adverse effect on the market price of our common stock.
Risks
Related to an Investment in Our Common Stock
Our
common stock currently is illiquid, and there is no guarantee a trading market
will ever develop for our securities.
There is presently no
demand for our common stock. While our common stock trades in the Pink Sheets,
there is presently no substantial trading market for the shares being offered in
this prospectus. If no market is ever developed for our common stock, it will be
difficult for you to sell any shares you purchase. In such a case, you may find
that you are unable to achieve any benefit from your investment or liquidate
your shares without considerable delay, if at all.
The
over-the-counter market for stock such as ours has had extreme price and volume
fluctuations.
The securities of
companies such as ours have historically experienced extreme price and volume
fluctuations during certain periods. These broad market fluctuations and other
factors, such as new product developments and trends in the our industry and in
the investment markets generally, as well as economic conditions and quarterly
variations in our operational results, may have a negative effect on the market
price of our common stock.
Buying
low-priced penny stocks is very risky and speculative.
The shares being offered are defined as a penny stock under the Securities and
Exchange Act of 1934, and rules of the Commission. The Exchange Act and such
penny stock rules generally impose additional sales practice and disclosure
requirements on broker-dealers who sell our securities to persons other than
certain accredited investors who are, generally, institutions with assets in
excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or
annual income exceeding $200,000, or $300,000 jointly with spouse, or in
transactions not recommended by the broker-dealer. For transactions covered by
the penny stock rules, a broker-dealer must make a suitability determination for
each purchaser and receive the purchaser's written agreement prior to the sale.
In addition, the broker-dealer must make certain mandated disclosures in penny
stock transactions, including the actual sale or purchase price and actual bid
and offer quotations, the compensation to be received by the broker-dealer and
certain associated persons, and deliver certain disclosures required by the
Commission. Consequently, the penny stock rules may affect the ability of
broker-dealers to make a market in or trade our common stock and may also affect
your ability to resell any shares you may purchase in the public
markets.
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13 -
Future
sales of common stock or other dilutive events may adversely affect prevailing
market prices for our common stock.
We are
currently authorized to issue up to 50,000,000 shares of common stock, of which
4,146,600 shares were issued and outstanding as of February 29, 2008.
Our board of directors has the authority, without further action or vote of our
stockholders, to issue any or all of the remaining authorized shares of our
common stock that are not reserved for issuance and to grant options or other
awards to purchase any or all of the shares remaining authorized. The board may
issue shares or grant options or awards relating to shares at a price that
reflects a discount from the then-current market price of our common stock. The
options and awards referred to above can be expected to include provisions that
require the issuance of increased numbers of shares of common stock upon
exercise or conversion in the event of stock splits, redemptions, mergers or
other transactions. The occurrence of any such event, the exercise of any of the
options or warrants described above and any other issuance of shares of common
stock will dilute the percentage ownership interests of our current stockholders
and may adversely affect the prevailing market price of our common
stock.
A
significant number of our shares will be eligible for sale, and their sale could
depress the market price of our common stock.
Sales
of a significant number of shares of our common stock in the public market could
harm the market price of our common stock. Virtually all shares of our common
stock may be offered from time to time in the open market, including the shares
offered pursuant to this prospectus. These sales may have a depressive effect on
the market for the shares of our common stock. Moreover, additional shares of
our common stock, including shares that have been issued in private placements,
may be sold from time to time in the open market pursuant to Rule 144. In
general, a person who has held restricted shares for a period of one year may,
upon filing with the SEC a notification on Form 144, sell into the market common
stock in an amount equal to the greater of 1% of the outstanding shares or the
average weekly number of shares sold in the last four weeks prior to such sale.
Such sales may be repeated at specified intervals. Subject to satisfaction
of a two-year holding requirement, non-affiliates of an issuer may make sales
under Rule 144 without regard to the volume limitations and any of the
restricted shares may be sold by a non-affiliate after they have been held two
years. Sales of our common stock by our affiliates are subject to Rule
144.
Failure
to achieve and maintain effective internal controls in accordance with Section
404 of the Sarbanes-Oxley Act of 2002 could have a material adverse effect on
our business and operating results. In addition, as a consequence of such
failure, current and potential stockholders could lose confidence in our
financial reporting, which could have an adverse effect on our stock
price.
Effective internal controls are necessary for us to provide reliable financial
reports and effectively prevent fraud. If we cannot provide reliable financial
reports or prevent fraud, we could be subject to regulatory action or other
litigation and our operating results could be harmed.
Commencing with our fiscal year beginning January 1, 2007, we
are required to document and test our internal control procedures in order to
satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which
requires our management to annually assess the effectiveness of our internal
controls over financial reporting and, commencing with the fiscal year beginning
January 1, 2008, our independent registered public accounting firm to report on
these assessments. In connection with their audit of our financial statements
for the fiscal year ended December 31, 2006, our independent accountants
notified us and our board of directors that they had identified significant
deficiencies that they considered material weaknesses in our internal controls.
The material weaknesses related to the financial reporting process and
segregation of duties. We have augmented and continue to augment our internal
controls procedures and expand our accounting staff, but there is no guarantee
that this effort will be adequate.
During the course of our testing, we may identify deficiencies which we
may not be able to remediate in time to meet the deadline imposed by the
Sarbanes-Oxley Act for compliance with the requirements of Section 404. In
addition, if we fail to maintain the adequacy of our internal accounting
controls, as such standards are modified, supplemented or amended from time to
time, we may not be able to ensure that we can conclude on an ongoing basis that
we have effective internal controls over financial reporting in accordance with
Section 404. Failure to achieve and maintain an effective internal control
environment could cause us to face regulatory action and also cause investors to
lose confidence in our reported financial information, either of which could
have an adverse effect on our stock price.
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Mr.
Capra has significant voting power and may take actions that may not be in the
best interest of all other stockholders.
Mr. Capra beneficially own approximately 74.5% of our currently
outstanding shares of common stock. Because of his holdings, he is able to exert
significant control over our management and affairs requiring stockholder
approval, including approval of significant corporate transactions. This
concentration of ownership may have the effect of delaying or preventing a
change in control and might adversely affect the market price of our common
stock. This concentration of ownership may not be in the best interests of all
our stockholders.
Investors
should not anticipate receiving cash dividends on our common stock.
We have never declared or paid any cash dividends or distributions on our
capital stock. We currently intend to retain our future earnings to support
operations and to finance expansion and, therefore, we do not anticipate paying
any cash dividends on our common stock in the foreseeable future.
We
may issue shares of preferred stock without stockholder approval that may
adversely affect your rights as a holder of our common stock.
Our certificate of incorporation authorizes us to issue up to 1,000,000
shares of “blank check” preferred stock with such designations, rights and
preferences as may be determined from time to time by our board of directors.
Accordingly, our board of directors is empowered, without stockholder approval,
to issue a series of preferred stock with rights to receive dividends and
distributions upon liquidation in preference to any dividends or distributions
upon liquidation to holders of our common stock and with conversion, redemption,
voting or other rights which could dilute the economic interest and voting
rights of our common stockholders. The issuance of preferred stock could also be
used as a method of discouraging, delaying or preventing a change in control of
our company or making removal of our management more difficult, which may not be
in your interest as holders of common stock.
As
noted above, our articles of incorporation authorizes us to issue up to
1,000,000 shares of “blank check” preferred stock with such designations, rights
and preferences as may be determined from time to time by our board of
directors. Our bylaws limit who may call a special meeting of stockholders and
establish advance notice requirements for nominations for election to our board
of directors or for proposing matters that can be acted upon at stockholder
meetings. Each of these provisions may have the effect to discouraging, delaying
or preventing a change in control of our company or making removal of our
management more difficult, which may not be in your interest as holders of
common stock.
Our
History
We were incorporated in 2005 as a successor to an operation which began in 2002.
The predecessor company was a sole proprietorship, also known as “Recycle-Tech,”
owned by a former officer who is no longer involved with us. This company was in
the same business and is the predecessor to us. This company has been absorbed
into us and is no longer in existence.
On June 27, 2005, we filed with the Colorado Division of Securities, Denver,
Colorado, a Limited Registration Offering Statement under cover of Form RL
pursuant to the Colorado Securities Code, relating to a proposed offering of up
to 250,000 of our Common Shares. The Registration was declared effective by the
Division on July 27, 2005. The offering was closed on November 15, 2005. We
raised $67,300 and sold a total of 134,600 shares in the offering. As of
December 31 , 2007, there were 4,146,600 common shares issued and
outstanding.
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Our
Business
Our business is to purchase, refurbish
and market its computer and technology products to the public. Our historic
focus has been in the Denver, Colorado metropolitan area. We have no plans to
expand into any other areas. We are paid to acquire used computer equipment and
technology products, refurbish these products, and resell them. At the present
time, we have active operations. Our primary customers are individuals and small
businesses. We also market directly to consumers through our store.
Results
of Operations
We are an organization which seeks to
develop a defined niche in the computer industry. We currently focus on
providing low-cost hardware and service to individuals and business computer
owners through the use of refurbished and reconditioned products. We also
provide service for those products. Originally, we planned to expand our
operations by adding additional products and services. However, our new approach
will be to continue to provide our current services and products but to expand
into the consumer market. Historically, we have focused only on small to medium
sized businesses. We will now also market to consumers and provide the same
products and services which we have provided to businesses.
We
currently operate out of one storefront location. In this location, we continue
to service a target market, which is a suburban and a medium to low income
demographic. This location is suitable to us at the present time. We
do not plan to add other locations at this time. At the present time, we believe
that we can achieve profitable operations out of one store. We may expand to
other stores and geographical areas in the future, but have no definitive plans
to do so at this time.
For the
fiscal years ended May 31, 2006 and 2007, our accountants have expressed doubt
about our ability to continue as a going concern as a history of losses and a
working capital deficit. Our ability to achieve and maintain profitability and
positive cash flow is dependent upon our ability to generate sales from the sale
of our products and services. Based upon current plans, we may incur
operating losses in future periods because we will be incurring expenses and not
generating sufficient sales. We cannot guarantee that we will be
successful in generating sufficient sales or other funds in the future to cover
these operating costs. Failure to generate sufficient sales will cause us to go
out of business.
Our sales
for the quarter ended February 29, 2008 were $373 compared to $26,306 for the
quarter ended February 28, 2007. We would anticipate these sales will
increase going forward if we can develop a new marketing program.
Cost of
goods sold for the quarter ended February 29, 2008 were $97 compared to $7,146
for the quarter ended February 29, 2007 was $276 compared to $ We
continue to expect gross margins in the range of 25% to 33%.
Operating
expenses were $5,105 for the quarter ended February 29, 2008 compared to $25,135
for the quarter ended February 28, 2007. This decrease was largely
attributable to the substantial decrease in general and administrative expenses
for the quarter as a result of decreased marketing activity. We
anticipate these costs will increase if can we develop our marketing
program.
We had a
net loss of $5,473 for the quarter ended February 29, 2008 compared to a net
loss of $6,089 for the quarter ended February 28, 2007. We do not
expect our results to be materially different in the next fiscal
quarter.
Our
sales for the nine-months ended February 29, 2008 were $20,347 compared to
$65,954 for the nine-months ended February 28, 2007. We have seen a
steady decline in sales attributable to a decrease in our
marketing.
Cost of
goods sold for the nine-months ended February 29, 2008 were $6,537 compared to
$18,127 for the nine-months ended February 28, 2007. Gross margin for
the nine-months ended February 29, 2008 was approximately 32%, which is
significantly higher than 27.5% for the nine-months ended February 28, 2007. The
difference is attributable to a special project which we completed during the
period.
Operating
expenses were $48,865 for the nine-months ended February 29, 2008 compared to
$60,870 for the nine-months ended February 28, 2007. This decrease
was largely attributable to the substantial decrease in general and
administrative expenses for the quarter as a result of decreased marketing
activity. We anticipate these costs will increase if can we develop
our marketing program.
We had a
net loss of $36,980 for the nine-months ended February 29, 2008 compared to a
net loss of $13,441 for the nine-months ended February 28, 2007. We
do not expect our results to be materially different in the next fiscal
quarter.
We are
attempting to develop a new marketing program. We believe that our ability to
generate significant revenues will be tied to the success of this new marketing
program.
We
do not know when we will be profitable. Given the uncertainties of our business
operations, we cannot assure you that we will show profitable results at any
time.
Cash used
for operating activities was $29,344 for the nine-months ended February 29, 2008
compared to cash provided by operating activities of $4,145 for the nine-months
ended February 28, 2007. This was primarily the result of declining
revenues.
Cash used
for investing activities $-0- for the nine-months ended February 29, 2008
compared to cash used for investing activities of $2,368 for the nine-months
ended February 28, 2007. We purchased fixed assets in
2007.
Cash
provided by financing activities was $28,500 for the nine-months ended February29, 2008 compared to cash used for financing activities of $500 for the
nine-months ended February 28, 2007. All relate to related party
notes.
We
do not anticipate significant capital expenditures and investments over the next
12 months. We may use additional loans from Mr. Capra and cash on hand to fund
corporate overhead.
At the present time, except for Mr.
Capra, we have no commitments for any additional financing, and there can be no
assurance that, if needed, additional capital will be available to use on
commercially acceptable terms or at all. Our failure to raise capital as needed
would significantly restrict our growth and hinder out ability to compete. We
may need to curtail expenses and forgo business opportunities. Additional equity
financings are likely to be dilutive to holders of our common stock and debt
financing, if available, may involve significant payment obligation and
covenants that restrict how we operate our business.
Management
continues to assess our capital resources in relation to our ability to fund
continued operations on an ongoing basis. As such, management may
seek to access the capital markets to raise additional capital through the
issuance of additional equity, debt or a combination of both in order to fund
our operations and continued growth.
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Off-Balance Sheet
Arrangements
We have not entered into any
transactions with unconsolidated entities in which we have financial guarantees,
subordinated retained interests, derivative instruments or other contingent
arrangements that expose us to material continuing risks, contingent liabilities
or any other obligations under a variable interest in an unconsolidated entity
that provides us with financing, liquidity, market risk or credit risk
support.
Critical
Accounting Policies
Our discussion and analysis of results
of operations and financial condition are based upon our consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
consolidated financial statements requires us to make estimates and judgments
that affect the reported amounts of assets, liabilities, sales and expenses, and
related disclosure of contingent assets and liabilities. We evaluate our
estimates on an ongoing basis, including those related to provisions for
uncollectible accounts receivable, inventories, valuation of intangible assets
and contingencies and litigation. We base our estimates on historical experience
and on various other assumptions that are believed to be reasonable 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. Actual results may differ from these estimates under different
assumptions or conditions.
The accounting policies that we
follow are set forth in Note 1 to our financial statements as included in
this prospectus. These accounting policies conform to accounting principles
generally accepted in the United States, and have been consistently applied in
the preparation of the financial statements.
Recently
Issued Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 123R "Share Based Payment." This
statement is a revision of SFAS No. 123, "Accounting for Stock-Based
Compensation" and supersedes APB Opinion No. 25, Accounting for Stock Issued to
Employees, and its related implementation guidance. SFAS No. 123R addresses all
forms of share based payment ("SBP") awards including shares issued under
employee stock purchase plans, stock options, restricted stock and stock
appreciation rights. Under SFAS No. 123R, SBP awards result in a cost that will
be measured at fair value on the awards' grant date, based on the estimated
number of awards that are expected to vest. This statement is effective for
public entities that file as small business issuers, as of the beginning of the
first interim or annual reporting period that begins after December 15, 2005. We
adopted this pronouncement during the first quarter of 2005.
In December 2004, the FASB issued SFAS No. 153, Exchanges of Non-monetary Assets
- An Amendment of APB Opinion No. 29. The amendments made by SFAS No. 153 are
based on the principle that exchanges of non-monetary assets should be measured
based on the fair value of the assets exchanged. Further, the amendments
eliminate the narrow exception for non-monetary exchanges of similar productive
assets and replace it with a broader exception for exchanges of non-monetary
assets that do not have "commercial substance." SFAS No. 153 is effective for
non-monetary asset exchanges occurring in fiscal periods beginning after June15, 2005. The adoption of SFAS No. 153 on its effective date did not have a
material effect on our consolidated financial statements.
In March 2005, the FASB issued Financial Interpretation No. 47,
"Accounting for Conditional Asset Retirement Obligations - an Interpretation of
FASB Statement No. 143", which specifies the accounting treatment for
obligations associated with the sale or disposal of an asset when there are
legal requirements attendant to such a disposition. We adopted this
pronouncement in 2005, as required, but there was no impact as there are no
legal obligations associated with the future sale or disposal of any
assets.
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In
May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections — A Replacement of APB Opinion No. 20 and SFAS Statement No. 3".
SFAS No. 154 changes the requirements for the accounting and reporting of a
change in accounting principle by requiring retrospective application to prior
periods' financial statements of the change in accounting principle, unless it
is impracticable to do so. SFAS No. 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005. We
do not expect the adoption of SFAS No. 154 to have any impact on our
consolidated financial statements.
Seasonality.
We do not
expect our revenues to be impacted by seasonal demands for our
services.
ITEM
3. CONTROLS AND PROCEDURES
As of the end of the period covered by this Quarterly Report on Form 10-QSB, we
evaluated the effectiveness of the design and operation of its disclosure
controls and procedures (as defined in the Securities Exchange Act of 1934 Rules
13a-15(e) and 15d-15(e)). That evaluation was performed under the supervision
and with the participation of its management, including each our Chief Executive
Officer and Chief Financial Officer. Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer each concluded that the Company's
disclosure controls and procedures are effective to ensure that information
required to be disclosed in the reports we file or submit under the Exchange Act
is recorded, processed, summarized and reported within the time periods
specified by the SEC rules and forms, and that such information is accumulated
and communicated to our management, including our certifying officer, to allow
timely decisions regarding the required disclosure. There was no change in
internal control over financial reporting identified in connection with the
evaluation required under paragraph (d) of Rules 13a-15 or 15d-15 during the
period covered by this Quarterly Report of Form 10-QSB that has materially
affected or is reasonably likely to materially affect our internal control over
financial reporting.
PART
II. OTHER INFORMATION
ITEM
1. LEGAL PROCEEDINGS
There are
no legal proceedings, to which we are a party, which could have a material
adverse effect on our business, financial condition or operating
results.
ITEM
2. CHANGES IN SECURITIES
None
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Reports
on Form 8-K. No reports have ever been filed under cover of Form
8-K.
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SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.
