NOTES TO FINANCIAL STATEMENTS
December 31, 2013 and 2012
(1) Summary of Accounting Policies, and Description of Business
This summary of significant accounting policies of Fona, Inc. (Company), a Development Stage Company, is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles in the United States of America and have been consistently applied in the preparation of the financial statements.
(a)
Organization and Description of Business
The Company was incorporated as Fonahome Corporation in 1990 under the laws of the State of Minnesota. On March 3, 2009, the Company held a shareholder meeting approving a migratory merger to Nevada and a name change to Fona, Inc., which became effective March 24, 2010.
The Company initially developed and marketed an interactive information and advertising service, but ceased all major operations in December, 1999. Currently the Company is a Development Stage Company with plans to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions.
Effective August 1, 2008, the Company commenced activities to become a reporting company with the Securities and Exchange Commission (SEC) with the intention to become a publicly trading company.
(b)
Use of Estimates in the Preparation of Financial Statements
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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
(c)
Per Share Information
Earnings (loss) per share of common stock is computed by dividing the net earnings (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings per share is not shown for periods in which the Company incurs a loss because it would be anti-dilutive.
(d)
Basis of Presentation - Going Concern
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, which contemplates continuation of the Company as a going concern. However, the Company has no business operations and has negative working capital and stockholders deficits, which raise substantial doubt about its ability to continue as a going concern.
In view of these matters, realization of certain of the assets in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to meet its financial requirements, raise additional capital, and the success of its future operations. The financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company has financed its operations primarily through cash advances from a related party, which has advanced the Company a total of $76,512 for working capital on an as needed basis, including $13,695 during the year ended December 31, 2013. There is no assurance that these advances will continue in the future.
Management has opted to resume the filing of Securities and Exchange Commission (SEC) reporting documentation and then to seek a business combination. Management believes that this plan provides an opportunity for the Company to continue as a going concern.
F-7
FONA, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2013 and 2012
(1) Summary of Accounting Policies, Continued
(e)
Recent Accounting Pronouncements
There were various accounting standards and interpretations issued during 2013 and 2012, none of which are expected to a have a material impact on the Companys consolidated financial position, operations or cash flows.
(f)
Risks and Uncertainties
The Company is subject to substantial business risks and uncertainties inherent in starting a new business. There is no assurance that the Company will be able to complete a business combination.
(g)
Revenue Recognition
It is the Company's policy that revenue is recognized in accordance with SEC Staff Accounting Bulletin (SAB) No. 104, "Revenue Recognition." Under SAB 104, product revenues (or service revenues) are recognized when persuasive evidence of an arrangement exists, delivery has occurred (or service has been performed), the sales price is fixed and determinable and collectability is reasonably assured.
(h)
Cash and Cash Equivalents
The Company considers cash and cash equivalents to consist of cash on hand and demand deposits in banks with an initial maturity of 90 days or less.
(i)
Fair Value of Financial Instruments
Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ASC Subtopic 825-10 ("ASC 825-10"), "Disclosures About Fair Value of Financial Instruments." ASC 825-10 requires disclosure of fair value information about financial instruments when it is practicable to estimate that value. The carrying amount of the Company's cash, cash equivalents, accounts payable, accrued expenses, and accounts payable-related party approximate their estimated fair values due to their short-term maturities.
(j)
Income Taxes
The Company records deferred taxes in accordance with Statement of Financial Accounting Standards (SFAS) ASC 740, Accounting for Income Taxes, which requires the use of assets and liability method of accounting for income taxes. The statement requires recognition of deferred tax assets and liabilities for temporary differences between the tax bases of assets and liabilities and the amounts at which they are carried in the financial statements, the effect of net operating losses, based upon the enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.
(k)
Development stage
Based upon the Company's business plan, it is a development stage enterprise since planned principal operations have not yet commenced. Accordingly, the Company presents its financial statements in conformity with the accounting principles generally accepted in the United States of America that apply in establishing operating enterprises. As a development stage enterprise, the Company discloses the deficit accumulated during the development stage and the cumulative statements of operations and cash flows from commencement of development stage to the current balance sheet date. The development stage began August 1, 2008 when the Company commenced the process to become a publicly reporting company.
F-8
FONA, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2013 and 2012
(1) Summary of Accounting Policies, Continued
(l)
Concentrations
Financial instruments that potentially subject the company to concentrations of credit risk consist principally of cash and cash equivalents. At December 31, 2013 and December 31, 2012, the Company had no amounts of cash or cash equivalents in financial institutions in excess of amounts insured by agencies of the U.S. Government.
(m)
Reclassification
Certain amounts previously reported have been reclassified to conform to current presentation.
(n)
Other
The Company has selected December 31 as its fiscal year end.
The Company has paid no dividends.
No advertising expense has been incurred.
The Company consists of one reportable business segment.
The Company has not entered into any leases.
(2) Income Taxes
Deferred income taxes arise from temporary timing differences in the recognition of income and expenses for financial reporting and tax purposes. The Companys deferred tax assets consist entirely of the benefit from net operating loss (NOL) carry forwards, limited by the value of the shell. The net operating loss carry forward if not used, will expire in various years through 2032, and is severely restricted as per the Internal Revenue code if there is a change in ownership. The Companys deferred tax assets are offset by a valuation allowance due to the uncertainty of the realization of the net operating loss carry forwards. Net operating loss carry forwards may be further limited by other provisions of the tax laws. Our income tax returns are no longer subject to Federal tax examinations by tax authorities for years before December 31, 2010.
The Companys deferred tax assets, valuation allowance, and change in valuation allowance are as follows:
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|
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|
|
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|
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Period Ending
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Estimated
NOL Carry-
forward
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NOL Expires
|
|
Estimated Tax
Benefit from
NOL
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|
Valuation
Allowance
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|
Change in
Valuation
Allowance
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|
Net Tax
Benefit
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|
|
|
|
|
|
|
|
|
|
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|
|
December 31, 2012
|
|
586,550
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|
Various
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|
108,512
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|
(108,512)
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|
(3,151)
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|
|
December 31, 2013
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|
605,810
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Various
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|
112,075
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(112,075)
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(3,563)
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|
Income taxes at the statutory rate are reconciled to the Companys actual income taxes as follows:
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Income tax benefit at statutory rate resulting from net operating loss carry forward
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(15.0)%
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State tax (benefit) net of Federal benefit
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(3.5)%
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Deferred income tax valuation allowance
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|
18.5%
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Actual tax rate
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F-9
FONA, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2013 and 2012
(3) Common Stock and Migratory Merger
Pursuant to the Articles of Incorporation of Fona, Inc., the Company is authorized to issue 780,000,000 common shares with $.001 par value. There were 7,894,111 shares of common stock issued and outstanding at December 31, 2013. In April 2009, the Company issued a total of 3,954,950 shares of common stock to two directors for $10,000 cash and a note for an additional $10,000. The note was satisfied in May 2009. This resulted in a change in control of the Company.
On March 3, 2009, the Board of Directors unanimously approved an Agreement and Plan of Merger effectively changing the name of the Company to Fona Inc., a Nevada corporation (Re-incorporation Merger) and simultaneously adopting the capital structure of Fona Inc., which includes total authorized capital stock of 800,000,000, of which 780,000,000 are common stock and 20,000,000 are blank check preferred stock. There were no preferred shares outstanding as of December 31, 2013.
In accordance with the Agreement and Plan of Merger, effective March 24, 2009, Fonahome Corporation adopted the capital structure of Fona, Inc., which includes total authorized capital stock of 800,000,000 shares, of which 780,000,000 are common stock, with a par value of $.001 per share (the "Fona Common Stock") and 20,000,000 shares are blank check preferred stock, with a par value of $.001 per share (the "Preferred Stock"). In addition, on March 24, 2009, the issued and outstanding shares of our common stock automatically converted into shares of Fona Common Stock at a ratio of one (1) share of our currently outstanding common stock for one (1) share of Fona Common Stock.
All references in the accompanying financial statements to the number of shares authorized and outstanding have been retroactively adjusted to reflect the new capital structure and par values effective March 24, 2009.
On December 22, 2008, the Board of Directors approved the issuance of 39,957 shares of common stock to Nick T. Boosalis for forgiveness of debt totaling $5,994.
(4) Related Party Transactions
The Company uses the offices of its President for its minimal office facility needs for no consideration. No provision for these costs has been provided since it has been determined that they are immaterial.
At December 31, 2013 and 2012, the Company owed a related party for expenses paid on behalf of the Company totaling $76,512 and $62,817, respectively. The advances are uncollateralized, bear no interest and are due on demand.
(5) Subsequent Events
The Company has evaluated events subsequent to December 31, 2013 and through the date the financial statements were available to be issued, to assess the need for potential recognition or disclosure in this report. No events were noted that require recognition or disclosure in the financial statements.
F-10