UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q/A
(Mark
One)
x
QUARTERLY REPORT
UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
For
Quarterly Period Ended March 31, 2008
or
o
TRANSITION REPORT
UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
Transition period from _______________ to ______________
|
Commission
File Number: 000-10210
|
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TREE
TOP INDUSTRIES, INC.
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|
|
(Exact
name of registrant as specified in its charter)
|
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NEVADA
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83-0250943
|
(State or
other jurisdiction of
incorporation
or organization)
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(I.R.S.
Employer Identification No.)
|
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511
Sixth Avenue, Suite 800, New York, New York 10011
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|
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(Address
of principal executive offices) (Zip Code)
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(775)
261-3728
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Registrant's
telephone number, including area code
|
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|
|
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|
(Former
name, former address and former fiscal year,
if
changed since last report)
|
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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
proceeding 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.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non accelerated filer, or a smaller reporting
company. See definitions of "large accelerated filer," "accelerated
filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check
One).
|
Large
accelerated filer
|
o
|
|
Accelerated
filer
|
o
|
|
Non-accelerated
filer
|
o
|
|
Smaller
reporting company
|
x
|
|
(Do not check
if a smaller
reporting
company)
|
|
|
|
|
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Indicate
the number of shares outstanding of each of the issuer's classes of common stock
as of the latest practicable date.
As of
March 31, 2008 the number of shares outstanding of the registrant's class of
common stock was 72,328,400.
|
TABLE
OF CONTENTS
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Page
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FINANCIAL
INFORMATION
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1
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Financial
Statements (Unaudited)
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|
1
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|
Consolidated
Balance Sheets
at March 31, 2008 (Unaudited) and
December 31, 2007 (Audited)
|
|
1
|
|
Consolidated
Statement of Operations
for the Three Months Ended March
31, 2008 and from Inception through March 31, 2008
(Unaudited)
|
|
2
|
|
|
|
3
|
|
Consolidated
Statement of Cash Flow
for the Three Months Ended March
31, 2008 and from Inception through March 31, 2008
(Unaudited)
|
|
4
|
|
Notes
to Condensed Consolidated Financial
Statements
|
|
6
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|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
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9
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|
Quantitative
and Qualitative Disclosures About Market Risk
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11
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Controls
and Procedures
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11
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OTHER
INFORMATION
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12
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Legal
Proceedings
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12
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Unregistered
Sales of Equity Securities and Use of Proceeds
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12
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Defaults
Upon Senior Securities
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12
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Submission
of Matters to a Vote of Security Holders
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12
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Other
Information
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12
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Exhibits.
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12
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13
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
(UNAUDITED)
TREE TOP
INDUSTRIES, INC.
(A
Development Stage Company)
Consolidated Balance Sheets
ASSETS
|
|
|
|
March
31,
2008
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|
December
31,
2007
|
|
|
|
(unaudited)
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
Cash
|
|
$
|
727,201
|
|
|
$
|
435,858
|
|
Work-in-progress
|
|
|
20,848
|
|
|
|
-
|
|
Employee
advances
|
|
|
13,800
|
|
|
|
6,400
|
|
Total
Current Assets
|
|
|
761,849
|
|
|
|
442,258
|
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, NET
|
|
|
85,765
|
|
|
|
71,973
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
|
|
|
|
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|
Security
deposit
|
|
|
12,424
|
|
|
|
12,424
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|
Total
Other Assets
|
|
|
12,424
|
|
|
|
12,424
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
860,038
|
|
|
$
|
526,655
|
|
|
|
|
|
|
|
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|
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
382,509
|
|
|
$
|
363,451
|
|
Accrued
expenses
|
|
|
395,252
|
|
|
|
344,591
|
|
Accrued
interest payable
|
|
|
47,292
|
|
|
|
45,560
|
|
Due
to officers and directors
|
|
|
15,122
|
|
|
|
170,367
|
|
Notes
payable
|
|
|
113,000
|
|
|
|
113,000
|
|
Total
Current Liabilities
|
|
|
953,175
|
|
|
|
1,036,969
|
|
|
|
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|
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STOCKHOLDERS’
EQUITY (DEFICIT)
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Preferred
stock, $0.001 par value, 50,000 shares authorized, -0- shares issued and
outstanding
|
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|
-
|
|
|
|
-
|
|
Common
stock, $0.001 par value, 350,000,000 shares authorized, 73,427,791 and
72,327,791 shares issued and outstanding
|
|
|
7,343
|
|
|
|
7,233
|
|
Additional
paid-in capital
|
|
|
6,788,628
|
|
|
|
5,139,775
|
|
Deficit
accumulated during the development stage
|
|
|
(6,889,108
|
)
|
|
|
(5,657,322
|
)
|
Total
Stockholders’ Equity (Deficit)
|
|
|
(93,137
|
)
|
|
|
(510,314
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABLITIES & STOCKOLDERS’ EQUITY (DEFICIT)
|
|
$
|
860,038
|
|
|
$
|
526,655
|
|
The
accompanying notes are an integral part of these consoldiated financial
statements.
TREE TOP
INDUSTRIES, INC.
(A
Development Stage Company)
Consolidated Statements of Operations
(unaudited)
|
|
For
the Three Months Ended March 31,
2008
|
|
|
From
Inception
on
August 1,
2007
through
March
31,
2008
|
|
REVENUES,
net
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
COST
OF SALES, net
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
224,629
|
|
|
|
2,845,725
|
|
Officer
compensation
|
|
|
250,991
|
|
|
|
2,778,701
|
|
Professional
fees
|
|
|
749,905
|
|
|
|
1,256,043
|
|
Depreciation
|
|
|
4,185
|
|
|
|
5,794
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
|
1,229,710
|
|
|
|
6,886,263
|
|
|
|
|
|
|
|
|
|
|
OPERATING
LOSS
|
|
|
(1,229,710
|
)
|
|
|
(6,886,263
|
)
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(2,076
|
)
|
|
|
(2,845
|
)
|
|
|
|
|
|
|
|
|
|
Total
other Income (Expenses)
|
|
|
(2,076
|
)
|
|
|
(2,845
|
)
|
|
|
|
|
|
|
|
|
|
LOSS
BEFORE INCOME TAXES
|
|
|
(1,231,786
|
)
|
|
|
(6,889,108
|
)
|
INCOME
TAX EXPENSE
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(1,231,786
|
)
|
|
$
|
(6,889,108
|
)
|
|
|
|
|
|
|
|
|
|
BASIC
LOSS PER SHARE
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING
|
|
|
72,580,538
|
|
|
|
|
|
The
accompanying notes are an integral part of these consoldiated financial
statements.
TREE TOP
INDUSTRIES, INC.
(A
Development Stage Company)
Consolidated Statements of Stockholders' Equity
(Deficit)
(unaudited)
|
|
Preferred
Stock
|
|
|
Common Stock
|
|
|
Additional
Paid-In
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
August
1, 2007 (inception)
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of founder shares at
inception
at $0.007per share
|
|
|
-
|
|
|
|
-
|
|
|
|
68,000,000
|
|
|
|
68,000
|
|
|
|
432,000
|
|
|
|
-
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issue in recapitalization
|
|
|
-
|
|
|
|
-
|
|
|
|
987,791
|
|
|
|
988
|
|
|
|
(988
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options issued for services
at
$0.74 per share
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,494,298
|
|
|
|
-
|
|
|
|
1,494,298
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options issued for cash at
$0.10
per share
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
200,000
|
|
|
|
-
|
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options issued for services
at
$0.85 per share
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
126,210
|
|
|
|
-
|
|
|
|
126,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of stock options at $0.25
per
share
|
|
|
-
|
|
|
|
-
|
|
|
|
500,000
|
|
|
|
500
|
|
|
|
124,500
|
|
|
|
-
|
|
|
|
125,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for services at
$0.85
per share
|
|
|
-
|
|
|
|
-
|
|
|
|
2,590,000
|
|
|
|
2,590
|
|
|
|
2,198,910
|
|
|
|
-
|
|
|
|
2,201,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for services at
$2.00
per share
|
|
|
-
|
|
|
|
-
|
|
|
|
250,000
|
|
|
|
250
|
|
|
|
499,750
|
|
|
|
-
|
|
|
|
500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in par value to $0.001
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(65,095
|
)
|
|
|
65,095
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the year ended
December
31, 2007
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,657,322
|
)
|
|
|
(5,657,322
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December
31, 2007
|
|
|
-
|
|
|
|
-
|
|
|
|
72,327,791
|
|
|
|
7,233
|
|
|
|
5,139,775
|
|
|
|
-
|
|
|
|
(510,314
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of stock options at $0.25
per
share
|
|
|
-
|
|
|
|
-
|
|
|
|
1,100,000
|
|
|
|
110
|
|
|
|
724,890
|
|
|
|
-
|
|
|
|
725,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options issued for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
923,963
|
|
|
|
-
|
|
|
|
923,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss for the three months
ended
March 31, 2008
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,231,786
|
)
|
|
|
(1,231,786
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
March
31, 2008
|
|
|
-
|
|
|
$
|
-
|
|
|
|
73,427,791
|
|
|
$
|
7,343
|
|
|
$
|
6,788,628
|
|
|
$
|
(6,889,108
|
)
|
|
$
|
(93,137
|
)
|
The
accompanying notes are an integral part of these consoldiated financial
statements.
TREE TOP
INDUSTRIES, INC.
(A
Development Stage Company)
Consolidated Statements of Cash Flows
(unaudited)
|
|
For
the Three Months Ended March 31,
2008
|
|
|
From
Inception
on
August 1,
2007
through
March
31,
2008
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,231,786
|
)
|
|
$
|
(6,889,108
|
)
|
Adjustments
to reconcile net loss to net cash used by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
4,185
|
|
|
|
5,794
|
|
Stock
options and warrants granted for services rendered
|
|
|
923,963
|
|
|
|
2,544,471
|
|
Common
stock issued for services rendered
|
|
|
-
|
|
|
|
2,701,500
|
|
Change
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
(Increase)
Decrease in work-in-progress
|
|
|
(20,848
|
)
|
|
|
(20,848
|
)
|
(Increase)
Decrease in employee advances
|
|
|
(7,400
|
)
|
|
|
(13,800
|
)
|
(Increase)
Decrease in security deposits
|
|
|
-
|
|
|
|
(12,424
|
)
|
Increase
(Decrease) in accounts payable and accrued expenses
|
|
|
71,451
|
|
|
|
726,188
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Used in Operating Activities
|
|
|
(260,435
|
)
|
|
|
(958,227
|
)
|
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash received
in acquisition
|
|
|
-
|
|
|
|
44,303
|
|
Cash
paid for fixed assets
|
|
|
(17,977
|
)
|
|
|
(91,559
|
)
|
|
|
|
|
|
|
|
(47,256
|
)
|
Net
Cash Used in Investing Activities
|
|
|
(17,977
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment
of related party loans
|
|
|
(193,365
|
)
|
|
|
(253,120
|
)
|
Cash
received from issuance of common stock
|
|
|
725,000
|
|
|
|
1,550,000
|
|
Cash
received from related party loans
|
|
|
38,120
|
|
|
|
435,804
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by Financing Activities
|
|
|
569,755
|
|
|
|
1,732,684
|
|
|
|
|
|
|
|
|
|
|
NET
DECREASE IN CASH
|
|
|
291,343
|
|
|
|
727,201
|
|
|
|
|
|
|
|
|
|
|
CASH
AT BEGINNING OF PERIOD
|
|
|
435,858
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
CASH
AT END OF PERIOD
|
|
$
|
727,201
|
|
|
$
|
727,201
|
|
The
accompanying notes are an integral part of these consoldiated financial
statements.
TREE TOP
INDUSTRIES, INC.
(A
Development Stage Company)
Consolidated
Statements of Cash Flows (Continued)
(unaudited)
|
|
For
the Three Months Ended March 31,
2008
|
|
|
From
Inception
on
August 1,
2007
through
March
31,
2008
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
PAID FOR:
|
|
|
|
|
|
|
Interest
|
|
$
|
567
|
|
|
$
|
567
|
|
Income
Taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
NON-CASH
TRANSACTIONS
|
|
|
|
|
|
|
|
|
Common
Stock issued for services
|
|
$
|
-
|
|
|
$
|
2,701,500
|
|
The
accompanying notes are an integral part of these consoldiated financial
statements.
TREE TOP
INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.
INTERIM PRESENTATION
Initially, we
reported the transaction between Tree Top Industries, Inc. (the “Company”) and
Ludicrous, Inc. (“Ludicrous”) as a purchase. Subsequently, the
Company, along with the independent auditors and legal counsel, determined that
such transaction should instead be treated as a reverse merger. The
financial statements were restated to account for the change in
treatment.
The December
31, 2007 balance sheet data was derived from audited financial statements but
does not include all disclosures required by generally accepted accounting
principles. In the opinion of management, the accompanying unaudited financial
statements contain all normal and recurring adjustments necessary to present
fairly the financial position of the Company as of March 31, 2008, its results
of operations for the three months ended March 31, 2008 and its cash flows for
the three months ended March 31, 2008.
The
statements of operations for the three months ended March 31, 2008 are not
necessarily indicative of the results for the full year.
While the
Company believes that the disclosures presented are adequate to make the
information not misleading, these financial statements should be read in
conjunction with the financial statements and accompanying notes
included in the Company's annual Report on Form 10-KSB for the year ended
December 31, 2007.
2. GOING
CONCERN
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. The Company has incurred accumulated losses
totaling $6,889,108, has a working capital deficit of $191,326 and is in default
on several notes payable (see Note 5).
Since
inception (August 1, 2007) through March 31, 2008, the Company has not generated
any significant business. Through the date of these financial statements viable
operations have not been achieved and the Company has been unsuccessful in
raising all the capital that it requires. Revenues have been minimal
and the Company continues to require substantial financing. Most of the
financing has been provided by David Reichman, the present Chief Executive
Officer, Chairman and President. The Company is dependent upon his ability and
willingness to continue to provide such financing which is required to meet
reporting and filing requirements of a public company.
In order for
the Company to remain a going concern, it will need to continue to receive funds
from the exercise of outstanding warrants and options or through other equity or
debt financing. There can be no assurance that the Company will continue to
receive any proceeds from the exercise of warrants or options or that the
Company will be able to obtain the necessary funds to finance its operations.
These conditions raise substantial doubt about its ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
3.
SIGNIFICANT ACCOUNTING POLICIES
Please refer
to the Company's Form 10-KSB for the year ended December 31, 2007 for its
significant accounting policies.
4.
EARNINGS (LOSS) PER SHARE
The Company
computes earnings or loss per share in accordance with Statement of Financial
Accounting Standards No.128 (SFAS 128), "Earning Per Share". Basic earnings per
share are computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding. Diluted earnings per share
reflects the potential dilution that could occur if securities or other
agreements to issue common stock were exercised or converted into common stock.
Diluted earnings per share is computed based upon the weighted average number of
common shares and dilutive common equivalent shares outstanding, which includes
convertible debentures, stock options and warrants. The calculation of basic and
diluted income (loss) per share is as follows:
TREE TOP
INDUSTRIES, INC.
NOTES TO
FINANCIAL STATEMENTS
(Unaudited)
|
|
Three
Months Ended 2008
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(1,231,786
|
)
|
|
|
|
|
|
Weighted
average shares outstanding – basic
|
|
|
72,580,538
|
|
|
|
|
|
|
Net
income (loss) – per share – basic
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
Weighted
average shares outstanding – basic
|
|
|
72,580,538
|
|
|
|
|
|
|
Weighted
average shares outstanding – diluted
|
|
|
72,580,538
|
|
|
|
|
|
|
Net
income (loss) – per share – diluted
|
|
$
|
(0.02
|
)
|
5. NOTES
PAYABLE
Notes payable
consist of various notes bearing interest at rates from 5% to 7%, all with
original due dates between August 2000 and September 2002. All of the notes are
unpaid to date and are in default. At March 31, 2008, notes payable amounted to
$113,000. The notes payable were assumed in the acquisition of Tree
Top.
At March 31,
2008, accrued interest on the notes was $ 47,292. Interest expense on the notes
amounted to $1,733 for the three months ended March 31, 2008.
6.
RELATED PARTY TRANSACTIONS
Due to
officers and directors consists of advances primarily from David Reichman, CEO,
President and Chairman of the Company. The advances are due on demand and do not
bear interest. During the quarter Mr. Reichman advanced the company $38,120 and
was repaid $193,365, resulting in a balance owing to him of $15,122 at March 31,
2008.
7.
STOCKHOLDERS' EQUITY
On December
26, 2007, the Company's Board of Directors approved for issuance 250,000 stock
options to each of its four directors, to be issued effective January
1, 2008, with an at an exercise price of $4.50 per share, expiring October 8,
2018. The options vest 1/24th upon grant and then 1/24th each subsequent month.
The fair value of the options as calculated under the Black-Scholes model
totaled $1,993,000. For the three months ended March 31, 2007, the Company
recognized $249,125 of compensation expense related to these options. The fair
value of these options was determined using the following
assumptions: risk free rate of 3.39%, no dividend yield, an expected
life o five years and a volatility factor of 271.7%.
During the
three months ended March 31, 2008, the Company recorded the value of 1,000,000
stock options issued to a shareholder with an at an exercise price of $1.00 per
share, expiring October 8, 2008. The fair value of the options as calculated
under the Black-Scholes model totaled $548,628 which was recorded as
compensation expense. The fair value of these options was determined
using the following assumptions: risk free rate of 4.33%, no dividend yield, an
expected life of five years and a volatility factor of 275.6%.
TREE TOP
INDUSTRIES, INC.
NOTES TO
FINANCIAL STATEMENTS
(Unaudited)
The Company
also recorded $126,210 of compensation expense relating to the amortization of
the October 1, 2007 options issued to David Reichman under his employment
contract.
During the
three months ended March 31, 2008, 1,100,000 shares of the Company's common
stock were issued in exchange for the exercise of stock options:
DATE
|
|
OPTIONS
EXERCISED
|
|
|
PROCEEDS
|
|
|
|
|
|
|
|
|
|
|
January
16, 2008
|
|
|
250,000
|
|
|
$
|
62,500
|
|
|
|
|
|
|
|
|
|
|
March
26, 2008
|
|
|
250,000
|
|
|
|
62,500
|
|
|
|
|
|
|
|
|
|
|
March
26, 2008
|
|
|
600,000
|
|
|
|
600,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,100,000
|
|
|
$
|
725,000
|
|
8. RECENT
PRONOUNCEMENT
In March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments
and Hedging Activities--an amendment of FASB Statement No. 133." SFAS No. 161
requires enhanced disclosures about an entity's derivative and hedging
activities and thereby improves the transparency of financial reporting. SFAS
No. 161 is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The Company has not completed its evaluation of SFAS No. 161 to
determine the impact that adoption will have on our consolidated financial
condition or results of operations.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS
OF
OPERATIONS
This
Quarterly Report on Form 10-Q for the period ended March 31, 2008 (the “Form
10-Q”), was initially amended to state that the Chief Executive Officer and
Principal Accounting Officer of Tree Top Industries, Inc. (“TTI”) concluded that
TTI’s disclosure controls and procedures were ineffective and there were
material weaknesses in the internal controls over financial
reporting. The Form 10-Q has been amended further in order to conform
the entire document to a change in the reporting, from a purchase to a reverse
merger, of a transaction TTI between TTI and Ludicrous, Inc. (“Ludicrous”, and
together with TTI, “we”) and to more fully and accurately disclose the
information required by the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), including the disclosure related to our internal controls and
procedures and controls over financial reporting.
CAUTIONARY
STATEMENTS
This
Form 10-Q/A may contain "forward-looking statements, “as that term is used in
federal securities laws, about Ludicrous’ consolidated financial condition,
results of operations and business. These statements include, among
others:
|
|
statements
concerning the potential benefits that may be experienced from business
activities and certain transactions contemplated or completed;
and
|
|
|
|
|
|
statements
of our expectations, beliefs, future plans and strategies,
anticipated developments and other matters that are not
historical facts. These statements may be made expressly in this Form
10-Q/A. You can find many of these statements by looking for words such as
"believes," "expects," "anticipates," "estimates," "opines," or similar
expressions used in this Form 10-Q/A. These forward-looking statements are
subject to numerous assumptions, risks and uncertainties that may cause
our actual results to be materially different from any future results
expressed or implied in those statements. The most important
facts that could prevent us from achieving our stated goals include, but
are not limited to, the following:
|
|
|
|
(a)
|
|
volatility
or decline of TTI’s stock price;
|
|
|
|
(b)
|
|
potential
fluctuation of quarterly results;
|
|
|
|
(c)
|
|
failure
to earn revenues or profits;
|
|
|
|
(d)
|
|
inadequate
capital to continue or expand its business, and inability to
raise additional capital or financing to implement its business
plans;
|
|
|
|
(e)
|
|
failure
to commercialize our technology or to make sales;
|
|
|
|
(f)
|
|
decline
in demand for our products and services;
|
|
|
|
(g)
|
|
rapid
adverse changes in markets;
|
|
|
|
(h)
|
|
litigation
with or legal claims and allegations by outside parties against TTI or
Ludicrous, including but not limited to challenges to intellectual
property rights;
|
|
|
|
(i)
|
|
insufficient
revenues to cover operating costs;
|
|
|
|
(j)
|
|
failure
of the NetThruster.com(R) to operate properly
|
|
|
|
(k)
|
|
competition
from other businesses and technologies that materially
adversely impacts our operations, financial condition and
business performance.
|
There is no
assurance that we will be profitable, we may not be able to successfully
develop, manage or market our products and services, we may not be able to
attract or retain qualified executives and technology personnel, we may not be
able to obtain customers for its products or services, our products and
services may become obsolete, government regulation may hinder our
business, additional dilution in outstanding stock ownership may be incurred due
to the issuance of more shares, warrants and stock options, or the exercise of
outstanding warrants and stock options, and other risks inherent in our
businesses.
Because the
statements are subject to risks and uncertainties, actual results may differ
materially from those expressed or implied by the forward-looking statements. We
caution you not to place undue reliance on the statements, which speak only as
of the date of this Form 10-Q/A. The cautionary statements contained or referred
to in this section should be considered in connection with any subsequent
written or oral forward looking statements that we, or persons acting on our
behalf, may issue. We do not undertake any obligation to review or confirm
analysts' expectations or estimates or to release publicly any revisions to any
forward looking statements to reflect events or circumstances after the date of
this Form 10-Q/A, or to reflect the
occurrence
of unanticipated events.
CURRENT
OVERVIEW
Our business
is operated through Ludicrous. Ludicrous was formed on August 1, 2007 to
engage in the installation and operation of its network for commercialization of
its proprietary technology for content delivery for the telecommunications
industry. The new content delivery network (“CDN”) developed by Ludicrous
is called NetThruster.com®. NetThruster is a content delivery network for
Internet distribution of video, music,
games and
downloads. NetThruster’s advanced network is designed to provide media companies
with high-performance, cost-effective delivery of high bandwidth media and
software via the Internet.
We are in the
process of reevaluating and reorienting our business. With NetThruster,
Ludicrous has successfully broadcast live streaming video of events pursuant to
event based contracts resulting in minimal revenue to date. This capability
may be used by another TTI subsidiary, MLN,Inc., a Delaware corporation(“MLN”),
in the operation of MLN's new Internet website. NetThruster also has
worked out the necessary hardware equipment designs to support the Internet
background logistics of MLN’s coming website, My Lord’s
Network. NetThruster may be employed to implement and maintain the
website's operational equipment.
The operation
of this website is the primary business of MLN. MLN has completed the research
and planning necessary to create the website and its supporting business. The
focus of the website is the worldwide Christian community but with the initial
enrollment emphasis on Christians in the United States. The website is designed
to facilitate interaction between enrolled individual members and, in addition,
provide information about Christian churches, both their location and events.
MLN plans to contract for creation of the initial website and expects to make
its revenues through the ongoing operation of the website (through subscriptions
fees and advertising).
My Lord’s
Network will be designed to bring together members of the Christian community in
an arena that provides an opportunity for online social networking and
information about church activities across the community. It will strive to
provide up-to-date information from its church and ministry members to the
individual members. It plans to offer Christian-oriented contemporary news as
well.
The primary
business model is a content-based Internet website. Individual members will join
for free and receive the basic website services. Individual members may enroll
with optional yearly fees for additional premium website services. Individual
churches will pay a yearly membership fee for services that will enable a church
to upload and update church information including a current event schedule and,
for an additional amount, weekly videos of the pastor's sermon. There are
several sources for the site's actual content. Some sources are simple
information pages plus there may be on-demand video downloads. The website plans
to have three basic kinds of information pages: each enrolled individual will
have his/her own page; each enrolled church will have its own page; and each
enrolled ministry will have its own page. The information contained
on each type of page is unique. If a sufficient number of people have joined, it
will become profitable to sell advertising since a guaranteed audience will
exist. Advertising may be either nationwide (or even worldwide)
or local since the website will have geographical information about its members
and can target advertising based upon that information.
Each church
page will have location and activity information for that church. Each church
has the ability to continually update its activity or event schedule so that
when its page is visited, the information will be topical. Each enrolled church
will be able to continuously update the church's web page with topical
information. The ministry pages will be customized for each ministry and feature
information unique to each particular ministry. Many ministries sell products
such as books and videos on their own websites and My Lord's Network plans to
offer these same products on its site. Advertising revenues can be realized once
a sufficient number of individuals have joined the site and provided their
demographic information.
CRITICAL
ACCOUNTING POLICIES
Our
discussion and analysis of our financial condition and results of operations are
based upon our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities. We
monitor our estimates on an on-going basis for changes in facts and
circumstances, and material changes in these estimates could occur in the
future. Changes in estimates are recorded in the period in which they become
known. We base our estimates on historical experience and other assumptions that
we believe to be reasonable under the circumstances. Actual results may differ
from our estimates if past experience or other assumptions do not turn out to be
substantially accurate.
Certain of
our accounting policies are particularly important to the portrayal and
understanding of our financial position and results of operations and require us
to apply significant judgment in their application. As a result,
these policies are subject to an inherent degree of uncertainty. In applying
these policies, we use our judgment in making certain assumption and estimates.
Our critical accounting policies are described in our Annual Reports on Form
10-KSB and Form 10-KSB/A for the years ended December 31, 2007 and December 31,
2006, respectively. There have been no material changes to our critical
accounting policies as of March 31, 2008 and for the three months then
ended.
RESULTS
OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2008
We had
revenue in the first three months of 2008 of $0. The lack of revenue is due to
TTI becoming a software development company for which no revenue has yet been
generated.
Our operating
expenses were $1,229,710 in the first three months of 2008, primarily due to
stock based compensation expense to officers, directors and a shareholder
aggregating $923,963, and the ramp up of TTI’s software development business and
associated general and administrative expenses. Our net loss was $1,231,786 in
the three months ended March 31, 2008.
CAPITAL
RESOURCES
TTI’s cash
position was $727,201 at March 31, 2008 compared to $435,858 at December 31,
2007. The increase in cash is attributable to cash proceeds from the exercise of
stock options of $725,000, offset by repayments of officer's loans and cash
utilized in operating activities.
As of March
31, 2008, TTI had current assets of $761,849 and current liabilities of
$953,175.
Net cash used in
operating activities amounted to $415,680 for the three month period ended March
31, 2008. The primary reason for the utilization of cash in 2008 was to fund the
new software development business of the Company. Net cash provided by financing
activities amounted to a $725,000 for the three months ended March 31, 2008. The
increase in 2008 resulted from the exercise of stock options of $725,000. We had
repayments of officers' loans of $155,245.
We do not
have sufficient capital to meet our cash requirements for the coming twelve
months as we continue with our plan of securing customer relationships and
developing requisite products. We intend to meet our cash requirements
through sales of our products and plan to continue to generate sales leads
through marketing. We will also attempt to raise additional capital through
the sale of our common stock or through debt financing. We estimate that we will
need between $150,000 and $200,000 annually to maintain our reporting
obligations, we estimate that we will incur approximately $500,000 in marketing
and sales costs during the next twelve months of operations and that our
research and development costs will be approximately $100,000 during the next
twelve months of operations. There is no assurance, however, that the funds
will be available or adequate.
GOING
CONCERN QUALIFICATION
We have
incurred significant losses from operations, and such losses are expected to
continue. Our auditors have included a "Going Concern Qualification" in their
report for the year ended December 31, 2007. In addition, we have limited
working capital. The foregoing raises substantial doubt about our ability to
continue as a going concern. Management's plans include seeking additional
capital and/or debt financing. There is no guarantee that additional capital
and/or debt financing will be available when and to the extent required, or that
if available, it will be on acceptable terms. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty. The "Going Concern Qualification" may make it substantially
more difficult to raise capital.
OFF-BALANCE
SHEET ARRANGEMENTS
We have no
off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not
Applicable.
ITEM 4T. CONTROLS AND PROCEDURES
EVALUATION
OF DISCLOSURE CONTROLS AND PROCEDURES
As required
by Rules 13a-15(e) and 15d-15(e) under the Exchange Act, we carried out an
evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures as of the end of the period covered by this Quarterly
Report. This evaluation was carried out under the supervision and with the
participation of our Chief Executive Officer and our Principal Accounting
Officer.
We maintain a
set of disclosure controls and procedures which were designed to ensure that
information required to be disclosed by TTI in the reports filed under the
Securities Exchange Act of 1934, as amended, is recorded, processed, summarized
and reported within the time periods specified by the Securities and Exchange
Commission's (“SEC”)rules and forms. Disclosure controls are also designed with
the objective of ensuring that this information is accumulated and communicated
to our management, including our Chief Executive Officer and Principal
Accounting Officer, to allow timely decisions regarding required
disclosure.
Based upon
his evaluation as of the end of the period covered by this report, our Chief
Executive Officer and Principal Accounting Officer concluded that our disclosure
controls and procedures are not effective to ensure that
information required to be included in our
periodic filings with
the SEC are recorded, processed, summarized and
reported within the time periods specified in the SEC rules and forms, nor to
ensure that information we are required to include in the reports that we file
or submit under the Act is accumulated and communicated to management, including
our Chief Executive Officer and Principal Accounting Officer, as appropriate to
allow timely decisions regarding required disclosure, both due to certain
weaknesses in the internal control over our financial reporting.
INTERNAL
CONTROL OVER FINANCIAL REPORTING
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rule 13a-15(f) under the
Exchange Act).Our internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes of
accounting principles generally accepted in the United States. Because of its
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Therefore, even those systems determined to be
effective can provide only reasonable assurance of achieving their control
objectives.
At the end of
2007, Section 404 of the Sarbanes-Oxley Act required our management to provide
an assessment of the effectiveness of our internal control over financial
reporting, and at the end of 2009, our independent registered public accountants
will be required to audit management's assessment. We completed our assessment
for the fiscal year ended December 31, 2007 and identified the following
material weaknesses which continued to exist at the end of our first fiscal
quarter ending on March 31, 2008:
We have
been deficient in our interpretation of generally accepted accounting principles
("GAAP") and in verifying our interpretations by conferring with additional
qualified outside consultants, as well as our independent certified public
accountants. In particular, we were deficit in our interpretation of the
application of GAAP to our business combination with Ludicrous, and the effect
of our voting trust agreements on the manner in which we would report that
business combination under GAAP.
Because of
the material weaknesses noted above, management, including our Chief Executive
Officer and our Principal Accounting Officer, concluded that we did not maintain
effective internal control over financial reporting as of December 31, 2007,
based on the INTERNAL CONTROL OVER FINANCIAL REPORTING -GUIDANCE FOR SMALLER
PUBLIC COMPANIES. Accordingly, TTI restated its financial statements for the
fiscal quarter ending March 31, 2008.
We are in the
process of implementing remediation efforts with respect to the material
weaknesses which include:
The
establishment of a system of external verification of our interpretations of
GAAP with respect to all of our financial reporting obligations, by retaining
and conferring with our private certified public accountant, who is now an
outside consultant to TTI, in conjunction with ongoing consultation with our
independent certified public accounting firm that performs the audit of our
financial statements.
We believe
the foregoing efforts will enable us to improve our internal control over
financial reporting. Management is committed to continuing efforts aimed at
improving the design adequacy and operational effectiveness of its system of
internal controls. The remediation efforts noted above will be subject to our
internal control assessment, testing and evaluation process.
CHANGES
IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
Other than
the modification to our internal controls over financial reporting which
established a verification procedure, including conferring with qualified
outside professional consultants, to verify our ongoing interpretation of GAAP,
as described above, there have been no changes in our internal controls over
financial reporting during the most recent fiscal quarter that have
materially affected, or are reasonable likely to
materially affect, our internal controls over financial reporting.
INHERENT
LIMITATIONS ON EFFECTIVENESS OF CONTROLS
TTI’s
management does not expect that its disclosure controls or its internal control
over financial reporting will prevent or detect all error and all fraud. A
control system, no matter how well designed and operated, can provide only
reasonable, not absolute, assurance that the control system’s objectives will be
met. The design of a control system must reflect the fact that there are
resource constraints, and the benefits of
controls
must be considered relative to their costs. Further, because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that misstatements due to error or fraud will not
occur or that all control issues and instances of fraud, if any, within TTI have
been detected. These inherent limitations include the realities that
judgments in decision making can be faulty and that breakdowns can occur because
of simple error or mistake. Controls can also be circumvented by the individual
acts of some persons, by collusion of two or more people, or management override
of the controls. The design of any system of controls is based in part on
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions. Projections of any evaluation of controls
effectiveness to future periods are subject to risks. Over time, controls
may become inadequate because of changes in conditions or deterioration in the
degree of compliance with policies or procedures.
Our
disclosure controls and procedures are designed to provide reasonable assurance
of that our reports will be accurate. Our Chief Executive Officer and
Principal Accounting Officer concludes that our disclosure controls and
procedures were ineffective at that reasonable assurance level, as of the end of
the period covered by this Form 10-Q/A. Our future reports shall also indicate
that our disclosure controls and procedures are designed for this reason and
shall indicate the related conclusion by the Chief Executive Officer and
Principal Accounting Officer as to their effectiveness.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A.-RISK FACTORS
WE DID NOT
TIMELY FILE WITH THE SEC OUR FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31,
2007. AS A RESULT OF THIS DELAYED FILING, WE ARE CURRENTLY INELIGIBLE TO USE
FORM S-3 TO REGISTER SECURITIES WITH THE SEC IN CAPITAL-RAISING TRANSACTIONS,
WHICH MAY ADVERSELY AFFECT OUR COST OF FUTURE CAPITAL.
We did not
timely file with the SEC our Form 10-KSB for the fiscal year ended December 31,
2007. Although we are now current in our filings with the SEC,
because our Form 10-KSB was not filed within the deadline promulgated by the
SEC, the filing was not timely under applicable SEC rules. As a result of the
delayed filing of our Form 10-KSB, we are ineligible to use a "short form"
registration statement on Form S-3 to register securities for sale by us or for
resale by other security holders, in capital raising transactions, until we
have timely filed all periodic reports under the Securities Exchange Act of 1934
for at least 12 calendar months. In the meantime, for capital raising
transactions, we would need to use Form S-1 to register securities with the SEC,
or issue such securities in a private placement, which could increase the time
and resources required to raise capital during this period.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not
Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
Not
Applicable.
ITEM 5. OTHER INFORMATION
Not
Applicable.
ITEM 6. EXHIBITS
(a) Exhibits
EXHIBIT
NO.
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DESCRIPTION
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Section
302 Certification of Chief Executive Officer
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Section
302 Certification of Chief Financial Officer
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Section
906 Certification of Chief Executive Officer
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Section
906 Certification of Chief Financial
Officer
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SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
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TREE
TOP INDUSTRIES, INC.
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Date:
April 9, 2009
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By:
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/s/ David
Reichman
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David
Reichman, Chief Executive Officer
and
Chairman (Principal Executive Officer)
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Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By:
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/S/
David Reichman
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David
Reichman, Chairman of the Board,
Chief
Executive Officer, President
Chief
Financial Officer, and Secretary
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Date:
April 9, 2009
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By:
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/S/
Frank Benintendo
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Date:
April 9, 2009
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Frank
Benintendo, Director
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By:
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/S/
Michael Valle
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Date:
April 9, 2009
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Michael
Valle, Director
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By:
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/S/
Don Gilbert
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Date:
April 9, 2009
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Don
Gilbert, Director
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By:
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/S/
Christopher Cecil
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Date:
April 9, 2009
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Christopher
Cecil
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