ITEM 5. MARKET REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES
Market Information
The Company's common stock is quoted in the Over-the-Counter Bulletin Board under the symbol VSMR:OTC US.
The following information concerning the high and low bid prices of the Company's common stock on the Over-the-Counter Bulletin Board.
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Quarterly period
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High
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Low
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Fiscal year ended June 30, 2011:
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First Quarter
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$
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0.23
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$
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0.05
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Second Quarter
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$
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0.10
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$
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0.03
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Third Quarter
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$
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0.06
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$
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0.01
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Fourth Quarter
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$
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0.05
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$
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0.01
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Fiscal year ended June 30, 2010:
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First Quarter
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$
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1.52
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$
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0.80
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Second Quarter
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$
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1.04
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$
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0.38
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Third Quarter
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$
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0.54
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$
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0.12
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Fourth Quarter
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$
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0.54
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$
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0.01
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11
Common Stock
All outstanding shares of Common Stock are of the same class and have equal rights and attributes. The holders of Common Stock are entitled to one vote per share on all matters submitted to a vote of stockholders of the Company. All stockholders are entitled to share equally in dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available. In the event of liquidation, the holders of Common Stock are entitled to share ratably in all assets remaining after payment of all liabilities. The stockholders do not have cumulative or preemptive rights.
As of June 30, 2011, there are approximately 52 shareholders of record, including beneficial holders of the Companys common stock, with 52,785,000 shares outstanding.
The Company had no Common shares in treasury stock as of June 30, 2011.
The Company is authorized to issue up to 250,000,000 shares of common stock.
The description of certain matters relating to the securities of the Company is a summary and is qualified in its entirety by the provisions of the Company's Certificate of Incorporation and By-Laws.
Dividends
The Company has not paid any cash dividends to date and does not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of the Company's business.
Debt Securities
The Company has not issued any debt securities to date and does not anticipate or contemplate issuing any debt securities in the foreseeable future.
Stock Purchase Warrants
The Company had not issued any stock purchase warrants to June 30, 2011. Pursuant to a private placement subscription agreement, on November 9, 2012 the Company issued 500,000 units @ $0.10 per unit. Each unit consists of one share of common stock in the capital of the Company, and one common share purchase warrant. Each warrant entitles the holder to purchase one share of common stock in the capital of the Company for a period of 18 months at a price per warrant of $0.30.
Recent Sales of Unregistered Securities
During the year ended June 30, 2011, the Company had no stock activity.
During the year ended June 30, 2010, the Company issued the following common shares:
i) On July 14, 2009, the Company entered a consulting service agreement and issued 50,000 shares of restricted common stock at a fair value $0.53 per share, amounting $26,500 as compensation.
ii) On August 14, 2009, the Company entered into a consulting service agreement and issued 1,000,000 shares of common stock at a fair value $0.425 per share, amounting $425,000 as compensation.
iii) On October 28, 2009, 10,000,000 shares of common stock from Howard Gelfand were cancelled and returned.
iv) On November 15, 2009, the Company entered into three consulting service agreements and issued 140,000 shares of common stock at a fair value $0.475 per share, amounting $66,500 as compensation.
12
v) On April 24, 2010, the Company issued 550,000 shares of common stock at $0.10 per share for cash proceeds of $55,000. The Company issued 20,000 shares of common stock at a deemed fair value of $2,000 in connection with the private placement.
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our audited financial statements and the related notes for the years ended June 30, 2011 and June 30, 2010 that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to those discussed below and elsewhere in this annual report, particularly in the section entitled "Risk Factors" of this annual report.
Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Forward-Looking Statements
This report contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology including, "could" "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" and the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.
While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this Annual Report.
Recently Issued Accounting Pronouncements
Refer to the notes to the financial statements for a complete description of recent accounting pronouncements.
Company Overview
Verify Smart Corp. (the "Company") was incorporated under the laws of the State of Nevada on May 31, 2006. The Company was originally formed to engage in the acquisition, exploration and development of natural resource properties. Effective March 25, 2009, the Company commenced activity involving developing and selling internet security software for credit card fraud prevention.
13
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. The SEC has defined a company's critical accounting policies as the ones that are most important to the portrayal of the company's financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. We believe that our estimates and assumptions are reasonable under the circumstances; however, actual results may vary from these estimates and assumptions. We have identified in Note 3 Summary of Significant Accounting Policies to the Financial Statements contained in Item 8 of this document certain critical accounting policies that affect the more significant judgments and estimates used in the preparation of the financial statements.
Use of Estimates and Assumptions
Preparation of the Companys financial statements in conformity with United States GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. The significant areas requiring managements estimates and assumptions relate to determining the fair value of stock-based compensation, fair value of shares issued for services and the acquisitions, and useful lives of long-lived assets.
Development Stage Company
The Company is a development stage company as defined by SFAS 7, Accounting and Reporting by Development Stage Enterprises (codified in ASC 915, Development Stage Entities). The Company is devoting substantially all of its present efforts to establishing a new business. All losses accumulated since inception have been considered as part of the Companys development stage activities.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents. At June 30, 2011 and 2010 cash consists primarily of cash on deposit.
Impairment of Long-Lived Assets
In accordance with SFAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets (codified in ASC 360, Property, Plant, and Equipment), the carrying value of intangible assets and other long-lived assets is reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment. The Company recognizes impairment when the sum of the expected undiscounted future cash flows is less than the carrying amount of the asset. Impairment losses, if any, are measured as the excess of the carrying amount of the asset over its estimated fair value.
Financial Instruments and Concentration of Risk
The fair values of financial instruments, which include cash, accounts payable and accrued liabilities and loans payable, were estimated to approximate their carrying values due to the immediate or relatively short maturity of these instruments. Management does not believe that the Company is subject to significant interest currency or credit risks arising from these financial instruments.
14
Basic and Diluted Net Income (Loss) Per Share
The Company computes net income (loss) per share in accordance with SFAS 128, Earnings per Share (codified in ASC 260, Earnings Per Share), which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) before and after discontinued operations, by the weighted average number of common shares outstanding (denominator) during the period, including contingently issuable shares where the contingency has been resolved. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
Foreign Currency Translation
The Companys functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with SFAS 52, Foreign Currency Translation (codified in ASC 830, Foreign Currency Matters), using the exchange rate prevailing at the balance sheet date. Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
Comprehensive Loss
SFAS 130, Reporting Comprehensive Income, (codified in ASC 220, Comprehensive Income) establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. At June 30, 2011, the Company had no items that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.
Common Share Non-Monetary Consideration
In situations where common shares are issued and the fair value of the goods or services received is readily determinable, the fair value of the common shares is used to measure and record the transaction. The fair value of the common shares issued in exchange for the receipt of goods and services is based on the stock price as of the earliest of the date at which:
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i)
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the counterpartys performance is complete;
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ii)
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a commitment for performance by the counterparty to earn the common shares is reached; or
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iii)
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the common shares are issued if they are fully vested and non-forfeitable at that date.
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Stock-Based Compensation
The Company had adopted the fair value recognition provisions of SFAS 123R, Share-Based Payment, (codified in ASC 718, Compensation-Stock Compensation). The Company adopted SFAS 123R using the modified-prospective-transition method. Under this method, compensation cost recognized for all periods prior to December 1, 2005 includes: a) compensation cost for all share-based payments granted prior to, but not yet vested as of November 30, 2005, based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123, and b) compensation cost for all share-based payments granted subsequent to November 30, 2005, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. In addition, deferred stock compensation related to non-vested options is required to be eliminated against additional paid-in capital upon adoption of SFAS 123R.
15
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from parties other than employees in accordance with SFAS 123 and the conclusions reached by the Emerging Issues Task Force (EITF) in Issue No. 96-18, (codified in ASC 505, Equity). Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18.
Income Taxes
Income taxes are provided in accordance with ASC 740 Accounting For Income Taxes. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.
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.
Plan of Operations
The business will market and sell its licensed software which provides a comprehensive solution to credit card fraud by addressing the security needs of consumer clients, credit card companies, banks and merchants through instant verification that is inexpensive to implement and simple to use.
The software operates through the use of a cellular phone for secured verification of monetary transactions. The software has been developed to include debit card purchases, internet purchases, ATM, passport and mortgage verification.
We had also entered into preliminary discussions with Verified Capital Corp. wherein we would acquire either the assets or outstanding shares of common stock of Verified Capital Corp. The parties will jointly determine the optimum structure for the acquisition in order to best satisfy tax planning, regulatory and other considerations, including mutually agreed upon performance based milestones.
The acquisition contemplated by the preliminary discussions was subject to the fulfillment of certain conditions precedent, due diligence and the negotiation of a definitive agreement. As at September 19, 2012, the joint venture agreement was terminated by mutual consent of the par
On April 3, 2009, we entered into an agreement with China Trust to launch our first credit card "VeriSmart (TM) Platinum Visa".
Under the terms of the agreement, China Trust will distribute, for pilot, 2,500 co-branded VeriSmart(TM) Platinum Visa Cards linked to our patent-pending Authentication system, VerifyNGo(TM), to serve as enterprise payroll, payout and remittance solutions affording centralized control and management of fund disbursement globally, anytime, anywhere.
On April 6, 2009, we entered into a services agreement with European hosting and infrastructure provider Prime Interactive S.R.O. The services agreement with Prime Interactive accelerates the European leg of our expansion plan and compliments our company's existing capabilities. Under the terms of the agreement Prime Interactive will be providing the following services to our company:
* Web and Mobile Application Development
* Data Centre infrastructure servicing Europe and located in Slovakia
* Marketing access to a legacy worldwide customer base of 130,000
* Marketing access to established European Financial Industry vertical
16
Our Products / Services
Through our interest in the joint venture, we currently offer or intend to offer the following four product lines consisting of:
(i) VerifyNGo,
(ii) VerifyGateway,
(iii) VerifyTransfer and
(iv) VeriSmart Card.
VerifyNGo
VerifyNGo is a comprehensive authentication system which addresses security concerns through an instant verification process. It is an easy, inexpensive and unique solution that uses a response to an individual's mobile phone as verification for a transaction. VerifyNGo address the security needs of clients, credit card companies, banks and merchants through an instant verification process.
VerifyNGo will provide secure verification for the following types of transactions:
* debit and credit card purchases
* internet purchases
* ATM transactions
* passport applications
* credit applications
* mortgage verifications
* access to medical history
* entry into secured areas
VerifyNGo requires no special hardware, software, upgrades or training. All that is required is for the user to have a mobile phone or PDA.
A typical VerifyNGo process occurs in the following way:
The process starts when a user performs an action which contains a certain security constraint (i.e. online purchase, website login). Once the user performs an action that contains a security constraint, a VerifyNGO authentication is triggered sending a message to the user's mobile phone or PDA.
The message options include:
* Phone call
* SMS detailing the action
* One time password via SMS
* WAP Push, opening a mobile web page
The user receives the request and authorizes the action via mobile phone or PDA. Finally, the system receives the response, determines authenticity and then grants or denies the user's access to the action.
VerifyGateway
VerifyGateway is cutting-edge technology for secure and confidential online payment processing. It acts as a processing hub and intermediary between a business' website and their account provider, giving an enhanced network and superior transaction capabilities to make e-commerce reliable and seamless. It's simple, economical technology, accredited by most major banks and ensures the secure, successful delivery of billions of transactions to billions of ports worldwide.
VerifyGateway provides a system that easily accepts credit card payments from customers and instills confidence because every transaction is sent through a secured system. The system complies with privacy and security regulations globally, and allows client companies to safely manage and track funds across all borders and boundaries. This innovative technical infrastructure is unrivaled in the industry.
17
Business-to-business services include:
* Processing transaction for major credit cards such as MasterCard and Visa
* PCI-certified processing centers
* Support for major merchant processing networks
* Transaction reports with the necessary data to track daily activity
* Reliable and secure business solutions
VerifyTransfer
VerifyTransfer is a comprehensive remittance service allowing business clients to easily and securely send and receive money instantly, in person, online, wirelessly, or by phone.
Using VerifyGateway, VerifyTransfer covers all aspects of the process from transaction logging to retrieval.
The service offers:
* easier remittance payments
* faster data transmission
* multiple recipient accounts
* fast, flexible payment options
* 24 hour, 7 day/week client support
* cutting-edge security, fraud monitoring, and reporting
* increased accuracy and speed of contributions to member accounts
* synchronization with sophisticated retrieval methods, including remittance on Visa cards
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mobile to mobile money transfers (PDA's and iPhones)
* comprehensive tracking and reporting on transactions and client accounts, providing details and history.
VeriSmart Card
The VeriSmart Card is a Visa co-branded, multipurpose prepaid card designed to work optimally with VeriSmart's own secure remittance service, VerifyTransfer, or to be easily integrated with any existing remittance platform.
It can be used, worldwide, for:
* traditional debit/credit card transactions in Visa affiliated establishments
* payment processing between individuals and organizations (e.g.; commission and payroll payments, accounts payable, etc.)
* gift cards (pre-loaded format)
* ATM transactions for Visa ATMs
Requirements and Utilization of Funds
To implement our plan of operations, including some or all of the above described milestones (objectives), we will need to continue to raise capital (equity) in an amount between $135,000 and $1.0 million in equity from restricted stock sales or other acceptable financing options over the next 6-12 month period beginning in the first quarter of 2013 on terms and conditions to be determined. Management may elect to seek subsequent interim or bridge financing in the form of debt (corporate loans) as may be necessary.
We anticipate the need to raise additional capital beyond the first 6 months of operations, subject to the successful implementation of our initial milestones over the first 180 days of operations and our revenue growth cycle thereafter. At this time, management is unable to determine the specific amounts and terms of such future financings.
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Proceeds
We foresee the proceeds from capital raised to be allocated as follows: (a) consolidation and integration; (b) growth capital; (c) research and due diligence; (d) pre-development plant costs; (e) product enhancements and technology partners; (f) new business development; (g) legal, audit, SEC filings and compliance fees; (h) financing costs; (i) working capital (general and administrative); (j) reserve capital for costs of acquisition and market expansion.
Financial Condition, Liquidity and Capital Resources
We have cash and cash equivalents of $2,727 as at June 30, 2011. We are indebted to creditors in the amount of $135,282. These advances were paid for auditing, office, legal, transfer agent and filing fees payable.
During the last year we did not raise any funds from investors.
Management believes that our current financial condition, liquidity and capital resources may not satisfy our cash requirements for the next 12 months and as such we will need to either raise additional proceeds and/or our officers and/or directors will need to make additional financial commitments to our company, neither of which is guaranteed. We plan to satisfy our future cash requirements, primarily the working capital required to execute on our objectives, including marketing and sales of our product, and legal and accounting fees, through financial commitments from future debt/equity financings, if and when possible.
Management believes that we may generate sales revenue during the fiscal year ended in 2013, but that these sales revenues will not satisfy our cash requirements to implement the first 6-12 months of our business plan, including, but not limited to, project acquisitions and integration costs, and other operating expenses and corporate overhead (which is subject to change depending upon pending business opportunities and available financing).
We have no committed source for funds as of this date. No representation is made that any funds will be available when needed. In the event that funds cannot be raised when needed, we may not be able to carry out our business plan, may never achieve sales, and could fail to satisfy our future cash requirements as a result of these uncertainties.
If we are unsuccessful in raising the additional proceeds from officers and/or directors, we may then have to seek additional funds through debt financing, which would be extremely difficult for an early stage company to secure and may not be available to us. However, if such financing is available, we would likely have to pay additional costs associated with high-risk loans and be subject to above market interest rates.
At such time as these funds are required, management would evaluate the terms of such debt financing and determine whether the business could sustain operations and growth and manage the debt load. If we cannot raise additional proceeds via a private placement of our common stock or secure debt financing we would be required to cease business operations. As a result, investors in our common stock would lose all of their investment.
The staged development of our business will continue over the next 12 months. Other than engaging and/or retaining independent consultants to assist the Company in various administrative and marketing related needs, we do not anticipate a significant change in the number of our employees, if any, unless we are able to obtain adequate financing.
Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next 12 months unless we obtain additional capital to pay our expenses. This is because we have not generated revenues and no substantial revenues are anticipated in the near-term. Accordingly, we must raise cash from sources other than from the sale of our products.
Results from Operations
The following summary financial data was derived from our financial statements. This information is only a summary and does not provide all the information contained in our financial statements and related notes thereto. You should read the Managements Discussion and Analysis or Plan of Operations and our financial statements and related noted included elsewhere in this Form 10-K.
19
Our operating results for the years ended June 30, 2011 and 2010 are summarized as follows:
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For the year
ended
June 30, 2011
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For the year ended
June 30, 2010
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Revenue
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$
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-
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|
|
|
-
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Operating Expenses
|
|
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221,010
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|
|
|
840,830
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|
Other Expenses
|
|
|
1,555
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|
|
|
4,934
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|
Net (Loss)
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|
$
|
(222,565)
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|
|
(845,764)
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Our expenses for years ended June 30, 2011 and 2010 are outlined in the table below:
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For the year
ended
June 30, 2011
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|
For the year ended
June 30, 2010
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Operating Expenses
|
|
|
|
|
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|
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General and administrative expenses
|
|
$
|
430
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|
|
$
|
52,072
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Professional fees
|
|
|
840
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|
|
|
51,804
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Management fees
|
|
|
219,740
|
|
736,954
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Total Operating Expenses
|
|
$
|
221,010
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|
|
$
|
840,830
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Other Expenses
|
|
|
|
|
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|
|
Interest expense
|
|
$
|
1,555
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|
|
$
|
212
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Exchange loss
|
|
|
-
|
|
|
|
4,722
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Total Other Expenses
|
|
$
|
1,555
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|
|
$
|
4,934
|
The decrease in professional fees during the year ended June 30, 2011 as compared to the year ended June 30, 2010 is primarily due to decreased business activity in areas such as accounting, auditing and legal. The decrease in management fees during the year ended June 30, 2011 is primarily related to termination of consulting agreements under former management and less business activity as the Company prepares for its new business venture.
During the period from inception (May 31, 2006) to June 30, 2011 we have had accumulated losses of $1,592,114 which are as follows:
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|
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|
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General and administrative expenses
|
|
$
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81,645
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Professional fees
|
|
|
96,080
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Management fees
|
|
1,406,116
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Interest expense
|
|
|
1,767
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Exchange loss
|
|
|
6,506
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Net (Loss)
|
|
$
|
(1,592,114)
|
Our balance sheets as at June 30, 2011 and 2010 are summarized as follows:
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As at June 30, 2011
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|
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As at June 30, 2010
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Cash
|
$
|
2,728
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|
|
|
9,728
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Total assets
|
$
|
29,290
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|
|
|
248,861
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Total liabilities
|
$
|
135,282
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|
|
|
132,288
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Total shareholders equity (deficit)
|
$
|
(105,992)
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|
|
|
116,573
|
Our Company has no plant or significant equipment to sell and we have no intension to purchase any plant or significant equipment in the immediate future. Presently we do not have any money to buy any significant assets.
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Working Capital
|
|
|
|
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|
As of June 30,
|
|
2011
|
|
|
2010
|
|
|
|
|
|
Current Assets
|
$
|
29,290
|
|
|
|
222,298
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Current Liabilities
|
|
135,282
|
|
|
|
132,288
|
Working Capital (Deficit)
|
$
|
(105,992)
|
|
|
|
90,010
|
Cash Flows