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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
þ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2012
o TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from _________ to _________
Commission File Number: 000-52044
USA GRAPHITE INC.
(Name of Small Business Issuer in its charter)
848 N. Rainbow Blvd. #3550
Las Vegas, Nevada 89107
(Address of principal executive offices)
Issuers telephone number
Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was require to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
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 definition 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 þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
APPLICABLE ONLY TO CORPORATE ISSUERS
As of October 2, 2012 the registrant had 169,400,000 shares of common stock outstanding.
USA GRAPHITE INC.
Table of Contents
PART I - FINANCIAL INFORMATION
Safe Harbor Statement
This report on Form 10-Q contains certain forward-looking statements. All statements other than statements of historical fact are forward-looking statements for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements.
These forward-looking statements involve significant risks and uncertainties, including, but not limited to, the following: competition, promotional costs, and risk of declining revenues. Our actual results could differ materially from those anticipated in such forward-looking statements as a result of a number of factors. These forward-looking statements are made as of the date of this filing, and we assume no obligation to update such forward-looking statements. The following discusses our financial condition and results of operations based upon our financial statements which have been prepared in conformity with accounting principles generally accepted in the United States. It should be read in conjunction with our financial statements and the notes thereto included elsewhere herein.
Item 1. Financial Statements
The unaudited interim financial statements of USA Graphite Inc. (the Company, Magnum, we, our, us) follow. All currency references in this report are in U.S. dollars unless otherwise noted. The accompanying Financial Statements of USA Graphite Inc. should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended February 28, 2012. Significant accounting policies disclosed therein have not changed except as noted below.
USA GRAPHITE INC.
(A Development Stage Company)
(Express in U.S. Dollars)
August 31, 2012
The accompanying notes are an integral part of these financial statements
The accompanying notes are an integral part of these financial statements
USA GRAPHITE, INC.
(A Development Stage Enterprise)
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
August 31, 2012
NOTE 1 NATURE OF OPERATIONS AND BASIS OF PRESENTATION
USA GRAPHITE, INC. (Formerly MAGNUM OIL, INC.) (the Company) was incorporated under the laws of the State of Nevada on December 13, 2005. The Company is in the development stage. Its activities to date have included capital formation, organization and development of its business plan. The Company has commenced operations. On April 12, 2012 the company changed its name to USA Graphite, Inc.
The Company operated through its lone subsidiary: PTM Publications Sdn Bhd, a Malaysian Corporation.
The Company decided to cease the operation of subsidiary in January 2011.
USA Graphite, Inc. (the parent company) is now a holding company.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Companys financial statements are prepared using the accrual method of accounting. The Company has elected a February year-end.
Basic Earnings per Share
The Company computes earnings (loss) per share in accordance with Accounting Standards Codification (ASC) 260, Earnings per Share. ASC 260 specifies the computation, presentation and disclosure requirements for earnings (loss) per share for entities with publicly held common stock. The Company has adopted the provisions of ASC 260 effective December 13, 2005 (inception).
Basic earnings (loss) per share amounts are computed by dividing the net income (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share are the same as basic earnings (loss) per share due to the lack of dilutive items in the Company.
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally accepted accounting principles 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 revenues and expenses during the reporting period. Actual results could differ from those estimates.
The Company records stock-based compensation in accordance with ASC 718, Compensation Stock Based Compensation, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.
Recent Accounting Pronouncements
The company has evaluated all the recent accounting pronouncements and believes that none of them will have a material effect on the companys financial statement.
NOTE 3 GOING CONCERN
The Companys financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company has a working capital deficit of $168,203, an accumulated deficit of $233,203 and net loss from operations since inception of $233,203. The Company does not have a source of revenue sufficient to cover its operation costs giving substantial doubt for it to continue as a going concern. The Company will be dependent upon the raising of additional capital through placement of our common stock in order to implement its business plan, or merge with an operating company. There can be no assurance that the Company will be successful in either situation in order to continue as a going concern. The Company is funding its initial operations by way of issuing Founders shares.
The officers and directors have committed to advancing certain operating costs of the Company, including Legal, Audit, Transfer Agency and Edgarizing costs
NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has determined the estimated fair value of financial instruments using available market information and appropriate valuation methodologies. The fair value of financial instruments classified as current assets or liabilities approximate their carrying value due to the short-term maturity of the instruments.
NOTE 5 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional shares of common.
NOTE 6 - DIRECTOR'S FEES
Fees of $500 per month have been recorded for the remuneration of the director.
NOTE 7 - RELATED PARTY TRANSACTIONS
As of August 31, 2012, there is a total of $105,044 that has been forwarded by an officer of the Company; no specific repayment terms have been established.
NOTE 8 - INCOME TAXES
We did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because we have experienced operating losses since inception. Accounting for Uncertainty in Income Taxes when it is more likely than not that a tax asset cannot be realized through future income the Company must allow for this future tax benefit. We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward period.
The components of the Companys deferred tax asset and reconciliation of income taxes computed at the statutory rate to the income tax amount recorded as of are as follows:
Realization of deferred tax assets is dependent upon sufficient future taxable income during the period that deductible temporary differences and carryforwards are expected to be available to reduce taxable income. As the achievement of required future taxable income is uncertain, the Company recorded a valuation allowance.
NOTE 9 - NET OPERATING LOSSES
As of August 31, 2012, the Company has a net operating loss carryforwards of approximately $233,203. Net operating loss carryforward expires twenty years from the date the loss was incurred.
NOTE 10 - STOCK TRANSACTIONS
Transactions, other than employees stock issuance, are in accordance with ASC 505. Thus issuances shall be accounted for based on the fair value of the consideration received. Transactions with employees stock issuance are in accordance with ASC 718. These issuances shall be accounted for based on the fair value of the consideration received or the fair value of the equity instruments issued, or whichever is more readily determinable.
On December 14, 2005, the company issued a total of 22,000,000 shares of $0.000455 par value common stock as founder's shares to Jasmin Bin Omar Jayaseelan, Jefferi Bin Omar Jayaseelan and Cheryl Lim Phaik Suan, all of whom are officers and directors of the company. Mr. Jasmin Jayaseelan and Mr. Jefferi Jayaseelan received 8,800,000 shares each, and Ms. Lim received 4,400,000 shares. The shares were issued in exchange for cash in the aggregate amount of $5,000.
In August 2006, the company completed an offering of shares of common stock in accordance with an SB-2 registration statement declared effective by the Securities and Exchange Commission on May 4, 2006. The company sold 26,400,000 shares of common stock, par value $0.001, at a price of $0.0227 per share to approximately 32 investors. The aggregate offering price for the offering closed in August 2006 was $60,000, all of which was collected from the offering.
On May 23, 2010 the company received approval from FINRA for a forward split of common share of 22:1.
On April 17, 2012 the company received approval from FINRA for a forward slit of 3.5:1. All share amounts have been retroactively adjusted for all periods presented.
On August 28, 2012 the company amended the authorized common shares from 175,000,000 to 800,000,000 common shares of $0.001 per share. On the same day the company authorized 10,000,000 preferred shares, par value $0.001 per share. None were previously authorized.
As of August 31, 2012, the Company had 169,400,000 shares of common stock issued and outstanding.
NOTE 11 - STOCKHOLDERS EQUITY
The stockholders equity section of the Company contains the following classes of capital stock as at August 31, 2012: Common stock, $ 0.001 par value: 800,000,000 shares authorized; 169,400,000 shares issued and outstanding.
No preferred shares have been authorized or issued.
NOTE 12 - SUBSEQUENT EVENTS
In accordance with ASC 855, Subsequent Events, the Company has evaluated subsequent events through the date of issuance of the unaudited consolidated financial statements. During this period, the Company did not have any material recognizable subsequent events.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
This section of this report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions
Results of Operations
Our financial statements and information for the three and six months ended August 31, 2012 have been prepared by our Management on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. We generated no revenues during the three and six months ended August 31, 2012 and have incurred total net losses of $233,203 from inception to August 31, 2012.
Three months Ended August 31, 2012 compared to the Three months Ended August 31, 2011
We incurred net losses of $10,097, or $0.00 per share, for the three-month period ended August 31, 2012, as compared to a net loss of $20,630, or $0.00 per share, for the three-month period ended August 31, 2011. The decrease was mainly attributed to reduced office and general expenses ($2,707 - 2012 compared to $13,444 2011). Our other expenses for the three-month period ended August 31, 2012 consisted of professional fees of $6,915 ($6,711 - 2011).
Six months Ended August 31, 2012 compared to the Six months Ended August 31, 2011
We incurred net losses of $28,431, or $0.00 per share, for the six-month period ended August 31, 2012, as compared to a net loss of $29,928, or $0.00 per share, for the six-month period ended August 31, 2011. The decrease was mainly attributed to reduced office and general expenses ($4,591 - 2012 compared to $15,191 2011). Our other expenses for the six-month period ended August 31, 2012 consisted of professional fees in the amount of $22,890 ($13,787 - 2011).
Liquidity and Capital Resources
At August 31, 2012, we had total assets of $2,003 consisting of cash in the bank in the amount of $3 and prepaid expenses of $2,000.
Our accounts payable and accrued liabilities at August 31, 2012 were $23,405.
There are currently no options, warrants, rights or other securities conversion rights issued and/or outstanding.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
The amounts presented in the financial statements do not provide for the effect of inflation on our operations or financial position. The net operating losses shown would be greater than reported if the effects of inflation were reflected either by charging operations with amounts that represent replacement costs or by using other inflation adjustments.
Item 3. Quantitative And Qualitative Disclosures Of Market Risk
We are a non-accelerated filer and a smaller reporting company, as defined in Rule 12b-2 of the of the Securities Exchange Act of 1934, and as such, are not required to provide the information under this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our sole officer, as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our sole officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of August 31, 2012. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses in our internal control over financial reporting identified in our Annual Report on Form 10-K for the year ended February 28, 2012, the sole officer concluded that our disclosure controls and procedures are ineffective.
Changes in internal controls
We have not yet implemented any of the recommended changes to internal control over financial reporting listed in our Annual Report on Form 10-K for the year ended February 28, 2012. As such, there were no changes in our internal control over financial reporting, as defined in Rule 13a-15(f) promulgated under the Exchange Act, during the quarter ended August 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.