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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2012
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______ to _______
File No. 333-164086
ENVIRATRENDS, INC.
(Exact name of registrant as specified in its charter)
Registrant’s telephone number: 941.365.8835
Check whether the issuer (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 required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o 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 the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of August 1, 2012 there were 24,190,850 shares issued and outstanding of the registrant’s common stock.
TABLE OF CONTENTS
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The accompanying notes are an integral part of these financial statements.
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The accompanying notes are an integral part of these financial statements.
4
The accompanying notes are an integral part of these financial statements.
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The accompanying notes are an integral part of these financial statements.
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EnviraTrends, Inc.
(A Development Stage Company)
Notes To Financial Statements
June 30, 2012
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
History
EnviraTrends, Inc. (the “Company”), a development stage company, was organized in Wyoming on June 22, 2009. The Company is in the development stage as defined in Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 915, “Development Stage Entities.” The Company is in the business of selling pet memorial products. The fiscal year end is September 30.
Development Stage Company and Going-Concern
The Company is in the development stage since planned principal activities have not commenced and the Company has not generated any revenue. In a development stage company, management devotes most of its activities to developing a market for its products and services. These financial statements have been prepared on a going-concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business.
The Company has a deficit accumulated during the development stage of $895,588. Further, the Company has negative working capital of $666,728 as of June 30, 2012. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The continuation of the Company as a going-concern and the ability of the Company to emerge from the development stage is dependent upon the continued financial support from its stockholders, the ability of the Company to obtain necessary equity and debt financings to continue operations and to generate sustainable revenue. There is no guarantee that the Company will be able to raise adequate equity or debt financings or generate profitable operations.
Use of Estimates in the Preparation of Financial Statements
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, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates and assumptions.
Cash and Cash Equivalents
For purposes of the statements of cash flows, EnviraTrends considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Revenue Recognition
EnviraTrends plans to recognize revenue when persuasive evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured.
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EnviraTrends, Inc.
(A Development Stage Company)
Notes To Financial Statements
June 30, 2012
Income Taxes The Company uses the liability method of accounting for income taxes pursuant to ASC Topic 740, “Income Taxes.” Under this method, deferred income taxes are recorded to reflect the tax consequences in future years of temporary differences between the tax basis of the assets and liabilities and their financial amounts at year-end. The Company adopted the provisions of FASB ASC 740-10, Accounting for Uncertainty in Income Taxes - An interpretation of FASB Statement 109, (formerly FASB issued Interpretation 48 - FIN 48), on October 1, 2009. FASB ASC 740-10-65 clarifies the accounting and disclosure requirements for uncertainty in tax positions, as defined. It required a two-step approach to evaluate tax positions and determine if they should be recognized in the financial statements. The two-step approach involves recognizing any tax positions that are “more likely than not” to occur and then measuring those positions to determine if they are recognizable in the financial statements. Management regularly reviews and analyzes all tax positions and has determined that no aggressive tax positions have been taken.
Basic and Diluted Net Loss per Share
Basic earnings per common share is computed based upon the weighted average number of common shares outstanding during the period. Diluted earnings per share consists of the weighted average number of common shares outstanding plus the dilutive effects of options and warrants calculated using the treasury stock method. In loss periods, dilutive common equivalent shares are excluded as the effect would be anti-dilutive.
Stockholder’s Equity
The Company records shares as issued when the obligation to issue has occurred and the subscriber has all the rights and duties of a stockholder.
Recently Issued Accounting Pronouncements
EnviraTrends does not expect the adoption of recently issued accounting pronouncements to have a material effect on its results of operations, financial position, or cash flows.
NOTE 2 - STOCKHOLDER'S EQUITY
On March 13, 2012, the Company issued 1,000 shares for $0.10 per share to an investor.
The Company has the ability to issue up to 20,000,000 shares of no par value preferred stock. As of June 30, 2012, there were no shares issued and outstanding.
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EnviraTrends, Inc.
(A Development Stage Company)
Notes To Financial Statements
June 30, 2012
NOTE 3 – RELATED PARTY TRANSACTIONS
EnviraTrends subleases office space from an affiliate for $2,226 per month. The sublease expired December 31, 2009 at which time the Company was able to continue on a month to month basis or be subject to the terms of a new master lease. The Company has recorded rent expense of $6,677, $20,031 and $73,778 for the three and Nine months ended June 30, 2012 and 2011 and for the period June 22, 2009 (date of inception) to June 30, 2012, respectively.
From June 22, 2009 (date of inception) through June 30, 2012, ImagiTrend Group LLC, (“ImagiTrend”) of which the president and majority stockholder is managing member, paid certain expenses on behalf of the Company. The amount due to ImagiTrend as of June 30, 2012 and September 30, 2011 is $64,184, which is non interest bearing and unsecured.
NOTE 4 – INCOME TAXES
EnviraTrends uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. During the current period, EnviraTrends incurred a net loss and therefore has no tax liability.
NOTE 5 – DUE TO SHAREHOLDER
On August 1, 2009, the Company entered into an employment agreement with Russell Haraburda, the Company’s President. The agreement provides for a monthly salary of $10,000. Russell has also loaned funds to the company as an unsecured, noninterest bearing loan. As of June 30, 2012 and September 30, 2011, the amount due to Mr. Haraburda is $596,650 and $386,110, respectively.
NOTE 6 – SUBSEQUENT EVENTS
The Company has evaluated all subsequent events that occurred up to the time of the Company's issuance of its financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes, and other financial information included in this Form 10-Q.
Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national, and local general economic and market conditions; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; change in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; the risk of foreign currency exchange rate; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.
Although the forward-looking statements in this Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.
Plan of Operation
We have decided to focus our initial marketing efforts in China. Since November 2010, we have been continuing to modify and develop our business plan, refocusing initially on the China market, as follows:
Sourcing Manufacturers
In order to secure a manufacturer for our products, on January 23, 2011, we entered into an agreement with a non-affiliated third party, Dragon Sino Limited, a Hong Kong corporation (“Consultant”), pursuant to which Consultant has agreed to render and perform the following services to us:
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Developing a Marketing Program in China
On November 23, 2010, we entered into a Product Marketing Agreement with China Ventures Inc, (CV) a Nevada corporation with offices located at Sichuan, Chengdu 641001 Ren Min Nan Lu 4 duan 27 hao, Shang Ding Guoji 2 dong 1 danyuan 1015 (“CV” or “MiUSA).
Under the agreement CV/MiUSA will provide the following basic services:
As of the date of this report, manufacturing and distribution of our products by third parties has not commenced. We have not sold any products as of the date of this report.
Results of Operations
Three Months Ended June 30, 2012 compared to Three Months Ended June 30, 2011
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Expenses: Expenses were $72,394 for the three months ended June 30, 2012, an increase of $10,663 or 17%, compared to $61,731 for the three months ended June 30, 2011. The increase is due to an increase in payroll expenses and accounting fees.
Nine months Ended June 30, 2012 compared to Nine months Ended June 30, 2011
Expenses: Expenses were $207,956 for the Nine months ended June 30, 2012, an increase of $9,321 or 5%, compared to $198,635 for the Nine months ended June 30, 2011. The increase is due to an increase in payroll expenses and accounting fees.
Liquidity and Capital Resources
During the period June 22, 2009 (date of inception) through September 30 2011, we have raised $210,700 through the sale of our common stock, and an affiliate has provided $64,184 through the payment of certain expenses on our behalf. All payments required under the Agreements with the Chinese companies described above to date have been made. Until we generate operating revenue, the parties to these Agreements have agreed to accept a personal guarantee of payment in lieu of cash from Mr. Haraburda, our President and Director. He has pledged a total of 50,000 shares common shares (40,000 shares to China Ventures and 10,000 shares to CV/MiUSA) as collateral for this guarantee. When all the obligations under each guarantee are satisfied, the companies will release 80% of the collateral to the Guarantor but retain the remainder. Further, we intend to secure advances on orders in China which we will use to make payments necessary to manufacture the items to fulfill the order or, alternatively, factor the orders when received in order to generate the necessary funds to manufacture the products. Based upon the foregoing, we do not anticipate we will need any additional capital to implement our revised business plan, commence active marketing efforts, generate sales, manufacture products and generate revenues.
From inception, we have suffered from continuous losses with an accumulated deficit of $895,588 as of June 30, 2012. The continuation as a going concern through June 30, 2013 is dependent upon the continued financial support from our stockholders. Also, we are currently pursuing the additional financing for our operations. However, there is no assurance that we will be successful in securing sufficient funds to sustain the operations.
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Going Concern
Our financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We are in the development stage and have not generated any revenues from operations and have incurred accumulated losses of $895,588. As of June 30, 2012, the Company has negative working capital of $666,728. These conditions raise substantial doubt about our ability to continue as a going concern. We have issued stock to raise capital to fund current operations and believe that additional shares can be issued to fund operations until we begin generating revenue. We are in the process of contracting with suppliers to manufacture the product and have begun marking and advertising campaigns. If we are unable to find a manufacturer, then we might have to cease operations unless a viable alternative is found.
Critical Accounting Policies
Cash and Cash Equivalents
For purposes of the statements of cash flows, EnviraTrends considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Revenue Recognition
EnviraTrends plans to recognize revenue when persuasive evidence of an arrangement exists, services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured.
Off-Balance Sheet Arrangements
We have not entered into any 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 and would be considered material to investors.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company has established disclosure controls and procedures to ensure that information required to be disclosed in this quarterly report on Form 10-Q was properly recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. The Company’s controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers to allow timely decisions regarding required disclosure.
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) at June 30, 2012 based on the evaluation of these controls and procedures required by paragraph (b) of Rule 13a-15 or Rule 15d-15 under the Exchange Act. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer/Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer/Chief Financial Officer concluded that, at June 30, 2012, our disclosure controls and procedures are effective.
Changes in Internal Controls Over Financial Reporting
There were no significant changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors
Not applicable to smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On March 13, 2012, the Company issued 1,000 shares for $0.10 per share to one investor for aggregate consideration of $100 under Section 4(2) of the Securities Act of 1933.
We believed that Section 4(2) of the Securities Act of 1933 was available for each separate issuance transaction described above because:
In connection with the above transactions, although some of the investors may have also been accredited, we provided the following to all investors:
Prospective investors were invited to review at our offices at any reasonable hour, after reasonable advance notice, any materials available to us concerning our business. Prospective Investors were also invited to visit our offices.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information.
None.
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* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
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EXHIBIT INDEX
* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
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