XOTC:WCUI Wellness Center USA Inc Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________

 

FORM 10-Q

_______________

 

   X .   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2012

 

       .   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______to______.

 

WELLNESS CENTER USA, INC.

(Exact name of registrant as specified in its charter)


NEVADA

 

333-173216

 

27-2980395

(State or other jurisdiction of incorporation or organization)

 

Commission File Number

 

(IRS Employee Identification No.)


1014 E Algonquin Rd, Ste. 111, Schaumburg, IL, 60173

 (Address of Principal Executive Offices)

 

(847) 925-1885

(Issuer Telephone number)


Copies of communication to:

Ronald P. Duplack

Rieck and Crotty, P.C.

55 West Monroe Street, Ste. 3390, Chicago, IL 60603


Telephone (312)726-4646 Fax (312)726-0647


Securities registered under Section 12(b) of the Exchange Act:


Title of each class registered:

Name of each exchange on which registered:

None

None


Securities registered under Section 12(g) of the Exchange Act:


Common Stock, par value $0.001

(Title of class)


Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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      .

 

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      . No  X .


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer.  See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

 

Large accelerated filer

      .

Accelerated filer

      .

Non-accelerated filer

      . (Do not check if a smaller reporting company)

Smaller reporting company

  X .

 

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes      . No  X .


State the number of shares issued and outstanding of each of the issuer’s classes of common equity, as of May 15, 2012: 15,200,000 shares of issued common stock.





WELLNESS CENTER USA, INC.


FORM 10-Q

 

March 31, 2012

 

INDEX

 

 

PART I-- FINANCIAL INFORMATION

 

Item 1.

Financial Statements

3

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

Item 3

Quantitative and Qualitative Disclosures About Market Risk

37

Item 4.

Control and Procedures

37

 

PART II-- OTHER INFORMATION

 

Item 1

Legal Proceedings

37

Item 1A

Risk Factors

37

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

37

Item 3.

Defaults Upon Senior Securities

38

Item 4.

Removed and Reserved

38

Item 5.

Other Information

38

Item 6.

Exhibits

38

 

SIGNATURE



2




PART I-- FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

WELLNESS CENTER USA, INC.


CONTENTS


Wellness Center USA, Inc.


(A Development Stage Company)


March 31, 2012 and 2011


Index to the Financial Statements


Contents

Page(s)

Balance Sheets at March 31, 2012 (Unaudited) and September 30, 2011

4

 

 

Statements of Operations for the Six Months Ended March 31, 2012 and 2011, and for the Period from June 30, 2010 (inception) through March 31, 2012 (Unaudited)

5

 

 

Statements of Operations for the Three Months Ended March 31, 2012 and 2011 (Unaudited)

6

 

 

Statement of Stockholders’ Deficit for the Period from June 30, 2010 (inception) through March 31, 2012 (Unaudited)

7

 

 

Statements of Cash Flows for the Six Months Ended March 31, 2012 and 2011, and for the Period from June 30, 2010 (inception) through March 31, 2012 (Unaudited)

8

 

 

Notes to the Financial Statements (Unaudited)

9




3




Wellness Center USA, Inc.

(A Development Stage Company)

Balance Sheets


 

 

 

 

March 31,

2012

 

September 30,

2011

 

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

Cash

$

35,469

 

$

175

 

 

 

 

 

 

 

 

 

 

 

 

Total current assets

 

35,469

 

 

175

 

 

 

 

 

 

 

 

 

Office Equipment

 

 

 

 

 

 

 Office equipment

 

1,150

 

 

1,150

 

 Accumulated depreciation

 

(479)

 

 

(288)

 

 

 

 

 

 

 

 

 

 

 

Office equipment, net

 

671

 

 

862

 

 

 

 

 

 

 

 

 

Website Development Cost

 

 

 

 

 

 

Website development cost

 

15,599

 

 

-

 

 Accumulated amortization

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

Website development cost, net

 

15,599

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

$

51,739

 

$

1,037

 

 

 

 

 

 

 

 

 

Liabilities and stockholders' deficit

 

 

 

 

 

  Current Liabilities

 

 

 

 

 

 

Accounts payable

$

696

 

$

-

 

Accrued expenses

 

8,099

 

 

3,300

 

Advances from stockholder

 

149,375

 

 

134,875

 

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

158,170

 

 

138,175

 

 

 

 

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

 

 

Common stock: $0.001 par value: 75,000,000 shares authorized;15,200,000 and 15,030,000 shares issued and outstanding, respectively

 

15,200

 

 

15,030

 

Additional paid-in capital

 

103,638

 

 

58

 

Deficit accumulated during the development stage

 

(225,269)

 

 

(152,226)

 

 

 

 

 

 

 

 

 

 

 

Total stockholders' deficit

 

(106,431)

 

 

(137,138)

 

 

 

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders' Deficit

$

51,739

 

$

1,037


See accompanying notes to the financial statements.



4




Wellness Center USA, Inc.

(A Development Stage Company)

Statements of Operations


 

 

 

 

 

 

 

 

For the Period from

 

 

 

For the Six Months

 

For the Six Months

 

June 30, 2010

 

 

 

Ended

 

Ended

 

(Inception) through

 

 

 

March 31, 2012

 

March 31, 2011

 

March 31, 2012

 

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 Revenue

$

1,100

 

$

-

 

$

1,412

 

 

 

 

 

 

 

 

 

 

 

 Costs of Goods Sold

 

837

 

 

-

 

 

1,151

 

 

 

 

 

 

 

 

 

 

 

 Gross Profit

 

263

 

 

-

 

 

261

 

 

 

 

 

 

 

 

 

 

 

 Operating Expenses

 

 

 

 

 

 

 

 

 

 Consulting fees

 

4,750

 

 

13,913

 

 

55,163

 

 Officer's compensation

 

-

 

 

-

 

 

3,665

 

 Professional fees

 

42,227

 

 

50,000

 

 

101,562

 

 Rent expense - related party

 

14,770

 

 

9,768

 

 

36,259

 

 General and administrative

 

11,559

 

 

8,867

 

 

28,881

 

 

 

 

 

 

 

 

 

 

 

 

 

 Total operating expenses

 

73,306

 

 

82,548

 

 

225,530

 

 

 

 

 

 

 

 

 

 

 

 Loss before Income Tax Provision

 

(73,043)

 

 

(82,548)

 

 

(225,269)

 

 

 

 

 

 

 

 

 

 

 

 Income Tax Provision

 

-

 

 

-

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 Net Loss

$

(73,043)

 

$

(82,548)

 

$

(225,269)

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share - Basic and Diluted

$

(0.00)

 

$

(0.01)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - Basic and Diluted

 

15,048,497

 

 

11,501,521

 

 

 


See accompanying notes to the financial statements.



5




Wellness Center USA, Inc.

(A Development Stage Company)

Statements of Operations


 

 

 

For the

Three Months

 

For the

Three Months

 

 

 

Ended

 

Ended

 

 

 

March 31, 2012

 

March 31, 2011

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 Revenue

$

937

 

$

-

 

 

 

 

 

 

 

 

 Costs of Goods Sold

 

696

 

 

-

 

 

 

 

 

 

 

 

 Gross Profit

 

241

 

 

-

 

 

 

 

 

 

 

 

 Operating Expenses

 

 

 

 

 

 

 Consulting fees

 

4,750

 

 

(1,087)

 

 Professional fees

 

24,615

 

 

39,400

 

 Rent expense - related party

 

8,909

 

 

4,807

 

 General and administrative

 

6,502

 

 

2,331

 

 

 

 

 

 

 

 

 

 

 Total operating expenses

 

44,776

 

 

45,451

 

 

 

 

 

 

 

 

 Loss before Income Tax Provision

 

(44,535)

 

 

(45,451)

 

 

 

 

 

 

 

 

 Income Tax Provision

 

-

 

 

-

 

 

 

 

 

 

 

 

 Net Loss

$

(44,535)

 

$

(45,451)

 

 

 

 

 

 

 

 

Net loss per common share  - Basic and Diluted

$

(0.00)

 

$

(0.01)

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - Basic and Diluted

 

15,067,192

 

 

8,050,750


See accompanying notes to the financial statements.



6




Wellness Center USA, Inc.

(A Development Stage Company)

Statement of Stockholders' Deficit

For the period from June 30, 2010 (inception) through March 31, 2012


 

 



Common Stock, $0.001 Par Value

 

Additional

Paid-in

Capital

 

Deficit

Accumulated

during the

Development

Stage

 

Total

Stockholders'

Deficit

 

 

Number of

Shares

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2010 ( inception )

-

 

$

-

 

$

-

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares as compensation valued at $0.001 per share upon formation

3,665,000

 

 

3,665

 

 

-

 

 

-

 

 

3,665

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

-

 

 

-

 

 

-

 

 

(43,040)

 

 

(43,040)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance September 30, 2010

3,665,000

 

 

3,665

 

 

-

 

 

(43,040)

 

 

(39,375)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares and warrants for cash at par on November 10, 2010

2,557,500

 

 

2,557

 

 

-

 

 

-

 

 

2,557

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares and warrants for cash at par on November 30, 2010

7,982,500

 

 

7,983

 

 

-

 

 

-

 

 

7,983

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares as compensation valued at par on November 30, 2010

375,000

 

 

375

 

 

-

 

 

-

 

 

375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of warrants as compensation on November 30, 2010

-

 

 

-

 

 

38

 

 

-

 

 

38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares to newly appointed board of directors valued at par on November 30, 2010

200,000

 

 

200

 

 

-

 

 

-

 

 

200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of options to newly appointed board of directors on November 30, 2010

-

 

 

-

 

 

20

 

 

-

 

 

20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares to two members of board of directors valued at par on June 30, 2011

250,000

 

 

250

 

 

-

 

 

-

 

 

250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

-

 

 

-

 

 

-

 

 

(109,186)

 

 

(109,186)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2011

15,030,000

 

 

15,030

 

 

58

 

 

(152,226)

 

 

(137,138)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares and warrants for cash at $0.50 per share on March 08, 2012

95,000

 

 

95

 

 

47,405

 

 

-

 

 

47,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares and warrants for cash at $0.75 per share on March 15, 2012

75,000

 

 

75

 

 

56,175

 

 

-

 

 

56,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

-

 

 

-

 

 

-

 

 

(73,043)

 

 

(73,043)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2012

15,200,000

 

$

15,200

 

$

103,638

 

$

(225,269)

 

$

(106,431)


See accompanying notes to the financial statements.



7




Wellness Center USA, Inc.

(A development stage company)

Statements of Cash Flows


 

 

 

 

 

 

 

 

 

 

For the

 

 

 

 

For the

Six Months

 

For the

Six Months

 

Period from

June 30, 2010

 

 

 

 

Ended

 

Ended

 

(Inception) through

 

 

 

 

March 31, 2012

 

March 31, 2011

 

March 31, 2012

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

 Net loss  

$

(73,043)

 

$

(82,548)

 

$

(225,269)

 Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

 

 Common shares issued for compensation and services

 

-

 

 

575

 

 

4,490

 

 Warrants and options issued for compensation and services

 

-

 

 

58

 

 

58

 

 Depreciation expense

 

191

 

 

96

 

 

479

 

 Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 Prepaid expenses

 

-

 

 

16,500

 

 

-

 

 

 Accrued expenses

 

4,799

 

 

32,000

 

 

8,099

 

 

 Accounts payable

 

696

 

 

-

 

 

696

 

 

 

 

 

 

 

 

 

 

 Net Cash Used in Operating Activities

 

(67,357)

 

 

(33,319)

 

 

(211,447)

 

 

 

 

 

 

 

 

 

 Cash Flows from Investing Activities

 

 

 

 

 

 

 

 

 

 Purchase of office equipment  

 

-

 

 

(1,150)

 

 

(1,150)

 

 Website development cost

 

(15,599)

 

 

-

 

 

(15,599)

 

 

 

 

 

 

 

 

 

 

 Net Cash Used in Investing Activities

 

(15,599)

 

 

(1,150)

 

 

(16,749)

 

 

 

 

 

 

 

 

 

 

 Cash Flows from Financing Activities

 

 

 

 

 

 

 

 

 

 Sale of common shares for cash

 

103,750

 

 

10,540

 

 

114,290

 

 Advances from stockholder

 

14,500

 

 

27,400

 

 

149,375

 

 

 

 

 

 

 

 

 

 

 Net Cash Provided by Financing Activities

 

118,250

 

 

37,940

 

 

263,665

 

 

 

 

 

 

 

 

 

 

 Net Change in Cash

 

35,294

 

 

3,471

 

 

35,469

 

 

 

 

 

 

 

 

 

 

 Cash - beginning of period

 

175

 

 

200

 

 

-

 

 

 

 

 

 

 

 

 

 

 Cash - end of period

$

35,469

 

$

3,671

 

$

35,469

 

 

 

 

 

 

 

 

 

 

 Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

 

 Interest paid

$

-

 

$

-

 

$

-

 

 Income tax paid

$

-

 

$

-

 

$

-


See accompanying notes to the financial statements.



8



Wellness Center USA, Inc.

(A Development Stage Company)

March 31, 2012 and 2011

Notes to the Financial Statements

(Unaudited)


Note 1 - Organization and Operations


Wellness Center USA, Inc., a development stage company, (the “Company”) was incorporated on June 30, 2010 under the laws of the State of Nevada. The Company engages in online sports and nutrition supplements marketing and distribution through its website www.aminofactory.com.


Note 2 - Summary of Significant Accounting Policies


Basis of Presentation – Unaudited Interim Financial Information


The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for the interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented.  Unaudited interim results are not necessarily indicative of the results for the full fiscal year.  These financial statements should be read in conjunction with the financial statements of the Company for the fiscal year ended September 30, 2011 and notes thereto contained in the information filed as part of the Company’s Annual Report on Form 10K filed with the SEC on December 13, 2011.


Development Stage Company


The Company is a development stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification. Although the Company has recognized some nominal amount of revenue since inception, the Company is still devoting substantially all of its efforts on establishing the business and its planned principal operations have not commenced.  All losses accumulated since inception have been considered as part of the Company's development stage activities.


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.


The Company’s significant estimates and assumptions include the fair value of financial instruments; the carrying value, recoverability and impairment, if any, of long-lived assets, including the values assigned to and the estimated useful life of office equipment; expected term of share options and similar instruments, expected volatility of the entity’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk free rate(s); income tax rate, income tax provision, deferred tax assets, deferred tax assets and the valuation allowance of deferred tax assets, and the assumption that the Company will continue as a going concern.  Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.


Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.


Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.  Actual results could differ from those estimates.



9




Fair Value of Financial Instruments


The Company follows paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments and paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels.  The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:


Level 1

 

Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

 

 

 

Level 2

 

Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

 

 

 

Level 3

 

Pricing inputs that are generally observable inputs and not corroborated by market data.


Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.


The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.  If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.


The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts payable and accrued expenses approximate their fair values because of the short maturity of these instruments.


Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.


It is not, however, practical to determine the fair value of advances from stockholders due to their related party nature.


Carrying Value, Recoverability and Impairment of Long-Lived Assets


The Company has adopted paragraph 360-10-35-17 of the FASB Accounting Standards Codification for its long-lived assets. The Company’s long-lived assets, which include office equipment and website development cost, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.


The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets.  Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.  If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.


The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes.  The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.


The impairment charges, if any, is included in operating expenses in the accompanying statements of operations.



10




Fiscal Year End


The Company elected September 30th as its fiscal year end date upon its formation.


Cash Equivalents


The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.


Office Equipment


Office equipment is recorded at cost.  Expenditures for major additions and betterments are capitalized.  Maintenance and repairs are charged to operations as incurred.  Depreciation of office equipment is computed by the straight-line method (after taking into account their respective estimated residual values) over the assets estimated useful life of five (5) years.  Upon sale or retirement of office equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations.


Website Development Cost


Website development cost is stated at cost less accumulated amortization. The cost of the website development is amortized on a straight-line basis over its estimated useful life of three (3) years. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.


Related Parties


The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.


Pursuant to Section 850-10-20 the Related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.


The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involvedb. description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. mounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.


Commitment and Contingencies


The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur.  The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.  In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.



11




If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements.  If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.


Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.  Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.


Revenue Recognition


The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition.  The Company will recognize revenue when it is realized or realizable and earned.  The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.


Shipping and Handling Costs


The Company accounts for shipping and handling fees in accordance with paragraph 605-45-45-19 of the FASB Accounting Standards Codification.  While amounts charged to customers for shipping products are included in revenues, the related costs are classified in cost of goods sold as incurred.


Stock-Based Compensation for Obtaining Employee Services


The Company accounts for its stock based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, 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.  The measurement date used to determine the fair value of the equity instruments issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.


The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model.  The ranges of assumptions for inputs are as follows:


·

Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2 of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments.  The Company uses historical data to estimate employee termination behavior.  Pursuant to paragraph 718-50-S99-1, it may be appropriate to use the simplified method, if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.



12




·

Expected volatility of the entity’s shares and the method used to estimate it.  An entity that uses a method that employs different volatilities during the contractual term shall disclose the range of expected volatilities used and the weighted-average expected volatility.  A thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for it to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index.  The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility.  If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.


·

Expected dividends.  An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends.  The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options or similar instruments.


·

Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used.  The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options or similar instruments.


The Company’s policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over the requisite service period for the entire award.


Equity Instruments Issued to Parties other than Employees for Acquiring Goods or Services


The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of section 505-50-30 of the FASB Accounting Standards Codification (“Section 505-50-30”).


Pursuant to Section 505-50-30, 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.  The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.


The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model.  The ranges of assumptions for inputs are as follows:


·

Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments.  The Company uses historical data to estimate holder’s expected exercise behavior.  Pursuant to paragraph 718-50-S99-1, it may be appropriate to use the simplified method, if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.


·

Expected volatility of the entity’s shares and the method used to estimate it.  Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for it to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index.  The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility.  If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.



13




·

Expected annual rate of quarterly dividends.  An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends.  The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.


·

Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used.  The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments.


Pursuant to ASC paragraph 505-50-25-7, if fully vested, nonforfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, nonforfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services. Section 505-50-30 provides guidance on the determination of the measurement date for transactions that are within the scope of this Subtopic.


Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9,an entity may grant fully vested, nonforfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a stock option that the counterparty has the right to exercise expires unexercised.


Pursuant to Paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded.


Income Tax Provision


The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which the differences are expected to reverse.  Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Income and Comprehensive Income in the period that includes the enactment date.


The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”) with regards to uncertainty income taxes.  Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.  Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.  The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.


The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.



14




Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.


Uncertain Tax Positions


The Company did not take any uncertain tax positions and had no adjustments to unrecognized income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the interim period ended March 31, 2012 or 2011.


Net Income (Loss) per Common Share


Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification.  Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.  Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through stock options and warrants.


The following table shows the number of potentially outstanding dilutive common shares excluded from the diluted net income (loss) per common share calculation as they were anti-dilutive:


 

Potentially Outstanding Dilutive Common Shares

 

For the

Interim Period

Ended

March 31,

2012

 

For the Interim

Period

Ended

March 31,

2011

Stock options

 

 

 

 

 

 

 

Stock options issued on June 30, 2010 to the founder of the Company upon formation with an exercise price of $0.01 per share expiring five (5) years from the date of issuance

1,600,000

 

1,600,000

 

 

 

 

Stock options issued on November 30, 2010 to the members of board of directors of the Company with an exercise price of $0.01 per share expiring five (5) years from the date of issuance

200,000

 

200,000

 

 

 

 

Stock options issued on March 13, 2012  to a consultant with an exercise price of $0.44 per share expiring five (5) years from the date of issuance

50,000

 

-

 

 

 

 

Sub-total: stock options

1,850,000

 

1,800,000

 

 

 

 

Warrants

 

 

 

 

 

 

 

Warrants issued on November 10, 2010  to investor in connection with the Company’s November 10, 2010 equity financing with an exercise price of $0.01 per share expiring five (5) years from the date of issuance

1,600,000

 

1,600,000

 

 

 

 

Warrants issued on November 30, 2010 to investor with an exercise price of $0.01 per share expiring five (5) years from the date of issuance

4,718,334

 

4,718,334

 

 

 

 

Warrants issued on November 30 , 2010 for services with an exercise price of $0.01 per share expiring five (5) years from the date of issuance

375,000

 

375,000

 

 

 

 

Warrants issued on March 8, 2012 to investor with an exercise price of $0.50 per share expiring five (5) years from the date of issuance

190,000

 

-

 

 

 

 

Warrants issued on March 15, 2012 to investor with an exercise price of $0.75 per share expiring five (5) years from the date of issuance

75,000

 

-

 

 

 

 

Sub-total: warrants

6,958,334

 

6,693,334

 

 

 

 

Total potentially outstanding dilutive common shares

8,808,334

 

8,493,334




15




Cash Flows Reporting

 

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments.  The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.


Subsequent Events


The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued.  Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.


Recently Issued Accounting Pronouncements


FASB Accounting Standards Update No. 2011-05


In June 2011, the FASB issued the FASB Accounting Standards Update No. 2011-05 “Comprehensive Income” (“ASU 2011-05”), which was the result of a joint project with the IASB and amends the guidance in ASC 220, Comprehensive Income, by eliminating the option to present components of other comprehensive income (OCI) in the statement of stockholders’ equity. Instead, the new guidance now gives entities the option to present all non-owner changes in stockholders’ equity either as a single continuous statement of comprehensive income or as two separate but consecutive statements. Regardless of whether an entity chooses to present comprehensive income in a single continuous statement or in two separate but consecutive statements, the amendments require entities to present all reclassification adjustments from OCI to net income on the face of the statement of comprehensive income.


The amendments in this Update should be applied retrospectively and are effective for public entity for fiscal years, and interim periods within those years, beginning after December 15, 2011.


FASB Accounting Standards Update No. 2011-08


In September 2011, the FASB issued the FASB Accounting Standards Update No. 2011-08 “Intangibles—Goodwill and Other: Testing Goodwill for Impairment” (“ASU 2011-08”). This Update is to simplify how public and nonpublic entities test goodwill for impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.


The guidance is effective for interim and annual periods beginning on or after December 15, 2011. Early adoption is permitted.


FASB Accounting Standards Update No. 2011-10


In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-10 “Property, Plant and Equipment: Derecognition of in Substance Real Estate-a Scope Clarification” (“ASU 2011-09”). This Update is to resolve the diversity in practice as to how financial statements have been reflecting circumstances when parent company reporting entities cease to have controlling financial interests in subsidiaries that are in substance real estate, where the situation arises as a result of default on nonrecourse debt of the subsidiaries.


The amended guidance is effective for annual reporting periods ending after June 15, 2012 for public entities. Early adoption is permitted.



16




FASB Accounting Standards Update No. 2011-11


In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-11 “Balance Sheet: Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). This Update requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS.


The amended guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.


FASB Accounting Standards Update No. 2011-12


In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-12 “Comprehensive Income:  Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05” (“ASU 2011-12”). This Update is a deferral of the effective date pertaining to reclassification adjustments out of accumulated other comprehensive income in ASU 2011-05. FASB is to going to reassess the costs and benefits of those provisions in ASU 2011-05 related to reclassifications out of accumulated other comprehensive income. Due to the time required to properly make such a reassessment and to evaluate alternative presentation formats, the FASB decided that it is necessary to reinstate the requirements for the presentation of reclassifications out of accumulated other comprehensive income that were in place before the issuance of Update 2011-05.


All other requirements in Update 2011-05 are not affected by this Update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011.


Other Recently Issued, but not yet Effective Accounting Pronouncements


Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.


Note 3 – Going Concern


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.


As reflected in the accompanying financial statements, the Company had a deficit accumulated during the development stage at March 31, 2012, a net loss and net cash used in operating activities for the interim period then ended, respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern.


While the Company is attempting to commence operations and generate sufficient revenues, the Company’s cash position may not be sufficient enough to support the Company’s daily operations.  Management intends to raise additional funds by way of a public or private offering.  Management believes that the actions presently being taken to further implement its business plan and generate sufficient revenues provide the opportunity for the Company to continue as a going concern.  While the Company believes in the viability of its strategy to generate sufficient revenues and in its ability to raise additional funds, there can be no assurances to that effect.  The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient revenues.


The financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.



17




Note 4 – Office Equipment


Office equipment, stated at cost, less accumulated depreciation at March 31, 2012 and September 30, 2011 consisted of the following:


 

Estimated

Useful Life (Years)

 

March 31,

2012

 

September 30,

2011

 

 

 

 

 

 

 

 

Office equipment

5

 

$

1,150

 

$

1,150

 

 

 

 

 

 

 

 

 

 

 

 

1,150

 

 

1,150

 

 

 

 

 

 

 

 

Less accumulated depreciation

 

 

 

(479)

 

 

(288)

 

 

 

 

 

 

 

 

 

 

 

$

671

 

$

862


Depreciation Expense


The Company acquired the office equipment on December 7, 2010 and started to depreciate as of January 1, 2011.  Depreciation expense for the interim period ended March 31, 2012 and 2011 was $191 and $96, respectively.


Note 5 – Website Development Cost


Website development cost, stated at cost, less accumulated amortization at March 31, 2012 and September 30, 2011 consisted of the following:


 

Estimated Useful

Life (Years)

 

March 31,

2012

 

September 30,

2011

 

 

 

 

 

 

 

 

Website development cost

3

 

$

15,599

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

15,599

 

 

-

 

 

 

 

 

 

 

 

Less accumulated amortization

 

 

 

(-)

 

 

(-)

 

 

 

 

 

 

 

 

 

 

 

$

15,599

 

$

-


Amortization Expense


The Company retained an unrelated third party to develop its website and completed its website development at the end of March 2012 and started to amortize as of April 1, 2012.


Note 6 – Related Party Transactions


Related Parties


Related parties with whom the Company had transactions are:


Related Parties

 

Relationship

Andrew J. Kandalepas

 

Chairman, CEO and majority stockholder of the Company

 

 

 

CADserv Corporation

 

An entity owned and controlled by majority stockholder of the Company


Advances from Stockholder


From time to time, stockholders of the Company advance funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and due on demand.



18




Advances from stockholder at March 31, 2012 and September 30, 2011, consisted of the following:


 

 

March 31,

2012

 

September 30,

2011

 

 

 

 

 

 

 

Advances from stockholder

 

$

149,375

 

$

134,875

 

 

 

 

 

 

 

 

 

$

149,375

 

$

134,875


For the period from June 30, 2010 (inception) through September 30, 2010, the Company received advances from its founder of $53,075 in aggregate for working capital purposes.


For the fiscal year ended September 30, 2011, the Company received advances from its founder of $81,800 in aggregate for working capital purposes.


For the interim period ended March 31, 2012, the Company received advances from its founder of $14,500 in aggregate for working capital purposes.


Operating Lease with a Related Party


On December 20, 2010 the Company entered into a non-cancellable sub-lease for office space in Illinois with CADserv Corporation for $1,909.50 per month for the period from January 1, 2011 through December 31, 2011.


On January 10, 2012 the Company renewed the non-cancellable sub-lease for office space in Illinois with CADserv Corporation with the same terms and condition for the period from January 1, 2012 through December 31, 2012.


Future minimum lease payments required under the non-cancelable operating lease are as follows:


Fiscal year ending September 30:

 

 

 

 

 

 

 

2012 (remainder of the fiscal year)

 

$

11,457

 

 

 

 

2013

 

 

5,728

 

 

 

 

 

 

$

17,185


Note 7 – Stockholders’ Deficit


Shares Authorized


Upon formation the total number of shares of all classes of stock which the Company is authorized to issue is Seventy Five Million (75,000,000) shares of which Seventy Five Million (75,000,000) shares shall be Common Stock, par value $.001 per share.


Common Stock


Issuance of Common Stock or Equity Units for Obtaining Employee Services


Upon formation the Company issued to the Company’s founder (i) 3,665,000 shares of its common stock valued at par, or $3,665 and (ii) an option to purchase 1,600,000 shares of its common stock with an exercise price of $0.01 per share expiring five (5) years from the date of issuance valued at nil, on the date of grant, as officer's compensation.


Sale of Common Stock or Equity Units


On November 10, 2010 the Company issued (i) 2,557,500 shares of its common stock and (ii) warrants to purchase 1,600,000 shares of common stock with an exercise price of $0.01 per share expiring five (5) years from the date of issuance for $2,557.50 in cash.  No value was allocated to the warrants due to the fact that the equity units were sold at par value of $0.001 per unit.


On November 30, 2010 the Company issued (i) 7,982,500 shares of its common stock and (ii) warrants to purchase 4,718,334 shares of common stock with an exercise price of $0.01 per share expiring five (5) years from the date of issuance for $7,982.50 in cash.  No value was allocated to the warrants due to the fact that the equity units were sold at par value of $0.001 per unit.



19




On March 8, 2012 the Company issued (i) 95,000 shares of its common stock and (ii) warrants to purchase 190,000 shares of common stock with an exercise price of $0.50 per share expiring five (5) years from the date of issuance. The units were sold at $0.50 per unit consisting one common share and the warrant to purchase two (2) common shares for an aggregate of $47,500, $22,753 and $24,652 of which were allocated as the relative fair value of the common stock and warrants, respectively.


On March 15, 2012 the Company issued (i) 75,000 shares of its common stock and (ii) warrants to purchase 75,000 shares of common stock with an exercise price of $0.75 per share expiring five (5) years from the date of issuance. The units were sold at $0.75 per unit consisting one common share and the warrant to purchase one (1) common share for an aggregate of $56,250, $36,450 and $19,800 of which were allocated as the relative fair value of the common stock and warrants, respectively.


Issuance of Common Stock or Equity Units to Parties Other Than Employees for Acquiring Goods or Services


On November 30, 2010 the Company issued (i) 375,000 shares of its common stock, valued at $375 on the date of issuance and (ii) warrants to purchase 375,000 shares of common stock with an exercise price of $0.01 per share expiring five (5) years from the date of issuance, valued at $38 on the date of issuance for services.


On November 30, 2010 the Company issued 250,000 shares of its common stock to consultants pursuant to an agreement, valued at $250 on the date of issuance for future professional services, which was cancelled on June 16, 2011.


On November 30, 2010 the Company issued (i) 200,000 shares of its common stock, valued at $200 on the date of issuance and (ii) options to purchase 200,000 shares of common stock with an exercise price of $0.01 per share expiring five (5) years from the date of issuance, valued at $20 on the date of issuance to the newly appointed members of the board of directors as compensation.


On June 30, 2011 the Company issued 125,000 shares each or 250,000 shares of its common stock in aggregate, valued at $250 on the date of issuance to the two (2) outside members of the board of directors as compensation.


On March 13, 2012, the Company entered into a consulting agreement (the "Consulting Agreement"), with a Consultant (the "Consultant”). Under the terms of the Consulting Agreement, the Company agreed to retain the Consultant and the Consultant agreed to identify possible sources of working capital for the Company for a period of one (1) year from the date of signing.  As consideration for the services, the Company granted (i) 50,000 shares of its common stock and (ii) options to purchase 50,000 shares of common stock with an exercise price of $0.44 per share expiring five (5) years from the date of issuance to the Consultant.  The common shares and warrants are earned ratable over the term of the Consulting Agreement every three (3) months and the unearned shares are forfeitable in the event of nonperformance by the Consultant.


Pursuant to Paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the issuance date and no entry should be recorded.


12,500 common shares and an option to purchase 12,500 common shares with an exercise price of $0.44 per share each are to be earned on a quarterly basis. None of the common shares or options for quarter ended March 31, 2012 were earned.


Stock Options


2010 Non-Qualified Stock Option Plan (“2010 Option Plan”)


On December 22, 2010, effective retroactively as of June 30, 2010, the Company’s board of directors approved the adoption of the “2010 Non-Qualified Stock Option Plan” (“2010 Option Plan”) by unanimous consent.  The 2010 Option Plan was initiated to encourage and enable officers, directors, consultants, advisors and key employees of the Company to acquire and retain a proprietary interest in the Company by ownership of its common stock.  A total of 7,500,000 of the authorized shares of the Company’s common stock may be subject to, or issued pursuant to, the terms of the plan.


Pursuant to Section 7 - Adjustments or Changes in Capitalization of the Stock Option Plan, the number of shares to be received upon the exercise of the option and the exercise price to be paid for a share hereinafter sometimes referred to as “Exercise Price” which may be adjusted from time to time as hereinafter as follows:


7.1

In the event that the outstanding Common Shares of the Company are hereafter changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of merger, consolidation, other reorganization, recapitalization, reclassification, combination of shares, stock split-up or stock dividend:



20




A.

Prompt, proportionate, equitable, lawful and adequate adjustment shall be made of the aggregate number and kind of shares subject to Stock Options which may be granted under the Plan, such that the Optionee shall have the right to purchase such Common Shares as may be issued in exchange for the Common Shares purchasable on exercise of the NQSO had such merger, consolidation, other reorganization, recapitalization, reclassification, combination of shares, stock split-up or stock dividend not taken place;


B.

Rights under unexercised Stock Options or portions thereof granted prior to any such change, both as to the number or kind of shares and the exercise price per share, shall be adjusted appropriately, provided that such adjustments shall be made without change in the total exercise price applicable to the unexercised portion of such NQSO’s but by an adjustment in the price for each share covered by such NQSO’s; or


C.

Upon any dissolution or liquidation of the Company or any merger or combination in which the Company is not a surviving corporation, each outstanding Stock Option granted hereunder shall terminate, but the Optionee shall have the right, immediately prior to such dissolution, liquidation, merger or combination, to exercise his NQSO in whole or in part, to the extent that it shall not have been exercised, without regard to any installment exercise provisions in such NQSO.


7.2

The foregoing adjustments and the manner of application of the foregoing provisions shall be determined solely by the Committee, whose determination as to what adjustments shall be made and the extent thereof, shall be final, binding and conclusive. No fractional Shares shall be issued under the Plan on account of any such adjustments.


The Company’s policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over the requisite service period for the entire award.  Additionally, the Company’s policy is to issue new shares of common stock to satisfy stock option exercises.


June 30, 2010 Issuance


On June 30, 2010, upon formation, the Company issued an option to purchase 1,600,000 shares of common stock to the Company’s founder at $0.01 per share.


The stock options were valued using the Black-Scholes option-pricing model with the following weighted-average assumptions:


 

June 30, 2010

Expected life (year)

5

 

 

 

 

Expected volatility (*)

63.78

%

 

 

 

Risk-free rate(s)

1.79

%

 

 

 

Expected dividends

0.00

%


* As a newly formed entity it is not practicable for the Company to estimate the expected volatility of its share price. The Company selected five (5) comparable public companies listed on NYSEAmex and NASDAQ Capital Market within nutritional supplements industry which the Company plans to engage in to calculate the expected volatility.  The Company calculated those five (5) comparable companies’ historical volatility over the expected life of the options or warrants and averaged them as its expected volatility.


The Company estimated the fair value of the stock options issued under the 2010 Option Plan on the date of grant using the Black-Scholes Option Pricing Model at nil as compensation.


November 30, 2010 Issuance


On November 30, 2010, the Company issued an option to purchase 200,000 shares of common stock to the newly appointed members of the board of directors with an exercise price of $0.01 per share as part of the professional services.



21




The stock options were valued using the Black-Scholes option-pricing model with the following weighted-average assumptions:


 

November 30,

2010

Expected life (year)

5

 

 

 

 

Expected volatility (*)

63.78

%

 

 

 

Expected annual rate of quarterly dividends

0.00

%

 

 

 

Risk-free rate(s)

1.47

%


* As a newly formed entity it is not practicable for the Company to estimate the expected volatility of its share price.  The Company selected five (5) comparable public companies listed on NYSE Amex and NASDAQ Capital Market within nutritional supplements industry which the Company plans to engage in to calculate the expected volatility.  The Company calculated those five (5) comparable companies’ historical volatility over the expected life and averaged them as its expected volatility.


The Company estimated the fair value of the stock options on the date of grant using the Black-Scholes Option Pricing Model was $20 at the date of grant.


March 13, 2012 Issuance


On March 13, 2012, the Company issued an option to purchase 50,000 shares of common stock to the consultant with an exercise price of $0.44 per share as part of the future professional services.


The Company did not estimate the fair value of the stock options on the date of grant using the Black-Scholes Option Pricing Model as none of the options was earned as of March 31, 2012.


Summary of the Company’s Stock Option Activities


The table below summarizes the Company’s stock option activities through March 31, 2012:


 

Number

of

Option

Shares

 

Exercise

P rice

Range

Per Share

 

Weighted

Average

Exercise

Price

 

Fair Value

at Date of

Grant

 

Aggregate

Intrinsic

Value

Balance, June 30, 2010

1,600,000

 

$

0.01

 

$

0.01

 

 

*

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

-

 

 

-

 

 

-

 

 

 

 

 

-

Canceled

-

 

 

-

 

 

-

 

 

 

 

 

-

Exercised

-

 

 

-

 

 

-

 

 

 

 

 

-

Expired

-

 

 

-

 

 

-

 

 

 

 

 

-

Balance, September 30, 2010

1,600,000

 

$

0.01

 

$

0.01

 

 

*

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

200,000

 

 

0.01

 

 

0.01

 

 

20

 

 

-

Canceled

-

 

 

-

 

 

-

 

 

 

 

 

-

Exercised

-

 

 

-

 

 

-

 

 

 

 

 

-

Expired

-

 

 

-

 

 

-

 

 

 

 

 

-

Balance, September 30, 2011

1,800,000

 

$

0.01

 

$

0.01

 

$

20

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

50,000

 

 

0.44

 

 

0.44

 

 

**

 

 

-

Canceled

-

 

 

-

 

 

-

 

 

 

 

 

-

Exercised

-

 

 

-

 

 

-

 

 

 

 

 

-

Expired

-

 

 

-

 

 

-

 

 

 

 

 

-

Balance, March 31, 2012

1,850,000

 

$

0.01

 

$

0.02

 

$

20

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vested and exercisable, March 31, 2012

1,800,000

 

$

0.01

 

$

0.01

 

$

20

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unvested, March 31, 2012

50,000

 

$

0.44

 

$

0.44

 

$

**

 

$

-


* - nil

** - To be measured when it is earned.



22




The following table summarizes information concerning outstanding and exercisable options as of March 31, 2012:


 

 

Options Outstanding

 

Options Exercisable

Range of

Exercise

Prices

 

Number

Outstanding

 

Average

Remaining

Contractual

Life

(in years)

 

Weighted

Average

Exercise

Price

 

Number

Exercisable

 

Average

Remaining

Contractual

Life

(in years)

 

Weighted

Average

Exercise

Price

$0.01

 

 

1,600,000

 

 

3.25

 

$

0.01

 

 

1,600,000

 

 

3.25

 

$

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$0.01

 

 

200,000

.

 

3.62

 

 

0.01

 

 

200,000

 

 

3.62

 

 

0.01

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$0.44

 

 

50,000

 

 

4.95

 

 

0.44

 

 

-

 

 

4.95

 

 

0.44

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$0.01 - 0.44

 

 

1,850,000

 

 

3.34

 

$

0.02

 

 

1,800,000

 

 

3.34

 

$

0.02


As of March 31, 2012, there were 5,650,000 shares of stock options remaining available for issuance under the 2010 Plan.


Warrants


November 2010 Issuances


In November 2010, the Company issued (i) warrants to purchase 6,318,334 shares of the Company’s common stock to the investors with an exercise price of $0.01 per share expiring five (5) years from the date of issuance in connection with the sale of common shares in November 2010 (the “2010 Offering”) which were valued at zero due to the fact that those equity units were sold at par of $0.001, (ii) warrants to purchase 375,000 shares of the Company’s common stock to stockholder with an exercise price of $0.01 per share expiring five (5) years from the date of issuance as part of the professional services, valued at $38 on the date of grant, all of which have been earned upon issuance.


Significant terms of the warrants include Section (F) Anti-dilution provisions and (G) Registration rights.


Pursuant to Section (F) Anti-dilution provisions of the warrant, the number of shares to be received upon the exercise of the warrant and the exercise price to be paid for a share hereinafter sometimes referred to as “Exercise Price” which may be adjusted from time to time as hereinafter provided:


(1)

In case the Company shall issue Shares as a dividend upon Shares or in payment of a dividend thereon, or shall subdivide the number of outstanding Shares into a greater number of shares or shall contract the number of outstanding Shares into a lesser number of shares, the Exercise Price then in effect shall be adjusted, effective at the close of business on the record date for the determination of shareholders entitled to receive the same, to the price (computed to the nearest cent) determined by dividing: (a) the product obtained by multiplying the Exercise Price in effect immediately prior to the close of business on such record date by the number of Shares outstanding prior to such dividend, subdivision or contraction; by (b) the sum of the number of Shares outstanding immediately after such dividend, subdivision, or contraction.


(2)

If any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets to another corporation shall be effected, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be made whereby the Holder of each Warrant shall thereafter have the right to purchase and receive upon the basis and upon the terms and conditions specified in the Warrant and in lieu of the Shares of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented by such Warrant, such Shares, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding Shares immediately theretofore purchasable and receivable upon the exercise of the rights represented by such Warrant had such reorganization, reclassification, consolidation, merger or sale not taken place, and in any such case appropriate provision shall be made with respect to the rights and interest of the Holder to the end that the provisions of the Warrant (including, without limitation, provisions for adjustment of the Exercise Price and of the number of Shares issuable upon the exercise of Warrants) shall thereafter be applicable as nearly as may be practicable in relation to any shares of stock, securities, or assets thereafter deliverable upon exercise of Warrants. The Company shall not affect any such consolidation, merger or sale unless prior to or simultaneously with the consummation thereof, the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall assume, by written instrument, the obligation to deliver to the Holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, the Holder may be entitled to purchase.



23




(3)

Upon each adjustment of the Exercise Price pursuant to this Section (F), the number of shares of Common Stock specified in each Warrant shall thereupon evidence the right to purchase that number of shares of Common Stock (calculated to the nearest hundredth of a share of Common Stock) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock purchasable immediately by the Exercise Price in effect after such adjustment.


(4)

Irrespective of any adjustment of the number or kind of securities issuable upon exercise of Warrants or the Exercise Price, Warrants theretofore or thereafter issued may continue to express the same number of Shares and Exercise Price as are stated in similar Warrants previously issued.


(5)

The Company may, at its sole option, retain the independent public accounting firm regularly retained by the Company, or another firm of independent public accountants of recognized standing selected by the Company's Board of Directors, to make any computation required under this Section (F) and a certificate signed by such firm shall be conclusive evidence of any computation made under this Section (F).


(6)

Whenever there is an adjustment in the Exercise Price or in the number or kind of securities issuable upon exercise of the Warrants, or both, as provided in this Section (F), the Company shall: (i) promptly file in the custody of its Secretary or Assistant Secretary a certificate signed by the Chairman of the Board or the President or a Vice President of the Company and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company, showing in detail the facts requiring such adjustment and the number and kind of securities issuable upon exercise of each Warrant after such adjustment; and (ii) cause a notice stating that such adjustment has been effected and stating the Exercise Price then in effect and the number and kind of securities issuable upon exercise of each Warrant to be sent to each registered holder of Warrant.


(7)

In addition to the adjustments otherwise set forth in this Section (F), the Company, in its sole discretion, may reduce the Exercise Price or extend the expiration date of the Warrant.


(8)

The Exercise Price and the number of Shares issuable upon exercise of a Warrant shall be adjusted in the manner and only upon the occurrence of the events heretofore specifically referred to in this Section (F).


Pursuant to Section (G) Registration rights of the warrant, the warrant holder shall have piggyback registration rights as set forth in paragraph 12 of that certain Stockholder Subscription Agreement by and between the Company and the warrant holder.


The Company estimated the fair value of the warrants on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:


 

 

November 10,

2010

 

November 30,

2010

Expected life (year)

 

5

 

 

5

 

 

 

 

 

 

 

 

Expected volatility (*)

 

63.78

%

 

63.78

%

 

 

 

 

 

 

 

Expected annual rate of quarterly dividends

 

0.00

%

 

0.00

%

 

 

 

 

 

 

 

Risk-free rate(s)

 

1.23

%

 

1.47

%


* As a newly formed entity it is not practicable for the Company to estimate the expected volatility of its share price.  The Company selected five (5) comparable public companies listed on NYSEAmex and NASDAQ Capital Market within nutritional supplements industry which the Company plans to engage in to calculate the expected volatility.  The Company calculated those five (5) comparable companies’ historical volatility over the expected life of the options or warrants and averaged them as its expected volatility.


The aggregate fair value of the warrants issued on November 30, 2010 using the Black-Scholes Option Pricing Model was $38 at the date of issuance.


March 2012 Issuances


In March 2012, the Company issued (i) warrants to purchase 265,000 shares, in the aggregate, of the Company’s common stock to the investors with an exercise price ranging from $0.50 to $0.75 per share expiring five (5) years from the date of issuance in connection with the sale of common shares which were valued total $44,452.


Significant terms of the warrants include Section (F) Anti-dilution provisions and (G) Registration rights, same as that included in November 2010 issuances.



24




The Company estimated the relative fair value of the warrants on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:


 

 

March 8,

2012

 

March 15,

2012

Expected life (year)

 

5

 

 

5

 

 

 

 

 

 

 

 

Expected volatility (*)

 

64.53

%

 

64.53

%

 

 

 

 

 

 

 

Expected annual rate of quarterly dividends

 

0.00

%

 

0.00

%

 

 

 

 

 

 

 

Risk-free rate(s)

 

0.89

%

 

1.11

%


* As a newly formed entity it is not practicable for the Company to estimate the expected volatility of its share price.  The Company selected five (5) comparable public companies listed on NYSEAmex and NASDAQ Capital Market within nutritional supplements industry which the Company plans to engage in to calculate the expected volatility.  The Company calculated those five (5) comparable companies’ historical volatility over the expected life of the options or warrants and averaged them as its expected volatility.


The aggregate relative fair value of the warrants issued in March 2012 using the Black-Scholes Option Pricing Model was $44,452 at the date of issuance.


Summary of the Company’s Warrants Activities


The table below summarizes the Company’s warrants activities through March 31, 2012:


 

Number

of

Option

Shares

 

Exercise

P rice

Range

Per Share

 

Weighted

Average

Exercise

Price

 

Fair Value

at Date of

Grant

 

Aggregate

Intrinsic

Value

Balance, September 30, 2010

-

 

$

-

 

$

-

 

$

-

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

6,693,334

 

 

0.01

 

 

0.01

 

 

38

 

 

-

Canceled

-

 

 

-

 

 

-

 

 

 

 

 

-

Exercised

-

 

 

-

 

 

-

 

 

 

 

 

-

Expired

-

 

 

-

 

 

-

 

 

 

 

 

-

Balance, September 30, 2011

6,693,334

 

$

0.01

 

$

0.01

 

$

38

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

265,000

 

 

0.50-0.75

 

 

0.57

 

 

44,452

 

 

-

Canceled

-

 

 

-

 

 

-

 

 

-

 

 

-

Exercised

-

 

 

-

 

 

-

 

 

-

 

 

-

Expired

-

 

 

-

 

 

-

 

 

-

 

 

-

Balance, March 31, 2012

6,958,334

 

$

0.50-0.75

 

$

0.03

 

$

44,490

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earned and exercisable, March 31, 2012

6,958,334

 

$

0.50-0.75

 

$

0.03

 

$

44,490

 

$

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unvested, March 31, 2012

-

 

$

-

 

$

-

 

$

-

 

$

-




25




The following table summarizes information concerning outstanding and exercisable warrants as of March 31, 2012:


 

 

Options Outstanding

 

Options Exercisable

Range of

Exercise

Prices

 

Number

Outstanding

 

Average

Remaining

Contractual

Life

(in years)

 

Weighted

Average

Exercise

Price

 

Number

Exercisable

 

Average

Remaining

Contractual

Life

(in years)

 

Weighted

Average

Exercise

Price

$0.01 - 0.75

 

 

6,958,334

 

 

3.70

 

 

0.03

 

 

6,958,334

 

 

3.70

 

 

0.03

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$0.01 - 0.75

 

 

6,958,334

 

 

3.70

 

$

0.03

 

 

6,958,334

 

 

3.70

 

$

0.03


Note 8 – Subsequent Events


The Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were issued to determine if they must be reported.  The Management of the Company determined that there were no reportable subsequent events to be disclosed.



26




ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our financial statements and notes thereto. This section 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. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

 

Plan of Operations

 

We are a newly formed company, engaged in the development of an internet online store business, to market nutritional supplement solutions, through our registered website aminofactory.com, presently under development. Our planned product line shall consist of Amino acid supplements. Our target market is the sports industry and the general health minded public. Our current product portfolio consists of five Amino acid formulas and is available only to our Beta test customers. Beta testing is a pre-release trial phase conducted with customers outside the company who are willing to offer assistance in troubleshooting a product or process, prior to production release and real-world exposure. For their involvement, participants are normally offered discounted prices for products purchased during the Beta period and perhaps extended discounts for a period following the Beta test phase. Our Beta test clients are receiving a 25% discount during our Beta testing phase and a 10% discount on any product purchases within a six month period following completion of our Beta trial. We plan to conclude our testing phase on or before July 31, 2012. We have had minimal revenues, have had nominal operations and have $35,469 in cash as of March 31, 2012. We plan to continue developing our business and do not expect any product revenues for approximately six months from this date.


Letter of Understanding with Protein Factory (Manufacturer)


On October 3, 2011, the Company entered into a Letter of Understanding, providing for a non-exclusive and non-binding Value Added Distributorship (VAD) with Protein Factory Inc. Protein Factory Inc. is a New Jersey-based manufacturer and product fulfillment provider of nutritional vitamins and supplements, including customized Amino acid formulas. They carry branded name ingredients with trademarks and patents and are considered leaders in their field. Following are the principal terms of the Letter of Understanding (LOU).


LOU Summary of Terms:


1. LOU is applicable for a period of one (1) year with automatic renewal unless either party terminates the agreement in writing, sixty (60) days prior to the end of the agreement term.


2. The LOU is a non-binding and non-recourse instrument until such time as the parties agree to enter into a definitive and binding agreement. Following successful conclusion of our Beta trial, the Company will have the opportunity to execute a binding VAD agreement with Protein Factory.


3. The Company will make a market for certain specific products, independent of any marketing programs presently employed by Protein Factory Inc. As such, the Company will market Protein Factory’s products under a Value Added Distributorship arrangement.


4.  Under the VAD agreement, each of the parties shall be independent of each other’s financial, marketing and operational undertakings. Protein Factory shall make its products available to the Company at a pre-determined fixed price and the Company will create its own market price for its client base. Each party shall retain 100% of its respective revenue.


5. The VAD agreement does not restrict the Company’s ability to develop or offer products and services in addition to Protein Factory products, and the Company expects to offer products and services provided by other suppliers.



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Website Development Plan


At present, we have finalized phase 2 of our website development program and continue with Beta testing. Once the website is fully developed, our product portfolio shall be expanded to include a wider range of Amino acid offerings, including customized formulas uniquely tailored to fit each and every individual’s needs. Product portfolio expansion may also include additional Protein Factory products, as well as products and services provided by other suppliers. A customer will start by logging into our aminofactory.com website and shall be able to select an Amino acid supplement and/or nutritious formula combination, derived by the answers provided to the on-line questionnaires. Once a suitable supplement solution has been chosen by the client, the order shall be automatically placed for processing in our supplier’s factory. Product will be shipped directly by our supplier to the customer, within seven business days.


Product Manufacturing Plan


Our products are being produced by Protein Factory, a New Jersey manufacturer of Amino acid based nutritional products, to supply our initial custom orders during our Beta testing. Our present relationship as a Value Added Distributor (VAD) with Protein Factory is non-exclusive and non-binding. The products which we plan to sell can be also provided to our competitors by Protein Factory, or perhaps other suppliers. However, as a VAD of Protein Factory, we are able to specifically select our product portfolio and market it through our aminofactory.com website; with our custom packaging and pricing, and either with the Protein Factory label or our own aminofactory label. Following conclusion of our Beta testing, we will have the opportunity to execute a binding VAD agreement with Protein Factory. Further, in the near future, we plan to identify additional Amino acid suppliers to expand and diversify our product portfolio. Protein Factory is a licensed manufacturer of Amino acid products, including of the Ajinomoto brand. We have no direct relationship with Ajinomoto. We have selected Ajinomoto brand for inclusion in our product portfolio because its Amino acids are widely used, of good quality, and should be attractive to our potential customers. To process our customer orders automatically through our aminofactory.com website, we have linked aminofactory.com with Protein Factory for product placement and processing. We have also linked our website directly with our merchant banking account at Bank of America to receive credit card payments from our customers over the internet, when a product order is placed. Similar banking arrangements have been set up through Google and PAYPAL.


Marketing Plan


The Company is currently developing its marketing plan. We intend to create exposure of our products when ensured that our product thru-put is manageable and our order processing mechanisms are sufficiently tested. Once we have total assurance in our thru-put and order processing systems, we plan to begin our initial marketing campaign. Our main marketing and promotional vehicles will involve various internet search engine tools. The pace and size of our campaign will depend on the then available funding and product demand. However, if we have suitable product demand during our initial campaign, we believe that we will be able to pursue the potential capital needed to grow our operations accordingly.


Management


Presently, all business functions are managed by our CEO/director and founder, Andrew J. Kandalepas. He is responsible for developing and planning our business units, including product development, organizational structure, financing and administrational functions. His services shall be utilized until the Company is financially capable to engage additional staffing. At his discretion, Mr. Kandalepas has elected not to receive any compensation for his services, until the Company is financially capable to compensate him. He is also serving on the company’s board of directors, supported by two other directors.


Short Term Operating Requirements (first year) - Summary


For a period continuing through the next four months, we shall remain a development stage company; completing and testing our website and preparing our marketing plan. Our operational costs during this development period are expected to run at approximately $10,000/monthly. Following completion of our website and marketing plan development, we intend to begin implementation of our marketing campaign, on a limited basis, to ensure timely product delivery and good customer service. During this period which is estimated to consume approximately three months, we intend to hire two employees to support our marketing and customer support functions. As a result of our new hiring, our total costs shall increase to approximately $18,500/monthly. Therefore our anticipated capital requirements during the next seven months shall be:


 Operating Costs (4 months) - June 2012 to September 2012


$40,000

Operating Costs (3 months) - October 2012 to December 2012

$55,500

 

 

Total Operating Costs (7 months) - June 2012 to December 2012

$95,000



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Capital Source(s)


We are totally dependent upon our CEO/director and founder, Andrew J. Kandalepas to meet our operating financial requirements. Mr. Kandalepas, however, is under no obligation, formal or otherwise, to fund our operations. Mr. Kandalepas intends to provide the estimated $95,000 needed to support our operations for the next  seven months, but, there can be no assurance that Mr. Kandalepas will provide any additional funding we may need for operations. If for any reason Mr. Kandalepas ceases to provide sufficient working capital to the Company, we may have to curtail operations to keep our spending to the minimum to conserve cash or to cease operations entirely. From inception through March 31, 2012, Mr. Kandalepas provided advances to the Company in an aggregate amount of $149,375, for working capital purposes.  


Long Term Operating Requirements (second year) - Summary


As we begin our second year of operation, we will need additional staffing to support our sales administration and secretarial functions. As such, during the second year, we plan to hire two additional employees, one for sales administration and one secretarial. Our annual capital requirements during the second year of operation shall increase by approximately $80,000. Therefore our operating costs during the second year of operation are expected to be as follows:


 Operating Costs (6 months) - January 2013 to June. 2013

$151,000

Operating Costs (6 months) - July 2013 to December 2013

$151,000

 

 

Operating Costs – (12 months) - January 2013 to December 2013

$302,000

Total Operating Costs (including officer’s salary of $100K)

$402,000


Revenues/Capital Source(s)


We anticipate that during our second year, from January 2013 to June 2013, we can generate $350,000 in sale revenues, and an additional $600,000 during the following six months, from July 2013 to December 2013. Because of the customized nature of our product line and being a Value Added Distributor, we expect to realize profit margins in the range of 25% to 40%. Unlike Protein Factory’s affiliate program which is commission based, we are free to set our own pricing for the products we sell through our own website checkout payment method, and our own marketing strategy and expense. Based on our anticipated revenues during the second year of operation, our business can be self-sufficient and support additional growth.


Factors and Assumptions Affecting Future Performance


Given that we are currently in Beta testing of products and are operating at a point prior to implementation of our marketing plan, the level of future performance will be affected by a number of factors including, but not limited to, those identified in our prior periodic filings and our Form S-1/A which became effective on October 24, 2011. At this stage of business development, we have limited knowledge regarding anticipated levels of operations, sales and product demand. However, we are optimistic that our focus on Amino acid products will be embraced by our prospective customers and become a trusted supplier to them.


We believe that three key factors will determine our future performance expectations - they are demand driven indicators of revenues.


1. Cost of website traffic in building brand awareness

2. Conversion of web traffic into product acquisition for each of our five products

3. Customer experience and website ease in purchasing online - drive repeat purchases


We believe that our overall cost of sales will be manageable and transparent.  We also believe that we have reasonable expectations regarding our fixed costs with relative low sales volumes. Our business model should enable us to manage variable expenses as our suppliers bear all manufacturing, shipping and handling costs.


We will not retain any inventory and will therefore have the ability to increase or decrease our product portfolio, without significant financial consequences. We expect that this should provide us flexibility to select products which do well, and to eliminate those that do not, without significant financial penalties


Our future performance will depend on our ability to identify and address capital expenditures that will build brand awareness through website traffic. We must develop a marketing plan to properly address customer behavior, demographics, and product alternatives. We need to quantify spending requirements once we determine the yield per each dollar invested in customer acquisition.



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Because of these and other considerations, we are not able to provide a detailed profit and loss breakdown at this time. We have internally developed sales objectives and understand our costs well for the next twelve months but will need to formulate same for our long term plan.


We cannot project positive cash flow generation for the next twelve months. However, we do have internal plans and objectives to have positive cash flow generation beyond the second year. Accordingly, we foresee a negative EPS (earnings per share) for the current year.


If our revenues fall short of expectations and if additional capital is needed to support the Company’s ongoing needs, we may need to seek additional funding from Mr. Kandalepas or alternative potential sources. We believe Mr. Kandalepas has certain expertise that might aid efforts to obtain funding from alternative sources if he is unwilling or unable to provide funding himself; nevertheless, there can be no assurance that any additional funding will be available from Mr. Kandalepas or any alternative source.


Limited Operating History; Need for Additional Capital


There is no historical financial information about us on which to base an evaluation of our performance. We are a developmental stage company and have not generated revenues from operations. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, and possible cost overruns due to increases in the cost of services. To become profitable and competitive, we must receive additional capital. We have no assurance that future financing will materialize. If that financing is not available we may be unable to continue operations.


Results of Operations


For the six months ended March 31, 2012 and March 31, 2011, we had $1,100 and $0 in revenue, respectively. Operating expenses for the six months ended March 31, 2012 totaled $73,306, resulting in a loss of $73,043, as compared with operating expenses equal to $82,548 for the six month period ended March 31, 2011. Total operating costs for the six months of operations ended March 31, 2012 totaled $73,306. This included $4,750 in consulting fees, $42,227 in professional fees, $14,770 in rent expense to a related party, and $11,559 in general and administrative costs.


For the period from June 30, 2010 (inception) to March 31, 2012, we had $1,412 in revenue. Expenses for the period totaled $225,530, resulting in a net loss of $225,269.  Expenses for the period consisted of $55,163 in consulting fees, $3,665 in officer’s compensation, $101,562 in professional fees (including the cost related to our S-1 Registration Statement declared effective on October 24, 2011), $36,259 in rent expense to a related party, and $28,881 for General and Administrative expenses.


Liquidity and Capital Resources


As of March 31, 2012, our cash balance is $35,469. We believe that our cash balance in conjunction with additional capital to be raised and/or advances from our majority stockholder and president, the Company shall be able to sufficiently fund our limited levels of operations until the end of our next fiscal year, however no assurance can be given that additional capital and/or advances can be raised during the period. We are a developmental stage company and have only generated nominal revenue from inception to date. We expect to raise additional capital to have adequate funds available to pay for our minimum level of operations.


Our independent registered public accounting firm issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is due to the fact that we have only generated nominal revenues since inception. There is no assurance we will ever commence operations and become operational.


Off-Balance Sheet Arrangements


We have no 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.


Patents, Trademarks, Franchises, Concessions, Royalty Agreements, or Labor Contracts


We have no current plans for any registrations such as patents, trademarks, copyrights, franchises, concessions, royalty agreements or labor contracts. We will assess the need for any copyright, trademark or patent applications on an ongoing basis.



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Employees


We currently have no employees.


Critical Accounting Policies and Estimates


Basis of Presentation – Unaudited Interim Financial Information


The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for the interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim period presented.  Unaudited interim results are not necessarily indicative of the results for the full fiscal year.  These financial statements should be read in conjunction with the financial statements of the Company for the fiscal year ended September 30, 2011 and notes thereto contained in the information filed as part of the Company’s Annual Report on Form 10K filed with the SEC on December 13, 2011.


Development Stage Company


The Company is a development stage company as defined by section 915-10-20 of the FASB Accounting Standards Codification. Although the Company has recognized some nominal amount of revenue since inception, the Company is still devoting substantially all of its efforts on establishing the business and its planned principal operations have not commenced.  All losses accumulated since inception have been considered as part of the Company's development stage activities.


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.


The Company’s significant estimates and assumptions include the fair value of financial instruments; the carrying value, recoverability and impairment, if any, of long-lived assets, including the values assigned to and the estimated useful life of office equipment; expected term of share options and similar instruments, expected volatility of the entity’s common shares and the method used to estimate it, expected annual rate of quarterly dividends, and risk free rate(s); income tax rate, income tax provision, deferred tax assets, deferred tax assets and the valuation allowance of deferred tax assets, and the assumption that the Company will continue as a going concern.  Those significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to those estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.


Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.


Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.  Actual results could differ from those estimates.


Fair Value of Financial Instruments


The Company follows paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments and paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels.  The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:



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Level 1

 

Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

 

 

 

Level 2

 

Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

 

 

 

Level 3

 

Pricing inputs that are generally observable inputs and not corroborated by market data.


Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.


The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.  If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.


The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts payable and accrued expenses approximate their fair values because of the short maturity of these instruments.


Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.


It is not, however, practical to determine the fair value of advances from stockholders due to their related party nature.


Carrying Value, Recoverability and Impairment of Long-Lived Assets


The Company has adopted paragraph 360-10-35-17 of the FASB Accounting Standards Codification for its long-lived assets. The Company’s long-lived assets, which include office equipment and website development cost, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.


The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets.  Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.  If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.


The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes.  The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.


The impairment charges, if any, is included in operating expenses in the accompanying statements of operations.


Website Development Cost


Website development cost is stated at cost less accumulated amortization. The cost of the website development is amortized on a straight-line basis over its estimated useful life of three (3) years. Upon becoming fully amortized, the related cost and accumulated amortization are removed from the accounts.


Related Parties


The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.



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Pursuant to Section 850-10-20 the Related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.


The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.


Commitment and Contingencies


The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur.  The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.  In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.


If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements.  If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.


Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.  Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.


Revenue Recognition


The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition.  The Company will recognize revenue when it is realized or realizable and earned.  The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.


Shipping and Handling Costs


The Company accounts for shipping and handling fees in accordance with paragraph 605-45-45-19 of the FASB Accounting Standards Codification.  While amounts charged to customers for shipping products are included in revenues, the related costs are classified in cost of goods sold as incurred.



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Stock-Based Compensation for Obtaining Employee Services


The Company accounts for its stock based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, 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.  The measurement date used to determine the fair value of the equity instruments issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.


The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model.  The ranges of assumptions for inputs are as follows:


·

Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2 of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments.  The Company uses historical data to estimate employee termination behavior.  Pursuant to paragraph 718-50-S99-1, it may be appropriate to use the simplified method, if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.


·

Expected volatility of the entity’s shares and the method used to estimate it.  An entity that uses a method that employs different volatilities during the contractual term shall disclose the range of expected volatilities used and the weighted-average expected volatility.  A thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for it to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index.  The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility.  If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.


·

Expected dividends.  An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends.  The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options or similar instruments.


·

Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used.  The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options or similar instruments.


The Company’s policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight-line basis over the requisite service period for the entire award.


Equity Instruments Issued to Parties other than Employees for Acquiring Goods or Services


The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of section 505-50-30 of the FASB Accounting Standards Codification (“Section 505-50-30”).


Pursuant to Section 505-50-30, 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.  The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.



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The fair value of share options and similar instruments is estimated on the date of grant using a Black-Scholes option-pricing valuation model.  The ranges of assumptions for inputs are as follows:


·

Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments.  The Company uses historical data to estimate holder’s expected exercise behavior.  Pursuant to paragraph 718-50-S99-1, it may be appropriate to use the simplified method, if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.


·

Expected volatility of the entity’s shares and the method used to estimate it.  Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for it to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index.  The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility.  If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.


·

Expected annual rate of quarterly dividends.  An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends.  The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.


·

Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used.  The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments.


Pursuant to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services. Section 505-50-30 provides guidance on the determination of the measurement date for transactions that are within the scope of this Subtopic.


Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9,an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a stock option that the counterparty has the right to exercise expires unexercised.



35




Pursuant to Paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded.


Net Income (Loss) per Common Share


Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification.  Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.  Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through stock options and warrants.


For the Company’s significant accounting policies please refer to Note 2 - Summary of significant accounting policies to the financial statements.


Recent Accounting Pronouncements


FASB Accounting Standards Update No. 2011-05


In June 2011, the FASB issued the FASB Accounting Standards Update No. 2011-05 “Comprehensive Income” (“ASU 2011-05”), which was the result of a joint project with the IASB and amends the guidance in ASC 220, Comprehensive Income, by eliminating the option to present components of other comprehensive income (OCI) in the statement of stockholders’ equity. Instead, the new guidance now gives entities the option to present all non-owner changes in stockholders’ equity either as a single continuous statement of comprehensive income or as two separate but consecutive statements. Regardless of whether an entity chooses to present comprehensive income in a single continuous statement or in two separate but consecutive statements, the amendments require entities to present all reclassification adjustments from OCI to net income on the face of the statement of comprehensive income.


The amendments in this Update should be applied retrospectively and are effective for public entity for fiscal years, and interim periods within those years, beginning after December 15, 2011.


FASB Accounting Standards Update No. 2011-08


In September 2011, the FASB issued the FASB Accounting Standards Update No. 2011-08 “Intangibles—Goodwill and Other: Testing Goodwill for Impairment” (“ASU 2011-08”). This Update is to simplify how public and nonpublic entities test goodwill for impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount.


The guidance is effective for interim and annual periods beginning on or after December 15, 2011. Early adoption is permitted.


FASB Accounting Standards Update No. 2011-10


In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-10 “Property, Plant and Equipment: Derecognition of in Substance Real Estate-a Scope Clarification” (“ASU 2011-09”). This Update is to resolve the diversity in practice as to how financial statements have been reflecting circumstances when parent company reporting entities cease to have controlling financial interests in subsidiaries that are in substance real estate, where the situation arises as a result of default on nonrecourse debt of the subsidiaries.


The amended guidance is effective for annual reporting periods ending after June 15, 2012 for public entities. Early adoption is permitted.


FASB Accounting Standards Update No. 2011-11


In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-11 “Balance Sheet: Disclosures about Offsetting Assets and Liabilities” (“ASU 2011-11”). This Update requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The objective of this disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of IFRS.



36




The amended guidance is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.


FASB Accounting Standards Update No. 2011-12


In December 2011, the FASB issued the FASB Accounting Standards Update No. 2011-12 “Comprehensive Income:  Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05” (“ASU 2011-12”). This Update is a deferral of the effective date pertaining to reclassification adjustments out of accumulated other comprehensive income in ASU 2011-05. FASB is to going to reassess the costs and benefits of those provisions in ASU 2011-05 related to reclassifications out of accumulated other comprehensive income. Due to the time required to properly make such a reassessment and to evaluate alternative presentation formats, the FASB decided that it is necessary to reinstate the requirements for the presentation of reclassifications out of accumulated other comprehensive income that were in place before the issuance of Update 2011-05.


All other requirements in Update 2011-05 are not affected by this Update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011.


Other Recently Issued, but not yet Effective Accounting Pronouncements


Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk

 

Not required for smaller reporting Companies.


Item 4.  Controls and Procedures


Disclosure controls and procedures. Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are not effective as of March 31, 2012 because we do not have sufficient staff to segregate responsibilities and no written documentation of internal control policies. We plan to seek to correct these deficiencies during the current fiscal year or the next.


Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting that occurred during the quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

Item 1A. Risk Factors

 

Not required for smaller reporting companies.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 



37




Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. (Removed and Reserved)

  

Item 5. Other Information

 

None

 

Item 6. Exhibits

 

Exhibits No.

Descriptions

31.1

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(*)

32.1

Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification of Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (**)


(*) Included in Exhibit 31.1

(**) Included in Exhibit 32.1



38




SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  

WELLNESS CENTER USA, INC.

  

  

Date:  May 18, 2012

By:  

/s/ Andrew J. Kandalepas

  

  

Andrew J. Kandalepas

  

  

Chairman, Chief Executive Officer, Principal Accounting Officer, and Chief Financial Officer



POWER OF ATTORNEY


Known All Persons By These Present, that each person whose signature appears below appoints Mr. Andrew Kandalepas as his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, to sign any amendment (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he may do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or any of them, or of his/her substitutes, may lawfully do or cause to be done by virtue hereof.


Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated:



 

 

 

 

 

SIGNATURE

 

TITLE

 

DATE

 

 

 

 

 

/s/ Andrew J. Kandalepas

 

Chief Executive Officer, Chairman, Principal Accounting Officer, Chief Financial Officer, and Director

 

May 18, 2012

Andrew J. Kandalepas

 

 

 

 

 

 

 

 

 

/s/ Periklis Papadopoulos

 

Director

 

May 18, 2012

Periklis Papadopoulos

 

 

 

 

 

 

 

 

 

/s/ Evan T. Manolis

 

Director and Secretary

 

May 18, 2012

Evan T. Manolis

 

 

 

 




39


XOTC:WCUI Quarterly Report 10-Q Filling

XOTC:WCUI Stock - Get Quarterly Report SEC Filing of XOTC:WCUI stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

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XOTC:WCUI Quarterly Report 10-Q Filing - 3/31/2012
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