|• FORM 10-Q • EXHIBIT 31 • EXHIBIT 32 • EXHIBIT 3.3 • EXHIBIT 3.4 • XBRL INSTANCE DOCUMENT • XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT • XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT • XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT • XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT • XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT|
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 __________
Commission file number 000-53780
JOURNAL OF RADIOLOGY, INC.
(Exact name of registrant as specified in its charter)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the 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 þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. o
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
As of May 15, 2012, the registrant had 7,085,000 outstanding shares of Common Stock.
JOURNAL OF RADIOLOGY, INC.
(A Development Stage Company)
This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the 1933 Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). All statements other than statements of historical fact are forward-looking statements for purposes of this Quarterly Report on Form 10-Q, including any projections of earnings, revenue or other financial items, any statements regarding the plans and objectives of management for future operations, any statements concerning proposed new products or services, any statements regarding future economic conditions or performance, any statements regarding expected benefits from any transactions and any statements of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as may, will, expects, plans, anticipates, estimates, potential or continue, or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct and actual results could differ materially from those projected or assumed in the forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risk and uncertainties, including, but not limited to, the risk factors set forth in Part II, Item 1A Risk Factors below and for the reasons described elsewhere in this Quarterly Report on Form 10-Q. All forward looking statements and reasons why results may differ included in this report are made as of the date hereof and we do not intend to update any forward-looking statements except as required by law or applicable regulations. Except where the context otherwise requires, in this Quarterly Report on Form 10-Q, the Company, Journal of Radiology, we, us and our refer to Journal of Radiology, Inc., a Nevada corporation.
PART 1 FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited financial statements included herein have been prepared by Journal of Radiology, Inc. (the Company). In the opinion of management, the interim financial statements reflect all adjustments of a normal recurring nature necessary for a fair statement of the results for interim periods. It is suggested that these financial statements and notes to the financial statements be read in conjunction with the financial statements included in the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2011.
JOURNAL OF RADIOLOGY, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
JOURNAL OF RADIOLOGY, INC.
(A Development Stage Company)
Notes to Financial Statements
March 31, 2012
NOTE 1. NATURE AND BACKGROUND OF BUSINESS
Journal of Radiology, Inc. ("the Company" or "the Issuer") was organized under the laws of the State of Nevada on May 21, 2009. The Company was established as part of the Chapter 11 reorganization of AP Corporate Services, Inc. ("AP"). Under AP's Plan of Reorganization, as confirmed by the U.S. Bankruptcy Court for the Central District of California, the Company was organized to own and develop a professional journal devoted to radiology. Management believes the Company lacks the resources to effectively develop such a journal on its own at this time and is therefore engaged in a search for a strategic partner to assist in the development of the journal, or for a merger or acquisition partner with the resources to take the Company in a new direction and bring greater value to its shareholders.
The unaudited financial statements included herein have been prepared by the Company. In the opinion of management, the interim financial statements reflect all adjustments of a normal recurring nature necessary for a fair statement of the results for interim periods. It is suggested that these financial statements and notes to the financial statements be read in conjunction with the financial statements included in the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2011.
The Company has been in the development stage since its formation and has only one client from its planned operations.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. BASIS OF ACCOUNTING
The Company's financial statements are prepared using the accrual method of accounting. The Company has elected a June 30 year-end.
b. BASIC EARNINGS PER SHARE
ASC No. 260, Earnings Per Share, specifies the computation, presentation, and disclosure requirements for earnings (loss) per share for entities with publicly held common stock. The Company has adopted the provisions of ASC No. 260.
Basic net loss per share amount is computed by dividing the net loss by the weighted average number of common shares outstanding. In computing diluted earnings per share, the weighted average number of shares outstanding is adjusted to reflect the effect of potentially dilutive securities, such as stock options and warrants. Common stock equivalent shares are excluded from the computation if their effect is antidilutive. Common stock equivalents, which include warrants to purchase common stock, on March 31, 2012 and 2011 were not included in the computation of diluted earnings per share because the effect would be antidilutive.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
d. CASH and CASH EQUIVALENT
Investments with maturity of three months or less are considered to be cash equivalents.
The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits. At March 31, 2012 and June 30, 2011, the balance did not exceed the federally insured limit.
e. REVENUE RECOGNITION
The Company recognizes revenues and the related costs when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured. Amounts invoiced or collected in advance of product delivery or providing services are recorded as deferred revenue. The Company accrues for warranty costs, sales returns, bad debts, and other allowances based on its historical experience.
f. STOCK-BASED COMPENSATION
We follow ASC 718-10, "Stock Compensation", which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized. The Company has not adopted a stock option plan and has not granted any stock options. The Company granted stock awards, at par value, to its officers, directors and advisors for services rendered in its formation. Accordingly, stock-based compensation has been recorded to date.
g. INCOME TAXES
Income taxes are provided in accordance with Codifications topic 740, Income Taxes, which requires an asset and liability approach for the financial accounting and reporting of income taxes. Current income tax expense (benefit) is the amount of income taxes expected to be payable (receivable) for the current year. A deferred tax asset and/or liability is computed for both the expected future impact of differences between the financial statement and tax bases of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. Deferred income tax expense is generally the net change during the year in the deferred income tax asset and liability. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be more likely than not realized in future tax returns. Tax rate changes and changes in tax law are reflected in income in the period such changes are enacted.
h. IMPACT OF NEW ACCOUNTING STANDARDS
There have been no recent accounting pronouncements or changes in accounting pronouncements that impacted the second quarter of fiscal 2012, or which are expected to impact future periods that were not already adopted and disclosed in prior periods.
NOTE 3. GOING CONCERN
The Company's financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates course of business. Currently, the Company does not have significant cash or other material assets, nor does it have operations or a source of revenue sufficient to cover its operation costs and allow it to continue as a going concern. The officers and directors have committed to advancing certain operating costs of the Company.
Management plans to seek a strategic partner to assist in the development of the journal business, or a merger or acquisition partner with the resources to take the Company in a new direction and bring greater value to its
shareholders. Management has yet to identify any of these and there is no guarantee that the Company will be able to identify such opportunities in the future.
NOTE 4. FINANCIAL INSTRUMENTS
Fair value is defined as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity. In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.
In addition to defining fair value, the standard expands the disclosure requirements around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of the three levels which is determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are:
inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
inputs are based upon significant observable inputs other than quoted prices included in Level 1, such as quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
inputs are generally unobservable and typically reflect managements estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques.
The carrying value of the Companys financial assets and liabilities which consist of cash, accounts receivable, accounts payable and due to director in managements opinion approximate their fair value due to the short maturity of such instruments. These financial assets and liabilities are valued using level 3 inputs, except for cash which is at level 1. Unless otherwise noted, it is managements opinion that the Company is not exposed to significant interest, exchange or credit risks arising from these financial instruments.
NOTE 5. STOCKHOLDERS' EQUITY - COMMON STOCK
On April 5, 2012, the Board of Directors approved the creation of 5,000,000 of shares blank check preferred stock with a series of 1,000,000 shares of Preferred Stock, $0.01 par value per share, designated as Series A Convertible Preferred Stock. All share information has been revised to reflect the creation and designation of preferred stock since the Companys inception.
The authorized undesignated blank check preferred stock consists of 4,000,000 shares. The authorized Series A Convertible Preferred Stock consists of 1,000,000 shares with $0.01 par value per shares. Subject to the rights of the holder of any shares of any series of Preferred Stock ranking prior and superior to the shares of Series A Convertible Preferred Stock with respect to dividends, the holders of shares of Series A Convertible Preferred Stock, in preference to the holders of Common Stock. Subject to adjustment, each share of Series A Convertible Preferred shall entitle the holder thereof to 5,000 votes on all matters submitted to a vote of stockholders of the Corporation. As of March 31, 2012, there were no preferred shares issued and outstanding.
The authorized common stock of the Company consists of 75,000,000 shares with $0.001 par value. As of March 31, 2012, there were a total of 7,085,000 common shares issued and outstanding.
The Company's first stock issuance, totaling 1,085,000 shares, took place on May 21, 2009 pursuant to the Chapter 11 Plan of Reorganization confirmed by the U.S. Bankruptcy Court in the matter of AP Corporate Services, Inc. ("AP").
The Court ordered the distribution of shares in Journal of Radiology, Inc. to all general unsecured creditors of AP, with these creditors to receive their PRO RATA share (according to amount of debt held) of a pool of 80,000 shares in the Company.
The Court also ordered the distribution of shares in the Company to all shareholders of AP, with these shareholders to receive their PRO RATA share (according to number of shares held) of a pool of 5,000 shares in the Company.
The Court also ordered the distribution of shares and warrants in the Company to all administrative creditors of AP, with these creditors to receive one share and five warrants in the Company for each $0.10 of AP's administrative debt which they held. These creditors received an aggregate of 1,000,000 common shares in the Company and 5,000,000 warrants consisting of 1,000,000 "A Warrants" each convertible into one share of common stock at an exercise price of $1.00; 1,000,000 "B Warrants" each convertible into one share of common stock at an exercise price of $2.00; 1,000,000 "C Warrants" each convertible into one share of common stock at an exercise price of $3.00; 1,000,000 "D Warrants" each convertible into one share of common stock at an exercise price of $4.00; and 1,000,000 "E Warrants" each convertible into one share of common stock at an exercise price of $5.00. All warrants are exercisable at any time during the five year period immediately following the effective date January 4, 2009.
On July 6, 2009 the President of the Issuer acquired 6,000,000 common shares from the Issuer in a private placement for cash. The shares were purchased at par value ($0.001 per share) for a total investment of $6,000.
As a result of these issuances there were a total 7,085,000 common shares issued and outstanding, and a total of 5,000,000 warrants issued and outstanding, at March 31, 2012.
NOTE 6. ADVANCES
Advances are non-interest bearing, unsecured and have no specific terms of repayment.
NOTE 7. RELATED PARTY TRANSACTIONS
The Company received from a director, a related party, a $15,000 advance during the nine month period ended March 31, 2012 for the payment of expenses. This amount is included on the balance sheet as due to director as a current liability. Total amounts advanced as of March 31, 2012 and June 30, 2011 is $49,000 and $34,000, respectively. Amounts due to director are unsecured, non-interest bearing and have no specific terms of repayment.
The Company neither owns nor leases any real or personal property. An officer of the corporation provides office services without charge. Such costs are immaterial to the financial statements and accordingly, have not been reflected therein. The officers and directors for the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interests. The Company has not formulated a policy for the resolution of such conflicts.
NOTE 8. WARRANTS AND OPTIONS
On May 21, 2009 (inception), the Company issued 5,000,000 warrants exercisable into 5,000,000 shares of the Company's common stock. These warrants were issued per order of the U.S. Bankruptcy Court in the matter of AP Corporate Services, Inc. ("AP") to the administrative creditors of AP. These creditors received an aggregate of 5,000,000 warrants consisting of 1,000,000 "A Warrants" each convertible into one share of common stock at an exercise price of $1.00; 1,000,000 "B Warrants" each convertible into one share of common stock at an exercise price of $2.00; 1,000,000 "C Warrants" each convertible into one share of common stock at an exercise price of $3.00; 1,000,000 "D Warrants" each convertible into one share of common stock at an exercise price of $4.00; and
1,000,000 "E Warrants" each convertible into one share of common stock at an exercise price of $5.00. All warrants are exercisable at any time prior to January 4, 2014. As of the date of this report, no warrants have been exercised.
The fair value of these warrants was estimated at the date of the Company's inception, May 21, 2009, which was also the date of the grant, using the Black-Scholes Option Pricing Model with current value of the stock at $0.001 (par value) since there is no market for the stock at the time; dividend yield of 0%; risk-free interest rate of 2.16% (5 year Treasury Note rate at the issue date); and expiration date of 5 years. Since the stock does not trade, and since its par value is $0.001, the fair value of the warrants came out to be zero.
NOTE 9. COMMITMENT AND CONTIGENTCY
There is no commitment or contingency to disclose as of the period ended March 31, 2012.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE NINE AND THREE MONTHS ENDED MARCH 31, 2012 AND 2011 AND FROM INCEPTION (MAY 21, 2009) TO MARCH 31, 2012
Journal of Radiology, Inc. ("the Company") was organized under the laws of the State of Nevada on May 21, 2009. The Company was established as part of the Chapter 11 reorganization of AP Corporate Services, Inc. ("AP"). Under AP's Plan of Reorganization, as confirmed by the U.S. Bankruptcy Court for the Central District of California, the Company was organized to own and develop a professional journal devoted to radiology. Management believes the Company lacks the resources to effectively develop such a journal on its own at this time and is therefore engaged in a search for a strategic partner to assist in the development of the journal, or for a merger or acquisition partner with the resources to take the Company in a new direction and bring greater value to its shareholders.
RESULTS OF OPERATIONS
NINE MONTHS ENDED MARCH 31, 2012 COMPARED WITH THE NINE MONTHS ENDED MARCH 31, 2011 AND FROM INCEPTION (MAY 21, 2009) TO MARCH 31, 2012
For the nine months ended March 31, 2012, we had revenues of $0 compared to $0 for the nine months ended March 31, 2011. We recorded revenues of $105,000 for the cumulative period from Inception (May 21, 2009) through March 31, 2012.
We are completely dependent upon the willingness of our management to fund our initial operations by way of loans from our Chief Executive Officer. The Company has been in the development stage since its formation and has not yet realized a profit from its planned operations.
COSTS OF GOODS SOLD
We did not incur cost of sales for the nine month periods ended March 31, 2012 and 2011 and for the cumulative period from Inception (May 21, 2009) through March 31, 2012.
Administrative expenses were $448 for the nine months ended March 31, 2012, compared to $64 for the nine months ended March 31, 2011 and professional fees were $51,858 for the nine months ended March 31, 2012, compared to $5,500 for the nine months ended March 31, 2011, an increase of $46,358. The increase in professional fees primarily relate to filing costs, transfer agent, legal, audit and accounting fees. The comparative period had limited activity. Total operating expenses for the cumulative period from Inception (May 21, 2009) through March 31, 2012 was $188,631.
Our net loss for the nine months ended March 31, 2012 and the nine months ended March 31, 2011 were $52,306 and $5,564, respectively. Our net loss for the cumulative period from Inception (May 21, 2009) through March 31, 2012 was $83,631. Our net losses are primarily attributed to costs for professional fees.
THREE MONTHS ENDED MARCH 31, 2012 COMPARED WITH THE THREE MONTHS ENDED MARCH 31, 2011
For the three months ended March 31, 2012, we had revenues of $0 compared to $0 for the three months ended March 31, 2011.
COSTS OF GOODS SOLD
We did not incur cost of sales for the three month periods ended March 31, 2012 and 2011.
Administrative expenses were $78 for the three months ended March 31, 2012, compared to $48 for the three months ended March 31, 2011 and professional fees were $16,369 for the three months ended March 31, 2012, compared to $3,500 for the three months ended March 31, 2011, an increase of $12,869. The increase in professional fees primarily relate to filing costs, transfer agent, legal, audit and accounting fees. The comparative period had limited activity.
Our net loss for the three months ended March 31, 2012 and the three months ended March 31, 2011 were $16,447 and $3,548, respectively. Our net losses are primarily attributed to costs for professional fees.
Our financial statements have been prepared on a going concern basis which contemplates the realization of assets and the liquidation of liabilities in the ordinary course of business. As of March 31, 2012, we had cash of $6,874 and total liabilities of $146,420. Our cash flows from operating activities for the nine months ended March 31, 2012 resulted in cash used of $22,306. Our current cash balance and cash flow from operating activities will not be sufficient to fund our operations. Our cash flow provided by financing activities for the nine months ended March 31, 2012 and 2011 were $23,420 and $40,000, respectively. The Company has an accumulated deficit during development stage at March 31, 2012 of $83,631. The deficit reported at March 31, 2012 is largely a result of operating expenses for professional fees.
Over the next 12 months we expect to expend approximately $30,000 in cash for legal, accounting and related services. Cash used for other expenditures is expected to be minimal. We hope to be able to attract suitable investors for our business plan, which will not require us to use our cash, although there can be no assurances that we will be successful in these efforts.
We expect to be able to secure capital through advances from our Chief Executive Officer in order to pay expenses such as organizational costs, filing fees, accounting fees and legal fees. We believe it will be difficult to secure capital in the future because we have no assets to secure debt and there is currently no trading market for our securities. We will need additional capital in the next twelve months and if we cannot raise such capital on acceptable terms, we may have to curtail our operations or terminate our business entirely. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The inability to obtain financing or generate sufficient cash from operations could require us to reduce or eliminate expenditures for acquiring suitable partners or otherwise curtail or discontinue our operations, which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, to the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities may result in dilution to existing stockholders. If we raise additional funds through the issuance of debt securities, these securities may have rights, preferences and privileges senior to holders of our common stock and the terms of such debt could impose restrictions on our operations. Regardless of whether our cash assets prove to be inadequate to meet our operational needs, we may seek to compensate providers of services by issuing stock in lieu of cash, which may also result in dilution to existing stockholders.
OPERATING CAPITAL AND CAPITAL EXPENDITURE REQUIREMENTS
We are currently funding our initial operations by way of issuing 6,000,000 shares of our common stock valued at $0.001 per share to our Chief Executive Officer. We had hoped to be able to attract suitable publishing partners seeking the benefits of stock-based compensation, which will not require us to use our cash, although there can be no assurances that we will be successful in these efforts. Our Chief Executive Officer has committed to advancing us an additional $30,000 for certain operating costs in order to start implementing our business plan, the funds are loaned to the company as required to pay amounts owed by the Company. As such, our operating capital is currently limited to the personal resources of our Chief Executive Officer. The loans from our Chief Executive Officer are unsecured and non-interest bearing and have no set terms of repayment. We anticipate receiving additional capital once we are able to have our securities actively trading on a public exchange. There is no guarantee our stock will develop a market on that public exchange.
PLAN OF OPERATION AND FUNDING
We do not currently engage in enough business activities that provide cash flow. The costs of investigating and analyzing business combinations for the next 12 months and beyond such time will be paid with amounts to be loaned to or invested in us by our stockholders, management or other investors.
During the next twelve months we anticipate incurring costs related to:
(i) filing of Exchange Act reports, and
(ii) costs relating to developing our new business plan
We believe we will be able to meet these costs through amounts, as necessary, to be loaned to or invested in us by our stockholders, management or other investors.
Journal of Radiology, Inc. currently has no employees.
Office and Facilities
Our corporate headquarters are located at 2230 Michigan Avenue, Santa Monica, California 90404.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4T. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) that are designed to be effective in providing reasonable assurance that information required to be disclosed in the Companys reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (SEC), and that such information is accumulated and communicated to the Companys management to allow timely decisions regarding required disclosure.
In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of its principal executive officer and principal financial officer, of the Companys disclosure controls and procedures. Based on their evaluation, the principal executive officer and principal financial officer concluded that the Companys disclosure controls and procedures were adequately effective as of March 31, 2012 to cause the information required to be disclosed in reports that the Company files or submits under the Exchange Act to be recorded, processed, summarized and reported within the time periods prescribed by the SEC, and that such information is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate, to ensure timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There was no change in the Companys internal control over financial reporting identified in connection with the requisite evaluation that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 1A. RISK FACTORS
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below before deciding to purchase shares of our common stock. If any of the events, contingencies, circumstances or conditions described in the risks below actually occurs, our business, financial condition or results of operations could be seriously harmed.
RISK FACTORS CONCERNING OUR BUSINESS
Our business is subject to numerous risk factors, including the following:
We have had little operating history and no revenues or earnings from operations.
We have no assets. We will, in all likelihood, sustain operating expenses without corresponding revenues, at least until the consummation of a business combination. This may result in us incurring a net operating loss that will increase continuously until we can consummate a business combination with a profitable business entity. There is no assurance that we can identify such a business entity and consummate such an agreement or combination.
Our auditor's going concern opinion and the notation in the financial statements indicate that we do not have significant cash or other material assets and we are relying on advances from stockholders, officers and directors to meet our limited operating expenses. We may become insolvent if we are unable to pay our debts in the ordinary course of business as they become due.
Our proposed plan of operation is speculative.
The success of our proposed plan of operation will depend to a great extent on the operations, financial condition and management of the business opportunity which we identify, if any is identified. While management intends to seek business agreement(s) or combination(s) with entities having established operating histories, there can be no assurance that we will be successful in locating candidates meeting such criteria.
We face intense competition for business combination opportunities.
We are and will continue to be an insignificant participant in the business of seeking mergers with, joint ventures with and acquisitions of small private and public entities. A large number of established and well-financed entities, including venture capital firms, are active in mergers and acquisitions of companies that may be our desirable target candidates. Nearly all such entities have significantly greater financial resources, technical expertise and managerial capabilities than we have and, consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. Moreover, we will also compete in seeking merger or acquisition candidates with numerous other small public companies.
We have no agreements for a business combination or licensing transaction and have established no standards for such transactions.
We have no arrangement, agreement or understanding with respect to entering into an agreement or engaging in a merger with, joint venture with or acquisition of, a private or public entity. There can be no assurance that we will be successful in identifying and evaluating suitable business opportunities or in concluding a business transaction. Management has not identified any particular business for our evaluation. There is no assurance that we will be able to negotiate a business combination on terms favorable to us. We have not established a specific length of operating history or a specified level of earnings, assets, net worth or other criteria which we will require a target business opportunity to have achieved, and without which we would not consider a business transaction in any form with such business opportunity. Accordingly, we may enter into a business agreement or a business combination with a business having no significant operating history, losses, limited potential or no potential for earnings, limited assets, negative net worth or other negative characteristics.
Our success is dependent on management that has other full time employment, has limited experience and will only devote limited time (part time) to working for the Company, all of which makes our future even more uncertain.
Aaron Shrira is the President and Chief Executive Officer of the Company and Elana Berman-Shrira is the Secretary and Treasurer and CFO of the Company. Both Mr. Shrira and Ms. Berman-Shrira will serve without pay while maintaining other employment. Although both Mr. Shrira and Ms. Berman-Shrira have considerable business and marketing experience, neither has any experience in the publishing industry or in mergers and acquisitions. Notwithstanding the limited experience and availability of management, loss of the services of either officer would adversely affect development of our business and its likelihood of continuing in operation.
The reporting requirements under federal securities law may delay or prevent us from making certain acquisitions.
Sections 13 and 15(d) of the Securities Exchange Act of 1934, as amended, (the "1934 Act"), require companies subject thereto to provide certain information about significant acquisitions, including certified financial statements for the company acquired, covering one, two, or three years, depending on the relative size of the acquisition. The time and additional costs that may be incurred by some target entities to prepare such statements may significantly delay or essentially preclude consummation of an otherwise desirable acquisition by the Company. Acquisition prospects that do not have or are unable to obtain the required audited statements may not be appropriate for acquisition so long as the reporting requirements of the 1934 Act are applicable.
In addition to the audited financial statements, the time and additional costs that may be incurred by some target entities to prepare and disclose such information may significantly delay or essentially preclude consummation of an otherwise desirable acquisition by the Company.
An acquisition could create a situation wherein we would be required to register under The Investment Company Act of 1940 and thus be required to incur substantial additional costs and expenses.
Although we will be subject to regulation under the 1934 Act, management believes the Company will not be subject to regulation under the Investment Company Act of 1940, insofar as we will not be engaged in the business of investing or trading in securities. In the event we engage in a business combination that results in us holding passive investment interests in a number of entities, we could be subject to regulation under the Investment Company Act of 1940. In such event, we would be required to register as an investment company and could be expected to incur significant registration and compliance costs. We have obtained no formal determination from the Securities and Exchange Commission as to the status of our Company under the Investment Company Act of 1940 and, consequently, any violation of such Act would subject us to material adverse consequences.
A merger, acquisition, or licensing agreement would most likely be exclusive, resulting in a lack of diversification.
Management anticipates that it may be able to participate in only one potential business venture because a business partner might require exclusivity. This lack of diversification should be considered a substantial risk to our shareholders because it will not permit us to offset potential losses from one venture against gains from another.
If we do any business combination, each shareholder will most likely hold a substantially lesser percentage ownership in the Company.
If we enter a business combination with a private concern, that, in all likelihood, would result in the Company issuing securities to shareholders of any such private company. The issuance of our previously authorized and unissued Common Stock would result in reduction in percentage of shares owned by our present and prospective shareholders.
The requirement of audited financial statements may disqualify some business opportunities seeking a business combination with us.
Our management believes that any potential business combination opportunity must provide audited financial statements for review, for the protection of all parties to the business combination. One or more attractive business opportunities may choose to forego the possibility of a business combination with us, rather than incur the expenses associated with preparing audited financial statements.
Our officers and directors are the principal shareholders and will be able to approve all corporate actions without shareholder consent and will control our Company.
Our principal shareholder, Aaron Shrira, currently owns approximately 85% of our Common Stock. He will have significant influence over all matters requiring approval by our shareholders, but not requiring the approval of the minority shareholders. In addition, he is now an officer and director. Because he is the majority shareholder, he will be able to elect all of the members of our board of directors, allowing him to exercise significant control of our affairs and management. In addition, he may transact most corporate matters requiring shareholder approval by written consent, without a duly-noticed and duly-held meeting of shareholders.
If our Common Stock does not meet blue sky resale requirements, certain shareholders may be unable to resell our Common Stock.
The resale of Common Stock must meet the blue sky resale requirements in the states in which the proposed purchasers reside. If we are unable to qualify the Common Stock and there is no exemption from qualification in certain states, the holders of the Common Stock or the purchasers of the Common Stock may be unable to sell them.
Our shareholders may face significant restrictions on the resale of our Common Stock due to state "blue sky" laws or if we are determined to be a "blank check" company.
There are state regulations that may adversely affect the transferability of our Common Stock. We have not registered our Common Stock for resale under the securities or "blue sky" laws of any state. We may seek qualification or advise our shareholders of the availability of an exemption. We are under no obligation to register or qualify our Common Stock in any state or to advise the shareholders of any exemptions.
Current shareholders, and persons who desire to purchase the Common Stock in any trading market that may develop in the future, should be aware that there might be significant state restrictions upon the ability of new investors to purchase the Common Stock.
Blue sky laws, regulations, orders, or interpretations place limitations on offerings or sales of securities by "blank check" companies or in "blind-pool" offerings, or if such securities represent "cheap stock" previously issued to promoters or others. Our majority shareholder, because he received stock at a price of $.001 for each share, may be deemed to hold "cheap stock." These limitations typically provide, in the form of one or more of the following limitations, that such securities are:
(a) Not eligible for sale under exemption provisions permitting sales without registration to accredited investors or qualified purchasers;
(b) Not eligible for the transaction exemption from registration for non-issuer transactions by a registered broker-dealer;
(c) Not eligible for registration under the simplified small corporate offering registration (SCOR) form available in many states;
(d) Not eligible for the "solicitations of interest" exception to securities registration requirements available in many states;
(e) Not permitted to be registered or exempted from registration, and thus not permitted to be sold in the state under any circumstances.
Virtually all 50 states have adopted one or more of these limitations, or other limitations or restrictions affecting the sale or resale of stock of blank check companies or securities sold in "blind pool" offerings or "cheap stock" issued to promoters or others. Specific limitations on such offerings have been adopted in:
Any secondary trading market which may develop may only be conducted in those jurisdictions where an applicable exemption is available or where the shares have been registered.
Current shareholders and persons who desire to purchase the Common Stock in any trading market that may develop in the future, should be aware that we are under no obligation to register the shares on behalf of our shareholders under the Securities Act of 1933, as amended.
The Company's officers, directors and majority shareholders have expressed their intentions not to engage in any transactions with respect to the Company's Common Stock except in connection with or following a business combination resulting in us no longer being defined as a blank check issuer. Any transactions in our Common Stock by said shareholders will require compliance with the registration requirements under the Securities Act of 1933, as amended.
Our common stock may be difficult or impossible for you to sell for the foreseeable future.
Our shares are listed on the Over-the-Counter Bulletin Board, trading symbol JRRD.
Penny Stock rules may make buying or selling our securities difficult which may make our stock less liquid and make it harder for investors to buy and sell our shares.
Trading in our securities is subject to the SEC's "penny stock" rules and it is anticipated that trading in our securities will continue to be subject to the penny stock rules for the foreseeable future. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer who recommends our securities to persons other than prior customers and accredited investors must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser's written agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by these requirements may discourage broker-dealers from recommending transactions in our securities, which could severely limit the liquidity of our securities and consequently adversely affect the market price for our securities.
Our stock price may be volatile, and you may not be able to resell shares of our common stock at or above the price you paid.
We cannot predict the extent to which a trading market will develop or how liquid that market might become. The selling stockholders will sell their shares at such prices and such times as they determine. It is possible that they may not sell their shares at all. The selling stockholders will sell at prevailing market prices or privately negotiated prices. The trading price of our common stock is therefore likely to be highly volatile and could be subject to wide fluctuations in price in response to various factors, some of which
are beyond our control. These factors include:
- Quarterly variations in our results of operations or those of our Competitors or target acquisition or merger.
- Announcements by us or our competitors of acquisitions, significant contracts, commercial relationships or capital
- Our ability to find a suitable partner or acquisition on a timely basis.
- Commencement of, or our involvement in, litigation.
- Any major change in our board or management.
- General economic conditions and slow or negative growth of related markets.
In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of individual companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market price of a company's securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management's attention and resources.
We may issue additional shares of common stock which would reduce investors percentage of ownership, decrease the value of investors investment and may dilute our share value.
Our Certificate of Incorporation authorizes the issuance of 75,000,000 shares of common stock. In the past, we have been able to pay for some of the services we require through the issuance of our common stock. We may continue to compensate our consultants and other staff with common stock in order to preserve our cash for other uses. The future issuance of authorized common stock may result in substantial dilution in the percentage of our common
stock held by our then existing stockholders. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the common stock held by our investors, may decrease the value of our investors' investment and might have an adverse effect on any trading market for our common stock, if one ever exists.
We do not plan to pay dividends in the foreseeable future, and, as a result, stockholders will need to sell shares to realize a return on their investment.
We have not declared or paid any cash dividends on our capital stock since inception. We intend to retain any future earnings to finance the operation and merger or acquisition of our business and do not anticipate paying any cash dividends in the foreseeable future. As a result, stockholders will need to sell shares of common stock in order to realize a return on their investment, if any.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
ITEM 4. MINING SAFETY DISCLOSURES.
ITEM 5. OTHER INFORMATION.
ITEM 6. EXHIBITS.
Except as so indicated in Exhibits 32.1 and 32.2, the following exhibits are filed as part of, or incorporated by reference, this Quarterly Report on Form 10-Q.
In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.