|• LIVING 3D HOLDINGS 10Q JUN 2012 • EX 31.1 • EX 31.2 • EX 32|
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
For the quarterly period ended June 30, 2012
For the transition period from to
Commission File Number: 000-53643
Living 3D Holdings, 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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.ý Yes¨ 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).¨ Yes ý No
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,” “non-accelerated filer,” and “a smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ Accelerated filer ¨
Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ý
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
¨Yes ý No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
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See Notes to Unaudited Consolidated Financial Statements
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See Notes ot Unaudited Consolidated Financial Statements
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See Notes to Unaudited Consolidated Financial Statements
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Living 3D Holdings, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
NOTE 1 - DESCRIPTION OF BUSINESS AND ORGANIZATION
Living 3D Holdings Ltd (“L3D”) was incorporated in the British Virgin Islands (the “BVI”) on June 23, 2008. The Company markets three-dimensional (3D) hardware display devices designed by affiliates and manufactured by third parties. Such products have application in industries where LCD monitors and LED panels are utilized, including location based entertainment, computer monitors, telecommunications, mobile phones and other hand held devices.
L3D has the following wholly owned subsidiaries, Living 3D (Hong Kong) Ltd, 3D Capital Holdings Inc, Columbia College Hollywood International Limited and Living 3D Technology Group Limited. L3D and its subsidiaries are collectively referred to as L3D or the Company. L3D is a development stage company as defined by Statement of Financial Accounting Standard No. 7, Accounting and Reporting by Development Stage Enterprises.
On December 8, 2011, L3D entered into a share exchange agreement (the "Share Exchange") with Living 3D Holdings, Inc. (formerly AirWare International Corp and formerly Concrete Casting Incorporated), a company incorporated in the State of Nevada on October 29, 1987. Under the Exchange Agreement Living 3D Holdings, Inc. ("Living 3D" or the “Company”) issued an aggregate of 62,590,880 shares of its common stock to the shareholders of the Company in exchange for all of the issued and outstanding securities of the Company. The Share Exchange closed on December 8, 2011. As a result of the Share Exchange, the Company became Living 3D's wholly-owned subsidiary.
The transaction has been treated as a recapitalization of L3D and its subsidiaries, with Living 3D (the legal acquirer of L3D and its subsidiaries) considered the accounting acquiree, and L3D whose management took control of Living 3D (the legal acquiree of L3D) considered the accounting acquirer. The Company did not recognize goodwill or any intangible assets in connection with the transaction. All costs related to the transaction are being charged to operations as incurred. The 62,590,880 shares of common stock issued to the in conjunction with the Share Exchange have been presented as outstanding for all periods. The historical consolidated financial statements include the operations of the accounting acquirer for all periods presented.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements of Living 3D Holdings, Inc. have been prepared in according with accounting principles generally accepted in United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s latest Annual Report filed with SEC on Form 10-K. In the option of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results of operations for the interim periods presented have been reflected herein. The results of operations for such interim periods are not necessarily indicative of operations for a full year. Notes to the unaudited consolidated financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for the most recent fiscal year ended December 31, 2011, as reported in Form 10-K, have been omitted.
NOTE 3 – GOING CONCERN
The Company first generated revenue in 2010 and is still in the early stages of establishing a market for the products it sells. The Company is primarily funded by Wong Jimmy Kent Lam, the Company’s Chief Executive Officer ("CEO") and principal owner. The Company will have to raise additional capital, including through the sale of equity securities, to support its operation and expansion.
These conditions and uncertainties raise substantial doubt as to the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
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NOTE 4 – RELATED PARTY TRANSACTIONS
The due to related party balances at June 30, 2012 and December 31, 2011 are $184,807 and $120,418, respectively, represents advances from Wong Jimmy Kent Lam, the Company’s CEO and principal owner to support the Company’s operation. The advances are unsecured and non-interest bearing without terms and set maturity dates.
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This report on Form 10-Q for the three and six months ended June 30, 2012 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may,” “should,” “could,” “will,” “plan,” “future,” “continue” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. These forward-looking statements are based largely on our expectations or forecasts of future events, can be affected by inaccurate assumptions, and are subject to various business risks and known and unknown uncertainties, a number of which are beyond our control. Therefore, actual results could differ materially from the forward-looking statements contained in this document, and readers are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. A wide variety of factors could cause or contribute to such differences and could adversely impact revenues, profitability, cash flows and capital needs. There can be no assurance that the forward-looking statements contained in this document will, in fact, transpire or prove to be accurate.
Factors that could cause or contribute to our actual results to differ materially from those discussed herein or for our stock price to be adversely affected include, but are not limited to:
The following discussion should be read in conjunction with our Financial Statements and notes thereto. The following discussion contains forward-looking statements, including, but not limited to, statements concerning our plans, anticipated expenditures, the need for additional capital and other events and circumstances described in terms of our expectations and intentions. You are urged to review the information set forth under the captions for factors that may cause actual events or results to differ materially from those discussed below.
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Our business is focused on the marketing and sale of 3D image display devices designed and manufactured by third parties using original equipment manufacturer (OEM) parts. To date, we have concentrated on the markets for 3D touch pads, 3D indoor and outdoor light emitting diode (LED) displays and 3D televisions. We believe that the market for touch pads, displays and televisions will grow more quickly over the next five years than other 3D markets, although we can offer no assurances in this regard. The products we market are based on "auto stereoscopic 3D" technology, or Auto 3D, which means that viewers are not required to wear 3D glasses in order to experience the 3D effects of the screen, and instant switching between two dimensional, or 2D, and 3D viewing is enabled. We believe that this gives us a competitive advantage over other suppliers of 3D products requiring the use of a visor or glasses in order to experience a 3D effect. While our sales to date have focused on customers utilizing our products in media and advertising, 3D display products are applicable in a wide range of industries, including entertainment, education, consumer electronics, medical diagnosis and scientific research.
We market our 3D technologies and products under our Living 3D brand in the PRC. Given sufficient capital, we plan to build our revenues by focusing on direct sales and sales to retail distributors in selected markets. The following discussion summarizes the material changes in our results of operations and our financial condition for the three and six months ended June 30, 2012 and June 30, 2011.
For the Three months Ended June 30, 2012 and 2011
The Statement of Operations is included in the Financial Statements attached to this report. Please refer to this Statement of Operations.
Results From Operations
Revenues. For the three months ended June 30, 2012 and June 30, 2011, revenues were $-0- and $16,866, respectively, a decrease of $16,866. The revenues for the three months ended June 30, 2011 were derived from sales of 3D technology products manufactured by third parties. The decrease in revenue is due to the fact that we are a development stage company and did not undertake the same marketing efforts in the three months ended June 30, 2012 as we did for the same period in 2011.
Cost of Revenue. Our cost of revenue declined to $-0- from $14,815 in the three months ended June 30, 2012 compared to the same period in 2011. This decline was due to our decrease in sales during the period.
General and Administrative Expenses. For the three months ended June 30, 2012 and June 30, 2011, general and administrative expenses were $149,291 and $11,883, respectively, an increase of $137,408. The increase in such expenses is attributable to our efforts to advance our development, including becoming publicly held.
Operating (Loss) or Operating Income. For the three months ended June 30, 2012, the operating loss was ($149,204) and for the same period ended June 30, 2011 the operating loss was ($9,843), an increase in the operating loss of ($139,361). The increase in the operating loss between the periods is due to the increase in general and administrative expenses discussed above and the decrease in revenues.
Income Tax Provision. No provision for income tax benefit from net operating losses has been made for the three months ended June 30, 2012 as we have fully reserved the asset until realization is more reasonably assured.
Net (Loss) or Net Income. The net loss for the three months ended June 30, 2012 was ($149,204) and the net loss for the three months ended June 30, 2011 was ($9,843), an increase in net loss of ($139,361). This increase in net loss resulted from the increase in general and administrative expenses and decrease in revenues.
Liquidity and Capital Resources. Cash and equivalents as of June 30, 2012 and June 30, 2011 totaled $84,229 and $102,236, respectively, a decrease of $18,007. This reflects our increased operating loss partially offset by related party loans made to us by Mr. Wong, our CEO and a principal shareholder.
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For the Six Months Ended June 30, 2012 and 2011
The Statement of Operations is included in the Financial Statements attached to this report. Please refer to this Statement of Operations.
Results From Operations
Revenues. For the six months ended June 30, 2012 and June 30, 2011, revenues were $-0- and $21,237, respectively, a decrease of $21,237. The revenues for the six months ended June 30, 2011 were derived from sales of 3D technology products manufactured by third parties. The decrease in revenue is due to the fact that we are a development stage company and did not undertake the same marketing efforts in the six months ended June 30, 2012 as we did for the same period in 2011.
Cost of Revenue. Our cost of revenue declined to $-0- from $18,756 in the six months ended June 30, 2012 compared to the same period in 2011. This decline was due to our decrease in sales during the period versus the prior period.
General and Administrative Expenses. For the six months ended June 30, 2012 and June 30, 2011, general and administrative expenses were $291,153 and $60,940, respectively, an increase of $230,213. The increase in such expenses is attributable to our efforts to advance our development, including becoming publicly held.
Operating (Loss) or Operating Income. For the six months ended June 30, 2012, the operating loss was ($291,149) and for the same period ended June 30, 2011, the operating loss was ($58,475) an increase in the operating loss of ($232,674). The increase in the operating loss between the periods is explained by the increase in general and administrative expenses discussed above and the decrease in revenues.
Income Tax Provision. No provision for income tax benefit from net operating losses has been made for the six months ended June 30, 2012 as we have fully reserved the asset until realization is more reasonably assured.
Net (Loss) or Net Income. The net loss for the six months ended June 30, 2012 was ($291,149) and the net loss for the six months ended June 30, 2011 was ($58,475), an increase in net loss of ($232,674). This increase in net loss resulted from the increase in general and administrative expenses and decrease in revenues.
Liquidity and Capital Resources, Going Concern
Current and Expected Liquidity
Historically, we have financed operations primarily through the issuance of debt. In the near future, as additional capital is needed, we expect to rely primarily on the sale of equity securities. We had loans payable to Jimmy Kent-Lam Wong, our CEO and majority shareholder, in an aggregate principal amount of $184,807 at June 30, 2012 that do not contain any restrictive covenants restricting our ability to our issue additional debt or equity securities. Such loans do not bear interest and do not have set maturity dates.
Our cash and cash equivalents decreased by $18,007, from $102,236 at June 30, 2011 to $84,229 at June 30, 2012, due principally to the payment of liabilities.
Our cash from financing activities increased by $15,960, from $48,429 at June 30, 2011 to $64,389 at June 30, 2012, due to an increase in loans from our principal shareholder.
We will require substantial additional capital to develop a market for 3D products and implement our business plan. We plan to pursue financing from private investors and institutions in and outside the PRC. We do not have any commitments for additional financing. Such new financing could include equity, which may be dilutive to our shareholders, or debt, which would likely restrict our ability to borrow from other sources. In addition, such securities may contain rights, preferences or privileges senior to the rights of our current shareholders.
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There can be no assurance that additional funds will be available on terms attractive to us or at all. If adequate funds are not available, we may have to materially curtail our operations. Any inability to raise adequate funds could have a material adverse effect on our business, results of operation and financial condition.
Due to the uncertainties related to these matters, there exists substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should we be unable to continue as a going concern.
We had no material commitments for capital expenditures.
Off-Balance Sheet Arrangements
There were no off-balance sheet arrangements at June 30, 2012.
Critical Accounting Policies and Estimates
Accounting Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. 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 revenue and expenses during the reporting period. Actual results when ultimately realized could differ from those estimates.
Fair Value of Financial Instruments. The carrying amounts of financial instruments, including cash, other receivables, accounts payable and accrued expenses, approximates their fair value due to the relatively short-term nature of these instruments.
Revenue Recognition. We recognize revenue when the significant risks and rewards of ownership have been transferred to the customer, including factors such as when persuasive evidence of an arrangement exists, delivery or service has been performed, the sales price is fixed and determinable, and collectability is probable. The Company recognizes sales when the merchandise is shipped, title has passed to the customers or the service is provided, and collectability is reasonably assured.
Foreign Currency Translation. For financial reporting purposes, the financial statements of the Company, which are prepared in Hong Kong Dollars ("HKD"), are translated into the Company's reporting currency, United States Dollars ("USD"). Balance sheet accounts are translated using the closing exchange rate in effect at the balance sheet date and income and expense accounts are translated using the average exchange rate prevailing during the reporting period. Adjustments resulting from the translation, if any, are included in accumulated other comprehensive income (loss) in the owner's equity.
We follow FASB ASC 80-30, "Foreign Currency Translation", for both the translation and re-measurement of balance sheet and income statement items into U.S. dollars. Resulting translation adjustments are reported as a separate component of accumulated comprehensive income (loss) in stockholders' equity.
We maintain our books and accounting records in HKD, with HKD being the functional currency. Transactions denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates. Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance sheet date. Any translation gains (losses) are recorded in exchange reserve as a component of shareholders equity. Income and expenditures are translated at the average exchange rate of the year.
Income Taxes. Taxes are calculated in accordance with taxation principles currently effective in Hong Kong. We account for income taxes using the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the 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 as income in the period that includes the enactment date. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
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Related Parties. A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and 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. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one of more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Under the supervision and with the participation of our Chief Executive Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on his evaluation as of the end of the period covered by this report, he concluded that our disclosure controls and procedures were effective at a reasonable assurance level to ensure that the information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, including this report, were recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and was accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal controls over financial reporting during the quarter ended June 30, 2012 that have materially affected or are reasonably likely to materially affect, such controls.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
There are no claims, actions, suits, proceedings or investigations that are currently pending or, to our knowledge, threatened by or against us, or with respect to our operations or assets, by or against any of our officers, directors or affiliates.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Index to Exhibits