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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2012
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______
COMMISSION FILE NO. 333-141328
Securities registered pursuant to Section 12(g) of the Act:
Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. o
Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 403 of the Securities Act. o Yes x No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. x Yes o No
Indicate by check mark whether the registrant has (i) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (ii) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, 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). o Yes x No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained in this form, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated file, 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.
Large accelerated filed o Accelerated filer o
Non-accelerated filer o Smaller reporting company x
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the average bid and asked price of the common equity, as of the last business of the registrant’s most recently completed second fiscal quarter: July 31, 2011 is $-0-.
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS
Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 and 15(d) of the Securities Exchange Act of 1934 after the distribution of securities under a plan confirmed by a court. Yes o Noo
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.
Class Outstanding as of March 31, 2012 Common Stock, $0.001 42,223,512 shares*
*Reflects reverse stock split of one for five hundred (1:500) effective as of March 1, 2012.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe them and identify the part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (i) any annual report to security holders; (ii) any proxy or information statement; and (iii) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933 (the "Securities Act"). The listed documents should be clearly described for identification purposes (e.g. annual reports to security holders for fiscal year ended December 24, 1990).
Transitional Small Business Disclosure Format (Check one): Yes o No x
KITCHER RESOURCES INC.
Now known as AMOGEAR INC.
Statements made in this Form 10-K that are not historical or current facts are "forward-looking statements" made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933 (the "Act") and Section 21E of the Securities Exchange Act of 1934. These statements often can be identified by the use of terms such as "may," "will," "expect," "believe," "anticipate," "estimate," "approximate" or "continue," or the negative thereof. We intend that such forward-looking statements be subject to the safe harbors for such statements. We wish to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond our control that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.
Kitcher Resources Inc. files annual, quarterly, current reports, proxy statements, and other information with the Securities and Exchange Commission (the "Commission"). You may read and copy documents referred to in this Annual Report on Form 10-K that have been filed with the Commission at the Commission's Public Reference Room, 450 Fifth Street, N.W., Washington, D.C. You may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. You can also obtain copies of our Commission filings by going to the Commission's website at http://www.sec.gov.
We were incorporated pursuant to the laws of the State of Nevada on December 26, 2006. We were previously engaged in the business of the exploration and development of a mineral property consisting of 5 M.T.O. cells (totaling 5,446 acres) in southern British Columbia. Our property was without known reserves and our program was exploratory in nature.
Stock Purchase Agreement
On October 19, 2011, Joseph Arcaro (the “Seller”) and Michael Ceccon (the “Buyer”) entered into that stock purchase agreement (the “Stock Purchase Agreement”), pursuant to which the Seller sold and transferred to Buyer an aggregate 1,000,000 shares of restricted common stock held of record by Seller. This represented the transfer of a majority control interest. Simultaneously with execution of the Stock Purchase Agreement, the Seller resigned as the sole executive officer and member of the Board of Directors and the Buyer was appointed as the President/Chief Executive Officer, Secretary, Treasurer/Chief Financial Officer and sole member of the Board of Directors. Subsequent to the Stock Purchase Agreement, management changed the operational strategy and general operations to design and develop prototypes of sports apparel for the Mixed Marshal Arts (“MMA”), similar fighting styles and other custom athletic sports.
March 2012 Reverse Stock Split
On October 27, 2011, our Board of Directors authorized and approved a reverse stock split of one for every five hundred (1:500) of our total issued and outstanding shares of common stock (the “Reverse Stock Split”). The Reverse Stock Split was effectuated based on market conditions and upon a determination by our Board of Directors that the Reverse Stock Split was in our best interests and those of the shareholders. Certain factors were discussed among the members of the Board of Directors concerning the need for the Reverse Stock Split, including: (i) current trading price of or shares of common stock on the OTC Pink Sheet Market and potential to increase the marketability and liquidity of our common stock; (ii) possible reluctance of brokerage firms and institutional investors to recommend lower-priced stocks to their clients or to hold in their own portfolios; and (iii) desire to meet future requirements of per-share price and net tangible assets and shareholders’ equity relating to admission for trading on other markets
The Reverse Stock Split was effectuated on March 1, 2012 upon filing the appropriate documentation with FINRA. The Reverse Stock Split decreased our total issued and outstanding shares of common stock from 1,750,005 to 3,512 shares of common stock. The common stock will continue to be $0.001 par value.
Our trading symbol on the Over-the-Counter Bulletin Board will change to “AMOG” on April 11, 2012.
Amendment to Articles of Incorporation
On January 30, 2012, we filed with the Nevada Secretary of State a certificate of change to the Articles of Incorporation to change our name from “Kitcher Resources Inc.” to “Amogear International Inc”. .
We intend to capitalize on the increasing popularity of Mixed Marshal Arts (“MMA”), similar fighting styles and other custom athletic sports to provide exciting apparel for the world-wide audience of MMA and other custom athletic sports fans and consumers. We will: (i) design and develop prototypes for sports apparel for the MMA, similar fighting styles and other custom athletic sports consumer for the initial summer 2012 product line, which prototypes will be further developed into a product line classified into three categories: (a) training; (b) competition; and (c) lifestyle (the (“Product Line”); and (ii) market and sell the Product Line creating brand recognition in the MMA and boxing sports apparel industry. See “Business of the Corporation”.
Management believes that it has identified an opportunity in the equipment and apparel market to successfully launch its new established brand (“AMOGEAR”). Management’s goal is to establish the highest quality apparel and equipment company within the industry gaining significant market traction by leveraging the initial brand recognition and establishing mass cross-over appeal. The AMOGEAR product line will create an additional niche brand in the MMA/boxing, similar fighting styles and other custom athletic sports apparel and equipment industry.
Management further believes that the customers desire merchandise and fashion that is rooted in the MMA and similar fighting styles and other action sports lifestyle and reflects their individuality. Management intends to strive to keep the merchandising mix fresh by continuously introducing new styles and categories of product. Management believes that its strategic mix of both MMA and other custom action sports apparel and hardgoods, including MMA fight gloves, boxing gloves, gym bags and other equipment will allow the Corporation to strengthen the potential of the AMOGEAR brand and help to affirm the Corporation’s credibility with its customers.
Management intends to develop a corporate culture based on a passion for the MMA and similar fighting styles and other custom action sports lifestyle. Management’s philosophy will emphasize an integrated combination of results measurement, training and incentive programs, all designed to drive sales productivity. Management intends to empower its sales associates to make business decisions and consistently reward their success. Management further intends to seek to enhance the productivity of its employees and encourage their advancement by offering future comprehensive training programs.
As of the date of this Annual Report, we have designed and developed its initial prototypes for the summer 2012 Product Line The products comprising the summer 2012 Product Line are ready for commercial production. For the summer 2012 Product Line, we have created initial “first phase” prototypes or have created the required designs. "First phase" prototypes are initial test products created from two dimensional drawings to test feasibility of design. Once analyzed and changed, the next step is to produce a "second phase" prototype which should be correct in fit and fabric. Finally, the "third phase" prototype is a sales sample, ready for commercial production. For all of our Product Lines, management has obtained or developed and tested the necessary fabrics.
Our products are classified into three categories: Training, Competition, and Lifestyle/Sportswear. These categories are relevant to both genders; male and female.
Our training products are synthetic fabrications geared toward athletic pursuits and will consist of the following: (i) rash guard training tops in short sleeve and long sleeve varieties and will retail for approximately $25 to $30; and (ii) polyester training shorts and will retail for approximately $25 to $30.
Our competition products will include: (i) shorts made from recycled polyester that will retail for approximately $45 to $55; (ii) MMA fight gloves that will retail for approximately $35 to $40; (iii) boxing gloves that will retail for approximately $40 to $50; and (iv) polyester boxing shorts that will retail between $75 and $85.
Our lifestyle/sportswear products will include: (i) graphic tee shirts in tank, short sleeve, and long sleeve varieties with graphics that will retail for approximately $28; (ii) hoody’s in full zip and pullover varieties made from premium heavyweight cotton that will retail for approximately $65 to $75; (iii) rayon tee shirts that will retail for approximately $45; and (iv) fitted hats that will retail between $25 and $30
Our equipment products will include: (i) gym bags that will retail at approximately $65 to $85; and (ii) backpacks that will retail at approximately $75.
Management believes that the following competitive strengths differentiate is and our Product Line from competitors and are critical to our continuing success.
Attractive Lifestyle Retailing Concept
We target a large population of 16 to 60 year olds, many of whom management believes are attracted to the MMA, similar fighting styles and other custom athletic sports lifestyle and desire to promote their personal independence and style through the MMA, similar fighting styles and other custom sports apparel and accessories and the equipment they use. Management believes that the MMA and fighting action sports is a permanent aspect of our culture, reaching not only consumers that actually participate in MMA and fighting action sports, but also those who seek brands and styles that fit a desired MMA and fighting action sports image. Management believes that is has developed a brand image that customers view as consistent with their attitudes, fashion tastes and identity that should allow us to benefit in the market.
The culture and MMA brand image and other similar fighting styles will enable us to successfully attract and retain high quality employees who are passionate and knowledgeable about the Product Line. Management will pace great emphasis on customer service and satisfaction, and will make this a defining feature of the corporate culture. To preserve our culture, management will strive to promote employees from within and will provide them with the knowledge and tools to succeed through training programs and the flexibility to meet localized customer demand.
Disciplined Operating Philosophy
Our management team intends to build a strong operating foundation based on sound retail principles that underlie the Corporation’s unique culture. Our philosophy emphasizes an integrated combination of results measurement and training all designed to drive sales productivity. We believe that our merchandising team’s immersion in the MMA, similar fighting styles and other custom athletic sports lifestyle, supplemented with feedback from our customers, will allow us to consistently identify and react to emerging fashion trends. Management believes that this, combined with inventory planning and allocation processes and systems, will help management to better manage markdown and fashion risk.
High-Impact, Integrated Marketing Approach
Management intends to build relationships with its customers through a multi-faceted marketing approach that is designed to integrate our AMOGEAR brand image with the MMA and fighting action sports lifestyle. Our marketing efforts will focus on reaching our customers in their environment and feature extensive grassroots marketing events, such as inactive sports and lifestyle events held at various locations throughout the United States. Our marketing efforts will also incorporate local sporting event promotions, advertising in magazines popular with our target market, interactive contest sponsorships that actively involve our customers with the AMOGEAR brand and Product Line and various social network channels such as Facebook and Twitter. Events and activities such as these will provide opportunities for our customers to develop a strong identity with the AMOGEAR culture and brand. Management believes that its immersion in the MMA and fighting action sports lifestyle will allow us to build credibility with its customers and gather valuable feedback on evolving customer preferences.
We plan to outsource the commercial manufacturing of its Product Line to third parties. As of the date of this Annual Report, we have no formal agreements in place for such supply. However, we have verbal commitments and price quotes from various suppliers located in the United States and Asia to manufacture our products on terms to be negotiated, which management expects to be within reasonable commercial norms. We also have a domestic resource that we have ordered quality merchandise from that can fill orders on short notice. The pricing is extremely competitive and all of the merchandise is extremely high quality.
We will distribute its Product Line through a variety of retail channels. Distribution will happen in stages congruent with the stages of our business plan as follows:
Stage 1: Specialty shops and AMO online.
Stage 2: Specialty shops, AMO online, limited department stores and limited sporting goods stores.
Stage 3: Expansion of department stores and sporting goods stores as well as international distributors and retail stores.
Beyond: Expansion of all the above
Specialty shops are small stores and websites specializing in MMA products or similar types of products that relate to the sport and its culture and other custom action sports. AMO online and retail stores are retail outlets owned and operated by us. Department stores are large regional and national chain department stores with both active and sportswear retail spaces. Sporting goods stores are large and small stores specializing in the sale of sports clothing and equipment, both physical locations and online stores.
We plan on contracting with third parties to outsource our inventory warehousing and our product distribution and shipping needs once the demand is there.
PRODUCT TESTING AND MARKETING
As of the date of this Annual Report, we have spent approximately $10,000 for event and fighter sponsorships. In order to create brand awareness for AMOGEAR in anticipation of our commercial launch of our Product Line, management began marketing the AMOGEAR brand by sponsoring Peter Manfredo Jr. in his title fight vs. Julio Cesar Chavez Jr. that took place on November 20, 2011 in Houston, TX at Reliant Arena. Manfredo Jr. wore the AMOGEAR t-shirt and hat pre-fight in the locker room. He also wore the AMOGEAR patch on his robe pre fight and the AMOGEAR logo was featured on his fighting trunks. Manfredo’s entire staff wore AMOGEAR hats and t-shirts throughout the entire fight. World famous boxing promoter Lou Dibella wore the AMOGEAR hat post fight in the ring while being interviewed. Management believes that this was major exposure for us and our Product Line as the fight was seen all around the world on HBO.
Management intends to sponsor more events and fighters in both the UFC and Professional boxing ranks. Typically, sponsorship of a UFC event costs between $5,000 and $10,000, depending on the level of sponsorship. The cost to sponsor a UFC fighter is approximately $5,000 per event, but this cost also depends on the caliber of the fighter. A sponsored fighter would be required to wear our branded apparel at the pre-fight conference, weigh-in, during the fight and at the post-fight interview. The industry norm is that these sponsorships are governed by verbal agreements. Currently we have no ongoing fighter sponsorships; however, management plans on sponsoring approximately three to five UFC fighters for various events in 2012. Management anticipates the cost of sponsorship to be approximately $30,000 to $50,000 and the cost is included in the marketing budgets for Stages 1 and 2 in the “Use of Proceeds” section above.
In the first half of 2012, management intends to conduct a test run solely for the limited purpose of gaining feedback on the AMOGEAR brand design. We are currently manufacturing 250-500 pieces of flagship cotton t-shirts with the AMOGEAR logo and plans on selling them through a third party website. Because of the nature of this test run, management will sell the designated shirts at a price of approximately $5-10 per unit. This will cover costs of manufacturing and shipping. This represents a deep discount off of our planned retail price of $28 per unit. We do not plan on offering such deep discounts for our commercial line of apparel.
Management is also in the process of having several dozen MMA fight gloves with the AMOGEAR logo manufactured. These gloves will be distributed to several current UFC fighters in an attempt to create AMOGEAR brand awareness among the MMA fighting community.
The market for athletic apparel is highly competitive. Competition is principally based on brand image and recognition, as well as product quality, innovation, style and price. It includes competition from established companies who are expanding their production and marketing of performance products, as well as from new entrants into the market. We are in competition with wholesalers and direct sellers of general athletic apparel such as RVCA, Nike, Adidas, Reebok, and Under Armour. We are also in direct competition with the MMA apparel market such as Tapout, Hyabusa, Affliction, and Silver Star. All of these competitors are fully funded, operational businesses that have significantly greater financial and marketing resources than we do. In contrast, we are a start-up company that has not commenced commercial operations. We have not yet begun to compete with these entities, and won't until it raises sufficient investment capital to commence business operations and its products become available to the consumer. However, management believes its strategy of focusing on delivering a high quality product that can be used by a MMA Fighter, Boxer, any other professional athlete or anyone who aspires to be a pro. Our technology has been extensively tested, which management believes will give our customers an advantage. Our rash guard training products are designed to be lightweight, sweat absorbing material that is extremely comfortable. This gives the athlete who wears it a competitive edge.
PATENTS & TRADEMARKS
Management intends to trade marking both the “AMOGEAR” name and logo within the first quarter of 2012. Management is currently consulting with the proper attorneys to determine the best economical and efficient way of executing the task. Management is still in the information gathering and education stage but intends to commence filing by the time of the summer 2012 launch of the Product Line.
PRODUCT DEVELOPMENT & RESEARCH COSTS
From inception in November of 2011 to December 31, 2012, we have spent approximately $10,000 on the design and development of our sports apparel line. This includes logo creation and purchasing samples from several different overseas and domestic manufacturers in order to locate the best possible quality at a competitive price so that target margins can be achieved.
REPORTS TO SECURITIES HOLDERS
We provide an annual report that includes audited financial information to our shareholders. We also make our financial information equally available to any interested parties or investors through compliance with the disclosure rules of Regulation S-B for a small business issuer under the Securities Exchange Act of 1934. We are subject to disclosure filing requirements including filing Form 10-K annually and Form 10-Q quarterly. In addition, we will file Form 8-K and other proxy and information statements from time to time as required. We do not intend to voluntarily file the above reports in the event that our obligation to file such reports is suspended under the Exchange Act. The public may read and copy any materials that we file with the Securities and Exchange Commission, ("SEC"), at the SEC's Public Reference Room at 100 F Street NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
ITEM 1A. RISK FACTORS
An investment in the shares of common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in evaluating us and our business before purchasing shares of the common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks. The risks described below are all of the material risks that management is currently aware of that we are facing. Additional risks not presently known to management may also impair our business operations. You could lose all or part of your investment due to any of these risks.
Significant fluctuations and volatility in the price of cotton, foreign labor costs and other raw materials used in the production of our Product Line may have a material adverse effect on our business, results of operations and financial conditions.
Increases in the cost of cotton, foreign labor costs or other raw materials used in the production of our merchandise can result in higher costs in the price we will pay for this merchandise. The costs for cotton are affected by weather, consumer demand, speculation on the commodities market and other factors that are generally unpredictable and beyond our control. Our potential gross profit and earnings per share could be adversely affected to the extent that the selling prices of its products do not increase proportionately with the increases in the costs of cotton or other materials. Increasing labor costs and oil-related product costs, such as manufacturing and transportation costs, could also adversely impact gross profit. Additionally, significant changes in the relationship between carrier capacity and shipper demand could increase transportation costs, which could also adversely impact gross profit.
Management is aware of increasing cotton, oil and other input costs that affect our cost of goods sold. Management is currently working with potential vendors and private label manufacturers to best manage these potential cost increases. Management’s current expectation is that increases in product cost may rise in the upcoming years. While management believes that it has strategies in place to mitigate the increase in cost, there can be no assurance that management’s efforts will be successful and potential gross profit margins may decline.
Our Product Line in part may be produced by foreign manufacturers. Therefore, the availability and costs of these products may be negatively affected by risks associated with international trade and other international conditions.
Certain clothing and/or equipment comprising our Product Line may be produced by manufacturers around the world. Some of these facilities may be located in regions that may be affected by natural disasters, political instability or other conditions that could cause a disruption in trade. Trade restrictions such as increased tariffs or quotas, or both, could also affect the importation of merchandise generally and increase the cost and reduce the supply of available merchandise. Any reduction in available merchandise or any increase in its cost due to tariffs, quotas or local issues that disrupt trade could have a material adverse effect on our results of operations. Although the prices charged by vendors for the merchandise we intend to purchase are primarily denominated in United States dollars, a continued decline in the relative value of the United States dollar to foreign currencies could lead to increased merchandise costs, which could negatively affect our competitive position and its results of operation.
Our ability to attract customers to our Product Line will depend heavily on the success of the specialty shops, department stores and sporting goods stores and our online website in which the Product Line will be available. Any decrease in customer traffic in those forums could cause potential sales to be less than expected.
In order to successfully market our Product Line and generate customer traffic, we will depend heavily on placing our Product Line in specialty shops, department stores and sporting goods stores in prominent locations within successful shopping retail outlets. Sales at these stores will be derived, in part, from the volume of traffic in those retail outlets. Our Product Line will benefit from the ability of a mall’s other tenants to generate consumer traffic in the vicinity of shops and stores in close proximity and the continuing popularity of retail outlets, such as malls as shopping destinations. Potential sales volume and consumer traffic generally may be adversely affected by, among other things, economic downturns in a particular area, competition from ecommerce retailers, increases in gasoline prices and the closing or decline in popularity of other stores in the retail outlets in which we are located. An uncertain economic outlook could curtail new shopping retail outlet development, decrease shopping mall traffic, reduce the number of hours that shopping retail outlet operators keep their doors open or force them to cease operations entirely. A reduction in retail outlet traffic as a result of these or any other factors could have a material adverse effect on our business, results of operations and financial condition.
Our growth strategy depends on its ability to place its Product Line in new stores each year.
Our growth largely depends on our ability to place our Product Line in new stores and market successfully. However, placement of our Product Line in new stores is subject to a variety of risks and uncertainties, and we may be unable to place our Product Line in new stores as planned. Any such failure would have a material adverse effect on our results of operations. Our proposed expansion will place increased demands on our operational, managerial and administrative resources. These increased demands could cause us to operate our business less effectively, which in turn could cause deterioration in the financial performance of the marketing of our Product Line and our overall business. Successful execution of our growth strategy may require that it obtains additional financing, and management cannot assure you that we will be able to obtain that financing on acceptable terms or at all.
Our business is dependent upon being able to anticipate, identify and respond to changing fashion trends, customer preferences and other fashion-related factors within the MMA and other sports fighting industries. Failure to do so could have a material adverse effect on our business operations.
Customer tastes and fashion trends in the MMA and other sport fighting lifestyle markets are volatile and tend to change rapidly. Our success depends on our ability to effectively anticipate, identify and respond to changing fashion tastes and consumer preferences, and to translate market trends into appropriate, saleable product offerings in a timely manner. If we are unable to successfully anticipate, identify or respond to changing styles or trends and misjudges the market for its products or any new product lines, our sales may be lower than predicted and we may be faced with a substantial amount of unsold inventory or missed opportunities. In response to such a situation, we may be forced to rely on markdowns or promotional sales to dispose of excess or slow-moving inventory, which could have a material adverse effect on our results of operations.
The current uncertainty surrounding the United States economy coupled with cyclical economic trends in MMA and other fighting sports retailing could have a material adverse effect on our results of operations.
The MMA and other fighting sports retail industry historically has been subject to substantial cyclicality. As economic conditions in the United States change, the trends in discretionary consumer spending become unpredictable and discretionary consumer spending could be reduced due to uncertainties about the future. When discretionary consumer spending is reduced, purchases of MMA and other fighting sports apparel and related products may decline. The current uncertainty in the United States economy and increased government debt spending may have a material adverse impact on our results of operations and financial position.
Our sales and inventory levels may fluctuate on a seasonal basis, leaving our operating results particularly susceptible to changes in summer and winter holiday shopping patterns.
Management believes that sales and profitability may be typically disproportionately higher or lower in certain fiscal quarters due to either increased or decreased sales based upon MMA boxing events/season, traditional retail slowdowns and winter holiday shopping seasons. Sales during these periods cannot be used as an accurate indicator of annual results.. As a result of this seasonality, any factors negatively affecting us during these seasons, including unfavorable economic conditions, adverse weather or ability to acquire seasonal merchandise inventory, could have a material adverse effect on our financial condition and results of operations for the entire year. In addition, in order to prepare winter holiday shopping seasons, we will need to keep in stock significantly more merchandise than we carry during other times of the year. Any unanticipated decrease in demand for our Product Line during these peak shopping seasons could require us to sell excess inventory at a substantial markdown, which could have a material adverse effect on our business, results of operations and financial condition.
Failure to successfully integrate our Product Line into stores could have an adverse impact on our results of operations and financial performance.
We may experience difficulties in assimilating our Product Line into retail stores and any such difficulty may result in the diversion of our capital and its management’s attention from other business issues and opportunities. We may not be able to successfully integrate our Product Line into certain retail stores. If we fail to successfully integrate our Product Line or if such integration of its Product Line into retail outlets fails to provide the benefits that we expect to receive, we could experience increased costs and other operating inefficiencies, which could have an adverse effect on our results of operations and financial performance.
We may be unable to compete favorably in the highly competitive retail sports industry, and if we lose customers to other sports apparel competitors, including those involved in other sports industries, our sales could decrease.
The sports retail apparel, hardgoods and accessories industry is highly competitive. We will compete with other retailers for vendors, consumers, shelf space in retail outlets and management personnel. In the softgoods market, which includes apparel, accessories and footwear, we will compete with other sports-focused retailers. In addition, in the softgoods market, we will compete with independent specialty shops, department stores and direct marketers that sell similar lines of merchandise, including other sports apparel, and target customers through catalogs and ecommerce. In the hardgoods market, which includes components and other equipment, we will compete directly or indirectly with other specialty retailers across a significant portion of our merchandising categories, such as boxing gloves, MMA fight gloves, gym bags and backpacks.
Some of our competitors will be larger than us and have substantially greater financial, marketing, including advanced ecommerce marketing capabilities, and other resources than we do. Direct competition with these and other retailers may increase significantly in the future, which could require us, among other things, to lower its prices and could result in the loss of customers. Current and increased competition could have a material adverse effect on our business, results of operations and financial condition.
If we fail to maintain good relationships with vendors or if a vendor is otherwise unable or unwilling to supply us with adequate quantities of their products at acceptable prices, our business and financial performance could suffer.
Our business will be dependent on continued good relations with our vendors. In particular, management believes that it generally will be able to obtain attractive pricing and other terms from vendors because we will be perceived as a desirable customer. Any deterioration in our relationship with our vendors would likely have a material adverse effect on our business. We do not have any current contractual relationships with vendors but believes we will in the short future. Accordingly, there can be no assurance that our vendors will provide us with an adequate supply or quality of products or acceptable pricing. Our vendors could discontinue selling to us or raise the prices they charge at any time. There can be no assurance that we will be able to acquire desired merchandise in sufficient quantities on terms acceptable to us in the future. In addition, certain of our potential vendors may sell their products directly to the retail market and therefore compete with us directly and other vendors may decide to do so in the future. There can be no assurance that such vendors will not decide to discontinue supplying their products to us, supply us only less popular or lower quality items, raise the prices they charge us or focus on selling their products directly. In addition, a number of our potential vendors may be smaller, less capitalized companies and will be more likely to be impacted by unfavorable general economic and market conditions than larger and better capitalized companies. These smaller vendors may not have sufficient liquidity during economic downturns to properly fund their businesses and their ability to supply their products to us could be negatively impacted. Any inability to acquire suitable merchandise at acceptable prices, or the loss of one or more key vendors, would have a material adverse effect on our business, results of operations and financial condition.
If we lose key management or is unable to attract and retain the talent required for its business, our financial performance could suffer.
Our performance depends largely on the efforts and abilities of its management, including Richard Brutti, our President/Chief Executive Officer. We do not have an employment agreement with Mr. Brutti not have we obtained key person life insurance covering Mr. Brutti. If we lose the service of Mr. Brutti or other key employees, we may not be able to successfully manage our business or achieve our growth objectives. As our business grows, we will need to attract and retain additional qualified management personnel in a timely manner and we may not be able to do so.
Our failure to meet potential staffing needs could adversely affect our ability to implement our growth strategy and could have a material impact on our results of operations.
Our success will depend in part upon our ability to attract, motivate and retain a sufficient number of qualified employees, including managers and associates, who understand and appreciate our corporate culture based on a passion for the MMA action sports lifestyle and are able to adequately represent this culture to our customers. Qualified individuals of the requisite caliber, skills and number will be needed to fill these positions and may be in short supply and the general employee turnover rate in the retail industry is high. Competition for qualified employees could require us to pay higher wages to attract a sufficient number of suitable employees. If we are unable to hire and retain managers and associates capable of consistently providing a high level of customer service, as demonstrated by their enthusiasm for our MMA culture and knowledge of our merchandise, our ability to successfully market our Product Line may be impaired. We will also be dependent upon personnel in retail outlets which are marketing our Product Line. There can be no assurance that we will receive adequate assistance from such personnel. Any failure to meet staffing needs, any material increases in employee turnover rates, any increases in labor costs or any work stoppages, interruptions or strikes could have a material adverse effect on our business or results of operations.
Our operations will be concentrated in the northeastern United States, which may make us susceptible to adverse conditions in this region.
Our home office and ecommerce fulfillment center will be located in Massachusetts. We will also have our Product Line in a substantial number of stores in the northeastern portion of the United States. As a result, our business may be more susceptible to regional factors than the operations of more geographically diversified competitors. These factors include, among others, economic and weather conditions, demographic and population changes and fashion tastes. In addition, we will rely on a single distribution center to receive, store and distribute the vast majority of our merchandise to the stores and retail outlets. As a result, a natural disaster or other catastrophic event could significantly disrupt our operations and have a material adverse effect on our business, results of operations and financial condition.
Our business could suffer if our ability to acquire financing is reduced or eliminated.
In the current economic environment, management cannot be assured that a borrowing relationship with any lender on our behalf will be created and if created will continue or that any potential lender would remain able to support its commitments to us in the future. If any potential lender fails to do so, then we may not be able to secure alternative financing on commercially reasonable terms or at all.
Our business could suffer as a result of parcel delivery services such as United Parcel Service or Federal Express being unable to distribute the Product Line to retail outlets.
We will be relying upon parcel delivery services for our Product Line shipments, including shipments to, from and between stores. Accordingly, we are subject to risks, including employee strikes and inclement weather, which may affect their ability to meet our shipping needs. Among other things, any circumstances that require us to use other delivery services for all or a portion of our shipments could result in increased costs and delayed deliveries and could harm our business materially. In addition, although we intend to have contracts with parcel delivery services, we and our service providers will have the right to terminate these contracts upon typically a 30-90 days written notice. Although the contracts with these small parcel delivery services will provide certain discounts from the shipment rates in effect at the time of shipment, the contracts will not limit their ability to raise the shipment rates at any time. Accordingly, we are subject to the risk that parcel delivery services may increase the rates they charge, that they may terminate their contracts with us, that they may decrease the rate discounts provided to us when an existing contract is renewed or that we may be unable to agree on the terms of a new contract with them, any of which could materially adversely affect our operating results.
Our business could suffer if a manufacturer fails to use acceptable labor practices.
We will not control our vendors or the manufacturers that produce the products we will buy from them, nor will we control the labor practices of our vendors and these manufacturers. The violation of labor or other laws by any of our vendors or these manufacturers, or the divergence of the labor practices followed by any of our vendors or these manufacturers from those generally accepted as ethical in the United States, could interrupt, or otherwise disrupt, the shipment of finished products to us or damage our reputation. Any of these, in turn, could have a material adverse effect on our financial condition and results of operations. In that regard, most of our Product Line that will be sold in stores and other retail outlets will be manufactured overseas, primarily in Asia, which may increase the risk that the labor practices followed by the manufacturers of these products may differ from those considered acceptable in the United States.
Additionally, our Product Line will be subject to regulation of and regulatory standards set by various governmental authorities with respect to quality and safety. Regulations and standards in this area are currently in place. These regulations and standards may change from time to time. Our inability to comply on a timely basis with regulatory requirements could result in significant fines or penalties, which could adversely affect our reputation and sales. Issues with the quality and safety of merchandise we will sell in stores and other retail outlets, regardless of our culpability, or customer concerns about such issues, could result in damage to our reputation, lost sales, uninsured product liability claims or losses, merchandise recalls and increased costs.
If our information systems hardware or software fails to function effectively or does not scale to keep pace with its planned growth, operations could be disrupted and our financial results could be harmed.
Management will be establishing infrastructure and existing hardware and software systems as well as implementing new systems. If these or any other information systems and software do not work effectively, this could adversely impact the promptness and accuracy of our transaction processing, financial accounting and reporting and our ability to manage business and properly forecast operating results and cash requirements. To manage the anticipated growth of operations and personnel, management will need to continue to improve our operational and financial systems, transaction processing, procedures and controls, and in doing so could incur substantial additional expenses that could impact our financial results.
Our inability or failure to protect our intellectual property or its infringement of other’s intellectual property could have a negative impact on our operating results.
Management believes that our trademarks and domain names will be valuable assets that are critical to our success. The unauthorized use or other misappropriation of our trademarks or domain names could diminish the value of the AMOGEAR brand, the overall business concept, private label brands or the Corporation’s goodwill and cause a decline in our net sales. Management intends to secure protection for our trademarks and domain names. The efforts management will take to protect our trademarks may not be sufficient or effective. Therefore, we may not be able to prevent other persons from using our trademarks or domain names outside of the United States, which also could adversely affect its business. We are also subject to the risk that we may infringe on the intellectual property rights of third parties. Any infringement or other intellectual property claim made against us, whether or not it has merit, could be time-consuming, result in costly litigation, cause product delays or require us to pay royalties or license fees. As a result, any such claim could have a material adverse effect on our operating results.
The effects of war or acts of terrorism could adversely affect the Corporation’s business.
Management believes that a substantial portion of our Product Line will be placed in stores and other retail outlets located in shopping malls. Any threat of terrorist attacks or actual terrorist events, particularly in public areas, could lead to lower customer traffic in shopping malls. In addition, local authorities or mall management could close shopping malls in response to security concerns. Mall closures, as well as lower customer traffic due to security concerns, would likely result in decreased sales. Additionally, the armed conflicts in the Middle East, or the threat, escalation or commencement of war or other armed conflict elsewhere, could significantly diminish consumer spending, and result in decreased sales. Decreased sales would have a material adverse effect on the Corporation’s business, financial condition and results of operations.
Our failure to comply with federal, state or local laws, or changes in these laws, could have an adverse impact on our results of operations and financial performance.
Our business will be subject to a wide array of laws and regulations. Changes in the regulations, the imposition of additional regulations, or the enactment of any new legislation including those related to taxes, environmental issues and trade, could adversely affect our results of operations or financial condition.
Our ecommerce operations will subject it to numerous risks that could have an adverse effect on our results of operations.
Although ecommerce sales will constitute a small, but increasing portion of our overall sales, ecommerce operations will subject us to certain risks that could have an adverse effect on our operational results, including: (i) diversion from sales of our Product Lines in stores and other retail outlets; (ii) liability for online content; and (iii) risks related to the computer systems that will operate our website and related support systems, including computer viruses, electronic break-ins and similar disruptions. In addition, risks beyond our control, such as governmental regulation of ecommerce, entry of our vendors in the ecommerce business in competition with us, online security breaches and general economic conditions specific to ecommerce could have an adverse effect on our results of operations.
We will incur and continue to incur significant expenses as a result of being a public company, which may negatively impact our financial performance.
We intend to resume our status as a fully reporting company and thus will incur and could continue to incur significant legal, accounting and other expenses as a result of being a public company. Rules and regulations implemented by Congress, the Securities and Exchange Commission and FINRA have required changes in corporate governance practices of public companies. Compliance with these laws could cause us to incur significant costs and expenses, including legal and accounting costs, and could make some compliance activities more time-consuming and negatively impact its financial performance. Additionally, these rules and regulations may make it more expensive for us to obtain director and officer liability insurance. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as officers.
Risks of the Corporation
Lack of Ready Transferability of Shares of Common Stock
There is no substantial market for the sale of our shares of common stock nor is it likely that a substantial public or private market in the shares of common stock will develop in the future. There are limitations on the transferability of the shares of common stock. A shareholder will not be able to liquidate his investment whenever he desires.
Nevada Law and our Articles of Incorporation May Protect our Directors From Certain Types of Lawsuits.
Nevada law provides that the corporate officers and directors will not be liable to us or our stockholders for monetary damages for all but certain types of conduct as officers and directors. The Bylaws permit broad indemnification powers to all persons against all damages incurred in connection with our business to the fullest extent provided or allowed by law. The exculpation provisions may have the effect of preventing stockholders from recovering damages against our officers and directors caused by their negligence, poor judgment or other circumstances. The indemnification provisions may require us to use our limited assets to defend our officers and directors against claims, including claims arising out of their negligence, poor judgment, or other circumstances.
Additional Issuance of Equity Securities May Result in Dilution to Existing Stockholders.
The Articles of Incorporation authorize the issuance of 75,000,000 shares of common stock. The Board of Directors has the authority to issue additional shares of common stock to provide additional financing in the future and the issuance of any such shares may result in a reduction of the book value or market price of the then outstanding shares of common stock. In addition, as of the date of this Annual Report, we have two convertible notes issued and outstanding, which if converted could result in the issuance of further shares of common stock. If we issue any such additional shares, such issuance also will cause a reduction in the proportionate ownership and voting power of all other stockholders. As a result of such dilution, your proportionate ownership interest and voting power will be decreased accordingly. Further, any such issuance could result in a change of control.
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
As of the date of this Annual Report, our corporate offices are located at 7 Bond Street, Boston, Massachusetts 02118.
ITEM 3. LEGAL PROCEEDINGS
On May 24, 2011, the District Court in and for Clark County, Nevada, appointed Joseph Arcaro as our custodian pursuant to Nevada Revised Statutes 78.347. This resulted from the abandonment by Raminder Badyal as the sole executive officer and member of the Board of Directors. A copy of the documentation filed with the Nevada District Court and the Court Order dated May 24, 2011 (the “Court Order”) is attached as an exhibit. On May 30, 2011, the court appointed custodian, Joseph Arcaro, appointed himself to serve as our sole executive officer (President, Secretary and Treasurer) and member of the Board of Directors on an interim basis. Under Nevada statutory law and the Court Order, the custodian had the express authority to appoint a new board and new statutory officers. On June 2, 2011, we were reinstated under the laws of the State of Nevada and currently in good standing.
On March 8, 2012, the Nevada District Court order termination of the custodianship. A copy of the termination order is attached as an exhibit.
Other than as referenced above, we are not currently involved in any legal proceedings and we are not aware of any pending or potential legal actions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the security holders during the year ended January 31, 2012.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our shares are quoted on the Over-the-Counter Electronic Bulletin Board (OTCBB) under the symbol AMOG. The OTCBB is a regulated quotation service that displays real-time quotes, last sale prices and volume information in over-the-counter securities. The OTCBB is not an issuer listing service, market or exchange. Although the OTCBB does not have any listing requirements per se, to be eligible for quotation on the OTCBB issuers must remain current in their filings with the SEC or applicable regulatory authority. Market Makers are not permitted to begin quotation of a security whose issuer does not meet this filing requirement. Securities already quoted on the OTCBB that become delinquent in their required filings will be removed following a 30 or 60 day grace period if they do not make their required filing during that time. We cannot guarantee that we will continue to have the funds required to remain in compliance with our reporting obligations.
There has been no active trading of our securities, and, therefore, no high and low bid pricing. As of the date of this Annual Report, we had 26 shareholders of record. We have paid no cash dividends and have no outstanding options.
RECENT SALES OF UNREGISTERED SECURITIES
As of the date of this Annual Report and during fiscal year ended January 31, 2012, to provide capital, we issued stock in exchange for our debts or pursuant to contractual agreements as set forth below.
Effective on March 13, 2012, we issued an aggregate of 40,000,000 shares of our restricted common stock to our President/Chief Executive Officer, Michael Ceccon. We had entered into that certain one year advisory board agreement (the “Advisory Agreement”) with Michael Ceccon pursuant to which Mr. Ceccon will provide certain services to us and we shall pay a monthly fee of $2,500 and issue 40,000,000 shares of restricted common stock. The shares were issued in reliance on Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”). The shares have not been registered under the Securities Act or under any state securities laws and may not be offered or sold without registration with the United States Securities and Exchange Commission or an applicable exemption from the registration requirements. Mr. Ceccon acknowledged that the securities to be issued have not been registered under the Securities Act, that he understood the economic risk of an investment in the securities, and that it had the opportunity to ask questions of and receive answers from our management concerning any and all matters related to acquisition of the securities.
Effective on March 14, 2012, our Board of Directors authorized the settlement of debt in the amount of $222.00. The aggregate debt of $1,700 consisted of funds due and owing to Holladay Stock Transfer, our transfer agent (“Holladay”), incurred during fiscal year ended January 31, 2010. The debt is evidenced by that certain convertible promissory note dated June 1, 2009 between us and Holladay in the principal amount of $1,700.00 (the “Note”), with associated conversion rights to convert the debt into shares of our common stock. Holladay subsequently assigned all of its right, title and interest in the debt and the Note to Trinity International LLC (the “Assignee”), as evidenced in that certain assignment of convertible promissory note dated June 17, 2011 and supplemented March 12, 2012 (the “Assignment”). We received a conversion notice dated March 14, 2012 from the Assignee (the “Conversion Notice”) and agreed to settle a portion of the debt in the amount of $222.00 by conversion into 2,220,000 shares of our common stock at $0.0001 per share.
The shares of common stock under the debt were issued to the Assignee in reliance on Section 4(2) under the United States Securities Act of 1933, as amended (the “Securities Act”). The shares of common stock have not been registered under the Securities Act or under any state securities laws and may not be offered or sold without registration with the United States Securities and Exchange Commission or an applicable exemption from the registration requirements. The Assignee acknowledged that the securities to be issued have not been registered under the Securities Act, that it understood the economic risk of an investment in the securities, and that it had the opportunity to ask questions of and receive answers from our management concerning any and all matters related to acquisition of the securities.
PENNY STOCK RULES
The Securities and Exchange Commission has also adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the Nasdaq system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).
A purchaser is purchasing penny stock which limits the ability to sell the stock. Our shares constitute penny stock under the Securities and Exchange Act. The shares will remain penny stocks for the foreseeable future. The classification of penny stock makes it more difficult for a broker-dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his/her investment. Any broker-dealer engaged by the purchaser for the purpose of selling his or her shares in us will be subject to Rules 15g-1 through 15g-10 of the Securities and Exchange Act. Rather than creating a need to comply with those rules, some broker-dealers will refuse to attempt to sell penny stock.
The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document, which: (i) contains a description of the nature and level of risk in the market for penny stock in both public offerings and secondary trading; (ii) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the Securities Act of 1934, as amended; (iii) contains a brief, clear, narrative description of a dealer market, including "bid" and "ask" price for the penny stock and the significance of the spread between the bid and ask price; (iv) contains a toll-free telephone number for inquiries on disciplinary actions; (v) defines significant terms in the disclosure document or in the conduct of trading penny stocks; and (vi) contains such other information and is in such form (including language, type, size and format) as the Securities and Exchange Commission shall require by rule or regulation;
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, to the customer: (i) the bid and offer quotations for the penny stock; (ii) the compensation of the broker-dealer and its salesperson in the transaction; (iii) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (iv) monthly account statements showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements will have the effect of reducing the trading activity in the secondary market for our stock because it will be subject to these penny stock rules. Therefore, stockholders may have difficulty selling their securities.
We are subject to certain filing requirements and will furnish annual financial reports to our stockholders, certified by our independent accountant, and will furnish un-audited quarterly financial reports in our quarterly reports filed electronically with the SEC. All reports and information filed by us can be found at the SEC website, www.sec.gov.
Our transfer agent is Holladay Stock Transfer, Inc. of 2939 North 67th Place, Suite C, Scottsdale, Arizona.
ITEM 6. SELECTED FINANCIAL DATA
RESULTS OF OPERATIONS
We incurred losses of $55,619 during the year ended January 31, 2012 compared to losses of $12,000 in 2011. The main area of expenses incurred during fiscal year ended January 31, 2012 consisted of: (i) general and administrative of $33,619; and (ii) professional fees of $22,000. Expenses incurred during fiscal year ended January 31, 2011 consisted of $12,000 in general and administrative fees.
LIQUIDITY AND CAPITAL RESOURCES
We used cash from operations of $-0- for fiscal year ended January 31, 2012 compared to $-0- in the previous year ended January 31, 2011. At January 31, 2012, we had no liquid assets.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Michael F. Cronin
Certified Public Accountant
Orlando, FL 32708
Board of Directors and Shareholders
Amogear, Inc. (f/k/aKitcher Resources, Inc.)
I have audited the accompanying balance sheets of Amogear, Inc. (f/k/aKitcher Resources, Inc.) as of January 31, 2012 and 2011 and the related statements of operations, stockholders' deficiency and cash flows for the years then ended. The financial statements are the responsibility of the directors. My responsibility is to express an opinion on these financial statements based on my audits.
I conducted my audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor was I engaged to perform, an audit of its internal control over financial reporting. My audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, I express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Amogear, Inc. (f/k/aKitcher Resources, Inc.) as of January 31, 2012 and 2011 and the results of its operations, its cash flows and changes in stockholders' deficiency for the years then ended in conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred a $55,619 loss from operations and has no cash. The Company may not have adequate readily available resources to fund operations through 2012. This raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
March 27, 2012
(f/k/a Kitcher Resources Inc.)
See Summary of Significant Accounting Policies and Notes to Financial Statements.
(f/k/a Kitcher Resources, Inc.)
Statements of Operations
See Summary of Significant Accounting Policies and Notes to Financial Statements.
(f/k/a Kitcher Resources, Inc.)
Statements of Cash Flows
See Summary of Significant Accounting Policies and Notes to Financial Statements.
(f/k/a Kitcher Resources, Inc.)
Statements of Stockholders' Deficiency
See Summary of Significant Accounting Policies and Notes to Financial Statements.
(F/K/A KITCHER RESOURCES, INC.)
SIGNIFICANT ACCOUNTING POLICIES
JANUARY 31, 2012
Organizational Background: Amogear, Inc. (f/k/aKitcher Resources, Inc.) (the “Company” or "Amogear"), was originally incorporated on December 26, 2006 in the state of Nevada. In 2008 we ceased operations and have not engaged in any material business operations since that time.
District Court Clark County, Nevada Proceedings: On May 24, 2011, in its Court Order, the District Court Clark County, Nevada granted the application of Joseph Arcaro to appoint a receiver. The Court Order appointing Receiver empowered the receiver to evaluate our financial status, to determine whether there are any options for corporate viability that could benefit our shareholders, to reinstate our corporation with the Nevada Secretary of State, and to obtain copies of our shareholder records from our transfer agent. Under the receivership, and with funds supplied by Mr. Arcaro, the Company reinstated its corporate charter; paid all past due franchise taxes and settled all outstanding debts. In addition, on May 30, 2011, the receiver, appointed Joseph Arcaro as our temporary sole Director, President, Secretary and Treasurer.
On February 22, 2012, following the submittal of detailed reports by the receiver; the Court discharged the receiver and returned the Company to the control of its Board of Directors.
Significant Accounting Policies
Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.
Cash and Cash Equivalents: For financial statement presentation purposes, the Company considers those short-term, highly liquid investments with original maturities of three months or less to be cash or cash equivalents.
Property and Equipment New property and equipment are recorded at cost. Property and equipment included in the bankruptcy proceedings and transferred to the Trustee had been valued at liquidation value. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 5 years. Expenditures for renewals and betterments are capitalized. Expenditures for minor items, repairs and maintenance are charged to operations as incurred. Gain or loss upon sale or retirement due to obsolescence is reflected in the operating results in the period the event takes place.
Valuation of Long-Lived Assets: We review the recoverability of our long-lived assets including equipment, goodwill and other intangible assets, when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of the asset from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. Our primary measure of fair value is based on discounted cash flows. The measurement of impairment requires management to make estimates of these cash flows related to long-lived assets, as well as other fair value determinations.
Stock Based Compensation: Stock-based awards are accounted for using the fair value method in accordance with ASC 718, Share-Based Payments. Our primary type of share-based compensation consists of stock options. We use the Black-Scholes option pricing model in valuing options. The inputs for the valuation analysis of the options include the market value of the Company’s common stock, the estimated volatility of the Company’s common stock, the exercise price of the warrants and the risk free interest rate.
Accounting For Obligations And Instruments Potentially To Be Settled In The Company’s Own Stock: We account for obligations and instruments potentially to be settled in the Company’s stock in accordance with FASB ASC 815, Accounting for Derivative Financial Instruments. This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company’s own stock.
Fair Value of Financial Instruments: FASB ASC 825, “Financial Instruments,” requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value. FASB ASC 825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At January 31, 2012 and 2011, the carrying value of certain financial instruments (cash and cash equivalents, accounts payable and accrued expenses.) approximates fair value due to the short-term nature of the instruments or interest rates, which are comparable with current rates.
Earnings per Common Share: We compute net income (loss) per share in accordance with ASC 260, Earning per Share. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive. All per share disclosures retroactively reflect shares outstanding or issuable as though the reverse split had occurred as of January 31, 2010.
Income Taxes: We have adopted ASC 740, Accounting for Income Taxes. Pursuant to ASC 740, we are required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes.
Deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax basis of assets and liabilities using the tax rates and laws in effect when the differences are expected to reverse. ASC 740 provides for the recognition of deferred tax assets if realization of such assets is more likely than not to occur. Realization of our net deferred tax assets is dependent upon our generating sufficient taxable income in future years in appropriate tax jurisdictions to realize benefit from the reversal of temporary differences and from net operating loss, or NOL, carryforwards. We have determined it more likely than not that these timing differences will not materialize and have provided a valuation allowance against substantially all of our net deferred tax asset. Management will continue to evaluate the realizability of the deferred tax asset and its related valuation allowance. If our assessment of the deferred tax assets or the corresponding valuation allowance were to change, we would record the related adjustment to income during the period in which we make the determination. Our tax rate may also vary based on our results and the mix of income or loss in domestic and foreign tax jurisdictions in which we operate.
In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax regulations. We recognize liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and to the extent to which, additional taxes will be due. If we ultimately determine that payment of these amounts is unnecessary, we will reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We will record an additional charge in our provision for taxes in the period in which we determine that the recorded tax liability is less than we expect the ultimate assessment to be.
ASC 740 which requires recognition of estimated income taxes payable or refundable on income tax returns for the current year and for the estimated future tax effect attributable to temporary differences and carry-forwards. Measurement of deferred income tax is based on enacted tax laws including tax rates, with the measurement of deferred income tax assets being reduced by available tax benefits not expected to be realized.
Uncertain Tax Positions: The Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, Accounting for Income Taxes” (“FIN No. 48”) which was effective for the Company on February 1, 2007. FIN No. 48 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 FIN No. 48, 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 position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure requirements.
Our federal and state income tax returns are open for fiscal years ending on or after January 31, 2007. We are not under examination by any jurisdiction for any tax year. At January 31, 2012 we had no material unrecognized tax benefits and no adjustments to liabilities or operations were required under FIN 48.
Recent Accounting Pronouncements
In January 2010, the FASB issued an amendment to ASC 820, Fair Value Measurements and Disclosure, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. This standard, for which the Company is currently assessing the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010.
In January 2010, the FASB issued an amendment to ASC 505, Equity, where entities that declare dividends to shareholders that may be paid in cash or shares at the election of the shareholders are considered to be a share issuance that is reflected prospectively in EPS, and is not accounted for as a stock dividend. This standard is effective for interim and annual periods ending on or after December 15, 2009 and is to be applied on a retrospective basis. The adoption of this standard is not expected to have a significant impact on the Company’s financial statements..
In June 2009, the FASB issued guidance now codified as ASC 105, Generally Accepted Accounting Principles as the single source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP, aside from those issued by the SEC. ASC 105 does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all authoritative literature related to a particular topic in one place. The adoption of ASC 105 did not have a material impact on the Company’s financial statements, but did eliminate references to pre-codification standards.
Management does not anticipate that the adoption of these standards will have a material impact on the financial statements.
(F/K/A KITCHER RESOURCES, INC.)
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2012
1. Recent Court Proceedings:
On May 24, 2011, in its Court Order, the District Court Clark County, Nevada granted the application of Joseph Arcaro to appoint a receiver. Following the submittal of detailed reports by the receiver the Court discharged the receiver on February 22, 2012 and returned the Company to the control of its Board of Directors.
Resultant Change in Control: In connection with the Order and subsequent shareholder meeting, Joseph Arcaro became our sole director and President on May 30, 2011. On October 17, 2011 Mr. Arcaro resigned and Michael Ceccon was appointed sole office and director of the corporation.
In exchange for services of approximately $12,000 by Mr. Ceccon we issued 2,000 common shares representing approximately 57%our common stock outstanding on that date.
2. Income Taxes:
We have adopted ASC 740, Income Taxes, which provides for the recognition of a deferred tax asset based upon the value the loss carry-forwards will have to reduce future income taxes and management's estimate of the probability of the realization of these tax benefits. Our net operating loss carryovers incurred prior to 2011 considered available to reduce future income taxes may be reduced or eliminated through our recent change of control (I.R.C. Section 382(a)) and the continuity of business limitation of I.R.C. Section 382(c).
We have a current operating loss carry-forward of $ 115,000 resulting in deferred tax assets of $22,000. We have determined it more likely than not that these timing differences will not materialize and have provided a valuation allowance against substantially all our net deferred tax asset.
Future utilization of currently generated federal and state NOL and tax credit carry forwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended and similar state provisions. The annual limitation may result in the expiration of NOL and tax credit carry-forwards before full utilization.
The Company is not a party to any leases and does not have any commitments
4. Stockholders' Equity:
Reverse Stock Split
In June and again in October of 2011 we declared a reverse split of our common stock. The combined result of the reverse splits was that that every twenty thousand (20,000) issued and outstanding shares of common stock of the Corporation were automatically converted into 1 share of common stock. Any resulting share ownership interest of fractional shares was rounded up to the first whole integer in such a manner that all rounding was done to the next single share. Except as otherwise noted, all share, option and warrant numbers have been restated to give retroactive effect to these reverse splits. All per share disclosures retroactively reflect shares outstanding or issuable as though the reverse split had occurred January 31, 2010.
We are currently authorized to issue up to 75,000,000 shares of $ 0.001 par value common stock. All issued shares of common stock are entitled to vote on a 1 share/1 vote basis.
There are no employee or non-employee option grants.
5. Related Party Transactions not Disclosed Elsewhere:
Due Related Parties: Amounts due related parties consist of corporate reinstatement expenses and prior obligations paid by affiliates prior to the establishment of a bank account. Such items totaled $41,669 at January 31, 2012. The corresponding note is payable upon demand.
Fair value of services: The principal stockholder provided, without cost to the Company, his services, valued at $800 per month which totaled $ 9,600 respectively for the years 2012 and 2011. The principal stockholder also provided, without cost to the Company, office space valued at $200 per month, which totaled $2,400 for the twelve-month periods ended January 31, 2012 and 2011. The total of these expenses was reflected in the statement of operations as general and administrative expenses with a corresponding contribution of paid-in capital.
6. Subsequent Events:
Effective March 1, 2012 we issued 40 million common shares to our President and CEO in exchange for services.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There are no disagreements with our current accountants on any matters related to accounting and financial disclosure issues. As of the date of this Annual Report, our principal independent registered public accounting firm is Cronin and Company.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We have performed an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of our disclosure controls and procedures, (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our management, including our CEO and CFO, concluded that our disclosure controls and procedures were not effective as of January 31, 2012 to provide reasonable assurance that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Under the supervision and with the participation of our management, including our CEO and CFO, we evaluated the effectiveness of our internal control over financial reporting as of January 31, 2012, and concluded that our internal control over financial reporting was not effective at January 31, 2012. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. We identified a material weakness in our internal control over financial reporting primarily attributable to limited accounting and SEC reporting expertise within the Company. Due to our exploration stage, we have limited financial ability to remedy this staffing deficiency at this time; however, we will add additional accounting and SEC reporting expertise in the future as funds permit.
This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this Annual Report on Form 10-K.
INHERENT LIMITATIONS ON EFFECTIVENESS OF CONTROLS
We believe that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, and our CEO and our CFO have concluded that these controls and procedures are not effective at the “reasonable assurance” level.
CHANGES IN INTERNAL CONTROLS
No significant changes were implemented in our internal controls over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Our Board of Directors has not established an audit committee. The respective role of an audit committee has been conducted by our Board of Directors. When an audit committee is established, the audit committee's primary function will be to provide advice with respect to our financial matters and to assist our Board of Directors in fulfilling its oversight responsibilities regarding finance, accounting, and legal compliance. The audit committee's primary duties and responsibilities will be to: (i) serve as an independent and objective party to monitor our financial reporting process and internal control system; (ii) review and appraise the audit efforts of our independent accountants; (iii) evaluate our quarterly financial performance as well as its compliance with laws and regulations; (iv) oversee management's establishment and enforcement of financial policies and business practices; and (v) provide an open avenue of communication among the independent accountants, management and our Board of Directors.
IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
All of our directors hold office until the next annual general meeting of the shareholders or until their successors are elected and qualified. Our officers are appointed by our board of directors and hold office until their earlier death, retirement, resignation or removal.
Our directors and executive officers, their ages and positions held are as follows:
The following is a brief account of the education and business experience of our director, executive officer and key employee during at least the past five years, indicating the person's principal occupation during the period, and the name and principal business of the organization by which he was employed, and including other directorships held in reporting companies.
On March 27, 2012, the Board of Directors of accepted the resignation of Michael Ceccon as the President/Chief Executive Officer, Secretary, Treasurer/Chief Financial Officer and sole member of the Board of Directors. Mr. Ceccon did not resign as a result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.
Simultaneously, the Board of Directors accepted the consent of Richard Brutti as the President/Chief Executive Officer, Secretary, Treasurer/Chief Financial Officer and sole member of the Board of Directors effective March 27, 2012 to serve until his successor is duly elected.
Richard Brutti. Mr. Brutti has been an independent management consultant for the past thirty years with an emphasis on operational strategies and corporate finance. Since 1980, Mr. Brutti has been providing management consulting services to a number of businesses with a focus on assisting early stage development companies from inception to viable operating entities. In 2009, he founded and is the co-host of Mind Your Own Business The Radio Show, which is a radio show for business entrepreneurs. From June2004 through 2007, Mr. Brutti was the president of New England Ringside, a sports marketing company. In 2002, Mr. Brutti merged his consumer products company, Rephresh Inc., with Tasker Products Inc. Mr. Brutti was also the chief financial officer at New Balance and a consultant with Ernst & Young.
Mr. Brutti earned a Master In Business Administration from Boston College in 1983 and a degree in Accounting from Bentley College in 1977.
COMMITTEES OF THE BOARD OF DIRECTORS
As of the date of this Annual Report, we have not established an audit committee, a compensation committee nor a nominating committee.
During the past five years, none of our directors, executive officers or persons that may be deemed promoters is or have been involved in any legal proceeding concerning: (i) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (ii) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (iii) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction permanently or temporarily enjoining, barring, suspending or otherwise limiting involvement in any type of business, securities or banking activity; or (iv) being found by a court, the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law (and the judgment has not been reversed, suspended or vacated).
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires our directors and officers, and the persons who beneficially own more than ten percent of our common stock, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Copies of all filed reports are required to be furnished to us pursuant to Rule 16a-3 promulgated under the Exchange Act. Based solely on the reports received by us and on the representations of the reporting persons, we believe that these persons have not complied with all applicable filing requirements during the fiscal year ended January 31, 2012.
The following table sets forth the compensation paid to our Chief Executive Officer and those executive officers that earned in excess of $100,000 during fiscal years ended January 31, 2012 and 2011 (collectively, the “Named Executive Officers”):
SUMMARY COMPENSATION TABLE
STOCK OPTIONS/SAW GRANTS IN FISCAL YEAR ENDED JANUARY 31, 2010
The following table sets forth information as at January 31, 2012 relating to Stock Options that have been granted to the Named Executive Officers:
The following table sets forth information relating to compensation paid to our directors during fiscal year ended January 31, 2012 and 2011:
DIRECTOR COMPENSATION TABLE
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
As of the date of this Annual Report, the following table sets forth certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5% of our common stock and by each of our current directors and executive officers. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated. As of the date of this Annual Report, there are 42,,223,512 shares of common stock issued and outstanding.
CHANGES IN CONTROL
On October 14, 2011, a stock purchase agreement was entered into between Joseph Arcaro and Michael Ceccon (the “Stock Purchase Agreement”), pursuant to which Mr. Arcaro sold an aggregate of 1,000,000 pre-Reverse Stock Split shares of restricted common stock to Michael Ceccon. Therefore, a change of control occurred. On October 17, 2011, Joseph Arcaro resigned as our sole officer and director and Michael Ceccon was appointed as the sole officer and director of the Corporation. On March 27, 2012, Michael Ceccon resigned his executive and board position and Mr. Richard Brutti was appointed as the sole executive officer and member of the Board of Directors.
We are unaware of any other contract, or other arrangement or provision, the operation of which may at a subsequent date result in a change of control of our company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
As of the date of this Annual Report, none of our directors, officers or principal stockholders, nor any associate or affiliate of the foregoing, have any interest, direct or indirect, in any transaction or in any proposed transactions, which has materially affected or will materially affect us during fiscal year ended January 31, 2012.
During fiscal year ended January 31, 2012, we incurred approximately $-0- in fees to our principal independent accountant for professional services rendered in connection with the audit of our financial statements for fiscal year ended January 31, 2012 and for the review of our financial statements for the quarters ended April 31, 2011, July 31, 2011 and October 31, 2011.
During fiscal year ended January 31, 2012, did not incur any other fees for professional services rendered by our principal independent accountant for all other non-audit services which may include, but is not limited to, tax-related services, actuarial services or valuation services.
The following exhibits are filed with this Annual Report.
** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
KITCHER RESOURCES INC.
Now known as AMOGEAR INC.
Pursuant to the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.